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                                                                     EXHIBIT 3.1

                          CERTIFICATE OF INCORPORATION

                                       OF

                              ON2.COM DELAWARE INC.


      KNOW ALL MEN BY THESE PRESENTS that the undersigned Incorporator being a
natural person of the age of eighteen years or older and desiring to form a body
corporate under the laws of the State of Delaware does hereby sign, verify and
deliver in duplicate to the Secretary of State of the State of Delaware this
Certificate of Incorporation:

                                   ARTICLE I
             NAME; REGISTERED AND PRINCIPAL OFFICE; REGISTERED AGENT

      The name of the Corporation is On2.com Delaware Inc. (the "Corporation").

      The registered and principal office of the Corporation in the State of
Delaware is located at 1013 Center Road, Wilmington, County of New Castle,
Delaware 19805-1297, and the name of the registered agent of the Corporation at
such address is Corporation Service Company.

                                   ARTICLE II
                                     PURPOSE

      The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.

                                  ARTICLE III
                            POWERS OF THE CORPORATION

      The powers of the Corporation shall be those powers granted by Chapter 1
of the Delaware General Corporation Law under which this Corporation is formed.
In addition, the Corporation shall have the following specific powers:

Section 1 OFFICERS. The Corporation shall have the power to elect or appoint
officers and agents of the Corporation and to fix their compensation.

Section 2 CAPACITY. The Corporation shall have the power to act as an agent for
any individual, association, partnership, corporation or other legal entity, and
to act as general partner for any limited partnership.

Section 3 ACQUISITIONS. The Corporation shall have the power to receive,
acquire, hold, exercise rights arising out of the ownership or possession
thereof, sell or otherwise dispose of shares or other interests in, or
obligations of, individuals, associations, partnerships, corporations, or
governments.

Section 4 EARNED SURPLUS. The Corporation shall have the power to receive,
acquire, hold, pledge, transfer, or otherwise dispose of shares of the
Corporation, but such shares may only be purchased, directly or indirectly, out
of earned surplus.


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Section 5 GIFTS. The Corporation shall have the power to make gifts or
contributions for the public welfare or for charitable, scientific or
educational purposes.

                                   ARTICLE IV
                                CAPITAL STRUCTURE


Section 1 AUTHORIZED CAPITAL. The aggregate number of shares and the amount of
the total authorized capital of said Corporation shall consist of 50,000,000
shares of common stock, par value $0.01 per share ("Common Stock"), and
20,000,000 shares of non-voting preferred stock, par value $0.01 per share
("Preferred Stock").

Section 2 SHARE STATUS. All Common Stock will be equal to each other, and when
issued, shall be fully paid and nonassessable, and the private property of
stockholders shall not be liable for corporate debts. Preferred Stock shall have
such preferences as the Directors may assign to them prior to issuance. Each
holder of Common Stock of record shall have one vote for each share of stock
outstanding in his name on the books of the Corporation and shall be entitled to
vote said stock.

Section 3 CONSIDERATION FOR SHARES. The Common Stock of the Corporation shall be
issued for such consideration as shall be fixed from time to time by the Board
of Directors. In the absence of fraud, the judgment of the Directors as to the
value of any property or services received in full or partial payment for shares
shall be conclusive. When shares are issued upon payment of the consideration
fixed by the Board of Directors, such shares shall be taken to be fully paid
stock and shall be nonassessable.

Section 4 PRE-EMPTIVE RIGHTS. Except as may otherwise be provided by the Board
of Directors, holders of shares of stock of the Corporation shall have no
pre-emptive right to purchase, subscribe for or otherwise acquire shares of
stock of the Corporation, rights, warrants or options to purchase stock or
securities of any kind convertible into stock of the Corporation.

Section 5 DIVIDENDS. Dividends in cash, property or shares of the Corporation
may be paid, as and when declared by the Board of Directors, out of funds of the
Corporation to the extent and in the manner permitted by law.

Section 6 DISTRIBUTION IN LIQUIDATION. Upon any liquidation, dissolution or
winding up of the Corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the Corporation
shall be distributed, either in cash or in kind, pro rata to the holders of the
Common Stock, subject to preferences, if any, granted to holders of the
Preferred Stock. The Board of Directors may, from time to time, distribute to
the shareholders in partial liquidation from stated capital of the Corporation,
in cash or property, without the vote of the shareholders, in the manner
permitted and upon compliance with limitations imposed by law.

Section 7   SERIES A PREFERRED STOCK.

            (i) DESIGNATION AND AMOUNT. Two Million (2,000,000) shares of Twenty
      Million (20,000,000) authorized shares of Preferred Stock of the Company
      are designated Series A Preferred Stock (the "Series A Preferred Stock).

            (ii) RANK. The Series A Preferred Stock shall rank: (i) junior to
      any other class or series of capital stock of the Company hereafter
      created specifically ranking by its terms senior to the Series A Preferred
      Stock (the "Senior Securities"); (ii) prior to all


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      of the Common Stock; (iii) prior to any class or series of capital stock
      of the Company hereafter created not specifically ranking by its terms
      senior to or on parity with any Series A Preferred Stock of whatever
      subdivision (collectively, with the Common Stock, the "Junior
      Securities"); and (iv) on parity with any class or series of capital stock
      of the Company hereafter created specifically ranking by its terms on
      parity with the Series A Preferred Stock ("Parity Securities"), in each
      case as to distribution of assets upon liquidation, dissolution or winding
      up of the Company, whether voluntary or involuntary (all such
      distributions being referred to collectively as "Distributions").

            (iii) LIQUIDATION PREFERENCE.

                  (A) In the event of any liquidation, dissolution or winding up
            of the Company, either voluntary or involuntary, the Holders of
            shares of Series A Preferred Stock shall be entitled to receive,
            immediately after any distributions to Senior Securities required by
            the Company's Certificate of Incorporation, and prior in preference
            to any distribution to Junior Securities but in parity with any
            distribution to Parity Securities, an amount per share equal to
            seven dollars and fifty cents ($7.50) ("Original Issue Price"). If
            upon the occurrence of such event, and after payment in full of the
            preferential amounts with respect to the Senior Securities, the
            assets and funds available to be distributed among the Holders of
            the Series A Preferred Stock and Parity Securities shall be
            insufficient to permit the payment to such Holders of the full
            preferential amounts due to the Holders of the Series A Preferred
            Stock and the Parity Securities, respectively, then the entire
            assets and funds of the Company legally available for distribution
            shall be distributed among the holders of the Series A Preferred
            Stock and the Parity Securities, pro rata, based on the respective
            liquidation amounts to which each such series of stock is entitled
            by the Company's Certificate of Incorporation and any certificate(s)
            of designation relating thereto.

                  (B) Upon the completion of the distribution required by
            Section (iii)(A), if assets remain in the Company, they shall be
            distributed to holders of Junior Securities in accordance with the
            Company's Certificate of Incorporation, including any duly adopted
            certificate(s) of designation.

                  (C) At each Holder's option, a sale, conveyance or disposition
            of all or substantially all the assets of the Company to a private
            entity, the common stock of which is not publicly traded, shall be
            deemed to be a liquidation, dissolution or winding up within the
            meaning of this Section 7(iii); PROVIDED, however, that an event
            described in the prior clause that the Holder does not elect to
            treat as a liquidation and consolidation, merger, acquisition, or
            other business combination of the Company with or into any company
            or companies shall not be treated as a liquidation, dissolution or
            winding up within the meaning of this Subsection C but instead shall
            be treated pursuant to Subsection (iv)(C)(2) of this Section 7
            hereof (a Holder who elects to have the transaction treated as a
            liquidation is herein referred to as a "Liquidating Holder").

                  (D) Prior to the closing of a transaction described in Section
            7(iii)(C) which would constitute a liquidation event, the Company
            shall either (i) make all cash contributions it is required to make
            to the Liquidating Holders pursuant to the first sentence of
            Subsection 7(iii)(A), (ii) set aside sufficient funds from which the
            cash distributions required to be made to the Liquidating Holders
            can be made; or



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            (iii) establish an escrow or other similar arrangement with a third
            party pursuant to which the proceeds payable to the Company from a
            sale of all or substantially all the assets of the Company will be
            used to make the liquidating payments to the Liquidating Holders
            immediately after the consummation of such sale. In the event that
            the Company has not fully complied with any of the foregoing
            alternatives, the Company shall either: (x) cause such closing to be
            postponed until such cash distributions have been made, or (y)
            cancel such transaction, in which event the rights of the Holders or
            other arrangements shall be the same as existing immediately prior
            to such proposed transaction.

            (iv) CONVERSION OF SERIES A PREFERRED STOCK. The record Holders of
      the Series A Preferred Stock shall have conversion rights as follows:

                  (A) RIGHT TO CONVERT. Each record Holder of Series A Preferred
            Stock shall be entitled at any time to convert whole shares of
            Series A Preferred Stock for the Common Stock issuable upon
            conversion of the Series A Preferred Stock, as follows: each
            outstanding share of Series A Preferred Stock is convertible into
            one fully-paid and non-assessable share of Common Stock, subject to
            adjustment as provided in Section 7(iv) hereof. The number of shares
            of Common Stock issuable upon conversion of one (1) share of Series
            A Preferred Stock is hereinafter referred to as the "Conversion
            Rate."

                  (B) MECHANICS OF CONVERSION. In order to convert Series A
            Preferred Stock into full shares of Common Stock, the Holder shall
            (i) fax a copy of a fully executed notice of conversion ("Notice of
            Conversion") to the Company at the office of the Company or to the
            Company's designated transfer agent (the "Transfer Agent") for the
            Series A Preferred Stock, stating that the Holder elects to convert,
            which notice shall specify the date of conversion, the number of
            shares of Series A Preferred Stock to be converted, the Conversion
            Rate and a calculation of the number of shares of Common Stock
            issuable upon such conversion (together with a copy of the front
            page of each certificate to be converted) and (ii) surrender to a
            common courier for either overnight or two (2) day delivery to the
            office of the Company or the Transfer Agent, the original
            certificates representing the Series A Preferred Stock being
            converted (the "Preferred Stock Certificates"), duly endorsed for
            transfer; PROVIDED, however, that the Company -------- shall not be
            obligated to issue certificates evidencing the shares of Common
            Stock issuable upon such conversion, unless either the Preferred
            Stock Certificates are delivered to the Company or the Transfer
            Agent, as provided above, or the Holder notifies the Company or its
            Transfer Agent that such certificates have been lost, stolen or
            destroyed (subject to the requirements of Subsection (iv)(B)(1)
            below).

                        (1) LOST OR STOLEN CERTIFICATES. Upon receipt by the
                  Company of evidence of the loss, theft, destruction or
                  mutilation of any Preferred Stock Certificates representing
                  shares of Series A Preferred Stock, and (in the case of loss,
                  theft or destruction) of indemnity or security reasonably
                  satisfactory to the Company, and upon surrender and
                  cancellation of the Preferred Stock Certificates, if
                  mutilated, the Company shall execute and deliver new Preferred
                  Stock Certificates of like tenor and date. However, the
                  Company shall not be obligated to re-issue such lost or stolen
                  Preferred Stock Certificates if the Holder contemporaneously
                  requests the Company to convert such Series A Preferred Stock
                  into Common Stock.


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                        (2) DELIVERY OF COMMON STOCK UPON CONVERSION. The
                  Company, no later than 6:00 p.m. (New York City time) on the
                  third (3rd) business day after receipt by the Company or its
                  Transfer Agent of all necessary documentation duly executed
                  and in proper form required for conversion, including the
                  original Preferred Stock Certificates to be converted (or
                  after provision for security or indemnification in the case of
                  lost, stolen or destroyed certificates, if required), shall
                  issue and surrender to a common courier for either overnight
                  or (if delivery is outside the United States) two (2) day
                  delivery to the Holder as shown on the stock records of the
                  Company a certificate for the number of shares of Common Stock
                  to which the Holder shall be entitled as aforesaid.

                        (3) DATE OF CONVERSION. The date on which conversion
                  occurs (the "Date of Conversion") shall be deemed to be the
                  date such Notice of Conversion is faxed to the Company or the
                  Transfer Agent, as the case may be, provided that the advance
                  copy of the Notice of Conversion is faxed to the Company on or
                  prior to 6:00 p.m., New York City time, on the Date of
                  Conversion. The original Preferred Stock Certificates
                  representing the shares of Series A Preferred Stock to be
                  converted shall be surrendered by depositing such certificates
                  with a common courier for either overnight or two (2) day
                  delivery, as soon as practicable following the Date of
                  Conversion. The person or persons entitled to receive the
                  shares of Common Stock issuable upon such conversion shall be
                  treated for all purposes as the record Holder or Holders of
                  such shares of Common Stock on the Date of Conversion.

                      (C)   ADJUSTMENT TO CONVERSION RATE.

                        (1) ADJUSTMENT TO THE CONVERSION RATE DUE TO STOCK
                  SPLIT, STOCK DIVIDEND, OR OTHER SIMILAR EVENT. If, prior to
                  the conversion of all the Series A Preferred Stock, the number
                  of outstanding shares of Common Stock is increased by a stock
                  split, stock dividend or other similar event, the Conversion
                  Rate shall be proportionately reduced, or if the number of
                  outstanding shares of Common Stock is decreased by a
                  combination or reclassification of shares, or other similar
                  event, the Conversion Rate shall be proportionately increased.

                        (2) ADJUSTMENT DUE TO CONSOLIDATION, MERGER, EXCHANGE OF
                  SHARES, RECAPITALIZATION, REORGANIZATION OR OTHER SIMILAR
                  Event. If, prior to the conversion of all the Series A
                  Preferred Stock, there shall be any merger, consolidation,
                  exchange of shares, recapitalization, reorganization or other
                  similar event, as a result of which shares of Common Stock of
                  the Company shall be changed into the same or different number
                  of shares of the same or another class or classes of stock or
                  securities of the Company or another entity or there is a sale
                  of all or substantially all of the Company's assets that is
                  not deemed to be a liquidation pursuant to Section 7(iii)(C),
                  then the Holders of Series A Preferred Stock thereafter shall
                  have the right to receive, upon conversion of Series A
                  Preferred Stock and upon the basis and upon the terms and
                  conditions specified herein and in lieu of the shares of
                  Common Stock immediately theretofore issuable upon conversion,
                  such stock, securities and/or other assets which the Holder
                  would have been entitled to receive in such transaction had
                  the Series A Preferred Stock been converted immediately prior
                  to


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                  such transaction, and in any such case appropriate provisions
                  shall be made with respect to the rights and interests of the
                  Holders of the Series A Preferred Stock to the end that the
                  provisions hereof (including, without limitation, provisions
                  for the adjustment of the Conversion Rate and of the number of
                  shares issuable upon conversion of the Series A Preferred
                  Stock) shall thereafter be applicable, as nearly as may be
                  practicable in relation to any securities thereafter
                  deliverable upon the exercise hereof. The Company shall not
                  effect any transaction described in this Subsection (iv)(C)(2)
                  unless (a) it first gives thirty (30) calendar days prior
                  notice of such merger, consolidation, exchange of shares,
                  recapitalization, reorganization or other similar event
                  (during which time the Holder shall be entitled to convert its
                  shares of Series A Preferred Stock into Common Stock to the
                  extent permitted hereby) and (b) the resulting successor or
                  acquiring entity (if not the Company) assumes by written
                  instrument the obligation of the Company under this
                  Certificate of Incorporation, including the obligation of this
                  Subsection (iv)(C)(2).

                        (3) NO FRACTIONAL SHARES. If any adjustment under this
                  Section 7(iv)(C) would create a fractional share of Common
                  Stock or a right to acquire a fractional share of Common
                  Stock, such fractional share shall be disregarded and the
                  number of shares of Common Stock issuable upon conversion
                  shall be the next higher number of shares of Common Stock.

                  (v) VOTING RIGHTS. The Holders of the Series A Preferred Stock
            shall have no voting power whatsoever except to the extent otherwise
            expressly provided by the Delaware General Corporation Law, and no
            holder of Series A Preferred Stock shall vote or otherwise
            participate in any proceeding in which actions shall be taken by the
            Company or the stockholders thereof or be entitled to a notification
            as to any meeting of the stockholders.

                  (vi) PROTECTIVE PROVISION. So long as shares of Series A
            Preferred Stock are outstanding, the Company shall not without first
            obtaining the approval (by vote or written consent, as provided by
            the Delaware General Corporation Law) of the Holders of at least a
            majority of the then-outstanding shares of Series A Preferred Stock:

                        (A) alter or change the rights, preferences or
                  privileges of the Series A Preferred Stock so as to affect
                  adversely the Series A Preferred Stock, including, but not
                  limited to the creation or authorization of any Senior
                  Securities.

                        (B) increase the size of the authorized number of Series
                  A Preferred Stock; or

                        (C) do any act or thing not authorized or contemplated
                  by this Certificate of Incorporation which would result in
                  taxation of the Holders of shares of the Series A Preferred
                  Stock under Section 305 of the Internal Revenue Code of 1986,
                  as amended (or any comparable provision of the Internal
                  Revenue Code as hereafter from time to time amended).

                  In the event Holders of a majority of then-outstanding shares
            of Series A Preferred Stock agree to allow the Company to alter or
            change the rights, preferences, or privileges of the shares of
            Series A Preferred Stock, pursuant to Subsection (a) above, so as to
            affect adversely the Series A Preferred Stock, then the Company will
            deliver notice


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            of such approved alteration or change to the Holders of the Series A
            Preferred Stock that did not agree to such alternation or change
            (the "Dissenting Holders") and the Dissenting Holders shall have the
            right for a period of thirty (30) days to convert pursuant to the
            terms of this Certificate of Incorporation as they exist prior to
            such alteration or change or continue to hold their shares of Series
            A Preferred Stock subject to the approved alteration or change of
            the rights, preferences or privileges of the Series A Preferred
            Stock.

                  (vii) STATUS OF CONVERTED STOCK. In the event any shares of
            Series A Preferred Stock shall be converted pursuant to Section
            7(iv) hereof, the shares so converted shall be canceled, shall
            return to the status of authorized but unissued Preferred Stock of
            no designated series, and shall not be issuable by the Company as
            Series A Preferred Stock.

                  (viii) PREFERENCE RIGHTS. Nothing contained herein shall be
            construed to prevent the Board of Directors of the Company form
            issuing one (1) or more series of preferred stock with dividend
            and/or liquidation preferences junior to the dividend and
            liquidation preferences of Series A Preferred Stock.

                                   ARTICLE V
                             VOTING BY SHAREHOLDERS

Section 1 VOTING RIGHTS; CUMULATIVE VOTING. Each outstanding share of Common
Stock is entitled to one vote and each fractional share of Common Stock is
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders. Cumulative voting shall not be allowed in the election of
Directors of the Corporation and every shareholder entitled to vote at such
election shall have the right to vote the number of shares owned by him for as
many persons as there are Directors to be elected, and for whose election he had
a right to vote. Preferred Stock have no voting rights unless granted by
amendment to this Certificate of Incorporation.

Section 2 MAJORITY VOTE. When, with respect to any action to be taken by the
Shareholders of the Corporation, the Delaware General Corporation Law requires
the vote or concurrence of the holders of two-thirds of the outstanding shares
entitled to vote thereon, or of any class or series, any and every such action
shall be taken, notwithstanding such requirements of the Delaware General
Corporation Law, by the vote or concurrence of the holders of a majority of the
outstanding shares entitled to vote thereon, or of any class or series.

                                   ARTICLE VI
                                  INCORPORATOR

      The name and mailing address of the Incorporator is Joel L. Laser,
McGuire, Woods, Battle & Boothe LLP, 9 West 57th Street, Suite 1620, New York,
NY 10019-2602.

                                  ARTICLE VII
                               BOARD OF DIRECTORS

Section 1 The Corporate powers shall be exercised by a majority of the Board of
Directors. The number of individuals to serve on the Board of Directors shall be
set forth in the Bylaws of the Corporation; PROVIDED, however, that the initial
Board of Directors shall consist of the persons below-named to manage the
affairs of the Corporation in each case until such time as any such person
resigns or his successor is elected by a majority vote of the Shareholders:

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                  NAME OF DIRECTOR                       ADDRESS
                  ----------------                       -------
                  Daniel B. Miller                    375 Greenwich Street
                                                      New York, NY 10013

                  David S. Silver                     375 Greenwich Street
                                                      New York, NY 10013

                  Ajmal Khan                          375 Greenwich Street
                                                      New York, NY 10013

                  Jack L. Rivkin                      375 Greenwich Street
                                                      New York, NY 10013

                  Stephen D. Klein                    375 Greenwich Street
                                                      New York, NY 10013

                  Strauss Zelnick                     375 Greenwich Street
                                                      New York, NY 10013


      Section 2 If, in the interval between the annual meetings of shareholders
of the Corporation, the Board of Directors of the Corporation deems it desirable
that the number of Directors be increased, additional Directors may be elected
by a unanimous vote of the Board of Directors of the Corporation then in office,
or as otherwise set forth in the Bylaws of the Corporation.

      Section 3 The number of Directors comprising the whole Board of Directors
may be increased or decreased from time to time within such foregoing limit as
set forth in the Bylaws of the Corporation.

                                  ARTICLE VIII
                        POWERS OF THE BOARD OF DIRECTORS

      In furtherance, and not in limitation, of the powers conferred by the
State of Delaware, the Board of Directors is expressly authorized and empowered:

Section 1 BYLAWS. To make, alter, amend and repeal the Bylaws, subject to the
power of the shareholders to alter or repeal the Bylaws made by the Board of
Directors.

Section 2 BOOKS AND RECORDS. Subject to the applicable provisions of the Bylaws
then in effect, to determine, from time to time, whether and to what extent, and
at what times and places, and under what conditions and regulations, the
accounts and books of the Corporation or any of the Directors shall be open to
shareholder inspection. No shareholder shall have any right to inspect any of
the accounts, books, or documents of the Corporation, except as permitted by
law, unless and until authorized to do so by resolution of the Board of
Directors or of the shareholders of the Corporation.

Section 3 POWER TO BORROW. To authorize and issue, without shareholder consent,
obligations of the Corporation, secured and unsecured, under such terms and
conditions as the


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Board, in its sole discretion, may determine, and to pledge, or mortgage, as
security therefor, any real or personal property of the Corporation, including
after-acquired property.

Section 4 DIVIDENDS. To determine whether any and, if so, what part, of the
earned surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and disposition of any such
earned surplus.

Section 5 PROFITS. To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other lawful purpose.

Section 6 EMPLOYEE'S PLANS. From time to time to provide and carry out and to
recall, abolish, revise, amend, alter, or change a plan or plans for the
participation by all or any of the employees, including Directors and officers
of this Corporation or of any corporation in which or in the welfare of which
the Corporation has any interest, and those actively engaged in the conduct of
this Corporation's business, in the profits of this Corporation or of any branch
or division thereof, as part of this Corporation's legitimate expenses, and for
the furnishing to such employees and persons, or any of them, at this
Corporation's expense, of medical services, insurance against accident,
sickness, or death, pensions during old age, disability, or unemployment,
education, housing, social services, recreation, or other similar aids for their
relief or general welfare, in such manner and upon such terms and conditions as
may be determined by the Board of Directors.

Section 7 WARRANTS AND OPTIONS. The Corporation, by resolution or resolutions of
its Board of Directors, shall have power to create and issue, whether or not in
connection with the issue and sale of any shares of any other securities of the
Corporation, warrants, rights, or options entitling the holders thereof to
purchase from the Corporation any shares of any class or classes of any other
securities of the Corporation, such warrants, rights or options to be evidenced
by or in such instrument or instruments as shall be approved by the Board of
Directors. The terms upon which, the time or times (which may be limited or
unlimited in duration), and the price or prices (not less than the minimum
amount prescribed by law, if any) at which any such warrants, rights, or options
may be issued and any such shares or other securities may be purchased from the
Corporation upon the exercise of such warrant, right, or option shall be such as
shall be fixed and stated in the resolution or resolutions of the Board of
Directors providing for the creation and issue of such warrants, rights or
options. The Board of Directors is hereby authorized to create and issue any
such warrants, rights, or options from time to time for such consideration, and
to such persons, firms, or corporations, as the Board of Directors may
determine.

Section 8 COMPENSATION. To provide for the reasonable compensation of its own
members, and to fix the terms and conditions upon which such compensation will
be paid.

Section 9 NOT IN LIMITATION. In addition to the powers and authority
hereinabove, or by statute expressly conferred upon it, the Board of Directors
may exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the laws
of the State of Delaware, of this Certificate of Incorporation and of the Bylaws
of the Corporation.

                                   ARTICLE IX
                 RIGHT OF DIRECTORS TO CONTRACT WITH CORPORATION

      No contract or other transaction between this Corporation and one or more
of its Directors or any other corporation, firm, association, or entity in which
one or more of its


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Directors are directors or officers or are financially interested shall be
either void or voidable solely because of such relationship or interest or
solely because such directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction or solely because their votes are counted for such
purpose if:

(A) The fact of such relationship or interest is disclosed or known to the Board
of Directors or committee which authorizes, approves, or ratifies the contract
or transaction by a vote or consent sufficient for the purpose without counting
the votes of consents of such interested Directors; or

(B) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or

(C) The contract or transaction is fair and reasonable to the Corporation.

                                   ARTICLE X
                              CORPORATE OPPORTUNITY

      The officers, Directors, and other members of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
Board of Directors as evidenced by resolutions appearing in the Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, Directors, and other members of management of this Corporation shall
be disclosed promptly to this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter any
officer, Director or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its Board of
Directors, has designated an area of interest, the officers, Directors and other
members of management of this Corporation shall be free to engage in other areas
of interest on their own and this doctrine shall not limit the right of any
officer, Director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than an officer, Director or member of
management) from any duties which the person may have to this Corporation.

                                   ARTICLE XI
                INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

      The Board of Directors of the Corporation shall have the power to:

(A) Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that the person is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding had no


<PAGE>

reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.

(B) Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of another
corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of the Corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys fees)
actually and reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation; except no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which the Court of Chancery or such court
shall deem proper.

(C) Indemnify a present or former Director or officer of the Corporation to the
extent that such person has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Subparagraphs A or B of
this Article or in defense of any claim, issue, or matter therein, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.

(D) Authorize indemnification under Subparagraphs A or B of this Article (unless
ordered by a Court) in the specific case upon a determination that
indemnification of the present or former Director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard
of conduct set forth in said Subparagraph A or B. Such determination shall be
made, with respect to a person who is a director or officer at the time of such
determination, (i) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum; or (ii) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum; or (iii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion; or (iv)
by the stockholders, if such a quorum is not obtainable or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or by the shareholders.

(E) Authorize payment of expenses (including attorneys' fees) incurred by an
officer or director in defending a civil, criminal, administrative or
investigative action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding as authorized in Subparagraph D of this Article
upon receipt of an undertaking by or on behalf of such Director, officer,
employee or agent to repay such amount if it is ultimately determined that the
person is not entitled to be indemnified by the Corporation as authorized in
this Article.

(F) Purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation or who is or was serving
at the request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person

<PAGE>

in any such capacity or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such persons against such
liability under the provisions of this Article.

(G) For purposes of this Article XI, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.

      The indemnification and advancement of expenses provided by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under this
Certificate of Incorporation, the Bylaws, or any agreement, vote of stockholders
or disinterested directors or otherwise, or any procedure provided for by any of
the foregoing, both as to action in such person's official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a Director, officer, employee or agent and shall
inure to the benefit of heirs, executors, and administrators of such a person.

                                  ARTICLE XII
                                 RIGHT TO AMEND

      The right is expressly reserved to amend, alter, change, or repeal any
provision or provisions contained in this Certificate of Incorporation, or any
Article herein, by a majority vote of the members of the Board of Directors and
a majority vote of the stockholders of the Corporation.


      IN WITNESS WHEREOF, the undersigned has set his hand this 1st day of
March, 2000.



/s/ Joel L. Laser
Joel L. Laser, Incorporator


<PAGE>


                          -----------------------------


                            CERTIFICATE OF AMENDMENT
                                     TO THE
                          CERTIFICATE OF INCORPORATION
                                       OF
                              ON2.COM DELAWARE INC.


                 Pursuant to Section 241 of the Delaware General
                                 Corporation Law


                           ---------------------------


      IT IS HEREBY CERTIFIED that:

      1. The name of the company (hereinafter called the "Company") is On2.com
Delaware Inc., a corporation organized and now existing under the Delaware
General Corporation Law.

      2. The Certificate of Incorporation of the Company (the "Certificate of
Incorporation") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), and
expressly vests in the Board of Directors of the Company the authority to issue
any or all of said shares in one (1) or more series by resolution or resolutions
to establish the designation and number and to fix the relative rights and
preferences of each series to be issued.

      3. The Board of Directors considers it to be in the best interest of the
Company to amend the Certificate of Incorporation as set forth in the
resolutions below.

      4. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
241 of the Delaware General Corporation Law, prior to receiving any payment for
any of its stock, has duly adopted the resolutions set forth below to create a
Series B issue of Preferred Stock and to otherwise amend the Certificate of
Incorporation.

      RESOLVED, that ARTICLE II of the Certificate of Incorporation is amended
to read in its entirety as follows: "ARTICLE II PURPOSE AND DURATION. The
purpose of the Company is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law. The
Company is to have perpetual existence."

      FURTHER RESOLVED, that Thirty Four Thousand One Hundred (34,100) shares of
the Twenty Million (20,000,000) authorized shares of Preferred Stock of the


<PAGE>

Company are hereby designated Series B Preferred Stock, par value $0.01 per
share, and shall possess the rights and preferences set forth below, which shall
constitute a new Section 7A to ARTICLE IV of the Certificate of Incorporation:

      Section 7A SERIES B PREFERRED STOCK.

            (i) DESIGNATION AND AMOUNT. Thirty Four Thousand One Hundred
      (34,100) shares of the Twenty Million (20,000,000) authorized shares of
      Preferred Stock of the Company are designated Series B Preferred Stock
      (the "Series B Preferred Stock"). The Series B Preferred Stock shall be
      issued or offered at a purchase price of Twenty-three and 46875/100000
      Dollars ($23.46875) per share (the "Original Issue Price"). The holders of
      record of the Series B Preferred Stock are sometimes referred to in this
      Section 7A as the "Holders."

            (ii) RANK. The Series B Preferred Stock shall rank on parity with
      the Company's Series A Preferred Stock and shall accordingly rank (i)
      junior to any other class or series of capital stock of the Company
      hereafter created specifically ranking by its terms senior to the Series A
      Preferred Stock or the Series B Preferred Stock (the "Senior Securities");
      (ii) prior to all of the Common Stock; (iii) prior to any class or series
      of capital stock of the Company hereafter created not specifically ranking
      by its terms senior to or on parity with any Series A Preferred Stock or
      Series B Preferred Stock of whatever subdivision (collectively, with the
      Common Stock, the "Junior Securities"); and (iv) on parity with any class
      or series of capital stock of the Company hereafter created specifically
      ranking by its terms on parity with the Series A Preferred Stock or the
      Series B Preferred Stock ("Parity Securities") in each case as to
      distribution of assets upon liquidation, dissolution or winding up of the
      Company, whether voluntary or involuntary (all such distributions being
      referred to collectively as "Distributions").

            (iii) LIQUIDATION PREFERENCE.

                  (A) In the event of any liquidation, dissolution or winding
      up of the Company, either voluntary or involuntary, the Holders of shares
      of Series B Preferred Stock shall be entitled to receive, immediately
      after any distributions to Senior Securities required by the Company's
      Certificate of Incorporation, and prior in preference to any distribution
      to Junior Securities but in parity with any distribution to the Series A
      Preferred Stock or the other Parity Securities, an amount per share equal
      to the Original Issue Price. If upon the occurrence of such event, and
      after payment in full of the preferential amounts with respect to the
      Senior Securities, the assets and funds available to be distributed among
      the Holders of the Series B Preferred Stock, the Series A Preferred Stock
      and the Parity Securities shall be insufficient to permit the payment to
      such Holders of the full preferential amounts due to the Holders of the
      Series B Preferred Stock and the Parity Securities, respectively, then the


<PAGE>

      entire assets and funds of the Company legally available for distribution
      shall be distributed among the Holders of the Series B Preferred Stock,
      the Series A Preferred Stock and the Parity Securities, pro rata, based on
      the respective liquidation amounts to which each such series of stock is
      entitled by the Company's Certificate of Incorporation and any
      certificate(s) of designation relating thereto.

                  (B) Upon the completion of the distribution required by
      Section 7A(iii)(A), if assets remain in the Company, they shall be
      distributed to holders of Junior Securities in accordance with the
      Company's Certificate of Incorporation, including any duly adopted
      certificate(s) of designation.

                  (C) At each Holder's option, a sale, conveyance or disposition
      of all or substantially all the assets of the Company to a private entity,
      the common stock of which is not publicly traded, shall be deemed to be a
      liquidation, dissolution or winding up within the meaning of this Section
      7A(iii); PROVIDED, that an event described in the prior clause that the
      Holder does not elect to treat as a liquidation and a consolidation,
      merger, acquisition, or other business combination of the Company with or
      into any other company or companies shall not be treated as a liquidation,
      dissolution or winding up within the meaning of this Subsection C, but
      instead shall be treated pursuant to Subsection (iv)(D)(2) of this Section
      7A (a Holder who elects to have the transaction treated as a liquidation
      is herein referred to as a "Series B Liquidating Holder").

                  (D) Prior to the closing of a transaction described in Section
      7A(iii)(C) which would constitute a liquidation event, the Company shall
      either (i) make all cash distributions it is required to make to the
      Liquidating Holders pursuant to the first sentence of Section 7A(iii)(A),
      (ii) set aside sufficient funds from which the cash distributions required
      to be made to the Series B Liquidating Holders can be made, or (iii)
      establish an escrow or other similar arrangement with a third party
      pursuant to which the proceeds payable to the Company from a sale of all
      or substantially all the assets of the Company will be used to make the
      liquidating payments to the Series B Liquidating Holders immediately after
      the consummation of such sale. In the event that the Company has not fully
      complied with any of the foregoing alternatives, the Company shall either:
      (x) cause such closing to be postponed until such cash distributions have
      been made, or (y) cancel such transaction, in which event the rights of
      the Holders or other arrangements shall be the same as existing
      immediately prior to such proposed transaction.

            (iv) CONVERSION OF SERIES B PREFERRED STOCK. The record Holders of
      the Series B Preferred Stock shall have conversion rights as follows:

                 (A) RIGHT TO CONVERT. At any time after the second anniversary
      of the date on which the shares of Series B Preferred Stock


<PAGE>

      have been issued to a Holder of Series B Preferred Stock, each such Holder
      of Series B Preferred Stock shall be entitled to convert whole shares of
      Series B Preferred Stock held of record by such Holder for the Common
      Stock issuable upon conversion of the Series B Preferred Stock as follows:
      each outstanding share of Series B Preferred Stock is convertible into one
      fully-paid and non-assessable share of Common Stock, subject to adjustment
      as provided in Section 7A(iv). The number of shares of Common Stock
      issuable upon conversion of one share of Series B Preferred Stock is
      hereafter referred to as the "Series B Conversion Rate."

                  (B) MECHANICS OF CONVERSION. In order to convert Series B
      Preferred Stock into full shares of Common Stock, a Holder shall (i)
      execute and send to the Company at its principal office a notice in letter
      form (a "Notice of Conversion"), which notice shall specify the date of
      conversion, the number of shares of Series B Preferred Stock to be
      converted, the Series B Conversion Rate and a calculation of the number of
      shares of Common Stock issuable upon such conversion (together with a copy
      of the front page of each certificate to be converted) and (ii) surrender
      to a common courier for either overnight or two-day delivery to the
      principal office of the Company the original certificates evidencing the
      shares of Common Stock issuable upon such conversion, unless either the
      Series B Preferred Stock certificates are delivered to the Company as
      provided above, or the Holder notifies the Company that such certificates
      have been lost, stolen or destroyed (subject to the requirements of
      Subsection (iv)(B)(1) below).

                        (1) LOST OR STOLEN CERTIFICATES. Upon receipt by the
      Company of evidence of the loss, theft, destruction or mutilation of any
      Preferred Stock Certificates representing shares of Series B Preferred
      Stock, and (in the case of loss, theft or destruction) of indemnity or
      security reasonably satisfactory to the Company, and upon surrender and
      cancellation of the Series B Preferred Stock Certificates, if mutilated,
      the Company shall execute and deliver new Series B Preferred Stock
      Certificates of like tenor and date. However, the Company shall not be
      obligated to re-issue such lost or stolen Series B Preferred Stock
      Certificates if Holder contemporaneously requests the Company to convert
      such Series B Preferred Stock into Common Stock.

                        (2) DELIVERY OF COMMON STOCK UPON CONVERSION. The
      Company, no later than 6:00 p.m. (New York City time) on the fifth
      business day after receipt by the Company of all necessary documentation
      duly executed and in proper form required for conversion, including the
      original Series B Preferred Stock Certificates to be converted (or after
      provision for security or indemnification in the case of lost, stolen or
      destroyed certificates, if required), shall issue and surrender to a
      common courier for either overnight or (if delivery is outside the United
      States) two-day delivery to the Holder as shown on the stock records of


<PAGE>

      the Company a certificate for the number of shares of Common Stock to
      which the Holder shall be entitled as aforesaid.

                        (3) DATE OF CONVERSION. The date on which conversion
      occurs (the "Series B Date of Conversion") shall be deemed to be the date
      such Notice of Conversion is faxed to the Company; PROVIDED, that the
      advance copy of the Notice of Conversion is faxed to the Company on or
      prior to 6:00 p.m., New York City time, on the Date of Conversion. The
      original Preferred Stock Certificates representing the shares of Series B
      Preferred Stock to be converted shall be surrendered by depositing such
      certificates with a common courier for either overnight or two-day
      delivery, as soon as practicable following the Series B Date of
      Conversion. The person or persons entitled to receive the shares of Common
      Stock issuable upon such conversion shall be treated for all purposes as
      the record Holder or Holders of such shares of Common Stock on the Series
      B Date of Conversion.

                  (C) AUTOMATIC CONVERSION. Notwithstanding any other provision
      of this Certificate to the contrary, all shares of Series B Preferred
      Stock which are outstanding and issued at the time shall be automatically
      converted, without any further action on the part of the Holder thereof,
      into shares of Common Stock at the Series B Conversion Rate then in effect
      whenever the Company delivers to the holders of any of its securities a
      notice stating that it has determined to register any shares of its Common
      Stock for its own account, or for the account of any of its shareholders
      (other than (i) a registration relating solely to the sale of convertible
      debt instruments; (ii) a registration on Form S-4 or S-8 or another form
      not available for registering resales of shares of Common Stock for sale
      to the public; or (iii) any registration comprised in whole or in
      substantial part of shares underlying stock options granted by the Company
      or its predecessor), or becomes obligated to deliver such a notice
      pursuant to the terms of any written agreement to which the Company is a
      party.


                  (D)   ADJUSTMENT TO SERIES B CONVERSION RATE.

                        (1) ADJUSTMENT TO THE SERIES B CONVERSION RATE DUE TO
      STOCK SPLIT, STOCK DIVIDEND OR OTHER SIMILAR EVENT. If, prior to the
      conversion of all the Series B Preferred Stock, the number of outstanding
      shares of Common Stock is increased by a stock split, stock dividend or
      other similar event, the Series B Conversion Rate shall be proportionately
      reduced, or if the number of outstanding shares of Common Stock is
      decreased by a combination or reclassification of shares, or other similar
      event, the Series B Conversion Rate shall be proportionately increased.

                        (2) ADJUSTMENT DUE TO CONSOLIDATION, MERGER, EXCHANGE OF
      SHARES, RECAPITALIZATION, REORGANIZATION OR OTHER SIMILAR


<PAGE>

      EVENT. If, prior to the conversion of all the Series B Preferred Stock,
      there shall be any merger, consolidation, exchange of shares,
      recapitalization, reorganization or other similar event, as a result of
      which shares of Common Stock of the Company shall be changed into the same
      or a different number of shares of the same or another class or classes of
      stock or securities of the Company or another entity or there is a sale of
      all or substantially all of the Company's assets that is not deemed to be
      a liquidation pursuant to Section 7A(iii)(C), then the Holders of Series B
      Preferred Stock thereafter shall have the right to receive, upon
      conversion of Series B Preferred Stock and upon the basis and upon the
      terms and conditions specified herein and in lieu of the shares of Common
      Stock immediately theretofore issuable upon conversion, such stock,
      securities and/or other assets which the Holder would have been entitled
      to receive in such transaction had the Series B Preferred Stock been
      converted immediately prior to such transaction, and in any such case
      appropriate provisions shall be made with respect to the rights and
      interests of the Holders of the Series B Preferred Stock to the end that
      the provisions hereof (including, without limitation, provisions for the
      adjustment of the Series B Conversion Rate and of the number of shares
      issuable upon conversion of the Series B Preferred Stock) shall thereafter
      be applicable, as nearly as may be practicable in relation to any
      securities thereafter deliverable upon the exercise hereof. The Company
      shall not effect any transaction described in this Subsection (iv)(D)(2)
      unless (a) it first gives 30 days prior notice of such merger,
      consolidation, exchange of shares, recapitalization, reorganization or
      other similar event (during which time the Holder shall be entitled to
      convert its shares of Series B Preferred Stock into Common Stock to the
      extent permitted hereby) and (b) the resulting successor or acquiring
      entity (if not the Company) assumes by written instrument the obligation
      of the Company under this Certificate of Incorporation, including the
      obligation of this Subsection (iv)(D)(2).

                        (3) NO FRACTIONAL SHARES. If any adjustment under this
      Section 7A(iv)(D) would create a fractional share of Common Stock or a
      right to acquire a fractional share of Common Stock, such fractional share
      shall be disregarded and the number of shares of Common Stock issuable
      upon conversion shall be the next higher number of shares of Common Stock.

            (v) VOTING RIGHTS. The Holders of the Series B Preferred Stock shall
      have no voting power whatsoever except to the extent otherwise expressly
      provided by the Delaware General Corporation Law, and no Holder of Series
      B Preferred stock shall vote or otherwise participate in any proceeding in
      which actions shall be taken by the Company or the stockholders thereof or
      be entitled to notification as to any meeting of the stockholders.


<PAGE>

            (vi) PROTECTIVE PROVISION. So long as shares of Series B Preferred
      Stock are outstanding, the Company shall not without first obtaining the
      approval (by vote or written consent, as provided by the Delaware General
      Corporation Law) of the Holders of at least a majority of the then
      outstanding shares of Series B Preferred Stock:

                  (a) alter or change the rights, preferences or privileges of
      the Series B Preferred Stock, including, but not limited to, the creation
      or authorization of any Senior Securities.

                  (b)   increase  the  size  of  the  authorized
      number of Series B Preferred Stock; or

                  (c) do any act or thing not authorized or contemplated by this
      Certificate of Incorporation which would result in taxation of the Holders
      of the shares of the Series B Preferred Stock under Section 305 of the
      Internal Revenue Code of 1986, as amended (or any comparable provision of
      the Internal Revenue Code as hereafter from time to time amended).

            If the Holders of a majority of the then outstanding shares of
      Series B Preferred Stock agree to allow the Company to alter or change the
      rights, preferences or privileges of the shares of Series B Preferred
      Stock, pursuant to Subsection (a) above, so as to affect adversely the
      Series B Preferred Stock, then the Company will deliver notice of such
      approved alteration or change to the Holders of the Series B Preferred
      Stock that did not agree to such alteration or change (the "Series B
      Dissenting Holders") and the Series B Dissenting Holders shall have the
      right for a period of 30 days to convert pursuant to the terms of this
      Certificate of Incorporation as they exist prior to such alteration or
      change or continue to hold their shares of Series B Preferred Stock
      subject to the approved alteration or change of the rights, preferences or
      privileges of the Series B Preferred Stock.

            (vii) STATE OF CONVERTED STOCK. In the event any shares of Series B
      Preferred Stock shall be converted pursuant to Section 7A(iv), the shares
      so converted shall be canceled, shall return to the status of authorized
      but unissued preferred stock of no designated series, and shall not be
      issuable by the Company as Series B Preferred Stock.

            (viii) PREFERENCE RIGHTS. Nothing contained herein shall be
      construed to prevent the Board of Directors of the Company from issuing
      one or more series of preferred stock with dividend and/or liquidation
      preferences on parity with or junior to the dividend and liquidation
      preferences of the Series B Preferred Stock.


<PAGE>

      FURTHER RESOLVED, that ARTICLE V of the Certificate of Incorporation is
amended as follows:

      Section 2 of Article V of the Certificate of Incorporation is amended to
read in its entirety as follows: "Section 2 ELECTION OF DIRECTORS. Elections of
directors need not be by written ballot unless the Bylaws of the Company so
provide."

      FURTHER RESOLVED, that ARTICLE VIII of the Certificate of Incorporation is
amended as follows:

            (a)   Section 2 is amended to add the following sentence at the end
                  thereof: "The books of the Company may be kept (subject to any
                  provision contained in the statutes) outside the State of
                  Delaware at such place or places as may be designated from
                  time to time by the Board of Directors or in the Bylaws of the
                  Company."

            (b)   Section 9 is renumbered as Section 13.

            (c)   The following sections are added in appropriate numerical
                  order:

                  Section 9 RESERVES. To set apart out of any of the funds of
      the Company available for dividends a reserve or reserves for any proper
      purpose and to abolish any such reserve in the manner in which it was
      created.

                  Section 10 COMMITTEES. By a majority of the whole board, to
      designate one or more committees, each committee to consist of one or more
      of the directors of the Company. The board may designate one or more
      directors as alternate members of any committee, who may replace any
      absent or disqualified member at any meeting of the committee. The Bylaws
      may provide that in the absence or disqualification of a member of a
      committee, the member or members thereof present at any meeting and not
      disqualified from voting, whether or not he or they constitute a quorum,
      may unanimously appoint another member of the board of directors to act at
      the meeting in the place of any such absent or disqualified member. Any
      such committee, to the extent provided in the resolution of the board of
      directors, or in the Bylaws of the Company, shall have and may exercise
      all the powers and authority of the board of directors in the management
      of the business and affairs of the Company, and may authorize the seal of
      the Company, if any, to be affixed to all papers which may require it; but
      no such committee shall have the power or authority in reference to
      amending the Certificate of Incorporation of adopting an agreement of
      merger or consolidation, recommending to the stockholders the sale, lease
      or exchange of all or substantially all of the Company's property and
      assets, recommending to


<PAGE>

      the stockholders a dissolution of the Company or a revocation of a
      dissolution, or amending the Bylaws of the Company; and, unless the
      resolution or Bylaws expressly so provide, no such committee shall have
      the power or authority to declare a dividend or to authorize the issuance
      of stock.

                  Section 11 DISPOSITION OF CORPORATE Property. When and as
      authorized by the stockholders in accordance with law, to sell, lease or
      exchange all or substantially all of the property and assets of the
      Company, including its good will and its corporate franchises, upon such
      terms and conditions and for such consideration, which may consist in
      whole or in part of money or property including shares of stock in, and/or
      other securities of, any other company or companies as its board of
      directors shall deem expedient and for the best interests of the Company.

      FURTHER RESOLVED, that ARTICLE XII of the Certificate of Incorporation is
deleted therefrom and that the following articles are substituted in lieu
thereof:

                                   ARTICLE XII
                 LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS

            A director of the Company shall not be personally liable to the
      Company or its stockholders for monetary damages for breach of fiduciary
      duty as a director except for liability (i) for any breach of the
      director's duty of loyalty to the Company or its stockholders, (ii) for
      acts or omissions not in good faith or which involved intentional
      misconduct or a knowing violation of law, (iii) under Section 174 of the
      Delaware General Corporation Law, or (iv) for any transaction from which
      the director derived any improper personal benefit.


<PAGE>

                                  ARTICLE XIII
                            COMPROMISE OR ARRANGEMENT

            Whenever a compromise or arrangement is proposed between this
      Company and its creditors or any class of them and/or between this Company
      and its stockholders or any class of them, any court of equitable
      jurisdiction within the State of Delaware may, on the application in a
      summary way of this Company or of any creditor or stockholder thereof or
      on the application of any receiver or receivers appointed for this Company
      under the provisions of Section 291 of Title 8 of the Delaware Code order
      a meeting of the creditors or class of creditors, and/or of the
      stockholders or class of stockholders of this Company, as the case may be,
      to be summoned in such manner as the said court directs. If a majority in
      number representing ninety percent (90%) in value of the creditors or
      class of creditors, and/or of the stockholders or class of stockholders of
      this Company, as the case may be, agree to any compromise or arrangement
      and to any reorganization of this Company as a consequence of such
      compromise or arrangement, the said compromise or arrangement and said
      reorganization shall, if sanctioned by the court to which the said
      application has been made, be binding on all of the creditors or class of
      creditors, and/or on all the stockholders or class of stockholders, of
      this Company, as the case may be, and also on this Company.

                                   ARTICLE XIV
                                 RIGHT TO AMEND

            The Company reserves the right to amend, alter, change or repeal any
      provision contained in the Certificate of Incorporation, in the manner now
      or hereafter prescribed by statute, and all rights conferred upon
      stockholders herein are subject to this reservation.


      IN WITNESS WHEREOF, this Certificate of Amendment has been duly adopted by
the Board of Directors and has been duly executed on behalf of the Company by
its Secretary this 17th day of March, 2000.

                                    ON2.COM DELAWARE INC.


                                    By:   /s/ David Silver
                                       ---------------------------
                                       David Silver
                                       Secretary


<PAGE>


                              ON2.COM DELAWARE INC.


                           ---------------------------

                                 DESIGNATION OF
                        POWERS, PREFERENCES AND RIGHTS OF
                            SERIES C PREFERRED STOCK,
                            PAR VALUE $0.01 PER SHARE


                           ---------------------------

               Pursuant to Section 151(g) of the Delaware General
                                 Corporation Law


                     ---------------------------


IT IS HEREBY CERTIFIED that:

      1. The name of the company (hereinafter called the "Company") is On2.com
Delaware Inc., a corporation organized and now existing under the Delaware
General Corporation Law.

      2. The Certificate of Incorporation of the Company (the "CERTIFICATE OF
INCORPORATION") authorize the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "PREFERRED STOCK"), and
expressly vest in the Board of Directors of the Company the authority to issue
any or all of said shares in one or more series by resolution or resolutions to
establish the designation and number and to fix the relative rights and
preferences of each series to be issued.

      3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151(g) of the Delaware General Corporation Law, has adopted the resolution set
forth below to create a series issue of Preferred Stock. Pursuant to 151(g), the
approval of the Company's shareholders was not required.

      RESOLVED, THAT Four Million Two Hundred Eighty-Five Thousand Seven Hundred
Fifteen (4,285,715) shares of the Twenty Million (20,000,000) authorized shares
of Preferred Stock of the Company shall be designated Series C Preferred Stock,
par value $0.01 per share, and shall possess the rights and preferences set
forth below, which shall constitute a new Section 7B to Article IV of the
Certificate of Incorporation:


<PAGE>

      "Section 7B.      Series C Preferred Stock.

            1. DESIGNATION AND AMOUNT. Four Million Two Hundred Eighty-Five
Thousand Seven Hundred Fifteen (4,285,715) shares of the Twenty Million
(20,000,000) authorized shares of Preferred Stock of the Company are designated
Series C Preferred Stock (the "SERIES C PREFERRED STOCK"). The Series C
Preferred Stock shall be issued or offered at a purchase price equal to $6.0816
per share (the "SERIES C ORIGINAL ISSUE PRICE"). The holders of record of any
series of the Series C Preferred Stock are sometimes referred to in this Section
7B as the "SERIES C HOLDERS." The holders of record of any shares of any series
of the Preferred Stock are referred to in this Section 7B as the "HOLDERS."

            2. RANK. The Series C Preferred Stock shall rank on parity with the
Company's Series A Preferred Stock and the Company's Series B Preferred Stock
and shall accordingly rank (i) junior to any other class or series of capital
stock of the Company hereafter created specifically ranking by its terms senior
to the Series A Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock (the "SENIOR SECURITIES"); (ii) prior to all of the Common
Stock; (iii) prior to any class or series of capital stock of the Company
hereafter created not specifically ranking by its terms senior to or on parity
with any Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
the "JUNIOR SECURITIES"); and (iv) on parity with any class or series of capital
stock of the Company hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock, the Series B Preferred Stock or the
Series C Preferred Stock (the "PARITY SECURITIES") in each case as to
distribution of assets upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "DISTRIBUTIONS").

            3.    LIQUIDATION PREFERENCE.

                  (a) In the event of any Distribution, the Series C Holders
shall be entitled to receive, immediately after any distributions to the holders
of the Senior Securities required by the Company's Certificate of Incorporation,
and prior in preference to any distribution to the holders of the Junior
Securities, but in parity with any Distribution to the holders of the Series A
Preferred Stock (the "SERIES A HOLDERS"), the holders of the Series B Preferred
Stock (the "SERIES B HOLDERS") or the holders of the Parity Securities, an
amount per share equal to the Original Issue Price. If upon the occurrence of
any such Distribution, and after payment in full of any preferential amounts due
in respect of the Senior Securities, the assets and funds available to be
distributed among the Series A Holders, the Series B Holders, the Series C
Holders and the holders of the Parity Securities shall be insufficient to pay to
such Holders the full preferential amounts due to the Series A Holders, the
Series B Holders, the Series C Holders and holders of the Parity Securities,
then the entire assets and funds of the Company legally available for
distribution shall be distributed among the Series A Holders, the Series B
Holders, the Series C Holders and the holders of the Parity Securities, pro
rata, based on the respective liquidation amounts to which each such series of
stock is entitled by the


<PAGE>

Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.

                  (b) Upon the completion of the distribution required by
Section 7B.3(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation, including any duly adopted certificate(s) of designation.

                  (c) At the option of each Series C Holder, a sale, conveyance
or disposition of all or substantially all the assets of the Company to any
entity other than an Affiliate of the Company which is controlled by the Company
through the direct or indirect ownership of not less than 50% of the voting
securities or interests thereof (a "Liquidating Transaction") shall be deemed to
be a liquidation, dissolution or winding up within the meaning of this Section
7B.3; PROVIDED, that neither (i) any Liquidating Transaction that a Series C
Holder elects in writing not to treat as a liquidation, dissolution or winding
up of the Company nor (ii) any consolidation, merger, acquisition, or other
business combination of the Company with or into any other company or companies
shall be treated as a liquidation, dissolution or winding up within the meaning
of this Section 7B.3(c), but instead shall be subject to Section 7B.4(f). Any
Series C Holder as to which any Liquidating Transaction is treated as a
liquidation, dissolution or winding up of the Company under this Section 7B.3(c)
is referred to herein as a "SERIES C LIQUIDATING HOLDER."

                  (d) Prior to the closing of a transaction described in Section
7B.3(c) which would constitute a liquidation event, the Company shall either (i)
make all cash distributions it is required to make to the Series C Liquidating
Holders pursuant to the first sentence of Section 7B.3(a), (ii) set aside
sufficient funds from which the cash distributions required to be made to the
Series C Liquidating Holders can be made, or (iii) establish an escrow or other
similar arrangement with a third party pursuant to which the proceeds payable to
the Company from a sale of all or substantially all the assets of the Company
will be used to make the liquidating payments to the Series C Liquidating
Holders immediately after the consummation of such sale. If the Company has not
fully complied with any of the foregoing alternatives, the Company shall either:
(x) cause such closing to be postponed until such cash distributions have been
made, or (y) cancel such transaction, in which event the rights of the Series C
Holders or other arrangements shall be the same as existing immediately prior to
such proposed transaction.

            4.    CONVERSION.   The  holders  of  Series  C  Preferred
Stock have conversion rights (the "Conversion Rights") as follows:

                  (a) RIGHT TO CONVERT. Each share of Series C Preferred Stock
shall be convertible into a share or shares of Common Stock without the payment
of any additional consideration at the option of the Series C Holder thereof, at
any time after the date of issuance of such share of Series C Preferred Stock,
at the office of the Company or any transfer agent for the Series C Preferred
Stock, each share of Series C Preferred Stock shall be convertible into the
number of fully paid and nonassessable shares of Common Stock which results from
dividing the Original Purchase Price by the


<PAGE>

conversion value per share in effect for each share of Series C Preferred Stock
(the "SERIES C CONVERSION VALUE") at the time of conversion. The Series C
Conversion Value shall initially be equal to the Original Purchase Price and
shall be adjusted from time to time pursuant to the provisions of Section
7B.4(d) and Section 7B.4(e) and shall be subject to adjustment from time to time
as provided below. The number of shares of Common Stock into which a share of
Series C Preferred Stock is convertible is hereinafter referred to as the
"SERIES C CONVERSION RATE."

            (b)   MECHANICS OF CONVERSION.

                  (i) No fractional shares of Common Stock shall be issued upon
conversion of Series C Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to such fraction multiplied by the then effective Series C Conversion Value.
Before any holder of Series C Preferred Stock shall be entitled to convert such
shares into full shares of Common Stock and to receive certificates therefor,
such holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or of any transfer agent for the Series C
Preferred Stock, as the case may be, and shall give written notice to the
Company at such office that such holder elects to convert the same; the Company
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid and a check payable to
such holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.

                  (ii) The Company shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series C Preferred Stock pursuant to this
Section 7B.4. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involving the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of Series C
Preferred Stock so converted were registered, and no such issuance or delivery
shall be made unless and until the person or entity requesting such issuance has
paid to the Company the amount of any tax or has established, to the
satisfaction of the Company, that such tax has been paid.

            (c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series C Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series C Preferred Stock, the
Company shall take such corporate action as may, in the opinion of

<PAGE>

its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.

            (d) ADJUSTMENTS TO SERIES C CONVERSION VALUE FOR DILUTIVE ISSUANCES.

                (i) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Series C Conversion Value shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the Company is less than
the Series C Conversion Value in effect on the date of, and immediately prior
to, such issue. No adjustment in the Series C Conversion Value shall be made
pursuant to Section 7B.4(d)(iv) as a result of any stock dividend or subdivision
which causes an adjustment in the Series C Conversion Value pursuant to Section
7B.4(e) or any event which is subject to the provisions of Section 7B.4(f). No
adjustment in the Series C Conversion Value shall be made in respect of an
issuance or deemed issuance of Additional Shares of Common Stock if such
issuance or deemed issuance involves the issuance or deemed issuance of stock,
options or warrants (A) to employees, consultants or directors of the Company,
(B) to other entities for acquisition purposes or (C) to banks or other
institutional credit financing sources; in the case of each of (A), (B) or (C)
pursuant to plans or arrangements approved by the Board of Directors.

                  (ii) DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If
the Company at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; PROVIDED, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 7B.4(d)(iv)) of such Additional Shares
of Common Stock would be less than the Series C Conversion Value in effect on
the date of and immediately prior to such issue, or such record date, as the
case may be; and PROVIDED, further, that in any case in which Additional Shares
of Common Stock are deemed to be issued:

                        (A) no further adjustment in the Series C Conversion
Value shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;

                        (B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the


<PAGE>

Series C Conversion Value computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record date with respect to
the issuance of such Options or Convertible Securities), and any subsequent
adjustments based thereon shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities; and

                        (C) on the expiration or cancellation of any Options or
the termination of the right to convert or exchange any Convertible Securities
which shall have not been exercised, if the Series C Conversion Value shall have
been adjusted upon the original issuance of such Options or Convertible
Securities or shall have been subsequently adjusted pursuant to clause (B)
above, the Series C Conversion Value shall be recomputed as if:

                              (1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issuance of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, if any, or
for the issuance of all such Convertible Securities, whether or not actually
converted or exchanged, plus the consideration actually received by the Company
upon such conversion or exchange, if any; and

                              (2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issuance of such Options and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issuance of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised;

                        (D) no readjustment pursuant to clauses (B) and (C)
above shall have the effect of increasing the Series C Conversion Value to an
amount which exceeds the lower of (i) the Original Purchase Price and (ii) the
Series C Conversion Value that would have resulted from any issuance of
Additional Shares of Common Stock between the Original Issue Date and the date
of such readjustment.


                  (iii) ADJUSTMENT OF SERIES C CONVERSION VALUE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. If the Company shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 7B.4(d)(ii)) without consideration or for a consideration
per share less than the Series C Conversion Value in effect on the date of and
immediately prior to such issuance, then and in such event, the Series C
Conversion Value shall be reduced, concurrently with such issuance, to a price
(calculated to the nearest one cent) determined


<PAGE>

by dividing (A) an amount equal to the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issue (determined on a fully-diluted
basis; I.E. treating as outstanding all shares of Common Stock issuable upon
exercise, exchange or conversion of all outstanding options (to the extent then
vested or exercisable), warrants or other securities exercisable or exchangeable
for or convertible into, directly or indirectly, shares of Common Stock)
multiplied by the then existing Series C Conversion Value, plus (y) the
consideration, if any, received by the Company (or deemed to have been received
by the Company) upon such issue of Additional Shares of Common Stock, by (B) the
sum of the number of shares of the Company's issued and outstanding Common Stock
on a fully-diluted basis immediately before the issuance of such Additional
Shares of Common Stock plus the number of shares of Additional Shares of Common
Stock that were issued (or deemed to have been issued). Notwithstanding the
foregoing provisions of this Section, if the operation of the foregoing
provisions shall result in a new Series C Conversion Value which is less than or
equal to the price paid or deemed to have been paid for such Additional Shares
of Common Stock (the "Additional Shares Issue Price"), then the new Series C
Conversion Value shall be the amount which is $0.01 more than the Additional
Shares Issue Price. If such Additional Shares of Common Stock are issued for no
consideration, then the Additional Shares Issue Price shall be deemed to be
$0.01.

                  (iv) DETERMINATION OF CONSIDERATION. For purposes of
this Section 7B.4(d), the consideration received by the Company for the issuance
of any Additional Shares of Common Stock shall be computed as follows:

                        (A) CASH AND PROPERTY. Such consideration shall:

                              (1) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company;

                              (2) insofar as it consists of securities (i) if
the securities are then traded on a national securities exchange or the NASDAQ
Stock Market (or a similar national quotation system), then the value shall be
computed based on the average of the closing prices of the securities on such
exchange or system over the 30 day period ending three days prior to receipt of
such securities by the Company, (ii) if the securities are actively traded
over-the-counter, then the value shall be computed based on the average of the
closing bid prices over the 30 day period ending three days prior to the receipt
of such securities by the Company, and (iii) if there is no active public
market, then the value shall be computed based on the fair market value thereof
on the date of receipt of such securities by the Company, as determined in good
faith by the Board of Directors;

                              (3) insofar as it consists of property other than
cash and securities, be computed at the fair market value thereof at the time of
such issuance, as determined in good faith by the Board of Directors; and

                              (4) if Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for


<PAGE>

consideration which covers both, be the proportion of such consideration so
received for such Additional Shares of Common Stock, computed as provided in
clauses (A)(1), (A)(2) and (A)(3) of this Section 7B.4(d)(iv), in each case as
determined in good faith by the Board of Directors.

                        (B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 7B.4(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing

                              (1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or, in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by

                              (2) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

            (e) ADJUSTMENT TO THE CONVERSION RATE DUE TO STOCK SPLIT, STOCK
DIVIDEND OR OTHER SIMILAR EVENT. If, prior to the conversion of all the Series C
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend or other similar event, the Series C Conversion
Value shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Series C Conversion Value shall be proportionately
increased.

            (f) ADJUSTMENT DUE TO CONSOLIDATION, MERGER, EXCHANGE OF SHARES,
RECAPITALIZATION, REORGANIZATION OR OTHER SIMILAR EVENT. If, prior to the
conversion of all the Series C Preferred Stock, (i) there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity, or
(ii) there occurs a sale of all or substantially all of the Company's assets
that is not deemed to be a liquidation, dissolution or winding up of the Company
pursuant to Section 7B.3(c), then the Series C Holders thereafter shall have the
right to receive upon conversion of the shares of Series C Preferred Stock held
by them, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore issuable upon
conversion, such stock, securities and/or other assets which the Series C
Holders would have been entitled to receive in such transaction had the Series C
Preferred Stock been converted immediately prior to such transaction, and in any
such case appropriate provisions shall be made with respect to the


<PAGE>

rights and interests of the Series C Holders to the end that the provisions
hereof (including, without limitation, provisions for the adjustment of the
Series C Conversion Value and the Series C Conversion Rate shall thereafter be
applicable, as nearly as may be practicable in relation to any securities
thereafter deliverable upon the exercise hereof.

            (g) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment or
readjustment of the Series C Conversion Value pursuant to Sections 7B.4(d), (e)
and (f) above, the Company at its expense promptly shall compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series C Preferred Stock a certificate of the Chief Financial
Officer of the Company setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any holder of Series C
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the then
effective Series C Conversion Value, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of each share of such Series C Preferred Stock.

            (h) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7B and in
the taking of all such action as may be necessary or appropriate to protect the
Conversion Rights against impairment.

            (i) DEFINITIONS. As used in this Section 7B, the following terms
shall have the following meanings:

            "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued (or, pursuant to Section 7B.4(d)(ii), deemed to be issued) by the
Company after the Original Issue Date, other than shares of Common Stock issued
or issuable:

                  (i) upon conversion of shares of Series C Preferred Stock;

                  (ii) to officers, directors or employees of, or financial
advisors or other consultants to, the Company pursuant to a Plan or Plans or
pursuant to any acquisition, financing or other written agreement so long as any
such Plan or written agreement has been approved by the Board of Directors
(including at least one of the members of the Board of Directors designated by
the holders of the Series C Preferred Stock while such holders have the right to
designate one or more directors); and

                  (iii) as a dividend or distribution on Series C Preferred
Stock.

            "AFFILIATE" shall have the meaning given such term in Rule 405
promulgated under the Securities Act.


<PAGE>

            "COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Company.

            "CONVERSION RIGHTS" shall mean the rights to convert Series C
Preferred Stock into Common Stock as provided in this Section 7B.

            "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares (other than Common Stock or Series C Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.

            "OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.

            "ORIGINAL ISSUE DATE" shall mean June 8, 2000.

            "ORIGINAL PURCHASE PRICE" shall mean the original purchase price of
$7.00 per share for each share of Series C Preferred Stock, as such amount shall
be adjusted for all stock splits, combinations, consolidations, stock
distributions, stock dividends or other recapitalization transactions involving
the Series C Preferred Stock.

            "PLAN" shall mean a written stock grant, option plan or purchase
plan or other employee stock incentive program.

            "PREFERRED STOCK" shall mean the preferred stock, par value $0.01
per share, of the Company.

            "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

            "SERIES C CONVERSION RATE" shall mean the number of shares of Common
Stock into which a share of Series C Preferred Stock is convertible.

            "SERIES C CONVERSION VALUE" shall have the meaning given such term
in Section 7B.4(a).

            "SERIES C PREFERRED STOCK" shall mean those authorized shares of
Preferred Stock of the Company designated as "Series C Preferred Stock", par
value $0.01 per share.

      5. OPTIONAL REDEMPTION OF SERIES C PREFERRED STOCK. The Company may, at
any time after June 7, 2003, and from time to time, call for redemption and
repurchase of any and all shares of Series C Preferred Stock for a purchase
price per share equal to the Series C Original Issue Price. The Company shall
give written notice via certified mail, and any Series C Holder shall have the
right to convert the shares of Series C Preferred Stock held by it at any time
prior to the payment date specified in such notice. Any such redemption and
repurchase shall be made from funds legally available for such purpose and which
are not otherwise restricted.


<PAGE>

      6. VOTING RIGHTS. The Series C Holders shall have no voting power
whatsoever except to the extent otherwise expressly provided by the Delaware
General Corporation Law ("DGCL"), and no Series C Holder shall vote or otherwise
participate in any proceeding in which actions shall be taken by the Company or
the stockholders thereof or be entitled to notification as to any meeting of the
stockholders.

      7. PROTECTIVE PROVISION. So long as shares of Series C Preferred Stock are
outstanding, the Company shall not without first obtaining the approval (by vote
or written consent, as provided by the DGCL) of the holders of at least a
majority of the then outstanding shares of Series C Preferred Stock:

                  (a) alter or change the rights, preferences or privileges of
the Series C Preferred Stock, including, but not limited to, the creation or
authorization of any Senior Securities.

                  (b)   increase  the  size of the  authorized  number
of Series C Preferred Stock; or

                  (c) do any act or thing not authorized or contemplated by
these Certificate of Incorporation which would result in taxation of the Series
C Holders under Section 305 of the Internal Revenue Code of 1986, as amended (or
any comparable provision of the Internal Revenue Code as hereafter from time to
time amended).

      If the holders of a majority of the then outstanding shares of Series C
Preferred Stock agree to allow the Company to alter or change the rights,
preferences or privileges of the shares of Series C Preferred Stock, pursuant to
Subsection (a) above, so as to affect adversely the Series C Preferred Stock,
then the Company will deliver notice of such approved alteration or change to
the Series C Holders that did not agree to such alteration or change (the
"SERIES C DISSENTING HOLDERS"), and the Series C Dissenting Holders shall
thereafter have the right for a period of 30 days to convert pursuant to the
terms of these Certificate of Incorporation as they exist prior to such
alteration or change or continue to hold their shares of Series C Preferred
Stock subject to the approved alteration or change of the rights, preferences or
privileges of the Series C Preferred Stock.

      8. STATUS OF CONVERTED STOCK. In the event any shares of Series C
Preferred Stock shall be converted pursuant to Section 7B.4, the shares so
converted shall be canceled, shall return to the status of authorized but
unissued preferred stock of no designated series, and shall not be issuable by
the Company as Series C Preferred Stock.

      9. PREFERENCE RIGHTS. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one or more series of
preferred stock with dividend and/or liquidation preferences on parity with or
junior to the dividend and liquidation preferences of the Series C Preferred
Stock.



<PAGE>

      IN WITNESS WHEREOF, this Certificate of Designations have been duly
adopted by the Board of Directors of the Company and have been duly executed on
behalf of the Company by its Assistant Secretary thereunto duly authorized this
15th day of June, 2000.


                                    ON2.COM DELAWARE INC.



                                    By: /s/ William A. Newman
                                        ----------------------
                                        Assistant Secretary
                                        William A. Newman


<PAGE>


                       CERTIFICATE OF OWNERSHIP AND MERGER
                                     MERGING
                                  ON2.COM INC.
                                      INTO
                              ON2.COM DELAWARE INC.

                      (FILED PURSUANT TO SECTION 253 OF THE
                        DELAWARE GENERAL CORPORATION LAW)


      Pursuant to Section 253 of the Delaware General Corporation Law ("the
"DGCL"), On2.com Inc. (the "Corporation"), a corporation organized and existing
under the laws of the State of Colorado,

      DOES HEREBY CERTIFY:

      FIRST: That this Corporation was incorporated on the 26th day of
September, 1994, pursuant to the Colorado Business Corporation Act under the
name Applied Capital Funding, Inc.

      SECOND: That the provisions of the Colorado Business Corporation Act
permit the merger of a parent corporation organized and existing under the laws
of the State of Colorado into a subsidiary corporation organized and existing
under the laws of the State of Delaware.

      THIRD: That this Corporation owns one hundred percent (100%) of the
outstanding shares of the capital stock of On2.com Delaware Inc. ("Delawareco"),
a corporation that was organized pursuant to the provisions of the General
Corporation Law of the State of Delaware on the 1st day of March, 2000.

      FOURTH: That the Corporation's Board of Directors, at a meeting held on
the 26th day of January, 2000, determined to merge the Corporation with and into
Delawareco and did adopt the resolutions relating to such merger as set forth in
Exhibit A attached hereto.

      FIFTH: That, upon completion of the merger of the Corporation with and
into Delawareco (the "Merger"), the holders of the common shares of the
Corporation shall be entitled to receive and be issued pro rata an equivalent
number of shares of the common shares of the Delawareco and that the holders of
each series of the preferred shares of the Corporation shall be entitled to
receive and be issued pro rata an equivalent number of shares of the same series
of the preferred stock of Delawareco, and no holder of shares shall have any
further claims of any kind or nature against the Corporation in respect of their
shares, and all of the capital shares the Corporation held by the shareholders
shall be surrendered and cancelled for exchange into capital shares of
Delawareco.


<PAGE>

      SIXTH: That the Merger has been adopted, approved, certified, executed and
acknowledged by the Corporation in accordance with the laws of the state of
Colorado.

      SEVENTH: That on May 17, 2000, the Merger was approved by the holders of
at least a majority of the outstanding shares of stock of this Corporation at a
meeting duly called for this purpose.

      EIGHTH: That, pursuant to Section 253(b) of the DGCL, upon the date of the
Merger, the name of the surviving corporation shall be On2.com Inc.

      IN WITNESS WHEREOF: On2.com Inc. has caused this Certificate to be signed
by Mark J. Meagher, its authorized officer, this 23rd day of May, 2000.




                                          BY: /s/ Mark J. Meagher
                                              -------------------
                                          TITLE:  Executive Vice President


<PAGE>

                                                                       Exhibit A
                                          TO CERTIFICATE OF OWNERSHIP AND MERGER




            RESOLVED, that pursuant to Section 1 of Article II of the Bylaws of
      this Corporation, the Annual Meeting of Stockholders for the fiscal year
      ended December 31, 1999 shall be held on or about May 17, 2000 at a
      location to be selected; and further

            RESOLVED, that pursuant to Section 5(a) of Article II of the Bylaws
      of this Corporation, April 6, 2000 shall be the record date for
      determination of the stockholders entitled to notice of and to vote at
      said Annual Meeting of Stockholders; and further

            RESOLVED, that the Secretary of this Corporation be, and hereby is,
      authorized to do and perform all acts necessary or convenient to
      accomplish the aforesaid; and further

            RESOLVED, that the reincorporation of On2.com Inc., a Colorado
      corporation, into On2.com Delaware, Inc., a corporation organized at the
      direction of this Corporation under the laws of the State of Delaware, is
      hereby authorized and approved; and further

            RESOLVED, that each officer of this Corporation is hereby authorized
      and empowered to take all actions and to execute and deliver the Agreement
      and Plan of Merger, in the form reviewed by each of the Directors, and any
      and all other documents in the name and on behalf of the Corporation or
      any of its subsidiaries or affiliates, as such officer shall deem
      necessary and proper to effect or otherwise carry out the foregoing
      resolution, as conclusively evidenced by such officer's so acting,
      executing or delivering (including, without limitation, the preparation,
      execution and filing or mailing of all documents necessary or appropriate
      with or to any federal or state securities authorities, any federal, state
      or local tax authorities, any securityholders of this Corporation or any
      other persons), and to present (with the Board's recommendation) for the
      approval of the holders of Common Stock a proposal to accomplish the
      foregoing reincorporation and, upon such approval, to put into effect such
      reincorporation (including the honoring of applicable appraisal rights of
      dissenting holders of this Corporation's Series A Preferred Stock and this
      Corporation's Series B Preferred Stock, if any); and further

            RESOLVED, that the Secretary of the Corporation be, and hereby is,
      directed to cause notice of the adoption of the foregoing resolution to


<PAGE>

      be mailed to each stockholder of this Corporation at his, her or its
      address as it appears on the record of the Corporation as of April 6,
      2000, the record date for said Annual Meeting of Stockholders; and further

            RESOLVED, that the Secretary of the Corporation be, and hereby is,
      authorized to do and perform all acts necessary or convenient to
      accomplish the aforesaid; and further

            RESOLVED, that the selection of Arthur Andersen LLP as this
      Corporation's independent public accountants for the fiscal year ending
      December 31, 2000 be presented for ratification at said Annual Meeting of
      Stockholders; and further

            RESOLVED, that the Secretary of this Corporation be, and hereby is,
      directed to cause notice of the adoption of the foregoing resolutions to
      be mailed to each stockholder of this Corporation at his, her or its
      address as it appears on the record of the Corporation as of April 6,
      2000, the record date for said Annual Meeting of Stockholders; and further

            RESOLVED, that the Secretary of this Corporation be, and hereby is,
      authorized to do and perform all acts necessary or convenient to
      accomplish the aforesaid; and further

            RESOLVED, that the Board of Directors of this Corporation hereby
      authorizes, empowers and directs the Chairman of the Board and the
      Secretary of this Corporation to prepare the Proxy Statement to be
      furnished in connection with the solicitation of proxies by the management
      of the corporation for use at said Annual Meeting of Stockholders, and
      further authorizes the President and the Secretary, upon the advice of
      counsel, to submit said Proxy Statement to the Securities and Exchange
      Commission, and to mail the definitive proxy material to stockholders of
      record as of April 6, 2000, the record date for said Annual Meeting of
      Stockholders.


<PAGE>


                                  ON2.COM INC.


                           ---------------------------

                                 DESIGNATION OF
                        POWERS, PREFERENCES AND RIGHTS OF
                          SERIES C-II PREFERRED STOCK,
                            PAR VALUE $0.01 PER SHARE


                           ---------------------------

               Pursuant to Section 151(g) of the Delaware General
                                 Corporation Law


                           ---------------------------


IT IS HEREBY CERTIFIED that:

      1. The name of the company (hereinafter called the "Company") is On2.com
Inc., a corporation organized and now existing under the Delaware General
Corporation Law.

      2. The Certificate of Incorporation of the Company (the "CERTIFICATE OF
INCORPORATION") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "PREFERRED STOCK"), and
expressly vests in the Board of Directors of the Company the authority to issue
any or all of said shares in one or more series by resolution or resolutions to
establish the designation and number and to fix the relative rights and
preferences of each series to be issued.

      3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151(g) of the Delaware General Corporation Law, has adopted the resolution set
forth below to create a series issue of Preferred Stock. Pursuant to 151(g), the
approval of the Company's shareholders was not required.

      RESOLVED, THAT Nine Hundred Twenty-Four Thousand Five Hundred Twenty-Seven
(924,527) shares of the Twenty Million (20,000,000) shares of Preferred Stock of
the Company which are authorized shares as of the date of this Certificate shall
hereby be designated Series C-II Preferred Stock, par value $0.01 per share, and
shall


<PAGE>

possess the rights and preferences set forth below, which shall constitute a new
Section 7C to Article IV of the Certificate of Incorporation:

      "Section 7C.      Series C Preferred Stock.

            1. DESIGNATION AND AMOUNT. Nine Hundred Twenty-Four Thousand Five
Hundred Twenty-Seven (924,527) shares of the Twenty Million (20,000,000)
authorized shares of Preferred Stock of the Company are designated Series C-II
Preferred Stock (the "SERIES C-II PREFERRED STOCK"). The Series C-II Preferred
Stock shall be issued or offered at a purchase price equal to $2.65 per share
(the "SERIES C-II ORIGINAL ISSUE PRICE"). The holders of record of any series of
the Series C-II Preferred Stock are sometimes referred to in this Section 7C as
the "SERIES C-II HOLDERS." The holders of record of any shares of any series of
the Preferred Stock are referred to in this Section 7C as the "HOLDERS."

            2. RANK. The Series C-II Preferred Stock shall rank on parity with
the Company's Series A Preferred Stock, par value $0.01 per share, the Company's
Series B Preferred Stock, par value $0.01 per share, and the Company's Series
C-I Preferred Stock, par value $0.01 per share, and shall accordingly rank (i)
junior to any other class or series of capital stock of the Company hereafter
created specifically ranking by its terms senior to the Series A Preferred
Stock, the Series B Preferred Stock or the Series C-I Preferred Stock (the
"SENIOR SECURITIES"); (ii) prior to all of the Common Stock; (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series A
Preferred Stock, Series B Preferred Stock or Series C-I Preferred Stock of
whatever subdivision (collectively, with the Common Stock, the "JUNIOR
SECURITIES"); and (iv) on parity with any class or series of capital stock of
the Company hereafter created specifically ranking by its terms on parity with
the Series A Preferred Stock, the Series B Preferred Stock or the Series C-I
Preferred Stock (the "PARITY SECURITIES") in each case as to distribution of
assets upon any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary (all such distributions being referred to collectively
as "DISTRIBUTIONS").

            3.    LIQUIDATION PREFERENCE.

                  (a) In the event of any Distribution, the Series C-II Holders
shall be entitled to receive, immediately after any distributions to the holders
of the Senior Securities required by the Company's Certificate of Incorporation,
and prior in preference to any distribution to the holders of the Junior
Securities, but in parity with any Distribution to the holders of the Series A
Preferred Stock (the "SERIES A HOLDERS"), the holders of the Series B Preferred
Stock (the "SERIES B HOLDERS") the holders of the Series C-I Preferred Stock or
the holders of the Parity Securities, an amount per share equal to the Series
C-II Original Issue Price. If upon the occurrence of any such Distribution, and
after payment in full of any preferential amounts due in respect of the Senior
Securities, the assets and funds available to be distributed among the Series A
Holders, the Series B Holders, Series C-I Holders, the Series C-II Holders and
the holders of the Parity Securities shall be insufficient to pay to such
Holders the full


<PAGE>

preferential amounts due to the Series A Holders, the Series B Holders, the
Series C-I Holders, the Series C-II Holders and the holders of the Parity
Securities, then the entire assets and funds of the Company legally available
for distribution shall be distributed among the Series A Holders, the Series B
Holders, the Series C-I Holders, the Series C-II Holders and the holders of the
Parity Securities, pro rata, based on the respective liquidation amounts to
which each such series of stock is entitled by the Company's Certificate of
Incorporation and any certificate(s) of designation relating thereto.

                  (b) Upon the completion of the distribution required by
Section 7C.3(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation, including any duly adopted certificate(s) of designation.

                  (c) At the option of each Series C-II Holder, a sale,
conveyance or disposition of all or substantially all the assets of the Company
to any entity other than an Affiliate of the Company which is controlled by the
Company through the direct or indirect ownership of not less than 50% of the
voting securities or interests thereof (a "LIQUIDATING TRANSACTION") shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 7C.3; PROVIDED, that neither (i) any Liquidating Transaction that a
Series C-II Holder elects in writing not to treat as a liquidation, dissolution
or winding up of the Company nor (ii) any consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall be treated as a liquidation, dissolution or winding up within
the meaning of this Section 7C.3(c), but instead shall be subject to Section
7C.4(f). Any Series C-II Holder as to which any Liquidating Transaction is
treated as a liquidation, dissolution or winding up of the Company under this
Section 7C.3(c) is referred to herein as a "SERIES C-II LIQUIDATING HOLDER."

                  (d) Prior to the closing of a transaction described in Section
7C.3(c) which would constitute a liquidation event, the Company shall either (i)
make all cash distributions it is required to make to the Series C-II
Liquidating Holders pursuant to the first sentence of Section 7C.3(a), (ii) set
aside sufficient funds from which the cash distributions required to be made to
the Series C-II Liquidating Holders can be made, or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which the proceeds
payable to the Company from a sale of all or substantially all the assets of the
Company will be used to make the liquidating payments to the Series C-II
Liquidating Holders immediately after the consummation of such sale. If the
Company has not fully complied with any of the foregoing alternatives, the
Company shall either: (x) cause such closing to be postponed until such cash
distributions have been made, or (y) cancel such transaction, in which event the
rights of the Series C-II Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.

            4.    CONVERSION.  The  holders of Series  C-II  Preferred
Stock have conversion rights (the "Conversion Rights") as follows:

<PAGE>

                  (a) RIGHT TO CONVERT. Each share of Series C-II Preferred
Stock shall be convertible without the payment of any additional consideration
at the option of the Series C-II Holder thereof, at any time after the date of
issuance of such shares of Series C-II Preferred Stock, at the office of the
Company or any transfer agent for the Series C-II Preferred Stock into the
number of fully paid and nonassessable shares of Common Stock which results from
dividing the Series C-II Original Issue Price by the conversion value per share
in effect for each share of Series C-II Preferred Stock (the "SERIES C-II
CONVERSION VALUE") at the time of conversion. The Series C-II Conversion Value
shall initially be equal to the Series C-II Original Issue Price and shall be
adjusted from time to time pursuant to the provisions of Section 7C.4(d) and
Section 7C.4(e) and shall be subject to adjustment from time to time as provided
below. The number of shares of Common Stock into which a share of Series C-II
Preferred Stock is convertible is hereinafter referred to as the "SERIES C-II
CONVERSION RATE."

            (b)   MECHANICS OF CONVERSION.

                  (i) No fractional shares of Common Stock shall be issued upon
conversion of Series C-II Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to such fraction multiplied by the then effective Series C-II Conversion Value.
Before any holder of Series C-II Preferred Stock shall be entitled to convert
such shares into full shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any transfer agent for the
Series C-II Preferred Stock, as the case may be, and shall give written notice
to the Company at such office that such holder elects to convert the same; the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to such holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C-II Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.

                  (ii) The Company shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series C-II Preferred Stock pursuant to this
Section 7C.4. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involving the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of Series
C-II Preferred Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Company the amount of any tax or has established, to
the satisfaction of the Company, that such tax has been paid.

            (c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of


<PAGE>

Common Stock solely for the purpose of effecting the conversion of the shares of
Series C-II Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series C-II Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series C-II Preferred Stock,
the Company shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.

            (d) ADJUSTMENTS TO SERIES C-II CONVERSION VALUE FOR DILUTIVE
ISSUANCES.

                  (i) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Series C-II Conversion Value shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Series C-II Conversion Value as measured at the date of the
issuance of the Additional Shares of Common Stock. No adjustment in the Series
C-II Conversion Value shall be made pursuant to Section 7C.4(d) as a result of
any stock dividend or subdivision which causes an adjustment in the Series C-II
Conversion Value pursuant to Section 7C.4(e) or any event which is subject to
the provisions of Section 7C.4(f). No adjustment in the Series C-II Conversion
Value shall be made in respect of an issuance or deemed issuance of Additional
Shares of Common Stock if such issuance or deemed issuance involves the issuance
or deemed issuance of stock, options or warrants (A) to employees, consultants
or directors of the Company, (B) to other entities for acquisition purposes, (C)
to banks or other institutional credit financing sources, or (D) the issuance of
Common Stock upon conversion or redemption of any shares of any convertible
series of the company's Preferred Stock; in the case of each of (A), (B) or (C)
pursuant to plans or arrangements approved by the Board of Directors.

                  (iiii) DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
If the Company at any time or from time to time after September 8, 2000 shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; PROVIDED, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 7C.4(d)(iv)) of such Additional Shares
of Common Stock would be less than the Series C-II Conversion Value in effect on
the date of and immediately prior to such issue (or with respect to any issues
made prior to the date hereof, the Series C-II Conversion Value that would have
been in effect as of such date), or such record date, as


<PAGE>

the case may be; and PROVIDED, further, that in any case in which Additional
Shares of Common Stock are deemed to be issued:

                        (A) no further adjustment in the Series C-II Conversion
Value shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;

                        (B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series C-II Conversion Value computed upon
the original issue of such Options or Convertible Securities (or upon the
occurrence of a record date with respect to the issuance of such Options or
Convertible Securities), and any subsequent adjustments based thereon shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities; and

                        (C) on the expiration or cancellation of any Options or
the termination of the right to convert or exchange any Convertible Securities
which shall have not been exercised, if the Series C-II Conversion Value shall
have been adjusted upon the original issuance of such Options or Convertible
Securities or shall have been subsequently adjusted pursuant to clause (B)
above, the Series C Conversion Value shall be recomputed as if:

                              (1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issuance of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, if any, or
for the issuance of all such Convertible Securities, whether or not actually
converted or exchanged, plus the consideration actually received by the Company
upon such conversion or exchange, if any; and

                              (2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issuance of such Options and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issuance of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised;

                        (D) no readjustment pursuant to clauses (B) and (C)
above shall have the effect of increasing the Series C-II Conversion Value to an
amount


<PAGE>

which exceeds the higher of (i) the Series C-II Issue Price and (ii) the Series
C Conversion Value that would have resulted from any issuance of Additional
Shares of Common Stock between September 8, 2000 and the date of such
readjustment.


                  (iii) ADJUSTMENT OF SERIES C CONVERSION VALUE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. If at any time after September 8, 2000 the
Company shall issue (or shall have issued in the case of issuances after
September 8, 2000 but prior to the date hereof) Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to Section 7C.4(d)(ii)) without consideration or for a consideration per share
less than the Series C-II Conversion Value in effect on the date of and
immediately prior to such issuance, then and in such event, the Series C-II
Conversion Value shall be reduced, concurrently with such issuance, to a price
(calculated to the nearest one cent) determined by dividing (A) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issue (determined on a fully-diluted basis; I.E. treating as
outstanding all shares of Common Stock issuable upon exercise, exchange or
conversion of all outstanding options (to the extent then vested or
exercisable), warrants or other securities exercisable or exchangeable for or
convertible into, directly or indirectly, shares of Common Stock) multiplied by
the then existing Series C-II Conversion Value, plus (y) the consideration, if
any, received by the Company (or deemed to have been received by the Company)
upon such issue of Additional Shares of Common Stock, by (B) the sum of the
number of shares of the Company's issued and outstanding Common Stock on a
fully-diluted basis immediately before the issuance of such Additional Shares of
Common Stock plus the number of shares of Additional Shares of Common Stock that
were issued (or deemed to have been issued). Notwithstanding the foregoing
provisions of this Section, if the operation of the foregoing provisions shall
result in a new Series C-II Conversion Value which is less than or equal to the
price paid or deemed to have been paid for such Additional Shares of Common
Stock (the "Additional Shares Issue Price"), then the new Series C-II Conversion
Value shall be the amount which is $0.01 more than the Additional Shares Issue
Price. If such Additional Shares of Common Stock are issued for no
consideration, then the Additional Shares Issue Price shall be deemed to be
$0.01.

                  (iv) DETERMINATION OF CONSIDERATION. For purposes of this
Section 7C.4(d), the consideration received by the Company for the issuance of
any Additional Shares of Common Stock shall be computed as follows:

                        (E) CASH AND PROPERTY. Such consideration shall:

                              (1) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company;

                              (2) insofar as it consists of securities (i) if
the securities are then traded on a national securities exchange or the NASDAQ
Stock Market (or a similar national quotation system), then the value shall be
computed based on the average of the closing prices of the securities on such
exchange or system over the


<PAGE>

30-day period ending three days prior to receipt of such securities by the
Company, (ii) if the securities are actively traded over-the-counter, then the
value shall be computed based on the average of the closing bid prices over the
30-day period ending three days prior to the receipt of such securities by the
Company, and (iii) if there is no active public market, then the value shall be
computed based on the fair market value thereof on the date of receipt of such
securities by the Company, as determined in good faith by the Board of
Directors;

                              (3) insofar as it consists of property other than
cash and securities, be computed at the fair market value thereof at the time of
such issuance, as determined in good faith by the Board of Directors; and

                              (4) if Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received for such Additional Shares of Common Stock, computed as provided in
clauses (A)(1), (A)(2) and (A)(3) of this Section 7C.4(d)(iv), in each case as
determined in good faith by the Board of Directors.

                        (F) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 7C.4(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing

                              (1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or, in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by

                              (2) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

            (e) ADJUSTMENT TO THE CONVERSION RATE DUE TO STOCK SPLIT, STOCK
DIVIDEND OR OTHER SIMILAR EVENT. If, prior to the conversion of all the Series
C-II Preferred Stock, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend or other similar event, the Series
C-II Conversion Value shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Series C-II Conversion
Value shall be proportionately increased.


<PAGE>

            (f) ADJUSTMENT DUE TO CONSOLIDATION, MERGER, EXCHANGE OF SHARES,
RECAPITALIZATION, REORGANIZATION OR OTHER SIMILAR EVENT. If, prior to the
conversion of all the Series C-II Preferred Stock, (i) there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities of the Company or another
entity, or (ii) there occurs a sale of all or substantially all of the Company's
assets that is not deemed to be a liquidation, dissolution or winding up of the
Company pursuant to Section 7C.3(c), then the Series C-II Holders thereafter
shall have the right to receive upon conversion of the shares of Series C-II
Preferred Stock held by them, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other assets
which the Series C-II Holders would have been entitled to receive in such
transaction had the Series C-II Preferred Stock been converted immediately prior
to such transaction, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the Series C-II Holders to the end
that the provisions hereof (including, without limitation, provisions for the
adjustment of the Series C-II Conversion Value and the Series C-II Conversion
Rate shall thereafter be applicable, as nearly as may be practicable in relation
to any securities thereafter deliverable upon the exercise hereof.

            (g) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment or
readjustment of the Series C-II Conversion Value pursuant to Sections 7C.4(d),
(e) and (f) above, and upon the initial issue of Series C-II Preferred Stock, if
any adjustment or readjustment would have occurred prior thereto (but after
September 8, 2000) pursuant to the terms hereof, the Company at its expense
promptly shall compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series C-II Preferred
Stock a certificate of the Chief Financial Officer of the Company setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of Series C-II Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the then effective Series C-II Conversion Value, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of each share
of such Series C-II Preferred Stock.

            (h) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7C and in
the taking of all such action as may be necessary or appropriate to protect the
Conversion Rights against impairment.

            (i) DEFINITIONS. As used in this Section 7C, the following terms
shall have the following meanings:


<PAGE>

            "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued (or, pursuant to Section 7C.4(d)(ii), deemed to be issued) by the
Company after September 8, 2000, other than shares of Common Stock issued or
issuable:

                   (i) issued or issuable to officers, directors or employees
of, or financial advisors or other consultants to, the Company pursuant to a
Plan or Plans or pursuant to any acquisition, financing or other written
agreement so long as any such Plan or written agreement has been approved by the
Board of Directors (including at least one of the members of the Board of
Directors designated by the holders of the Series C-II Preferred Stock while
such holders have the right to designate one or more directors);

                  (ii) issued or issuable as a dividend or distribution on
            Series C-II Preferred Stock.

                  (iii) if such shares of Common Stock are referred to in any of
            clauses (A), (B) and (C) of Section 7C.4(d)(i).

            "AFFILIATE" shall have the meaning given such term in Rule 405
promulgated under the Securities Act.

             "COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Company.

            "CONVERSION RIGHTS" shall mean the rights to convert Series C-II
Preferred Stock into Common Stock as provided in this Section 7C.

            "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares (other than Common Stock or Series C-II Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.

            "OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.

             "PLAN" shall mean a written stock grant, option plan or purchase
plan or other employee stock incentive program.

            "PREFERRED STOCK" shall mean the preferred stock, par value $0.01
per share, of the Company.

            "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

            "SERIES C-II CONVERSION RATE" shall mean the number of shares of
Common Stock into which a share of Series C Preferred Stock is convertible.

            "SERIES C-II CONVERSION VALUE" shall have the meaning given such
term in Section 7C.4(a).


<PAGE>

            "SERIES C-II ORIGINAL ISSUE PRICE" shall mean the original purchase
price of $2.65 per share for each share of Series C-II Preferred Stock, as such
amount shall be adjusted for all stock splits, combinations, consolidations,
stock distributions, stock dividends or other recapitalization transactions
involving the Series C-II Preferred Stock.

            "SERIES C-II PREFERRED STOCK" shall mean those authorized shares of
Preferred Stock of the Company designated as "Series C-II Preferred Stock", par
value $0.01 per share.

      5. OPTIONAL REDEMPTION OF SERIES C PREFERRED STOCK. The Company may, at
any time after September 28, 2003 (the "Redemption Date"), and from time to time
thereafter, call for redemption and repurchase of any and all shares of Series
C-II Preferred Stock for a purchase price per share equal to the Series C-II
Original Issue Price. The Company shall give written notice via certified mail,
and any Series C-II Holder shall have the right to convert the shares of Series
C-II Preferred Stock held by it at any time prior to the payment date specified
in such notice. Any such redemption and repurchase shall be made from funds
legally available for such purpose and which are not otherwise restricted.

      6.    VOTING RIGHTS.

                  (a) If and to the extent that the aggregate number of (i)
shares of Common Stock at the time owned directly or indirectly of record by (A)
the Series C-II Holders and (B) the holders (including, but not limited to, Sam
Belzberg) of any additional shares of the Preferred Stock that have been issued
under (x) the Preferred Stock Unit Subscription Agreement, dated as of September
29, 2000 (the "Subscription Agreement Preferred Stock") and (y) the Single
Investor Preferred Stock Unit Subscription Agreement, dated as of September 29,
2000 (the "Belzberg Preferred Stock" collectively with the Subscription
Agreement Preferred Stock, the "September 2000 Preferred Stock"), and (ii)
shares of Common Stock that underlie the Series C-II Preferred Stock or the
September 2000 Preferred Stock equals or exceeds 10% of the Company's issued and
outstanding shares of Common Stock (counting all such shares of Preferred Stock
as issued and outstanding for these purposes) (such holding equal or greater of
10% is referred to as the "Eligibility Condition"), then the holders of a
majority of the aggregate of such shares of Preferred Stock (the "Designated
Preferred Stock Holders") shall have the right to nominate one individual
("Preferred Stock Holders Nominee") for election to the Board of Directors as
provided in this Section 6(a); PROVIDED, that in no event shall the Designated
Preferred Stock Holders have the right to designate more than one such
individual. If the Eligibility Condition is satisfied, then the Designated
Preferred Stock Holders shall send a written notice ("Election Notice") to the
Company that they desire to nominate an individual for election to the Board of
Directors. Within 30 days of the Company's receipt of the Election Notice, the
Chairman of the Board of Directors shall call a meeting of the Board of
Directors for the purpose of electing the Preferred Stock Holders Nominee (the
"Original Election Meeting"). The Preferred Stock Holders Nominee shall be a
person reasonably acceptable to a majority of the elected existing members of
the Board of Directors. If the Preferred Stock Holders Nominee is not reasonably
acceptable to a majority of the Board of Directors at the


<PAGE>

Original Election Meeting, then the Chairman of the Board shall immediately send
a written notice to the Designated Preferred Stock Holders stating that the
Preferred Stock Holders Nominee has been rejected by the Board of Directors and
shall request that the Designated Preferred Stock Holders submit a new nominee.
The Chairman of the Board shall call an additional meeting of the Board of
Directors ("Additional Election Meeting") within 48 hours of the Original
Election Meeting. The Designated Preferred Stock Holders shall have the
opportunity to name another individual as the Preferred Stock Holders Nominee at
the Additional Election Meeting. The aforementioned procedure shall continue
until a Preferred Stock Holders Nominee has been accepted by the Board of
Directors. Notwithstanding the foregoing, the Board of Directors shall remain
duly constituted for all purposes until a Preferred Stock Holders Nominee has
been accepted in accordance with this Section 6(a);

                  (b) The Series C-II Holders and the holders of the Company's
Series C-III Preferred Stock shall have no voting power whatsoever except to the
extent otherwise expressly provided by the Delaware General Corporate Law, and
no Series C-II Holder or holder of the Company's Series C-III Preferred Stock
shall vote or otherwise participate in any proceeding in which actions shall be
taken by the Company of the Stockholders thereof or be entitled to notification
as to any meeting of the stockholders.

      7. PROTECTIVE PROVISION. So long as shares of Series C-II Preferred Stock
are outstanding, the Company shall not without first obtaining the approval (by
vote or written consent, as provided by the DGCL) of the holders of at least a
majority of the then outstanding shares of Series C-II Preferred Stock:

                  (a) alter or change the rights, preferences or privileges of
the Series C-II Preferred Stock, including, but not limited to, the creation or
authorization of any Senior Securities.

                  (b) increase the size of the authorized number of Series C-II
Preferred Stock; or

                  (c) do any act or thing not authorized or contemplated by
these Certificate of Incorporation which would result in taxation of the Series
C-II Holders under Section 305 of the Internal Revenue Code of 1986, as amended
(or any comparable provision of the Internal Revenue Code as hereafter from time
to time amended).

      If the holders of a majority of the then outstanding shares of Series C-II
Preferred Stock agree to allow the Company to alter or change the rights,
preferences or privileges of the shares of Series C-II Preferred Stock, pursuant
to Section 7C.7(a) so as to affect adversely the Series C-II Preferred Stock,
then the Company will deliver notice of such approved alteration or change to
the Series C-II Holders that did not agree to such alteration or change (the
"SERIES C-II DISSENTING HOLDERS"), and the Series C-II Dissenting Holders shall
thereafter have the right for a period of 30 days to convert pursuant to the
terms of the Certificate of Incorporation as they exist prior to such alteration
or change or continue to hold their shares of Series C-II Preferred Stock
subject


<PAGE>

to the approved alteration or change of the rights, preferences or privileges of
the Series C-II Preferred Stock.

      8. STATUS OF CONVERTED STOCK. If any shares of Series C-II Preferred Stock
shall be converted pursuant to Section 7C.4, the shares so converted shall be
canceled, shall return to the status of authorized but unissued preferred stock
of no designated series, and shall not be issuable by the Company as Series C-II
Preferred Stock.

      9. PREFERENCE RIGHTS. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one or more series of
preferred stock with dividend and/or liquidation preferences on parity with or
junior to the dividend and liquidation preferences of the Series C-II Preferred
Stock.



<PAGE>


      IN WITNESS WHEREOF, this Certificate of Designations have been duly
adopted by the Board of Directors of the Company and have been duly executed on
behalf of the Company by its Executive Vice President thereunto duly authorized
this 29th day of September, 2000.


                                    ON2.COM INC.



                                    By:  /s/ Mark Meagher
                                         --------------------------
                                    Name:  Mark Meagher
                                    Title: Executive Vice President



<PAGE>

                                  ON2.COM INC.


                           ---------------------------

                                 DESIGNATION OF
                        POWERS, PREFERENCES AND RIGHTS OF
                          SERIES C-III PREFERRED STOCK,
                            PAR VALUE $0.01 PER SHARE


                           ---------------------------

               Pursuant to Section 151(g) of the Delaware General
                                 Corporation Law


                           ---------------------------


IT IS HEREBY CERTIFIED that:

      1. The name of the company (hereinafter called the "Company") is On2.com
Inc., a corporation organized and now existing under the Delaware General
Corporation Law.

      2. The Certificate of Incorporation of the Company (the "CERTIFICATE OF
INCORPORATION") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.01 per share (the "PREFERRED STOCK"), and
expressly vests in the Board of Directors of the Company the authority to issue
any or all of said shares in one or more series by resolution or resolutions to
establish the designation and number and to fix the relative rights and
preferences of each series to be issued.

      3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151(g) of the Delaware General Corporation Law, has adopted the resolution set
forth below to create a series issue of Preferred Stock. Pursuant to 151(g), the
approval of the Company's shareholders was not required.

      RESOLVED, That Two Million Forty-Nine Thousand Eight Hundred Thirty-Nine
(2,049,839) shares of the Twenty Million (20,000,000) shares of Preferred Stock
of the Company which are authorized shares as of the date of this Certificate
shall hereby be designated Series C-III Preferred Stock, par value $0.01 per
share, and shall possess the


<PAGE>

rights and preferences set forth below, which shall constitute a new Section 7C
to Article IV of the Certificate of Incorporation:

      "Section 7C.      Series C Preferred Stock.

            1. DESIGNATION AND AMOUNT. Two Million Forty-Nine Thousand Eight
Hundred Thirty-Nine (2,049,839) shares of the Twenty Million (20,000,000)
authorized shares of Preferred Stock of the Company are designated Series C-III
Preferred Stock (the "SERIES C-III PREFERRED STOCK"). The Series C-III Preferred
Stock shall be issued or offered at a purchase price equal to $1.24 per share
(the "SERIES C-III ORIGINAL ISSUE PRICE"). The holders of record of any series
of the Series C-III Preferred Stock are sometimes referred to in this Section 7C
as the "SERIES C-III HOLDERS." The holders of record of any shares of any series
of the Preferred Stock are referred to in this Section 7C as the "HOLDERS."

            2. RANK. The Series C-III Preferred Stock shall rank on parity with
the Company's Series A Preferred Stock, par value $0.01 per share, the Company's
Series B Preferred Stock, par value $0.01 per share, the Company's Series C
Preferred Stock, par value $0.01 per share, and the Company's Series C-II
Preferred Stock, par value $0.01 per share, and shall accordingly rank (i)
junior to any other class or series of capital stock of the Company hereafter
created specifically ranking by its terms senior to the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock or the Series
C-II Preferred Stock (the "SENIOR SECURITIES"); (ii) prior to all of the Common
Stock; (iii) prior to any class or series of capital stock of the Company
hereafter created not specifically ranking by its terms senior to or on parity
with any Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series C-II Preferred Stock of whatever subdivision (collectively, with
the Common Stock, the "JUNIOR SECURITIES"); and (iv) on parity with any class or
series of capital stock of the Company hereafter created specifically ranking by
its terms on parity with the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock or the Series C-II Preferred Stock (the
"PARITY SECURITIES") in each case as to distribution of assets upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"DISTRIBUTIONS").

            3.    LIQUIDATION PREFERENCE.

                  (a) In the event of any Distribution, the Series C-III Holders
shall be entitled to receive, immediately after any distributions to the holders
of the Senior Securities required by the Company's Certificate of Incorporation,
and prior in preference to any distribution to the holders of the Junior
Securities, but on parity with any Distribution to the holders of the Series A
Preferred Stock (the "SERIES A HOLDERS"), the holders of the Series B Preferred
Stock (the "SERIES B HOLDERS"), the holders of the Series C Preferred Stock (the
"Series C Holders"), the holders of the Series C-II Preferred Stock (the "Series
C-II Holders") or the holders of the Parity Securities, an amount per share
equal to the Series C-III Original Issue Price. If upon the occurrence of any
such Distribution, and after payment in full of any preferential amounts due in
respect of the Senior Securities, the assets and funds available to be
distributed among the Series A Holders, the Series B Holders, the Series C
Holders, the Series C-II Holders, the Series C-III Holders and the holders of
the Parity Securities shall be insufficient to pay to such Holders the full
preferential amounts due to the Series A


<PAGE>

Holders, the Series B Holders, the Series C Holders, the Series C-II Holders,
the Series C-III Holders and the holders of the Parity Securities, then the
entire assets and funds of the Company legally available for distribution shall
be distributed among the Series A Holders, the Series B Holders, the Series C
Holders, the Series C-II Holders, the Series C-III Holders and the holders of
the Parity Securities, pro rata, based on the respective liquidation amounts to
which each such series of stock is entitled by the Company's Certificate of
Incorporation and any certificate(s) of designation relating thereto.

                  (b) Upon the completion of the distribution required by
Section 7C.3(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation, including any duly adopted certificate(s) of designation.

                  (c) At the option of each Series C-III Holder, a sale,
conveyance or disposition of all or substantially all the assets of the Company
to any entity other than an Affiliate of the Company which is controlled by the
Company through the direct or indirect ownership of not less than 50% of the
voting securities or interests thereof (a "LIQUIDATING TRANSACTION") shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 7C.3; PROVIDED, that neither (i) any Liquidating Transaction that a
Series C-III Holder elects in writing not to treat as a liquidation, dissolution
or winding up of the Company nor (ii) any consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall be treated as a liquidation, dissolution or winding up within
the meaning of this Section 7C.3(c), but instead shall be subject to Section
7C.4(f). Any Series C-III Holder as to which any Liquidating Transaction is
treated as a liquidation, dissolution or winding up of the Company under this
Section 7C.3(c) is referred to herein as a "SERIES C-III LIQUIDATING HOLDER."

                  (d) Prior to the closing of a transaction described in Section
7C.3(c) which would constitute a liquidation event, the Company shall either (i)
make all cash distributions it is required to make to the Series C-III
Liquidating Holders pursuant to the first sentence of Section 7C.3(a), (ii) set
aside sufficient funds from which the cash distributions required to be made to
the Series C-III Liquidating Holders can be made, or (iii) establish an escrow
or other similar arrangement with a third party pursuant to which the proceeds
payable to the Company from a sale of all or substantially all the assets of the
Company will be used to make the liquidating payments to the Series C-III
Liquidating Holders immediately after the consummation of such sale. If the
Company has not fully complied with any of the foregoing alternatives, the
Company shall either: (x) cause such closing to be postponed until such cash
distributions have been made, or (y) cancel such transaction, in which event the
rights of the Series C-III Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.


<PAGE>

            4.    CONVERSION.  The holders of Series  C-III  Preferred
Stock have conversion rights (the "Conversion Rights") as follows:

                  (a) RIGHT TO CONVERT. Each share of Series C-III Preferred
Stock shall be convertible without the payment of any additional consideration
at the option of the Series C-III Holder thereof, at any time after the date of
issuance of such shares of Series C-III Preferred Stock, at the office of the
Company or any transfer agent for the Series C-III Preferred Stock into the
number of fully paid and nonassessable shares of Common Stock which results from
dividing the Series C-III Original Issue Price by the conversion value per share
in effect for each share of Series C-III Preferred Stock (the "SERIES C-III
CONVERSION VALUE") at the time of conversion. The Series C-III Conversion Value
shall initially be equal to the Series C-III Original Issue Price and shall be
adjusted from time to time pursuant to the provisions of Section 7C.4(d) and
Section 7C.4(e) and shall be subject to adjustment from time to time as provided
below. The number of shares of Common Stock into which a share of Series C-III
Preferred Stock is convertible is hereinafter referred to as the "SERIES C-III
CONVERSION RATE."

            (b)   MECHANICS OF CONVERSION.

                  (i) No fractional shares of Common Stock shall be issued upon
conversion of Series C-III Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company shall pay cash equal
to such fraction multiplied by the then effective Series C-III Conversion Value.
Before any holder of Series C-III Preferred Stock shall be entitled to convert
such shares into full shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any transfer agent for the
Series C-III Preferred Stock, as the case may be, and shall give written notice
to the Company at such office that such holder elects to convert the same; the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to such holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C-III Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.

                  (ii) The Company shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of Common
Stock upon conversion of shares of Series C-III Preferred Stock pursuant to this
Section 7C.4. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involving the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of Series
C-III Preferred Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Company the amount of any tax or has established, to
the satisfaction of the Company, that such tax has been paid.


<PAGE>

            (c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series C-III Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C-III Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of Series C-III
Preferred Stock, the Company shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.

            (d) ADJUSTMENTS TO SERIES C-III CONVERSION VALUE FOR DILUTIVE
ISSUANCES.

                  (iv) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Series C-III Conversion Value shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Series C-III Conversion Value as measured at the date of the
issuance of the Additional Shares of Common Stock. No adjustment in the Series
C-III Conversion Value shall be made pursuant to Section 7C.4(d) as a result of
any stock dividend or subdivision which causes an adjustment in the Series C-III
Conversion Value pursuant to Section 7C.4(e) or any event which is subject to
the provisions of Section 7C.4(f). No adjustment in the Series C-III Conversion
Value shall be made in respect of an issuance or deemed issuance of Additional
Shares of Common Stock if such issuance or deemed issuance involves the issuance
or deemed issuance of stock, options or warrants (A) to employees, consultants
or directors of the Company, (B) to other entities for acquisition purposes, (C)
to banks or other institutional credit financing sources, or (D) the issuance of
Common Stock upon conversion or redemption of any shares of any convertible
series of the company's Preferred Stock; in the case of each of (A), (B) or (C)
pursuant to plans or arrangements approved by the Board of Directors.

                  (ii) DEEMED ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If
the Company at any time or from time to time after September 8, 2000 shall issue
any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; PROVIDED, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 7C.4(d)(iv)) of such Additional Shares
of Common Stock would be less than the Series C-III Conversion Value in effect
on the date of and immediately prior


<PAGE>

to such issue (or with respect to any issues made prior to the date hereof, the
Series C-III Conversion Value that would have been in effect as of such date),
or such record date, as the case may be; and PROVIDED, further, that in any case
in which Additional Shares of Common Stock are deemed to be issued:

                        (A) no further adjustment in the Series C-III Conversion
Value shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;

                        (B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series C-III Conversion Value computed upon
the original issue of such Options or Convertible Securities (or upon the
occurrence of a record date with respect to the issuance of such Options or
Convertible Securities), and any subsequent adjustments based thereon shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities; and

                        (C) on the expiration or cancellation of any Options or
the termination of the right to convert or exchange any Convertible Securities
which shall have not been exercised, if the Series C-III Conversion Value shall
have been adjusted upon the original issuance of such Options or Convertible
Securities or shall have been subsequently adjusted pursuant to clause (B)
above, the Series C-III Conversion Value shall be recomputed as if:

                              (1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issuance of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, if any, or
for the issuance of all such Convertible Securities, whether or not actually
converted or exchanged, plus the consideration actually received by the Company
upon such conversion or exchange, if any; and

                              (2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise of such Options were issued at the time of issuance of such Options and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issuance of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised;


<PAGE>

                        (D) no readjustment pursuant to clauses (B) and (C)
above shall have the effect of increasing the Series C-III Conversion Value to
an amount which exceeds the higher of (i) the Series C-III Issue Price and (ii)
the Series C Conversion Value that would have resulted from any issuance of
Additional Shares of Common Stock between September 8, 2000 and the date of such
readjustment.


                  (iii) ADJUSTMENT OF SERIES C CONVERSION VALUE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. If at any time after September 8, 2000 the
Company shall issue (or shall have issued in the case of issuances after
September 8, 2000 but prior to the date hereof) Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to Section 7C.4(d)(ii)) without consideration or for a consideration per share
less than the Series C-III Conversion Value in effect on the date of and
immediately prior to such issuance, then and in such event, the Series C-III
Conversion Value shall be reduced, concurrently with such issuance, to a price
(calculated to the nearest one cent) determined by dividing (A) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issue (determined on a fully-diluted basis; I.E. treating as
outstanding all shares of Common Stock issuable upon exercise, exchange or
conversion of all outstanding options (to the extent then vested or
exercisable), warrants or other securities exercisable or exchangeable for or
convertible into, directly or indirectly, shares of Common Stock) multiplied by
the then existing Series C-III Conversion Value, plus (y) the consideration, if
any, received by the Company (or deemed to have been received by the Company)
upon such issue of Additional Shares of Common Stock, by (B) the sum of the
number of shares of the Company's issued and outstanding Common Stock on a
fully-diluted basis immediately before the issuance of such Additional Shares of
Common Stock plus the number of shares of Additional Shares of Common Stock that
were issued (or deemed to have been issued). Notwithstanding the foregoing
provisions of this Section, if the operation of the foregoing provisions shall
result in a new Series C-III Conversion Value which is less than or equal to the
price paid or deemed to have been paid for such Additional Shares of Common
Stock (the "Additional Shares Issue Price"), then the new Series C-III
Conversion Value shall be the amount which is $0.01 more than the Additional
Shares Issue Price. If such Additional Shares of Common Stock are issued for no
consideration, then the Additional Shares Issue Price shall be deemed to be
$0.01.

                  (iv) DETERMINATION OF CONSIDERATION. For purposes of this
Section 7C.4(d), the consideration received by the Company for the issuance of
any Additional Shares of Common Stock shall be computed as follows:

                        (E) CASH AND PROPERTY. Such consideration shall:

                              (1) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company;

                              (2) insofar as it consists of securities (i) if
the securities are then traded on a national securities exchange or the NASDAQ
Stock


<PAGE>

Market (or a similar national quotation system), then the value shall be
computed based on the average of the closing prices of the securities on such
exchange or system over the 30-day period ending three days prior to receipt of
such securities by the Company, (ii) if the securities are actively traded
over-the-counter, then the value shall be computed based on the average of the
closing bid prices over the 30-day period ending three days prior to the receipt
of such securities by the Company, and (iii) if there is no active public
market, then the value shall be computed based on the fair market value thereof
on the date of receipt of such securities by the Company, as determined in good
faith by the Board of Directors;

                              (3) insofar as it consists of property other than
cash and securities, be computed at the fair market value thereof at the time of
such issuance, as determined in good faith by the Board of Directors; and

                              (4) if Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received for such Additional Shares of Common Stock, computed as provided in
clauses (A)(1), (A)(2) and (A)(3) of this Section 7C.4(d)(iv), in each case as
determined in good faith by the Board of Directors.

                        (F) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 7C.4(d)(ii), relating to
Options and Convertible Securities, shall be determined by dividing

                              (1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or, in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by

                              (2) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

            (e) ADJUSTMENT TO THE CONVERSION RATE DUE TO STOCK SPLIT, STOCK
DIVIDEND OR OTHER SIMILAR EVENT. If, prior to the conversion of all the Series
C-III Preferred Stock, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend or other similar event, the Series
C-III Conversion Value shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Series C-III Conversion
Value shall be proportionately increased.


<PAGE>

            (f) ADJUSTMENT DUE TO CONSOLIDATION, MERGER, EXCHANGE OF SHARES,
RECAPITALIZATION, REORGANIZATION OR OTHER SIMILAR EVENT. If, prior to the
conversion of all the Series C-III Preferred Stock, (i) there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities of the Company or another
entity, or (ii) there occurs a sale of all or substantially all of the Company's
assets that is not deemed to be a liquidation, dissolution or winding up of the
Company pursuant to Section 7C.3(c), then the Series C-III Holders thereafter
shall have the right to receive upon conversion of the shares of Series C-III
Preferred Stock held by them, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other assets
which the Series C-III Holders would have been entitled to receive in such
transaction had the Series C-III Preferred Stock been converted immediately
prior to such transaction, and in any such case appropriate provisions shall be
made with respect to the rights and interests of the Series C-III Holders to the
end that the provisions hereof (including, without limitation, provisions for
the adjustment of the Series C-III Conversion Value and the Series C-III
Conversion Rate shall thereafter be applicable, as nearly as may be practicable
in relation to any securities thereafter deliverable upon the exercise hereof.

            (g) CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment or
readjustment of the Series C-III Conversion Value pursuant to Sections 7C.4(d),
(e) and (f) above, and upon the initial issue of Series C-III Preferred Stock,
if any adjustment or readjustment would have occurred prior thereto (but after
September 8, 2000) pursuant to the terms hereof, the Company at its expense
promptly shall compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series C-III Preferred
Stock a certificate of the Chief Financial Officer of the Company setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of Series C-III Preferred Stock, furnish or cause to
be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the then effective Series C-III Conversion
Value, and (iii) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of each
share of such Series C-III Preferred Stock.

            (h) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7C and in
the taking of all such action as may be necessary or appropriate to protect the
Conversion Rights against impairment.

            (i) DEFINITIONS. As used in this Section 7C, the following terms
shall have the following meanings:


<PAGE>

            "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued (or, pursuant to Section 7C.4(d)(ii), deemed to be issued) by the
Company after September 8, 2000, other than shares of Common Stock issued or
issuable:

                   (i) to officers, directors or employees of, or financial
advisors or other consultants to, the Company pursuant to a Plan or Plans or
pursuant to any acquisition, financing or other written agreement so long as any
such Plan or written agreement has been approved by the Board of Directors
(including at least one of the members of the Board of Directors designated by
the holders of the Series C-III Preferred Stock while such holders have the
right to designate one or more directors);

                  (ii) as a dividend or distribution on Series C-III Preferred
            Stock.

                  (iii) if such shares of Common Stock are referred to in any of
            clauses (A), (B) and (C) of Section 7C.4(d)(i).

            "AFFILIATE" shall have the meaning given such term in Rule 405
promulgated under the Securities Act.

            "COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Company.

            "CONVERSION RIGHTS" shall mean the rights to convert Series C-III
Preferred Stock into Common Stock as provided in this Section 7C.

            "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares (other than Common Stock or Series C-III Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.

            "OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.

             "PLAN" shall mean a written stock grant, option plan or purchase
plan or other employee stock incentive program.

            "PREFERRED STOCK" shall mean the preferred stock, par value $0.01
per share, of the Company.

            "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

            "SERIES C-III CONVERSION RATE" shall mean the number of shares of
Common Stock into which a share of Series C Preferred Stock is convertible.

            "SERIES C-III CONVERSION VALUE" shall have the meaning given such
term in Section 7C.4(a).


<PAGE>

            "SERIES C-III ORIGINAL ISSUE PRICE" shall mean the original purchase
price of $1.24 per share for each share of Series C-III Preferred Stock, as such
amount shall be adjusted for all stock splits, combinations, consolidations,
stock distributions, stock dividends or other recapitalization transactions
involving the Series C-III Preferred Stock.

            "SERIES C-III PREFERRED STOCK" shall mean those authorized shares of
Preferred Stock of the Company designated as "Series C-III Preferred Stock", par
value $0.01 per share.

      5. OPTIONAL REDEMPTION OF SERIES C-III PREFERRED STOCK. The Company may,
at any time after September 28, 2003 (the "Redemption Date"), and from time to
time thereafter, call for redemption and repurchase of any and all shares of
Series C-III Preferred Stock for a purchase price per share equal to the Series
C-III Original Issue Price. The Company shall give written notice via certified
mail, and any Series C-III Holder shall have the right to convert the shares of
Series C-III Preferred Stock held by it at any time prior to the payment date
specified in such notice. Any such redemption and repurchase shall be made from
funds legally available for such purpose and which are not otherwise restricted.

      6.    VOTING RIGHTS.

                  (a) If and to the extent that the aggregate number of (i)
shares of Common Stock at the time owned directly or indirectly of record by (A)
the Series C-II Holders, the Series C-III Holders and (B) the holders
(including, but not limited to, Sam Belzberg) of any additional shares of the
Preferred Stock that have been issued under (x) the Preferred Stock Unit
Subscription Agreement, dated as of September 29, 2000 (the "Subscription
Agreement Preferred Stock") and (y) the Single Investor Preferred Stock Unit
Subscription Agreement, dated as of September 29, 2000 (the "Belzberg Preferred
Stock" collectively with the Subscription Agreement Preferred Stock, the
"September 2000 Preferred Stock"), and (ii) shares of Common Stock that underlie
the Series C-II Preferred Stock, the Series C-III Preferred Stock or the
September 2000 Preferred Stock equals or exceeds 10% of the Company's issued and
outstanding shares of Common Stock (counting all such shares of Preferred Stock
as issued and outstanding for these purposes) (such holding equal or greater of
10% is referred to as the "Eligibility Condition"), then the holders of a
majority of the aggregate of such shares of Preferred Stock (the "Designated
Preferred Stock Holders") shall have the right to nominate one individual
("Preferred Stock Holders Nominee") for election to the Board of Directors as
provided in this Section 6(a); PROVIDED, that in no event shall the Designated
Preferred Stock Holders have the right to designate more than one such
individual. If the Eligibility Condition is satisfied, then the Designated
Preferred Stock Holders shall send a written notice ("Election Notice") to the
Company that they desire to nominate an individual for election to the Board of
Directors. Within 30 days of the Company's receipt of the Election Notice, the
Chairman of the Board of Directors shall call a meeting of the Board of
Directors for the purpose of electing the Preferred Stock Holders Nominee (the
"Original Election Meeting"). The Preferred Stock Holders Nominee shall be a
person reasonably acceptable to a majority of the elected existing members of
the Board of Directors. If the Preferred Stock Holders Nominee is not


<PAGE>

reasonably acceptable to a majority of the Board of Directors at the Original
Election Meeting, then the Chairman of the Board shall immediately send a
written notice to the Designated Preferred Stock Holders stating that the
Preferred Stock Holders Nominee has been rejected by the Board of Directors and
shall request that the Designated Preferred Stock Holders submit a new nominee.
The Chairman of the Board shall call an additional meeting of the Board of
Directors ("Additional Election Meeting") within 48 hours of the Original
Election Meeting. The Designated Preferred Stock Holders shall have the
opportunity to name another individual as the Preferred Stock Holders Nominee at
the Additional Election Meeting. The aforementioned procedure shall continue
until a Preferred Stock Holders Nominee has been accepted by the Board of
Directors. Notwithstanding the foregoing, the Board of Directors shall remain
duly constituted for all purposes until a Preferred Stock Holders Nominee has
been accepted in accordance with this Section 6(a);

                  (b) The Series C-II Holders and the holders of the Company's
Series C-III Preferred Stock shall have no voting power whatsoever except to the
extent otherwise expressly provided by the Delaware General Corporate Law, and
no Series C-II Holder or holder of the Company's Series C-III Preferred Stock
shall vote or otherwise participate in any proceeding in which actions shall be
taken by the Company of the Stockholders thereof or be entitled to notification
as to any meeting of the stockholders.

      7. PROTECTIVE PROVISION. So long as shares of Series C-III Preferred Stock
are outstanding, the Company shall not without first obtaining the approval (by
vote or written consent, as provided by the DGCL) of the holders of at least a
majority of the then outstanding shares of Series C-III Preferred Stock:

                  (a) alter or change the rights, preferences or privileges of
the Series C-III Preferred Stock, including, but not limited to, the creation or
authorization of any Senior Securities.

                  (b) increase the size of the authorized number of Series C-III
Preferred Stock; or

                  (c) do any act or thing not authorized or contemplated by
these Certificate of Incorporation which would result in taxation of the Series
C-III Holders under Section 305 of the Internal Revenue Code of 1986, as amended
(or any comparable provision of the Internal Revenue Code as hereafter from time
to time amended).

      If the holders of a majority of the then outstanding shares of Series
C-III Preferred Stock agree to allow the Company to alter or change the rights,
preferences or privileges of the shares of Series C-III Preferred Stock,
pursuant to Section 7C.7(a) so as to affect adversely the Series C-III Preferred
Stock, then the Company will deliver notice of such approved alteration or
change to the Series C-III Holders that did not agree to such alteration or
change (the "SERIES C-III DISSENTING HOLDERS"), and the Series C-III Dissenting
Holders shall thereafter have the right for a period of 30 days to convert
pursuant to the terms of the Certificate of Incorporation as they exist prior to
such alteration or change or continue to hold their shares of Series C-III
Preferred Stock


<PAGE>

subject to the approved alteration or change of the rights, preferences or
privileges of the Series C-III Preferred Stock.

      8. STATUS OF CONVERTED STOCK. If any shares of Series C-III Preferred
Stock shall be converted pursuant to Section 7C.4, the shares so converted shall
be canceled, shall return to the status of authorized but unissued preferred
stock of no designated series, and shall not be issuable by the Company as
Series C-III Preferred Stock.

      9. PREFERENCE RIGHTS. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one or more series of
preferred stock with dividend and/or liquidation preferences on parity with or
junior to the dividend and liquidation preferences of the Series C-III Preferred
Stock.



<PAGE>


      IN WITNESS WHEREOF, this Certificate of Designations have been duly
adopted by the Board of Directors of the Company and have been duly executed on
behalf of the Company by its Executive Vice President thereunto duly authorized
this 30th day of November, 2000.


                                    ON2.COM INC.



                                    By: /s/ Mark Meagher
                                        ---------------------------
                                    Name:  Mark Meagher
                                    Title: Executive Vice President



<PAGE>


                           CERTIFICATE OF AMENDMENT OF
                         CERTIFICATE OF INCORPORATION OF
                                  ON2.COM INC.

                                 PURSUANT TO THE
                        DELAWARE GENERAL CORPORATION LAW


      On2.com Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby adopts the following Certificate
of Amendment to its Certificate of Incorporation ("Certificate of Amendment"):

      1.    The name of the Corporation is On2.com Inc.

      2.    Pursuant to resolution of its Board of Directors, a special meeting
            of shareholders of the Corporation was duly called and held on
            November 17, 2000, upon notice in accordance with the provisions of
            ss.222 of the General Corporation Law of the State of Delaware at
            which meeting the necessary number of shares as required by statute
            were voted in favor of the amendment.

3.          The amendment to the Corporation's Certificate of Incorporation set
            forth below was duly adopted in accordance with the provisions of
            ss.242 of the General Corporation Law of the State of Delaware. The
            text of the amendment is set forth below:

            (a) Article IV, Section 1 of the Certificate of Incorporation shall
      be deleted in its entirety and the following substituted in lieu thereof:

            "Section 1. Authorized Capital. The aggregate number of shares and
      the amount of the total authorized capital of said Corporation shall
      consist of 100,000,000 shares of common stock, par value $0.01 per share
      ("Common Stock"), and 20,000,000 shares of non-voting preferred stock, par
      value $0.01 per share ("Preferred Stock")."

      3.    This Certificate shall be effective upon filing.

      IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Amendment on November 30, 2000.

                                          ON2.COM INC.


                                          By: /s/ Denise Ben-attar
                                              --------------------------
                                              Name:   Denise Ben-Attar
                                              Title:  Secretary