ex10-1.htm


    
      
        

      

      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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

                        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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

                        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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

                       (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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              (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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

                        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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    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.