CERTIFICATE AND STATEMENT OF DETERMINATION OF
                             RIGHTS AND PREFERENCES
                                       OF
              10% SERIES J CONVERTIBLE, NON-VOTING PREFERRED STOCK
                                       OF
                              BIOMUNE SYSTEMS, INC.

     The undersigned, being the Chief Executive Officer and Secretary of Biomune
Systems, Inc., a Nevada corporation, do hereby certify and declare as follows:

     1. The name of the corporation is Biomune Systems, Inc.

     2. Attached hereto as Exhibit A and  incorporated  herein by this reference
is a true and correct copy of the  Designation of Rights and  Preferences of 10%
Series J Convertible Non-Voting Preferred Stock of Biomune Systems, Inc.

     3. The Designation of Rights and  Preferences  described above was approved
by the Board of Directors of Biomune  Systems,  Inc. at a meeting duly  convened
following notice as required by the Bylaws of the Company.

     IN WITNESS WHEREOF, we have signed this Certificate this 29 day of December
1998.

                             BIOMUNE SYSTEMS, INC.,
                              a Nevada corporation


By: /s/ Michael G. Acton
-------------------------------------
Michael G. Acton, 
President and Chief Executive Officer


By: /s/ Kevin R. Pinegar
-------------------------------
Kevin R. Pinegar, Secretary


Attested and Verified:

/s/ Kevin R. Pinegar
--------------------------------------
Kevin R Pinegar, Secretary


<PAGE>


STATE OF Utah          )
                       ):ss
COUNTY OF Salt Lake        )

On the 29 day of December 1998,  Michael G. Acton,  who, being by me duly sworn,
did say that he is the President and Chief Executive Officer of Biomune Systems,
Inc., a Nevada  corporation,  and that the  foregoing  instrument  was signed on
behalf  of  such  Corporation  by  authority  of its  Bylaws  and  such  officer
acknowledged to me that the Corporation executed the same.


/s/ Linda Haskins
--------------------------
NOTARY PUBLIC

STATE OF Utah          )
                       ):ss
COUNTY OF Salt Lake        )

On the 29 day of December 1998,  Kevin R. Pinegar,  who, being by me duly sworn,
did say that he is the Secretary of Biomune Systems, Inc., a Nevada corporation,
and that the foregoing  instrument  was signed on behalf of such  Corporation by
authority of its Bylaws and such officer acknowledged to me that the Corporation
executed the same.


/s/ Linda Haskins
--------------------------
NOTARY PUBLIC

<PAGE>


                      BIOMUNE SYSTEMS, INC.

              DESIGNATION OF RIGHTS AND PREFERENCES
                                OF
       10% SERIES J CONVERTIBLE NON-VOTING PREFERRED STOCK

     Pursuant  to the  authority  vested in the Board of  Directors  of  BIOMUNE
SYSTEMS,  INC.,  a  Nevada  corporation  (the  "Company"),  in its  Articles  of
Incorporation and as permitted by Section 602 of the Nevada Private Corporations
Act, as amended (the "Nevada Act"), the Company's Board of Directors does hereby
establish a new series of the Company's Preferred Stock designated as 10% Series
J Convertible  Non-Voting  Preferred Stock and does hereby designate the rights,
preferences,  privileges  and other  attributes  of the shares of such series as
follows:

     1.  Designation and Number of Shares.  A series of the Company's  Preferred
Stock is  hereby  established,  to be  designated  and  known  as "10%  Series J
Convertible, Non-Voting Preferred Stock" (hereinafter referred to as the "Series
J Preferred  Stock"),  consisting of 2,000 shares of the authorized and unissued
shares of the  Company's  Preferred  Stock,  $0.0001  par value per  share.  The
Company  shall from time to time,  in  accordance  with the laws of the State of
Nevada, increase the number of shares of its Common Stock, $0.0001 par value per
share,  if at any time the  number  of  shares  of the  Company's  Common  Stock
remaining  unissued and available for issuance shall not be sufficient to permit
conversion of the Series J Preferred Stock provided herein.

     2.  Dividends.  The holders of shares of Series J Preferred  Stock shall be
entitled  to  receive  an annual  dividend  out of any of the  Company's  assets
legally  available  therefor,  prior and in  preference  to any  declaration  or
payment of any dividend on the Common  Stock of the Company,  at the rate of ten
percent (10%) per annum on the stated value of the Series J Preferred Stock. The
stated  value is $1,000 per share and the  dividend  rate will be $100 per annum
per share of Series J Preferred  Stock. At the exclusive  option of the Company,
dividends  may be paid  either  in cash or in  additional  shares  of  Series  J
Preferred  Stock or other  securities  of the Company at the  discretion  of the
Board of Directors to holders of record of shares of Series J Preferred Stock as
they appear on the books and  records of the  Company on such  record  dates not
less than ten (10) days nor more than  sixty  (60) days  preceding  the  payment
dates  thereof,  as may be  fixed  by the  Board of  Directors  of the  Company.
Dividends  shall be fully  cumulative and shall accrue from the date of original
issuance of the Series J Preferred Stock.  Once dividends are paid on the Series
J  Preferred  Stock,  holders  of shares of Series J  Preferred  Stock  will not
participate  in  dividends  paid to holders of Common  Stock or other  series of
Preferred  Stock.  Except as  described  below,  no  dividends  shall be paid or
declared  and set  apart  for  payment  on any  class or series of shares of the
Company  that are junior to the Series J Preferred  Stock for any period  unless
full cumulative dividends have been paid or  contemporaneously  are declared and
paid or set apart for  payment  on the  Series J  Preferred  Stock.  A  dividend
payable in shares of Common Stock or in shares of another class of shares junior
to the Series J Preferred Stock may, however, be made. Dividends on the Series J
Preferred Stock may, at the option of the Company's Board of Directors,  be paid
in either cash or in additional  shares of Series J Preferred Stock or in shares
of other securities issued by the Company;  provided,  however,  that if accrued
dividends  on the  Series J  Preferred  Stock are paid in  additional  shares of
Series J Preferred Stock, accrued dividends paid subsequent thereto shall not be
paid on shares of Series J Preferred  Stock that were  previously  paid as stock
dividends.  Holders of Series J Preferred  Stock shall not participate in excess
dividends  remaining following payment of all accrued and unpaid dividends owing
to holders of Series J Preferred Stock.

               3.   Liquidation Preference.

               (a) In the event of any  voluntary  or  involuntary  liquidation,
     dissolution or winding up of the Company, the holders of Series J Preferred
     Stock  shall be  entitled  to  receive  out of the  assets  of the  Company
     available for  distribution  to  shareholders  before any  distribution  or
     payment is made to holders of shares of Common Stock,  or to holders of any
     other shares of the Company ranking junior upon liquidation to the Series J
     Preferred  Stock,  liquidation  distributions in the amount of One Thousand
     Dollars  ($1,000.00)  per share  plus all  accrued  and  unpaid  regular or
     special dividends,  if any, before any payment is made to holders of shares
     of the  Company's  equity  securities  that  are  junior  to the  Series  J
     Preferred  Stock.  If  upon  any  voluntary  or  involuntary   liquidation,
     dissolution  or winding up of the Company,  the assets of the Company shall
     be insufficient to make the full payment on the Series J Preferred Stock as
     described in the immediately  preceding  sentence,  and similar payments on
     any other  class of shares  ranking on a parity with the Series J Preferred
     Stock upon  liquidation,  then the holders of the Series J Preferred  Stock
     and of  such  other  class  of  shares  will  share  ratably  in  any  such
     distribution  of assets of the Company in proportion to the full respective
     distributable amounts to which they are entitled.

               (b) After payment to the holders of the Series J Preferred  Stock
     of the amounts set forth in subparagraph  3(a) above, the holders of Series
     J Preferred Stock will not be entitled to any further  participation in any
     distribution or payment by the Company, and the entire remaining assets and
     funds of the Company legally available for  distribution,  if any, shall be
     distributed  among the holders of shares of Common Stock in  proportion  to
     the shares of Common Stock then held by them.

               (c) A  consolidation  or merger of the  Company  with or into any
     other corporation or corporations, or a sale of all or substantially all of
     the  assets of the  Company  that does not  involve a  distribution  by the
     Company of cash or other property to the holders of shares of Common Stock,
     shall be deemed  to be a  liquidation,  dissolution  or  winding  up of the
     Company  within the meaning of this  Section 3, but rather shall be subject
     to the provisions of Section 6 below.

     4. Voting  Rights.  Except as  otherwise  expressly  provided  herein or as
required  by Nevada law,  the  holders of Series J Preferred  Stock shall not be
entitled  to voting  rights,  except that  without the  approval of holders of a
majority of the outstanding shares of Series J Preferred Stock, the Company will
not (i)  authorize,  create or issue any  shares of any class or series  ranking
senior to the Series J Preferred  Stock as to  liquidation  rights;  (ii) amend,
alter or repeal by any means the  Company's  Articles  of  Incorporation  if the
powers,  preferences or special rights of the Series J Preferred  Stock would be
materially adversely affected; or (iii) become subject to any restriction on the
Series J Preferred Stock other than restrictions arising solely under the Nevada
Act or existing under the Company's  Articles of  Incorporation  as in effect on
December 31, 1998.

     5.   Conversion.  

                         (a)  Generally.

                         (i)  Conversions  at Option of  Holder.  Each  share of
          Preferred  Stock  shall be  convertible  into  shares of Common  Stock
          (subject to the limitations set forth in Section  5(a)(iii) hereof) at
          the Conversion Ratio (as defined in Section 5(c), below) at the option
          of a  Holder,  at any time and from  time to time,  from and after the
          Original Issue Date (the "Initial  Conversion  Date").  A Holder shall
          effect  conversions by  surrendering  the  certificate or certificates
          representing  the shares of  Preferred  Stock to be  converted  to the
          Company,  together with a written  notice of  conversion  ("Conversion
          Notice"). Each Conversion Notice shall specify the number of shares of
          Preferred Stock to be converted, 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 by facsimile (the "Conversion  Date").
          If no  Conversion  Date  is  specified  in a  Conversion  Notice,  the
          Conversion Date shall be the date that the Conversion Notice is deemed
          delivered to the Company  pursuant to Section  5(h).  Each  Conversion
          Notice, once given, shall be irrevocable.  If the Holder is converting
          less than all of the  shares of  Preferred  Stock  represented  by the
          certificate or certificates tendered by the holder with the Conversion
          Notice,  or if a conversion  hereunder  cannot be effected in full for
          any reason,  the Company shall promptly deliver to such holder (in the
          manner  and  within  the  time  set  forth in  Section  5(b)  below) a
          certificate for such number of shares as have not been converted.

                         (ii) Automatic Conversion.  Subject to the restrictions
          in Section  5(a)(iii),  all outstanding  shares of Preferred Stock for
          which  conversion  notices have not  previously  been  received or for
          which  redemption  has not been made or  required  hereunder  shall be
          automatically converted on the third anniversary of the Original Issue
          Date at the Conversion Price on such date. The conversion contemplated
          by this  paragraph  shall not occur if at such time (A) the  Holder is
          not permitted to resell  underlying shares of Common Stock pursuant to
          Rule 144(k)  promulgated  under the  Securities  Act,  without  volume
          restrictions,  as evidenced by an opinion letter of counsel acceptable
          to the Holder and the transfer  agent for the Common Stock;  (B) there
          are not sufficient  shares of Common Stock authorized and reserved for
          issuance upon such conversion; or (C) the Company shall have defaulted
          on its covenants and obligations hereunder.

               (iii)     Certain Conversion Restrictions.

                                   (A) In no event  (except (i) with  respect to
               an automatic  conversion  of the  Preferred  Stock as provided in
               Section 5(a)(ii) hereof, (ii) if the Company is in default of any
               of its  obligations  hereunder,  or (iii) except as otherwise set
               forth  herein)  shall  any  Holder be  entitled  to  convert  any
               Preferred Stock to the extent that,  after such  conversion,  the
               sum of (1) the  number of shares  of  Common  Stock  beneficially
               owned by such Holder and its affiliates (other than the shares of
               Common Stock which may be deemed  beneficially  owned through the
               ownership of the unconverted portion of the Preferred Stock), and
               (2) the  number  of  shares of  Common  Stock  issuable  upon the
               conversion  of the  Preferred  Stock  with  respect  to which the
               determination  of this  proviso is being  made,  would  result in
               beneficial  ownership  by the Holder and its  affiliates  of more
               than 4.9% of the outstanding shares of Common Stock. For purposes
               of the immediately preceding sentence, beneficial ownership shall
               be determined in accordance  with section 13(d) of the Securities
               Exchange Act of 1934, as amended (the "Exchange Act"),  except as
               otherwise  provided in clause (1) of the preceding  sentence.  To
               the  extent  that  the  limitation  contained  in this  paragraph
               applies,  the  determination of whether shares of Preferred Stock
               are  convertible  (in  relation  to other  securities  owned by a
               Holder) and of which  shares of Preferred  Stock are  convertible
               shall be in the sole discretion of the Holder, and the submission
               of shares of Preferred Stock for conversion shall be deemed to be
               the  Holder's  determination  of whether such shares of Preferred
               Stock are convertible (in relation to other  securities  owned by
               the  Holder)  and of which  portion of such  shares of  Preferred
               Stock are  convertible,  in each case  subject to such  aggregate
               percentage  limitation,  and the Company shall have no obligation
               to verify or confirm the accuracy of such determination.  Nothing
               contained  herein  shall be deemed to  restrict  the right of the
               Holder to convert shares of Preferred  Stock at such time as such
               conversion will not violate the provisions of this paragraph. The
               provisions  of this  Section  will not  apply  to any  conversion
               pursuant to Section 5 (a)(ii) hereof.

                                   (B) If on any Conversion  Date (1) the Common
               Stock is listed for trading on the Nasdaq  SmallCap Market or the
               Nasdaq National  Market,  (2) the Conversion Price then in effect
               is such that the aggregate  number of shares of Common Stock that
               would  then be  issuable  upon  conversion  in  full of all  then
               outstanding shares of Preferred Stock and as payment of dividends
               thereon in shares of Common  Stock,  together  with any shares of
               the Common Stock  previously  issued upon conversion of shares of
               Preferred Stock and as payment of dividends thereon,  would equal
               or exceed  the lesser of (a) 19.9% of the number of shares of the
               Common  Stock  outstanding  on the  Original  Issue  Date  or (b)
               2,500,000  shares of Common Stock (such number of shares as would
               not equal or exceed such 19.9% limit, the "Issuable  Maximum" and
               any such Conversion Date, the "Record Date"), and (3) the Company
               shall not have previously  obtained the vote of shareholders (the
               "Shareholder  Approval"),  if  any,  as  may be  required  by the
               applicable  rules and  regulations of The Nasdaq Stock Market (or
               any  successor  entity)  applicable  to approve  the  issuance of
               shares of Common  Stock in excess of the  Issuable  Maximum  in a
               private  placement  whereby  shares of Common Stock are deemed to
               have been issued at a price that is less than the greater of book
               or fair market value of the Common Stock,  then the Company shall
               issue to the Holder so requesting a conversion a number of shares
               of Common Stock equal to the Issuable  Maximum and,  with respect
               to the remainder of the  aggregate  Stated Value of the shares of
               Preferred  Stock then held by such Holder for which a  conversion
               in  accordance  with the  Conversion  Price  would  result  in an
               issuance of Common Stock in excess of the  Issuable  Maximum (the
               "Excess Stated Value"), the Company shall, within one year of the
               Record  Date,  use its best  efforts  to obtain  the  Shareholder
               Approval applicable to such issuance. If the Company shall either
               (i) fail to seek such Shareholder Approval, or (ii) indicate in a
               notice  to the  Holder  that it does not  intend  to  obtain  the
               Shareholder  Approval  applicable  to  such  issuance,  then  the
               converting Holder shall have the option to require the Company to
               either (1) if the Company has not prior thereto  attempted or has
               attempted to and has failed to obtain the Shareholder Approval in
               accordance with this Section,  use its best efforts to obtain the
               Shareholder  Approval  applicable  to such issuance as soon as is
               possible, but in any event not later than the 90th day after such
               request, or (2) redeem the remaining shares of Preferred Stock as
               provided below. If the Company fails to pay the Redemption Amount
               in full pursuant to this Section  within seven (7) days after the
               date payable,  the Company will pay interest thereon at a rate of
               8% per annum to the  converting  Holder,  accruing daily from the
               Conversion  Date  until  such  amount,  plus  all  such  interest
               thereon, is paid in full.

               (b) Not later than  three (3)  Trading  Days  after a  Conversion
     Date,  the  Company  will  deliver  to  the  holder  (i) a  certificate  or
     certificates representing the number of shares of Common Stock being issued
     upon the  conversion  of shares of  Preferred  Stock  (subject to reduction
     pursuant  to  the  restrictions   set  forth  above),   (ii)  one  or  more
     certificates  representing  the  number of shares  of  Preferred  Stock not
     converted, (iii) a bank check in the amount of accrued and unpaid dividends
     (if the  Company  has  elected or is  required  to pay  accrued  and unpaid
     dividends  in cash) and (iv) if the Company  has  elected and is  permitted
     hereunder to pay accrued  dividends in shares of Common Stock or additional
     shares of Preferred Stock,  certificates representing such number of shares
     of  Common  or  Preferred  Stock as are  issuable  on  account  of  accrued
     dividends.   Notwithstanding  the  foregoing,  the  Company  shall  not  be
     obligated  to issue  certificates  evidencing  the  shares of Common  Stock
     issuable  upon   conversion   of  any  shares  of  Preferred   Stock  until
     certificates evidencing such shares of Preferred Stock are either delivered
     for conversion to the Company or any transfer agent for the Preferred Stock
     or Common Stock, or the holder of such Preferred Stock notifies the Company
     that such  certificates  have been lost, stolen or destroyed and provides a
     bond (or other adequate security) reasonably satisfactory to the Company to
     indemnify the Company from any loss incurred by it in connection therewith.
     The Company  shall,  upon  request of the holder,  use its best  efforts to
     deliver any  certificate  or  certificates  required to be delivered by the
     Company  under this Section  electronically  through the  Depository  Trust
     Corporation or another established clearing corporation  performing similar
     functions.

                    (c)  Conversion Ratio.

                         (i) The  conversion  ratio for each share of  Preferred
          Stock  (the  "Conversion  Ratio")  on any  Conversion  Date  shall  be
          calculated  by dividing  $1,000 by the market  price of the  Company's
          Common Stock on such date.

                         (ii) If the  Company,  at any time  while any shares of
          Preferred  Stock are  outstanding,  (a) shall pay a stock  dividend or
          otherwise  make a  distribution  on account of or to holders of Junior
          Securities   payable  in  shares  of  Common   Stock,   (b)  subdivide
          outstanding  shares of Common Stock into a larger number of shares, or
          (c) combine  outstanding  shares of Common Stock into a smaller number
          of  shares,  then  the  Conversion  Price  shall  be  multiplied  by a
          fraction,  the  numerator  of which  shall be the  number of shares of
          Common Stock (excluding  treasury shares,  if any) outstanding  before
          such event and the  denominator of which shall be the number of shares
          of Common Stock  outstanding  after such event.  Any  adjustment  made
          pursuant to this Section 5(c)(ii) 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 or
          combination.

               (d) The Company  covenants  that it will at all times reserve and
     keep available out of its  authorized and unissued  Common Stock solely for
     the purpose of issuance upon  conversion of Preferred  Stock and payment of
     dividends on Preferred Stock, each as herein provided, free from preemptive
     rights or any other actual contingent purchase rights of persons other than
     the  holders of  Preferred  Stock,  not less than such  number of shares of
     Common  Stock as  shall  (subject  to any  additional  requirements  of the
     Company  as to  reservation  of  such  shares  set  forth  in the  Purchase
     Agreement)   be  issuable   (taking  into  account  the   adjustments   and
     restrictions of Section 5(c)) upon the conversion of all outstanding shares
     of  Preferred  Stock  and  payment  of  dividends  hereunder.  The  Company
     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
     non-assessable.

               (e) Upon a conversion hereunder the Company shall not be required
     to issue  stock  certificates  representing  fractions  of shares of Common
     Stock,  but may if otherwise  permitted  and unless waived by the holder of
     the Preferred  Stock,  make a cash payment in respect of any final fraction
     of a share based on the Per Share Market Value at such time. If the Company
     elects  not,  or is unable,  to make such a cash  payment,  the holder of a
     share of Preferred Stock shall be entitled to receive, in lieu of the final
     fraction of a share, one whole share of Common Stock.

               (f) The  issuance of  certificates  for shares of 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
     Company 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  and the  Company  shall  not be
     required to issue or deliver such  certificates  unless or until the person
     or persons  requesting the issuance  thereof shall have paid to the Company
     the amount of such tax or shall have established to the satisfaction of the
     Company that such tax has been paid.

               (g) Shares of Preferred  Stock  converted into Common Stock shall
     be canceled and shall have the status of authorized but unissued  shares of
     undesignated stock. They may not be reissued as shares of this series.

               (h) 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,  sent  by  a  nationally  recognized
     overnight courier service or sent by certified or registered mail,  postage
     prepaid,  addressed to the attention of the President of the Company at the
     facsimile telephone number or address of the principal place of business of
     the Company as set forth in the Purchase Agreement.  Any and all notices or
     other  communications or deliveries to be provided by the Company hereunder
     shall be in writing  and  delivered  personally,  by  facsimile,  sent by a
     nationally  recognized  overnight  courier  service or sent by certified or
     registered  mail,  postage  prepaid,  addressed to each holder of Preferred
     Stock at the facsimile telephone number or address of such holder appearing
     on the books of the Company,  or if no such facsimile  telephone  number or
     address  appears,  at the  principal  place of business of the holder.  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 5:00 p.m.  (Salt Lake
     City time), (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 5:00 p.m. (Salt Lake City time) on any
     date and earlier than 11:59 p.m. (Salt Lake City time) on such date,  (iii)
     four days after deposit in the United  States mails,  (iv) the Business Day
     following the date of mailing, if send by nationally  recognized  overnight
     courier  service,  or (v) upon  actual  receipt  by the  party to whom such
     notice is  required to be given.  For  purposes  of Section  5(c)(h),  if a
     Conversion  Notice is delivered by facsimile  prior to 5:00 p.m. (Salt Lake
     City  time) on any date,  then the day prior to such date shall be the last
     Trading Day calculated to determine the Conversion Price applicable to such
     Conversion  Notice,  and the  date  of such  delivery  shall  commence  the
     counting of days for purposes of Section 5(b).

               6.   Merger or Consolidation.

          (a)  At any time, in the event of:

                         (i) any  transaction or series of related  transactions
          (including,   without  limitation,   any  reorganization,   merger  or
          consolidation)   that  will  result  in  the  Company's   shareholders
          immediately  prior to such  transaction not holding (by virtue of such
          shares or  securities  issued  solely with  respect  thereto) at least
          fifty percent (50%) of the voting power of the surviving or continuing
          entity; or

                         (ii) a sale of all or  substantially  all of the assets
          of the Company, unless the Company's shareholders immediately prior to
          such  sale  will,  as a  result  of such  sale,  hold  (by  virtue  of
          securities  issued as  consideration  for the Company's sale) at least
          fifty percent (50%) of the voting power of the purchasing entity;

          (the foregoing events are individually  referred to herein as a "Sales
     Transaction"),  then,  holders of the Series J Preferred Stock of record as
     of the date of consummation of the Sales  Transaction  shall be entitled to
     receive,  prior and in  preference to any payment of  consideration  to the
     holders  of  Common  Stock,  in cash or in  securities  received  from  the
     acquiring  corporation,  or in a combination thereof, at the closing of any
     such Sales  Transaction,  at the holder's  discretion,  an amount per share
     equal to One Thousand  Dollars  ($1,000.00)  per share (as adjusted for any
     combinations,  consolidations,  stock distributions or stock dividends with
     respect  to such  shares),  plus all  declared  or  accumulated  but unpaid
     dividends  on  such  shares  as of  the  date  of  closing  of  such  Sales
     Transaction.  In the event the  proceeds of the Sales  Transaction  are not
     sufficient to make full payment of the aforementioned  preferential amounts
     to the holders of the Series J Preferred Stock in accordance herewith, then
     the entire  amount  payable in respect of the  proposed  Sales  Transaction
     shall be  distributed  ratably  among the holders of the Series J Preferred
     Stock in  proportion to the product of the  liquidation  preference of each
     such share and the number of such shares  owned by each such  holder.  Upon
     completion  of the payment to the  holders of Series J  Preferred  Stock as
     provided above, the remaining  proceeds of such Sales  Transaction shall be
     distributed among the holders of record (as of the date of the consummation
     of the Sales  Transaction)  of shares of Common Stock in  proportion to the
     number of shares of Common Stock then held.  Unless otherwise  consented to
     by the  holders  of a  majority  of the  outstanding  shares  of  Series  J
     Preferred  Stock,  such payments shall be made with respect to the Series J
     Preferred  Stock and to holders of Common  Stock by purchase of such shares
     of Series J Preferred Stock and Common Stock by the surviving  corporation,
     entity or person,  or by redemption  of such shares by the Company,  in the
     discretion of the Company.

               (b) Any  securities  to be  delivered  to the holders of Series J
     Preferred  Stock  pursuant to Section 6(a) above shall be valued solely for
     purposes of this Section, as follows:

                         (i)  Securities  not  subject to  investment  letter or
          other similar  restrictions on free  marketability  as provided for in
          subsection (ii) below:

                                   (A) If traded  on a  securities  exchange  or
               reported on the NASDAQ SmallCap Market, the value shall be deemed
               to be the average of the closing prices of the securities on such
               exchange  over the thirty (30) day period  ending  three (3) days
               prior to the closing;

                                   (B) If actively traded over-the-counter,  the
               value  shall be deemed to be the  average of the  closing  bid or
               sale prices  (whichever is  applicable)  over the thirty (30) day
               period ending three (3) days prior to the closing; and

                                   (C) If there is no active public market,  the
               value  shall  be the  fair  market  value  thereof,  as  mutually
               determined by the Company's Board of Directors and the holders of
               a majority of the outstanding shares of Series J Preferred Stock.

                         (ii) The method of valuation of  securities  subject to
          investment letter or other restrictions on free  marketability  (other
          than restrictions  arising solely by virtue of a shareholder's  status
          as an affiliate or former  affiliate of the Company)  shall be to make
          an  appropriate  discount from the market value  determined in Section
          6(b)(i)(A),  (B) or (C) above to reflect the  approximate  fair market
          value thereof,  as mutually  determined by the Company and the holders
          of a majority of the outstanding shares of Series J Preferred Stock.

               (c) In the event the  requirements  of Section 6(a) above are not
     complied with, the Company shall forthwith either:

                         (i) cause such closing to be postponed  until such time
          as the requirements of this Section 6 have been complied with; or

                         (ii)  cancel  such  transaction,  in  which  event  the
          rights,  preferences  and  privileges  of  the  holders  of  Series  J
          Preferred  Stock  shall  revert  to and be the  same as  such  rights,
          preferences and privileges  existing  immediately prior to the date of
          the first notice referred to in Section 6(d) below.

               (d) The  Company  shall  give  each  holder of record of Series J
     Preferred Stock written notice of such impending transaction not later than
     ten (10) days prior to the  shareholders'  meeting  called to approve  such
     transaction. The notice shall describe the material terms and conditions of
     the  impending  transaction  and the  provisions of this Section 6, and the
     Company shall  thereafter  give such holders  prompt notice of any material
     changes to the impending  transaction.  The  transaction  shall in no event
     take  place soon than  twenty  (20) days  after the  Company  has given the
     notice  provided  for herein or sooner than ten (10) days after the Company
     has given the notice of any material  changes in the impending  transaction
     as  provided  for  herein;  provided,  however,  that such  periods  may be
     shortened  upon the  written  consent of the  holders of a majority  of the
     outstanding shares of Series J Preferred Stock.

     7.  Restrictions  and  Limitations.  So  long as any  shares  of  Series  J
Preferred Stock remain issued and outstanding, the Company shall not without the
consent of the holders of a majority  of the shares of Series J Preferred  Stock
then outstanding:

               (a) Effect any reclassification, recapitalization or other change
     with  respect  to any  outstanding  shares  of stock  that  results  in the
     issuance  of  shares of stock  having  any  preference  or  priority  as to
     liquidation  preferences  that  are  superior  to any  such  preference  or
     priority of the Series J Preferred Stock; or

               (b) Increase or decrease (other than by redemption or conversion)
     the total number of authorized shares of the Series J Preferred Stock.

     8. No Reissuance of Series J Preferred  Stock. No share or shares of Series
J Preferred  Stock acquired by the Company by reason of redemption,  purchase or
otherwise shall be reissued, and all such shares shall be returned to the status
of undesignated shares of the Company's Preferred Stock.

     9. Redemption. The Company shall have the right to call for redemption part
or all of the  shares of Series J  Preferred  Stock at any time and from time to
time, by giving  notice,  regardless of whether any holder shall have also given
notice of intent to convert such shares.  The  redemption  price  payable by the
Company  at any time  shall be $1,333  per share at the time of the  redemption.
After the date fixed for  redemption,  dividends on shares of Series J Preferred
Stock called for redemption  shall cease to accrue,  such shares shall no longer
be deemed to be issued and outstanding, and all rights of the holders thereof as
shareholders  of the  Company  shall cease  unless the  Company  defaults on the
payment of the redemption  price.  Redemption  shall be made on a pro rata basis
among all holders of the Series J Preferred  Stock.  The  redemption  price paid
shall be applied  first to the  redemption  of shares  that would  otherwise  be
subject to  conversion  in the year the  redemption is made. At its sole option,
the  Company  may offset  amounts  owed the  Company by a holder of the Series J
Preferred  Stock or any affiliate of such a holder against any redemption  price
payable against the shares of Series J Preferred Stock owned by such holder.

     10. United States Dollars. All references herein to Dollars shall be deemed
to refer to United States Dollars.