SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS : COMMERCIAL DIVISION x MICHAEL JIANNARAS, on Behalf of : Index No. 21262/09 Himself and All Others Similarly Situated, : : Plaintiff, : The Honorable Marguerite A. Grays, J.S.C. : vs. : : MIKE ALFANT, MIKE KOPETSKI, J. AMENDED CLASS ACTION COMPLAINT : ALLEN KOSOWSKY, JAMES MEYER, : AFSANEH NAIMOLLAH, THOMAS : WEIGMAN, ON2 TECHNOLOGIES, INC. : and GOOGLE INC., : : Defendants. : x Plaintiff, by his attorneys, alleges upon information and belief, except for those allegations that pertain to him, which are alleged upon personal knowledge, as follows: NATURE OF THE ACTION 1. Plaintiff brings this shareholder class action on behalf of himself and all other public shareholders of On2 Technologies, Inc. (“On2” or the “Company”), against On2 and its Board of Directors (the “Board” or “Individual Defendants”), arising out of the proposed sale of On2 to defendant Google Inc. (“Google”) in a transaction valued at approximately $106.5 million pursuant to which each share of On2 common stock will be exchanged for 60 cents worth of Google Class A common stock (the “Proposed Transaction”). 2. In connection with the Proposed Transaction, however, the Board failed to discharge its fiduciary duties to the shareholders by, inter alia : (i) failing to ensure that they will receive maximum value for their shares; (ii) failing to conduct an appropriate sale process; (iii) implementing preclusive deal protections that will inhibit an alternate transaction; (iv) favoring the interests of certain “insider” shareholders over the interests of the Company’s unaffiliated public shareholders; (v) falsely portraying the Proposed Transaction as one in which the On2 shareholders will receive Google stock in exchange for their shares; and (vi) favoring its own interests in connection with the Proposed Transaction by attempting to extinguish shareholder derivative standing to evade liability for admitted accounting improprieties that resulted in the generation of false financial statements. 3. Moreover, the Board has evinced an intention to obtain shareholder approval of the Proposed Transaction through materially incomplete and misleading disclosures contained in a joint preliminary proxy statement and prospectus that Google, with the Board’s input and approval, filed on September 11, 2009 with the U.S. Securities and Exchange Commission (“SEC”) on Form S-4 (the “Proxy”). 4. As detailed herein, the Proxy omits, and in some cases misrepresents, material information concerning, among other things: (i) the process resulting in the Proposed Transaction; (ii) the value and prospects of On2 and Google, including details concerning management’s five- year financial projections and the synergies and other benefits that will result from Google’s acquisition of On2; (iii) the full nature and extent of the various conflicts of interest that arose in the context of the Proposed Transaction’s negotiation; (iv) the fact that the Proposed Transaction will extinguish shareholder derivative standing to bring claims against the culpable members of the Board with respect to the admitted accounting improprieties; (v) the financial analyses conducted by Covington Associates, LLC (“Covington”) and Duff & Phelps, LLC (“Duff & Phelps”), On2’s financial advisors in connection with the Proposed Transaction, as well as material information concerning the terms of their engagement; and (vi) the nature and import of the preclusive deal protections that the Board has used to dissuade the emergence of competing offers. - 2 - 5. In the absence of full and adequate disclosure prior to a shareholder vote, the Company’s unaffiliated public shareholders will not be able to cast an informed vote in connection with the Proposed Transaction. 6. Accordingly, this action seeks equitable relief compelling the Board to properly exercise its fiduciary duties to the shareholders and to enjoin the close of the Proposed Transaction to prevent irreparable harm to them. PARTIES 7. Plaintiff is, and at all relevant times has been, the owner of On2 common stock. 8. Defendant On2 is a Delaware corporation whose principal executive offices are located at 3 Corporate Drive, Suite 100, Clifton Park, New York. It develops video compression and other technologies that enable the creation, transmission, and playback of multimedia in resource- limited environments, such as cellular networks transmitting to battery operated mobile handsets or High Definition (HD) video transmitted over the Internet. Specifically, the Company has developed a proprietary technology platform and the On2 Video VPx family ( e.g ., VP6, VP7, and VP8) of video compression/decompression software (“codec”) for the delivery of high-quality video at the lowest possible data rates over proprietary networks and the Internet to personal computers, wireless devices, set-top boxes and other devices. In fact, On2 has claimed that its VP8 format “will offer better quality than [the] H.264 and VC-1 [video codecs] using as much as 50% less data.” Moreover, unlike other video codecs, On2’s proprietary technology is based solely on intellectual property that it developed. The Company’s common stock is publicly traded on the NYSE Amex under the symbol “ONT,” and, as of April 30, 2009, there were 175,511,000 shares outstanding. According to the Proxy, 184,577,748 is the maximum number of shares of On2 common stock that may be cancelled and exchanged in the Proposed Transaction. - 3 - 9. Defendant Mike Alfant (“Alfant”) has served as a member of the Board since May 2004. He is President and Chief Executive Officer (“CEO”) of Fusion Systems Co., Ltd., a company he founded in 2005. Previously, Alfant worked as a founder and partner in Building2, a technology investment company located in Tokyo and Boston. From 1992 to 1999, he was president of Fusion Systems Japan Co., Ltd., an information technology solutions company that he founded and that was eventually acquired by IMRglobal Corporation. Alfant serves as a vice president of the American Chamber of Commerce in Japan. 10. Defendant Mike Kopetski (“Kopetski”) has served as a member of the Board since August 2003. He was involved in politics for 25 years, including service as an Oregon state legislator and a member of the U.S. House of Representatives. Since 1996, Kopetski has worked as an international trade consultant. 11. Defendant J. Allen Kosowsky (“Kosowsky”) has served as a member of the Board since January 2003 and as the Chairman of the Board since February 2007. He is the Chairman of On2’s Audit Committee and its financial expert, and served in those capacities when the accounting improprieties described herein occurred. Since 1992, Kosowsky has run J. Allen Kosowsky, CPA, P.C., a firm in Shelton, Connecticut that specializes in forensic accounting and analysis, business valuations, and interim management services. From November 1995 to April 2002, he was a director of Webster Bank. He has also served as interim Chief Financial Officer (“CFO”) of FIND/SVP of New York and Memry Corporation of Connecticut. In addition, until 2003, Kosowsky served as an Advisory Board Member of the Digital Angel Trust, which oversaw financial interests in Digital Angel Corporation. 12. Defendant James Meyer (“Meyer”) has served as a member of the Board since May 2005. Since May 2006, he has served as CEO of Mindset Media, LLC, an internet advertising - 4 - technology and market research company that he founded which is headquartered in Tarrytown, New York. From February to May 2006, he served as Interim President and CEO of On2. Previously, Meyer served as a managing director at Novantas, a consulting management firm located in New York, New York. He was an advertising agency executive for 20 years and an independent marketing consultant for two years before joining Novantas. 13. Defendant Afsaneh Naimollah (“Naimollah”) has served as a member of the Board since May 2005, and was a member of the Audit Committee when the accounting improprieties described herein occurred. From January 2000 until the present, Naimollah has been the Managing Partner of Chela Capital Partners, LLC, a mergers and acquisition advisory company that she founded which is incorporated and headquartered in New York. 14. Defendant Thomas Weigman (“Weigman”) has served as a member of the Board since February 2002, and was a member of the Audit Committee when the accounting improprieties described herein occurred. Since September 2006, he has served as the Senior Vice President of Wireless Services at AirCell, a firm that introduces in-flight Internet and communications services to U.S. airlines. Between September 2000 and September 2006, Weigman was a principal at two consulting practices, Riverstone Weston and MCAWorks, aimed at providing marketing counsel to technology oriented companies. From September 2003 until January 2004, he was the Chief Marketing Officer of Intuit Inc., a software development company. From February 1999 to June 2000, Weigman was Senior Vice President, Consumer Strategy and Communications, of the Sprint Corporation. From January of 1995 to February of 1999, he was the President of the Consumer Services Group, Long Distance Division of the Sprint Corporation. Since October 2005, Weigman has served on the Board of Directors of MDC Partners, a publicly-traded company. - 5 - 15. The Individual Defendants, as officers and/or directors of On2, have a fiduciary responsibility to Plaintiff and the other public shareholders of On2, and owe them the highest obligations of good faith, loyalty, fair dealing, due care and candor. 16. Defendant Google is a global technology leader that specializes in developing web indexing and searching technology that it makes freely available to users around the world through its proprietary search engine. It also develops and markets a variety of web-based media. In fact, in 2006, Google acquired YouTube Inc., a consumer media company best known for its streaming video sharing website, for approximately $1.65 billion. Google’s Class A common stock is publicly traded on the Nasdaq Global Select Market under the symbol “GOOG,” and, as of July 31, 2009, it had 241,971,977 shares of such stock outstanding.