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                                                                     Exhibit 4.8

                                  ON2.COM INC.

                           UNIT SUBSCRIPTION AGREEMENT

         THIS UNIT SUBSCRIPTION AGREEMENT (this "AGREEMENT") is entered into as
of January 29, 2001 by and among ON2.COM INC., a Delaware corporation (the
"COMPANY"), and ABANAT LIMITED, a British Virgin Islands corporation (the
"INVESTOR"). Certain capitalized terms used in this Agreement without definition
shall have the meanings given them in Section 10 hereof.

         In consideration of the mutual promises, representations, warranties
and covenants set forth in this Agreement, the parties to this Agreement agree
as follows:

         1. PURCHASE AND SALE OF UNITS.

                  (a) The Company has duly authorized for sale, issue and
delivery to the Investor of up to an aggregate of $2.0 million principal amount
of Series A Convertible Debentures due 2005 (the "DEBENTURES"), substantially in
the form attached hereto as EXHIBIT A and convertible as provided therein into
shares of the Company's Common Stock, $0.01 par value per share (the "COMMON
STOCK"). The Company has further authorized for sale, issue and delivery to the
Investor warrants (the "WARRANTS") to acquire Common Stock during the period
ending five years after the date of issuance thereof. The form of the Warrant is
attached to this Agreement as EXHIBIT B.

                  (b) Subject to the terms of this Agreement, the Investor
agrees to purchase, and the Company agrees to sell to the Investor, an aggregate
of 200 Units. Each unit (a "Unit") consists of: (i) $10,000 principal amount of
Debentures and (ii) one Warrant to purchase 6,667 shares of Common Stock
(rounded to the nearest whole share). The aggregate purchase price to be paid by
the Investor for the Units shall be $2.0 million (the "AGGREGATE COMMITMENT").

                  (c) On the date hereof (the "FIRST CLOSING DATE"), the Company
shall deliver to the Investor, 75 Units consisting of debentures that represents
$750,000 principal amount of Debentures being purchased by it and warrant
certificates that represent 500,025 Warrants being purchased by it, in all cases
against delivery to the Company by the Investor by wire transfers of immediately
available funds of the purchase price of the Units being purchased by the
Investor of $750,000 (the "FIRST CLOSING PURCHASE PRICE").

                  (d) In addition, on the date hereof, the Investor will
contribute an amount equal to the Aggregate Commitment less the First Closing
Purchase Price into an escrow fund, pursuant to the terms of the Escrow
Agreement (the "ESCROW FUND").

                  (e) Until the Investor contributes the full Aggregate
Commitment, the Investor will contribute the balance of the Aggregate Commitment
from the Escrow Fund at one or more closings (each, a "SUBSEQUENT CLOSING") to
be held on one or more dates, each of which shall be a Business Day (each, a
"SUBSEQUENT CLOSING DATE"), concurrently with either (i) any settlement of a
draw down notice of the Company under the Company's common stock purchase
agreement with Crossover Ventures, Inc. or (ii) any other investment in the
Company (whether public or
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private) (any investment under clause (i) or (ii) hereof shall be referred to
herein as a "CO-INVESTMENT").

                  At least five Business Days prior to any Subsequent Closing
Date, the Company shall provide a written notice (each, a "CLOSING NOTICE")
stating the portion of the balance of the Aggregate Commitment to be contributed
at each Subsequent Closing, which shall be equal to the amount of the
Co-Investment (the "SUBSEQUENT CLOSING PURCHASE PRICE"). Upon delivery of the
Closing Notice to the Investor, the Investor shall be obligated to purchase, and
the Company shall become committed to sell to such Investor, an amount of Units
equal to the Subsequent Closing Purchase Price at the Subsequent Closing
referred to in such Closing Notice; provided, however, that the Investor shall
under no circumstances be obligated to purchase the Units if the Company has not
met the requirements of Section 5 hereof. Notwithstanding the foregoing or
anything to the contrary contained in this Agreement or any other Transaction
Document, the Investor need not have a Subsequent Closing unless and until the
amount of any Subsequent Closing Purchase Price under the Aggregate Commitment
shall be for an amount of no less than $250,000; provided however, that should
the Escrow Fund carry at any time a balance that is less than $250,000, the
Company will be entitled under the circumstances otherwise provided for in this
Agreement and the other Transaction Documents to a final Subsequent Closing for
an amount equivalent to the balance of the monies in the Escrow Fund.

                  At each Subsequent Closing, the Company shall issue to the
Investor, an amount of Units consisting of debentures that represent the amount
of Debentures being purchased at such Subsequent Closing and warrant
certificates that represent the Warrants being purchased at such Subsequent
Closing, in all cases against delivery to the Company by the Investor at such
Subsequent Closing of funds from the Escrow Fund, equal to the Subsequent
Closing Purchase Price of the Units being purchased by the Investor at such
Subsequent Closing.

         2. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to, and confirms the agreement with, the Company, as
follows:

                  (a) The Investor is acquiring the Debentures and the Warrants
that comprise the Units (the "SECURITIES") for the Investor's own account, not
as nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the "SECURITIES ACT"). By executing
this Agreement, the Investor further represents that the Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any such person or to any third person, with
respect to the Securities.

                  (b) The Investor understands that (i) the Securities have not
been registered under either the Securities Act or the securities laws of any
state of the United States by reason of specific exemptions therefrom, (ii) the
Securities must be held by the Investor indefinitely, and, therefore, the
Investor must bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act and the
securities laws of any applicable state or is exempt from such registrations;
(iii) each certificate that represents the Securities will be endorsed with
legends as required by the Investor's Rights Agreement; and (iv)

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the Company will instruct any transfer agent not to register the transfer of any
of the Securities unless the conditions specified in the foregoing legend are
satisfied.

                  (c) The Investor has been furnished with such materials and
has been given access to such information relating to the Company as the
Investor or the Investor's qualified representative has requested. The Investor
has been afforded the opportunity to ask questions regarding the Company and the
Securities as it has found necessary to make an informed investment decision.
The Investor has been solely responsible for its own due diligence investigation
of the Company and its business, for its own analysis of the merits and risks of
its investment made pursuant to this Agreement and for its own analysis of the
terms of its investment.

                  (d) The Investor is in a financial position to hold the
Securities and is able to bear the economic risk and withstand a complete loss
of the Investor's investment in the Securities. The Investor recognizes that the
Securities involve a high degree of risk. The Investor understands and
acknowledges that there can be no assurance that the Company will be able to
meet its projected goals and that the Company will need significant additional
capital to be successful, which capital may not be available readily.

                  (e) The Investor acknowledges hereby that the Investor has
been advised to obtain and has obtained, to the extent the Investor deems
necessary, professional (including legal) advice with respect to the risks
inherent in the investment in the Units, the condition of the Company, the
suitability of the investment in the Units in light of Investor's condition and
investment needs, and the terms and conditions of this Agreement and documents
relating to the investment in the Units. The Investor, either alone or with the
assistance of such professional advisors, is a sophisticated investor, is able
to fend for itself in the transaction contemplated by this Agreement, and has
such knowledge and experience in financial and business matters that the
Investor is capable of evaluating the merits and risks of the prospective
investment in the Units.

                  (f) The investment in the Units is suitable for the Investor
based upon the Investor's investment objectives and financial needs, and the
Investor has adequate net worth and means for providing for its current
financial needs and contingencies and has no need for liquidity of the
investment with respect to the Units. The Investor's overall commitments to
investments that are illiquid or not readily marketable are not disproportionate
to the Investor's net worth, and investment in the Units will not cause such
overall commitment to become excessive.

                  (g) The Investor represents that the Investor is a not U.S.
person, as defined by Regulation S, and is not purchasing the Debenture for the
account or benefit of a U.S. person and agrees that this Debenture is being
acquired for investment and that such Investor will not offer, sell or otherwise
dispose of this Debenture or the shares of Common Stock issuable upon conversion
thereof except in compliance with the provisions of Regulation S, pursuant to
registration under the Act or pursuant to an available exemption from
registration and under circumstances which will not result in a violation of the
Act or any applicable state Blue Sky or foreign laws or similar laws relating to
the sale of securities. The Investor further agrees that it

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will not engage in hedging transactions with regard to the Debenture or the
shares of Common Stock issuable upon conversion thereof unless in compliance
with the Act. The Investor represents and agrees that neither it, nor any of its
affiliates, nor any person acting on its or their behalf has engaged or will
engage in any direct selling efforts with respect to the shares of Common Stock.

                  (h) The Investor also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
(as that term is defined by Regulation S) with respect to the distribution of
the shares of Common Stock, except with the prior written consent of the
Company. The Investor acknowledges that the Company is not obligated to take any
action that will permit the offer or sale of the shares of Common Stock or the
distribution of any offering memorandum or any other offering material relating
to the shares in any non-U.S. jurisdiction where action for that purpose is
required and the Company will have no responsibility with respect to the right
of any person to offer or sell shares or distribute any offering memorandum or
any other offering material relating to the shares in any non-U.S. jurisdiction.
The Investor represents and agrees that it will obtain any consent, approval or
authorization required for it to offer or sell shares of Common Stock, or to
distribute any offering memorandum or any other offering material relating to
the shares, under the law or regulations of any jurisdiction where it proposes
to make offers or sales of shares, or to distribute any offering memorandum or
any other offering material relating to the shares.

                  (i) The execution, delivery, and performance by the Investor
of this Agreement and each other Transaction Document have been duly authorized
by all necessary actions of the Investor. The Investor has duly and validly
executed and delivered this Agreement and each other Transaction Document, and
this Agreement and each other Transaction Document constitutes a valid, binding,
and enforceable obligation of the Investor in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
on the Schedule of Exceptions attached hereto as Schedule A, which has been
delivered to the Investor prior to the Investor's execution hereof, the Company
represents and warrants to the Investor as follows:

                  (a) ORGANIZATION, STANDING AND POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted, and as proposed to be conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which a failure to so qualify
would have a material adverse effect on the business condition of the Company.
Each of the subsidiaries of the Company (the "SUBSIDIARIES") is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, and as proposed to be conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which a failure to so qualify
would have a material adverse effect on the business condition of such
subsidiary.

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                  (b) COMPANY CAPITAL STRUCTURE AND OWNERSHIP. The authorized
capital stock of the Company on the date hereof consists of 100,000,000 shares
of Common Stock of which 26,953,533 shares are issued and outstanding and
20,000,000 shares of preferred stock, par value $0.01 per share, of which
400,000 shares of Series A Preferred Stock are issued and outstanding, 34,100
shares of Series B Preferred Stock are issued and outstanding, 1,644,304 shares
of Series C Preferred Stock are issued and outstanding, 924,527 shares of Series
C-II Preferred Stock are issued and outstanding and 2,049,839 shares of Series
C-III Preferred Stock are issued and outstanding. All outstanding shares of the
Common Stock are validly issued, fully paid, and nonassessable, are not subject
to any preemptive rights and were issued in compliance with applicable state and
federal laws regarding the issuance of securities. Except as set forth in the
Company's consolidated quarterly financial statements as of September 30, 2000
(the "2000 FINANCIAL STATEMENTS"), including the notes thereto, and except as
set forth on the Schedule of Exceptions, there are no options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character to which the Company is a
party or by which the Company may be bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
the capital stock of the Company, or obligating the Company to grant, extend or
enter into any such option, warrant, call, conversion right, commitment,
agreement, contract, understanding, restriction, arrangement or right. The
Company does not have outstanding any bonds, debentures, notes or other
indebtedness, the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of the Common
Stock on any matter. The Company has not received any notice from the American
Stock Exchange questioning or threatening the continued inclusion of the Common
Stock on such market.

                  (c) AUTHORITY. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of the Transaction Documents
and the consummation of the transaction contemplated herein and therein, and for
the authorization, issuance and delivery of the Debentures and the Warrants have
been taken or will be taken prior to the Closing. This Agreement and the other
Transaction Documents are the legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
other laws of general application affecting enforcement of creditors' rights
generally, rules of law governing specific performance and injunctive relief or
other equitable remedies. The execution, delivery and performance by the Company
of the Transaction Documents and compliance herewith and therewith and the sale
and issuance of the Debentures and the Warrants (a) will not result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under the Company's Certificate of
Incorporation or Bylaws, each as amended or any Federal, state or local statute,
rule, regulation or other law (collectively, "LAWS"); (b) do not and will not
(i) conflict with, contravene, result in any violation or breach of or default
under any material contract (with or without the giving of notice or the lapse
of time or both), (ii) create in any other person or entity a right or claim of
termination or amendment of any material contract, or (iii) require
modification, acceleration or cancellation of any security issued by such person
or entity in any material agreement, undertaking, contract, indenture, mortgage,
deed of trust or other instrument or arrangement (whether in writing or
otherwise) to which such person or entity or its property is bound, or any
amendment of any of the foregoing (collectively, "CONTRACTUAL OBLIGATIONS");

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and (c) do not and will not (other than pursuant to the Transaction Documents)
result in the creation of any mortgage, deed of trust, pledge, hypothecation,
assignment, lien (statutory or otherwise), charge, claim, restriction or
preference, security interest or preferential arrangement or any other
encumbrance (or obligation to create a lien) of any kind or nature
(collectively, "LIENS") against any property, asset or business of the Company
or the suspension, revocation, impairment, forfeiture or non renewal of any
material permit, license, authorization or approval applicable to the Company,
or its businesses or operations or any of its assets or properties. No
shareholder has any preemptive rights or rights of first refusal by reason of
issuance of the Units.

                  (d) SEC MATTERS. The Company has made available to the
Investor a true, correct, and complete copy of the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1999, and its Quarterly Report on
Form 10-QSB for the quarters ended March 31, 2000, June 30, 2000 and September
30, 2000, as filed with SEC (collectively, the "COMPANY SEC REPORTS"). As of
their respective filing dates, the Company SEC Reports (i) complied as to form
in all material respects with the requirements of the SEC and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made not
misleading. The financial statements (including the notes thereto) included in
the Company SEC Reports complied as to form in all material aspects with the
published rules and regulations of the SEC. Since June 16, 1999, the Company has
filed all required reports, schedules, forms, statements and other documents
with the SEC as and when any such documents were required to be filed and no
Company SEC Reports were filed after the filing deadline therefor (after giving
effect to all extensions) or otherwise in an untimely manner. The Company has
not provided to the Investor any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement.

                  (e) AUTHORIZATION. The execution and delivery by the Company
of this Agreement and each other Transaction Document, the performance by the
Company of its obligations hereunder and thereunder, and the issuance to the
Investor of the Debentures, the Warrants and the shares of Common Stock
underlying the Debentures and the Warrants (the "UNDERLYING COMMON STOCK"), as
herein provided, have been duly authorized by all necessary corporate action of
the Company. When issued upon due conversion of the Debentures, the shares of
Underlying Common Stock into which the Debentures are convertible will be
validly authorized and, when issued upon the conversion of the Debentures, will
be fully paid and nonassessable. When issued upon due exercise of the Warrants
and upon payment of the exercise price thereunder as required by the Warrants,
the shares of Underlying Common Stock that underlie the Warrants will be validly
authorized, duly issued and fully paid and nonassessable shares of the Company.
To the Company's knowledge, all outstanding shares of capital stock of the
Company have been issued in compliance with all applicable federal and state
securities laws. To the Company's knowledge, other than the agreements set forth
in the Schedule of Exceptions, there are no voting trusts or agreements,
stockholders agreements, pledge agreements, buy-sell agreements or proxies
relating to any capital stock of the Company.

                  (f) COMPLIANCE WITH LAWS. Neither the Company nor any of its
Subsidiaries has violated any Requirement of Law (as defined below), which
violation would reasonably be

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expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries, taken as a whole, and neither the Company nor any of its
Subsidiaries has received notice of any such violation. "REQUIREMENT OF LAW"
means, with respect to the Company or any Subsidiary, its articles or
certificate of incorporation, formation or organization, partnership or
operating agreements and bylaws or other organizational or governing documents,
and any law, treaty, rule, regulation, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other Governmental
Authority (as defined below), in each case applicable to or binding upon the
Company or any of its Subsidiaries or any of its or their property or to which
the Company or any Subsidiary or any of its or their property is subject or
pertaining to any or all the transactions contemplated or referred to herein.
"GOVERNMENTAL AUTHORITY" means the government of any country where the Company
conducts business or any state, county or parish, city, locality or other
political subdivision of any thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

                  (g) GOVERNMENTAL APPROVALS; CONSENTS. Other than as set forth
on the Schedule of Exceptions, except for filings required to be made with any
Governmental Authority or Person (as defined below) that governs the Investor,
the Company is not required to obtain any order, consent, approval or
authorization of, or make any declaration or filing with, any Governmental
Authority or other Person (as defined below) in connection with (i) the
negotiation, execution, delivery and performance of this Agreement or any of the
other Transaction Documents, (ii) the offer, issuance, sale and delivery to the
Investor of the Units, or (iii) the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents. "PERSON"
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof.

                  (h) LITIGATION. Except as disclosed in the Company SEC Reports
or the Schedule of Exceptions, there is no action, suit, claim, proceeding or
investigation pending or, to the Company's knowledge, threatened against or
affecting the Company or any of its Subsidiaries, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau agency or instrumentality, domestic or foreign, which
could reasonably be expected to have a material adverse effect on the business,
financial condition, operations or prospects of the Company and its
Subsidiaries, taken as a whole, or materially adversely affect the Company's
ability to consummate the transactions contemplated by the Transaction Documents
(a "MATERIAL ADVERSE EFFECT"). Neither the Company nor any of its Subsidiaries
is in default with respect to any order, writ, injunction, or decree known to or
served upon the Company of any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Except as disclosed in the Company SEC
Reports, there is no material action or suit by the Company or any Subsidiary
pending or threatened against others. The Company and each of its Subsidiaries
have all necessary permits, licenses and other authorizations required to
conduct their respective businesses as conducted and as proposed to be
conducted, except where the failure to obtain any such permit, license or
authorization could not reasonably be expected to have a Material

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Adverse Effect. The Company has complied in all material respects with all laws,
rules and regulations (including, without limitation, laws relating to
employment, including wages, hours, equal opportunity, collective bargaining,
payment of social security and other taxes, and ERISA), and any orders,
injunctions and decrees applicable to it, except where such non-compliance could
not reasonably be expected to have a Material Adverse Effect.

                  (i) TAX MATTERS. The Company has filed all tax returns and
reports, federal, state, county and local, required to be filed by it, and these
returns and reports are true and correct in all material respects, and the
Company has paid all taxes shown to be due by such returns as well as all other
taxes, assessments and governmental charges which have become due or payable,
including without limitation, all taxes which the Company is obligated to
withhold from amounts owing to creditors and third parties. The Company has
withheld or collected from each payment made to each of its employees, in all
material respects, the amount of all taxes, including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes required to be withheld or collected there from, and
has paid the same to the proper tax receiving officers or authorized
depositories. No deficiency assessment with respect to or proposed adjustment of
the Company's federal, state, county and local taxes is pending or, to the
Company's knowledge threatened. There is no tax lien, whether imposed by any
federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company.

                  (j) CORPORATE POWER. The Company has or will have at the
Closing all requisite corporate power and authority to execute and deliver this
Agreement and the Transaction Documents, sell and issue the Debentures and the
Warrants and to carry out and perform its obligations under the terms of the
Transaction Documents.

                  (k) OUTSTANDING DEBT. The Company has no outstanding
indebtedness for borrowed money and is not a guarantor or indemnitor or
otherwise continently liable for any indebtedness for borrowed money (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, provide funds for payment, supply funds or otherwise invest in any
debtor or otherwise to insure any creditor against loss). There exists no
material default under the provisions of any instrument evidencing any such
indebtedness or otherwise or of any agreement relating thereto.

                  (l) MATERIAL CONTRACTS AND OTHER COMMITMENTS. The Company has
satisfied in full or provided for all of its liabilities and obligations under
each material contract requiring performance prior to the date hereof in all
material respects, and is not in default under any of them, nor, to the actual
knowledge of the Company, does any condition exist that with notice or lapse of
time or both would constitute such a default. To the actual knowledge of the
Company, no other party to any such material contract is in default thereunder,
nor does any condition exist that with notice or lapse of time or both would
constitute such a default. No approval or consent of any person or entity is
needed for all of the material contracts to continue to be in full force and
effect.

                  (m) STOCKHOLDERS, DIRECTORS AND OFFICERS: CONFLICT OF
INTEREST. The Company is not currently indebted to its officers or directors
other than for travel, relocation, and other

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expenses that are advanced and reimbursed in the ordinary course of business. To
the Company's knowledge, none of the officers or directors or significant
employees or consultants of the Company, or their respective relatives, (a)
owns, directly or indirectly, any interest in (excepting less than 5% stock
holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any person or
entity that is, or is engaged in business as, a competitor, lessor, lessee,
distributor, sales agent or customer of, or lender to or borrower from, the
Company; or (b) owns, directly or indirectly, in whole or in part, any tangible
or intangible property that the Company uses in the conduct of business; or (c)
has any cause of action or other claim whatsoever against, or owes or has
advanced any amount to, the Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof.

                  (n) TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company
has good and marketable title to its tangible properties and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, security interest, conditional sale agreement, encumbrance or charge,
except (i) tax, materialmen's or like liens for obligations not yet due or
payable or being contested in good faith by appropriate proceedings, or (ii)
possible minor liens or encumbrances which do not in any case materially detract
from the value of the property subject thereto or materially impair the
operations of the Company and which have not arisen otherwise than in the
ordinary course of business of the Company.

                  (o) FRANCHISES AND OTHER RIGHTS. The Company has all material
franchises, permits, and other similar authority necessary for the conduct of
its business. The Company has not received any notice of infringement upon or
conflict with the asserted rights of others and is not aware of any threats of
such a claim or assertion. Reasonable security measures have been taken by the
Company to protect the secrecy, confidentiality and value of the Company's
confidential, proprietary information. The Company owns or possesses adequate
licenses or other rights to use and license its customers the right to use (in
the manner and to the extent presently or proposed to be used or licensed) all
material patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know-how (collectively,
"INTELLECTUAL PROPERTY") currently or proposed to be used in its business,
except the possibility exists that other persons or entities may have developed
trade secrets or technical information similar or identical to those of the
Company or filed patent, trademark or copyright applications or registrations.
No claim is pending or, to the knowledge of the Company threatened, to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company. None of the Intellectual Property that the Company owns or purports
to own is subject to any outstanding judgment or contract restricting the use
thereof by the Company.

                  (p) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any term of its Certificate of Incorporation or Bylaws nor any term
of any mortgage, indenture, contract, agreement, instrument, judgment, decree,
order, statute, rule or regulation to which the Company is subject and a
violation of which, in all cases, would have a material adverse effect on the
condition, financial or otherwise, or operations of the Company. The Company is
not in

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violation of, or in default under, any franchise, permit, license, authorization
or approval that is material to the Company.

                  (q) LABOR AGREEMENTS AND ACTIONS. The Company is not bound by
or subject to (and none of its material assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees.

                  (r) ENVIRONMENTAL AND SAFETY LAWS. The Company is not in
material violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety and to the best of its knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law or regulation. The Company has not caused or allowed,
or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
material violation of any of the applicable Environmental Laws (as defined
below) in connection with the operation of its business or otherwise. For the
purposes of this Agreement, the term "ENVIRONMENTAL LAWS" shall mean any
federal, state or local law or ordinance or regulation pertaining to the
protection of human health or the environment, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sections 9601, ET SEQ., the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Sections 11001, ET SEQ., and the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ. For purposes of
this Agreement, the term "HAZARDOUS SUBSTANCES" shall include oil and petroleum
products, asbestos, polychlorinated biphenyls, urea formaldehyde and any other
materials classified as hazardous or toxic under the Environmental Laws.

                  (s) MINUTE BOOKS. The minute book of the Company contains
minutes of all official meetings of directors and shareholders and all actions
by written consent without a meeting by the directors and shareholders since
June 16, 1999 and reflects all actions by the directors (and any committee of
directors) and shareholders with respect to all transactions referred to in such
minutes accurately in all material respects.

                  (t) EMPLOYEES. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents or on the Schedule of Exceptions.
Except as set forth in the SEC Documents or on the Schedule of Exceptions,
neither the Company nor any subsidiary is in breach of any employment contract,
agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such subsidiary. Since
the date of the December 31, 1999 Form 10-KSB, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either

                                      -10-
<Page>

individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.

                  (u) REGISTRATION RIGHTS. At the First Closing Date, except as
set forth on the Schedule of Exceptions and as provided for in the Investor's
Rights Agreement, the Company will not be under any obligation to register any
of its currently outstanding securities or any of its securities issued
hereafter.

                  (v) SECURITIES ACT. Subject to the accuracy of the Investors'
representations in Section 2, the offer, sale, and issuance of the Debentures
and the Warrants in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirement of Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). No form of general
solicitation or general advertising was used by the Company, or its
representatives in connection with the offer or sale of the Debentures and the
Warrants.

                  (w) INSURANCE. Except as disclosed in the Company SEC Reports,
the Company carries or will have the benefit of insurance in such amounts and
covering such risks as is adequate for the conduct of its business and the value
of its properties.

                  (x) FOREIGN CORRUPT PRACTICES ACT. The Company has not taken
any action which would cause it to be in material violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules and regulations
thereunder.

                  (y) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the date of
the financial statement contained in the most recently filed Form 10-Q or Form
10-K, whichever is most current, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties, operations or
financial condition, that, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed in the SEC Documents.

                  (z) USE OF PROCEEDS. The proceeds from the sale of the Units
will be used by the Company and its subsidiaries for general corporate purposes.

                  (aa) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF UNITS.
The Company acknowledges and agrees that Investor is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor's purchase of the
Units. The Company further represents to the Investor that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company and its own representatives and counsel

                                      -11-
<Page>

                  (bb) ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided in
SEC Reports or on the Schedule of Exceptions, since the date of the financial
statement contained in the most recently filed Form 10-QSB or Form 10-KSB,
whichever is most current, neither the Company nor any subsidiary has:

                  (i) issued any stock, bonds or other corporate securities or
         any rights, options or warrants with respect thereto;

                  (ii) borrowed any amount or incurred or become subject to any
         liabilities (absolute or contingent) except current liabilities
         incurred in the ordinary course of business which are comparable in
         nature and amount to the current liabilities incurred in the ordinary
         course of business during the comparable portion of its prior fiscal
         year, as adjusted to reflect the current nature and volume of he
         Company's or such subsidiary's business;

                  (iii) discharged or satisfied any lien or encumbrance or paid
         any obligation or liability (absolute or contingent), other than
         current liabilities paid in the ordinary course of business;

                  (iv) declared or made any payment or distribution of cash or
         other property to a stockholder with respect to its stock, or purchased
         or redeemed, or made any agreements so to purchase or redeem, any
         shares of its capital stock;

                  (v) sold, assigned or transferred any other tangible assets,
         or cancelled any debts or claims, except in the ordinary course of
         business;

                  (vi) sold, assigned or transferred any patent rights,
         trademarks, trade names, copyrights, trade secrets or other intangible
         assets or intellectual property rights, or disclosed any proprietary
         confidential information to any person except to customers in the
         ordinary course of business or to the Purchaser or its representatives;

                  (vii) suffered any material losses or waived any rights of
         material value, whether or not in the ordinary course of business, or
         suffered the loss of any material amount of prospective business;

                  (viii) made any changes in employee compensation except in the
         ordinary course of business and consistent with past practices;

                  (ix) made capital expenditures or commitments therefor that
         aggregate in excess of $500,000;

                  (x) entered into any other material transaction, whether or
         not in the ordinary course of business;

                  (xi) suffered any material damage, destruction or casualty
         loss, whether or not covered by insurance;

                                      -12-
<Page>

                  (xii) experienced any material problems with labor or
         management in connection with the terms and conditions of their
         employment; or

                  (xiii) effected any two or more events of the foregoing kind
         which in the aggregate would be material to the Company or its
         Subsidiaries.

         4. ADDITIONAL DOCUMENTS. Concurrently herewith, the Company and the
Investor shall have entered into the Investor's Rights Agreement and the Escrow
Agreement. In addition, the Company shall furnish to the Investor reasonable
evidence of the closing of a Co-Investment or Co-Investments in an amount equal
to or greater than the First Closing Purchase Price that closed in the 20 days
prior to the date hereof. On the First Closing Date, the Company shall also
furnish to the Investor an opinion of special counsel to the Company, dated the
First Closing Date, in the form attached hereto as EXHIBIT F.

         5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT EACH SUBSEQUENT CLOSING. The
obligations of the Investor under Section 1(b) and 1(f) of this Agreement are
subject to the fulfillment on or before each Subsequent Closing of each of the
following conditions, unless otherwise waived by the Investor:

                  (a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 3 shall be true, in all material
respects, on and as of the applicable Subsequent Closing Date with the same
effect as though such representations and warranties had been made on and as of
such Subsequent Closing Date (except to the extent that such representations and
warranties were made as of a specified date, which representations and
warranties shall continue on each Subsequent Closing Date to be true, in all
material respects, as of such specified date); provided that prior to each
Subsequent Closing Date the Company shall have the right to supplement any
schedules hereto to reflect more recent information required by the provisions
of this Agreement; provided further that the representations and warranties made
in Section 3(d) shall be deemed to extend to any reports filed with the SEC
after the date hereof and prior to the date of the applicable Subsequent Closing
Date.

                  (b) COVENANTS. The Company shall have performed and complied
in all material respects with all covenants, agreements, obligations and
conditions contained in this Agreement and the Transaction Documents that are
required to be performed or complied with by it on or before the respective
Subsequent Closing.

                  (c) CO-INVESTMENT. A Co-Investment or Co-Investments in an
amount equal to or greater than the Subsequent Closing Purchase Price shall
close prior to or concurrently with each Subsequent Closing and the Company
shall furnish to the Investor reasonable evidence of such closing or closings.

                  (d) COMPLIANCE CERTIFICATE. The President or any Vice
President of the Company shall deliver to the Investor at a Subsequent
Closing a certificate stating that the conditions specified in Sections 5(a)
and 5(b) have been fulfilled and stating that there shall have been no change
in the financial condition or in any material agreement of the Company from
the date

                                      -13-
<Page>

hereof to the applicable Subsequent Closing Date which has had or could
reasonably be expected to have a Material Adverse Effect.

                  (e) QUALIFICATIONS. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Units pursuant to this Agreement shall be duly obtained and be effective
as of the applicable Subsequent Closing.

                  (f) MATERIAL ADVERSE EFFECT. No event which has a Material
Adverse Effect and no event including a merger, acquisition or similar
transaction whereby a successor entity shall have not agreed to perform the
Company's obligations shall have occurred.

                  (g) CONTINUED LISTING. The Common Stock shall continue to be
listed on the Amex or otherwise be listed on the Nasdaq National Market, Nasdaq
Small Cap Market, the New York Stock Exchange or over-the-counter.

         6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT EACH SUBSEQUENT CLOSING.
The obligations of the Company to the Investor under this Agreement purchasing
at a Subsequent Closing are subject to the fulfillment on or before such
Subsequent Closing, as the case may be, of each of the following conditions by
the Investor:

                  (a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 2 shall be true, in all material
respects, on and as of such Subsequent Closing with the same effect as though
such representations and warranties had been made on and as of such Subsequent
Closing (except to the extent that such representations and warranties were made
as of a specified date, which representations and warranties shall continue on
each Subsequent Closing Date to be true, in all material respects, as of such
specified date).

                  (b) COVENANTS. The Investor shall have performed and complied
in all material respects with all covenants, agreements, obligations and
conditions contained in this Agreement and the Transaction Documents that are
required to be performed or complied with by it on or before the respective
Subsequent Closing.

                  (c) QUALIFICATIONS. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Units pursuant to this Agreement shall be duly obtained and effective as
of the applicable Subsequent Closing Date.

         7. EXISTING WARRANT CANCELLATION. In full and complete satisfaction and
discharge of the Company's obligations to Investor under the Existing Warrants,
the Company shall cancel the Existing Warrants and in their place issue 116,400
warrants with an exercise price of $1.68 (the "NEW WARRANTS"), substantially in
the form attached hereto as EXHIBIT C. In order to receive the New Warrants in
accordance with this Section 6, the Investor must surrender the Existing
Warrants to the Company for cancellation at its office at 145 Hudson Street, New
York, New York 10013.

         8. COVENANTS BY THE COMPANY. The Company covenants with the Investor as
follows:

                                      -14-
<Page>

                  (a) SECURITIES COMPLIANCE. If applicable, the Company shall
notify the American Stock Exchange, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Units to the Investor or subsequent holders.

                  (b) REGISTRATION AND LISTING. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all material respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to the Transaction Documents, and will
not take any action or file any document (whether or not permitted by the
Securities Act or the Exchange Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein and in the other Transaction Documents. The Company will take
all action reasonably necessary to continue the listing or trading of its Common
Stock on the American Stock Exchange and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the American Stock Exchange and shall provide the Investor with copies of any
correspondence to or from the American Stock Exchange which questions or
threatens delisting of the Common Stock within three (3) Business Days of the
Company's receipt thereof, until the Investor has disposed of all of its Units.

                  (c) OTHER AGREEMENTS/BEST EFFORTS. The Company shall not enter
into any agreement the terms of which would restrict or impair the ability of
the Company to perform its obligations under this Agreement. The Company agrees
(i) to use all reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by the Transaction
Documents, (ii) to execute any documents, instruments or conveyances of any kind
that may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder and thereunder; and (iii) to cooperate with
the Investor in connection with the foregoing.

                  (d) CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument or by operation of law the obligation to
deliver to the Investor such shares of stock and/or securities as the Investor
is entitled to receive pursuant to this Agreement.

         9. COVENANTS BY THE INVESTOR. The Investor covenants with the Company
to not enter into any agreement the terms of which would restrict or impair the
ability of the Investor to perform its obligations under this Agreement. The
Investor agrees (i) to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by the
Transaction Documents, (ii) to execute any documents, instruments or conveyances
of any kind that may be reasonably necessary or advisable to carry out any of
the transactions

                                      -15-
<Page>

contemplated hereunder and thereunder; and (iii) to cooperate with the Company
in connection with the foregoing.

         10. INDEMNITY BY THE INVESTOR. The Investor agrees that it will
indemnify and hold harmless the Company, its affiliates, its Subsidiaries and
each of their respective officers, directors, employees and agents for any
costs, liabilities or losses caused by any misstatement of material fact by the
Investor with respect to the representations and warranties contained in Section
2 or any other written information furnished to the Company by the Investor in
connection with the investment contemplated by this Agreement.

         11. INDEMNITY BY THE COMPANY. The Company agrees that it will indemnify
and hold harmless the Investor for any costs, liabilities or losses caused by
any misstatement of material fact by the Company with respect to the
representations and warranties contained in Section 3 or any other written
information furnished to the Investor by the Company in connection with the
investment contemplated by this Agreement, or a breach of any covenant or any
obligation of the Company set forth in this Agreement.

         12. DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:

                  (a) "Amex" means the American Stock Exchange.

                  (b) "Business Day" means any day other than a Saturday, Sunday
or a day on which commercial banks in New York City are required or authorized
to close.

                  (c) "Escrow Agreement" means the Escrow Agreement, dated the
date hereof, by and among the Company, Investor and McGuireWoods LLP, as escrow
agent, substantially in the form attached hereto as EXHIBIT D.

                  (d) "Existing Warrants" means the 116,400 warrants, dated as
of December 30, 1999, by the Company in favor of the Investor, with an exercise
price of $28.37.

                  (e) "Investor's Rights Agreement" means the Investor's Rights
Agreement, dated the date hereof, by and between the Company and Investor,
substantially in the form attached hereto as EXHIBIT E.

                  (f) "Material Adverse Effect" shall mean any adverse effect on
the business, operation, properties, or financial condition of the Company that
is material and adverse to the Company and its subsidiaries, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to perform any of
its material obligations under this Agreement or any other Transaction Document.

                  (g) "SEC" means the Securities and Exchange Commission.

                  (h) "Transaction Documents" means this Agreement, the
Debentures, the Warrants, the Escrow Agreement and the Investor's Rights
Agreements entered into under this Agreement.

                                      -16-
<Page>

         13. TERMINATION.

                  (a) Unless otherwise terminated in accordance with Section
11.2 herein, the term of this Agreement shall be forty-eight (48) months from
the date hereof; provided, however, that the termination will not affect any
obligations arising prior to the date of such termination.

                  (b) OTHER TERMINATION. The Investor may terminate this
Agreement upon five (5) Business Day's notice if (i) an event resulting in a
Material Adverse Effect has occurred and has not been cured for a period of 60
days, (ii) the Common Stock is de-listed from the American Stock Exchange unless
such de-listing is in connection with the listing of the Common Stock on the
Nasdaq National Market, Nasdaq Small Cap Market or the New York Stock Exchange,
or (iii) the Company files for protection from creditors under any applicable
law.

                  (c) EFFECT OF TERMINATION. In the event of termination by the
Investor, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated without
further action by either party. Nothing in this Section 11(c) shall be deemed to
release the Company or the Investor from any liability for any breach under this
Agreement, or to impair the rights of the Company and the Investor to compel
specific performance by the other party of its obligations under this Agreement.

         14. MISCELLANEOUS.

                  (a) EXPENSES. Each party will bear its own expenses in respect
of the transactions contemplated by this Agreement, whether or not the Closing
or the Subsequent Closing occurs, except that the Company will pay the legal
fees of the Investor up to the lesser of (i) half of the aggregate legal fees
owed by the Investor to White & Case LLP or (ii) $15,000.

                  (b) FURTHER ASSURANCES. Upon the terms and subject to the
conditions contained herein, the parties agree (i) to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement; (ii) to execute any documents,
instruments or conveyances of any kind that may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder; and (iii)
to cooperate with each other in connection with the foregoing.

                  (c) NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be deemed to be delivered when received by certified mail, postage
prepaid, return receipt requested, when delivered by an expedited delivery
service or when sent by facsimile or e-mail after confirmation. All notices
shall be directed to the parties at the respective addresses set forth below or
to such other address as either party may, from time to time, designate by
notice to the other party:

If to the Company:         145 Hudson Street
                           New York, New York 10013
                           Attn: CFO and General Counsel

                                      -17-
<Page>

                           Tel: (917) 237-0500
                           Fax: (917) 237-1544

With copies to:            McGuire Woods LLP
                           9 West 57th Street
                           Suite 1620
                           New York, New York 10019
                           Attn:  William Newman, Esq.
                           Tel:  (212) 548-2160
                           Fax:  (212) 548-2150

If to Investor:   Abanat Limited

                           __________________
                           __________________
                           Attn:______________
                           Tel:
                           Fax:

With copies to:            White & Case LLP
                           1155 Avenue of the Americas
                           New York, New York 10036
                           Attn:  Kevin Keogh, Esq.
                           Tel:  (212) 819-8200
                           Fax:  (212) 354-8113

                                      -18-
<Page>

                  (d) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the Investor. Any
amendment, termination or waiver effected in accordance with this Section shall
be binding upon each holder of any securities issued pursuant to this Agreement
(including securities into which such securities have been converted or
exchanged), each future holder of any or all such securities, and the Company.

                  (e) ASSIGNABILITY. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither this Agreement nor
any rights, duties or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that vested rights to receive payment or to initiate legal action with respect
to causes of action that have accrued hereunder shall be assignable by devise,
descent or operation of law

                  (f) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement, and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

                  (g) GOVERNING LAW AND VENUE. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without regard to any conflicts of laws provisions. Each of the parties hereby
(i) irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
exclusively in the Federal or state courts sitting in New York, New York, and
any court to which an appeal may be taken in any such litigation, and (ii) by
execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to any such action or proceeding, for itself and in respect of its
properties and assets, generally and unconditionally, the jurisdiction of the
aforesaid courts, and irrevocably waives any and all rights such party may now
or hereafter have to object to such jurisdiction.

                  (h) BINDING EFFECT. Except as herein otherwise expressly
stipulated to the contrary, this Agreement shall be binding upon and inure to
the benefit of the parties signatory hereto, and their respective successors and
permitted assigns.

                  (i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  (j) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements with respect to the
subject matter hereof.

                  (k) WAIVER OF JURY TRIAL. Each of the Company and the other
parties hereto waives its right to a jury trial with respect to any action or
claim arising out of any dispute in connection with this agreement, any rights
or obligations hereunder or the performance of such

                                      -19-
<Page>

rights and obligations. Except as prohibited by law, each of the Company and the
other parties hereto hereby waives any right it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. Each of the Company and other parties hereto (x) certifies that
no representative, agent or attorney of any party hereto has represented,
expressly or otherwise, that such party would not, in the event of litigation,
seek to enforce the foregoing waivers and (y) acknowledges that the parties
hereto have been induced to enter into this Agreement by, among other things,
the waivers and certifications contained herein.

                  (l) PUBLICITY. Except as may be required by applicable law,
neither party hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval of the Company and the
Investor. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.

                            [Signature Page Follows]

                                      -20-
<Page>

         This Unit Subscription Agreement has been executed as of the date and
year first written above.

                                            ON2.COM INC.

                                            By:
                                                --------------------------------
                                            Name:
                                            Title:

                                            ABANAT LIMITED

                                            By:
                                                --------------------------------
                                            Name:
                                            Title:

                                      -21-
<Page>

                                    EXHIBIT A

                               [Form of Debenture]

                                      -22-
<Page>

                                    EXHIBIT B

                                [Form of Warrant]

                                      -23-
<Page>

                                    EXHIBIT C

                              [Form of New Warrant]

                                      -24-
<Page>

                                    EXHIBIT D

                           [Form of Escrow Agreement]

                                      -25-
<Page>

                                    EXHIBIT E

                      [Form of Investor's Rights Agreement]

                                      -26-
<Page>

                                    EXHIBIT F

                      [Form of Opinion of McGuireWoods LLP]

                                      -27-
<Page>

                                   SCHEDULE A

                             SCHEDULE OF EXCEPTIONS

                                      -28-<Page>

                                                                     EXHIBIT 4.9

                           INVESTOR'S RIGHTS AGREEMENT

This Investor's Rights Agreement (this "AGREEMENT") is made as of January 29,
2001, by and among On2.com Inc. (the "COMPANY"), a Delaware corporation, and
Abanat Limited, a British Virgin Islands corporation. Certain capitalized terms
used in this Agreement without definition shall have the meanings given them in
Section 14 hereof.

                                    PREAMBLE

      The Holder may acquire an aggregate of up to 200 Units consisting of $2.0
million principal amount of Series A Convertible Debentures due 2005 (the
"DEBENTURES") that are convertible into shares of the Company's Common Stock,
$0.01 par value per share (the "COMMON STOCK"), and warrants (the "WARRANTS") to
purchase 1,333,400 shares of the Company's Common Stock, and may exchange its
existing 116,400 warrants for new warrants (the "NEW WARRANTS") to purchase
116,400 shares of the Company's Common Stock, pursuant to the Unit Subscription
Agreement (the "SUBSCRIPTION AGREEMENT"), dated as of the date hereof, between
the Company and the Holder.

      Pursuant to the Subscription Agreement, the Company and the Holder have
agreed to enter into this Agreement.

      NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Holder hereby agree as follows:

      1. RESTRICTIONS ON TRANSFERABILITY. None of the Restricted Securities may
be sold, assigned, transferred, pledged or otherwise disposed of, whether or not
for value, except in compliance with the terms and conditions of this Agreement.
At such time as the Restricted Securities cease to be Restricted Securities
under the terms of this Agreement, the provisions of this Agreement shall no
longer apply to the securities that theretofore were Restricted Securities.

      2. RESTRICTIVE LEGEND.

      2.1 Each certificate representing the Debentures, the Common Stock into
which such Debentures are convertible, the Warrants, the New Warrants or the
Common Stock issued upon exercise of the Warrants and New Warrants shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required under applicable state securities laws or
otherwise):

            THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
            FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
            OF 1933 (THE "SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAW
            AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED,
            HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED BY THE

<Page>

            PROVISIONS OF REGULATION S UNDER THE ACT OR PURSUANT TO REGISTRATION
            UNDER THE ACT OR AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING
            TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
            IN COMPLIANCE WITH THE ACT.

            THE SALE, ASSIGNMENT, TRANSFER, PLEDGE AND OTHER DISPOSITION OF THE
            SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE
            INVESTOR'S RIGHTS AGREEMENT (THE "INVESTOR'S RIGHTS AGREEMENT"),
            DATED JANUARY 29, 2001. A COPY OF THE INVESTOR'S RIGHTS AGREEMENT IS
            ON FILE WITH THE CORPORATE SECRETARY AT THE PRINCIPAL EXECUTIVE
            OFFICES OF THE COMPANY. A COPY THEREOF MAY BE OBTAINED AT NO COST
            UPON WRITTEN REQUEST THEREFOR MADE BY THE HOLDER OF RECORD OF THIS
            CERTIFICATE TO THE CORPORATE SECRETARY AT THE PRINCIPAL OFFICES OF
            THE COMPANY.

Upon request of a holder of such a certificate, the Company shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, the Company shall
have received either (i) a written opinion of legal counsel to the Holder who
shall be reasonably satisfactory to the Company, addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act or (ii) a "no-action" letter from
the Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto; PROVIDED, that no such opinion of
counsel shall be required for a transfer by a Holder of Restricted Securities to
an Affiliate if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if such transferee were an original Holder of
Restricted Securities hereunder.

      2.2   STOP TRANSFER INSTRUCTIONS. The Holder consents to the Company's
making a notation on its records and giving instructions to any transfer agent
of the Restricted Securities in order to implement the restrictions on transfer
established in this Agreement. The Company agrees to, upon the request of a
Holder and as expeditiously as possible, make a notation on its records and give
instructions to any transfer agent of the Restricted Securities to cease to
implement the restrictions on transfer established in this Agreement, when such
restrictions cease in accordance with the terms of this Agreement or applicable
securities law.

      3.    NOTICE AND OTHER REQUIREMENTS OF TRANSFER. The Holder will be
permitted to sell, assign, transfer, pledge or otherwise dispose of any
Restricted Securities if and only if:

            a. the intended sale, assignment, transfer, pledge or other
            disposition is permitted by the other provisions of this Agreement;
            or

                                       2
<Page>

            b. there is in effect a registration statement under the Securities
            Act covering such proposed disposition and such disposition is made
            in accordance with such registration statement; or

            c. (i) the proposed sale, assignment, transfer, pledge or other
            disposition is to an Affiliate, and (ii) the Affiliate transferee,
            as a condition to the effectiveness of such sale, assignment,
            transfer, pledge or other disposition, has executed a counterpart of
            this Agreement expressly assuming the obligations of a Holder under
            this Agreement; or

            d. (i) the Holder has notified the Company of the proposed
            disposition and has furnished the Company with a statement of the
            circumstances surrounding the proposed sale, pledge or other
            disposition for value, including the name and address of the
            intended transferee, the residence of the transferee, a brief
            description of the business of the transferee and identifying the
            Restricted Securities with respect to which such rights are being
            assigned, and (ii) the intended transferee, as a condition to the
            effectiveness of such disposition, has executed a counterpart of
            this Agreement expressly assuming the obligations of the Holder
            under this Agreement; and, if the Company requests within five
            Business Days of receipt of the notice provided for in (i) the
            Holder shall also furnish the Company with an opinion of counsel,
            reasonably satisfactory to the Company, that such intended
            disposition does not require registration of such shares under the
            Securities Act.

      4.    PIGGYBACK REGISTRATION.

      4.1   NOTICE TO HOLDERS REQUIRED. If at any time or from time to time the
Company shall determine to register any shares of Common Stock for its own
account or the account of any person who holds securities of the Company that
are "restricted securities" under Rule 144, other than (a) a registration on
Form S-4 or S-8 or another form not generally available for registering the
Restricted Securities for sale to the public or (b) any registration comprised
in whole or in substantial part of shares underlying stock options or restricted
shares issued under an incentive compensation plan that has been adopted by the
Company or its predecessor, the Company will give to each Holder notice as soon
as practicable prior to filing the registration statement and include in such
registration all Registrable Securities specified in one or more written
requests which have been made within 15 Business Days after receipt of such
written notice from the Company by each Holder, except as set forth in Section
4.2

      4.2   REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the
registration of shares of Common Stock is for a registered public offering
involving an underwritten offering, the Company shall so advise each Holder as a
part of the written notice given pursuant to Section 4.1. In such event, the
right of each Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of each Holder's Registrable Securities in the underwriting to the
extent provided herein. If any Holder proposes to distribute his securities
through such underwriting, the Holder shall (together with the Company and the
other holders of Common Stock distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or

                                       3
<Page>

underwriters selected for such underwriting by the Company. The Company will use
its reasonable best efforts to include the Holder's Registrable Securities, pro
rata with all other securities of holders of piggyback registration rights, in
any such underwritten offering. Notwithstanding any provision of Section 4.1, if
the managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the underwriting or may
limit the number of Registrable Securities to be included in such registration.
The Company shall so advise the Holders, and the number of shares of Registrable
Securities and other securities that may be included in the registration and
underwriting shall be allocated among each Holder and all other holders of
Common Stock that hold rights granted by the Company to cause shares of Common
Stock held by them to be included in such registration or underwriting, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by the Holder and each other such holder that are requested to
be included in the registration or underwriting. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriter
may round the number of shares allocated to each Holder to the nearest one
hundred shares. If any Holder disapproves of the terms of any such underwriting,
it may elect to withdraw therefrom by written notice to the Company. In the
event of any such withdrawal, the Company will include in any such registration
in lieu thereof, on a pro rata basis, any additional shares of Registrable
Securities which were requested to be included by a Holder and any other shares
requested to be included by any other piggyback right holders, which were
excluded pursuant to the above-described underwriter limitation, up to the
maximum set by such underwriter.

      4.3   The Company's obligation to file a registration statement under
Section 4, or to cause a registration statement to become and remain effective
under such Section, shall be suspended for a period not to exceed 90 days (and
for periods not exceeding, in the aggregate, 120 days in any 12-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Board of Directors of the Company,
should not be disclosed.

      5.    DEMAND REGISTRATION

      5.1   NOTICE OF REGISTRATION. At any time after April 29, 2001, the Holder
may thereafter demand that a registration statement be filed with the Commission
within 30 days after the date on which the Company has received such request,
subject to the provisions of this Section 5. Subject to the terms and conditions
set forth below in this Section 5.1 and Sections 5.2 through 5.3 and Section 7,
upon the Company's receipt from a Holder of a written request that the Company
effect a registration under the Securities Act with respect to its Registrable
Securities, the Company will, as expeditiously as possible, notify the Holders
in writing of such request and use its diligent best efforts to effect all such
registrations (including, without limitation, the execution of an undertaking to
file post-effective amendments and appropriate qualifications and approvals
under the laws and regulations applicable to the Company of any applicable
governmental agencies and authorities, including applicable blue sky or other
state securities laws) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of the Registrable Securities
as are specified in such request, PROVIDED, that (a) the Holders may not make
their request within 90 days following the effectiveness of any registered
public offering of Common Stock, unless prohibited by applicable securities
laws; (b)

                                       4
<Page>

before filing any such registration statement or any amendments or supplements
thereto, the Company will (i) furnish to the Holders of Registrable Securities
which are to be included in such registration copies of all such documents
proposed to be filed, which documents will be subject to the review of the
Holders and their counsel, and (ii) give the Holders of Registrable Securities
to be included in such registration statement and their representatives the
opportunity to conduct a reasonable investigation of the records and business of
the Company and to participate in the preparation of any such registration
statement or any amendments or supplements thereto; (c) the Company shall not be
obligated to take any action to effect such registration pursuant to this
Section 5.1 after the Company has effected one such registration pursuant to
this Section 5.1 at the request of the Holder; PROVIDED, that such registration
has been declared or ordered effective by the Commission and, if the method of
distribution is a registered public offering involving an underwritten offering,
all such shares registered thereby shall have been sold pursuant thereto; and
(d) the Company shall not be required to file any registration statement under
this Section 5.1 unless the holders of at least 33% of the issued and
outstanding Registrable Securities (taken as a whole) shall have demanded in
writing that the Company file a registration statement under this Section 5.1.
With respect to any registration requested pursuant to this Section 5.1, the
Company may include in such registration any other shares of Common Stock,
subject to the restrictions set forth in Section 5.3, as to which it is
obligated to include such shares pursuant to agreements requiring such
registration.

      5.2   REGISTRATION STATEMENT. Subject to Section 5.1 above and the other
terms and conditions contained herein, the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practical, but in any event within 30 days after receipt of the request
of the Holders; PROVIDED, that if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment and upon the consent of a majority of the Board of Directors it
would require the disclosure of material non-public information about the
Company, the disclosure of which could be seriously detrimental to the business
or financial condition of the Company or to negotiations in which it is engaged
for such registration statement to be filed at the date filing would be required
under Section 5.1 and it is therefore desirable to defer the filing of such
registration statement, in which case the Company shall have an additional
period of not more than 60 days within which to file such registration
statement.

      5.3   REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the Holders
intend to distribute the Registrable Securities covered by their request under
Section 5.1 by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to Section 5.1. In such event, the Holders
shall negotiate in good faith with a nationally recognized underwriter or
underwriters selected by the Holders and reasonably satisfactory to the Company
with regard to the underwriting of such requested registration. The right of the
Holders to registration pursuant to this Section 5.3 shall be conditioned upon
participation by all Holders in such underwriting to the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected pursuant to this
Section 5.3. Notwithstanding any other provision of this Section 5.3, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) limit the

                                       5
<Page>

number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following priority: first, among all Holders, and any reduction among such
Holders shall be pro rata among all such persons and, for purposes of making any
such reduction, each Holder which is a partnership, together with the
affiliates, partners, employees, retired partners and retired employees of such
Holder, the estates and family members of any such partners, employees, retired
partners and retired employees and of their spouses, and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "person,"
and any pro rata reduction with respect to such "person" shall be based upon the
aggregate number of Registrable Securities owned by all entities and individuals
included as such "person", as defined in this sentence (and the aggregate number
so allocated to such "person" shall be allocated among the entities and
individuals included in such "person" in such manner as such Holder may
reasonably determine); and second, to the Company, and third, among all other
stockholders in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration at
the time of filing the Registration Statement. To facilitate the allocation of
shares in accordance with the above provisions, the underwriter may round the
number of shares allocated to the Holders to the nearest one hundred shares. If
any Holder of Registrable Securities disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter and the other Holders. In the event of any such
withdrawal, the Company will include in any such registration in lieu thereof
any additional shares of Registrable Securities which were requested to be
included by a Holder and which were excluded pursuant to the above-described
underwriter limitation up to the maximum set by such underwriter.

      6.    EXPENSES OF REGISTRATION. The Company will bear all reasonable
expenses incurred in connection with registrations pursuant to Section 4 and
Section 5, including without limitation all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and independent accounts for the Company and expenses of any special
audits of the Company's financial statements incidental to or required by such
registration, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars' fees, but the Company
will not pay underwriters' fees, discounts or commissions relating to the
Registrable Securities or any fees or expenses legal counsel for any or all of
the Holders.

      7.    REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Sections 4 or 5 to use its best efforts to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:

            (a) furnish to a single representative of the Holders, who shall
initially be Abanat Limited or such other person or entity as the Company is
instructed in writing (the "Representative") and to each managing underwriter,
if any, a reasonable time in advance of their filing with the SEC any
registration statement, amendment or supplement thereto, and any prospectus used
in connection therewith, and the Representative shall have the opportunity to
object to any information pertaining to it and its plan of distribution that is
contained therein and the Company will make the corrections reasonably required
by such Representative with respect to such information prior to filing any such
registration statement or any amendment or

                                       6
<Page>

supplement thereto, and if requested in writing by the Representative, and
furnish a copy of any and all transmittal letters or other correspondence with
the SEC or any other governmental agency or self-regulatory body or other body
having jurisdiction (including any domestic or foreign securities exchange)
relating to such offering;

            (b) prepare and file with the SEC a registration statement (which,
in the case of a requested registration pursuant to Section 5, shall be on a
registration statement form which is sufficient to permit the sale or other
disposition of any or all shares of Common Stock to be included therein in
accordance with the intended method of sale or other distribution stated by the
initiating Holders, including a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision) with respect to such
securities and use its best efforts to cause such registration statement to
become effective as soon as practicable and to remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);

            (c) furnish to each seller and to each underwriter such number of
copies of the registration statements, each amendment and supplement thereto
(and, if requested in writing, all exhibits thereto and documents incorporated
by reference therein) and the prospectus included therein (including each
preliminary prospectus and prospectus) and any other prospectus filed under Rule
424 promulgated under the Securities Act relating to the Registrable Securities
and such other documents as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Registrable Securities
covered by such registration statement;

            (d) after the filing of the registration statement, on the day of
receipt of knowledge thereof notify each seller of Registrable Securities and
each managing underwriter, if any, of any stop order issued or, to the knowledge
of the Company, threatened to be issued by the SEC and promptly take all
reasonably necessary actions to prevent the entry of such stop order or to
remove it if entered;

            (e) use its commercially reasonable best efforts to register or
qualify the Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of any state as the sellers of Registrable
Securities, or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request, and use its commercially reason-able best
efforts to obtain all appropriate registrations, permits and consents required
in connection therewith, and to keep such registrations, qualifications, permits
and consents in effect for so long as such registration statement remains in
effect and to take any other action which may be reasonably necessary to enable
the seller of Registrable Securities to consummate the disposition in such
jurisdictions of such securities; provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;

            (f) use its commercially reasonable best efforts to list the
Registrable Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is then listed;

                                       7
<Page>

            (g) furnish, in a timely fashion, unlegended certificates
representing ownership of the Registrable Securities being sold in such
denominations as shall be requested by the seller or the lead underwriter;

            (h) on the day of receipt of knowledge thereof inform each seller
and the managing underwriter or underwriters, if any, (1) of the date on which a
registration statement or any post-effective amendment thereto has been filed
and when the same has become effective and, if applicable, of the date of filing
a Rule 430A prospectus, or (2) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws of any
jurisdiction and as soon as practicable after receipt of knowledge thereof
inform each seller and the managing underwriters, if any, of any written
comments from the SEC with respect to any filing referred to in clause (1) and
of any request by the SEC, any securities exchange, government agency,
self-regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or preliminary prospectus or prospectus
included therein or any offering memorandum or other offering document relating
to such offering.

            (i) on the day of receipt of knowledge thereof notify the
Representative and each underwriter under such registration statement, at any
time when a prospectus relating thereto is required by law to be delivered in
connection with sales by an underwriter or dealer, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and as promptly as practicable make available to each
seller and to each managing underwriter, if any, any such supplement or
amendment; in the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective as provided in Section 7(b) hereof by the number of days during the
period from and including the date of the giving of such notice to the date when
the Company shall make available to such sellers such supplemented or amended
prospectus;

             (j) upon written request, make available for inspection by each
seller of Registrable Securities, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply information
reason-ably requested by such seller, underwriter, attorney, accountant or agent
in connection with such registration statement;

            (k) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the sale of such securities,
including having one of its senior executives appear at no more than two
"roadshow" meetings to be held in New York City;

                                       8
<Page>

            (l) provide a transfer agent and registrar, and a CUSIP number, for
all Registrable Securities covered by such registration statement not later than
the effective date of such registration statement; and

            (m) provide signed counterparts, addressed to each such Holder, of
an opinion of the Company's counsel and a "cold comfort" letter of the Company's
independent certified public accountants with respect to the matters customarily
covered in such documents delivered to underwriters in underwritten public
offerings.

            In connection with each registration hereunder, the sellers of
Registrable Securities will furnish to the Company in writing such information
with respect to themselves and the proposed distribution by them as reasonably
shall be necessary in order to assure compliance with federal and applicable
state securities laws.

            In connection with each registration pursuant to Sections 4 or 5
covering an underwritten public offering, the Company and each Holder agrees to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.

            For purposes of Section 7(b) hereof, the period of distribution of
Registrable Securities in a firm commitment underwritten public offering shall
be deemed to extend until the earlier of the sale of all Registrable Securities
covered thereby or twelve months after the effective date thereof, and the
period of distribution of Registrable Securities in any other registration shall
be deemed to extend until the earlier of the sale of all Registrable Securities-
covered thereby or nine months after the effective date thereof.

      8.    INDEMNIFICATION.

      8.1   INDEMNITY BY THE COMPANY. If the Company registers any Registrable
Securities held by the Holder under the Securities Act pursuant to Section 4 or
Section 5, the Company will indemnify and hold harmless the Holder, and each
other person, if any, who controls the Holder, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Holder, the underwriter, if any, or such controlling
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act or any state securities
law applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse the Holder
and the underwriter, their respective officers, directors and partners, and each
person controlling the Holder and the

                                       9
<Page>

underwriter, for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by the
Holder or the underwriter specifically for use therein.

      8.2   INDEMNITY BY THE HOLDER. Each Holder will, if Registrable Securities
held by or issuable to the Holder are included in the securities as to which
such registration is being effected, indemnify and hold harmless the Company,
each of its directors, each officer who signs the registration statement, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company and each underwriter within the
meaning of the Securities Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other document
made in writing by the Holder, or any omission (or alleged omission) by the
Holder to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, partners, persons or underwriters for any
reasonable legal or any other expenses incurred by them in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by the Holder specifically for use
therein; PROVIDED, that the total amount for which the Holder, its officers,
directors and partners, and any person controlling the Holder, shall be liable
under this Section 8.2 shall not in any event exceed the proceeds (net of
underwriting discounts and commissions) received by the Holder from the sale of
Registrable Securities sold by the Holder in such registration.

      8.3   NOTICE BY THE INDEMNIFIED PARTY. Each party entitled to
indemnification under this Section 8 (the "INDEMNIFIED PARTY") shall give notice
to the party required to provide indemnification (the "INDEMNIFYING PARTY")
promptly after such Indemnified Party has actual knowledge of any claims as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
actual detriment to the Indemnifying Party. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom. An Indemnified
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be

                                       10
<Page>

inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding, provided that in no event shall the Indemnifying Party be required
to pay the fees and expenses of more than one such separate counsel for all
Indemnified Parties. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.

      8.4 CONTRIBUTION. If the indemnification provided for in this Section is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount that the Holder shall be obligated to
contribute pursuant to this Section 8.4 shall be limited to an amount equal to
the proceeds to the Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Registrable Securities).

      8.5 SURVIVAL OF INDEMNITY. The indemnification and contribution provided
by this Section shall be a continuing right to indemnification and shall survive
the registration and sale of any securities by any person entitled to
indemnification under this Agreement.

      9. LOCKUP AGREEMENT. In consideration for the Company's performance of its
obligations under this Agreement, the Holder will, in connection with any
registration of any Registrable Securities in an underwritten offering, at the
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, agree not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any Restricted
Securities (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 90 days) from the effective date of such
registration as the Company and the underwriters may specify, so long as
similarly situated stockholders of the Company are bound by a comparable
obligation.

      10. BOARD OF DIRECTORS. For as long as the Holders beneficially own (as
determined in accordance with Section 13(d) of the Exchange Act) at least 10% of
the outstanding Common

                                       11
<Page>

Stock of the Company, at the Holders request, the Company shall use its best
efforts to cause and maintain the election to the Board of Directors of one
designee of the Holders of a majority of the Registrable Securities; provided,
however, that such designee must be approved by the Board of Directors, which
approval shall not be unreasonably withheld. The Company shall promptly
reimburse such director for any expenses incurred by him in connection with his
activities as a director of the Company in accordance with Company policies. The
Company shall indemnify such director against liability to the fullest extent
permitted by applicable law.

      11.   HOLDERS' COOPERATION.

      11.1  INFORMATION REGARDING HOLDERS. Each Holder shall promptly furnish to
the Company such information regarding the Holder and the distribution proposed
by the Holder as the Company may request in writing and as shall be required in
connection with any registration referred to herein.

      11.2  OBLIGATIONS OF THE HOLDERS. The Holders will not (until further
notice by the Company) effect sales thereof (or deliver a prospectus to any
purchaser) after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus. At the end of the period during which the Company is
obligated to keep any registration statement filed under Section 4 or Section 5
current and effective as required by applicable law, the Holders shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares of Registrable Securities covered by such registration statement that
remain unsold, and the Holders shall notify the Company of the number of such
shares registered that remain unsold immediately upon receipt of such notice
from the Company.

      12.   RULE 144. With a view to making available to the Holders the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:

      (a)   make and keep public information available, as those terms are
            understood and defined in Rule 144; and

      (b)   use its best efforts to file with the Commission in a timely manner
            all reports and other documents required of the Company under the
            Securities Act and the Exchange Act.

      13.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder as follows:

      13.1  The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other

                                       12
<Page>

instrument or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.

      13.2  This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of equitable remedies as such remedies may be limited
by equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).

      14.   DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

            a. "AFFILIATE" shall have the meaning given to it under Rule 405 of
            the Securities Act.

            b. "BUSINESS DAY" means any day other than a Saturday, Sunday or a
            day on which commercial banks in New York City are required or
            authorized to close.

            c. "COMMISSION" shall mean the U. S. Securities and Exchange
            Commission, or any other federal agency at the time administering
            the Securities Act.

            d. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
            amended, or any similar United States statute and the rules and
            regulations thereunder, all as the same shall be in effect at the
            time.

            e. "HOLDER" or "HOLDERS" shall mean Abanat Limited and, if
            applicable, any other person who holds Restricted Securities and who
            has assumed the obligations of the Holder under this Agreement
            pursuant to Section 3(d).

            f. "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
            registration effected by preparing and filing a registration
            statement in compliance with the Securities Act, and the declaration
            or ordering of the effectiveness of such registration statement, and
            compliance with applicable state securities laws of such states in
            which the Holder notifies the Company of its intention to offer
            Registrable Securities.

            g. "REGISTRABLE SECURITIES" shall mean any shares of Common Stock
            into which the Debentures are convertible or were converted and any
            shares of Common Stock issuable or issued upon due exercise of the
            Warrants and New Warrants; provided, however, that Registrable
            Securities shall only be treated as Registrable Securities if and so
            long as, they have not been (A) sold to or through a broker or
            dealer or underwriter in a public distribution or a public
            securities transaction or (B) sold in a transaction exempt from the
            registration and prospectus delivery requirements of the Securities
            Act so that all transfer restrictions and restrictive legends with
            respect thereto are removed upon the consummation of such sale.

                                       13
<Page>

            h. "RESTRICTED SECURITIES" shall mean the Debenture, any shares of
            Common Stock into which the Debentures are convertible, the
            Warrants, the New Warrants and any shares of Common Stock issuable
            upon due exercise of the Warrants and the New Warrants, in each case
            only to the extent the same have not been sold to the public. As to
            any particular Restricted Securities, such securities shall cease to
            be Restricted Securities when (i) a registration statement with
            respect to the sale of such securities shall have become effective
            under the Securities Act and such securities shall have been
            disposed of under such registration statement, (ii) such securities
            shall have become eligible for resale pursuant to Rule 144(k) and
            any restrictive legend on certificates representing such securities
            shall have been removed, (iii) such securities shall have been
            otherwise transferred or disposed of, and (x) new certificates
            therefore not bearing a legend restricting further transfer shall
            have been delivered by the Company, and (y) subsequent transfer or
            disposition of them shall not require their registration or
            qualification under the Securities Act or any similar state law then
            in force or compliance with Rule 144, or (iv) such securities shall
            have ceased to be outstanding. Notwithstanding the foregoing,
            Restricted Securities shall not include otherwise Restricted
            Securities (i) sold by a person in a transaction in which his rights
            under this Agreement are not properly assigned; or (ii) (A) sold to
            or through a broker or dealer or underwriter in a public
            distribution or a public securities transaction, or (B) sold in a
            transaction exempt from the registration and prospectus delivery
            requirements of the Securities Act under Section 4(1) thereof if all
            transfer restrictions, and restrictive legends with respect thereto,
            if any, are removed upon the consummation of such sale.

            i. "RULE 144" shall mean Rule 144 under the Securities Act or any
            successor or similar rule as may be enacted by the Commission from
            time to time.

            j. "SECURITIES ACT" shall mean the Securities Act of 1933, as
            amended, or any similar United States statute and the rules and
            regulations thereunder, all as the same shall be in effect at the
            time.

      15.   MISCELLANEOUS.

      15.1  AMENDMENTS. This Agreement may be amended only by a written
instrument executed by the Holders and the Company.

      15.2  COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute a single instrument.

      15.3  NOTICES. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to be delivered when received by certified mail, postage prepaid, return
receipt requested, when delivered by an expedited delivery service or when sent
by facsimile or e-mail after confirmation. All notices shall be directed to the
parties at the respective addresses set forth below or to such other address as
either party may, from time to time, designate by notice to the other party:

                                       14
<Page>

If to the Company:      145 Hudson Street
                        New York, New York 10013
                        Attn: CFO and General Counsel
                        Tel: (917) 237-0500
                        Fax: (917) 237-1544

With copies to:         McGuire Woods LLP
                        9 West 57th Street
                        Suite 1620
                        New York, New York 10019
                        Attn:  William Newman, Esq.
                        Tel:  (212) 548-2160
                        Fax:  (212) 548-2150

If to the Holder:       Abanat Limited

                        _____________________
                        _____________________
                        Attn:
                        Tel:
                        Fax:

With copies to:         White & Case LLP
                        1155 6th Avenue, 40th Floor
                        New York, NY  10036
                        Attn:  Kevin Keogh, Esq.
                        Tel:  (212) 819-8200
                        Fax:  (212) 354-8113

      15.4 ASSIGNABILITY. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, duties or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties hereto, except that
vested rights to receive payment or to initiate legal action with respect to
causes of action that have accrued hereunder shall be assignable by devise,
descent or operation of law.

      15.5 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.

      15.6 GOVERNING LAW; VENUE. (a) This Agreement shall be governed by and
construed under the laws of the State of New York without regard to principles
of conflict of law. Each of the parties hereby (i) irrevocably consents and
agrees that any legal or equitable action or proceeding arising under or in
connection with this Agreement shall be brought exclusively in the Federal or
state courts sitting in New York, New York, and any court to which an appeal may

                                       15
<Page>

be taken in any such litigation, and (ii) by execution and delivery of this
Agreement, irrevocably submits to and accepts, with respect to any such action
or proceeding, for itself and in respect of its properties and assets, generally
and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to such
jurisdiction.

            (b) Each of the Company and the other parties hereto waives its
right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this agreement, any rights or obligations hereunder
or the performance of such rights and obligations. Except as prohibited by law,
each of the Company and the other parties hereto hereby waives any right it may
have to claim or recover in any litigation referred to in the preceding sentence
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. Each of the Company and other parties
hereto (x) certifies that no representative, agent or attorney of any party
hereto has represented, expressly or otherwise, that such party would not, in
the event of litigation, seek to enforce the foregoing waivers and (y)
acknowledges that the parties hereto have been induced to enter into this
Agreement by, among other things, the waivers and certifications contained
herein.

                            [Signature Page Follows]

                                       16
<Page>

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                    THE COMPANY:

                                    ON2.COM INC.

                                    By:
                                       ---------------------------------------
                                    Name:
                                    Title:

                                    THE HOLDER:

                                    ABANAT LIMITED

                                    By:
                                       ---------------------------------------
                                    Name:
                                    Title:

                                       17

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