Execution
      Copy


    


    On2
      Technologies, Inc.

     

    13,000,000
      Shares

     

    Common
      Stock ($0.01 par value)

     

    Underwriting
      Agreement

     

    New
      York,
      New York

    October
      17, 2007

     

    ThinkEquity
      Partners LLC

    Merriman
      Curhan Ford & Co.

    As
      Representatives of the several Underwriters

    c/o
      ThinkEquity Partners LLC

    600
      Montgomery Street, 8th
      Floor

    San
      Francisco, California 94111

     

    Ladies
      and Gentlemen:

     

    On2
      Technologies, Inc., a corporation organized under the laws of the State of
      Delaware (the “Company”),
      proposes to sell to the several underwriters named in Schedule
      I
      hereto
      (the “Underwriters”),
      for
      whom you (the “Representatives”)
      are
      acting as representatives, 13,000,000 shares of Common Stock, $0.01 par value
      per share (“Common
      Stock”),
      of
      the Company (said shares to be issued and sold by the Company being hereinafter
      called the “Firm
      Shares”).
      The
      Company also proposes to grant to the Underwriters an option (the “Over-Allotment
      Option”)
      to
      purchase up to 1,950,000 additional shares of Common Stock (as may be adjusted
      to give effect to any stock split, reverse stock split or recapitalization
      effected by the Company prior to the exercise of such option) to cover
      over-allotments (the “Option
      Shares”;
      the
      Option Shares, together with the Firm Shares, being hereinafter called the
      “Securities”)
      on the
      terms set forth in Section 3. To the extent there are no additional
      Underwriters listed on Schedule
      I
      other
      than you, the term Representatives as used herein shall mean you, as
      Underwriters, and the terms Representatives and Underwriters shall mean either
      the singular or plural as the context requires. The use of the neuter in this
      Agreement shall include the feminine and masculine wherever appropriate. Certain
      terms used herein are defined in Section 20 hereof.

     

    1.    Representations
      and Warranties.

     

    The
      Company represents, warrants and agrees as follows:

     

    (a) The
      Company has prepared and filed with the Commission a registration statement
      (file number 333-142336) on Form S-3, including a related base prospectus,
      for
      registration under the Act of the offering and sale of the Securities. Such
      Registration Statement, including any amendments thereto filed prior to the
      Execution Time, has become effective. The Company may have filed one or more
      amendments thereto, including a related preliminary prospectus, each of which
      has previously been furnished to you. The Company will file with the Commission
      a final prospectus in accordance with Rule 424(b). As filed, such final
      prospectus shall conform in all material respects with the applicable
      requirements of the Act and the rules thereunder, on the Effective Date and
      at
      the Execution Time, and, except to the extent the Representatives shall agree
      in
      writing to a modification, shall be in all material respects in the form
      furnished to you prior to the Execution Time or, to the extent not completed
      at
      the Execution Time, shall contain only such specific additional information
      and
      other changes (beyond that contained in the latest Preliminary Prospectus)
      as
      the Company has advised you, prior to the Execution Time, will be included
      or
      made therein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) On
      the
      Effective Date, the Registration Statement did, and when the Prospectus is
      first
      filed in accordance with Rule 424(b) and on the Closing Date (as defined herein)
      and on any date on which Option Shares are purchased, if such date is not the
      Closing Date (a “settlement
      date”),
      the
      Prospectus (and any supplements thereto) will, conform in all material respects
      with the applicable requirements of the Act and the rules thereunder; on the
      Effective Date and at the Execution Time, the Registration Statement did not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary to make the statements therein
      not misleading; and on the date of any filing pursuant to Rule 424(b) and on
      the
      Closing Date and any settlement date, the Prospectus (together with any
      supplement thereto) will not, include any untrue statement of a material fact
      or
      omit to state a material fact necessary in order to make the statements therein,
      in the light of the circumstances under which they were made, not misleading;
      provided,
      however,
      that
      the Company makes no representations or warranties as to the information
      contained in or omitted from the Registration Statement or the Prospectus (or
      any supplement thereto) in reliance upon and in conformity with information
      furnished in writing to the Company by or on behalf of any Underwriter through
      the Representatives specifically for inclusion in the Registration Statement
      or
      the Prospectus (or any supplement thereto), it being understood and agreed
      that
      the only such information furnished by any Underwriter consists of the
      information described as such in Section 8(b) hereof.

     

    (c) The
      Disclosure Package as of the Effective Date and at the Execution Time does
      not
      contain any untrue statement of a material fact or omit to state any material
      fact necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. The preceding sentence
      does not apply to statements in or omissions from the Disclosure Package based
      upon and in conformity with written information furnished to the Company by
      any
      Underwriter through the Representatives specifically for use therein, it being
      understood and agreed that the only such information furnished by or on behalf
      of any Underwriter consists of the information described as such in
      Section 8(b) hereof.

     

    (d) (i) At
      the time of filing the Registration Statement and (ii) as of the Execution
      Time (with such date being used as the determination date for purposes of this
      clause (ii)), the Company was not and is not an Ineligible Issuer (as defined
      in
      Rule 405), without taking account of any determination by the Commission
      pursuant to Rule 405 that it is not necessary that the Company be considered
      an
      Ineligible Issuer.

     

    (e) Each
      Issuer Free Writing Prospectus, when considered together with the Disclosure
      Package as of the Effective Date and at the Execution Time, did not contain
      an
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein, in the light
      of
      the circumstances under which they were made, not misleading, except that the
      price of the Securities and disclosures directly relating thereto will be
      included on the cover page of the Prospectus. The foregoing sentence does not
      apply to statements in or omissions from any Issuer Free Writing Prospectus
      based upon and in conformity with written information furnished to the Company
      by any Underwriter through the Representatives specifically for use therein,
      it
      being understood and agreed that the only such information furnished by any
      Underwriter consists of the information described as such in Section 8(b)
      hereof.

     

    (f) Each
      of
      the Company and its Subsidiaries (as defined in Section 1(h)) has been duly
      organized and is validly existing as a corporation or limited liability company
      (as applicable) in good standing under the laws of the jurisdiction in which
      it
      is chartered or organized with full corporate or limited liability company
      (as
      applicable) power and authority to own or lease, as the case may be, and to
      operate its properties and conduct its business as described in the Disclosure
      Package and the Prospectus, and is duly qualified to do business as a foreign
      corporation or limited liability company (as applicable) and is in good standing
      under the laws of each jurisdiction which requires such qualification, except
      where the failure to be so qualified or in good standing could not reasonably
      be
      expected, individually or in the aggregate, to have a material adverse effect
      on
      the condition (financial or otherwise), prospects, earnings, business or
      properties of the Company and its Subsidiaries, taken as a whole, whether or
      not
      arising from transactions in the ordinary course of business (a “Material
      Adverse Effect”),
      except as set forth in or contemplated in the Disclosure Package and the
      Prospectus (exclusive of any supplement thereto).

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (g) All
      the
      outstanding shares of capital stock or other equity interests of each Subsidiary
      of the Company have been duly authorized and validly issued and are fully paid
      and nonassessable, and, except as otherwise set forth in the Disclosure Package
      and the Prospectus, all outstanding shares of capital stock or other equity
      interests of the Subsidiaries of the Company are owned by the Company either
      directly or through its wholly owned subsidiaries free and clear of any security
      interests, claims, liens or encumbrances.

     

    (h) The
      entities listed on Annex
      A
      attached
      hereto are the only subsidiaries of the Company as defined by Rule 1-02 of
      Regulation S-X (the “Subsidiaries”).

     

    (i) The
      Company’s authorized equity capitalization is as set forth in the Disclosure
      Package and the Prospectus; the capital stock of the Company conforms in all
      material respects to the description thereof contained in the Disclosure Package
      and the Prospectus; the outstanding shares of Common Stock have been duly and
      validly authorized and issued and are fully paid and nonassessable; the
      Securities being issued and sold hereunder by the Company have been duly and
      validly authorized, and, when issued and delivered to and paid for by the
      Underwriters pursuant to this Agreement, will be fully paid and nonassessable;
      subject to the matters disclosed in the Current Report on Form 8-K filed by
      the
      Company with the Commission on October 10, 2007, the Securities shall, when
      issued, be duly listed, and admitted and authorized for trading, subject to
      official notice of issuance, on the American Stock Exchange; the certificates
      for the Securities have been duly approved and adopted by the Company and are
      in
      valid and sufficient form and comply with the requirements of the American
      Stock
      Exchange; the holders of outstanding shares of capital stock of the Company
      are
      not entitled to preemptive or other rights to subscribe for the Securities;
      and,
      except as set forth in the Disclosure Package and the Prospectus, no options,
      warrants or other rights to purchase, agreements or other obligations to issue,
      or rights to convert any obligations into or exchange any securities for, shares
      of capital stock of or ownership interests in the Company are
      outstanding.

     

    (j) There
      is
      no contract or other document that is required to be described in the Prospectus
      or filed as an exhibit to the Registration Statement under the Act or rules
      and
      regulations thereunder that has not been described in the Prospectus or filed
      as
      an exhibit to the Registration Statement.

     

    (k) This
      Agreement has been duly authorized, executed and delivered by the
      Company.

     

    (l) The
      Company is not and, after giving effect to the offering and sale of the
      Securities and the application of the proceeds thereof as described in the
      Disclosure Package and the Prospectus, will not be an “investment company” as
      defined in the Investment Company Act of 1940, as amended.

     

    
      
         

      

      
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    (m) No
      consent, approval, authorization, filing with or order of any court or
      Governmental Authority is required in connection with the transactions
      contemplated herein, except for the registration of the Securities under the
      Act
      and such consents, approvals, authorizations, registrations, or qualifications
      as may be required under the Exchange Act, by the Financial Industry Regulatory
      authority (“FINRA”),
      and
      such as may be required under the blue sky laws of any jurisdiction in
      connection with the purchase and distribution of the Securities by the
      Underwriters in the manner contemplated herein and in the Disclosure Package
      and
      the Prospectus.

     

    (n) Neither
      the issue and sale of the Securities nor the consummation of any other of the
      transactions herein contemplated nor the fulfillment of the terms hereof will
      (i) conflict with or result in a violation of the charter or by-laws of the
      Company or any of the Subsidiaries or (ii) conflict with, result in
      material breach or violation of, or imposition of any lien, charge or
      encumbrance upon any property or assets of the Company or any of the
      Subsidiaries pursuant to, (A) the terms of any indenture, contract, lease,
      mortgage, deed of trust, note agreement, loan agreement or other agreement,
      obligation, condition, covenant or instrument to which the Company or any of
      its
      subsidiaries is a party or bound or to which its or their property is subject,
      or (B) any statute, law, rule, regulation, judgment, order or decree of any
      court, regulatory body, administrative agency, Governmental Authority,
      arbitrator or other authority having jurisdiction over the Company or any of
      its
      subsidiaries or any of its or their properties.

     

    (o) No
      holders of securities of the Company have rights to the registration of such
      securities under the Registration Statement except as set forth in the
      Disclosure Package and Prospectus.

     

    (p) The
      consolidated historical financial statements and schedules of the Company and
      its consolidated Subsidiaries included in the Disclosure Package, the Prospectus
      and the Registration Statement present fairly in all material respects the
      consolidated financial condition, results of operations and cash flows of the
      Company and its Subsidiaries as of the respective dates and for the respective
      periods indicated and have been prepared in conformity with U.S. generally
      accepted accounting principles applied on a consistent basis throughout the
      periods involved (except as otherwise noted therein). The selected financial
      data set forth under the caption “Selected Consolidated Financial Data” in the
      Disclosure Package, the Prospectus and the Registration Statement present the
      information set forth therein on a basis consistent with that of the audited
      financial statements contained in the Registration Statement. 

     

    (q) Except
      as
      set forth in or contemplated in the Disclosure Package and the Prospectus,
      there
      are no actions, suits or proceedings by or before any court or governmental
      agency, authority or body or any arbitrator involving the Company or any of
      its
      Subsidiaries or its or their property pending or, to the Company’s knowledge,
      threatened that (i) could reasonably be expected to have a material adverse
      effect on the performance of this Agreement or the consummation of any of the
      transactions contemplated hereby or (ii) could, singly or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

     

    (r) The
      Company and each of the Subsidiaries have good and marketable title in fee
      simple to all real property and good and valid title to all personal property
      owned by them, in each case free and clear of all liens, encumbrances and
      defects, except such as are described in the most recent Prospectus or such
      as
      do not materially adversely affect the value of such property and do not
      materially interfere with the use made and proposed to be made of such property
      by the Company and the Subsidiaries; and all assets held under lease by the
      Company and the Subsidiaries are held by them under valid, subsisting and
      enforceable leases, with such exceptions as are not material and do not
      interfere with the use made and proposed to be made of such property and
      buildings by the Company and the Subsidiaries.

     

    
      
         

      

      
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    (s) Neither
      the Company nor any Subsidiary (i) is in violation or default of any
      provision of its charter or bylaws, (ii) is in default in any material
      respect of the terms of any indenture, contract, lease, mortgage, deed of trust,
      note agreement, loan agreement or other agreement, obligation, condition,
      covenant or instrument to which it is a party or bound or to which its property
      is subject, or (iii) except as set forth in the Prospectus, is in violation
      in any material respect of any statute, law, rule, regulation, judgment, order
      or decree of any court, regulatory body, administrative agency, governmental
      body, arbitrator or other authority having jurisdiction over the Company or
      such
      subsidiary or any of its properties, as applicable, except with respect to
      (ii)
      and (iii) above, for such violations or defaults that would not, individually
      or
      in the aggregate, have a Material Adverse Effect.

     

    (t) Eisner
      LLP, who has certified certain financial statements of the Company and its
      consolidated subsidiaries and delivered its report with respect to the audited
      consolidated financial statements and schedules included in the Disclosure
      Package and the Prospectus, is an independent registered public accounting
      firm
      with respect to the Company within the meaning of the Act within the meaning
      of
      Rule 3600T of the Public Company Accounting Oversight Board, and there has
      not
      been any disagreement (within the meaning of National Policy Statement
      No. 31) with the present or any former accountants of the Company.


     

    (u) There
      are
      no transfer taxes or other similar fees or charges under U.S. federal law or
      the
      laws of any state, or any political subdivision thereof, required to be paid
      in
      connection with the execution and delivery of this Agreement or the issuance
      by
      the Company or sale by the Company of the Securities.

     

    (v) Each
      of
      the Company and the Subsidiaries has filed all Tax Returns that are required
      to
      be filed or has requested extensions thereof (except in any case in which the
      failure so to file would not have a Material Adverse Effect, except as set
      forth
      in or contemplated in the Disclosure Package and the Prospectus (exclusive
      of
      any supplement thereto)) and has paid all Taxes required to be paid by it and
      any other assessment, fine or penalty levied against it, to the extent that
      any
      of the foregoing is due and payable, except for any such assessment, fine or
      penalty that is currently being contested in good faith or as would not have
      a
      Material Adverse Effect, except as set forth in or contemplated in the
      Disclosure Package and the Prospectus (exclusive of any supplement
      thereto).

     

    (w) No
      labor
      problem or dispute with the employees of the Company or any of its Subsidiaries
      exists or, to the knowledge of the Company, is threatened or imminent, and
      the
      Company is not aware of any existing or imminent labor disturbance by the
      employees of any of its or the Subsidiaries’ principal suppliers, contractors or
      customers, that could have a Material Adverse Effect, except as set forth in
      or
      contemplated in the Disclosure Package and the Prospectus (exclusive of any
      supplement thereto).

     

    (x) The
      Company and each of the Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      are prudent and customary in the businesses in which they are engaged; all
      policies of insurance and fidelity or surety bonds insuring the Company or
      any
      of the Subsidiaries or their respective businesses, assets, employees, officers
      and directors are in full force and effect; the Company and the Subsidiaries
      are
      in compliance with the terms of such policies and instruments in all material
      respects; and there are no claims by the Company or any of the Subsidiaries
      under any such policy or instrument as to which any insurance company is denying
      liability or defending under a reservation of rights clause; neither the Company
      nor any such Subsidiary has been refused any insurance coverage sought or
      applied for; and neither the Company nor any such Subsidiary has any reason
      to
      believe that it will not be able to renew its existing insurance coverage or
      obtain substantially equivalent insurance as and when such coverage expires
      or
      to obtain similar coverage from similar insurers as may be necessary to continue
      its business at a cost that would not have a Material Adverse Effect, except
      as
      set forth in or contemplated in the Disclosure Package and the Prospectus
      (exclusive of any supplement thereto).

     

    
      
         

      

      
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    (y) No
      Subsidiary is currently prohibited, directly or indirectly, from paying any
      dividends to the Company, from making any other distribution on such
      Subsidiary’s capital stock, from repaying to the Company any loans or advances
      to such Subsidiary from the Company or from transferring any of such
      Subsidiary’s property or assets to the Company or any other Subsidiary of the
      Company, except as described in or contemplated by the Disclosure Package and
      the Prospectus (exclusive of any supplement thereto).

     

    (z) The
      Company and the Subsidiaries possess all licenses, certificates, permits and
      other authorizations issued by the appropriate federal, state or foreign
      regulatory authorities necessary to conduct their respective businesses, except
      for any which the failure to possess could not reasonably be expected to have
      a
      Material Adverse Effect, except as set forth in or contemplated in the
      Disclosure Package and the Prospectus (exclusive of any supplement thereto);
      and
      neither the Company nor any such Subsidiary has received any notice of
      proceedings relating to the revocation or modification of any such certificate,
      authorization or permit which, singly or in the aggregate, if the subject of
      an
      unfavorable decision, ruling or finding, would have a Material Adverse Effect,
      except as set forth in or contemplated in the Disclosure Package and the
      Prospectus (exclusive of any supplement thereto).

     

    (aa) The
      Company and each of the Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions
      are executed in accordance with management’s general or specific authorizations;
      (ii) transactions are recorded as necessary to permit preparation of
      financial statements in conformity with U.S. generally accepted accounting
      principles and to maintain asset accountability; (iii) access to assets is
      permitted only in accordance with management’s general or specific
      authorization; and (iv) the reported accountability for assets is compared
      with the existing assets at reasonable intervals.

     

    (bb) The
      Company has not taken, directly or indirectly, any action designed to or that
      would constitute or that might reasonably be expected to cause or result in,
      under the Exchange Act or otherwise, stabilization or manipulation of the price
      of any security of the Company to facilitate the sale or resale of the
      Securities.

     

    (cc) The
      Company and the Subsidiaries are (i) in compliance with any and all
      applicable foreign, federal, state and local laws and regulations relating
      to
      the protection of human health and safety, the environment or hazardous or
      toxic
      substances or wastes, pollutants or contaminants (“Environmental
      Laws”)
      except
      where such lack of compliance would not result in a Material Adverse Effect,
      (ii) have received and are in compliance with all permits, licenses or
      other approvals required of them under applicable Environmental Laws to conduct
      their respective businesses except where such lack of compliance would not
      result in a Material Adverse Effect and (iii) have not received notice of
      any actual or potential liability under any environmental law, except where
      such
      non-compliance with Environmental Laws, failure to receive required permits,
      licenses or other approvals, or liability would not, individually or in the
      aggregate, have a Material Adverse Effect, except as set forth in or
      contemplated in the Disclosure Package and the Prospectus (exclusive of any
      supplement thereto). Except as set forth in the Disclosure Package and the
      Prospectus, neither the Company nor any of the Subsidiaries has been named
      as a
“potentially responsible party” under the Comprehensive Environmental Response,
      Compensation, and Liability Act of 1980, as amended.

     

    (dd) The
      Company is in compliance in all material respects with all presently applicable
      provisions of the Employee Retirement Income Security Act of 1974, as amended,
      including the regulations and published interpretations thereunder
      (“ERISA”);
      no
“reportable event” (as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the Company would have any
      liability; the Company has not incurred and could not reasonably be expected
      to
      incur liability under (i) Title IV of ERISA with respect to
      termination of, or withdrawal from, any “pension plan” or (ii) Sections 412
      or 4971 of the Internal Revenue Code of 1986, as amended, including the
      regulations and published interpretations thereunder (the “Code”);
      each
“pension plan” for which the Company would have any liability that is intended
      to be qualified under Section 401(a) of the Code is so qualified and
      nothing has occurred, whether by action or by failure to act, which would cause
      the loss of such qualification; and neither the Company nor any of the
      Subsidiaries maintains or is required to contribute to a “welfare plan” (as
      defined in Section 3(l) of ERISA) which provides retiree or other
      post-employment welfare benefits or insurance coverage (other than “continuation
      coverage” (as defined in Section 602 of ERISA).

     

    
      
         

      

      
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    (ee) The
      Company is in compliance in all material respects with all presently effective
      provisions of the Sarbanes Oxley Act of 2002 and the rules and regulations
      promulgated in connection therewith (the “Sarbanes
      Oxley Act”),
      including Section 402 related to loans.

     

    (ff) Neither
      the Company nor any of the Subsidiaries nor, to the knowledge of the Company,
      any director, officer, agent, employee or affiliate of the Company or any of
      the
      Subsidiaries is aware of or has taken any action, directly or indirectly, that
      would result in a violation by such persons of the FCPA, including, without
      limitation, making use of the mails or any means or instrumentality of
      interstate commerce corruptly in furtherance of an offer, payment, promise
      to
      pay or authorization of the payment of any money, or other property, gift,
      promise to give, or authorization of the giving of anything of value to any
      “foreign official” (as such term is defined in the FCPA) or any non-U.S.
      political party or official thereof or any candidate for non-U.S. political
      office, in contravention of the FCPA and the Company, the Subsidiaries and,
      to
      the knowledge of the Company, its affiliates have conducted their businesses
      in
      compliance with the FCPA and have instituted and maintain policies and
      procedures designed to ensure, and which are reasonably expected to continue
      to
      ensure, continued compliance therewith.

     

    “FCPA”
means
      Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
      thereunder.

     

    (gg)
      The
      operations of the Company and the Subsidiaries are and have been conducted
      at
      all times in compliance in all material respects with applicable financial
      recordkeeping and reporting requirements of the Currency and Foreign
      Transactions Reporting Act of 1970, as amended, the money laundering statutes
      of
      all jurisdictions, the rules and regulations thereunder and any related or
      similar rules, regulations or guidelines, issued, administered or enforced
      by
      any Governmental Authority (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or Governmental Authority
      or
      any arbitrator involving the Company or any of the Subsidiaries with respect
      to
      the Money Laundering Laws is pending or, to the best knowledge of the Company,
      threatened in each case, as would not be reasonably expected to have a Material
      Adverse Effect.

     

    (hh) Neither
      the Company nor any of the Subsidiaries nor, to the knowledge of the Company,
      any director, officer, agent, employee or affiliate of the Company or any of
      the
      Subsidiaries is currently subject to any U.S. sanctions administered by the
      Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the offering,
      or
      lend, contribute or otherwise make available such proceeds to any Subsidiary,
      joint venture partner or other person or entity, for the purpose of financing
      the activities of any person who, to the Company’s knowledge, is currently
      subject to any U.S. sanctions administered by OFAC.

     

    
      
         

      

      
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    (ii) The
      Company and the Subsidiaries own, possess, license or have other rights to
      use,
      on reasonable terms, all patents, patent applications, trade and service marks,
      trade and service mark registrations, trade names, copyrights, licenses,
      inventions, trade secrets, technology, know-how and other intellectual property
      (collectively, the “Intellectual
      Property”)
      necessary for the conduct of the Company’s business as now conducted as
      described in the Disclosure Package and the Prospectus. Except as set forth
      in
      the Disclosure Package and the Prospectus, (i) there is no material
      infringement by third parties of any such Intellectual Property; (ii) there
      is no pending or, to the Company’s knowledge, threatened action, suit,
      proceeding or claim by others challenging the Company’s rights in or to any such
      Intellectual Property; (iii) there is no pending or, to the Company’s
      knowledge, threatened action, suit, proceeding or claim by others challenging
      the validity or scope of any such Intellectual Property; and (iv) there is
      no pending or, to the Company’s knowledge, threatened action, suit, proceeding
      or claim by others that the Company infringes or otherwise violates any patent,
      trademark, copyright, trade secret or other proprietary rights of
      others.

     

    (jj)
      Neither
      the Company nor any of the Subsidiaries is a party to any contract, agreement
      or
      understanding with any person that would give rise to a valid claim against
      the
      Company or the Underwriters for a brokerage commission, finder’s fee or like
      payment in connection with the offering and sale of the Securities other than
      this Agreement.

     

    Any
      certificate signed by any officer of the Company and delivered to the
      Representatives or counsel for the Underwriters in connection with the offering
      of the Securities shall be deemed a representation and warranty by the Company,
      as to matters covered thereby, to each Underwriter.

     

    2.    Purchase
      and Sale.

     

    (a) Subject
      to the terms and conditions and in reliance upon the representations and
      warranties herein set forth, the Company agrees to sell to each Underwriter,
      and
      each Underwriter agrees, severally and not jointly, to purchase from the
      Company, at a purchase price of $0.94 per share, the amount of the Firm Shares
      set forth opposite such Underwriter’s name in Schedule
      I
      hereto.

     

    (b)
      Subject
      to the terms and conditions and in reliance upon the representations and
      warranties herein set forth, the Company hereby grants an option to the several
      Underwriters to purchase, severally and not jointly, up to 1,950,000 Option
      Shares at the same purchase price per share as the Underwriters shall pay for
      the Firm Shares. Said option may be exercised only to cover over-allotments
      in
      the sale of the Firm Shares by the Underwriters. Said option may be exercised
      in
      whole or in part at any time on or before the 30th day after the date of the
      Prospectus upon written or telegraphic notice by the Representatives to the
      Company setting forth the number of shares of the Option Shares as to which
      the
      several Underwriters are exercising the option and the settlement date. The
      number of Option Shares to be purchased by each Underwriter shall be the same
      percentage of the total number of shares of the Option Shares to be purchased
      by
      the several Underwriters as such Underwriter is purchasing of the Firm Shares,
      subject to such adjustments as the Representatives in their absolute discretion
      shall make to eliminate any fractional shares.

     

    The
      Company shall not be obligated to deliver any of the Securities on the date
      required for delivery under Section 3 except upon payment for all
      Securities to be purchased on such delivery date as provided
      herein.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    3.    Delivery
      and Payment.
      

     

    (a) Delivery
      of and payment for the Firm Shares and the Option Shares (if the option provided
      for in Section 2(b) hereof shall have been exercised on or before the
      fourth Business Day following the date of this Agreement) shall be made at
      10:00 a.m., New York City time, on October 23, 2007, or at such time on
      such later date not more than four Business Days after the foregoing date as
      the
      Representatives shall designate, which date and time may be postponed by
      agreement between the Representatives and the Company or as provided in
      Section 9 hereof (such date and time of delivery and payment for the
      Securities being herein called the “Closing
      Date”).
      Delivery of the Securities shall be made to the Representatives for the
      respective accounts of the several Underwriters against payment by the several
      Underwriters through the Representatives of the purchase price thereof to or
      upon the order of the Company by wire transfer payable in same-day funds to
      an
      account specified in writing by the Company. Delivery of the Firm Shares and
      the
      Option Shares shall be made through the facilities of The Depository Trust
      Company unless the Representatives shall otherwise instruct.

     

    (b) If
      the
      option provided for in Section 2(b) hereof is exercised after the fourth
      Business Day following the date of this Agreement, the Company will deliver
      (at
      the expense of the Company) to the Representatives, at 600 Montgomery Street,
      8th
      Floor,
      San Francisco, California 94111, on the date specified by the Representatives
      (which shall be within three Business Days after exercise of said option),
      certificates for the Option Shares in such names and denominations as the
      Representatives shall have requested for the respective accounts of the several
      Underwriters, against payment by the several Underwriters through the
      Representatives of the purchase price thereof to or upon the order of the
      Company. If settlement for the Option Shares occurs after the Closing Date,
      the
      Company will deliver to the Representatives on the settlement date for the
      Option Shares, and the obligation of the Underwriters to purchase the Option
      Shares shall be conditioned upon receipt of, supplemental opinions, certificates
      and letters confirming as of such date the opinions, certificates and letters
      delivered on the Closing Date pursuant to Section 6 hereof.

     

    4.    Offering
      by Underwriters.
      It is
      understood that the several Underwriters propose to offer the Securities for
      sale to the public upon the terms and conditions as set forth in the Prospectus
      as soon after this Agreement has been executed and as the Representatives,
      in
      their sole judgment, have determined is advisable and practicable. 

     

    5.    Agreements.

     

    (i)    The
      Company agrees with the several Underwriters that:

     

    (a) Prior
      to
      the termination of the offering of the Securities, the Company will not file
      any
      amendment of the Registration Statement or supplement to the Prospectus or
      any
      Rule 462(b) Registration Statement unless the Company has furnished you a copy
      for your review prior to filing and will not file any such proposed amendment
      or
      supplement to which you reasonably object. The Company will cause the
      Prospectus, properly completed, and any supplement thereto to be filed in a
      form
      approved by the Representatives with the Commission pursuant to the applicable
      paragraph of Rule 424(b) within the time period prescribed and will provide
      evidence satisfactory to the Representatives of such timely filing. The Company
      will promptly advise the Representatives (1) when the Prospectus, and any
      supplement thereto, shall have been filed (if required) with the Commission
      pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall
      have been filed with the Commission, (2) when, prior to termination of the
      offering of the Securities, any amendment to the Registration Statement shall
      have been filed or become effective, (3) of any request by the Commission
      or its staff for any amendment of the Registration Statement, or any Rule 462(b)
      Registration Statement, or for any supplement to the Prospectus or for any
      additional information, (4) of the issuance by the Commission of any stop
      order suspending the effectiveness of the Registration Statement or of any
      notice objecting to its use or the institution or threatening of any proceeding
      for that purpose and (5) of the receipt by the Company of any notification
      with respect to the suspension of the qualification of the Securities for sale
      in any jurisdiction or the institution or threatening of any proceeding for
      such
      purpose. The Company will use its best efforts to prevent the issuance of any
      such stop order or the occurrence of any such suspension or objection and,
      upon
      such issuance, occurrence or objection, to obtain as soon as possible the
      withdrawal thereof of such stop order or relief from such occurrence or
      objection, including, if necessary, by filing an amendment to the Registration
      Statement or a new registration statement and using its best efforts to have
      such amendment or new registration statement declared effective as soon as
      practicable.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b) If,
      at
      any time, prior to the filing of the Prospectus pursuant to Rule 424(b), any
      event occurs as a result of which the Disclosure Package would include any
      untrue statement of a material fact or omit to state any material fact necessary
      to make the statements therein in the light of the circumstances under which
      they were made at such time not misleading, the Company will: (1) notify
      promptly the Representatives so that any use of the Disclosure Package may
      cease
      until it is amended or supplemented; (2) amend or supplement the Disclosure
      Package to correct such statement or omission; and (3) supply any amendment
      or supplement to you in such quantities as you may reasonably
      request.

     

    (c) If,
      at
      any time when a prospectus relating to the Securities is required to be
      delivered under the Act (including in circumstances where such requirements
      may
      be satisfied pursuant to Rule 172 of the Act), any event which becomes known
      to
      the Company occurs as a result of which the Prospectus as then supplemented
      would include any untrue statement of a material fact or omit to state any
      material fact necessary to make the statements therein in the light of the
      circumstances under which they were made at such time not misleading, or if
      it
      shall be necessary to amend the Registration Statement or supplement the
      Prospectus to comply with the Act or the rules thereunder, the Company promptly
      will (1) notify the Representatives of any such event, (2) prepare and
      file with the Commission, subject to the second sentence of paragraph (i)(a)
      of
      this Section 5, an amendment or supplement which will correct such
      statement or omission or effect such compliance and (3) supply any
      supplemented Prospectus to you in such quantities as you may reasonably
      request.

     

    (d) As
      soon
      as practicable, the Company will make generally available to its security
      holders and to the Representatives an earnings statement or statements of the
      Company and its subsidiaries which will satisfy the provisions of
      Section 11(a) of the Act and Rule 158 under the Act.

     

    (e) The
      Company will furnish to the Representatives and counsel for the Underwriters
      signed copies of the Registration Statement (including exhibits thereto) and
      to
      each other Underwriter a copy of the Registration Statement (without exhibits
      thereto) and, so long as delivery of a prospectus by an Underwriter or dealer
      may be required by the Act (including the circumstances where such requirement
      may be satisfied pursuant to Rule 172), as many copies of each Preliminary
      Prospectus, the Prospectus and each Issuer Free Writing Prospectus and any
      supplement thereto as the Representatives may reasonably request.

     

    (f) The
      Company will arrange, if necessary, for the qualification of the Securities
      for
      sale under the laws of such jurisdictions as the Representatives may designate
      and will maintain such qualifications in effect so long as required for the
      distribution of the Securities; provided,
      that in
      no event shall the Company be obligated to qualify to do business in any
      jurisdiction where it is not now so qualified, to subject itself to taxation
      in
      any foreign jurisdiction or to take any action that would subject it to service
      of process in suits, other than those arising out of the offering or sale of
      the
      Securities, in any jurisdiction where it is not now so subject.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (g) The
      Company will not, without the prior written consent of ThinkEquity Partners
      LLC,
      offer, sell, contract to sell, pledge, or otherwise dispose of (or enter into
      any transaction which is designed to, or might reasonably be expected to, result
      in the disposition of (whether by actual disposition or effective economic
      disposition due to cash settlement or otherwise) by the Company or any affiliate
      of the Company or any person in privity with the Company or any affiliate of
      the
      Company), directly or indirectly, including the filing (or participation in
      the
      filing) of a registration statement with the Commission (other than a
      registration statement on Form S-8) in respect of, or establish or increase
      a put equivalent position or liquidate or decrease a call equivalent position
      within the meaning of Section 16 of the Exchange Act, with respect to any
      other shares of Common Stock or any securities convertible into, or exercisable,
      or exchangeable for, shares of Common Stock, or publicly announce an intention
      to effect any such transaction, for a period of 90 days after the date of this
      Agreement; provided,
      however,
      that
      the Company may (i) issue and sell Common Stock pursuant to any employee stock
      incentive plan, stock option plan (and may issue options thereunder), stock
      ownership plan or dividend reinvestment plan of the Company in effect at the
      Execution Time, (ii) Common Stock issuable upon the conversion of securities
      or
      the exercise of warrants outstanding at the Execution Time and (iii) Common
      Stock pursuant to the Share Exchange Agreement, dated as of May 21, 2007,
      between the Company and Nexit Ventures Oy, as the authorized representative
      of
      the holders of the outstanding equity securities of Hantro Products Oy. If
      (1) during the last 17 days of the 90-day restricted period the Company
      issues an earnings release or material news or a material event relating to
      the
      Company occurs or (2) prior to the expiration of the 90-day restricted
      period the Company announces that it will release earnings results during the
      16-day period beginning on the last day of the 90-day period, then the foregoing
      restrictions shall continue to apply until the expiration of the 18-day period
      beginning on the issuance of the earnings release or the occurrence of the
      material news or material event. 

     

    (h) The
      Company will comply with all applicable securities and other applicable laws,
      rules and regulations, including, without limitation, the Sarbanes Oxley Act,
      the Money Laundering Laws and the FCPA and use its best efforts to cause the
      Company’s directors and officers, in their capacities as such, to comply with
      such laws, rules and regulations, including, without limitation, the provisions
      of the Sarbanes Oxley Act, the Money Laundering Laws and the FCPA.

     

    (i) The
      Company will not take, directly or indirectly, any action designed to or that
      would constitute or that might reasonably be expected to cause or result in,
      under the Exchange Act or otherwise, stabilization or manipulation of the price
      of any security of the Company to facilitate the sale or resale of the
      Securities.

     

    (j) The
      Company will not issue any press release or public announcement between the
      date
      hereof and the Closing Date without first providing prior notice to the
      Representatives.

     

    (k) The
      Company agrees to pay the costs and expenses relating to the following matters:
      (i) the preparation, printing or reproduction and filing with the
      Commission of the Registration Statement (including financial statements and
      exhibits thereto), each Preliminary Prospectus, the Prospectus and each Issuer
      Free Writing Prospectus, and each amendment or supplement to any of them;
      (ii) the printing (or reproduction) and delivery (including postage, air
      freight charges and charges for counting and packaging) of such copies of the
      Registration Statement, each Preliminary Prospectus, the Prospectus, each Issuer
      Free Writing Prospectus and all amendments or supplements to any of them, as
      may, in each case, be reasonably requested for use in connection with the
      offering and sale of the Securities; (iii) the preparation, printing,
      authentication, issuance and delivery of certificates for the Securities,
      including any stamp or transfer taxes in connection with the original issuance
      and sale of the Securities; (iv) the printing (or reproduction) and
      delivery of this Agreement, any blue sky memorandum and all other agreements
      or
      documents printed (or reproduced) and delivered in connection with the offering
      of the Securities; (v) the registration of the Securities under the
      Exchange Act and the listing of the Securities on the American Stock Exchange;
      (vi) any registration or qualification of the Securities for offer and sale
      under the securities or blue sky laws of the several states (including filing
      fees and the reasonable fees and expenses of counsel for the Underwriters
      relating to such registration and qualification); (vii) any filings
      required to be made with FINRA (including filing fees and the reasonable fees
      and expenses of counsel for the Underwriters relating to such filings);
      (viii) the costs and expenses of the Company relating to investor
      presentations on any “road show” undertaken in connection with the marketing of
      the offering of the securities, including, without limitation, third party
      expenses associated with the production of road show slides and graphics, fees
      and expenses of any consultants engaged in connection with the road show
      presentations with the prior approval of the Company, lodging expenses of the
      officers of the Company and any such consultants, and 50% of the cost of any
      aircraft chartered in connection with the road show, but specifically excluding
      the lodging expenses of the representatives of the Underwriters; (ix) the
      fees and expenses of the Company’s accountants and the fees and expenses of
      counsel (including local and special counsel) for the Company; and (x) all
      other costs and expenses incident to the performance by the Company of its
      obligations hereunder; provided
      that,
      except as provided in this Section 5 and in Section 7, the
      Underwriters shall pay their own costs and expenses, including the costs and
      expenses of their counsel, any transfer taxes on the securities which they
      may
      sell and the expenses of advertising any offering of the securities made by
      the
      Underwriters.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (l) The
      Company will use the net proceeds from the sale of the Securities in the manner
      described in the Prospectus.

     

    (m) The
      Company agrees that, unless it has obtained or will obtain the prior written
      consent of the Representatives (such consent to not be unreasonably withheld),
      and each Underwriter, severally and not jointly, agrees with the Company that,
      unless it has obtained or will obtain, as the case may be, the prior written
      consent of the Company (such consent to not be unreasonably withheld), it has
      not made and will not make any offer relating to the Securities that would
      constitute an Issuer Free Writing Prospectus or that would otherwise constitute
      a Free Writing Prospectus required to be filed by the Company or such
      Underwriter with the Commission or retained by the Company under Rule 433;
      provided,
      that
      the prior written consent of the parties hereto shall be deemed to have been
      given in respect of the Free Writing Prospectuses identified in Schedule
      II
      hereto
      and any electronic road show. Any such Free Writing Prospectus consented to
      by
      the Representatives or the Company is hereinafter referred to as a “Permitted
      Free Writing Prospectus.”
The
      Company agrees that (x) it has treated and will treat, as the case may be,
      each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus
      and
      (y) it has complied and will comply, as the case may be, with the
      requirements of Rules 164 and 433 applicable to any Permitted Free Writing
      Prospectus, including in respect of timely filing with the Commission, legending
      and record keeping.

     

    (ii)    Each
      Underwriter severally agrees that such Underwriter shall not include any “issuer
      information” (as defined in Rule 433) in any Free Writing Prospectus used
      or referred to by such Underwriter without the prior written consent of the
      Company (any such issuer information with respect to whose use the Company
      has
      given its consent, “Permitted
      Issuer Information”); provided,
      that
      (i) no such consent shall be required with respect to any such issuer
      information contained in any document filed by the Company with the Commission
      prior to the use of such Free Writing Prospectus and (ii) ”issuer
      information,” as used in this Section 5(ii), shall not be deemed to include
      information prepared by or on behalf of such Underwriter on the basis of or
      derived from issuer information.

     

    6.    Conditions
      to the Obligations of the Underwriters.
      The
      obligations of the Underwriters to purchase the Firm Shares and the Option
      Shares, as the case may be, shall be subject to the accuracy of the
      representations and warranties on the part of the Company contained herein
      as of
      the Execution Time, the Closing Date and any Subsequent Closing Date, to the
      accuracy of the statements of the Company made in any certificates pursuant
      to
      the provisions hereof, to the performance by the Company of its obligations
      hereunder and to the following additional conditions:

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (a) Prior
      to
      the Closing Date and any Subsequent Closing Date, the Prospectus and any
      supplement thereto have been filed in the manner and within the time period
      required by Rule 424(b); and no stop order suspending the effectiveness of
      the
      Registration Statement or any notice objecting to its use shall have been issued
      and no proceedings for that purpose shall have been instituted or, to the
      Company’s knowledge, threatened.

     

    (b) On
      the
      Closing Date and any Subsequent Closing Date, McGuire Woods LLP, counsel for
      the
      Company, shall have furnished to the Representatives their opinion, dated the
      Closing Date and addressed to the Representatives and their counsel, in the
      form
      set forth in Exhibit
      B.

     

    (c) On
      the
      Closing Date and any Subsequent Closing Date, Levisohn Berger LLP, intellectual
      property counsel for the Company, shall have furnished to the Representatives
      its opinion, dated the Closing Date and addressed to the Representatives and
      their counsel, in the form set forth in Exhibit
      C.

     

    (d) The
      Representatives shall have received from Lowenstein Sandler PC, counsel for
      the
      Underwriters, such opinion or opinions, dated the Closing Date and addressed
      to
      the Representatives, with respect to the issuance and sale of the Securities,
      the Registration Statement, the Disclosure Package, the Prospectus (together
      with any supplement thereto), and other related matters as the Representatives
      may reasonably require, and the Company shall have furnished to such counsel
      such documents as they reasonably request for the purpose of enabling them
      to
      pass upon such matters.

     

    (e) On
      the
      Closing Date and any Subsequent Closing Date, the Company shall have furnished
      to the Representatives certificates dated the Closing Date, signed by
      appropriate officers of the Company, addressed to the Underwriters and their
      counsel, with respect to the charter and by-laws of the Company, all resolutions
      of the board of directors of the Company and other corporate action relating
      to
      this Agreement and to the authorization, issue and sale of the Securities,
      the
      incumbency and specimen signatures of signing officers and with respect to
      such
      other matters as the Underwriters may reasonably request.

     

    (f) On
      the
      Closing Date and any Subsequent Closing Date, the Company shall have furnished
      to the Representatives a certificate of the Company, signed by the principal
      executive officer and principal financial officer of the Company, dated the
      Closing Date, to the effect that the signers of such certificate have carefully
      examined the Registration Statement, the Prospectus, the Disclosure Package
      and
      any amendment or supplement thereto, as well as each electronic roadshow used
      to
      offer the securities, and this Agreement and that:

     

    (i) the
      representations and warranties of the Company in this Agreement are true and
      correct on and as of the Closing Date with the same effect as if made on the
      Closing Date and the Company has complied with all the agreements and satisfied
      all the conditions on its part to be performed or satisfied at or prior to
      the
      Closing Date;

     

    (ii) no
      stop
      order suspending the effectiveness of the Registration Statement or any notice
      objecting to is use has been issued and no proceedings for that purpose have
      been instituted or, to the Company’s knowledge, threatened;

     

    (iii) since
      the
      date of the most recent financial statements included in the Prospectus
      (exclusive of any supplement thereto), there has been no material adverse effect
      on the condition (financial or otherwise), prospects, earnings, business or
      properties of the Company and their Subsidiaries, taken as a whole, whether
      or
      not arising from transactions in the ordinary course of business, except as
      set
      forth in or contemplated in the Disclosure Package and the Prospectus (exclusive
      of any supplement thereto); and

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (iv) such
      other matters as the Underwriters may reasonably request.

     

    (g) At
      the
      Execution Time and on the Closing Date and any Subsequent Closing Date, Eisner
      LLP shall have furnished to the Representatives letters, dated respectively
      as
      of the Execution Time, the Closing Date or such Subsequent Closing Date, in
      form
      and substance reasonably satisfactory to the Representatives, a customary
“comfort letter” with respect to the financial statements and certain financial
      information of the Company and its subsidiaries contained in the Registration
      Statement, the Statutory Prospectus and the Prospectus and confirming that
      it is
      an independent registered public accounting firm within the meaning of the
      Act
      and the applicable rules and regulations adopted by the Commission.

     

    (h) Subsequent
      to the Execution Time or, if earlier, the dates as of which information is
      given
      in the Registration Statement (exclusive of any amendment thereof) and the
      Prospectus (exclusive of any supplement thereto), there shall not have been
      (i) any loss or interference with the Company’s business from fire,
      explosion, flood or other calamity, whether or not covered by insurance, or
      from
      any labor dispute or court or governmental action, order or decree, otherwise
      than as set forth or contemplated in the most recent Prospectus or (ii) any
      change in the capital stock or long-term debt of the Company or any of its
      subsidiaries or any change, or any development involving a prospective change,
      in or affecting the general affairs, management, financial position,
      stockholders’ equity or results of operations of the Company and its
      subsidiaries, taken as a whole, otherwise than as set forth or contemplated
      in
      the Prospectus, the effect of which, in any such case described in
      clause (i) or (ii), is, in the judgment of the Representatives, so material
      and adverse as to make it impracticable or inadvisable to proceed with the
      public offering or the delivery of the Securities being delivered on such date
      of delivery on the terms and in the manner contemplated in the
      Prospectus.

     

    (i) The
      Securities shall have been listed for trading on the American Stock Exchange
      and
      satisfactory evidence of such actions shall have been provided to the
      Representatives.

     

    (j) At
      or
      prior to the Execution Time, the Company shall have furnished to the
      Representatives a letter substantially in the form of Exhibits
      A-1
      or
A-2
      hereto
      from each executive officer and director of the Company (other than Pekka
      Salonoja) as of the Execution Time addressed to the
      Representatives.

     

    (k) Prior
      to
      the Closing Date, the Company shall have furnished to the Representatives such
      further information, certificates and documents as the Representatives may
      reasonably request for the purposes of enabling them to pass upon the issuance
      and sale of the Securities as contemplated in this Agreement, or to evidence
      the
      accuracy of the Company’s representations and warranties or the satisfaction of
      any of the agreements or conditions contained in this Agreement.

     

    If
      any of
      the conditions specified in this Section 6 shall not have been fulfilled
      when and as provided in this Agreement, or if any of the opinions and
      certificates mentioned above or elsewhere in this Agreement shall not be
      reasonably satisfactory in form and substance to the Representatives and counsel
      for the Underwriters, this Agreement and all obligations of the Underwriters
      hereunder may be canceled at, or at any time prior to, the Closing Date by
      the
      Representatives, which cancellation shall be without liability on the part
      of
      any party to any other party, except that Section 5(i)(k), Section 7, Section
      8
      and Section 11 shall at all times be effective and shall survive such
      cancellation. Notice of such cancellation shall be given to the Company in
      writing or by telephone or facsimile confirmed in writing.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    The
      documents required to be delivered by this Section 6 shall be delivered at
      the office of Lowenstein Sandler PC, counsel for the Underwriters, at 1251
      Avenue of the Americas, New York, New York 10020, Attention: Michael D. Maline,
      on the Closing Date or on such other date as shall be required or permitted
      by
      the terms of the Agreement.

     

    7.    Reimbursement
      of Underwriters’ Expenses.
      If the
      sale of the Securities provided for herein is not consummated because any
      condition to the obligations of the Underwriters set forth in Section 6
      hereof is not satisfied or because of any refusal, inability or failure on
      the
      part of the Company to perform any agreement herein or comply with any provision
      hereof other than by reason of a default by any of the Underwriters, the Company
      will reimburse the Underwriters severally through ThinkEquity Partners LLC
      on
      demand for all reasonable out-of-pocket expenses (including reasonable fees
      and
      disbursements of counsel) that shall have been incurred by them in connection
      with the proposed purchase and sale of the Securities. If this Agreement is
      terminated by reason of the default of one or more of the Underwriters as set
      forth in Section 9 hereof, the Company shall not be obligated to reimburse
      any defaulting Underwriter on account of those expenses.

     

    8.    Indemnification
      and Contribution.

     

    (a) The
      Company agrees to indemnify and hold harmless each Underwriter, the directors,
      officers, employees and agents of each Underwriter and each person who controls
      any Underwriter within the meaning of either the Act or the Exchange Act from
      and against any and all losses, claims, damages or liabilities, joint or
      several, or any action in respect thereof, to which they or any of them may
      become subject under the Act, the Exchange Act or any other Federal or state
      statutory law or regulation, at common law or otherwise, insofar as such losses,
      claims, damages or liabilities (or actions in respect thereof) arise out of
      or
      are based upon any untrue statement or alleged untrue statement of a material
      fact contained in the registration statement for the registration of the
      Securities as originally filed or in any amendment thereof, or in any
      Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus,
      or
      in any amendment thereof or supplement thereto, or in any Permitted Issuer
      Information used or referred to in any Free Writing Prospectus used or referred
      to by any Underwriter, or any “road show” (as defined in Rule 433) not
      constituting an Issuer Free Writing Prospectus (a “Non-Prospectus
      Road Show”),
      or
      arise out of or are based upon the omission or alleged omission to state therein
      a material fact required to be stated therein or necessary to make the
      statements therein not misleading, and agrees to reimburse each such indemnified
      party, as incurred, for any reasonable legal or other expenses incurred by
      them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action as such expenses are incurred; provided,
      however,
      that
      the Company will not be liable in any such case to the extent that any such
      loss, claim, damage or liability arises out of or is based upon any such untrue
      statement or alleged untrue statement or omission or alleged omission made
      therein in reliance upon and in conformity with written information furnished
      to
      the Company by or on behalf of any Underwriter through the Representatives
      specifically for inclusion therein. This indemnity agreement will be in addition
      to any liability which the Company may otherwise have.

     

    (b) Each
      Underwriter severally and not jointly agrees to indemnify and hold harmless
      the
      Company, each of its directors, each of its officers who signs the Registration
      Statement, and each person who controls the Company within the meaning of either
      the Act or the Exchange Act, to the same extent as the foregoing indemnity
      to
      each Underwriter, from and against any loss, claim, damage or liability, joint
      or several, or any action in respect thereof, to which the Company or any such
      director, officer or controlling person may become subject, under the Act,
      the
      Exchange Act or any other Federal or state statutory law or regulation, at
      common law or otherwise, insofar as such losses, claims, damages, liabilities
      (or actions in respect thereof) arise out of or are based upon, (i) any
      untrue statement or alleged untrue statement of a material fact contained in
      the
      registration statement for the registration of the Securities as originally
      filed or in any amendment thereof, or in any Preliminary Prospectus, the
      Prospectus, any Issuer Free Writing Prospectus or in any amendment thereof
      or
      supplement thereto or in any Permitted Issuer Information or any Non-Prospectus
      Road Show, or (ii) the omission or alleged omission to state therein, a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, but in each case only to the extent that the untrue
      statement or alleged untrue statement or omission or alleged omission was made
      in reliance upon and in conformity with written information concerning such
      Underwriter furnished to the Company through the Representatives by or on behalf
      of that Underwriter specifically for inclusion therein, and shall reimburse
      the
      Company and any such director, officer or controlling person for any legal
      or
      other expenses reasonably incurred by the Company or any such director, officer
      or controlling person in connection with investigating or defending or preparing
      to defend against any such loss, claim, damage, liability or action as such
      expenses are incurred. This indemnity agreement will be in addition to any
      liability which any Underwriter may otherwise have. The Company acknowledges
      that the statements set forth in the fifth paragraph of the cover page regarding
      delivery of the Securities and, under the heading “Underwriting,” (i) the
      list of Underwriters and their respective participation in the sale of the
      Securities, (ii) the sentences related to concessions and reallowances and
      (iii) the paragraph related to stabilization, syndicate covering
      transactions and penalty bids in any Preliminary Prospectus, the Prospectus
      and
      any Issuer Free Writing Prospectus constitute the only information furnished
      in
      writing by or on behalf of the several Underwriters for inclusion in any
      Preliminary Prospectus, the Prospectus and any Issuer Free Writing
      Prospectus.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (c) Promptly
      after receipt by an indemnified party under this Section 8 of notice of the
      commencement of any action, such indemnified party will, if a claim in respect
      thereof is to be made against the indemnifying party under this Section 8,
      notify the indemnifying party in writing of the commencement thereof; but the
      failure so to notify the indemnifying party (i) will not relieve it from
      liability under Section 8(a) or (b) above unless and to the extent it did
      not otherwise learn of such action and such failure results in the forfeiture
      by
      the indemnifying party of substantial rights and defenses and (ii) will
      not, in any event, relieve the indemnifying party from any obligations to any
      indemnified party other than the indemnification obligation provided in Section
      8(a) or (b) above. The indemnifying party shall be entitled to appoint
      counsel of the indemnifying party’s choice at the indemnifying party’s expense
      to represent the indemnified party in any action for which indemnification
      is
      sought (in which case the indemnifying party shall not thereafter be responsible
      for the fees and expenses of any separate counsel retained by the indemnified
      party or parties except as set forth below); provided,
      however,
      that
      such counsel shall be reasonably satisfactory to the indemnified party.
      Notwithstanding the indemnifying party’s election to appoint counsel to
      represent the indemnified party in an action, the indemnified party shall have
      the right to employ separate counsel (including local counsel), and the
      indemnifying party shall bear the reasonable fees, costs and expenses of such
      separate counsel if (i) the use of counsel chosen by the indemnifying party
      to represent the indemnified party would present such counsel with a conflict
      of
      interest, (ii) the actual or potential defendants in, or targets of, any
      such action include both the indemnified party and the indemnifying party and
      the indemnified party shall have reasonably concluded, based on the advice
      of
      counsel, that there may be legal defenses available to it and/or other
      indemnified parties which are different from or additional to those available
      to
      the indemnifying party, (iii) the indemnifying party shall not have
      employed counsel satisfactory to the indemnified party to represent the
      indemnified party within a reasonable time after notice of the institution
      of
      such action or (iv) the indemnifying party shall authorize the indemnified
      party to employ separate counsel at the expense of the indemnifying party.
      An
      indemnifying party will not, without the prior written consent of the
      indemnified parties (which such consent shall not be unreasonably withheld),
      settle or compromise or consent to the entry of any judgment with respect to
      any
      pending or threatened claim, action, suit or proceeding in respect of which
      indemnification or contribution may be sought hereunder (whether or not the
      indemnified parties are actual or potential parties to such claim or action)
      unless such settlement, compromise or consent includes an unconditional release
      of each indemnified party from all liability arising out of such claim, action,
      suit or proceeding.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (d) In
      the
      event that the indemnity provided in Section 8(a) or (b) is unavailable to
      or
      insufficient to hold harmless an indemnified party for any reason, the Company
      and the Underwriters severally agree to contribute to the aggregate losses,
      claims, damages and liabilities (including legal or other expenses reasonably
      incurred in connection with investigating or defending same) (collectively
      “Losses”)
      to
      which the Company and one or more of the Underwriters may be subject in such
      proportion as is appropriate to reflect the relative benefits received by the
      Company on the one hand and by the Underwriters on the other from the offering
      of the Securities; provided,
      however,
      that in
      no case shall any Underwriter (except as may be provided in any agreement among
      underwriters relating to the offering of the Securities) be responsible for
      any
      amount in excess of the underwriting discount or commission applicable to the
      Securities purchased by such Underwriter hereunder. If the allocation provided
      by the immediately preceding sentence is unavailable for any reason, the Company
      and the Underwriters severally shall contribute in such proportion as is
      appropriate to reflect not only such relative benefits but also the relative
      fault of the Company, on the one hand, and of the Underwriters, on the other,
      in
      connection with the statements or omissions which resulted in such Losses,
      as
      well as any other relevant equitable considerations. Benefits received by the
      Company shall be deemed to be equal to the total net proceeds from the offering
      (before deducting expenses) received by it, and benefits received by the
      Underwriters shall be deemed to be equal to the total underwriting discounts
      and
      commissions, in each case as set forth on the cover page of the Prospectus.
      Relative fault shall be determined by reference to, among other things, whether
      any untrue or any alleged untrue statement of a material fact or the omission
      or
      alleged omission to state a material fact relates to information provided by
      the
      Company on the one hand or the Underwriters on the other, the intent of the
      parties and their relative knowledge, access to information and opportunity
      to
      correct or prevent such untrue statement or omission. The Company and the
      Underwriters agree that it would not be just and equitable if contribution
      were
      determined by pro rata allocation or any other method of allocation which does
      not take account of the equitable considerations referred to above.
      Notwithstanding the provisions of this Section 8(d), no person guilty of
      fraudulent misrepresentation (within the meaning of Section 11(f) of the
      Act) shall be entitled to contribution from any person who was not guilty of
      such fraudulent misrepresentation. For purposes of this Section 8, each
      person who controls an Underwriter within the meaning of either the Act or
      the
      Exchange Act and each director, officer, employee and agent of an Underwriter
      shall have the same rights to contribution as such Underwriter, and each person
      who controls the Company within the meaning of either the Act or the Exchange
      Act, each officer of the Company who shall have signed the Registration
      Statement and each director of the Company shall have the same rights to
      contribution as the Company, subject in each case to the applicable terms and
      conditions of this Section 8(d).

     

    9.    Default
      by an Underwriter.
      If
      any
      one or more Underwriters shall fail to purchase and pay for any of the
      Securities agreed to be purchased by such Underwriter or Underwriters hereunder
      and such failure to purchase shall constitute a default in the performance
      of
      its or their obligations under this Agreement, the remaining Underwriters shall
      be obligated severally to take up and pay for (in the respective proportions
      which the amount of Securities set forth opposite their names in Schedule
      I
      hereto
      bears to the aggregate amount of Securities set forth opposite the names of
      all
      the remaining Underwriters) the Securities which the defaulting Underwriter
      or
      Underwriters agreed but failed to purchase; provided,
      however,
      that in
      the event that the aggregate amount of Securities which the defaulting
      Underwriter or Underwriters agreed but failed to purchase shall exceed 10%
      of
      the aggregate amount of Securities set forth in Schedule
      I
      hereto,
      the remaining Underwriters shall have the right to purchase all, but shall
      not
      be under any obligation to purchase, any of the Securities, and if such
      nondefaulting Underwriters do not purchase all the Securities, this Agreement
      will terminate without liability to any nondefaulting Underwriter or the
      Company. In the event of a default by any Underwriter as set forth in this
      Section 9, the Closing Date shall be postponed for such period, not
      exceeding five Business Days, as the Representatives shall determine in order
      that the required changes in the Registration Statement and the Prospectus
      or in
      any other documents or arrangements may be effected. Nothing contained in this
      Agreement shall relieve any defaulting Underwriter of its liability, if any,
      to
      the Company and any nondefaulting Underwriter for damages occasioned by its
      default hereunder.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    10.    Termination.
      This
      Agreement shall be subject to termination by the Representatives, by notice
      given to the Company prior to delivery of and payment for the Securities, if
      at
      any time prior to such time (i) trading in the Company’s Common Stock shall
      have been suspended by the Commission or the American Stock Exchange, (ii)
      trading in securities generally on the American Stock Exchange shall have been
      suspended or limited or minimum prices shall have been established on such
      Exchange, (iii) a general banking moratorium shall have been declared
      either by Federal or New York State authorities or (iv) there shall have
      occurred any outbreak or escalation of international hostilities, declaration
      by
      the United States of a national emergency or war, or other calamity or crisis
      the effect of which on United States or international financial markets is
      such
      as to make it, in the sole judgment of the Representatives, impractical or
      inadvisable to proceed with the offering or delivery of the Securities as
      contemplated by the Preliminary Prospectus or the Prospectus (exclusive of
      any
      supplement thereto). Any termination pursuant to this Section 10(ii), (iii)
      or
      (iv) shall be without liability on the part of (i) the Company to any
      Underwriter, except that the Company shall be obligated to reimburse the
      expenses of the Representatives and the Underwriters to the extent required
      by
      Section 7, and (b) any Underwriter to the Company.

     

    11.    Representations
      and Indemnities to Survive.
      The
      respective agreements, representations, warranties, indemnities and other
      statements of the Company or its officers and of the Underwriters set forth
      in
      or made pursuant to this Agreement will remain in full force and effect,
      regardless of any investigation made by or on behalf of any Underwriter or
      the
      Company or any of the officers, directors, employees, agents or controlling
      persons referred to in Section 8 hereof, and will survive delivery of and
      payment for the Securities. The provisions of Sections 5(i)(k), 7 and 8 hereof
      shall survive the termination or cancellation of this Agreement.

     

    12.    Notices.
      All
      communications hereunder will be in writing and effective only on receipt,
      and,
      if sent to the Representatives, will be mailed, delivered or telefaxed to the
      ThinkEquity Partners LLC General Counsel (fax no.: (415) 772-9017) and
      confirmed to ThinkEquity Partners LLC, at 600 Montgomery Street, 8th Floor,
      San
      Francisco, California 94111, Attention: General Counsel; or, if sent to the
      Company, will be mailed, delivered or telefaxed to On2 Technologies, Inc.,
      580
      White Plains Road, Tarrytown, NY 10591, Attention: General Counsel (fax no.:
      (914) 468-0510).

     

    13.    Successors.
      This
      Agreement will inure to the benefit of and be binding upon the parties hereto
      and their respective successors and the officers, directors, employees, agents
      and controlling persons referred to in Section 8 hereof, and no other
      person will have any right or obligation hereunder.

     

    14.    Fiduciary
      Duty.
      The
      Company hereby acknowledges that (i) the Underwriters have been retained
      solely as underwriters of the offering of the Securities and not as advisors
      to,
      or agents of, the Company or any other person and (ii) its engagement of
      the Underwriters in connection with the offering of the Securities is as an
      independent contractor and not in any other capacity, including as a fiduciary.
      Furthermore, each of the Company and the Underwriters agrees that it is solely
      responsible for making its own independent judgments with respect to the
      offering of the Securities. In addition, the Company agrees that it will not
      claim that the Underwriters or any of them, owe a fiduciary or similar duty
      to
      the Company in connection with the transactions contemplated by this
      Underwriting Agreement or the process leading thereto.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    15.    Integration.
      This
      Agreement supersedes all prior agreements and understandings (whether written
      or
      oral) between the Company and the Underwriters, or any of them, with respect
      to
      the subject matter hereof.

     

    16.    Applicable
      Law.
      This
      Agreement will be governed by and construed in accordance with the laws of
      the
      State of New York applicable to contracts made and to be performed within the
      State of New York.

     

    17.    Submission
      to Jurisdiction.
      Except
      as set forth below, no claim arising under or relating to this Agreement or
      the
      offering of the Securities may be commenced, prosecuted or continued in any
      court other than the courts of the State of New York located in the City and
      County of New York or in the United States District Court for the Southern
      District of New York, which courts shall have jurisdiction over the adjudication
      of such matters, and the Company and the Underwriters hereby consent to the
      jurisdiction of such courts and personal service with respect thereto. Each
      Underwriter and the Company (on its behalf and, to the extent permitted by
      applicable law, on behalf of its stockholders and affiliates), each waive all
      right to trial by jury in any action, proceeding or counterclaim (whether based
      upon contract, tort or otherwise) in any way arising out of or relating to
      this
      Agreement. Each Underwriter and the Company agree that a final judgment in
      any
      such action, proceeding or counterclaim brought in any such court shall be
      conclusive and binding upon such party and may be enforced in any other courts
      to the jurisdiction of which such party is or may be subject, by suit upon
      such
      judgment.

     

    18.    Counterparts.
      This
      Agreement may be signed in one or more counterparts, each of which shall
      constitute an original and all of which together shall constitute one and the
      same agreement.

     

    19.    Headings.
      The
      section headings used herein are for convenience only and shall not affect
      the
      construction hereof.

     

    20.    Definitions.
      The
      terms which follow, when used in this Agreement, shall have the meanings
      indicated.

     

    “Act”
shall
      mean the Securities Act of 1933, as amended, and the rules and regulations
      of
      the Commission promulgated thereunder.

     

    “Business
      Day”
shall
      mean any day other than a Saturday, a Sunday or a legal holiday or a day on
      which banking institutions or trust companies are authorized or obligated by
      law
      to close in New York, New York.

     

    “Commission”
shall
      mean the Securities and Exchange Commission.

     

    “Disclosure
      Package”
shall
      mean (i) the Statutory Prospectus, (ii) each Issuer Free Writing
      Prospectuses, if any, filed or used by the Company on or before the Effective
      Date and identified in Schedule II
      hereto
      (other than a roadshow that is an Issuer Free Writing Prospectus but is not
      required to be filed under Rule 433, (iii) the information contained
      on Schedule III
      hereto,
      and (iv) any other Free Writing Prospectus that the parties hereto shall
      hereafter expressly agree in writing to treat as part of the Disclosure
      Package.

     

    “Effective
      Date”
shall
      mean each date and time that the Registration Statement, any post-effective
      amendment or amendments thereto and any Rule 462(b) Registration Statement
      became or become effective.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, and the rules and
      regulations of the Commission promulgated thereunder.

     

    “Execution
      Time”
shall
      mean the date and time that this Agreement is executed and delivered by the
      parties hereto.

     

    “Laws”
means
      applicable securities laws and all other statutes, regulations, statutory rules,
      orders, by-laws, codes, ordinances, decrees, the terms and conditions of any
      grant of approval, permission, authority or license, or any judgment, order,
      decision, ruling, award, policy or guideline, of any Governmental Authority,
      and
      the term “applicable” with respect to such Laws and in the context that refers
      to one or more persons, means that such Laws apply to such person or persons
      or
      its or their business, undertaking, property or securities and emanate from
      a
      Governmental Authority, having jurisdiction over the person or persons or its
      or
      their business, undertaking, property or securities.

     

    “Free
      Writing Prospectus”
shall
      mean a free writing prospectus, as defined in Rule 405.

     

    “Issuer
      Free Writing Prospectus”
shall
      mean an issuer free writing prospectus, as defined in Rule 433.

     

    “Preliminary
      Prospectus”
shall
      mean any preliminary prospectus referred to in paragraph l(i)(a) above and
      any
      preliminary prospectus included in the Registration Statement at the Effective
      Date that omits Rule 430A Information.

     

    “Prospectus”
shall
      mean the prospectus relating to the Securities that is first filed pursuant
      to
      Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b)
      is
      required, shall mean the form of final prospectus relating to the Securities
      included in the Registration Statement at the Effective Date.

     

    “Registration
      Statement”
shall
      mean the registration statement referred to in paragraph 1(a) above, including
      exhibits and financial statements and any prospectus supplement relating to
      the
      Securities that is filed with the Commission pursuant to Rule 424(b) and deemed
      part of such registration statement pursuant to Rule 430B, as amended at the
      Effective Date and, in the event any post-effective amendment thereto or any
      Rule 462(b) Registration Statement becomes effective prior to the Closing Date,
      shall also mean such registration statement as so amended or such Rule 462(b)
      Registration Statement, as the case may be.

     

    “Rule
      158”,
      “Rule
      163”,
      “Rule
      164”,
      “Rule
      172”,
      “Rule
      405”,
      “Rule
      415”,
      “Rule
      424”,
      “Rule
      430B”,
      “Rule
      462”
and
      “Rule
      433”
refer
      to such rules under the Act.

     

    “Rule
      430A Information”
shall
      mean information with respect to the Securities and the offering thereof
      permitted to be omitted from the Registration Statement when it becomes
      effective pursuant to Rule 430A.

     

    “Rule
      462(b) Registration Statement”
shall
      mean a registration statement and any amendments thereto filed pursuant to
      Rule
      462(b) relating to the offering covered by the registration statement referred
      to in paragraph 1(a) hereof.

     

    “Statutory
      Prospectus”
shall
      mean the preliminary prospectus relating to the Securities that is included
      in
      the Registration Statement immediately prior to the Execution Time, including
      any document that is incorporated by reference therein.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    “Subsequent
      Closing Date”
shall
      mean any settlement date at which the purchase and sale of the Option Shares
      is
      to be settled pursuant to Section 3(b).

     

    “Taxes”
      includes all forms of taxation (including, without limitation, any net income
      or
      gains, minimum, gross income, gross receipts, sales, use, ad valorem,
      value-added, transfer, franchise, profits, license, withholding, payroll,
      employment, excise, severance, stamp, capital stock, occupation, property,
      custom, environmental or windfall tax or duty), together with interest,
      penalties and additions imposed with respect to the foregoing, imposed by any
      local, municipal, state, Federal or other government, governmental entity or
      political subdivision, whether of the United States or other country or
      political unit.

     

    “Tax
      Return”
means
      all returns, declarations, statements, reports, schedules, forms and information
      returns, whether original or amended, relating to Taxes.

     

    [Remainder
      of page intentionally left blank.]

     

     

     

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    


    If
      the
      foregoing is in accordance with your understanding of our agreement, please
      sign
      and return to us the enclosed duplicate hereof, whereupon this letter and your
      acceptance shall represent a binding agreement between the Company, and the
      several Underwriters.

     

    
      	 	 	 
	 	Very
              truly
              yours,
	 	 
	 	ON2 TECHNOLOGIES,
              INC 
	 
 	 
 	 
 
	 	By:  	/s/
              Bill
              Joll
	 	
              
Name:
              Bill Joll
	 	Title:
              President and Chief Executive Officer


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    The
      foregoing Agreement is hereby confirmed
      and accepted as of the date
      first above written.

     

    ThinkEquity
      Partners LLC

    Merriman
      Curhan Ford & Co.

     

    By: 
      ThinkEquity Partners LLC

     

    By: 
      /s/
      Jerome J. Joondeph

    
      
        

      

    

    Name:
      Jerome J. Joondeph

    Title:
      Chief Financial Officer and General Counsel

     

    For
      themselves and the other several Underwriters
      named in Schedule
      I
      to
the
      foregoing Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      I

     

    UNDERWRITERS

    


    
      	
               

               

              Underwriters

            	 	
              Number of

              Firm
                Shares

              to be
                Purchased

            	 	
              Number of 

              Option
                Shares

              to be
                Purchased

            
	
              ThinkEquity
                Partners LLC

            	 	
              8,450,000

            	 	
              1,267,500

            
	 	 	 	 	 
	
              Merriman
                Curhan Ford & Co

            	 	
              4,550,000

            	 	
              682,500

            
	 	 	 	 	 
	
              TOTAL:
                

            	 	 	 	 


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      II

     

    FREE
      WRITING PROSPECTUSES

    


    None.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      III

     

    PRICING
      INFORMATION

     

    
      	
              Price
                Per Share:

            	
              $1.00

            
	 	 
	
              Offering
                Size:

            	
              13,000,000
                shares, or 14,950,000 shares if the Underwriters exercise their
                over-allotment option in full.

            
	 	 
	
              Closing
                Date:

            	
              October
                23, 2007

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    ANNEX
      A

     

    SUBSIDIARIES

    


    
      	
              Name

            	
              Jurisdiction

            
	 	 
	
              The
                Duck Corporation

            	
              Delaware

            
	 	 
	
              MetaVisual
                Creations Limited

            	
              United
                Kingdom

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      A-1

     

    LOCK-UP
      LETTER AGREEMENT

     

    THINKEQUITY
      PARTNERS LLC

    MERRIMAN
      CURHAN FORD & CO.

    As
      Representatives of the several Underwriters

    c/o
      ThinkEquity Partners LLC

    600
      Montgomery Street, 8th
      Floor

    San
      Francisco, California 94111

     

    Ladies
      and Gentlemen:

     

    The
      undersigned understands that you and certain other firms (the “Underwriters”)
      propose to enter into an Underwriting Agreement (the “Underwriting
      Agreement”)
      providing for the purchase by the Underwriters of shares (the “Shares”)
      of
      common stock, par value $0.01 per share (the “Common
      Stock”),
      of
      On2 Technologies Inc, a Delaware corporation (the “Company”),
      and
      that the Underwriters propose to reoffer the Shares to the public (the
“Offering”).

     

    In
      consideration of the execution of the Underwriting Agreement by the
      Underwriters, and for other good and valuable consideration, the undersigned
      hereby irrevocably agrees that, without the prior written consent of ThinkEquity
      Partners LLC, on behalf of the Underwriters, the undersigned will not, directly
      or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of
      (or enter into any transaction or device that is designed to, or could be
      expected to, result in the disposition by any person at any time in the future
      of) any shares of Common Stock (including, without limitation, shares of Common
      Stock that may be deemed to be beneficially owned by the undersigned in
      accordance with the rules and regulations of the Securities and Exchange
      Commission and shares of Common Stock that may be issued upon exercise of any
      option or warrant) or securities convertible into or exchangeable for Common
      Stock (other than the Shares in the Offering), or (2) enter into any swap
      or other derivatives transaction that transfers to another, in whole or in
      part,
      any of the economic benefits or risks of ownership of shares of Common Stock,
      whether any such transaction described in clause (1) or (2) above is
      to be settled by delivery of Common Stock or other securities, in cash or
      otherwise, for a period of 90 days after the date of the final prospectus
      relating to the Offering (such 90-day period, the “Lock-Up
      Period”);
      provided,
      that
      the foregoing shall not prohibit any sale made under contract, instruction
      or
      written plan for trading securities that satisfies the requirements of
      Rule 10b5-1(c)(1)(B) under the Securities Exchange Act of 1934, as amended.
      In addition, the undersigned agrees that without the prior written consent
      of
      ThinkEquity Partners LLC, on behalf of the Underwriters, it will not, during
      the
      Lock-Up Period, make any demand for or exercise any right with respect to,
      the
      registration of any shares of Common Stock or any security convertible into
      or
      exercisable or exchangeable for Common Stock.

     

    Notwithstanding
      the foregoing, if (1) during the last 17 days of the Lock-Up Period, the
      Company issues an earnings release or material news or a material event relating
      to the Company occurs or (2) prior to the expiration of the Lock-Up Period,
      the Company announces that it will release earnings results during the 16-day
      period beginning on the last day of the Lock-Up Period, then the restrictions
      imposed by this Lock-Up Letter Agreement shall continue to apply until the
      expiration of the 18-day period beginning on the issuance of the earnings
      release or the announcement of the material news or the occurrence of the
      material event, unless ThinkEquity Partners LLC waives, in writing, such
      extension. The undersigned hereby further agrees that, prior to engaging in
      any
      transaction or taking any other action that is subject to the terms of this
      Lock-Up Letter Agreement during the period from the date of this Lock-Up Letter
      Agreement to and including the 34th day following the expiration of the Lock-Up
      Period, it will give notice thereof to the Company and will not consummate
      such
      transaction or take any such action unless it has received written confirmation
      from the Company that the Lock-Up Period (as such may have been extended
      pursuant to this paragraph) has expired.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    In
      furtherance of the foregoing, the Company and its transfer agent are hereby
      authorized to decline to make any transfer of securities if such transfer would
      constitute a violation or breach of this Lock-Up Letter Agreement. In addition,
      the undersigned agrees that, without the prior written consent of ThinkEquity
      Partners LLC, it will not, during the Lock-Up Period, make any demand for or
      exercise any right with respect to the registration of any shares of Common
      Stock or any security convertible into or exercisable or exchangeable for Common
      Stock.

     

    It
      is
      understood that, if the Company notifies the Underwriters that it does not
      intend to proceed with the Offering, if the Underwriting Agreement does not
      become effective, or if the Underwriting Agreement (other than the provisions
      thereof which survive termination) shall terminate or be terminated prior to
      payment for and delivery of the Shares, the undersigned will be released from
      its obligations under this Lock-Up Letter Agreement.

     

    The
      undersigned understands that the Company and the Underwriters will proceed
      with the Offering in reliance on this Lock-Up Letter Agreement.

     

    Whether
      or not the Offering actually occurs depends on a number of factors, including
      market conditions. Any Offering will only be made pursuant to an Underwriting
      Agreement, the terms of which are subject to negotiation between the Company
      and
      the Underwriters.

     

    [Signature
      page follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    The
      undersigned hereby represents and warrants that the undersigned has full power
      and authority to enter into this Lock-Up Letter Agreement and that, upon
      request, the undersigned will execute any additional documents necessary in
      connection with the enforcement hereof. Any obligations of the undersigned
      shall
      be binding upon the heirs, personal representatives, successors and assigns
      of
      the undersigned.

     

    
      	 	 	 
	 	Very
              truly
              yours,
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:


    

    


    Dated:
      October ___, 2007

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      A-2

     

    LOCK-UP
      LETTER AGREEMENT

    ([____________________])

    ([____________________])

    ([____________________])

     

    THINKEQUITY
      PARTNERS LLC

    MERRIMAN
      CURHAN FORD & CO.

    As
      Representatives of the several Underwriters

    c/o
      ThinkEquity Partners LLC

    600
      Montgomery Street, 8th
      Floor

    San
      Francisco, California 94111

     

    Ladies
      and Gentlemen:

     

    The
      undersigned understands that you and certain other firms (the “Underwriters”)
      propose to enter into an Underwriting Agreement (the “Underwriting
      Agreement”)
      providing for the purchase by the Underwriters of shares (the “Shares”)
      of
      common stock, par value $0.01 per share (the “Common
      Stock”),
      of
      On2 Technologies Inc, a Delaware corporation (the “Company”),
      and
      that the Underwriters propose to reoffer the Shares to the public (the
“Offering”).

     

    In
      consideration of the execution of the Underwriting Agreement by the
      Underwriters, and for other good and valuable consideration, the undersigned
      hereby irrevocably agrees that, without the prior written consent of ThinkEquity
      Partners LLC, on behalf of the Underwriters, the undersigned will not, directly
      or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of
      (or enter into any transaction or device that is designed to, or could be
      expected to, result in the disposition by any person at any time in the future
      of) any shares of Common Stock (including, without limitation, shares of Common
      Stock that may be deemed to be beneficially owned by the undersigned in
      accordance with the rules and regulations of the Securities and Exchange
      Commission and shares of Common Stock that may be issued upon exercise of any
      option or warrant) or securities convertible into or exchangeable for Common
      Stock (other than the Shares in the Offering), or (2) enter into any swap
      or other derivatives transaction that transfers to another, in whole or in
      part,
      any of the economic benefits or risks of ownership of shares of Common Stock,
      whether any such transaction described in clause (1) or (2) above is
      to be settled by delivery of Common Stock or other securities, in cash or
      otherwise, for a period of 90 days after the date of the final prospectus
      relating to the Offering (such 90-day period, the “Lock-Up
      Period”);
      provided,
      that
      the foregoing shall not prohibit (i) the sale of an aggregate of _____________
      shares on or after the later to occur of (A) November 15, 2007 and (B) the
      third
      business day after the Company publicly announces its third quarter financial
      results and (ii) any sale made under contract, instruction or written plan
      for
      trading securities that satisfies the requirements of Rule 10b5-1(c)(1)(B)
      under the Securities Exchange Act of 1934, as amended. In addition, the
      undersigned agrees that without the prior written consent of ThinkEquity
      Partners LLC, on behalf of the Underwriters, it will not, during the Lock-Up
      Period, make any demand for or exercise any right with respect to, the
      registration of any shares of Common Stock or any security convertible into
      or
      exercisable or exchangeable for Common Stock.

     

    Notwithstanding
      the foregoing, if (1) during the last 17 days of the Lock-Up Period, the
      Company issues an earnings release or material news or a material event relating
      to the Company occurs or (2) prior to the expiration of the Lock-Up Period,
      the Company announces that it will release earnings results during the 16-day
      period beginning on the last day of the Lock-Up Period, then the restrictions
      imposed by this Lock-Up Letter Agreement shall continue to apply until the
      expiration of the 18-day period beginning on the issuance of the earnings
      release or the announcement of the material news or the occurrence of the
      material event, unless ThinkEquity Partners LLC waive, in writing, such
      extension. The undersigned hereby further agrees that, prior to engaging in
      any
      transaction or taking any other action that is subject to the terms of this
      Lock-Up Letter Agreement during the period from the date of this Lock-Up Letter
      Agreement to and including the 34th day following the expiration of the Lock-Up
      Period, it will give notice thereof to the Company and will not consummate
      such
      transaction or take any such action unless it has received written confirmation
      from the Company that the Lock-Up Period (as such may have been extended
      pursuant to this paragraph) has expired.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    In
      furtherance of the foregoing, the Company and its transfer agent are hereby
      authorized to decline to make any transfer of securities if such transfer would
      constitute a violation or breach of this Lock-Up Letter Agreement. In addition,
      the undersigned agrees that, without the prior written consent of ThinkEquity
      Partners LLC, it will not, during the Lock-Up Period, make any demand for or
      exercise any right with respect to the registration of any shares of Common
      Stock or any security convertible into or exercisable or exchangeable for Common
      Stock.

     

    It
      is
      understood that, if the Company notifies the Underwriters that it does not
      intend to proceed with the Offering, if the Underwriting Agreement does not
      become effective, or if the Underwriting Agreement (other than the provisions
      thereof which survive termination) shall terminate or be terminated prior to
      payment for and delivery of the Shares, the undersigned will be released from
      its obligations under this Lock-Up Letter Agreement.

     

    The
      undersigned understands that the Company and the Underwriters will proceed
      with the Offering in reliance on this Lock-Up Letter Agreement.

     

    Whether
      or not the Offering actually occurs depends on a number of factors, including
      market conditions. Any Offering will only be made pursuant to an Underwriting
      Agreement, the terms of which are subject to negotiation between the Company
      and
      the Underwriters.

     

    [Signature
      page follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    



    The
      undersigned hereby represents and warrants that the undersigned has full power
      and authority to enter into this Lock-Up Letter Agreement and that, upon
      request, the undersigned will execute any additional documents necessary in
      connection with the enforcement hereof. Any obligations of the undersigned
      shall
      be binding upon the heirs, personal representatives, successors and assigns
      of
      the undersigned.

     

    
      	 	 	 
	 	Very
              truly
              yours,
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:


    

    


    Dated:
      October ___, 2007

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      B

     

    COMPANY
      COUNSEL LEGAL OPINION

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      C

     

    INTELLECTUAL
      PROPERTY COUNSEL LEGAL OPINION

    


    (i)
       As
      to the
      statements under the caption “Business- Intellectual Property” and “Risk
      Factors- Much of our technology relies on owned or licensed intellectual
      property, and if such rights are not protected from the use of others, including
      potential competitors, our business prospects may be harmed,” all contained in
      the Company’s Form 10-K, dated March 23, 2007, nothing has come to the attention
      of such counsel which caused them to believe that the above-mentioned sections
      of the
      Registration Statement and the Prospectus (and any similar section or
      information contained in the General Disclosure Package)
      and any
      amendment or supplement thereto made available and reviewed by such counsel,
      at
      the time the Registration Statement became effective and at all times subsequent
      thereto up to and on the Closing Date, contained any untrue statement of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary to make the statements therein, in light of the circumstances
      under
      which they were made, not misleading.

     

    (ii) Except
      as
      set forth in the General Disclosure Package, such counsel knows of no material
      action, suit, claim or proceeding relating to patents, patent rights or
      licenses, trademarks or trademark rights, copyrights, collaborative research,
      licenses or royalty arrangements or agreements or trade secrets, know-how or
      proprietary techniques, including processes and substances, owned by or
      affecting the business or operations of the Company which are pending or
      threatened against the Company or any of its officers or directors.

     

    (iii) The
      Company is listed in the records of the United States Patent and Trademark
      Office as the holder of record of the patents listed on a schedule to such
      opinion (the “Patents”)
      and
      each of the applications listed on a schedule to such opinion (the “Applications”).
      To
      the knowledge of such counsel, except as set forth in the General Disclosure
      Package, there are no claims of third parties to any ownership interest or
      lien
      with respect to any of the Patents or Applications. Such counsel is not aware
      of
      any material defect in form in the preparation or filing of the Applications
      on
      behalf of the Company. To the knowledge of such counsel, the Applications are
      being pursued by the Company. To the knowledge of such counsel, the Company
      owns
      as its sole property the Patents and pending Applications.

     

    (iv) The
      Company is listed in the records of the appropriate foreign offices as the
      sole
      holder of record of the foreign patents listed on a schedule to such opinion
      (the “Foreign
      Patents”)
      and
      each of the applications listed on a schedule to such opinion (the “Foreign
      Applications”).
      Except as set forth in the General Disclosure Package, such counsel knows of
      no
      claims of third parties to any ownership interest or lien with respect to the
      Foreign Patents or Foreign Applications. Such counsel is not aware of any
      material defect of form in the preparation or filing of the Foreign Applications
      on behalf of the Company. To the knowledge of such counsel, the Foreign
      Applications are being pursued by the Company. To the knowledge of such counsel,
      the Company owns as its sole property the Foreign Patents and pending Foreign
      Applications.  

     

    (v) Such
      counsel knows of no reason why the Patents or Foreign Patents are not valid
      as
      issued. Such counsel has no knowledge of any reason why any patent to be issued
      as a result of any Application or Foreign Application would not be valid or
      would not afford the Company useful patent protection with respect
      thereto.