EXHIBIT 10.3

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                     SERIES A COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                             ON2 TECHNOLOGIES, INC.

            THIS  SERIES  A  COMMON  STOCK  PURCHASE   WARRANT  (the  "Warrant")
certifies that, for value received,  _____________ (the "Holder"),  is entitled,
upon the terms and subject to the  limitations  on exercise  and the  conditions
hereinafter  set forth,  at any time on or after the date hereof  (the  "Initial
Exercise  Date") and on or prior to the close of business on the 380th  calendar
day  following  the  Initial  Exercise  Date (the  "Termination  Date")  but not
thereafter,  to  subscribe  for and  purchase  from ON2  Technologies,  Inc.,  a
Delaware corporation (the "Company"), up to ______ shares (the "Warrant Shares")
of Common Stock, par value $0.01 per share, of the Company (the "Common Stock").
The  purchase  price of one share of Common  Stock under this  Warrant  shall be
equal to the Exercise Price, as defined in Section 2(b).

      Section 1.  Definitions.  Capitalized terms used and not otherwise defined
herein shall have the meanings  set forth in that  certain  Securities  Purchase
Agreement (the "Purchase Agreement"),  dated October __, 2004, among the Company
and the purchasers signatory thereto.

      Section 2. Exercise.

            a) Exercise of Warrant.  Exercise of the purchase rights represented
      by this  Warrant  may be made at any time or times on or after the Initial
      Exercise  Date and on or before the  Termination  Date by  delivery to the
      Company of a duly executed  facsimile  copy of the Notice of Exercise Form
      annexed  hereto (or such other  office or agency of the  Company as it may
      designate by notice in writing to the registered  Holder at the address of
      such Holder  appearing on the books of the  Company);  provided,  however,
      within 5 Trading  Days of the date said Notice of Exercise is delivered to
      the Company, the Holder shall have surrendered this Warrant to the Company
      and the Company  shall have  received  payment of the  aggregate  Exercise
      Price of the shares thereby  purchased by wire transfer or cashier's check
      drawn on a United States bank.


                                       1
<PAGE>

            b) Exercise Price. The exercise price of the Common Stock under this
      Warrant shall be $0.65,  subject to adjustment  hereunder  (the  "Exercise
      Price").

            c) Cashless Exercise. If at any time after one year from the date of
      issuance of this  Warrant  there is no  effective  Registration  Statement
      registering  the resale of the  Warrant  Shares by the  Holder,  then this
      Warrant  may  also be  exercised  at such  time by  means  of a  "cashless
      exercise" in which the Holder  shall be entitled to receive a  certificate
      for the  number  of  Warrant  Shares  equal to the  quotient  obtained  by
      dividing [(A-B) (X)] by (A), where:

            (A) = the VWAP on the Trading Day  immediately  preceding the date
                  of such election;

            (B) = the Exercise Price of this Warrant, as adjusted; and

            (X) = the number of Warrant Shares  issuable upon exercise of this
                  Warrant in accordance  with the terms of this Warrant by means
                  of a cash exercise rather than a cashless exercise.

            d) Exercise Limitations.

                        i. Holder's Restrictions.  The Holder shall not have the
                  right to  exercise  any portion of this  Warrant,  pursuant to
                  Section  2(c) or  otherwise,  to the extent that after  giving
                  effect to such issuance after exercise,  the Holder  (together
                  with the Holder's affiliates),  as set forth on the applicable
                  Notice of Exercise,  would beneficially own in excess of 4.99%
                  of the  number  of  shares  of the  Common  Stock  outstanding
                  immediately after giving effect to such issuance. For purposes
                  of the  foregoing  sentence,  the  number  of shares of Common
                  Stock  beneficially  owned by the  Holder  and its  affiliates
                  shall  include the number of shares of Common  Stock  issuable
                  upon  exercise  of this  Warrant  with  respect  to which  the
                  determination  of such  sentence  is  being  made,  but  shall
                  exclude  the number of shares of Common  Stock  which would be
                  issuable  upon (A)  exercise  of the  remaining,  nonexercised
                  portion of this  Warrant  beneficially  owned by the Holder or
                  any of its  affiliates  and (B) exercise or  conversion of the
                  unexercised or nonconverted portion of any other securities of
                  the  Company  (including,   without   limitation,   any  other
                  Preferred  Stock  or  Warrants)  subject  to a  limitation  on
                  conversion or exercise  analogous to the limitation  contained
                  herein  beneficially  owned  by  the  Holder  or  any  of  its
                  affiliates. Except as set forth in the preceding sentence, for
                  purposes of this Section 2(d),  beneficial  ownership shall be
                  calculated  in  accordance  with Section 13(d) of the Exchange
                  Act, it being  acknowledged  by Holder that the Company is not
                  representing to Holder that such  calculation is in compliance
                  with  Section  13(d) of the  Exchange Act and Holder is solely
                  responsible  for  any  schedules   required  to  be  filed  in
                  accordance  therewith.  To  the  extent  that  the  limitation
                  contained in this Section 2(d) applies,  the  determination of
                  whether  this  Warrant is  exercisable  (in  relation to other
                  securities owned by the Holder) and of which a portion of this
                  Warrant is exercisable shall be in the sole discretion of such
                  Holder,  and the  submission of a Notice of Exercise  shall be
                  deemed  to be such  Holder's  determination  of  whether  this
                  Warrant is exercisable (in relation to other  securities owned
                  by such  Holder)  and of  which  portion  of this  Warrant  is
                  exercisable, in each case subject to such aggregate percentage
                  limitation, and the Company shall have no obligation to verify
                  or confirm the accuracy of such determination. For purposes of
                  this Section 2(d), in  determining  the number of  outstanding
                  shares of Common  Stock,  the Holder may rely on the number of
                  outstanding  shares of Common  Stock as  reflected  in (x) the
                  Company's most recent Form 10-QSB or Form 10-KSB,  as the case
                  may be, (y) a more recent public  announcement  by the Company
                  or (z)  any  other  notice  by the  Company  or the  Company's
                  Transfer  Agent  setting  forth the number of shares of Common
                  Stock  outstanding.  Upon the  written or oral  request of the
                  Holder,  the Company  shall  within two Trading  Days  confirm
                  orally  and in  writing  to the Holder the number of shares of
                  Common  Stock  then  outstanding.  In any case,  the number of
                  outstanding  shares of Common Stock shall be determined  after
                  giving  effect to the  conversion or exercise of securities of
                  the  Company,  including  this  Warrant,  by the Holder or its
                  affiliates   since  the  date  as  of  which  such  number  of
                  outstanding   shares  of  Common  Stock  was   reported.   The
                  provisions  of this  Section  2(d) may be waived by the Holder
                  upon,  at the  election of the Holder,  not less than 61 days'
                  prior  notice  to the  Company,  and  the  provisions  of this
                  Section  2(d) shall  continue to apply until such 61st day (or
                  such  later  date,  as  determined  by the  Holder,  as may be
                  specified in such notice of waiver).


                                       2
<PAGE>

                        ii. Trading Market Restrictions.  If the Company has not
                  obtained  Shareholder Approval (as defined below) if required,
                  then the Company may not issue upon  exercise of this  Warrant
                  in the aggregate, in excess of 19.999% of the number of shares
                  of Common  Stock  outstanding  on the Trading Day  immediately
                  preceding  the Closing  Date,  less any shares of Common Stock
                  issued upon  conversion  of or as payment of  dividends on the
                  Preferred  Stock or upon prior  exercise  of this or any other
                  Warrant issued pursuant to the Purchase Agreement (such number
                  of  shares,  the  "Issuable  Maximum").  If on  any  attempted
                  exercise of this Warrant, the issuance of Warrant Shares would
                  exceed the  Issuable  Maximum and the  Company  shall not have
                  previously obtained the vote of shareholders (the "Shareholder
                  Approval"), if any, as may be required by the applicable rules
                  and  regulations  of the  Trading  Market  (or  any  successor
                  entity) to approve the  issuance of shares of Common  Stock in
                  excess of the Issuable  Maximum  pursuant to the terms hereof,
                  then the  Company  shall  issue  to the  Holder  requesting  a
                  Warrant  exercise  such  number  of  Warrant  Shares as may be
                  issued  below the Issuable  Maximum  and,  with respect to the
                  remainder  of the  aggregate  number of Warrant  Shares,  this
                  Warrant shall not be exercisable until and unless  Shareholder
                  Approval has been obtained.


                                       3
<PAGE>

            e) Mechanics of Exercise.

                        i.   Authorization   of  Warrant  Shares.   The  Company
                  covenants that all Warrant Shares which may be issued upon the
                  exercise of the purchase  rights  represented  by this Warrant
                  will, upon exercise of the purchase rights represented by this
                  Warrant,  be duly authorized,  validly issued,  fully paid and
                  nonassessable  and free from all taxes,  liens and  charges in
                  respect of the issue  thereof  (other than taxes in respect of
                  any transfer occurring contemporaneously with such issue). The
                  Company  covenants  that  during  the  period  the  Warrant is
                  outstanding,  it will reserve from its authorized and unissued
                  Common Stock a sufficient  number of shares to provide for the
                  issuance  of the  Warrant  Shares  upon  the  exercise  of any
                  purchase  rights  under  this  Warrant.  The  Company  further
                  covenants  that its issuance of this Warrant shall  constitute
                  full  authority  to its officers who are charged with the duty
                  of  executing  stock  certificates  to  execute  and issue the
                  necessary   certificates  for  the  Warrant  Shares  upon  the
                  exercise  of the  purchase  rights  under  this  Warrant.  The
                  Company  will  take  all  such  reasonable  action  as  may be
                  necessary to assure that such Warrant  Shares may be issued as
                  provided  herein  without  violation of any  applicable law or
                  regulation,  or of any requirements of the Trading Market upon
                  which the Common Stock may be listed.

                        ii. Delivery of Certificates Upon Exercise. Certificates
                  for shares  purchased  hereunder  shall be  transmitted by the
                  transfer  agent of the Company to the Holder by crediting  the
                  account of the Holder's prime broker with the Depository Trust
                  Company  through  its  Deposit   Withdrawal  Agent  Commission
                  ("DWAC")  system  if the  Company  is a  participant  in  such
                  system,  and  otherwise  by  physical  delivery to the address
                  specified  by the  Holder in the Notice of  Exercise  within 3
                  Trading Days from the delivery to the Company of the Notice of
                  Exercise  Form,  surrender  of this Warrant and payment of the
                  aggregate  Exercise Price as set forth above  ("Warrant  Share
                  Delivery  Date").  This  Warrant  shall be deemed to have been
                  exercised  on the date the  Exercise  Price is received by the
                  Company.  The  Warrant  Shares  shall be  deemed  to have been
                  issued,  and Holder or any other  person so  designated  to be
                  named  therein  shall be  deemed  to have  become a holder  of
                  record of such  shares  for all  purposes,  as of the date the
                  Warrant has been  exercised  by the delivery to the Company of
                  the Notice of  Exercise  Form and by payment to the Company of
                  the  Exercise  Price and all taxes  required to be paid by the
                  Holder,  if any,  pursuant to Section  2(e)(vii)  prior to the
                  issuance of such shares, have been paid.


                                       4
<PAGE>

                        iii.  Delivery of New Warrants  Upon  Exercise.  If this
                  Warrant shall have been  exercised in part, the Company shall,
                  at the time of delivery  of the  certificate  or  certificates
                  representing  Warrant Shares,  deliver to Holder a new Warrant
                  evidencing  the rights of Holder to purchase  the  unpurchased
                  Warrant  Shares called for by this Warrant,  which new Warrant
                  shall in all other respects be identical with this Warrant.

                        iv. Rescission Rights. If the Company fails to cause its
                  transfer  agent to  transmit  to the Holder a  certificate  or
                  certificates  representing the Warrant Shares pursuant to this
                  Section  2(e)(iv) by the Warrant Share Delivery Date, then the
                  Holder will have the right to rescind such exercise.

                        v.  Compensation for Buy-In on Failure to Timely Deliver
                  Certificates  Upon  Exercise.  In addition to any other rights
                  available  to the Holder,  if the  Company  fails to cause its
                  transfer  agent to  transmit  to the Holder a  certificate  or
                  certificates  representing  the Warrant Shares  pursuant to an
                  exercise on or before the Warrant Share  Delivery Date, and if
                  after  such  date the  Holder  is  required  by its  broker to
                  purchase (in an open market  transaction or otherwise)  shares
                  of Common  Stock to deliver in  satisfaction  of a sale by the
                  Holder of the  Warrant  Shares  which the  Holder  anticipated
                  receiving  upon such exercise (a  "Buy-In"),  then the Company
                  shall (1) pay in cash to the  Holder  the  amount by which (x)
                  the  Holder's  total  purchase  price   (including   brokerage
                  commissions,  if any)  for  the  shares  of  Common  Stock  so
                  purchased  exceeds (y) the amount  obtained by multiplying (A)
                  the number of Warrant  Shares that the Company was required to
                  deliver to the Holder in connection with the exercise at issue
                  times  (B) the price at which the sell  order  giving  rise to
                  such purchase  obligation was executed,  and (2) at the option
                  of the Holder, either reinstate the portion of the Warrant and
                  equivalent  number of Warrant  Shares for which such  exercise
                  was not  honored or deliver to the Holder the number of shares
                  of Common  Stock that would have been  issued had the  Company
                  timely  complied  with its exercise  and delivery  obligations
                  hereunder.  For example,  if the Holder purchases Common Stock
                  having a total  purchase  price of  $11,000  to cover a Buy-In
                  with  respect  to an  attempted  exercise  of shares of Common
                  Stock  with  an  aggregate  sale  price  giving  rise  to such
                  purchase  obligation  of  $10,000,  under  clause  (1)  of the
                  immediately  preceding  sentence the Company shall be required
                  to pay the Holder $1,000. The Holder shall provide the Company
                  written notice indicating the amounts payable to the Holder in
                  respect of the Buy-In, together with applicable  confirmations
                  and  other  evidence  reasonably  requested  by  the  Company.
                  Nothing  herein  shall  limit a  Holder's  right to pursue any
                  other remedies available to it hereunder,  at law or in equity
                  including,   without   limitation,   a  decree   of   specific
                  performance  and/or  injunctive  relief  with  respect  to the
                  Company's failure to timely deliver certificates  representing
                  shares  of  Common  Stock  upon  exercise  of the  Warrant  as
                  required pursuant to the terms hereof.


                                       5
<PAGE>

                        vi. No Fractional  Shares or Scrip. No fractional shares
                  or scrip  representing  fractional shares shall be issued upon
                  the  exercise of this  Warrant.  As to any fraction of a share
                  which Holder would otherwise be entitled to purchase upon such
                  exercise,  the Company shall pay a cash  adjustment in respect
                  of such final  fraction  in an amount  equal to such  fraction
                  multiplied by the Exercise Price.

                        vii.   Charges,   Taxes  and   Expenses.   Issuance   of
                  certificates  for Warrant  Shares shall be made without charge
                  to  the  Holder  for  any  issue  or  transfer  tax  or  other
                  incidental   expense  in  respect  of  the  issuance  of  such
                  certificate,  all of which taxes and expenses shall be paid by
                  the Company, and such certificates shall be issued in the name
                  of the Holder or in such name or names as may be  directed  by
                  the Holder; provided,  however, that in the event certificates
                  for  Warrant  Shares are to be issued in a name other than the
                  name of the Holder, this Warrant when surrendered for exercise
                  shall be accompanied by the  Assignment  Form attached  hereto
                  duly executed by the Holder; and the Company may require, as a
                  condition  thereto,   the  payment  of  a  sum  sufficient  to
                  reimburse it for any transfer tax incidental thereto.

                        viii.  Closing of Books.  The Company will not close its
                  stockholder  books or records in any manner which prevents the
                  timely exercise of this Warrant, pursuant to the terms hereof.

      f) Call  Provision.  Subject to the  provisions  of this Section  2(f), if
after the Effective Date the VWAP for each of 10  consecutive  Trading Days (the
"Measurement  Period",  which  period shall not have  commenced  until after the
Effective Date) exceeds 130% of the Exercise Price (subject to adjustment as set
forth herein) (the "Threshold Price"), then the Company may, within five Trading
Days of the end of such  period,  call for  redemption  of all or any portion of
this  Warrant  for $0.01  per share  (the  "Call  Price")  for which a Notice of
Exercise has not yet been  delivered  (such right,  a "Call").  To exercise this
right,  the Company must deliver to the Holder an irrevocable  written notice (a
"Call Notice"),  indicating  therein the portion of unexercised  portion of this
Warrant to which such notice applies. If the conditions set forth below for such
Call are satisfied  from the period from the date of the Call Notice through and
including  the Call Date (as defined  below),  then any portion of this  Warrant
subject to such Call Notice for which a Notice of  Exercise  shall not have been
received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on
the 10th  Trading  Day after the date the Call  Notice is received by the Holder
(such date, the "Call Date").  Any unexercised  portion of this Warrant to which
the Call Notice does not pertain  will be  unaffected  by such Call  Notice.  In
furtherance  thereof,  the Company  covenants  and agrees that it will honor all
Notices of Exercise with respect to Warrant Shares subject to a Call Notice that
are  tendered  through  6:30 p.m.  (New York City  time) on the Call  Date.  The
parties  agree that any Notice of  Exercise  delivered  following  a Call Notice
shall  first  reduce to zero the number of Warrant  Shares  subject to such Call
Notice prior to reducing the  remaining  Warrant  Shares  available for purchase
under this Warrant.  For example, if (x) this Warrant then permits the Holder to
acquire 100 Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and
(z) prior to 6:30 p.m. (New York City time) on the Call Date the Holder  tenders
a Notice of Exercise in respect of 50 Warrant Shares,  then (1) on the Call Date
the right under this Warrant to acquire 25 Warrant Shares will be  automatically
cancelled,  (2) the Company, in the time and manner required under this Warrant,
will have issued and delivered to the Holder 50 Warrant Shares in respect of the
exercises  following  receipt of the Call Notice,  and (3) the Holder may, until
the  Termination  Date,  exercise this Warrant for 25 Warrant Shares (subject to
adjustment as herein provided and subject to subsequent  Call Notices).  Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent
Call Notices for any portion of this Warrant for which the Holder shall not have
delivered a Notice of  Exercise.  Notwithstanding  anything to the  contrary set
forth in this Warrant,  the Company may not deliver a Call Notice or require the
cancellation  of this Warrant (and any Call Notice will be void),  unless,  from
the beginning of the 10th consecutive Trading Days used to determine whether the
Common Stock has achieved the  Threshold  Price  through the Call Date,  (i) the
Company  shall have  honored in  accordance  with the terms of this  Warrant all
Notices  of  Exercise  delivered  by 6:30 p.m.  (New York City time) on the Call
Date,  (ii) the  Registration  Statement  shall be  effective  as to all Warrant
Shares and the  prospectus  thereunder  available  for use by the Holder for the
resale of all such Warrant  Shares and (iii) the Common Stock shall be listed or
quoted for  trading  on the  Trading  Market.  The  Company's  right to Call the
Warrant  shall be exercised  ratably  among the Holders  based on each  Holder's
initial purchase of Common Stock pursuant to the Purchase Agreement.


                                       6
<PAGE>

Section 3. Certain Adjustments.

      a) Stock  Dividends  and Splits.  If the  Company,  at any time while this
Warrant  is  outstanding:  (A)  pays  a  stock  dividend  or  otherwise  make  a
distribution or  distributions on shares of its Common Stock or any other equity
or equity equivalent  securities  payable in shares of Common Stock (which,  for
avoidance  of doubt,  shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant),  (B) subdivides  outstanding shares of Common
Stock into a larger number of shares, (C) combines  (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by  reclassification  of shares of the Common  Stock any shares of
capital  stock of the  Company,  then in each case the  Exercise  Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding  treasury shares, if any) outstanding  before such event
and of which the  denominator  shall be the  number  of  shares of Common  Stock
outstanding  after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately  adjusted. Any adjustment made pursuant to
this Section 3(a) shall become effective  immediately  after the record date for
the  determination  of  stockholders   entitled  to  receive  such  dividend  or
distribution and shall become effective  immediately after the effective date in
the case of a subdivision, combination or re-classification.


                                       7
<PAGE>

      b) Subsequent Equity Sales. If the Company or any Subsidiary  thereof,  as
applicable,  at any time while this Warrant is outstanding,  shall offer,  sell,
grant any option to  purchase  or offer,  sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents  entitling  any  Person to  acquire  shares of Common  Stock,  at an
effective  price per share less than the then Exercise  Price (such lower price,
the "Base Share Price" and such issuances collectively,  a "Dilutive Issuance"),
as  adjusted  hereunder  (if the  holder of the  Common  Stock or  Common  Stock
Equivalents so issued shall at any time,  whether by operation of purchase price
adjustments, reset provisions,  floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance,  be entitled to receive shares of Common Stock at
an  effective  price  per  share  which is less than the  Exercise  Price,  such
issuance  shall be deemed to have  occurred for less than the  Exercise  Price),
then, the Exercise Price shall be reduced by multiplying the Exercise Price by a
fraction,  the numerator of which is the number of shares of Common Stock issued
and outstanding  immediately  prior to the Dilutive  Issuance plus the number of
shares of Common Stock which the offering price for such Dilutive Issuance would
purchase at the then Exercise  Price,  and the denominator of which shall be the
sum of the number of shares of Common Stock issued and  outstanding  immediately
prior to the  Dilutive  Issuance  plus the  number of shares of Common  Stock so
issued or issuable  in  connection  with the  Dilutive  Issuance,  the number of
Warrant  Shares  issuable  hereunder  shall be increased such that the aggregate
Exercise Price payable hereunder,  after taking into account the decrease in the
Exercise  Price,  shall be equal to the aggregate  Exercise  Price prior to such
adjustment.  Such adjustments shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day  following the issuance of any Common Stock or Common
Stock  Equivalents  subject to this section,  indicating  therein the applicable
issuance price, or of applicable reset price,  exchange price,  conversion price
and other  pricing  terms (such  notice the  "Dilutive  Issuance  Notice").  For
purposes of clarification,  whether or not the Company -------------------------
provides a Dilutive  Issuance  Notice  pursuant to this Section  3(b),  upon the
occurrence of any Dilutive  Issuance,  after the date of such Dilutive  Issuance
the Holder is entitled to receive a number of Warrant Shares based upon the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Exercise.

      c) Pro  Rata  Distributions.  If the  Company,  at any  time  prior to the
Termination  Date,  shall  distribute to all holders of Common Stock (and not to
Holders of the Warrants)  evidences of its  indebtedness  or assets or rights or
warrants to subscribe  for or purchase any security  other than the Common Stock
(which  shall be subject to Section  3(b)),  then in each such case the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect  immediately
prior to the record date fixed for  determination  of  stockholders  entitled to
receive such  distribution by a fraction of which the  denominator  shall be the
VWAP  determined  as of the  record  date  mentioned  above,  and of  which  the
numerator  shall be such VWAP on such  record  date less the then per share fair
market  value at such  record  date of the portion of such assets or evidence of
indebtedness so distributed  applicable to one  outstanding  share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the
adjustments  shall be  described  in a statement  provided to the Holders of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.


                                       8
<PAGE>

      d) Calculations.  All  calculations  under this Section 3 shall be made to
the  nearest  cent or the  nearest  1/100th of a share,  as the case may be. The
number of  shares  of Common  Stock  outstanding  at any  given  time  shall not
includes  shares  of Common  Stock  owned or held by or for the  account  of the
Company,  and the  description  of any such  shares  of  Common  Stock  shall be
considered on issue or sale of Common Stock. For purposes of this Section 3, the
number of shares of Common  Stock  deemed to be issued and  outstanding  as of a
given date shall be the sum of the number of shares of Common  Stock  (excluding
treasury shares, if any) issued and outstanding.

      e) Notice to Holders.

                  i. Adjustment to Exercise  Price.  Whenever the Exercise Price
            is adjusted  pursuant to this Section 3, the Company shall  promptly
            mail to each Holder a notice  setting forth the Exercise Price after
            such  adjustment  and setting  forth a brief  statement of the facts
            requiring  such  adjustment.  If the Company  issues a variable rate
            security, despite the prohibition thereon in the Purchase Agreement,
            the Company  shall be deemed to have issued  Common  Stock or Common
            Stock  Equivalents  at the lowest  possible  conversion  or exercise
            price at which such  securities may be converted or exercised in the
            case of a Variable  Rate  Transaction  (as  defined in the  Purchase
            Agreement),  or the lowest possible  adjustment price in the case of
            an MFN Transaction (as defined in the Purchase Agreement.

                  ii.  Notice to Allow  Exercise  by Holder.  If (A) the Company
            shall declare a dividend (or any other  distribution)  on the Common
            Stock;  (B) the Company  shall declare a special  nonrecurring  cash
            dividend on or a  redemption  of the Common  Stock;  (C) the Company
            shall  authorize  the  granting to all  holders of the Common  Stock
            rights or  warrants  to  subscribe  for or  purchase  any  shares of
            capital stock of any class or of any rights; (D) the approval of any
            stockholders of the Company shall be required in connection with any
            reclassification of the Common Stock, any consolidation or merger to
            which  the  Company  is a  party,  any  sale or  transfer  of all or
            substantially  all of the assets of the Company,  of any  compulsory
            share  exchange  whereby the Common  Stock is  converted  into other
            securities,  cash or property;  (E) the Company shall  authorize the
            voluntary or involuntary  dissolution,  liquidation or winding up of
            the affairs of the Company;  then,  in each case,  the Company shall
            cause to be mailed to the Holder at its last  addresses  as it shall
            appear  upon  the  Warrant  Register  of the  Company,  at  least 20
            calendar  days  prior to the  applicable  record or  effective  date
            hereinafter  specified,  a  notice  stating  (x) the date on which a
            record  is  to  be  taken  for  the   purpose   of  such   dividend,
            distribution,  redemption, rights or warrants, or if a record is not
            to be taken, the date as of which the holders of the Common Stock of
            record to be entitled to such dividend,  distributions,  redemption,
            rights or  warrants  are to be  determined  or (y) the date on which
            such  reclassification,  consolidation,  merger,  sale,  transfer or
            share  exchange is expected to become  effective  or close,  and the
            date as of which it is expected  that holders of the Common Stock of
            record  shall be  entitled to  exchange  their  shares of the Common
            Stock for securities,  cash or other property  deliverable upon such
            reclassification,  consolidation,  merger,  sale,  transfer or share
            exchange;  provided,  that the  failure  to mail such  notice or any
            defect  therein  or in the  mailing  thereof  shall not  affect  the
            validity of the  corporate  action  required to be specified in such
            notice.  The Holder is entitled to exercise this Warrant  during the
            20-day  period  commencing  the date of such notice to the effective
            date of the event triggering such notice.


                                       9
<PAGE>

      f)  Fundamental  Transaction.  If,  at any  time  while  this  Warrant  is
outstanding,  (A) the Company effects any merger or consolidation of the Company
with  or into  another  Person,  (B)  the  Company  effects  any  sale of all or
substantially all of its assets in one or a series of related transactions,  (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed  pursuant to which  holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects  any  reclassification  of the  Common  Stock  or any  compulsory  share
exchange  pursuant to which the Common Stock is  effectively  converted  into or
exchanged  for  other  securities,  cash  or  property  (in  any  such  case,  a
"Fundamental  Transaction"),  then,  upon  any  subsequent  conversion  of  this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise absent such Fundamental Transaction,
at the option of the Holder,  (a) upon exercise of this  Warrant,  the number of
shares of Common  Stock of the  successor  or  acquiring  corporation  or of the
Company,  if  it is  the  surviving  corporation,  and  Alternate  Consideration
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation  or  disposition  of assets by a Holder of the number of shares of
Common Stock for which this  Warrant is  exercisable  immediately  prior to such
event or (b) cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes  option pricing formula (the "Alternate  Consideration").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate  Consideration based on the
amount of  Alternate  Consideration  issuable  in respect of one share of Common
Stock in such  Fundamental  Transaction,  and the Company  shall  apportion  the
Exercise  Price  among  the  Alternate  Consideration  in  a  reasonable  manner
reflecting  the relative  value of any  different  components  of the  Alternate
Consideration.  If  holders  of Common  Stock  are  given  any  choice as to the
securities,  cash or property to be received in a Fundamental Transaction,  then
the Holder shall be given the same choice as to the Alternate  Consideration  it
receives  upon  any  exercise  of  this  Warrant   following  such   Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or  surviving  entity in such  Fundamental  Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and  evidencing  the Holder's  right to exercise  such  warrant  into  Alternate
Consideration.  The  terms of any  agreement  pursuant  to  which a  Fundamental
Transaction  is effected  shall  include terms  requiring any such  successor or
surviving  entity  to  comply  with the  provisions  of this  paragraph  (f) and
insuring that this Warrant (or any such replacement  security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.


                                       10
<PAGE>

      g)  Exempt  Issuance.   Notwithstanding  the  foregoing,  no  adjustments,
Alternate  Consideration  nor notices  shall be made,  paid or issued under this
Section 3 in respect of an Exempt Issuance.

      h) Voluntary Adjustment By Company. The Company may at any time during the
term of this Warrant  reduce the then current  Exercise  Price to any amount and
for any  period of time  deemed  appropriate  by the Board of  Directors  of the
Company.

      Section 4. Transfer of Warrant.

      a) Transferability.  Subject to compliance with any applicable  securities
laws and the  conditions  set forth in Sections  5(a) and 4(d) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder are transferable,  in whole or in part, upon surrender of this Warrant
at the principal  office of the Company,  together with a written  assignment of
this Warrant  substantially  in the form  attached  hereto duly  executed by the
Holder or its agent or attorney and funds  sufficient to pay any transfer  taxes
payable upon the making of such transfer.  Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the  denomination or  denominations
specified in such  instrument of  assignment,  and shall issue to the assignor a
new Warrant  evidencing  the portion of this Warrant not so  assigned,  and this
Warrant shall promptly be cancelled.  A Warrant,  if properly  assigned,  may be
exercised by a new holder for the purchase of Warrant  Shares  without  having a
new Warrant issued.

      b) New  Warrants.  This  Warrant  may be  divided or  combined  with other
Warrants  upon  presentation  hereof at the  aforesaid  office  of the  Company,
together with a written notice  specifying the names and  denominations in which
new  Warrants  are to be issued,  signed by the Holder or its agent or attorney.
Subject  to  compliance  with  Section  4(a),  as to any  transfer  which may be
involved in such division or combination,  the Company shall execute and deliver
a new Warrant or Warrants in exchange  for the Warrant or Warrants to be divided
or combined in accordance with such notice.

      c) Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the  "Warrant  Register"),  in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any  distribution  to the Holder,  and for all
other purposes, absent actual notice to the contrary.


                                       11
<PAGE>

      d) Transfer Restrictions. If, at the time of the surrender of this Warrant
in connection  with any transfer of this  Warrant,  the transfer of this Warrant
shall not be registered  pursuant to an effective  registration  statement under
the Securities Act and under  applicable  state securities or blue sky laws, the
Company may  require,  as a condition  of allowing  such  transfer  (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written  opinion of counsel  (which  opinion  shall be in form,  substance and
scope  customary  for  opinions of counsel in  comparable  transactions)  to the
effect that such transfer may be made without  registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee  execute and deliver to the Company an  investment  letter in form
and  substance  acceptable  to the Company and (iii) that the  transferee  be an
"accredited investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified  institutional  buyer
as defined in Rule 144A(a) under the Securities Act.

Section 5. Miscellaneous.

      a) Title  to  Warrant.  Prior  to the  Termination  Date  and  subject  to
compliance with applicable laws and Section 4 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

      b) No Rights as Shareholder Until Exercise.  This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder  of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the  aggregate  Exercise  Price  (or by means of a  cashless  exercise),  the
Warrant  Shares so purchased  shall be and be deemed to be issued to such Holder
as the record  owner of such  shares as of the close of business on the later of
the date of such surrender or payment.

      c)  Loss,  Theft,  Destruction  or  Mutilation  of  Warrant.  The  Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

      d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the  expiration of any right  required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.


                                       12
<PAGE>

      e) Authorized Shares.

            The  Company  covenants  that  during  the  period  the  Warrant  is
      outstanding, it will reserve from its authorized and unissued Common Stock
      a  sufficient  number of shares to provide for the issuance of the Warrant
      Shares upon the exercise of any purchase  rights under this  Warrant.  The
      Company  further  covenants  that  its  issuance  of  this  Warrant  shall
      constitute full authority to its officers who are charged with the duty of
      executing   stock   certificates   to  execute  and  issue  the  necessary
      certificates  for the  Warrant  Shares upon the  exercise of the  purchase
      rights  under this  Warrant.  The  Company  will take all such  reasonable
      action as may be  necessary  to assure  that such  Warrant  Shares  may be
      issued as provided  herein  without  violation  of any  applicable  law or
      regulation,  or of any  requirements  of the Trading Market upon which the
      Common Stock may be listed.

            Except and to the extent as waived or  consented  to by the  Holder,
      the  Company  shall  not by any  action,  including,  without  limitation,
      amending its certificate of incorporation  or through any  reorganization,
      transfer of assets, consolidation,  merger, dissolution,  issue or sale of
      securities  or any  other  voluntary  action,  avoid or seek to avoid  the
      observance or performance of any of the terms of this Warrant, but will at
      all times in good faith  assist in the  carrying out of all such terms and
      in the taking of all such actions as may be necessary  or  appropriate  to
      protect  the  rights  of  Holder  as set  forth  in this  Warrant  against
      impairment.  Without limiting the generality of the foregoing, the Company
      will (a) not increase the par value of any Warrant Shares above the amount
      payable therefor upon such exercise  immediately prior to such increase in
      par value,  (b) take all such action as may be necessary or appropriate in
      order that the  Company  may  validly  and  legally  issue  fully paid and
      nonassessable  Warrant  Shares upon the exercise of this Warrant,  and (c)
      use  commercially  reasonable  efforts to obtain all such  authorizations,
      exemptions or consents from any public regulatory body having jurisdiction
      thereof  as  may be  necessary  to  enable  the  Company  to  perform  its
      obligations under this Warrant.

            Before  taking any action which would result in an adjustment in the
      number of Warrant  Shares for which this Warrant is  exercisable or in the
      Exercise  Price,  the  Company  shall  obtain all such  authorizations  or
      exemptions  thereof,  or consents  thereto,  as may be necessary  from any
      public regulatory body or bodies having jurisdiction thereof.

      f)  Jurisdiction.  All questions  concerning the  construction,  validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

      g) Restrictions.  The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant,  if not  registered,  will have  restrictions
upon resale imposed by state and federal securities laws.

      h) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right  hereunder on the part of Holder shall operate as a waiver of
such  right  or  otherwise  prejudice  Holder's  rights,   powers  or  remedies,
notwithstanding  the fact that all rights hereunder terminate on the Termination
Date. If the Company  willfully and knowingly fails to comply with any provision
of this  Warrant,  which  results in any  material  damages to the  Holder,  the
Company  shall pay to Holder such  amounts as shall be  sufficient  to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,  powers
or remedies hereunder.


                                       13
<PAGE>

      i) Notices. Any notice, request or other document required or permitted to
be given or  delivered  to the  Holder  by the  Company  shall be  delivered  in
accordance with the notice provisions of the Purchase Agreement.

      j)  Limitation of Liability.  No provision  hereof,  in the absence of any
affirmative  action by Holder to  exercise  this  Warrant  or  purchase  Warrant
Shares, and no enumeration  herein of the rights or privileges of Holder,  shall
give rise to any liability of Holder for the purchase  price of any Common Stock
or as a stockholder  of the Company,  whether such  liability is asserted by the
Company or by creditors of the Company.

      k) Remedies.  Holder, in addition to being entitled to exercise all rights
granted by law,  including  recovery  of  damages,  will be entitled to specific
performance  of its rights under this Warrant.  The Company agrees that monetary
damages would not be adequate  compensation for any loss incurred by reason of a
breach by it of the  provisions  of this Warrant and hereby  agrees to waive the
defense  in any action for  specific  performance  that a remedy at law would be
adequate.

      l) Successors and Assigns.  Subject to applicable  securities  laws,  this
Warrant  and the rights and  obligations  evidenced  hereby  shall  inure to the
benefit of and be binding upon the  successors of the Company and the successors
and permitted assigns of Holder.  The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.

      m)  Amendment.  This Warrant may be modified or amended or the  provisions
hereof waived with the written consent of the Company and the Holder.

      n) Severability.  Wherever possible,  each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any  provision of this Warrant  shall be  prohibited  by or invalid under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.

      o) Headings.  The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.


                              ********************


                                       14
<PAGE>

            IN  WITNESS  WHEREOF,  the  Company  has caused  this  Warrant to be
executed by its officer thereunto duly authorized.


Dated:  October __, 2004

                                ON2 TECHNOLOGIES, INC.


                                By:__________________________________________
                                   Name:
                                   Title:


                                       15
<PAGE>

                               NOTICE OF EXERCISE

To:      ON2 Technologies, Inc.

            (1) The  undersigned  hereby  elects to  purchase  ________  Warrant
Shares of the Company  pursuant to the terms of the  attached  Warrant  (only if
exercised in full),  and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

            (2) Payment shall take the form of (check applicable box):

                  [ ] in lawful money of the United States; or

                  [ ] the  cancellation  of such number of Warrant  Shares as is
                  necessary,  in  accordance  with  the  formula  set  forth  in
                  subsection  2(c), to exercise this Warrant with respect to the
                  maximum number of Warrant Shares  purchasable  pursuant to the
                  cashless exercise procedure set forth in subsection 2(c).

            (3) Please issue a certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

                  ________________________________________


The Warrant Shares shall be delivered to the following:

                  ________________________________________

                  ________________________________________

                  ________________________________________

            (4) Accredited Investor. The undersigned is an "accredited investor"
as defined in  Regulation D  promulgated  under the  Securities  Act of 1933, as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)


            FOR VALUE RECEIVED,  the foregoing  Warrant and all rights evidenced
thereby are hereby assigned to


_______________________________________________ whose address is

_______________________________________________________________.


_______________________________________________________________

                                                Dated:  ______________, _______


                           Holder's Signature: _____________________________

                           Holder's Address:   _____________________________

                                               _____________________________


Signature Guaranteed: ___________________________________________


NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.