Exhibit 10.23


 


EMPLOYMENT AGREEMENT FOR JOEL A. RONNING


 


This
Agreement is made effective as of August 8, 2005 between Digital River Inc., a
Delaware corporation (the “Company”), with its principal administrative office
at 9625 W. 76th Street, Eden Prairie, MN 55344, and Joel A. Ronning
(the “Executive”).


 


WHEREAS,
the Company wishes to assure itself of the services of the Executive for the
period provided in this Agreement; and


 


WHEREAS,
the Executive is willing to serve in the employ of the Company on a full-time
basis for said period.


 


NOW,
THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:


 


1.         POSITION
AND RESPONSIBILITIES.


 


During
the period of his employment hereunder, Executive agrees to serve as Chairman
and Chief Executive Officer of the Company. 
The Executive shall serve as a full time employee of the Company to
perform such duties as the Company may from time to time reasonably direct.  The Executive’s responsibilities will
include, among other things, (i) developing and assisting in the
development of new products and business for the Company, (ii) supervising
the preparation and development of budgets for the Company for approval by the
Board of Directors of the Company (the “Board”), and (iii) developing and
directing the Company’s e-commerce, finance, marketing, sales and
technology areas.  In the event that a
change in legal or regulatory requirements applicable to the Company shall
require the role of Chairman to be held by an independent director or be
separated from the position of Chief Executive Officer, Executive shall
continue to serve as the Company’s Chief Executive Officer and such event shall
not be deemed, in and of itself, to be an Event of Termination (as defined
below) under this Agreement.


 


2.         TERM.


 


(a)        The
period of Executive’s employment under this Agreement shall be deemed to have
commenced as of the date hereof, and shall continue for a period of twenty-four
(24) full calendar months thereafter (the “Expiration Date”).  Unless written notice shall have been
delivered by the party desiring to terminate this Agreement, which written
notice shall have been delivered not later than 120 days prior to the
Expiration Date (including the Expiration Date with respect to any renewed
term), this Agreement shall be renewed for consecutive one (1) year periods.


 


1





















 


(b)       During
the period of his employment hereunder, except for periods of absence
occasioned by illness, and reasonable vacation periods, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder, including activities and services
related to the organization, operation and management of the Company, provided,
however, that, with the approval of the Board, as evidenced by a resolution of
the Board, from time to time, Executive may serve on the boards of directors
of, and hold any other offices or positions in, companies or organizations,
which, in the Board’s judgment, will not present any conflict of interest with
the Company, or materially affect the performance of Executive’s duties
pursuant to this Agreement.


 


(c)        Notwithstanding
anything herein contained to the contrary: 
(i) Executive’s employment with the Company may be terminated by
the Company or Executive during the term of this Agreement, subject to the
terms and conditions of this Agreement; and (ii) nothing in this Agreement
shall mandate or prohibit a continuation of Executive’s employment following
the expiration of the term of this Agreement upon such terms and conditions as
the Board and Executive may mutually agree.


 


3.         COMPENSATION
AND REIMBURSEMENT.


 


(a)        The
compensation specified under this Agreement shall constitute the salary and
benefits paid for the duties described in Section 1.  The Company shall pay Executive as
compensation a salary of not less than $250,000 per year (“Base Salary”).  Such Base Salary shall be payable in
accordance with the Company’s payroll practice in effect from time to
time.  During the period of this
Agreement, Executive’s Base Salary shall be reviewed at least annually; the
first such review will be made no later than one year from the date of this
Agreement.  Such review shall be
conducted by the Compensation Committee of the Board, and the Board may
increase Executive’s Base Salary.  An
increase shall become the “Base Salary” for purposes of this Agreement.  In addition to the Base Salary provided in
this Section 3(a), the Company shall also provide Executive at no cost to
Executive with all such other benefits as are provided uniformly to permanent
full-time employees of the Company.


 


(b)       The
Executive shall also receive an annual bonus in an amount to be recommended by
the Compensation Committee and approved by the Board.  The Executive shall only be eligible for an
annual bonus as long as the Executive remains an employee of the Company.


 


(c)        The
Executive will be entitled to four (4) weeks paid vacation annually.  The Executive will be entitled to participate
in or receive benefits under any employee benefit plans, including, but not
limited to, retirement plans (i.e., 401(k) plans), supplemental retirement
plans, pension plans, profit-sharing plans, health-and-accident plan, medical
coverage or any other employee benefit plan or arrangement made available by
the Company currently or in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.  Executive will be entitled to incentive
compensation and bonuses as provided in any plan of the Company in which
Executive is eligible to participate, and without limiting the foregoing, the
Company may grant stock options, restricted stock, stock appreciation rights or
other incentive equity (“Incentive Equity”) to Executive in the future, in the
discretion of the Board or a committee of


 


2





















 


the
Board.  Nothing paid to the Executive
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which the Executive is entitled under this Agreement.  In addition, the Company shall maintain term
life insurance, naming the Executive’s designee as beneficiary, in the face
amount of $1,000,000.


 


(d)       In
addition to the Base Salary provided for by paragraph (a) of this
Section 3 and other compensation provided for by paragraphs (b) and
(c) of this Section 3, the Company shall pay or reimburse Executive for
all reasonable travel and other reasonable expenses incurred by Executive
performing his obligations under this Agreement.


 


4.         PAYMENTS
TO EXECUTIVE UPON AN EVENT OF TERMINATION.


 


The
provisions of this Section shall in all respects be subject to the terms and
conditions stated in Sections 7 and 14.


 


(a)        Upon
the occurrence of an Event of Termination (as herein defined) during the
Executive’s term of employment under this Agreement, the provisions of this
Section 4 shall apply.  As used in
this Agreement, an “Event of Termination” shall mean and include any one or
more of the following:  (i) the
termination by the Company of Executive’s full-time employment hereunder for
any reason, including, without limitation, the Company’s failure to renew this
Agreement, other than a termination following a Change in Control (as defined
in Section 5(a) hereof) within the term of this Agreement, upon Retirement (as
defined in Section 6 hereof), upon death or disability (as defined in
Section 6 hereof), or for Cause (as defined in Section 7 hereof); and
(ii) Executive’s resignation from the Company’s employ, upon any
(A) failure to elect or reelect or to appoint or reappoint Executive as Chief
Executive Officer, (B) unless consented to by the Executive, a material
change in Executive’s function, duties, or responsibilities, which change would
cause Executive’s position to become one of lesser responsibility, importance,
or scope from the position and attributes thereof described in Section 1,
above, (and any such material change shall be deemed a continuing breach of
this Agreement); provided that any removal of the role of Chairman from
Executive that is caused by a change in legal or regulatory requirements
applicable to the Company shall not be deemed, in and of itself, to be an Event
of Termination hereunder, (C) a relocation of Executive’s principal place
of employment by more than 30 miles from its location at the effective date of
this Agreement, or a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement
or (D) material breach of this Agreement by the Company.  Upon the occurrence of any event described in
clauses (A), (B), (C) or (D) above (a “resignation for Good Reason”), Executive
shall have the right to elect to terminate his employment under this Agreement
by resignation upon not less than thirty (30) days prior written notice given
within a reasonable period of time not to exceed, except in case of a
continuing breach, three (3) calendar months after the event giving rise to
said right to elect.


 


(b)       Subject
to Section 10 hereof, upon the occurrence of an Event of Termination, the
Company shall be obligated to pay Executive, as severance pay or liquidated
damages, or both, an amount equal to the sum of (i) twelve (12) months of
the Executive’s Base Salary at the time of the occurrence of the Event of
Termination plus (ii) the average of the annual bonus amount paid to
Executive for the three (3) prior years. 
Such payment shall be made in twelve


 


3





















 


(12)
equal monthly installments during the twelve (12) months following Executive’s
termination.


 


(c)        Upon
the occurrence of an Event of Termination, the Company will cause to be
continued life, medical, dental and disability coverage (to the extent
available) substantially identical to the coverage maintained by the Company
for Executive prior to his termination for twelve (12) months.


 


(d)       Upon
the occurrence of an Event of Termination, the Executive will be entitled to
receive vested benefits due him under or contributed by the Company on his
behalf pursuant to any retirement, incentive, profit sharing, bonus,
performance, disability (if coverage is available under the Company’s current
policy) or other employee benefit plans maintained by the Company on the
Executive’s behalf to the extent that such benefits are not otherwise paid to
Executive under a separate provision of this Agreement.


 


(e)        Upon
the occurrence of an Event of Termination, any unexercised Incentive Equity
granted to the Executive pursuant to Section 3(c) of this Agreement shall
immediately vest and be immediately exercisable and free from any right of
repurchase upon the Executive’s receipt of the Notice of Termination (as
defined below) relating to such Event of Termination, and any stock options
held by Executive shall remain exercisable for a period of one hundred twenty
(120) days thereafter, after which (unless otherwise provided in the Incentive
Equity agreement) they shall terminate.


 


5.         CHANGE
IN CONTROL.


 


(a)        No
benefit shall be payable under this Section 5 unless there shall have been
a Change in Control of the Company as set forth below.  For purposes of this Agreement, a “Change in
Control” of the Company shall mean any of the following:  (A) individuals who constitute the Board
on the date hereof (the “Incumbent Board”) cease for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
a majority of the directors comprising the Incumbent Board (or directors
elected by the process set forth in this clause (A)), shall be, for
purposes of this clause (A), considered as though he were a member of the
Incumbent Board; or (B) a sale of all or substantially all of the assets
of the Company, (C) a plan of reorganization, merger or consolidation or
similar transaction occurs in which the stockholders of the Company prior to
such transaction do not continue to hold, as a result of shares of capital
stock of the Company held by them prior to such transaction, a majority of the
voting power of the capital stock of the surviving corporation or entity;
(D) a proxy statement shall be distributed soliciting proxies from stockholders
of the Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company with one or more entities as a result of which the
outstanding shares of the class of securities then subject to such a plan or
transaction are subsequently exchanged for or converted into cash or property
or securities not issued by the Company shall be distributed; or (E) a
tender offer is completed for 50% or more of the voting securities of the
Company then outstanding.


 


4





















 


(b)       If
any of the events described in Section 5(a) hereof constituting a Change in
Control have occurred or the Board has determined that a Change in Control has occurred,
Executive shall be entitled to the benefits provided in paragraphs (c) and
(d) of this Section 5 upon his subsequent termination of employment by the
Company or resignation for Good Reason or in the event of Executive’s
subsequent death, in each case at any time during the term of this Agreement,
unless such termination is because of Termination for Cause.


 


(c)        Upon
the occurrence of a Change in Control followed by the Executive’s termination
of employment by the Company (other than a Termination for Cause or a
resignation without Good Reason), or in the event of Executive’s subsequent
death, the Company shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, an amount equal to the sum of
(i) twelve (12) months of the Executive’s Base Salary at the time of the
occurrence of the Change in Control plus (ii) the average of the annual
bonus amount for the prior three (3) years. 
Such payment shall be made in equal monthly installments during the
twelve (12) months following Executive’s termination.


 


(d)       Upon
the occurrence of a Change in Control followed by the Executive’s termination
of employment by the Company (other than a Termination for Cause or a
resignation without Good Reason), the Company will cause to be continued life,
medical, dental and disability coverage (if coverage is available under the
Company’s current policy) substantially identical to the coverage maintained by
the Company for Executive prior to his termination for twelve (12) months
following termination.


 


(e)        Upon
the occurrence of a Change in Control, any unvested Incentive Equity granted to
the Executive pursuant to Section 3(c) of this Agreement shall immediately vest
and be immediately exercisable and free from any rights of repurchase, subject
to the provisions of Section 5(f) hereof.


 


(f)        If
any payment or benefit Executive would receive pursuant to this Section 5
(“Payment”) would constitute a “parachute payment” within the meaning of
Section 280G of the Internal Revenue Code (the “Code”), and, but for this
paragraph (f), be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then such Payment shall be equal to the Reduced Amount.  The “Reduced Amount” shall be either
(x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up
to and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax (all computed at the highest applicable marginal rate),
results in Executive’s receipt, on an after-tax basis, of the greater amount of
the Payment notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax.  If a
reduction in payments or benefits constituting “parachute payments” is
necessary so that the Payment equals the Reduced Amount, reduction shall occur
in the following order unless Executive elects in writing a different order (provided, however, that such election
shall be subject to Company approval if made on or after the effective date of
the event that triggers the Payment): 
reduction of cash payments; cancellation of accelerated vesting of
Incentive Equity; reduction of employee benefits.  In the event that acceleration of vesting of
Incentive Equity compensation is to be reduced, such acceleration of vesting shall
be cancelled in the reverse order of the date of grant of Executive’s


 


5





















 


Incentive
Equity unless Executive elects in writing a different order for
cancellation.  The Company shall appoint
a nationally recognized accounting firm to make the determinations required
hereunder, and shall bear the expenses thereof. 
Such accounting firm shall provide its calculations, together with
detailed supporting documentation, to the Company and Executive within thirty (30)
calendar days after the date on which Executive’s right to a Payment is
triggered (if requested at that time by the Company or Executive).  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish the Company and Executive
with an opinion reasonably acceptable to Executive that no Excise Tax will be
imposed with respect to such Payment. 
Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and Executive.


 


6.         TERMINATION
UPON RETIREMENT, DEATH, AND DISABILITY.


 


(a)        Termination
by the Company of the Executive based on “Retirement” shall mean termination in
accordance with the Company’s retirement policy or in accordance with any
retirement arrangement established with Executive’s consent with respect to
him.  Upon termination of Executive upon
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Company and other plans to which Executive is a party.


 


(b)       This
Agreement shall automatically terminate upon the death of the Executive.  If terminated because of death, the rights
granted in section 4(e) will be immediately available for Executive’s
beneficiaries.  In addition, Executive
shall be awarded a pro-rated bonus, in an amount equal to the Board’s good
faith estimate of the bonus Executive would have been awarded for the current
year, pro-rated by the number of completed calendar months of such year (such
that, for example, a termination on October 5 in a calendar year would result
in payment of the 9/12 of Executive’s bonus); provided that in no event will
such bonus amount be less than such pro-rated portion of the average of
Executive’s bonuses for the three most recent years.


 


(c)        If
the Executive is Disabled (as defined below) for a continuous period of six (6)
months, the Company may terminate this Agreement upon written notice to the
Executive.  If the Company terminates the
Executive due to the Disability of the Executive, the Company shall, for a
period of one (1) year from the date of termination, provide the Executive with
the term life insurance and medical insurance and, to the extent permitted by
law and the terms and conditions of the Company’s benefit plans, other employee
benefits generally available to the Company’s employees, that are in effect at
the time of termination.  The Executive,
for purposes thereof, shall be deemed to be “Disabled” when, as a result of
bodily injury or disease or mental disorder he is so disabled that he is
prevented from performing the principal duties of his employment and is under
the regular care of a currently licensed physician or surgeon for such bodily
injury, disease or mental disorder.  In addition,
Executive shall be awarded (i) a cash amount equal to twelve (12) months of the
Executive’s Base Salary at the time of termination due to Disability, and (ii)
a pro-rated bonus, in an amount equal to the Board’s good faith estimate of the
bonus Executive would have been awarded following the end of the current year,
pro-rated by the number of completed calendar months of such year (such that,
for example, a termination on October 5 in a calendar year would result in
payment of the 9/12 of Executive’s bonus); provided that in no event will such
bonus amount be less than such pro-rated portion of the average of Executive’s
bonuses for the three most recent years.


 


6





















 


7.         TERMINATION
FOR CAUSE.


 


The
term “Termination for Cause” shall mean termination because of (i) any
knowing act, or knowing failure to act, by the Executive involving fraud or
willful malfeasance in the performance of his duties under this Agreement,
including, but not limited to, Executive’s willful failure to serve as a full time
employee of the Company pursuant to the terms and provisions of Section 1
of this Agreement, or (ii) the Executive’s unlawful appropriation of a
corporate opportunity or other breach of fiduciary duty or other obligation to
the Company, or (iii) the conviction of the Executive of a felony under
federal or state law.  For purposes of
this Section, no act, or the failure to act, on Executive’s part shall be “willful”
unless done, or omitted to be done, not in good faith and without reasonable
belief that the action or omission was in the best interest of the Company or
its affiliates.  Notwithstanding the
foregoing, Executive shall not be deemed to have been Terminated for Cause
unless and until there shall have been delivered to him a Notice of Termination
which shall include a copy of a resolution duly adopted by the affirmative vote
of a  majority of the members of the
Board at a meeting of the Board called and held for that purpose (after 30 days’
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail.  The
Executive shall not have the right to receive compensation or other benefits
for any period after Termination for Cause.


 


8.         NOTICE


 


(a)        Any
purported termination by the Company or by the Executive shall be communicated
by Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.


 


(b)       “Date
of Termination” shall mean (A) if Executive’s employment is terminated for
Disability, thirty (30) days after a Notice of Termination is given (provided
that he shall not have returned to the performance of his duties on a full-time
basis during such thirty (30) day period), and (B) if his employment is
terminated for any other reason, the date specified in the Notice of
Termination.


 


9.         CONFIDENTIALITY


 


Executive
will not, during or after the term of his employment, disclose any knowledge of
the past, present, planned or considered business activities of the Company to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever which is not otherwise publicly available.  In the event of a breach or threatened breach
by the Executive of the provisions of this Section 9, the Company will be
entitled to an injunction restraining Executive from disclosing, in whole or in
part, the knowledge of the past, present, planned or considered business
activities of the Company, or from rendering any services to any person, firm
corporation or other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed.  Nothing herein will be construed as
prohibiting the Company from pursuing any other remedies


 


7





















 


available to the Company for such breach or
threatened breach, including the recovery of damages from Executive.


 


10.       NON-COMPETITION.


 


Upon
any termination of Executive’s employment hereunder, Executive agrees not to
compete with the Company for a period of twelve (12) months following such
termination in those states within the United States and those countries
outside the United States in which the Company conducts business (the “Restricted
Area”); provided that the ownership by the Executive of less than five percent
(5%) of a publicly-traded class of securities shall not be deemed a violation
of this Section 10.  Executive agrees
that during such period and within the Restricted Area, Executive shall not
work for or advise, consult or otherwise serve with, directly or indirectly,
any entity whose business materially competes with the Company.  The parties hereto, recognizing that
irreparable injury will result to the Company, its business and property in the
event of Executive’s breach of this Section 10 agree that in the event of
any such breach by Executive, the Company will be entitled, in addition to any
other remedies and damages available, to an injunction to restrain the
violation hereof by Executive.  Executive
represents and admits that in the event of the termination of his employment,
Executive’s experience and capabilities are such that Executive can obtain
employment in a business engaged in other lines and/or of a different nature
than the Company, and that the enforcement of a remedy by way of injunction
will not prevent Executive from earning a livelihood.  Nothing herein will be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of damages
from Executive.


 


11.       SOURCE
OF PAYMENTS.


 


All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Company.  The
Company may use insurance proceeds especially obtained therefor as partial
payment in the event of disability.


 


12.       EFFECT
ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.


 


This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Company or any
predecessor of the Company and Executive (including without limitation
Executive’s Employment Agreement dated May 25, 1998).  No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.


 


13.       NO
ATTACHMENT.


 


(a)        Except
as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect any such action shall be null, void, and of
no effect.


 


8





















 


(b)       This
Agreement shall be binding upon, and inure to the benefit of, Executive and the
Company and their respective successors and assigns.


 


14.       MODIFICATION
AND WAIVER.


 


(a)        This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.


 


(b)       No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver
or estoppel.  No such written waiver
shall be deemed a continuing waiver unless specifically stated therein, and
each such waiver shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for the future as
to any act other than that specifically waived.


 


15.       SEVERABILITY.


 


If,
for any reason, any provision of this Agreement, or any part of any provision,
is held invalid, such invalidity shall not affect any other provision of this
Agreement or any part of such provision not held so invalid, and each such
other provision and part thereof shall to the full extent consistent with law
continue in full force and effect.


 


16.       HEADINGS
FOR REFERENCE ONLY.


 


The
headings of sections and paragraphs herein are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.


 


17.       GOVERNING
LAW


 


This
agreement shall be governed by the laws of the State of Minnesota.


 


9





















 


IN
WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be
duly executed and delivered as of the day and year first above written.


 


	
  EXECUTIVE:

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  DIGITAL RIVER, INC.

  
	
  By:

  	
  /s/ Joel A. Ronning

  	
   

  	
   

  
	
   

  	
  Joel A. Ronning

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Thomas F. Madison

  	
   

  
	
   

  	
   

  	
  Thomas F. Madison, Lead
  Director

  
						



 


10