TRANSITION AGREEMENT

Exhibit 10.1  
  TRANSITION AGREEMENT  
This Transition Agreement (the “Agreement”) is made and entered into this 16th day of January, 2008 (the “Effective Date”) between On2 Technologies, Inc., a Delaware corporation and its wholly-owned Finnish subsidiary On2 Technologies Finland Oy (collectively “On2”) and Eero Kaikkonen (hereinafter “Kaikkonen”).   WHEREAS, Kaikkonen and On2 Technologies Finland Oy (formerly Hantro Products Oy and hereinafter “On2 Finland”) are parties to an employment agreement dated October 31, 2007 (the “Employment Agreement”); and   WHEREAS, in accordance with the Employment Agreement, Kaikkonen has served as the President and Chief Executive Officer of On2 Finland and the Chief Marketing Officer of On2; and   WHEREAS, Kaikkonen and On2 have agreed that Kaikkonen will resign as an employee and officer of On2 and On2 Finland, and will serve as a consulting independent contractor for On2  until January 15, 2010, all under the terms and conditions of this Agreement.   NOW, THEREFORE, AND IN CONSIDERATION of the mutual promises of the parties to this Agreement, the receipt and sufficiency of which are hereby acknowledged, Kaikkonen and On2 hereby agree as follows:   1.  Resignation.  Effective as of January 16, 2009 (the “Termination Date”), Kaikkonen resigns, and On2 accepts his resignation, from his employment with On2 and from all the offices and other positions that he holds with On2 and any of On2’s directly and indirectly owned subsidiaries, including without limitation his positions as President and Chief Executive Officer of On2 Finland and Chief Marketing Officer of On2.  After the Termination Date, Kaikkonen shall not be entitled to the receipt of any further payments or benefits from On2 other than those expressly provided for in this Agreement. The parties hereto agree that, except for those provisions of the Employment Agreement that survive the termination of Kaikkonen’s employment with On2, the Employment Agreement is terminated as of the Termination Date.   2.  Consulting Engagement.   From the Termination Date through January 15, 2010 (the “Transition Period”), Kaikkonen shall serve in an independent contractor capacity as a consultant to On2’s chief executive officer.  Kaikkonen’s responsibilities during the Transition Period shall be to provide marketing and strategic planning advice to On2’s chief executive officer and to perform such other advisory duties as the chief executive officer shall reasonably assign to him, up to a maximum of forty (40) hours per month.  During the Transition Period, Kaikkonen will not undertake any business activities as an advisor to On2 or otherwise on behalf of On2 without the prior approval of On2’s chief executive officer.  Kaikkonen shall have no power or authority to act for or to take any action on behalf of On2 or to bind On2 to any obligation with any third party.     1

    3.  Compensation Payments During the Transition Period.   (a)  Vacation Days; Expenses.   (i)  On the next regularly scheduled pay day after the Termination Date, On2 will pay Kaikkonen for any accrued but unused vacation days as of the Termination Date, in accordance with On2’s applicable policies and procedures.   (ii)  On2 shall reimburse Kaikkonen for appropriate and reasonable expenses incurred by Kaikkonen on or before the Termination Date, if any, in accordance with On2’s applicable policies and procedures.  During the Transition Period, On2 shall reimburse Kaikkonen for reasonable and necessary expenses, including On2 approved travel expenses, subject to compliance with On2’s travel and other expense policies.   (iii)   On2 shall reimburse Kaikkonen for (A) the reasonable costs of transporting his personal belongings (except for his automobile) from New York to Finland, up to a maximum of $9,500 and (B) the rent through January 2009 for Kaikkonen’s Saratoga Springs apartment.   (b)  Consulting Fees.  Provided that Kaikkonen (i) signs this Agreement and (ii) complies with all of his obligations in this Agreement, then following the Termination Date and continuing for the Transition Period, On2 shall pay Kaikkonen a Five Thousand Euro (EUR 5,000) monthly (“Consulting Fees”) for his consulting services (with such amount to be prorated for the partial months of January 2009 and January 2010).  The Consulting Fees shall be in lieu of any severance or other post termination compensation that Kaikkonen might have been entitled to under the Employment Agreement or otherwise.   (c)  Stock Options.  The three (3) month period during which Kaikkonen may exercise vested On2 stock options pursuant to his On2 stock options agreements dated November 8, 2007 and September 25, 2008 shall commence as of the Termination Date.   4.  Proprietary Information; Confidentiality.  The restrictions and obligations set forth in Exhibit A hereto are hereby incorporated herein and made a part of this Agreement.   In addition, Kaikkonen will remain subject to On2’s blackout restrictions until the opening of the next trading window and, if Kaikkonen is in possession of material nonpublic information on or after the opening of the next trading window, after such opening for as long as such information remains material and nonpublic.   5.  General Release of Claims.   Kaikkonen (for Kaikkonen and Kaikkonen’s agents, heirs, successors, assigns, executors and/or administrators) does hereby and forever release and discharge On2 Technologies, Inc.,  On2 Technologies Finland Oy and their past and present parent, subsidiaries, affiliates, predecessors or other related entities, and their respective employees, agents and affiliates, as well as the successors, shareholders, partners, members, officers, directors, heirs, predecessors, assigns, agents, employees, attorneys and representatives of each of them, past or present (Collectively “Released Parties”) , from any and all causes of action, actions, judgments, liens, debts, contracts, indebtedness, damages, losses, claims, liabilities, rights, interests and demands of whatsoever kind or character, known or unknown, suspected to exist or not suspected to exist, anticipated or not anticipated, whether or not heretofore brought before any court of competent jurisdiction or before any government agency or other governmental entity, which Kaikkonen has or may have against any Released Party by reason of any and all acts, omissions, events or facts occurring or existing prior to the date hereof, including, without limitation, all claims attributable to the employment of Kaikkonen, all claims attributable to the termination of that employment, and all claims arising under contract, tort, common law, or any federal, state or other governmental statute, regulation or ordinance or common law.  This release includes, but is not limited to, all claims of discrimination in employment under Finnish law.       2

  6.  No Other Consideration. Kaikkonen affirms that the terms stated herein are the only consideration for signing this Agreement and that no other representations, promises, or agreements of any kind have been made by any person or entity to cause him to sign this Agreement. Kaikkonen has accepted the terms of this Agreement because he believes them to be fair and reasonable and for no other reason.   7.  Cooperation in Legal Proceedings. Kaikkonen agrees to reasonably cooperate with On2 and its directly and indirectly owned subsidiaries in connection with litigation and other legal and regulatory proceedings, investigations and inquiries that relate to his services or relate to his areas of responsibility during his employment. On2 shall reimburse Kaikkonen for reasonable expenses, if any, that he may incur while complying with this obligation.   8.  Successors and Assigns.  This Agreement shall inure to the benefit of and shall be binding upon (i) On2, its successors and assigns, and any company with which On2 may merge or consolidate or to which On2 may sell all or substantially all its assets, and (ii) Kaikkonen and Kaikkonen’s executors, administrators, heirs and legal representatives.  Kaikkonen may not sell or otherwise assign his rights, obligations or benefits under this Agreement, and any attempt to do so shall be void.   9.  Remedies. The parties hereto each acknowledge and agree that their respective rights under this Agreement are of a specialized and unique character, that a monetary remedy for a breach of the agreements set forth in this Agreement will be inadequate and impracticable and that immediate and irreparable damage will result to On2 or Kaikkonen (the "Aggrieved Party") if the other (the "Aggrieving Party") fails to or refuses to perform its obligations under this Agreement. Notwithstanding any election by any person to claim damages from On2 or Kaikkonen, as the case may be, as a result of any such failure or refusal, the Aggrieved Party may, in addition to any other remedies and damages available, seek temporary and permanent injunctive relief (without the posting of a bond or other security) in a court of competent jurisdiction to restrain any such failure or refusal and the Aggrieving Party, on its own behalf and, in the case of On2, on behalf of its affiliates, waives any defense that the Aggrieved Party has an adequate remedy at law. The Aggrieving Party agrees that, in addition to all other remedies available at law or in equity, the Aggrieved Party shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions as a court of competent jurisdiction shall determine.     3

  10.  Withholding. All payments to be made to Kaikkonen under this Agreeme