Document:

Exhibit
      10.1

    

    
 

    
      
        	
                
                
	

                On2
                  Technologies, Inc.

                3
                  Corporate Drive Suite 100

                Clifton
                  Park, NY 12065

                www.on2.com

              
	 	 

      

     

    

    

    

    Mr.
      Matthew Frost

    c/o
      3
      Corporate Drive

    Suite
      100

    Clifton
      Park, NY 12065

    

    Dear
      Matt:

    

    The
      following constitutes the employment agreement (the "Agreement") between you
      (the "Executive") and On2 Technologies, Inc. (the "Company"), a Delaware
      corporation. This letter sets forth the terms of your employment as Chief
      Operating Officer (“COO”) and shall be effective as of the last date on which
      any party hereto executes this Agreement (“Effective Date”). 

    

    1.
      EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT; FUTURE ADVANCEMENT. The Company hereby
      employs the Executive during the Term (as defined below) on a full-time basis
      to
      render exclusive services to the Company as COO. The Executive hereby accepts
      this employment and will render his services as required by the Company
      conscientiously, loyally, competently and to the best of his talents and
      abilities throughout the Term in accordance with the direction and control
      of
      the Chief Executive Officer and/or the Chairman of the Board of Directors.
      

    

    2.
      TERM
      OF AGREEMENT. The initial term of this Agreement shall commence on the Effective
      Date and terminate three (3) years hence. On or after the two hundred seventieth
      (270th)
      day
      before the end of the initial Term, but prior to the sixtieth (60th)
      day
      before the end of the initial Term, Executive may provide notice to Company
      of
      his offer to renew the Agreement for an additional three (3) year term, and
      Company shall be deemed to have accepted the offer unless, within fifteen (15)
      days of notice, Company provides Executive with notice that Company has
      determined not to renew the Agreement. The initial term, as extended by any
      renewal term, is referred to herein as the "Term". 

    

    3.
      EXECUTIVE'S DUTIES. 

    

    a.
      The
      Executive's responsibilities as COO will include managing the day-to-day
      operations of the Company, including product development, sales, services,
      legal
      and administration. The Executive will report directly to the Company’s CEO. The
      Executive shall also perform such other duties and services as may reasonably
      be
      assigned to him from time to time by the CEO, consistent with his position
      as
      COO, in the conduct of the business of the Company. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    b.
      The
      Executive's services shall be rendered at the Company's offices in Clifton
      Park,
      New York and at the Executive’s residence within 150 miles of such office, and
      from time to time at such other locations as the Company may reasonably request
      consistent with its business needs. Travel to such locations, including travel
      to the Clifton Park office, will be at the Company's expense. Executive shall
      use reasonable efforts to work in the Clifton Park office no less often than
      one
      (1) day per week, with the understanding that the Executive’s workload may
      occasionally make such a schedule impracticable.

    

    4.
      EXCLUSIVITY, RESTRICTIVE AGREEMENTS. 

    

    a.
      During
      his employment, the Executive shall devote all of his business time, skill
      and
      energies exclusively to the business of the Company. 

    

    b.
      The
      Executive acknowledges that the nature of the services, position and expertise
      of the Executive are such that he is capable of competing with the Company
      and
      seriously damaging its business and its prospects to the detriment of its
      stockholders and employees. In consideration of the Company's performance of
      its
      obligations under this Agreement, during the Term and thereafter during the
      Restricted Period (as defined below) the Executive shall not (i) directly or
      indirectly enter into the employ of, or render any advice or services, whether
      or not for compensation, to, any Person (as defined below) engaged in any
      Competitive Business (as defined below); (ii) directly or indirectly engage
      in
      any Competitive Business; and (iii) directly or indirectly become interested,
      whether or not for compensation, in any Competitive Business as an individual,
      partner, shareholder, creditor, director, officer, principal, agent, employee,
      trustee, consultant, advisor or in any other relationship or capacity or, in
      the
      case of any such company whose securities are traded on a national securities
      exchange in the United States or otherwise or in the over-the-counter market,
      acquire, directly or indirectly, an interest in excess of one percent (1%)
      of
      the outstanding capital stock of such company. The Company's business is
      worldwide in scope; accordingly, the Executive agrees that this covenant not
      to
      compete shall not be subject to any geographical limit. 

    

    c.
      For
      purposes of this Section, any "Competitive Business" shall mean any business
      engaged in the design or development of digital compression, decompression
      or
      playback technologies in the computing, telecommunications or entertainment
      industries. For the avoidance of doubt, any division, unit, subsidiary or
      affiliate of any other business will be deemed a Competitive Business unless
      the
      Executive can demonstrate upon the Company's request that his employment by,
      engagement in, or interest in such unit, division, subsidiary or affiliate
      does
      not and will not require him to provide services, information, advice or
      relevant knowledge, skill, know-how or contacts to a Competitive Business during
      the Restricted Period. 

    

    d.
      For
      purposes of this Section, "Person" shall mean any corporation, partnership,
      trust, individual or any other entity. 

    

    e.
      For
      all purposes of this Section 4, "Restricted Period" shall be the period
      commencing on the date of this agreement and extending through the expiration
      of
      the Term or through the 365th
      day
      immediately following termination of employment by resignation or termination
      by
      the Company, with or without Cause (as defined below).

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.
      COMPENSATION. 

    

    a.
      During
      the Term the Executive shall be entitled to receive base compensation (“Base
      Salary”) at the initial rate of $250,000 per year, payable semi-monthly, and as
      that rate may be increased from time to time over the Term. For his service
      between June 13, 2008 and the Effective Date, the Executive shall be compensated
      retroactively for the difference between his On2 salary then in effect and
      the
      initial Base Salary rate of $250,000 annually.

    

    b.
      The
      Company shall reimburse the Executive for expenses related to the Company’s
      business actually incurred or paid by the Executive in the performance of his
      duties under this Agreement, including without limitation home cable modem
      and
      satellite modem bills and cell phone bills, upon presentation of accountings,
      expense statements, vouchers or such other supporting information as may
      reasonably be required by the Company's policies. 

    

    c.
      The
      Company shall include the Executive at the highest level in any stock option,
      bonus, or other incentive compensation plan now or in the future made available
      to the most senior members of the Company’s management, including, but not
      limited to, the CEO.

    

    d. Executive
      shall receive a stock option grant convertible into 300,000 shares of the
      Company’s common stock, to be granted under the Company’s 2005 Incentive
      Compensation Plan. This grant will vest in three equal installments: one-third
      (1/3) on the date of the grant, one-third on June 13, 2009, and one-third on
      June 13, 2010. Executive shall also receive a restricted stock grant of 250,000
      shares of the Company’s common stock, which grant will vest in two equal
      installments: one-half (1/2) on June 13, 2009, and one-half on June 13, 2010.
      

     

    6.
      EXECUTIVE BENEFITS. 

    

    a.
      During
      the Term, the Executive shall be entitled to participate in such group health,
      retirement, profit sharing, 401(k) and other benefits programs or plans,
      qualified or unqualified, which are or become available to other senior
      executives of the Company, subject to the policies of the Company with respect
      to all of such programs or plans. Nothing in this clause 6.a. shall be construed
      to create a contractual obligation to provide the Executive with any particular
      form or type of benefit or to limit the discretion the Board of Directors or
      Compensation Committee or any other duly authorized or appointed plan
      administrator is permitted to exercise under any such benefit programs or plans.
      

    

    b.
      During
      the Term the Executive shall be entitled to four weeks' paid vacation per year
      of employment to be scheduled on reasonable notice to the Company and to be
      taken, accrued and paid on the same basis as other senior executives of the
      Company. 

    

    7.
      TERMINATION OF EMPLOYMENT FOR DEATH, DISABILITY, OR BY THE COMPANY FOR CAUSE.
      

    

    a.
      The
      Company may terminate employment of Executive for any of the following reasons,
      each of which is defined as "Cause:" 

     

    
      	 	 	i. commission of a felony, any crime of moral turpitude
              or any act of material fraud or dishonesty; 

      	 	 	 

      	 	 	
              ii.
                repeated failure to satisfactorily perform material services required
                under this Agreement in accordance with the requests of the Board
                of
                Directors; 

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	 	 	iii. willful misconduct or gross negligence in the
              performance of his duties; 

    

     

    
      	 	 	iv. intentional disregard or violation of the legal
              rights of any employees of the Company or of the Company's written
              policies regarding harassment or discrimination;
              or

    

     

    
      	 	 	v. a breach of any material provisions of this Agreement
              (including, but not limited to, any breach of Sections 4 or
              10).

    

     

    b.
      If the
      Company terminates the employment of the Executive for Cause, or if the
      Executive resigns during the Term other than for Good Reason, the Company's
      obligations under this Agreement to pay further compensation shall cease
      forthwith, except that the Company will pay to the Executive, within 30 days
      after the date of termination of his employment, in full and complete
      satisfaction of all of the Company's obligations under this Agreement: (i)
      the
      Base Salary earned to the date of termination and, subject to Executive’s
      submission of all required documentation, reimbursable expenses accrued (but
      unpaid) to the date of termination; and (ii) any accrued but unused vacation
      days paid at the rate of the Executive's Base Salary. In addition, during the
      six months after such termination, the Company will provide all benefits that
      would have been provided had Executive’s employment continued, including
      medical, disability and life insurance; PROVIDED that, in the case of the death
      of the Executive during such six-month period, medical insurance will be
      continued for the Executive's spouse and children for the duration of such
      period. Nothing contained in this Section 7.b shall be construed to alter the
      Executive's rights under any stock option plan pursuant to which options have
      been or may be issued to Executive. 

    

    c.
      If the
      Executive dies during the Term, such death shall be deemed termination for
      Cause
      and the Company's obligation to Executive's estate shall be the same as those
      after termination for Cause as defined in Section 7.a above. 

    

    d.
      If, as
      a result of the Executive's disability or incapacity during the Term due to
      any
      mental or physical illness or condition, the Executive is unable substantially
      to perform his duties hereunder for a consecutive 12-calendar week period,
      or an
      aggregate period of 12 calendar weeks during any 12 months (or such longer
      period as may be required to comply with the Family Leave Act or other
      applicable law), the Company shall have the right, upon written notice to the
      Executive, to terminate the Executive's employment under this Agreement. Such
      a
      termination shall be deemed termination for Cause as defined in Section 7.a,
      but
      shall in no case become effective until the date on which the Company's
      long-term disability plan pays benefits to the Executive. 

    

    e.
      Any
      alleged breach of this Agreement by either party shall not be deemed a breach
      until such time as the breaching party shall have received written notice from
      the non-breaching party setting forth the alleged breach ("Alleged Breach
      Notice") and the breaching party shall not have cured (if curable) the breach
      set forth in the Alleged Breach Notice in the 15 days (10 days for defaults
      in
      payments) after receipt of such Alleged Breach Notice. If the breach set forth
      in the Alleged Breach Notice is not curable and has not resulted in a
      substantive and material adverse effect on the party sending the Alleged Breach
      Notice, the Company and the Executive shall, at the request of the other,
      attempt to meet and discuss such alleged breach before resorting to remedies
      or
      rights under this Agreement or otherwise. Notwithstanding the foregoing, this
      Section shall not apply to, and the Executive shall have no right to cure,
      a
      breach by him under clauses (i) and (iv) of the definition "Cause" contained
      in
      Section 7.a, above. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8.
      TERMINATION OF EMPLOYMENT BY THE COMPANY OTHER THAN FOR CAUSE. 

    

    a.
      If the
      Company terminates the Executive's employment without Cause, the Company's
      obligations under this Agreement shall be as follows: 

    

    
      	 	 	
              i.
                The Company will continue to pay to the Executive, or in the case
                of death
                of the Executive after such termination without Cause to his successors
                or
                legal representatives or to his estate, during the 365 days immediately
                following such termination of employment (such period is hereinafter
                referred to as the "Severance Period"), his Base Salary on a monthly
                basis
                as would have been paid to the Executive had his employment with
                the
                Company continued; provided, however, that to the extent any payment
                under
                this Paragraph 8.a.i. fails to satisfy the requirements set forth
                in
                Treasury Regulation Section 1.409A-1(b)(9)(iii), the amount shall
                not be
                paid to the Executive before the date that is six (6) months after
                the
                date of the Executive’s separation from service, or if earlier, date of
                death.

            

    

    

    
      	 	 	
              ii.
                The Company shall pay to the Executive his proportionate share of
                any
                bonus compensation to which he would have been entitled had he continued
                to be employed until the end of the relevant bonus calculation period.
                Such bonus compensation shall be payable in a lump sum within 30
                days of
                determination of Executive's bonus amount, but in any event no later
                than
                March 15th following the taxable year to which such bonus applies,
                except
                as permitted under Section 409A of the Internal Revenue Code (the
“Code”);
                it is intended that the payment contemplated by this Paragraph 8.a.ii.
                comply with the short-term deferral exception to Section 409A of
                the
                Internal Revenue Code under Treasury Regulation Section 1.409A-1(b)(4)
                and, to the extent applicable, with Treasury Regulation
                Section
                1.409A-2(b)(7).

            

    

    

    
      	 	 	
              iii.
                The Company will continue to provide all benefits to the Executive
                during
                the Severance Period that would have been provided had Executive’s
                employment continued, including medical, disability and life insurance.
                In
                the case of the death of the Executive, medical insurance will be
                continued for Executive's spouse and children for the duration of
                the
                Severance Period; and 

            

    

    

    
      	 	 	
              iv.
                The Company will promptly, subject to the Executive’s submission of
                reasonably required documentation, reimburse the Executive for all
                reimbursable expenses accrued (but unpaid) to the date of termination;
                and
                within 10 business days after such termination, any accrued but unused
                vacation days paid at Executive's Base Salary.

            

    

    

    b.
      If a
      termination without Cause takes effect prior to the expiration of the Term,
      all
      of the Executive's stock options which would have vested and become exercisable
      had the Executive's employment continued to the end of the Term in which such
      termination without Cause occurred shall immediately vest and become
      exercisable, and the Executive may thereafter exercise all options held by
      him
      during the period ending on the last day on which the Executive may exercise
      any
      such options under the terms of the applicable option plan or 90 days from
      the
      date of termination, whichever is later. Additionally, if a termination without
      Cause takes effect prior to the expiration of the Term, all of the Executive's
      restricted stock which would have vested had the Executive's employment
      continued to the end of the Term in which such termination without Cause has
      occurred shall immediately vest.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    9.
      TERMINATION OF EMPLOYMENT BY EXECUTIVE FOR GOOD REASON. 

    

    a. If
      the
      Executive terminates his employment for Good Reason, the Company's obligations
      to pay further compensation to the Executive shall be the same as its
      obligations after a termination by the Company other than for Cause, as set
      forth in Section 8 above.

    

    b. "Good
      Reason" means the occurrence of any of the following:

     

    
      	 	 	i. a material diminution in the Executive’s base
              compensation, authority, duties, or
              responsibilities;

      	 	 	 

      	 	 	
              ii.
                a material diminution in the authority, duties, or responsibilities
                of the
                person or committee to whom the Executive is required to report;
                

            

      	 	 	 

      	 	 	iii. a material change in the geographic location
              at
              which the Executive must perform the services;
              or

      	 	 	
            

      	 	 	iv. any other action or inaction that constitutes
              a
              material breach by the Company of this Agreement;

    

     

    For
      the
      condition claimed by the Executive to constitute Good Reason, the Executive
      must
      give written notice to the Company of the existence of the condition within
      30
      days of the initial existence of the condition, and the Company must fail to
      remedy the condition within 15 days after the receipt by the Company of the
      Executive’s notice. The parties acknowledge and agree that, in addition to his
      current responsibilities as COO, Executive is as of the date hereof serving
      at
      the pleasure of the Board of Directors as the Company’s Interim Chief Executive
      Officer (“Interim CEO”). Executive agrees that the cessation of such Interim CEO
      service (whether due to the hiring of a non-Interim Chief Executive Officer
      or
      for any other reason) coupled with a continuation of Executive’s
      responsibilities as COO as contemplated herein shall not constitute a diminution
      of Executive’s authority, duties or responsibilities hereunder or a breach of
      this Agreement by the Company.

    

    c. "Calendar
      Year" means the twelve months ending December 31 in which any part of the Term
      falls.

    

    10.
      CHANGE IN CONTROL

    

    a.
      If the
      Company completes a business combination (including sale of assets, merger,
      consolidation or other transaction) that results in (1) the stockholders of
      the
      Company receiving liquid consideration for a majority of the holdings in the
      Company and (2) a change in actual control of the Company, then, regardless
      of
      whether the Executive’s employment hereunder is expected to continue after such
      transaction, (i) all stock options theretofore granted to the Executive shall
      vest and become exercisable, and the Executive may thereafter exercise all
      options held by him during the period ending on the last day on which the
      Executive may exercise any such options under the terms of the applicable option
      plan, or the day before such transaction closes, whichever is later; and (ii)
      all restricted stock theretofore granted to the Executive shall vest.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    11.
      NONDISCLOSURE. 

    

    a.
      Except
      as required in order to perform his obligations under this Agreement, the
      Executive shall not, without the express prior written consent of the Company,
      directly or indirectly, disclose or divulge to any other person or entity any
      of
      the Company's Confidential Information or Trade Secrets at any time (during
      or
      after the Executive's employment) during which such data or information
      continues to constitute Confidential Information or a Trade Secret. Upon any
      termination or expiration of his employment, the Executive will promptly deliver
      to the Company all data, lists, information, memoranda, documents and all other
      property belonging to the Company or containing Confidential Information or
      Trade Secrets of the Company. 

    

    b.
      As
      used in this Agreement: 

    

    i.
      "Confidential Information" of the Company shall mean any valuable, competitively
      sensitive data and information related to the Company's business other than
      Trade Secrets 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 the Executive for the Company, or was created or obtained
      by the Executive while performing services for the Company or by virtue of
      the
      Executive's relationship with the Company; and 

    

    ii.
      "Trade Secrets" shall mean information or data of the Company, including but
      not
      limited to technical or non-technical data, compilations, programs, devices,
      methods, techniques, processes, financial data and financial plans, that: (a)
      derive economic value, actual or potential, from not being generally known
      to,
      and not being readily ascertainable by proper means by, other persons who can
      obtain economic value from their disclosure or use; and (b) are the subject
      of
      efforts that are reasonable under the circumstances to maintain their secrecy.
      To the extent that the foregoing definition is inconsistent with a definition
      of
      "trade secret" mandated under applicable law, the latter definition shall govern
      for purposes of interpreting the Executive's obligations under this Agreement.
      

    

    iii.
      The
      obligations set forth in this Section shall not be applicable to any information
      which: (i) the Company has authorized the Executive in writing to publicly
      disclose, copy or use, but only to the extent of such authorization;

    (ii)
      is
      generally known or becomes part of the public domain through no fault of the
      Executive; (iii) is disclosed to the Company by third parties without
      restrictions on disclosure; or (iv) is required to be disclosed in the context
      of any administrative or judicial proceedings; PROVIDED that, if the Executive
      is requested or becomes legally compelled to disclose any Confidential
      Information or Trade Secrets, the Executive will provide the Company with prompt
      written notice so that the Company may seek a protective order or other
      appropriate remedy and/or waive compliance with the provisions of this Section
      and the Executive will cooperate with the Company in any effort the Company
      undertakes to obtain a protective order or other remedy. If such a protective
      order or other remedy is not obtained or the Company waives compliance with
      this
      Section, the Executive will furnish only that portion of the Confidential
      Information and Trade Secrets that is legally required and will exercise all
      reasonable efforts to obtain reliable assurance that confidential treatment
      will
      be accorded the Confidential Information to be disclosed. The Company hereby
      agrees to indemnify and hold harmless Executive from all costs and expenses,
      including attorneys' fees, he incurs in carrying out his obligations under
      the
      proviso provisions of this subsection 10.b.iii and further agrees upon the
      written request of Executive to advance to Executive the anticipated cost of
      complying with his obligations under such proviso provisions. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    12.
      REPRESENTATIONS AND WARRANTIES. The Executive hereby represents and warrants
      that (a) he has the right to enter into this Agreement with the Company and
      to
      grant the rights contained in this Agreement, and (b) the provisions of this
      Agreement do not violate any other contracts or agreements that the Executive
      has entered into with any other individual or entity. 

    

    13.
      SERVICES OF THE EXECUTIVE. In the course of his employment under this Agreement,
      the Executive will have access to Trade Secrets, the disclosure or unauthorized
      use of which, the Company seeks to protect and the Executive has agreed to
      protect. As a result of benefits accruing to the Executive from his access
      to
      such Trade Secrets, and of the improvement in his knowledge, and proficiency
      arising therefrom, the Executive acknowledges that (a) his services are and
      will
      remain special and extraordinary, and have and will have a peculiar value,
      the
      loss of which cannot be reasonably or adequately compensated in damages in
      any
      action at law; (b) he is willing to comply with the restrictions contained
      in
      Sections 4.b and 4.c; (c) the restrictions contained in those Sections will
      not
      impair his ability to earn a living in any businesses other than those
      businesses from which he is prohibited during the time of such restriction;
      and
      (d) a material breach of his obligations under Sections 4.b, 4.c or 11 will
      cause the Company irreparable injury and damage. It is, therefore, agreed that
      the Company, in addition to any other remedies, shall be entitled to injunctive
      and other equitable relief to enforce its rights under, and to prevent a breach
      of, Sections 4.b, 4.c and 10 of this Agreement by the Executive. 

    

    14.
      ASSIGNABILITY ETC. This Agreement shall be nondelegable and nonassignable by
      the
      Executive, and shall inure to the benefit of the heirs and assigns of the
      Executive. This Agreement shall be binding upon and inure to the benefit of
      the
      Company and any entity succeeding to all or substantially all of the business
      assets of the Company by merger, consolidation, purchase of assets or otherwise.
      

    

    15.
      NOTICES. Any notice pertaining to this Agreement shall be in writing and shall
      be served by delivering said notice (i) by hand, (ii) by overnight mail by
      a
      internationally recognized carrier, (iii) by sending it by certified mail,
      postage prepaid, return receipt requested, or (iv) by telefax, with notice
      confirmed, to the Executive’s home address then on file with the Company, and to
      the Company at: 

    

    3
      Corporate Dr.

    Ste.
      100

    Clifton
      Park, NY 12065

    Attn:
      CEO

    

    With
      a
      copy to the Chairman of the Compensation Committee at his or her address of
      record or in care of the Company at the above address. 

    

    The
      addresses for notice may be changed by notice given to the other party pursuant
      to this Section. 

    

    16.
      MISCELLANEOUS. 

    

    a.
      This
      Agreement shall be governed by and construed under the laws and decisions of
      the
      State of New York applicable without regard to the principles of conflicts
      of
      laws. The parties to this Agreement agree that the state or federal courts
      in
      the State of New York shall have personal jurisdiction over them with respect
      to, and shall be the exclusive forum for the resolution of, any matter or
      controversy arising from or with respect to this Agreement. Service of a summons
      and complaint concerning any such matter or controversy may, in addition to
      any
      other lawful means, be effected by sending a copy of such summons and complaint
      by certified mail to the party to be served as specified in Section 14 of this
      Agreement or at such other address as the party to be served shall have provided
      in writing to the other from time to time in accordance with Section 14.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    b.
      To the
      extent permitted by law, the Executive and the Company irrevocably waive trial
      by jury and any objection which he or it may now or hereafter have to the venue
      of any suit, action or proceeding arising out of or relating to this Agreement
      brought in the City of New York, and to the extent permitted by law, the
      Executive and the Company hereby further irrevocably waive any claim that any
      such suit, action or proceeding brought in the City of New York has been brought
      in an inconvenient forum. 

    

    c.
      This
      Agreement contains the entire understanding of the parties to this Agreement
      with respect to the subject matter of this Agreement and supersedes all previous
      written and oral agreements between the parties with respect to the subject
      matter set forth in this Agreement. 

    

    d.
      This
      Agreement may not be modified or amended except by a writing signed by the
      parties to this Agreement. 

    

    e.
      Any
      provision of this Agreement that is deemed invalid, illegal or unenforceable
      in
      any jurisdiction shall, as to that jurisdiction and subject to this Section,
      be
      ineffective to the extent of such invalidity, illegality or unenforceability,
      without affecting in any way the remaining provisions of this Agreement in
      such
      jurisdiction or rendering that or any other provision of this Agreement invalid,
      illegal or unenforceable in any other jurisdiction. If the covenant should
      be
      deemed invalid, illegal or unenforceable because its scope is considered
      excessive, such covenant shall be modified so that the scope of the covenant
      is
      reduced only to the minimum extent necessary to render the modified covenant
      valid, legal and enforceable. 

    

    f.
      The
      following provisions of this Agreement shall survive in accordance with their
      terms, the expiration or termination of this Agreement for any reason: Sections
      4, 7, 8, 9, 10, 11, 12 and 15. 

    

    g.
      A
      waiver by either party of any Section, term or condition of this Agreement
      in
      any instance shall not be deemed or construed to be a waiver of such Section,
      term or condition for the future or of any subsequent breach thereof, and any
      such waiver must be in writing, signed by the party to be charged. All rights
      and remedies contained in this Agreement are cumulative, and none of them shall
      be construed so as to limit any other right or remedy of either party.

    

    h.
      This
      Agreement may be executed in counterparts, all of which shall constitute one
      and
      the same Agreement. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    i.
      The
      headings and titles to the Sections of this Agreement are inserted for
      convenience only and shall not be deemed a part of or affect the construction
      or
      interpretation of any provisions of this Agreement. 

    

    j.
      All
      references to Sections shall be to sections and schedules of this Agreement.
      

    

    k.
      All
      references using male pronouns shall be deemed to include female pronouns.
      

    

    l.
      This
      Agreement maybe signed in multiple counterparts, each of which shall be deemed
      an original. Any executed counterpart returned by email or facsimile shall
      be
      deemed an original executed counterpart. 

    

    If
      the
      foregoing accurately reflects your understanding, please countersign and return
      one counterpart of this Agreement to the Company. 

    

    Sincerely
      yours, 

    

      
        	
                ON2
                  TECHNOLOGIES, INC. 

              
	 	 
	 	 
	
                By:

              	
                /s/
                  J. Allen Kosowsky

              
	
                Name:
                  

              	
                J.
                  Allen Kosowsky

              
	
                Title:

              	
                Chairman
                  of the 

              
	 	
                Board
                  of Directors

              
	
                Date:

              	
                October
                  16, 2008

              

      

     

    

    /s/
      Matthew C.
      Frost             

    Matthew
      C. Frost

    Date:
      October 17, 2008Unassociated Document

    OCTOBER
      2008 LETTER AGREEMENT WITH DEBENTURE HOLDERS

     

    MSTI
      Holdings, Inc.

    259-263
      Goffle Road

    Hawthorne,
      New Jersey 07506

    

    

    
      	 	October 16,
              2008

    

    

    To
      the
      MSTI Holdings, Inc. Debenture Holders:

     

    Reference
      is hereby made to that certain Securities Purchase Agreement, dated as of May
      25, 2007 (the “Purchase
      Agreement”),
      as
      supplemented by letter agreements dated January 30, 2008, February 11, 2008
      and
      May 23, 2008, by and among MSTI Holdings, Inc., a Delaware corporation (the
      “Company”),
      and
      each entity identified on the signature pages thereto (each, including its
      successors and assigns, a “Purchaser”
and,
      collectively, the “Purchasers”).
      Capitalized terms used in this letter agreement (this “Agreement”)
      and
      not otherwise defined shall have the meanings ascribed to them in the Purchase
      Agreement.

    

    
      
        1. 
          Additional
          Issuances.
          

      

    

    

    (a) Section
      7(a) of the Debentures states that so long as any portion of the Debentures
      remains outstanding, unless the holders of at least 85% in principal amount
      of
      the then outstanding Debentures shall have otherwise given prior written
      consent, the Company shall not, directly or indirectly, other than Permitted
      Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist
      any indebtedness for borrowed money of any kind.

    

    (b) Section
      4.12 of the Purchase Agreement grants each of the Purchasers the right to
      participate in a Subsequent Financing.

    

    (c) Section
      4.13(a) of the Purchase Agreement restricts the Company from issuing Common
      Stock or Common Stock Equivalents.

    

    (d) Section
      4.13(b) of the Purchase Agreement restricts the Company from engaging in a
      Variable Rate Transaction.

    

    (e) Section
      4.13(c) of the Purchase Agreement grants the Purchasers so-called most favored
      nations rights (“MFN
      Rights”).

    

    The
      Purchasers hereby consent solely to the issuance of the Additional Debentures
      and Incentive Shares (each as defined below) and grant only the waivers
      described herein and no others.

     

    2.  Additional
      Debentures; Incentive Shares.
      

     

    (a)  Each
      of
      the Purchasers identified on Schedule
      I
      hereto
      hereby agrees to purchase from the Company, and the Company hereby agrees to
      sell to such Purchasers, additional Debentures in the aggregate principal amount
      of $352,631 (the “Additional
      Debentures”),
      in
      the form annexed hereto as Exhibit
      A
      and in
      the denominations set forth on Schedule
      I,
      for the
      purchase price set forth on Schedule
      I
      hereto.
      In connection with the purchase of the Additional Debentures, the Company will
      issue to each Purchaser who is acquiring Additional Debentures the amount of
      Common Stock set forth on Schedule
      I
      (“Incentive
      Shares”).
      The
      purchase price of the Debentures and Incentive Shares and the Debentures and
      Incentive Shares and “Intercreditor
      Agreement”
to
      be
      entered into in connection herewith will be deposited in escrow with Grushko
      & Mittman, P.C., as Escrow Agent, and released pursuant to the terms of the
      Escrow Agreement annexed hereto as Exhibit
      B.
      

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    (b) The
      rights and obligations of each Purchaser identified on Schedule
      I
      (severally and not jointly with the rights of such other Purchasers) and of
      the
      Company with respect to the Additional Debentures and the shares of Common
      Stock
      issuable under the Additional Debentures (the “Additional
      Underlying Shares”)
      shall
      be identical in all respects to the rights and obligations of such Purchaser
      and
      of the Company with respect to the Debentures and the Underlying Shares. The
      Purchase Agreement is hereby amended so that the term “Debentures” includes the
      Additional Debentures and the term “Underlying Shares” includes the Additional
      Underlying Shares. The Registration Rights Agreement entered into in connection
      with the Purchase Agreement is hereby amended so that the term “Registrable
      Securities” includes in the calculation thereof the Additional Underlying Shares
      and the Incentive Shares. The parties confirm and ratify that the term
“Obligations” in the Security Agreement and Subsidiary Guarantee includes the
      Additional Debentures.

    

    3. Representations
      and Warranties of the Company.
      The
      Company hereby makes to the Purchasers the following representations and
      warranties:

    

    (a)  Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by this Agreement and otherwise to
      carry out its obligations hereunder. The execution and delivery of this
      Agreement by the Company and the consummation by the Company of the transactions
      contemplated hereby have been duly authorized by all necessary action on the
      part of the Company and no further action is required by the Company, its board
      of directors or its stockholders in connection therewith other than in
      connection with the Required Approvals. This Agreement has been duly executed
      by
      the Company and, when delivered in accordance with the terms hereof, will
      constitute the valid and binding obligation of the Company enforceable against
      the Company in accordance with its terms, except (i) as limited by general
      equitable principles and applicable bankruptcy, insolvency, reorganization,
      moratorium and other laws of general application affecting enforcement of
      creditors’ rights generally, (ii) as limited by laws relating to the
      availability of specific performance, injunctive relief or other equitable
      remedies and (iii) insofar as indemnification and contribution provisions may
      be
      limited by applicable law.

     

    (b)  No
      Conflicts.
      The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby do not
      and
      will not: (i) conflict with or violate any provision of the Company’s
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents; or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, result
      in the creation of any Lien (except as contemplated by the Security Documents)
      upon any of the properties or assets of the Company in connection with, or
      give
      to others any rights of termination, amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any material agreement,
      credit facility, debt or other material instrument (evidencing Company debt
      or
      otherwise) or other material understanding to which such Company is a party
      or
      by which any property or asset of the Company is bound or affected; or (iii)
      conflict with or result in a violation of any law, rule, regulation, order,
      judgment, injunction, decree or other restriction of any court or governmental
      authority to which the Company is subject (including federal and state
      securities laws and regulations), or by which any property or asset of the
      Company is bound or affected, except, in the case of each of clauses (ii) and
      (iii), such as could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

    (c)  Issuance
      of the Additional Debentures and Incentive Shares.
      The
      Additional Debentures are duly authorized and, upon the execution of this
      Agreement by a Purchaser, will be duly and validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company other than
      restrictions on transfer provided for in the Transaction Documents. The
      Incentive Shares upon issuance and the Additional Underlying Shares, when issued
      in accordance with the terms of the Additional Debentures, will be validly
      issued, fully paid and nonassessable, free and clear of all Liens imposed by
      the
      Company. The Company has reserved from its duly authorized capital stock a
      number of shares of Common Stock sufficient for issuance of the Incentive Shares
      and Additional Underlying Shares.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (d)  Equal
      Consideration.
      Except
      as set forth in this Agreement, no consideration has been offered or paid to
      any
      person to amend or consent to a waiver, modification, forbearance or otherwise
      of any provision of any of the Transaction Documents that is not proportional
      to
      such Purchaser’s holding of Debentures.

     

    (e) No
      Ratchet.
      The
      issuance of the Additional Debentures and Incentive Shares and the conduct
      of
      the Qualified Offering (defined below) do not and will not trigger any right
      of
      any holder of Common Stock or Common Stock Equivalents (other than the
      Purchasers if the Qualified Offering does not occur) to exercise or receive
      the
      benefit of ratchet, reset, anti-dilution, right of participation, right of
      first
      refusal, acceleration or other similar rights.

    

    (f)  Affirmation
      of Prior Representations and Warranties.
      The
      Company’s representations and warranties listed in Section 3.1 of the Purchase
      Agreement are true and correct as of the date hereof, provided that the
      Company’s representations and warranties are qualified by any SEC Filings made
      prior to the date hereof.

     

    4.  Representations
      and Warranties of the Purchasers.
      Each
      Purchaser hereby represents and warrants as of the date hereof to the Company
      as
      follows:

    

    (a)  Authority.
      The
      execution and delivery of this Agreement and performance by such Purchaser
      of
      the transactions contemplated by this Agreement have been duly authorized by all
      necessary corporate or similar action on the part of such Purchaser. This
      Agreement has been duly executed by such Purchaser and, when delivered by such
      Purchaser in accordance with the terms hereof, will constitute the valid and
      legally binding obligation of such Purchaser, enforceable against it in
      accordance with its terms, except (i) as limited by general equitable principles
      and applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      of general application affecting enforcement of creditors’ rights generally,
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by applicable
      law.

     

    (b)  Own
      Account.
      Such
      Purchaser (i) understands that the Additional Debentures, the Additional
      Underlying Shares and Incentive Shares (the “Securities”)
      are
“restricted securities” and have not been registered under the Securities Act or
      any applicable state securities law, (ii) is acquiring the Securities as
      principal for its own account and not with a view to or for distributing or
      reselling such Securities or any part thereof in violation of the Securities
      Act
      or any applicable state securities law, (iii) has no present intention of
      distributing any of such Securities in violation of the Securities Act or any
      applicable state securities law and (iv) has no arrangement or understanding
      with any other persons regarding the distribution of such Securities (this
      representation and warranty not limiting such Purchaser’s right to sell the
      Additional Underlying Shares pursuant to the Registration Statement or otherwise
      in compliance with applicable federal and state securities laws) in violation
      of
      the Securities Act or any applicable state securities law. Such Purchaser is
      acquiring the Securities hereunder in the ordinary course of its business.
      Such
      Purchaser does not have any agreement or understanding, directly or indirectly,
      with any Person to distribute any of the Securities.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (c)  Purchaser
      Status.
      Such
      Purchaser is an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
      (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Purchaser is not
      required to be registered as a broker-dealer under Section 15 of the Exchange
      Act.

     

    (d)  Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.

     

    (e)  General
      Solicitation.
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or any other general solicitation or general
      advertisement.

     

    5.  Public
      Disclosure.
      The
      Company shall, as soon as practical, issue a Current Report on Form 8-K,
      disclosing the material terms of the transactions contemplated hereby and
      attaching this Agreement as an exhibit thereto, but in any event within 5
      business days of the full execution hereof. The Company shall consult with
      the
      Purchasers in issuing any press releases with respect to the transactions
      contemplated hereby.

    

    6. Rollover
      Conditions and Qualified Offering.

    

    (a) Rollover
      Conditions.
      The
      Purchasers agree that the Maturity Date of the Additional Debenture will be
      automatically extended to April 30, 2010, as same may be accelerated pursuant
      to
      the terms of the Additional Debenture upon both the following conditions
      (“Rollover
      Conditions”):
      (i)
      the non-occurrence of an Event of Default (as defined in the Additional
      Debenture) or an event which with the passage of time or the giving of notice
      could become an Event of Default, and (ii) the receipt of net proceeds by the
      Company from a Qualified Offering.

    

    (b) Qualified
      Offering.
      “Qualified
      Offering”
shall
      mean (i) an offering of the Company’s Common Stock at not less than $0.125 of
      net proceeds to the Company per share of Common Stock, with aggregate net
      proceeds that must be received by the Company of not less than $1,000,000,
      (ii)
      the Company receives such net proceeds not later than sixty days after the
      issue
      date of the Additional Debenture, and (iii) the issuance of the Common Stock
      and
      the Common Stock Purchase Warrants described below do not result in the
      triggering of any right of any other holder of any Common Stock or Common Stock
      Equivalents to exercise or receive the benefit of any ratchet, reset,
      anti-dilution, right of participation, right of first refusal, acceleration,
      or
      other similar rights. If the Rollover Conditions do not occur, then the Maturity
      Date shall not be extended until April 30, 2010.

    

    (c) Qualified
      Offering Warrants.
      The
      Company may issue Common Stock Purchase Warrants as part of the Qualified
      Offering provided the exercise price of such Warrants is at no time less than
      $0.125 per share of Common stock and the number of shares purchasable upon
      exercise of the Warrants does not exceed the number of shares of Common Stock
      sold in the Qualified Offering.

    

    (d) Acknowledgement.
      The
      Company acknowledges and agrees that if the Qualified Offering does not occur,
      then the Conversion Price as set forth in Section 4(b) of the Additional
      Debentures shall be applicable to all of the Debentures issued by the Company
      to
      the Purchasers including the Additional Debentures and the Debentures issued
      pursuant to the Letter Agreement With Debenture Holders dated May 23, 2008.
      The
      Company further acknowledges and agrees that if the Qualified Offering does
      not
      occur the issuance of the Additional Debentures is not an Exempt Issuance.
      The
      Purchasers acknowledge that provided the Qualified Offering occurs, then the
      issuance of the Additional Debentures and Incentive Shares and the conduct
      of
      the Qualified Offering are each an Exempt Issuance.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    7.  Independent
      Nature of Purchasers' Obligations and Rights.
      The
      Company has elected to provide all Purchasers with the same terms and Agreement
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers. The obligations of each Purchaser under this
      Agreement, and any Transaction Document, are several and not joint with the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance or non-performance of the obligations of any other
      Purchaser under this Agreement or any Transaction Document. Nothing contained
      herein or in any Transaction Document, and no action taken by any Purchaser
      pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by this
      Agreement or the Transaction Documents. Each Purchaser shall be entitled to
      independently protect and enforce its rights, including, without limitation,
      the
      rights arising out of this Agreement or out of the other Transaction Documents,
      and it shall not be necessary for any other Purchaser to be joined as an
      additional party in any proceeding for such purpose. Each Purchaser has been
      represented by its own separate legal counsel in their review and negotiation
      of
      this Agreement and the Transaction Documents.

    

    8. Successor
      Agent.
      The
      Purchasers, Company and DKR Soundshore Oasis Holding Fund Ltd., as Agent,
      consent to the appointment of Collateral Agents, LLC as successor Agent pursuant
      to the Security Agreement. Collateral Agents, LLC, by its signature hereto
      accepts such appointment pursuant to the Security Agreement. DKR Soundshore
      Oasis Holding Fund Ltd. as former Agent will promptly deliver to Collateral
      Agents, LLC any Collateral (as defined in the Security Agreement) in its
      possession to Collateral Agents, LLC. The address for notice purposes of
      Collateral Agents, LLC is 111 West 57th
      Street,
      Suite 1416, New York, NY 10019, Attn: General Counsel, fax: (212) 245-9101.
      The
      Company agrees to pay Collateral Agents, LLC an annual fee of $2,500 for serving
      as Collateral Agent. The fee for the first year commencing on the date of this
      Letter Agreement shall be paid out of the proceeds of the purchase price of
      the
      Additional Debentures deposited pursuant to the Escrow Agreement.

    

    9. Additional
      Notice.
      Any
      notice required to be given by the Company to the Purchasers pursuant to the
      Transaction Documents shall also be given in the same manner to Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, NY 10176, fax: (212)
      697-3575.

    

    10.  Miscellaneous.
      Subject
      to the waivers and agreements provided herein, the Transactions Documents shall
      remain in full force and effect. Except as expressly set forth herein, this
      Agreement shall not be deemed to be a waiver, amendment or modification of
      any
      provisions of the Transaction Documents or of any right, power or remedy of
      the
      Purchasers, or constitute a waiver of any provision of the Transaction Documents
      (except to the extent herein set forth), or any other document, instrument
      and/or agreement executed or delivered in connection therewith, in each case
      whether arising before or after the date hereof or as a result of performance
      hereunder or thereunder. The Purchasers reserve all rights, remedies, powers
      or
      privileges available under the Transaction Documents, at law or otherwise,
      subject to the terms of this Agreement. This Agreement shall not constitute
      a
      novation or satisfaction and accord of the Transaction Documents or any other
      document, instrument and/or agreement executed or delivered in connection
      therewith. This Agreement shall be governed by and construed in accordance
      with
      the laws of the State of New York.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Please
      indicate your acknowledgment of and agreement to the foregoing by signing a
      copy
      of this letter and returning an executed original to the Company.
This
      Agreement may be executed by the parties hereto in counterparts, and execution
      may be evidenced by facsimile or other electronic transmission of a signed
      signature page by any party hereto, and all of such counterparts together shall
      constitute one and the same instrument.

    
      	 	 	 
	 	Sincerely,
	 	 
	 	MSTI HOLDINGS, INC.
	 
 	 
 	 
 
	 	              	/s/ Frank
              Matarazzo
	 	
              
Frank
              Matarazzo
	 	Chief
              Executive Officer

    

     

    

    

    

    [DEBENTURE
      HOLDER SIGNATURE PAGES TO FOLLOW]

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    [DEBENTURE
      HOLDER SIGNATURE PAGE TO

    OCTOBER
      2008 LETTER AGREEMENT WITH DEBENTURE HOLDER]

    

    

    ACCEPTED
      AND AGREED AS OF THE DATE ABOVE WRITTEN:

    

    DKR
      SOUNDSHORE OASIS HOLDING FUND LTD.

    

    

      
        	By: 	
                /s/
                  Barbara Burger

              	 
	 	
                By:
                  Barbara Burger

              	 
	 	
                DKR
                  Oasis Management Company L.P., its investment manager

              
	 	 	 	 
	 	 	 	 
	ALPHA
                CAPITAL ANSTALT
	 	 	 	 
	 	 	 	 
	 	
                By:
                  /s/
                  Konrad Ackerman

              	 
	 	Konrad
                Ackerman, Director
	 	 	 	 
	 	 	 	 
	GEMINI
                MASTER FUND, LTD.
	 	 	 	 
	 	 	 	 
	 	
                By:
                  /s/
                  Steven Winters

              	 
	 	Steven
                W. Winters, President
	 	 	 	 
	 	 	 	 
	WHALEHAVEN
                CAPITAL FUND LIMITED
	 	 	 	 
	 	 	 	 
	By: 	
                /s/
                  Brian Mazzella

              	 
	 	Brian
                Mazzella, Chief Financial Officer
	 	 	 	 
	 	 	 	 
	CMS
                CAPITAL
	 	 	 	 
	 	 	 	 
	By: 	
                /s/
                  Howard Weiss 

              	 
	 	Howard
                Weiss, Director	 
	 	 	 	 
	 	 	 	 
	BRIO
                CAPITAL L.P.
	 	 	 	 
	 	 	 	 
	By: 	
                /s/
                  Shaye Hirsch

              	 
	 	Shaye
                Hirsch, Manager of General
                Partner

      

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    SUBSIDIARY
      SIGNATURE PAGE TO OCTOBER 2008 LETTER

    AGREEMENT
      WITH DEBENTURE HOLDERS

    

    

    AGREED
      AND CONSENTED:

    

    

     

    

    

    

    The
      undersigned on behalf of Collateral Agents, LLC consents to the appointment
      as
      successor Agent under the Security Agreement.

    

    COLLATERAL
      AGENTS, LLC

    

    
      	 	 	 	 
	By:
/s/
              Robert Schechter	 	 	 
	
              
                
Robert
                Schechter, Chief Executive Officer

            	 	 	
            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

    
      	
              Name
                of Purchaser

            	 	
              Proportionate
                Share

            	 	 	
              Purchase
                Price

            	 	
              Principal
                Amount of Debenture

            	 	
              Incentive
                Shares

            	 
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

            	 	 	
              35.714%

            	
               

            	 	
              $

            	
              119,642.00

            	 	
              $

            	
              125,939.00

            	 	 	
              714,280

            	 
	
              GEMINI
                MASTER FUND, LTD.

              c/o
                Gemini Strategies LLC

              12220
                El Camino Real, Suite 400

              San
                Diego, CA 92130-2091

              Fax:
                (858) 509-8808

            	 	 	
              35.714%

            	
               

            	 	
              $

            	
              119,642.00

            	 	
              $

            	
              125,939.00

            	 	 	
              714,280

            	 
	
              WHALEHAVEN
                CAPITAL FUND LIMITED 

              560
                Sylvan Avenue

              Englewood
                Cliffs, NJ 07632

              Fax:
                (201) 782-9327

            	 	 	
              21.429%

            	
               

            	 	
              $

            	
              71,787.00

            	 	
              $

            	
              75,565.00

            	 	 	
              428,580

            	 
	
              BRIO
                CAPITAL L.P.

              401
                East 34th
                Street, Suite 33C

              New
                York, New York 10016

              Fax:
                (646) 390-2158

            	 	 	
               7.143%

            	
               

            	 	
              $

            	
              23,929.00

            	 	
              $

            	
              25,188.00

            	 	 	
              142,860

            	 
	
              TOTALS

            	 	 	
                 100%

            	
               

            	 	
              $

            	
              335,000.00

            	 	
              $

            	
              352,631.00

            	 	 	
              2,000,000

            	 

    

    

    
      
        
        

      

      
        9

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