EXHIBIT 3.1B
                                  ------------

                              ARTICLES OF AMENDMENT

                       TO THE ARTICLES OF INCORPORATION OF

                            RASER TECHNOLOGIES, INC.


         Pursuant to the  provisions of Section  16-10a-1006 of the Utah Revised
Business Corporation Act (the "Act"), the undersigned  corporation hereby adopts
the following Articles of Amendment to its Articles of Incorporation.

         FIRST: The name of the corporation is Raser Technologies, Inc.

         SECOND: The following amendment to the Articles of Incorporation of the
corporation  were duly adopted  through a resolution  by consent of the Board of
Directors in accordance with Section 16-10a-821 of the Act on June 30, 2004, and
Article  XI  of  this  corporation's  Articles  of  Incorporation,  as  amended,
following approval thereof by the Board of Directors in the manner prescribed by
the Act and the Articles of Incorporation, to-wit:

                                Article IV- Stock

         The  aggregate  number of shares  which  this  corporation  shall  have
authority to issue is 105,000,000 shares, divided into two classes,  100,000,000
shares  of  common  stock of a par  value  of one cent  ($0.01)  per  share  and
5,000,000  shares  of  preferred  stock of a par value of one cent  ($0.01)  per
share, 4,993,000 of which shall have such rights and preferences as the Board of
Directors shall  determine;  and 7,000 of which shall be designated as "Series B
Convertible  Preferred Stock" with the following  powers,  preferences,  rights,
qualifications, limitations and restrictions:

                      SERIES B CONVERTIBLE PREFERRED STOCK

         Section 1.  Designation,  Amount and  Ranking.  The series of preferred
stock shall be designated as the  corporation's  Series B Convertible  Preferred
Stock (the  "Preferred  Stock") and the number of shares so designated  shall be
7,000 (which shall not be subject to increase  without the consent of all of the
holders  of  the  Preferred  Stock  (each,  a  "Holder"  and  collectively,  the
"Holders")).  Each share of  Preferred  Stock shall have a stated value equal to
$1,000 (the "Stated  Value").  Capitalized  terms not otherwise  defined  herein
shall have the meaning given such terms in Section 8 hereof.

         Section 2. Dividends.

              (a) Holders shall be entitled to receive and the Corporation shall
         pay, cumulative dividends at the rate per share (as a percentage of the
         Stated Value per share) of 7% per annum,  payable quarterly on March 1,
         June 1,  September 1 and December 1,  beginning  with September 1, 2004
         and on any  Conversion  Date  pursuant to the terms  hereunder  (except
         that,  if such date is not a Trading Day, the payment date shall be the
         next succeeding  Trading  Day)("Dividend  Payment  Date").  The form of
         dividend  payments to each Holder shall be made in the following order:


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         (i) if funds are legally available for the payment of dividends and the
         Equity  Conditions  have not been met, in cash only,  (ii) if funds are
         legally   available  for  the  payment  of  dividends  and  the  Equity
         Conditions have been met, at the sole election of the  Corporation,  in
         cash or shares of Common  Stock which  shall be valued  solely for such
         purpose at the  lesser of (A) the Set Price and (B) 90% of the  average
         of the 20 VWAPs  immediately  prior to the Dividend Payment Date; (iii)
         if funds are not legally available for the payment of dividends and the
         Equity  Conditions have been met, in shares of Common Stock which shall
         be valued at 90% of the lesser of (A) the Set Price and (B) the average
         of the 20 VWAPs immediately prior to the Dividend Payment Date; (iv) if
         funds are not legally  available  for the payment of dividends  and the
         Equity  Conditions  have been waived by such Holder,  as to such Holder
         only,  in shares of Common Stock which shall be valued at the lesser of
         (A)  the  Set  Price  and  (B)  90% of  the  average  of  the 20  VWAPs
         immediately  prior to the Dividend  Payment Date;  and (v) if funds are
         not  legally  available  for the  payment of  dividends  and the Equity
         Conditions  have not been met,  then,  at the  election of such Holder,
         such dividends shall accrue to the next Dividend  Payment Date or shall
         be accreted to the outstanding Stated Value. The Holders shall have the
         same  rights and  remedies  with  respect to the  delivery  of any such
         shares as if such  shares were being  issued  pursuant to Section 5. On
         the  Closing  Date the  Corporation  shall have  notified  the  Holders
         whether or not it may  lawfully  pay cash  dividends.  The  Corporation
         shall  promptly  notify the Holders at any time the  Corporation  shall
         become  able or  unable,  as the  case  may be,  to  lawfully  pay cash
         dividends.  If at  any  time  the  Corporation  has  the  right  to pay
         dividends in cash or Common  Stock,  the  Corporation  must provide the
         Holder with at least 20 Trading  Days'  notice of its election to pay a
         regularly  scheduled  dividend  in  Common  Stock.   Dividends  on  the
         Preferred  Stock shall be  calculated  on the basis of a 360-day  year,
         shall accrue daily  commencing on the Original Issue Date, and shall be
         deemed to accrue from such date  whether or not earned or declared  and
         whether  or not  there  are  profits,  surplus  or  other  funds of the
         Corporation  legally available for the payment of dividends.  Except as
         otherwise  provided  herein,  if  at  any  time  the  Corporation  pays
         dividends  partially in cash and partially in shares, then such payment
         shall be distributed ratably among the Holders based upon the number of
         shares of Preferred Stock held by each Holder.  Any dividends,  whether
         paid in cash or shares,  that are not paid within  three  Trading  Days
         following a Dividend  Payment  Date shall  continue to accrue and shall
         entail a late fee,  which must be paid in cash,  at the rate of 18% per
         annum or the lesser  rate  permitted  by  applicable  law (such fees to
         accrue daily,  from the Dividend Payment Date through and including the
         date of payment).

              (b) So long  as any  Preferred  Stock  shall  remain  outstanding,
         neither  the  Corporation  nor any  subsidiary  thereof  shall  redeem,
         purchase  or  otherwise  acquire  directly  or  indirectly  any  Junior
         Securities.  So long as any Preferred  Stock shall remain  outstanding,
         neither the  Corporation  nor any subsidiary  thereof shall directly or
         indirectly pay or declare any dividend or make any distribution  (other
         than a dividend or distribution described in Section 5 or dividends due
         and paid in the ordinary  course on preferred  stock of the Corporation
         at such times when the  Corporation  is in compliance  with its payment
         and other  obligations  hereunder)  upon, nor shall any distribution be
         made in respect of, any Junior  Securities so long as any dividends due
         on the Preferred Stock remain unpaid, nor shall any monies be set aside
         for or applied to the purchase or redemption (through a sinking fund or
         otherwise)  of any  Junior  Securities  or shares  pari  passu with the
         Preferred Stock.

              (c) The  Corporation  acknowledges  and agrees that the capital of
         the Corporation (as such term is used in Section 16-10a-601 of the Utah
         Revised Business  Corporation Act in respect of the Preferred Stock and
         any future issuances of the Corporation's  capital stock shall be equal
         to the aggregate par value of such Preferred Stock or capital stock, as

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         the case  may be,  and  that,  on or  after  the  date of the  Purchase
         Agreement,  it shall not increase the capital of the  Corporation  with
         respect to any shares of the  Corporation's  capital  stock  issued and
         outstanding on such date. The Corporation also  acknowledges and agrees
         that it shall not create any special reserves under Section  16-10a-601
         of the Utah Revised Business  Corporation Act without the prior written
         consent of each Holder.

         Section 3. Voting Rights.  Except as otherwise  provided  herein and as
otherwise  required by law,  the  Preferred  Stock shall have no voting  rights.
However,  so  long  as any  shares  of  Preferred  Stock  are  outstanding,  the
Corporation shall not, without the affirmative vote of the Holders of the shares
of the  Preferred  Stock then  outstanding,  (a) alter or change  adversely  the
powers,  preferences  or rights given to the  Preferred  Stock or alter or amend
this  Certificate  of  Designation,  (b)  authorize or create any class of stock
ranking as to dividends, redemption or distribution of assets upon a Liquidation
(as defined in Section 4) senior to or otherwise  pari passu with the  Preferred
Stock, (c) amend its certificate of incorporation or other charter  documents so
as to affect  adversely any rights of the Holders,  (d) increase the  authorized
number of shares of  Preferred  Stock,  or (e)  enter  into any  agreement  with
respect to the foregoing.

         Section 4. Liquidation. Upon any liquidation, dissolution or winding-up
of the  Corporation,  whether  voluntary or involuntary (a  "Liquidation"),  the
Holders  shall be  entitled  to receive  out of the  assets of the  Corporation,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value per share plus any accrued and unpaid dividends
thereon  and any other  fees or  liquidated  damages  owing  thereon  before any
distribution  or payment shall be made to the holders of any Junior  Securities,
and if the assets of the  Corporation  shall be insufficient to pay in full such
amounts,  then the  entire  assets to be  distributed  to the  Holders  shall be
distributed among the Holders ratably in accordance with the respective  amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A Fundamental  Transaction or Change of Control  Transaction  shall not be
treated as a Liquidation.  The Corporation shall mail written notice of any such
Liquidation,  not less than 45 days prior to the payment date stated therein, to
each record Holder.

         Section 5. Conversion.

              (a) (i)  Conversions at Option of Holder.  Each share of Preferred
         Stock shall be  convertible  into that number of shares of Common Stock
         (subject to the limitations set forth in Section  5(a)(ii))  determined
         by dividing the Stated  Value of such share of  Preferred  Stock by the
         Set Price,  at the option of the  Holder,  at any time and from time to
         time from and after the  Original  Issue  Date.  Holders  shall  effect
         conversions  by providing the  Corporation  with the form of conversion
         notice  attached  hereto  as  Annex  A (a  "Conversion  Notice").  Each
         Conversion Notice shall specify the number of shares of Preferred Stock
         to be converted, the number of shares of Preferred Stock owned prior to
         the conversion at issue,  the number of shares of Preferred Stock owned
         subsequent  to the  conversion  at issue  and the  date on  which  such
         conversion  is to be effected,  which date may not be prior to the date
         the  Holder  delivers  such  Conversion  Notice to the  Corporation  by
         facsimile (the "Conversion  Date").  If no Conversion Date is specified
         in a Conversion Notice, the Conversion Date shall be the date that such
         Conversion Notice to the Corporation is deemed delivered hereunder. The
         calculations  and  entries  set forth in the  Conversion  Notice  shall
         control in the absence of manifest or mathematical error.

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              (ii) Beneficial  Ownership  Limitation.  The Corporation shall not
         effect any conversion of the Preferred  Stock, and the Holder shall not
         have the right to convert  any  portion of the  Preferred  Stock to the
         extent  that  after  giving  effect  to  such  conversion,  the  Holder
         (together with the Holder's affiliates), as set forth on the applicable
         Conversion  Notice,  would  beneficially  own in excess of 4.99% of the
         number of shares of the  Common  Stock  outstanding  immediately  after
         giving  effect  to  such  conversion.  For  purposes  of the  foregoing
         sentence,  the number of shares of Common Stock  beneficially  owned by
         the Holder and its  affiliates  shall  include  the number of shares of
         Common Stock  issuable  upon  conversion  of the  Preferred  Stock with
         respect to which the  determination of such sentence is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable upon (A)  conversion  of the  remaining,  nonconverted  Stated
         Value of Preferred Stock beneficially owned by the Holder or any of its
         affiliates  and  (B)  exercise  or  conversion  of the  unexercised  or
         nonconverted  portion  of  any  other  securities  of  the  Corporation
         (including  the  Warrants)  subject to a limitation  on  conversion  or
         exercise  analogous to the  limitation  contained  herein  beneficially
         owned by the  Holder or any of its  affiliates.  Except as set forth in
         the  preceding  sentence,   for  purposes  of  this  Section  5(a)(ii),
         beneficial  ownership  shall be calculated  in accordance  with Section
         13(d) of the Exchange Act. To the extent that the limitation  contained
         in this Section  5(a)(ii)  applies,  the  determination  of whether the
         Preferred Stock is convertible (in relation to other  securities  owned
         by the Holder  together  with any  affiliates)  and of which  shares of
         Preferred Stock is convertible  shall be in the sole discretion of such
         Holder, and the submission of a Conversion Notice shall be deemed to be
         such Holder's  determination  of whether the shares of Preferred  Stock
         may be converted (in relation to other securities owned by such Holder)
         and which shares of the Preferred  Stock is  convertible,  in each case
         subject to such aggregate percentage limitations.  To ensure compliance
         with this  restriction,  the Holder will be deemed to  represent to the
         Corporation  each  time it  delivers  a  Conversion  Notice  that  such
         Conversion  Notice has not violated the  restrictions set forth in this
         paragraph  and the  Corporation  shall have no  obligation to verify or
         confirm  the  accuracy  of such  determination.  For  purposes  of this
         Section  5(a)(ii),  in determining the number of outstanding  shares of
         Common Stock,  the Holder may rely on the number of outstanding  shares
         of Common Stock as reflected in the most recent of the  following:  (A)
         the  Corporation's  most recent Form 10-Q or Form 10-K, as the case may
         be, (B) a more recent public announcement by the Corporation or (C) any
         other notice by the  Corporation  or the  Corporation's  transfer agent
         setting  forth the number of shares of Common Stock  outstanding.  Upon
         the written or oral request of the Holder, the Corporation shall within
         two Trading Days confirm orally and in writing to the Holder the number
         of shares of Common Stock then outstanding.  In any case, the number of
         outstanding  shares of Common  Stock shall be  determined  after giving
         effect to the conversion or exercise of securities of the  Corporation,
         including the Preferred  Stock,  by the Holder or its affiliates  since
         the date as of which such number of outstanding  shares of Common Stock
         was reported.

              (iii) Forced  Conversion.  Notwithstanding  anything herein to the
         contrary,  if after the 90th day following the Effective  Date the VWAP
         for each of any 30 consecutive Trading Days ("Threshold Period"), which
         30  consecutive  Trading Day period shall have commenced only after the
         Effective  Date,  exceeds 200% of the then effective Set Price (defined
         below),  the  Corporation  may,  within 2 Trading  Days  after any such

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         Threshold Period, deliver a notice to all Holders (a "Forced Conversion
         Notice"  and the date  such  notice is  received  by the  Holders,  the
         "Forced  Conversion  Notice Date") to cause the Holders to  immediately
         convert all or part of the then  outstanding  shares of Preferred Stock
         pursuant to Section 5 and the Holders shall surrender (if all Preferred
         Stock is converted) their  respective  shares of Preferred Stock to the
         Corporation  for  conversion  within  5  Trading  Days  of  the  Forced
         Conversion  Notice  Date.  The  Corporation  may  only  effect a Forced
         Conversion  Notice if all of the Equity Conditions have been met during
         the Threshold  Period  through the Forced  Conversion  Notice Date. Any
         Forced  Conversion  Notices  shall  be  applied  ratably  to all of the
         Holders in  proportion to each Holders  initial  purchases of Preferred
         Stock hereunder.

              (b) (i) Not later than three  Trading  Days after each  Conversion
         Date (the "Share Delivery Date"),  the Corporation shall deliver to the
         Holder (A) a certificate  or  certificates  which,  after the Effective
         Date,  shall be free of  restrictive  legends and trading  restrictions
         (other than those  required by Section 4.1 of the  Purchase  Agreement)
         representing  the number of shares of Common Stock being  acquired upon
         the  conversion of shares of Preferred  Stock,  and (B) a bank check in
         the amount of accrued  and unpaid  dividends  (if the  Corporation  has
         elected or is  required to pay accrued  dividends  in cash).  After the
         Effective Date, the Corporation  shall,  upon request of the Holder and
         if  available  to  the   Corporation,   deliver  any   certificate   or
         certificates  required to be  delivered by the  Corporation  under this
         Section  electronically  through the  Depository  Trust  Corporation or
         another established clearing corporation  performing similar functions.
         If  in  the  case  of  any  Conversion   Notice  such   certificate  or
         certificates  are not  delivered  to or as directed  by the  applicable
         Holder by the third Trading Day after the  Conversion  Date, the Holder
         shall be entitled to elect by written notice to the  Corporation at any
         time on or before  its  receipt  of such  certificate  or  certificates
         thereafter,  to rescind such conversion, in which event the Corporation
         shall  immediately  return the certificates  representing the shares of
         Preferred Stock tendered for conversion.

              (ii) The  Corporation's  obligations  to  issue  and  deliver  the
         Conversion Shares upon conversion of Preferred Stock in accordance with
         the terms hereof are absolute and  unconditional,  irrespective  of any
         action or  inaction  by the Holder to enforce  the same,  any waiver or
         consent  with  respect to any  provision  hereof,  the  recovery of any
         judgment  against any Person or any action to enforce the same,  or any
         setoff,  counterclaim,  recoupment,  limitation or termination,  or any
         breach  or  alleged  breach by the  Holder  or any other  Person of any
         obligation to the Corporation or any violation or alleged  violation of
         law by the Holder or any other person,  and  irrespective  of any other
         circumstance  which  might  otherwise  limit  such  obligation  of  the
         Corporation  to the  Holder in  connection  with the  issuance  of such
         Conversion  Shares.  If the Corporation  fails to deliver to the Holder
         such  certificate or  certificates  pursuant to Section  5(b)(i) by the
         Share  Delivery Date  applicable to such  conversion,  the  Corporation
         shall pay to such Holder,  in cash, as liquidated  damages and not as a
         penalty,  for each  $5,000 of Stated  Value of  Preferred  Stock  being
         converted,  $50 per  Trading  Day  (increasing  to $100 per Trading Day
         after 3 Trading Days and  increasing  to $200 per Trading Day 6 Trading
         Days after such damages begin to accrue) for each Trading Day after the

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         Share  Delivery Date until such  certificates  are  delivered.  Nothing
         herein shall limit a Holder's  right to pursue  actual  damages for the
         Corporation's  failure to deliver  certificates  representing shares of
         Common Stock upon  conversion  within the period  specified  herein and
         such Holder shall have the right to pursue all remedies available to it
         hereunder, at law or in equity including,  without limitation, a decree
         of specific performance and/or injunctive relief.

              (iii) If the  Corporation  fails to  deliver  to the  Holder  such
         certificate  or  certificates  pursuant  to Section  5(b)(i) by a Share
         Delivery  Date,  and if after  such  Share  Delivery  Date  the  Holder
         purchases (in an open market  transaction or otherwise) Common Stock to
         deliver  in  satisfaction  of a sale by such  Holder of the  Conversion
         Shares  which the Holder was  entitled to receive  upon the  conversion
         relating to such Share Delivery Date (a "Buy-In"), then the Corporation
         shall pay in cash to the Holder  the  amount by which (x) the  Holder's
         total purchase price (including brokerage commissions,  if any) for the
         Common Stock so purchased  exceeds (y) the product of (1) the aggregate
         number of shares of Common  Stock  that such  Holder  was  entitled  to
         receive from the  conversion  at issue  multiplied  by (2) the price at
         which  the sell  order  giving  rise to such  purchase  obligation  was
         executed.  For example,  if the Holder  purchases Common Stock having a
         total  purchase  price of $11,000 to cover a Buy-In with  respect to an
         attempted conversion of shares of Preferred Stock with respect to which
         the  aggregate  sale price giving rise to such  purchase  obligation is
         $10,000,  under clause (A) of the  immediately  preceding  sentence the
         Corporation  shall be  required  to pay the Holder  $1,000.  The Holder
         shall provide the  Corporation  written  notice  indicating the amounts
         payable  to  the  Holder  in  respect  of  the  Buy-In,  together  with
         applicable confirmations and other evidence reasonably requested by the
         Corporation.  Nothing herein shall limit a Holder's right to pursue any
         other  remedies  available  to  it  hereunder,  at  law  or  in  equity
         including,  without limitation, a decree of specific performance and/or
         injunctive relief with respect to the  Corporation's  failure to timely
         deliver   certificates   representing   shares  of  Common  Stock  upon
         conversion of the shares of Preferred Stock as required pursuant to the
         terms hereof.

              (c) (i) The  conversion  price for each share of  Preferred  Stock
         shall equal $3.50 (the "Set Price"), subject to adjustment below.

              (ii) if the Corporation,  at any time while the Preferred Stock is
         outstanding:  (A)  shall  pay a  stock  dividend  or  otherwise  make a
         distribution  or  distributions  on shares of its  Common  Stock or any
         other  equity  or equity  equivalent  securities  payable  in shares of
         Common Stock, (B) subdivide  outstanding  shares of Common Stock into a
         larger number of shares, (C) combine (including by way of reverse stock
         split)  outstanding  shares of Common  Stock  into a smaller  number of
         shares, or (D) issue by  reclassification of shares of the Common Stock
         any  shares of  capital  stock of the  Corporation,  then the Set Price
         shall be multiplied  by a fraction of which the numerator  shall be the
         number of shares of Common Stock  Outstanding  before such event and of
         which the  denominator  shall be the  number of shares of Common  Stock
         Outstanding  after such event.  Any  adjustment  made  pursuant to this
         Section shall become  effective  immediately  after the record date for
         the determination of stockholders  entitled to receive such dividend or
         distribution and shall become effective immediately after the effective
         date in the case of a subdivision, combination or reclassification.

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              (iii) if the Corporation, at any time while the Preferred Stock is
         outstanding,  shall issue rights, options or warrants to all holders of
         Common Stock (and not to Holders)  entitling  them to subscribe  for or
         purchase shares of Common Stock at a price per share less than the VWAP
         at the  record  date  mentioned  below,  then  the Set  Price  shall be
         multiplied by a fraction,  of which the denominator shall be the number
         of shares of the Common  Stock  Outstanding  on the date of issuance of
         such rights or warrants plus the number of additional  shares of Common
         Stock offered for subscription or purchase,  and of which the numerator
         shall be the number of shares of the Common  Stock  Outstanding  on the
         date of issuance  of such rights or warrants  plus the number of shares
         which the  aggregate  offering  price of the total  number of shares so
         offered   (assuming   receipt  by  the   Corporation  in  full  of  all
         consideration  payable  upon  exercise  of  such  rights,   options  or
         warrants) would purchase at such VWAP.  Such  adjustment  shall be made
         whenever such rights or warrants are issued, and shall become effective
         immediately after the record date for the determination of stockholders
         entitled to receive such rights, options or warrants.

              (iv) if the  Corporation  or any  subsidiary  thereof  at any time
         while any of the Preferred  Stock is  outstanding,  shall offer,  sell,
         grant any  option or warrant to  purchase  or offer,  sell or grant any
         right to reprice its securities,  or otherwise  dispose of or issue any
         Common Stock or any equity or equity equivalent  securities  (including
         any equity,  debt or other instrument that is at any time over the life
         thereof   convertible   into  or   exchangeable   for   Common   Stock)
         (collectively,  "Common  Stock  Equivalents")  entitling  any Person to
         acquire  shares of Common Stock,  at an effective  price per share less
         than the Set Price (a "Dilutive  Issuance"),  as adjusted hereunder (if
         the holder of the Common  Stock or Common  Stock  Equivalent  so issued
         shall at any time,  whether by operation of purchase price adjustments,
         reset provisions,  floating conversion,  exercise or exchange prices or
         otherwise,  or due to  warrants,  options or rights per share which are
         issued in connection with such issuance,  be entitled to receive shares
         of Common  Stock at a price per share which is less than the Set Price,
         such  issuance  shall be deemed to have  occurred for less than the Set
         Price),  then the Set Price  shall be  reduced  to equal the  effective
         conversion,  exchange or purchase price for such Common Stock or Common
         Stock  Equivalents  (including any reset provisions  thereof) at issue.
         Such  adjustment  shall be made  whenever  such Common  Stock or Common
         Stock  Equivalents are issued.  The Corporation shall notify the Holder
         in writing,  no later than the Business Day  following  the issuance of
         any Common Stock or Common Stock  Equivalent  subject to this  section,
         indicating  therein the  applicable  issuance  price,  or of applicable
         reset price, exchange price,  conversion price and other pricing terms.
         For purposes of this subsection, a Dilutive Issuance shall be deemed to
         have  occurred  when  binding  agreements  have  been  executed  by the
         Corporation and any purchaser therein.

              (v) if the  Corporation,  at any time while the Preferred Stock is
         outstanding,  shall  distribute to all holders of Common Stock (and not
         to  Holders)  evidences  of its  indebtedness  or  assets  or rights or
         warrants to  subscribe  for or  purchase  any  security  other than the
         Common Stock (which shall be subject to Section 5(c)(iii), then in each

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         such case the Set Price shall be adjusted by multiplying  the Set Price
         in effect  immediately prior to the record date fixed for determination
         of stockholders  entitled to receive such distribution by a fraction of
         which the  denominator  shall be the VWAP  determined  as of the record
         date mentioned  above, and of which the numerator shall be such VWAP on
         such  record  date less the then per share  fair  market  value at such
         record date of the  portion of such assets or evidence of  indebtedness
         so distributed  applicable to one outstanding share of the Common Stock
         as determined  by the Board of Directors in good faith.  In either case
         the  adjustments  shall be  described  in a  statement  provided to the
         Holders  of the  portion  of assets or  evidences  of  indebtedness  so
         distributed  or such  subscription  rights  applicable  to one share of
         Common  Stock.   Such  adjustment  shall  be  made  whenever  any  such
         distribution is made and shall become effective  immediately  after the
         record date mentioned above.

              (vi) All calculations under this Section 5(c) shall be made to the
         nearest cent or the nearest 1/100th of a share, as the case may be. The
         number of shares of Common  Stock  outstanding  at any given time shall
         not  include  shares  owned  or  held  by or  for  the  account  of the
         Corporation, and the disposition of any such shares shall be considered
         an issue or sale of Common  Stock.  For purposes of this Section  5(c),
         the  number of shares of Common  Stock  deemed to be  outstanding  (the
         "Common Stock  Outstanding") as of a given date shall be the sum of the
         number of shares of Common Stock (excluding  treasury  shares,  if any)
         issued and outstanding.

              (vii)   Notwithstanding   anything  to  the  contrary  herein,  no
         adjustment  shall  be made  hereunder  in  connection  with  an  Exempt
         Issuance.

              (viii) Whenever the Set Price is adjusted pursuant to this Section
         the  Corporation  shall promptly mail to each Holder,  a notice setting
         forth the Set Price after such  adjustment  and  setting  forth a brief
         statement of the facts requiring such adjustment.

         Section 6. Three Year  Conversion/Redemption.  On the third anniversary
of the  Original  Issue Date  ("Third  Year  Date"),  each Holder shall have the
right, in its sole discretion,  to convert all outstanding  Preferred Stock held
by it for a conversion  price per share equal to the lesser of (a) the Set Price
and (b) 90% of the average of the 20 VWAPs  immediately  prior to the Third Year
Date  ("Third  Year  Conversion")  provided  that  the  Holder  shall  give  the
Corporation  irrevocable  notice of its election to convert its Preferred  Stock
hereunder  on or before  the 40th  calendar  day  prior to the  Third  Year Date
("Third Year Notice").  Third Year Conversions shall occur  automatically on the
Third Year Date without any further  action  required by the Holder.  Third Year
Conversions shall otherwise occur pursuant to Section 5 except that for purposes
thereof,  the  Conversion  Date shall be the Third  Year  Date.  Notwithstanding
anything herein to the contrary, within 10 calendar days after receiving a Third
Year Notice and by irrevocable  written notice to an electing Holder  hereunder,
the  Corporation  may elect to redeem  in cash any  Preferred  Stock of any such
Holder for a  redemption  price equal to (a) the Stated  Value of the  Preferred
Stock then outstanding and held by such Holder, (b) accrued but unpaid dividends
on such Preferred Stock and (c) all liquidated  damages and other amounts due in
respect of such Preferred Stock. Cash redemption shall be applied ratably to all
Holders that elect a Third Year  Conversion,  noting  herein shall  prohibit any
electing  Holder from  converting its Preferred  Stock at the Set Price prior to
the Third Year Date and an election of any Holder shall be independent,  several
and not joint with any other  Holder's  right to elect a Third  Year  Conversion
hereunder.

                                       8
<PAGE>

         Section 7. Redemption Upon Triggering Events.

              (a) Upon the occurrence of a Triggering  Event,  each Holder shall
         (in  addition  to all  other  rights  it may  have  hereunder  or under
         applicable law) have the right,  exercisable at the sole option of such
         Holder,  to  require  the  Corporation  to,  (i)  with  respect  to the
         Triggering Events set forth in Sections 7(b)(iii),  (vii), (ix)(only as
         to Changes of Control  pursuant to which the  Corporation  is a party),
         (x)(only  as to  voluntary  filings)  and  (xii)),  redeem  all  of the
         Preferred  Stock then held by such Holder for a  redemption  price,  in
         cash, equal to the Triggering Redemption Amount; or, (ii) at the option
         of the Holder and with  respect to the  Triggering  Events set forth in
         Sections 7(b)(i),  (ii), (iv), (vi), (viii),  (ix) )(only as to Changes
         of Control pursuant to which the Corporation is not a party),  (x)(only
         as to  involuntary  filings)  and (xi),  either  (A)  redeem all of the
         Preferred  Stock then held by such Holder for a  redemption  price,  in
         shares of  Common  Stock,  equal to a number of shares of Common  Stock
         equal to the Triggering  Redemption Amount divided by the lesser of (A)
         the Set Price and (B) 75% of the  average  of the 10 VWAPs  immediately
         prior to the date of election hereunder or (B) increase the dividend on
         all of the outstanding Preferred Stock held by such Holder to equal 15%
         per annum thereafter.  The Triggering  Redemption Amount, in cash or in
         shares, if the Corporation  elects clauses (i) or (ii)(A) above,  shall
         be due and payable or  issuable,  as the case may be,  within 5 Trading
         Days of the  date on which  the  notice  for the  payment  therefor  is
         provided by a Holder (the "Triggering Redemption Payment Date"). If the
         Corporation fails to pay the Triggering  Redemption Amount hereunder in
         full  pursuant  to this  Section  on the  date  such  amount  is due in
         accordance  with  this  Section  (whether  in cash or  shares of Common
         Stock),  the Corporation will pay interest thereon at a rate of 18% per
         annum (or such lesser  amount  permitted by applicable  law),  accruing
         daily from such date until the Triggering  Redemption Amount,  plus all
         such interest thereon, is paid in full. For purposes of this Section, a
         share of Preferred  Stock is outstanding  until such date as the Holder
         shall have received  Conversion  Shares upon a conversion (or attempted
         conversion) thereof that meets the requirements hereof or has been paid
         the Triggering  Redemption Amount plus all accrued but unpaid dividends
         and all accrued but unpaid liquidated damages in cash.

              (b)  "Triggering  Event"  means  any one or more of the  following
         events  (whatever  the reason  and  whether  it shall be  voluntary  or
         involuntary  or  effected  by  operation  of  law  or  pursuant  to any
         judgment,  decree  or  order  of any  court,  or  any  order,  rule  or
         regulation of any administrative or governmental body):

              (i) the failure of a Conversion Shares  Registration  Statement to
         be declared  effective by the  Commission  on or prior to the 180th day
         after the Original Issue Date;

              (ii) if, during the Effectiveness Period, the effectiveness of the
         Conversion Shares Registration Statement lapses for any reason for more
         than an  aggregate of 90 calendar  days (which need not be  consecutive
         days) during any 12 month period,  or the Holder shall not be permitted
         to  resell   Registrable   Securities   under  the  Conversion   Shares
         Registration  Statement  for more than an aggregate of 90 calendar days
         (which need not be consecutive days) during any 12 month period;

                                       9
<PAGE>

              (iii)  the   Corporation   shall  fail  to  deliver   certificates
         representing  Conversion  Shares  issuable upon a conversion  hereunder
         that comply with the  provisions  hereof  prior to the 10th Trading Day
         after such  shares  are  required  to be  delivered  hereunder,  or the
         Corporation  shall provide  written notice to any Holder,  including by
         way of public announcement, at any time, of its intention not to comply
         with  requests  for  conversion  of any  shares of  Preferred  Stock in
         accordance with the terms hereof;

              (iv) one of the Events  (as  defined  in the  Registration  Rights
         Agreement)  described in subsections (i), (ii) or (iii) of Section 2(c)
         of the  Registration  Rights Agreement shall not have been cured to the
         satisfaction of the Holders prior to the expiration of 30 days from the
         Event Date (as defined in the Registration  Rights Agreement)  relating
         thereto  (other than an Event  resulting from a failure of a Conversion
         Shares   Registration   Statement  to  be  declared  effective  by  the
         Commission on or prior to the 180th day after the Original  Issue Date,
         which shall be covered by Section 7(b)(i));

              (v) [INTENTIONALLY OMMITED];

              (vi) the  Corporation  shall fail to have  available a  sufficient
         number of authorized and unreserved  shares of Common Stock to issue to
         such Holder upon a conversion hereunder;

              (vii) the Corporation  shall materially fail to observe or perform
         any other  material  covenant,  agreement or warranty  contained in, or
         otherwise  commit any  breach of the  Transaction  Documents,  and such
         failure or breach shall not, if subject to the possibility of a cure by
         the  Corporation,  have been remedied within 45 calendar days after the
         date on which written  notice of such failure or breach shall have been
         given;

              (viii)  any  breach of the  agreements  delivered  to the  initial
         Holders at the Closing  pursuant to Section  2.2(a)(vi) of the Purchase
         Agreement;

              (ix) the  Corporation  shall be a party to any  Change of  Control
         Transaction  or the  Corporation  shall  redeem  more than a de minimis
         number of Junior Securities;

              (x) there shall have occurred a Bankruptcy Event;

              (xi) the  Common  Stock  shall  fail to be listed  or  quoted  for
         trading on a Trading  Market for more than 5 consecutive  Trading Days;
         or

              (xii) the failure of the  Corporation  to submit an application to
         list the  Common  Stock on an  alternative  Trading  Market  within  10
         Trading Days of the occurrence of a Triggering Event pursuant to clause
         (xi) of this Section 7(b) or the failure of the  Corporation to use its
         best efforts to obtain such listing after the application is filed with
         an alternative Trading Market.

         Section 8.  Definitions.  For the purposes hereof,  the following terms
shall have the following meanings:

              "Bankruptcy  Event"  means any of the  following  events:  (a) the
         Corporation or any  Significant  Subsidiary (as such term is defined in
         Rule  1.02(s) of  Regulation  S-X)  thereof  commences  a case or other
         proceeding   under   any   bankruptcy,   reorganization,   arrangement,
         adjustment  of debt,  relief of  debtors,  dissolution,  insolvency  or


                                       10
<PAGE>

         liquidation  or  similar  law  of  any  jurisdiction  relating  to  the
         Corporation  or  any  Significant  Subsidiary  thereof;  (b)  there  is
         commenced against the Corporation or any Significant Subsidiary thereof
         any such case or proceeding that is not dismissed  within 60 days after
         commencement; (c) the Corporation or any Significant Subsidiary thereof
         is  adjudicated  insolvent  or bankrupt or any order of relief or other
         order  approving  any  such  case or  proceeding  is  entered;  (d) the
         Corporation  or  any   Significant   Subsidiary   thereof  suffers  any
         appointment of any custodian or the like for it or any substantial part
         of its property that is not  discharged  or stayed within 60 days;  (e)
         the Corporation or any Significant  Subsidiary  thereof makes a general
         assignment  for the benefit of creditors;  (f) the  Corporation  or any
         Significant  Subsidiary thereof calls a meeting of its creditors with a
         view to arranging a  composition,  adjustment or  restructuring  of its
         debts; or (g) the Corporation or any Significant Subsidiary thereof, by
         any act or failure to act, expressly indicates its consent to, approval
         of or  acquiescence  in any of the  foregoing or takes any corporate or
         other action for the purpose of effecting any of the foregoing.

              "Change of Control  Transaction"  means the  occurrence  after the
         date  hereof of any of (a) an  acquisition  after the date hereof by an
         individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
         promulgated  under the  Exchange  Act) of  effective  control  (whether
         through  legal  or  beneficial   ownership  of  capital  stock  of  the
         Corporation,  by  contract  or  otherwise)  of in  excess of 40% of the
         voting securities of the Corporation,  or (b) a replacement at one time
         or within a one year period of more than one-half of the members of the
         Corporation's board of directors which is not approved by a majority of
         those individuals who are members of the board of directors on the date
         hereof (or by those individuals who are serving as members of the board
         of directors on any date whose nomination to the board of directors was
         approved by a majority of the members of the board of directors who are
         members on the date hereof), or (c) the execution by the Corporation of
         an  agreement  to which  the  Corporation  is a party or by which it is
         bound, providing for any of the events set forth above in (a) or (b).

              "Closing"  means closing of the purchase and sale of the Preferred
         Stock.

              "Commission" means the Securities and Exchange Commission.

              "Common  Stock" means the  Corporation's  common stock,  par value
         $0.01 per share,  and stock of any other  class into which such  shares
         may hereafter have been reclassified or changed.

              "Common  Stock  Outstanding"  shall have the  meaning set forth in
         Section 5(c)(vi).

              "Conversion Amount" means the sum of the Stated Value at issue.

              "Conversion  Date"  shall  have the  meaning  set forth in Section
         5(b)(i).

              "Conversion  Shares"  means,  collectively,  the  shares of Common
         Stock into  which the  shares of  Preferred  Stock are  convertible  in
         accordance with the terms hereof.

              "Conversion  Shares  Registration  Statement" means a registration
         statement  that  meets  the  requirements  of the  Registration  Rights
         Agreement  and  registers  the resale of all  Conversion  Shares by the
         Holder, who shall be named as a "selling stockholder"  thereunder,  all
         as provided in the Registration Rights Agreement.

                                       11
<PAGE>

              "Dividend  Payment  Date"  shall  have the  meaning  set  forth in
         Section 2(a).

              "Effective  Date"  means  the  date  that  the  Conversion  Shares
         Registration Statement is declared effective by the Commission.

              "Equity  Conditions"  Unless waived by a Holder as to a particular
         event (which waiver shall apply only to such Holder),  as of such event
         date, the following conditions have been met: (i) the Corporation shall
         have duly honored all conversions scheduled to occur or occurring prior
         to such date, (ii) there is an effective Conversion Shares Registration
         Statement  pursuant to which the Holders are  permitted  to utilize the
         prospectus  thereunder to resell all of the Conversion Shares issued to
         the Holders  and all of the  Conversion  Shares as are  issuable to the
         Holders  upon  conversion  in  full of the  Preferred  Stock  (and  the
         Corporation  believes,  in good  faith,  that such  effectiveness  will
         continue  uninterrupted for the foreseeable  future),  (iii) the Common
         Stock is listed for trading on the Trading Market (and the  Corporation
         believes,  in good  faith,  that  trading  of the  Common  Stock on the
         Trading Market will continue uninterrupted for the foreseeable future),
         (iv) all  liquidated  damages and other amounts owing in respect of the
         Preferred  Stock  shall have been paid or will,  concurrently  with the
         issuance  of the  Conversion  Shares,  be paid in cash;  (v) there is a
         sufficient  number of authorized but unissued and otherwise  unreserved
         shares of Common Stock for the issuance of all the Conversion Shares as
         are  issuable to the Holder upon  conversion  in full of the  Preferred
         Stock;  (vi) no Triggering Event has occurred and is continuing;  (vii)
         all of the Conversion  Shares issuable to the Holder upon conversion in
         full of the Preferred  Stock will not violate the limitations set forth
         in Sections 5(a)(ii); and (viii) no public announcement of a pending or
         proposed  Fundamental  Transaction or Change of Control Transaction has
         occurred that has not been consummated.

              "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as
         amended.

              "Fundamental  Transaction"  means  the  occurrence  after the date
         hereof  of  any  of  (a)  the   Corporation   effects   any  merger  or
         consolidation of the Corporation  with or into another Person,  (b) the
         Corporation  effects any sale of all or substantially all of its assets
         in one or a series of related  transactions,  (c) any  tender  offer or
         exchange  offer  (whether  by the  Corporation  or  another  Person) is
         completed  pursuant to which  holders of Common Stock are  permitted to
         tender or exchange their shares for other securities, cash or property,
         or (d) the Corporation effects any reclassification of the Common Stock
         or any compulsory share exchange  pursuant to which the Common Stock is
         effectively  converted into or exchanged for other securities,  cash or
         property.

              "Holder"  shall  have the  meaning  given  such term in  Section 1
         hereof.

              "Junior Securities" means the Common Stock and all other equity or
         equity  equivalent  securities  of the  Corporation  other  than  those
         securities  that are (a) outstanding on the Original Issue Date and (b)
         which are explicitly senior in rights or liquidation  preference to the
         Preferred Stock.

              "Original Issue Date" shall mean the date of the first issuance of
         any shares of the Preferred Stock regardless of the number of transfers

                                       12
<PAGE>

         of any  particular  shares of  Preferred  Stock and  regardless  of the
         number of  certificates  which may be issued to evidence such Preferred
         Stock.

              "Person" means a corporation,  an association,  a partnership,  an
         organization,  a business,  an  individual,  a government  or political
         subdivision thereof or a governmental agency.

              "Purchase  Agreement"  means the  Securities  Purchase  Agreement,
         dated as of the Original Issue Date, to which the  Corporation  and the
         original Holders are parties, as amended, modified or supplemented from
         time to time in accordance with its terms.

              "Registration  Rights  Agreement"  means the  Registration  Rights
         Agreement,   dated  as  of  the  Original  Issue  Date,  to  which  the
         Corporation and the original Holders are parties, as amended,  modified
         or supplemented from time to time in accordance with its terms.

              "Securities Act" means the Securities Act of 1933, as amended.

              "Set Price" shall have the meaning set forth in Section 5(c)(i).

              "Trading  Day" shall mean any day during which the Trading  Market
         shall be open for business.

              "Trading Market" means the following markets or exchanges on which
         the  Common  Stock is  listed  or  quoted  for  trading  on the date in
         question:  the OTC Bulletin Board, the American Stock Exchange, the New
         York Stock Exchange,  the Nasdaq National Market or the Nasdaq SmallCap
         Market.

              "Transaction  Documents" shall mean the Purchase Agreement and all
         agreements  entered  into  in  connection   therewith,   including  the
         Registration Rights Agreement and the Warrants.

              "Triggering  Event"  shall have the  meaning  set forth in Section
         7(b).

              "Triggering  Redemption  Amount" for each share of Preferred Stock
         means the sum of (i) the  greater of (A) 130% of the  Stated  Value and
         (B)  the  product  of (a)  the  VWAP  on the  Trading  Day  immediately
         preceding  the date of the  Triggering  Event and (b) the Stated  Value
         divided by the then Set Price,  (ii) all accrued  but unpaid  dividends
         thereon  and (iii) all  liquidated  damages  and other  amounts  due in
         respect of the Preferred Stock

              "VWAP" means,  for any date, the price  determined by the first of
         the  following  clauses that  applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the primary  Trading Market on which the Common Stock is then listed
         or quoted as reported by Bloomberg  Financial L.P.  (based on a Trading
         Day from  9:30  a.m.  EST to 4:02  p.m.  Eastern  Time)  using  the VAP
         function;  (b) if the Common  Stock is not then listed or quoted on the
         Trading  Market and if prices for the Common Stock are then reported in
         the  "Pink  Sheets"   published  by  the  National   Quotation   Bureau
         Incorporated  (or a similar  organization  or agency  succeeding to its
         functions of reporting prices),  the most recent bid price per share of

                                       13
<PAGE>

         the  Common  Stock so  reported;  or (c) in all other  cases,  the fair
         market value of a share of Common Stock as  determined  by a nationally
         recognized-independent  appraiser  selected in good faith by Purchasers
         holding a majority of the principal amount of Shares then outstanding.

         Section  9.  Fundamental  Transactions.  If a  Fundamental  Transaction
occurs,  then upon any subsequent  conversion of shares of Preferred  Stock, the
Holder  shall have the right to receive,  for each  Conversion  Share that would
have been issuable upon such conversion absent such Fundamental Transaction, the
same kind and  amount of  securities,  cash or  property  as it would  have been
entitled to receive upon the  occurrence of such  Fundamental  Transaction if it
had been, immediately prior to such Fundamental  Transaction,  the holder of one
share of Common Stock (the "Alternate Consideration").  For purposes of any such
conversion,  the determination of the Set Price shall be appropriately  adjusted
to apply  to such  Alternate  Consideration  based on the  amount  of  Alternate
Consideration  issuable  in  respect  of one  share  of  Common  Stock  in  such
Fundamental Transaction, and the Corporation shall apportion the Set Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction,  then the Holder shall be given the same choice as
to the  Alternate  Consideration  it receives  upon any  conversion of shares of
Preferred Stock following such Fundamental Transaction.  To the extent necessary
to effectuate  the foregoing  provisions,  any successor to the  Corporation  or
surviving entity in such Fundamental  Transaction  shall issue to the Holder new
preferred  stock  consistent  with the foregoing  provisions  and evidencing the
Holder's right to convert such preferred stock into Alternate Consideration. The
terms of any agreement  pursuant to which a Fundamental  Transaction is effected
shall include terms  requiring any such successor or surviving  entity to comply
with the provisions of this Section 9 and insuring that the Preferred  Stock (or
any such  replacement  security) will be similarly  adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

         Section 10. Miscellaneous.

              (a) If (i) the Corporation  shall declare a dividend (or any other
         distribution) on the Common Stock, (ii) the Corporation shall declare a
         special  nonrecurring  cash  dividend on or a redemption  of the Common
         Stock,  (iii) the  Corporation  shall  authorize  the  granting  to all
         holders of Common Stock rights or warrants to subscribe for or purchase
         any shares of  capital  stock of any class or of any  rights,  (iv) the
         approval of any  stockholders of the  Corporation  shall be required in
         connection  with any  Fundamental  Transaction  or  Change  of  Control
         Transaction,  or (v) the  Corporation  shall authorize the voluntary or
         involuntary  dissolution,  liquidation  or winding up of the affairs of
         the  Corporation;  then the  Corporation  shall file a press release or
         Current  Report on Form 8-K to disclose such  occurrence and notify the
         Holders at their last  addresses  as they shall  appear  upon the stock
         books  of the  Corporation,  at  least 20  calendar  days  prior to the
         applicable  record or effective date  hereinafter  specified,  a notice
         stating  (x) the date on which a record is to be taken for the  purpose
         of such dividend, distribution, redemption, rights or warrants, or if a
         record is not to be taken,  the date as of which the  holders of Common
         Stock  of  record  to be  entitled  to  such  dividend,  distributions,
         redemption,  rights or warrants are to be determined or (y) the date on
         which any such Fundamental Transaction or Change of Control Transaction
         is expected to become  effective or close,  and the date as of which it
         is expected that holders of Common Stock of record shall be entitled to
         exchange  their Common  Stock for  securities,  cash or other  property
         deliverable upon any such Fundamental  Transaction or Change of Control
         Transaction.  Holders are entitled to convert the Conversion  Amount of
         Preferred  Stock during the 20-day period  commencing  the date of such
         notice to the effective date of the event triggering such notice.

                                       14
<PAGE>

              (b) The  Corporation  covenants  that it will at all times reserve
         and keep available out of its authorized and unissued  shares of Common
         Stock solely for the purpose of issuance  upon  conversion of Preferred
         Stock,  each as herein  provided,  free from  preemptive  rights or any
         other  actual  contingent  purchase  rights of  persons  other than the
         Holders,  not less than such number of shares of Common  Stock as shall
         be issuable upon the conversion of all outstanding  shares of Preferred
         Stock.  The Corporation  covenants that all shares of Common Stock that
         shall be so issuable shall, upon issue, be duly and validly authorized,
         issued and fully paid and nonassessable.

              (c) Upon a  conversion  hereunder  the  Corporation  shall  not be
         required to issue stock certificates  representing  fractions of shares
         of Common Stock, but may if otherwise permitted, make a cash payment in
         respect  of any  final  fraction  of a share  based on the VWAP at such
         time.  If any  fraction of a  Conversion  Share  would,  except for the
         provisions  of this Section,  be issuable upon a conversion  hereunder,
         the  Corporation  shall  pay an  amount  in  cash  equal  to  the  VWAP
         immediately  prior  to the  applicable  conversion  multiplied  by such
         fraction.

              (d) The issuance of certificates for Common Stock on conversion of
         Preferred Stock shall be made without charge to the Holders thereof for
         any  documentary  stamp or similar taxes that may be payable in respect
         of the  issue  or  delivery  of such  certificate,  provided  that  the
         Corporation shall not be required to pay any tax that may be payable in
         respect of any  transfer  involved in the  issuance and delivery of any
         such  certificate  upon  conversion  in a name  other  than that of the
         Holder of such shares of Preferred Stock so converted.

              (e) To effect  conversions of shares of Preferred  Stock, a Holder
         shall not be required to surrender the certificate(s) representing such
         shares of Preferred Stock to the  Corporation  unless all of the shares
         of Preferred Stock represented thereby are so converted,  in which case
         the Holder shall  deliver the  certificate  representing  such share of
         Preferred Stock promptly following the Conversion Date at issue. Shares
         of  Preferred   Stock  converted  into  Common  Stock  or  redeemed  in
         accordance  with the  terms  hereof  shall be  canceled  and may not be
         reissued.

              (f) Any and all notices or other  communications  or deliveries to
         be provided by the Holders of the Preferred Stock hereunder, including,
         without  limitation,  any  Conversion  Notice,  shall be in writing and
         delivered  personally,  by facsimile or sent by a nationally recognized
         overnight  courier  service,  addressed  to the  attention of the Chief
         Financial Officer of the Corporation addressed to Tom Bailey, Facsimile
         Number: (801) 374-3314; or to such other address or facsimile number as
         shall be specified in writing by the Corporation for such purpose.  Any
         and all notices or other communications or deliveries to be provided by
         the Corporation hereunder shall be in writing and delivered personally,
         by  facsimile  or sent by a  nationally  recognized  overnight  courier

                                       15
<PAGE>

         service,  addressed to each Holder at the facsimile telephone number or
         address of such Holder appearing on the books of the Corporation, which
         address shall  initially be the address of such Holder set forth on the
         signature pages of the Purchase Agreement, or such other address as the
         Corporation  or a Holder  may  designate  by ten days  advance  written
         notice to the other parties hereto.  Any notice or other  communication
         or  deliveries  hereunder  shall be deemed  given and  effective on the
         earliest  of  (i)  the  date  of   transmission,   if  such  notice  or
         communication  is delivered via  facsimile at the  facsimile  telephone
         number  specified  in this  Section  prior to 6:30 p.m.  (New York City
         time) (with confirmation of transmission), (ii) the date after the date
         of  transmission,  if such notice or  communication  is  delivered  via
         facsimile at the facsimile  telephone  number specified in this Section
         later than 6:30 p.m.  (New York City time) on any date and earlier than
         11:59  p.m.  (New York City time) on such date  (with  confirmation  of
         transmission),  (iii) five days after having been sent by registered or
         certified mail, return receipt requested, postage prepaid, (iv) one day
         after deposit with a nationally  recognized  overnight courier service,
         specifying next day delivery,  with written verification of service, or
         (v) upon actual receipt by the party to whom such notice is required to
         be given.

              (g) For purposes hereof, a share of Preferred Stock is outstanding
         until such date as the Holder shall have received the Conversion Shares
         issuable to it in accordance with this Certificate of Designations.

         Fully paid stock of this corporation shall not be liable to any further
call or assessment.

         THIRD:   This   amendment   does   not   provide   for  any   exchange,
reclassification or cancellation of issued shares.

         FOURTH:  The effective date of this amendment  shall be the filing date
of these Articles of Amendment.

         FIFTH:  This  amendment  was adopted by the Board of Directors  without
stockholder action, which was not required.

         IN WITNESS  WHEREOF,  the undersigned  President and Secretary,  having
been  thereunto  duly  authorized,  have  executed  the  foregoing  Articles  of
Amendment  for the  corporation  under the penalty of perjury  this _____ day of
______________, 2004.

                                                  RASER TECHNOLOGIES, INC.


                                                  -----------------------------
                                                  John C. Ritter, President


Attest:


-------------------------------
James E. Morton, Secretary


                                       16
<PAGE>
                              ARTICLES OF AMENDMENT

                       TO THE ARTICLES OF INCORPORATION OF

                            RASER TECHNOLOGIES, INC.

         Pursuant to the  provisions of Section  16-10a-1006 of the Utah Revised
Business  Corporation Act (the Act), the undersigned  corporation  hereby adopts
the following Articles of Amendment to its Articles of Incorporation.

         FIRST: The name of the corporation is Raser Technologies, Inc.

         SECOND: The following amendment to the Articles of Incorporation of the
corporation was duly adopted by the written consent of the holders of a majority
of the  corporation's  issued and outstanding  shares in accordance with Section
16-10a-704 of the Act on May 1, 2004, following approval thereof by the Board of
Directors in the manner prescribed by the Act, to wit:

                                Article IV- Stock

         The  aggregate  number of shares  which  this  corporation  shall  have
authority to issue is 105,000,000 shares, divided into two classes,  100,000,000
shares  of  common  stock of a par  value  of one cent  ($0.01)  per  share  and
5,000,000  shares  of  preferred  stock of a par value of one cent  ($0.01)  per
share,  with the preferred stock having such rights and preferences as the Board
of Directors shall determine.  Fully paid stock of this corporation shall not be
liable to any further call or assessment.

         THIRD:   This   amendment   does   not   provide   for  any   exchange,
reclassification or cancellation of issued shares.

         FOURTH:  The effective date of this amendment  shall be the filing date
of these Articles of Amendment.

         FIFTH: This amendment was not adopted by the incorporators of the Board
of Directors without stockholder action.

         SIXTH:  (a) The  designation  and number of outstanding  shares of each
class entitled to vote thereon as a class were as follows:

                     CLASS                              NUMBER OF SHARES
                     -----                              ----------------

                     Common                             46,706,000

         (b) The number of shares voted for such amendments was 33,092,000, with
none opposing and none abstaining.

         IN WITNESS  WHEREOF,  the undersigned  President and Secretary,  having
been  thereunto  duly  authorized,  have  executed  the  foregoing  Articles  of
Amendment  for the  corporation  under the penalty of perjury  this _____ day of
May, 2004.

                                                   RASER TECHNOLOGIES, INC.



                                                   -----------------------------
                                                   John C. Ritter, President



Attest:



-------------------------------
James E. Morton, Secretary


                                       17