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EXHIBIT 10.1
 
ON2 TECHNOLOGIES, INC.
RETENTION AND SEVERANCE PLAN
 
                   The Company hereby adopts the ON2 Technologies, Inc.
Retention and Severance Plan, effective as of, and conditioned upon, the signing
of the Merger Agreement (as defined herein), for the benefit of certain
employees of the Company on the terms and conditions hereinafter stated. The
Plan, as set forth herein, is intended to assist in the retention and continued
dedication of qualified employees in the event of the Change of Control (as
defined herein) of the Company and provides for certain payments to eligible
employees in connection therewith.
 
SECTION 1.          DEFINITIONS. As hereinafter used:
 
                    1.1          “Base Salary” means the annual salary paid to a
Participant by the Company immediately prior to the Closing Date as compensation
for his or her services, and which has been disclosed to Parent. Base Salary
shall not include any incentive compensation, overtime, bonuses or other income
paid to the Participant.
 
                    1.2          “Board” means the Board of Directors of the
Company.
 
                    1.3          “Cause” means (i) Participant’s willful and
continued failure to perform the duties and responsibilities of his position
(other than as a result of the Participant’s illness or injury) after there has
been delivered to Participant a written demand for performance from the
Participant’s supervisor which describes the basis for the supervisor’s belief
that Participant has not substantially performed his duties and provides
Participant with a reasonable period of not less than ten (10) days to take
corrective action; (ii) any material act of personal dishonesty taken by
Participant in connection with his responsibilities as an employee of the
Company with the intention that such action may result in the substantial
personal enrichment of the Participant; or (iii) Participant’s conviction of, or
plea of nolo contendere to, a felony that the Company reasonably believes has
had or will have a material detrimental effect on the Company’s reputation or
business.
 
                    1.4          “Change in Control” means the occurrence of any
of the following events: (a) any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
“beneficial owner” (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities; (b) a change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the directors
are Incumbent Directors, (c) the consummation of a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or such surviving entity’s parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or such surviving entity’s parent outstanding immediately after
such merger or consolidation; (d) the consummation of the sale or disposition by
the Company of all or seventy-five percent (75%) or more of the Company’s assets
or (e) any other event that the Board determines to be a Change of Control. For
the avoidance of doubt, the consummation of the Merger shall constitute a Change
of Control and unless the Merger Agreement has been terminated, none of the
foregoing shall constitute a Change in Control other than the Closing.

 
 

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                    1.5          “Closing” shall have the meaning set forth in
the Merger Agreement.
 
                    1.6          “Closing Date” shall have the meaning set forth
in the Merger Agreement.
 
                    1.7          “Code” means the Internal Revenue Code of 1986,
as amended.
 
                    1.8          “Company” means ON2 Technologies, Inc., a
Delaware corporation.
 
                    1.9          “Confidential Information” means any valuable,
competitively sensitive data and information related to the Company’s business
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 a Participant for the Company, or was created or obtained by a
Participant while performing services for the Company or by virtue of a
Participant’s relationship with the Company. Confidential Information includes
but is not limited to, all tangible or intangible business or financial plans,
processes, strategies, market research and analyses, projections, methods and
techniques, forecasts and forecast assumptions, business practices, operations
and procedures, marketing information, customer information and other business
information, including records, technologies, designs, patents, business plans,
financial statements, manuals, memoranda, lists and other documentation
respecting the Company.
 
                    1.10         “Effective Date” means the date upon which this
Plan is adopted, effective as of, and conditioned upon the signing of the Merger
Agreement.
 
                    1.11         “Eligible Termination Date” means the effective
date of a Participant’s termination of employment as indicated in the Release.
 
                    1.12         “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.
 
                    1.13         “Merger” shall have the meaning set forth in
the Merger Agreement.
 
                    1.14         “Merger Agreement” means the Agreement and Plan
of Merger, dated as of August 4, 2009, by and among Google Inc., a Delaware
corporation (“Parent”), Oxide Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent, and the Company.
 
                    1.15         “Notice of Participation” means the individual
notice that informs the Participant of his or her designation as a participant
in the Plan and which sets forth the amount and timing of payments that such
Participant may be eligible to receive under the Plan. A form of the Notice of
Participation for Participants eligible for payments under Section 2.1(a) of the
Plan is attached hereto as Schedule B. A form of the Notice of Participation for
Participants eligible for payments under Section 2.1(b) of the Plan is attached
hereto as Schedule C.

 
 

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                    1.16          “Offer of Employment” means a bona fide offer
of employment from Parent or the Surviving Corporation (as defined in the Merger
Agreement).
 
                    1.17          “Participant” means (a) with respect to
Section 2.1(a) of this Plan, any employee of the Company or any subsidiary
thereof (other than employees of On2 Technologies Finland Oy), and (b) with
respect to Section 2.1(b) of this Plan, any employee who is designated by the
Board or Plan Administrator as eligible for benefits under Section 2.1(b) of
this Plan on or before the Effective Date. Notwithstanding the foregoing, no
employee of the Company may receive a Severance Payment under both Section
2.1(a) of this Plan and pursuant to an alternative arrangement with the Company,
Parent or the Surviving Corporation. In such a case, an employee will only be
entitled to the Severance Payment that provides him with the greatest amount of
severance pay. Severance Payments under this Plan will be reduced by any other
severance, pay in lieu of notice, or other similar benefits payable to such
employee from or on behalf of the Company or any prior employer of such
employee, which becomes payable on account of such employee’s involuntary
termination pursuant to (1) the WARN Act, (2) a written employment or severance
agreement, or any other severance plan or program sponsored or participated in
by the Company, unless otherwise specifically provided under such other plan,
program, arrangement or agreement or (3) any other obligation by any other
individual or entity other than the Company to provide a payment to such Covered
Employee in the event of an termination of such employee’s employment with the
Company. For the avoidance of doubt, Closing Retention Bonus payments made
pursuant to Section 2.1(b) of this Plan will not be reduced or changed as a
result of a Participant being eligible for payments under alternative
arrangements with the Company, Parent or the Surviving Corporation.
 
                    1.18          “Plan” means the ON2 Technologies, Inc.
Retention and Severance Plan.
 
                    1.19          “Plan Administrator” means the Compensation
Committee of the Board.
 
                    1.20          “Release” means the Separation Agreement and
Release in the form attached hereto as Schedule A.
 
SECTION 2.          CHANGE IN CONTROL RETENTION BENEFITS
 
                    2.1            General.
 
                  (a)          Subject to the terms and conditions of the Plan,
each Participant shall be entitled to a severance payment under this Section
2.1(a) equal to three months of the Participant’s Base Salary (“Severance
Payment”) if (i) after not receiving an Offer of Employment on or before the
60th day after the Closing Date, the Participant terminates employment; (ii) the
Participant’s employment is terminated either (a) by Parent or the Surviving
Corporation for any reason other than Cause on or before the 60th date after the
Closing Date; or (b) by Parent or the Surviving Corporation indicating in
writing to such Participant that he or she will not be receiving an Offer of
Employment for any reason other than Cause on or before the 60th day after the
Closing Date; or (iii) the Participant is given an Offer of Employment on or
before the 60th day after the Closing Date and the employee declines such Offer
of Employment within a time period (of no less than five (5) business days)
specified in the Offer of Employment and within forty-five (45) days after
receipt of such Offer of Employment his or her employment is terminated (by
Parent, the Surviving Corporation, or the Participant). Upon the occurrence of
any of the foregoing, within five (5 ) business days of such occurrence, Company
shall provide Participant with a Release specifying Participant’s Eligible
Termination Date and eligibility for the Severance Payment.

 
 

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                   (b)          Subject to the terms and conditions of the Plan,
each Participant designated by the Board or the Plan Administrator as eligible
for benefits under this Section 2.1(b) shall be entitled as of the Closing Date
to a retention bonus payment (“Closing Retention Bonus”) under this Section
2.1(b), in such amounts determined by the Board or the Plan Administrator, if
such Participant is employed by the Company on the Closing Date.
 
                     2.2          Payments.
 
                    (a)          Each Severance Payment under Section 2.1(a)
shall be paid in a lump sum within thirty (30) days after the Release Effective
Date (as defined in the Release). In addition, if a Participant’s employment is
terminated by Parent or the Surviving Corporation for any reason, other than
Cause, before the 60th day after the Closing Date, such Participant will
receive, in addition to the Severance Payment specified in Section 2.1(a) above,
Base Salary and continuation of standard Company benefits as if the Participant
was employed for such full 60-day period. For the avoidance of doubt, any
Participant that voluntarily terminates his or her employment prior to the 60th
day after the Closing Date and prior to the receipt of an Offer of Employment or
is terminated at any time for Cause, shall not be entitled to a Severance
Payment under Section 2.1(a) of this Plan.
 
                    (b)          Each Closing Retention Bonus under Section
2.1(b) shall be paid in a lump sum within thirty (30) days after the Closing
Date. In each case, the payments will be equal to a certain percentage of each
Participant’s Base Salary. The retention bonus payments are in such amounts as
have been designated by the Board or Plan Administrator on or before the
Effective Date.
 
                     2.3          409A. The provisions of this Plan are intended
to satisfy the requirements of the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations and be exempt from Section
409A of the Code and the final regulations and any guidance promulgated
thereunder (“Section 409A”). Further, it is the intent of the Plan to comply
with the requirements of Section 409A so that none of the benefits to be
provided hereunder will be subject to the additional tax imposed under Section
409A, and any ambiguities herein will be interpreted to so comply. The Company
reserves the right to amend the Plan and to take such reasonable actions which
are necessary, appropriate, or desirable to avoid imposition of any additional
tax or income recognition prior to actual payment to a Participant under Section
409A, provided that such amendment or action may not materially reduce the
benefits provided or to be provided to the Participant under the Plan.

 
 

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SECTION 3.          RESTRICTIVE COVENANTS.
 
                    3.1          General. A Participant’s entitlement to the
Severance Payment or Closing Retention Bonus not previously paid to or on behalf
of the Participant under Section 2 of the Plan shall be conditioned on
compliance with restrictive covenants, as set forth in this Section 3.
 
                    3.2          Confidentiality. During each Participant’s
employment with the Company and thereafter, the Participant shall not disclose
to any Person (except as required by applicable law or for the proper
performance of his duties and responsibilities to the Company and its
affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Participant incident to his employment or other association with
the Company or any of its affiliates. Notwithstanding anything herein to the
contrary, the term “Confidential Information” shall not include information
that: (i) becomes subsequently available to the Participant on a
non-confidential basis from a source not known or reasonably suspected by
Participant to be bound by a confidentiality agreement or secrecy obligation
owed to the Company; (ii) is or becomes generally available to the public other
than as a result of a breach of this Section 3.2 by the Participant; or (iii) is
independently developed by the Participant without use, directly or indirectly,
of Confidential Information. If only a portion of the Confidential Information
falls under one of the foregoing exceptions, then only that portion shall not be
deemed Confidential Information. In the event that the Participant is requested
or required, pursuant to any applicable court order, administrative order,
statute, regulation or other official order by any government or any agency or
department thereof, to disclose any Confidential Information, the Participant
shall (a) provide the Company with prompt written notice of any such request or
requirement so that the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Plan; and (b)
reasonably cooperate with the Company to obtain such protective order or other
remedy. In the event such protective order or other remedy is not obtained and
the Company fails to waive compliance with the relevant provisions of this Plan,
the Participant agrees to (1) furnish only that portion of the Confidential
Information that the Participant is advised by his or her legal counsel in
writing that he or she is legally required to disclose, (2) upon the Company’s
request and expense, use his or her reasonable efforts to obtain assurances that
confidential treatment will be accorded to such information, and (3) give the
Company prior written notice of the Confidential Information to be disclosed as
far in advance of his or her disclosure as is reasonably practicable.
 
                    3.3          Enforcement of Covenants; Breach.
 
          (1) The Company, in addition to any other remedies available to it,
shall be entitled to preliminary and permanent injunctive relief against any
breach or threatened breach by any Participant of any of the covenants contained
in this Section 3, without having to post bond, and shall be entitled to an
award of its attorneys’ fees and costs if the Participant is adjudged by a court
of competent jurisdiction to have breached any of the restrictive covenants in
this Section 3.

 
 

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          (2) In the event that any provision of this Section 3 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too
great a range of activities, such provision shall be deemed to be modified to
permit its enforcement to the maximum extent permitted by law.
 
SECTION 4.          PLAN ADMINISTRATION.
 
                    4.1          The Plan Administrator shall administer the
Plan and may interpret the Plan, prescribe, amend and rescind rules and
regulations under the Plan and make all other determinations necessary or
advisable for the administration of the Plan, subject to all of the provisions
of the Plan. Any determinations made by the Plan Administrator shall be binding
on the Company and all Participants and any other Person with rights under the
Plan.
 
                    4.2          The Plan Administrator is empowered, on behalf
of the Plan, to engage accountants, legal counsel and such other personnel as it
deems necessary or advisable to assist it in the performance of its duties under
the Plan. The functions of any such persons engaged by the Plan Administrator
shall be limited to the specified services and duties for which they are
engaged, and such persons shall have no other duties, obligations or
responsibilities under the Plan. Such persons shall exercise no discretionary
authority or discretionary control respecting the management of the Plan. All
reasonable expenses thereof shall be borne by the Company.
 
SECTION 5.          PLAN MODIFICATION OR TERMINATION.
 
                    The Plan may be terminated or amended at any time by the
Board or the Plan Administrator; provided, however, that for the first one
hundred and twenty (120) days following the Change in Control, the Plan may not
be terminated nor may the Plan be amended if such amendment would in any manner
be adverse to the interests of any Participant. For the avoidance of doubt, (a)
any action taken by the Board or the Plan Administrator to cause a Participant
to no longer be designated as a Participant, or to decrease the benefits for
which a Participant is eligible, and (b) any amendment to this Section 5
following the occurrence of the Change in Control, shall be treated as an
amendment to the Plan which is adverse to the interests of a Participant. After
the first one hundred and twenty (120) days following a Change in Control, the
Plan may not be amended if such amendment would in any manner be adverse to the
interests of any Participant who as of the 120th day following a Change in
Control is eligible for a payment pursuant to Section 2 of this Plan.

 
 

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SECTION 6.          GENERAL PROVISIONS.
 
                    6.1          Nothing in this Plan shall prevent or limit any
Participant’s continuing or future participation in any plan, program, policy or
practice provided by the Company or its Subsidiaries and for which the
Participant may qualify, nor shall anything herein limit or otherwise affect
such rights as any Participant may have under any other contract or agreement
with the Company or its Subsidiaries. Amounts that are vested benefits or that
the Participant is otherwise entitled to receive under any plan, policy,
practice or program of or any other contract or agreement with the Company or
its Subsidiaries at or subsequent to the Closing Date shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Plan.
 
                    6.2          No Participant whose employment is terminated
for any reason shall be eligible to receive the Severance Payment under the Plan
unless the Participant first executes the Release and does not revoke the
Release within the time permitted therein for such revocation.
 
                    6.3          The Company shall be entitled to withhold from
amounts to be paid to a Participant any federal, state or local withholding or
other taxes which it is from time to time required to withhold.
 
                    6.4          Except as otherwise provided herein or by law,
no right or interest of any Participant under the Plan shall be assignable or
transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Participant under the Plan
shall be liable for, or subject to, any obligation or liability of such
Participant. When a payment is due under this Plan to a severed employee who is
unable to care for his or her affairs, payment may be made directly to his or
her legal guardian or personal representative.
 
                    6.5          If the Company or any subsidiary thereof is
obligated by law or by contract to pay severance pay, a termination indemnity,
notice pay, or the like, or if the Company or any subsidiary thereof is
obligated by law to provide advance notice of separation (“Notice Period”), then
any pay hereunder shall be reduced by the amount of any such severance pay,
termination indemnity, notice pay or the like, as applicable, and by the amount
of any compensation received during any Notice Period.
 
                    6.6          Neither the establishment of the Plan, nor any
modification thereof, nor the creation of any fund, trust or account, nor the
payment of any benefits shall be construed as giving any Participant, or any
person whomsoever, the right to be retained in the service of the Company or any
subsidiary thereof, and all Participants shall remain subject to discharge to
the same extent as if the Plan had never been adopted.
 
                    6.7          Subject to the specific provisions of Section
3.3(2) concerning restrictive covenants, if any other provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provision had not been included.

 
 

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                    6.8          This Plan shall inure to the benefit of and be
binding upon the heirs, executors, administrators, successors and assigns of
each Participant, present and future. If a Participant shall die while any
amount would still be payable to such Participant hereunder if the Participant
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Plan to the executor, personal
representative or administrators of the Participant’s estate.
 
                     6.9          Any successor to the Company of all or
substantially all of the Company’s business and/or assets (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise), including specifically Parent and the Surviving Corporation will
assume the obligations under this Plan and will perform the obligations under
this Plan in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all
purposes under this Plan, the term “Company” will include any successor to the
Company’s business and/or assets which become bound by the terms of this Plan by
operation of law, or otherwise, including specifically Parent and the Surviving
Corporation.
 
                    6.10          The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
 
                    6.11          The Company shall not be required to set aside
assets for the purpose of funding benefits under the Plan unless such funding is
authorized by the Board. Regardless of whether the Plan is funded, no
Participant shall have any right to, or interest in, any assets of any Person
which may be applied by the Company to the payment of benefits or other rights
under this Plan.
 
                    6.12          Any notice or other communication required or
permitted pursuant to the terms hereof shall have been duly given when delivered
or mailed by United States Mail, first class, postage prepaid, addressed to the
intended recipient at his, her or its last known address except that the Notice
of Participation and Release may be delivered, in person, to Participant at
Participants place of work
 
                    6.13          This Plan shall be construed and enforced
according to the laws of the State of New York to the extent not preempted by
federal law, which shall otherwise control, provided however, that if the Merger
Agreement is consummated, this Plan shall be construed and enforced according to
the laws of the State of California to the extent not preempted by federal law,
which shall otherwise control.
 
                     6.14          The Participant acknowledges that Participant
is an employee at will.

 
 

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SECTION 7.          CLAIMS, INQUIRIES, APPEALS.
 
                    7.1          Applications for Benefits and Inquiries. Any
application for benefits, inquiries about the Plan or inquiries about present or
future rights under the Plan must be submitted to the Plan Administrator in
writing, as follows:
 
                    Plan Administrator
                    c/o ON2 Technologies, Inc.
                    3 Corporate Drive, Suite 100
                    Clifton Park, NY 12065
 
                     7.2          Denial of Claims. In the event that any
application for benefits is denied in whole or in part, the Plan Administrator
must notify the applicant, in writing, of the denial of the application, and of
the applicant’s right to review the denial. The written notice of denial will be
set forth in a manner designed to be understood by the applicant, and will
include specific reasons for the denial, specific references to the Plan
provision upon which the denial is based, a description of any information or
material that the Plan Administrator needs to complete the review and an
explanation of the Plan’s review procedure.
 
                    This written notice will be given to the employee within 90
days after the Plan Administrator receives the application, unless special
circumstances require an extension of time, in which case, the Plan
Administrator has up to an additional 90 days for processing the application. If
an extension of time for processing is required, written notice of the extension
will be furnished to the applicant before the end of the initial 90-day period.
 
                    This notice of extension will describe the special
circumstances necessitating the additional time and the date by which the Plan
Administrator is to render its decision on the application. If written notice of
denial of the application for benefits is not furnished within the specified
time, the application shall be deemed to be denied. The applicant will then be
permitted to appeal the denial in accordance with the review procedure described
below.
 
                     7.3          Request for a Review. Any person (or that
person’s authorized representative) for whom an application for benefits is
denied (or deemed denied), in whole or in part, may appeal the denial by
submitting a request for a review to the Plan Administrator within 60 days after
the application is denied (or deemed denied). The Plan Administrator will give
the applicant (or the applicant’s representative) an opportunity to review
pertinent documents in preparing a request for a review and submit written
comments, documents, records and other information relating to the claim. A
request for a review shall be in writing and shall be addressed to:
 
                    Plan Administrator
                    c/o ON2 Technologies, Inc.
                    3 Corporate Drive, Suite 100
                    Clifton Park, NY 12065

 
 

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A request for review must set forth all of the grounds on which it is based, all
facts in support of the request and any other matters that the applicant feels
are pertinent. The Plan Administrator may require the applicant to submit
additional facts, documents or other material as the Plan Administrator may find
necessary or appropriate in making its review.
 
                    7.4          Decision on Review. The Plan Administrator will
act on each request for review within 60 days after receipt of the request,
unless special circumstances require an extension of time (not to exceed an
additional 60 days), for processing the request for a review. If an extension
for review is required, written notice of the extension will be furnished to the
applicant within the initial 60-day period. The Plan Administrator will give
prompt, written notice of the Plan Administrator’s decision to the applicant. In
the event that the Plan Administrator confirms the denial of the application for
benefits in whole or in part, the notice will outline, in a manner calculated to
be understood by the applicant, the specific Plan provisions upon which the
decision is based. If written notice of the Plan Administrator’s decision is not
given to the applicant within the time prescribed in this Section 10.4 the
application will be deemed denied on review.
 
                    7.5          Rules and Procedures. The Plan Administrator
may establish rules and procedures, consistent with the Plan and with ERISA, as
necessary and appropriate in carrying out his or her responsibilities in
reviewing benefit claims. The Plan Administrator may require an applicant who
wishes to submit additional information in connection with an appeal from the
denial (or deemed denial) of benefits to do so at the applicant’s own expense.
 
                    7.6          Exhaustion of Remedies. No legal action for
benefits under the Plan may be brought until the claimant (1) has submitted a
written application for benefits in accordance with the procedures described by
Section 7.1 above, (2) has been notified by the Plan Administrator that the
application is denied (or the application is deemed denied due to the Plan
Administrator’s failure to act on it within the established time period), (3)
has filed a written request for a review of the application in accordance with
the appeal procedure described in Section 7.3 above and (4) has been notified in
writing that the Plan Administrator has denied the appeal (or the appeal is
deemed to be denied due to the Plan Administrator’s failure to take any action
on the claim within the time prescribed by Section 7.4 above).

 
 

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SCHEDULE A
 
[DATE]
 
[NAME]
[ADDRESS]
 
                  Re:   Separation Agreement and Release
 
Dear [NAME]:
 
This letter constitutes a Release in accordance with the On2 Technologies, Inc.
Retention and Severance Plan (the “Plan”). A copy of the Plan is enclosed with
this letter. In order to become eligible for the benefits described in this
letter, you will have to execute and return a copy of this letter. All
provisions of this Release are subject to and governed by the terms of the Plan.
 
          1.     Participant. You are a Participant under the Plan, and your
Eligible Termination Date is [TERMINATION DATE] (“Termination Date”).
 
          2.     Payment of Salary; Other Benefits. On your Eligible Termination
Date, On2 Technologies, Inc. or its successor in interest (the “Company”) will
pay you all salary, wages, bonuses, accrued vacation, commissions and any and
all other benefits due to you through the Termination Date.
 
          3.     Severance Payment. Provided all other requirements under the
Plan and this Release are met, your Severance Payment will be $[_______],
subject to applicable taxes and withholdings. Payments will be made payable
within thirty (30) days of the Effective Date of this Agreement as defined
below.
 
          4.     Confidential Information. You shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between you and the Company, a copy of which will be
provided to you upon request. You shall return all the Company property and
confidential and proprietary information in your possession to the Company on
the Termination Date. Your Severance Payment is also conditioned on the
confidentiality requirements set forth in Section 3 of the Plan, which is
attached.

 
 

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          5.     Release of Claims. You understand and agree that the Severance
Payment provided for herein, except for those to which you are already entitled,
are provided to you in consideration for the covenants undertaken and the
releases contained in this Agreement. You, on your own behalf, and on behalf of
your respective heirs, family members, executors, and assigns, hereby fully and
forever release the Company and its officers, directors, employees, investors,
shareholders, administrators, affiliates, divisions, subsidiaries, predecessor
and successor corporations, and assigns, from, and agree not to sue concerning,
any claim, duty, obligation or cause of action relating to any matters of any
kind, whether presently known or unknown, suspected or unsuspected, that you may
possess arising from any omissions, acts or facts that have occurred up until
and including the date you execute this Agreement including, without limitation:
any and all claims relating to or arising from your employment relationship with
the Company and the termination of that relationship; any and all claims for
wrongful discharge of employment, termination in violation of public policy,
discrimination, retaliation, breach of contract, both express and implied,
breach of a covenant of good faith and fair dealing, both express and implied,
promissory estoppel, negligent or intentional infliction of emotional distress,
negligent or intentional misrepresentation, negligent or intentional
interference with contract or prospective economic advantage, unfair business
practices, defamation, libel, slander, negligence, personal injury, assault,
battery, invasion of privacy, false imprisonment, and conversion; any and all
claims for violation of any federal, state or municipal statute, including, but
not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1967 (“ADEA”), the
Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the
Employee Retirement Income Security Act of 1974, the Worker Adjustment and
Retraining Notification Act, Older Workers Benefit Protection Act (“OWBPA”),
National Labor Relations Act, Family and Medical Leave Act, Equal Pay Act, any
and all claims for violation of the federal, or any state, constitution; any and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and any and all claims for attorneys’ fees and
costs.
 
The following paragraph applies to you only if you are at least 40 years of age.
You acknowledge that you are knowingly and voluntarily waiving and releasing any
rights you may have under the ADEA. You also acknowledge that the consideration
given for the waiver and release in the preceding paragraph is in addition to
anything of value to which you were already entitled. You acknowledge that this
Agreement is written in a manner calculated to be understood by you. You further
acknowledge that you have been advised by this writing, as required by the ADEA
and OWBPA, that: (a) your waiver and release do not apply to any rights or claim
that may arise after the execution of this Agreement; (b) you should consult
with an attorney prior to executing this Agreement; (c) you have forty-five (45)
days to consider this Agreement (although you may choose to voluntarily execute
this Agreement earlier); (d) you have seven (7) days following the execution of
this Agreement to revoke the Agreement, which if you opt to do so, must be in
writing; (e) this Agreement shall not be effective until the revocation period
has expired, i.e., as of the eighth day after this Agreement is executed by you;
and (f) at the time you were provided with this Agreement and Release, you were
provided with the attached document (Exhibit B) entitled “Information Concerning
Reduction in Force.”
 
The Company and you agree that the release set forth in this section shall be
and remain in effect in all respects as a complete general release as to the
matters released. This release does not extend to any obligations incurred under
this Agreement.

 
 

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          6.     Waiver of Unknown Claims – California Civil Code Section 1542
(For Employees Who Live or Work in California Only). Both you and the Company
represent that you are not aware of any claim by either party other than the
claims that are released by this Agreement. If you work or reside in California,
you acknowledge that you have been advised by legal counsel and are familiar
with the provisions of California Civil Code Section 1542, which provides as
follows:
 
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
 
         You and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
 
          7.     No Pending or Future Lawsuits. You represent that you have no
lawsuits, claims, or actions pending in your name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. You also represent that you do not intend to bring any claims on your
own behalf or on behalf of any other person or entity against the Company or any
other person or entity referred to herein.
 
          8.     Confidentiality. The existence of and provisions of the
Agreement shall be held in strictest confidence by you and shall not be
publicized or disclosed in any manner whatsoever, including but not limited to
any reference to its existence, meaning, importance, value or comparative value;
provided, however, you may disclose this Agreement to your spouse or domestic
partner (if any), attorney, accountant, tax preparer, and financial advisor, and
you may also disclose this Agreement insofar as such disclosure is required by
law. You specifically agree that your obligation to maintain the confidentiality
of this Agreement is a material term of this Agreement without which the Company
would not have entered into this Agreement. Therefore, you agree that a
violation of the terms of this provision will obligate you to refund the
Severance Payment paid to you pursuant to Section 3 of this Agreement. Nothing
is this paragraph shall prejudice the Company’s ability to recover damages for
the breach of any other provision of this Agreement.
 
          9.     Non-Disparagement; No Cooperation. You agree that you will not
engage in any conduct or communication, either personally or through agents,
that might damage the business of the Company or its reputation. You further
agree that you will not counsel or assist any attorneys or their clients in the
presentation or prosecution of any disputes, differences, grievances, claims,
charges, or complaints by any third party against the Company and/or any
officer, director, employee, agent, representative, shareholder or attorney of
the Company, unless under a subpoena or court order to do so.
 
          10.    No Admission of Liability. Nothing contained herein shall be
deemed to constitute an admission or evidence of liability on the part of the
Company.

 
 

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          11.     Miscellaneous. This Agreement constitutes the final and
exclusive embodiment of the entire agreement between you and the Company with
regard to its subject matter. It is entered into without reliance on any promise
or representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises, warranties or representations. This
Agreement may not be modified or amended except in a writing signed by both you
and a duly authorized officer of the Company. This agreement shall be binding
upon you and the Company and the respective heirs, personal representatives,
successors and assigns of you and the Company, but neither this Agreement nor
any right hereunder shall be assignable by you without the written consent of
the Company. If any provision of this Agreement is held to be invalid, void or
unenforceable, the remaining provisions shall remain in full force and effect.
This Agreement shall be construed and enforced according to the laws of the
State of New York to the extent not preempted by federal law, which shall
otherwise control, provided however, that if the Merger Agreement is
consummated, this Agreement shall be construed and enforced according to the
laws of the State of California to the extent not preempted by federal law,
which shall otherwise control.
 
          12.     Release Effective Date. If this Agreement is acceptable to
you, please indicate your agreement by signing and dating the enclosed copy of
this Agreement in the space provided below and returning it to me on or before
forty-five (45) days from the receipt of this agreement. If you are age 40 or
older, this Agreement’s “Release Effective Date” shall be the eighth day after
it is executed by you (“the Release Effective Date”), provided that you have not
revoked. If you are under 40 years of age, this Agreement’s “Release Effective
Date” shall be the date you sign the Agreement.

 
 

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SCHEDULE B
 
On2 Technologies, Inc. Retention and Severance Plan
 
NOTICE OF PARTICIPATION
 
          Unless otherwise defined herein, the terms defined in the On2
Technologies, Inc. Retention and Severance Plan (the “Plan”) will have the same
meanings in this Notice of Participation.
 

 
PARTICIPANT: [NAME]
 

 
          On2 Technologies, Inc. (the “Company”) is pleased to inform you that
you have been designated as a Participant in the Plan. Pursuant to the terms of
the Plan, you are entitled to receive a severance payment equal to $[_______]
under the Plan (the “Severance Payment”) if (i) after not receiving an Offer of
Employment on or before the 60th day after the Closing Date, you terminate
employment; (ii) your employment is terminated either (a) by Parent or the
Surviving Corporation for any reason other than Cause on or before the 60th date
after the Closing Date; or (b) by Parent or the Surviving Corporation indicating
in writing to you that you will not be receiving an Offer of Employment for any
reason other than Cause on or before the 60th day after the Closing Date; (iii)
you are given an Offer of Employment on or before the 60th day after the Closing
Date and you decline such Offer of Employment within a time period (of no less
than five (5) business days) specified in the Offer of Employment and within
forty-five (45) days after receipt of such Offer of Employment your employment
is terminated (by Parent, the Surviving Corporation, or you). In addition, in
the event your employment is terminated before the 60th day after the Closing
Date you will also receive, in addition to the Severance Payment, continuation
of standard Company benefits as if you were employed for such full 60-day
period.
 
          You will be required to sign a Separation Agreement and Release (the
“Release”) in order to receive your Severance Payment. The Severance Payment is
payable as a lump sum within thirty (30) days after the Release Effective Date
(as defined in the Release).

 
 

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SCHEDULE C
 
On2 Technologies, Inc. Retention and Severance Plan
 
NOTICE OF PARTICIPATION
 
          Unless otherwise defined herein, the terms defined in the On2
Technologies, Inc. Retention and Severance Plan (the “Plan”) will have the same
meanings in this Notice of Participation.
 

 
PARTICIPANT: [NAME]
 

 
          On2 Technologies, Inc. (the “Company”) is pleased to inform you that
you have been designated as a Participant in the Plan. Pursuant to the terms of
the Plan, you are entitled to receive a retention bonus equal to $[_______]
under the Plan (the “Closing Retention Bonus”) if you are employed with the
Company on the Closing Date.
 
          The Closing Retention Bonus is payable as a lump sum within thirty
(30) days after the Closing Date.