CERTIFICATE OF DESIGNATION,
                             PREFERENCES AND RIGHTS

                                       OF

                      SERIES C CONVERTIBLE PREFERRED STOCK

                                       OF

                                   P-COM, INC.

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


         P-Com, Inc., a corporation organized and existing under the laws of the
State of  Delaware  (the  "CORPORATION"),  hereby  certifies  that the  Board of
Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD"), pursuant
to  authority  of the Board of  Directors  as  required  by  Section  151 of the
Delaware  General  Corporation Law, and in accordance with the provisions of its
Certificate of  Incorporation  and Bylaws,  each as amended and restated through
the  date  hereof,  has and  hereby  authorizes  a series  of the  Corporation's
previously  authorized  Preferred  Stock,  par  value  $0.0001  per  share  (the
"PREFERRED STOCK"),  and hereby states the designation and number of shares, and
fixes the relative  rights,  preferences,  privileges,  powers and  restrictions
thereof, as follows:

                           I. DESIGNATION AND AMOUNT

         The designation of this series, which consists of Ten Thousand (10,000)
shares of Preferred  Stock,  is the Series C  Convertible  Preferred  Stock (the
"SERIES C  PREFERRED  STOCK") and the face amount  shall be One  Thousand  Seven
Hundred Fifty Dollars ($1,750) per share (the "FACE AMOUNT").


                            II. CERTAIN DEFINITIONS

         For purposes of this  Certificate of  Designation,  the following terms
shall have the following meanings:

         A.  "BUSINESS  DAY" means any day, other than a Saturday or Sunday or a
day on which  banking  institutions  in the State of New York are  authorized or
obligated by law, regulation or executive order to close.

         B. "CLOSING BID PRICE" means, for any security as of any date, the last
bid price of such security on the OTC  Electronic  Bulletin Board (the "OTC") or
the Bulletin Board Exchange (collectively with the OTC, the "Bulletin BOARD") or
other  principal  trading  market  where  such  security  is listed or traded as
reported by Bloomberg  Financial  Markets (or a comparable  reporting service of
national  reputation  selected by the Corporation  and reasonably  acceptable to
holders of a majority of the then outstanding shares of Series C Preferred Stock

<PAGE>

("MAJORITY  HOLDERS")  if  Bloomberg  Financial  Markets  is not then  reporting
closing  bid prices of such  security)  (collectively,  "BLOOMBERG"),  or if the
foregoing does not apply, the closing sales price of such security on a national
exchange  or in the  over-the-counter  market on any other  electronic  bulletin
board for such  security  as  reported  by  Bloomberg,  or, if no such  price is
reported for such  security by  Bloomberg,  the average of the bid prices of all
market makers for such security as reported in the "pink sheets" by the National
Quotation  Bureau,  Inc.,  in each case for such date or, if such date was not a
trading day for such  security,  on the next  preceding date which was a trading
day. If the  Closing  Bid Price  cannot be  calculated  for such  security as of
either of such dates on any of the  foregoing  bases,  the  Closing Bid Price of
such  security  on such  date  shall be the  fair  market  value  as  reasonably
determined  by an  investment  banking  firm  selected  by the  Corporation  and
reasonably  acceptable to the Majority Holders, with the costs of such appraisal
to be borne by the Corporation.

         C. "CONVERSION DATE" means, for any Optional  Conversion (as defined in
Article IV.A below),  the date specified in the notice of conversion in the form
attached hereto (the "NOTICE OF CONVERSION"), so long as a copy of the Notice of
Conversion  is faxed (or  delivered  by other means  resulting in notice) to the
Corporation  before  11:59  p.m.,  New York City time,  on the  Conversion  Date
indicated in the Notice of Conversion;  provided, however, that if the Notice of
Conversion  is not so faxed or otherwise  delivered  before such time,  then the
Conversion  Date shall be the date the holder  faxes or  otherwise  delivers the
Notice of Conversion to the Corporation.

         D.  "CONVERSION  PRICE" means $0.10, and shall be subject to adjustment
as provided herein.

         E.  "DEFAULT  CURE DATE" means,  as  applicable,  (i) with respect to a
Conversion  Default  described  in  clause  (i) of  Article  VI.A,  the date the
Corporation  effects  the  conversion  of the full  number of shares of Series C
Preferred  Stock,  and (ii) with  respect to a Conversion  Default  described in
clause (ii) of Article VI.A,  the date the  Corporation  issues freely  tradable
shares of Common Stock in  satisfaction of all conversions of Series C Preferred
Stock in accordance with Article IV.A, or (iii) with respect to either type of a
Conversion Default, the date on which the Corporation redeems shares of Series C
Preferred Stock held by such holder pursuant to Article VI.A.

         F.  "ISSUANCE  DATE" means the date of the closing under the Securities
Purchase Agreement by and among the Corporation and the purchasers named therein
(the "SECURITIES PURCHASE AGREEMENT"), pursuant to which the Corporation issues,
and such purchasers purchase,  shares of Series C Preferred Stock upon the terms
and conditions stated therein.

         G. "PRICE ADJUSTMENT  APPROVAL" means the approval of the Corporation's
stockholders  of  the   anti-dilution   and  other   conversion/exercise   price
adjustments  contained  in the Series C  Preferred  Stock and the  Warrants,  as
required by Article VII, Section 8 of the Corporation's Bylaws.

         H.  "REGISTRATION  RIGHTS  AGREEMENT"  means  the  Registration  Rights
Agreement,  dated as of the Issuance Date, by and among the  Corporation and the
initial holders of Series C Preferred Stock.


                                       2
<PAGE>

         I.  "TRADING  DAY" means any day on which the  principal  United States
securities  exchange or trading  market where the Common Stock is then listed or
traded, is open for trading.

         J.  "WARRANTS"  means the  warrants  issued by the  Corporation  to the
initial holders of Series C Preferred Stock pursuant to the Securities  Purchase
Agreement.


                                 III. DIVIDENDS

         A. Commencing on the first anniversary of the Issuance Date,  dividends
shall be payable  cumulatively out of funds legally available  therefor,  at the
rate of six percent (6%) per annum, which rate shall  automatically  increase to
eight percent (8%) per annum on the second  anniversary of the Issuance Date, as
to each  outstanding  share of Series C Preferred Stock on every successive June
30 and December 31 (each such date, a "DIVIDEND  DATE" and each such payment,  a
"DIVIDEND").  Payment of  Dividends  on each share of Series C  Preferred  Stock
shall be made, at the option of the Corporation  (subject to the limitations set
forth below in Article  IV.D),  either (x) in cash or (y) if all of the Required
Stock Dividend  Conditions (as defined below) are satisfied,  by the issuance of
shares of Common Stock by the  Corporation  in an amount  determined by dividing
the amount of the  Dividend  that is payable on such share of Series C Preferred
Stock by the  average  Closing  Bid Price of the  Common  Stock for the ten (10)
trading day period immediately preceding the applicable Dividend Date.

         B. The  "REQUIRED  STOCK  DIVIDEND  CONDITIONS"  shall  consist  of the
following:

                  (i) a  registration  statement  covering  the shares of Common
Stock to be issued as a Dividend  shall have been filed by the  Corporation  and
declared effective by the United States Securities and Exchange Commission,  and
such registration  statement  continues to be effective up through and including
the Dividend Date;

                  (ii) all shares of Common Stock to be issued as a Dividend are
then (a)  authorized  and  reserved  for  issuance,  (b)  registered  under  the
Securities  Act of 1933, as amended (the  "SECURITIES  ACT"),  for resale by the
holders  and (c) listed or traded on the  Bulletin  Board,  the Nasdaq  National
Market or any other national exchange;

                  (iii) no Redemption  Event (as defined in Article VII.A below)
shall have occurred without having been cured; and

                  (iv) all amounts,  if any,  then accrued or payable under this
Certificate of Designation or the Registration  Rights Agreement shall have been
paid.

                                 IV. CONVERSION

         A.  Conversion at the Option of the Holder.  Subject to the limitations
on  conversions  contained  in  Paragraph  C of this  Article IV, each holder of
shares  of  Series C  Preferred  Stock  may,  at any time and from time to time,
convert  (an  "OPTIONAL  CONVERSION")  each of its shares of Series C  Preferred
Stock  into a number of fully  paid and  nonassessable  shares  of Common  Stock
determined in accordance with the following formula:


                                       3
<PAGE>

      FACE AMOUNT + ACCRUED BUT UNPAID DIVIDENDS AS OF THE CONVERSION DATE
                                CONVERSION PRICE

         B. Mechanics of Conversion.  In order to effect an Optional Conversion,
a holder  shall:  (x) fax (or  otherwise  deliver) a copy of the fully  executed
Notice of Conversion to the Corporation (Attention: Secretary) and (y) surrender
or cause to be surrendered the original  certificates  representing the Series C
Preferred  Stock being  converted (the  "PREFERRED  STOCK  CERTIFICATES"),  duly
endorsed,  along with a copy of the Notice of Conversion as soon as  practicable
thereafter to the  Corporation.  Upon receipt by the  Corporation of a facsimile
copy of a Notice of Conversion  from a holder,  the  Corporation  shall promptly
send,  via facsimile,  a confirmation  to such holder stating that the Notice of
Conversion has been  received,  the date upon which the  Corporation  expects to
deliver  the  Common  Stock  issuable  upon  such  conversion  and the  name and
telephone  number  of  a  contact  person  at  the  Corporation   regarding  the
conversion.  The  Corporation  shall not be  obligated to issue shares of Common
Stock upon a conversion  unless  either the  Preferred  Stock  Certificates  are
delivered  to the  Corporation  as provided  above,  or the holder  notifies the
Corporation  that such Preferred Stock  Certificates  have been lost,  stolen or
destroyed and delivers the documentation to the Corporation  required by Article
XIV.B hereof.

                  (i)  Delivery  of  Common  Stock  Upon  Conversion.  Upon  the
surrender of Preferred Stock Certificates accompanied by a Notice of Conversion,
the Corporation (itself, or through its transfer agent) shall, no later than the
later of (a) the second  business day following the Conversion  Date and (b) the
business  day  following  the date of such  surrender  (or, in the case of lost,
stolen or destroyed  certificates,  after  provision  of  indemnity  pursuant to
Article XIV.B) (the "DELIVERY PERIOD"),  issue and deliver (i.e., deposit with a
nationally  recognized  overnight courier service postage prepaid) to the holder
or its  nominee  (x) that  number  of  shares  of  Common  Stock  issuable  upon
conversion of such shares of Series C Preferred  Stock being converted and (y) a
certificate  representing  the number of shares of Series C Preferred  Stock not
being converted,  if any.  Notwithstanding  the foregoing,  if the Corporation's
transfer agent is  participating  in the Depository  Trust Company  ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates  therefor
do  not  bear a  legend  (pursuant  to the  terms  of  the  Securities  Purchase
Agreement)  and  the  holder  thereof  is  not  then  required  to  return  such
certificate for the placement of a legend thereon  (pursuant to the terms of the
Securities Purchase  Agreement),  the Corporation shall cause its transfer agent
to promptly electronically transmit the Common Stock issuable upon conversion to
the  holder by  crediting  the  account of the  holder or its  nominee  with DTC
through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER").  If the
aforementioned  conditions to a DTC Transfer are not satisfied,  the Corporation
shall deliver as provided above to the holder physical certificates representing
the Common Stock issuable upon  conversion.  Further,  a holder may instruct the
Corporation  to deliver to the holder  physical  certificates  representing  the
Common Stock issuable upon  conversion in lieu of delivering  such shares by way
of DTC Transfer.

                  (ii) Taxes.  The Corporation  shall pay any and all taxes that
may be imposed  upon it with  respect to the issuance and delivery of the shares
of Common Stock upon the conversion of the Series C Preferred Stock.


                                       4
<PAGE>

                  (iii) No  Fractional  Shares.  If any  conversion  of Series C
Preferred  Stock would result in the  issuance of a  fractional  share of Common
Stock  (aggregating  all  shares of Series C  Preferred  Stock  being  converted
pursuant  to a given  Notice of  Conversion),  such  fractional  share  shall be
payable in cash based upon the ten day  average  Closing Bid Price at such time,
and the number of shares of Common Stock issuable upon  conversion of the Series
C  Preferred  Stock  shall be the next  lower  whole  number of  shares.  If the
Corporation elects not to, or is unable to, make such a cash payment, the holder
shall be  entitled  to receive,  in lieu of the final  fraction of a share,  one
whole share of Common Stock.

                  (iv)  Conversion  Disputes.  In the case of any  dispute  with
respect to a conversion,  the  Corporation  shall  promptly issue such number of
shares of Common Stock as are not disputed in accordance with  subparagraph  (i)
above.  If such dispute  involves the calculation of the Conversion  Price,  and
such dispute is not promptly resolved by discussion  between the relevant holder
and the Corporation,  the Corporation shall submit the disputed  calculations to
an independent  outside  accountant via facsimile  within three business days of
receipt of the Notice of Conversion.  The accountant,  at the Corporation's sole
expense,  shall promptly audit the  calculations  and notify the Corporation and
the holder of the  results no later  than three  business  days from the date it
receives the disputed calculations. The accountant's calculation shall be deemed
conclusive,  absent  manifest  error.  The  Corporation  shall  then  issue  the
appropriate number of shares of Common Stock in accordance with subparagraph (i)
above.

         C. Mandatory Conversion by Corporation.

                  (i) If, at any time after one hundred  eighty  (180) days from
the effective date of the registration statement (the "REGISTRATION  STATEMENT")
required  to be  filed  by the  Corporation  pursuant  to  Section  2(a)  of the
Registration  Rights Agreement,  and subject to Article IV.D hereof,  all of the
Required Conditions (as defined below) are satisfied, then, at the option of the
Corporation exercised by the delivery of written notice (a "MANDATORY CONVERSION
NOTICE") to all holders of the shares of Series C Preferred  Stock,  the Company
may  require  the  holders of Series C  Preferred  Stock to  convert  all of the
outstanding shares of Series C Preferred Stock into Common Stock pursuant to the
applicable conversion procedures in Article IV.B.

                  (ii) The "REQUIRED CONDITIONS" shall consist of the following:

                           (a) the Closing Bid Price of the Common Stock for the
ten (10) consecutive trading days prior to delivery of the Mandatory  Conversion
Notice equals or exceeds $0.20 (as adjusted for stock splits, stock dividends or
similar events);

                           (b)  the  Registration   Statement  continues  to  be
effective  up  through  and  including  the  date  of the  Mandatory  Conversion
contemplated  by this Article  IV.C (it being  understood  that the  Corporation
shall comply with its  obligations  under Article 3 of the  Registration  Rights
Agreement relating to the effectiveness of such registration statement);

                           (c)  all  shares  of  Common  Stock   issuable   upon
conversion of the Series C Preferred Stock and exercise of the Warrants are then
(a)  authorized and reserved for issuance,  (b) registered  under the Securities
Act, for resale by the holders and (c) listed or traded on the  Bulletin  Board,
the Nasdaq National Market or any other national exchange;


                                       5
<PAGE>

                           (d) no Redemption  Event (as defined in Article VII.A
below) shall have occurred without having been cured; and

                           (e) all  amounts,  if any,  then  accrued  or payable
under this Certificate of Designation or the Registration Rights Agreement shall
have been paid.

                  (iii) In the event any holder of Series C  Preferred  Stock is
unable to convert all of the outstanding  Series C Preferred Stock that it holds
due to the  limitations  set forth in  Article  IV. D hereof,  such  unconverted
Series C Preferred  Stock  shall  remain  outstanding  with all of the right and
privileges  set forth herein;  provided,  however,  that such shares of Series C
Preferred  Stock  shall  cease to accrue  any  additional  Dividends  hereunder,
effective as of the date of the mandatory  conversion specified in the Mandatory
Conversion Notice.

         D.  Limitations  on  Conversions.  The conversion of shares of Series C
Preferred  Stock and the payment of Dividends in shares of Common Stock shall be
subject to the following limitations (each of which limitations shall be applied
independently):

                  (i) [Reserved].

                  (ii)  Additional   Restrictions  on  Conversion,   Payment  of
Dividends  in  Shares  of  Common  Stock  or  Transfer.  In no event  shall  the
Corporation  issue  Common  Stock to any holder of Series C  Preferred  Stock as
payment of any  Dividend,  and in no event  shall a holder of shares of Series C
Preferred Stock of the Corporation  have the right to convert shares of Series C
Preferred  Stock  into  shares of Common  Stock or to  dispose  of any shares of
Series C Preferred Stock to the extent that such right to effect such conversion
or  disposition  would  result in the holder or any of its  affiliates  together
beneficially  owning more than 9.999% of the outstanding shares of Common Stock.
For purposes of this subparagraph,  beneficial  ownership shall be determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and Regulation  13D-G  thereunder.  The restriction  contained in this
subparagraph  may not be  altered,  amended,  deleted  or  changed in any manner
whatsoever unless the holders of a majority of the outstanding  shares of Common
Stock (considered  separately as a single class without giving effect to Article
XI hereof) and the Majority Holders shall approve, in writing,  such alteration,
amendment, deletion or change; provided, however, no such alteration, amendment,
deletion or change shall be effective  until the 61st day following the later of
the vote of the  holders of the Common  Stock or the  Majority  Holders.  In the
event the  Corporation is prohibited  from issuing Common Stock to any holder of
Series C Preferred Stock as payment of any Dividend,  it shall pay such Dividend
to such holder in cash.


                    V. RESERVATION OF SHARES OF COMMON STOCK

         A. Reserved  Amount.  The Company shall,  at and after such time as the
Company's stockholders have approved an amendment to its Restated Certificate of
Incorporation  to increase the number of authorized  shares of Common Stock from
69,000,000 to at least  600,000,000  shares (the  "AMENDMENT"),  but in no event
later than ninety (90) days following the Issuance Date; provided, however, that
in the event the SEC conducts a full review of the  preliminary  proxy statement

                                       6
<PAGE>

filed  in  connection  with  the  Company  soliciting  proxies  to  approve  the
Amendment,  such  period  may  be  extended,  if  reasonably  necessary,  by  an
additional  thirty  (30) days (the  "AMENDMENT  DATE"),  reserve  such number of
shares of its authorized but unissued  shares of Common Stock to provide for the
conversion  of the Series C  Preferred  Stock that is equal to (i) the number of
shares of Common Stock issuable upon  conversion of the Series C Preferred Stock
issued and  outstanding  on the  Issuance  Date,  as adjusted to provide for any
subsequent  issuances  after the  Issuance  Date but prior to the  filing of the
registration  statement  contemplated  by  the  Registration  Rights  Agreement,
multiplied by (ii) 125%, and, thereafter,  the number of authorized but unissued
shares of Common Stock so reserved (the "RESERVED AMOUNT") shall at all times be
sufficient  to provide for the full  conversion of all of the Series C Preferred
Stock  outstanding at the then current  Conversion Price thereof (without giving
effect to the limitations  contained in Article IV.D). The Reserved Amount shall
be  allocated  among the  holders of Series C  Preferred  Stock as  provided  in
Article XIV.C. In the event the Company's  stockholders  shall not have approved
the Amendment by the Amendment  Date,  then the Company shall pay to each holder
of Series C Preferred  Stock an amount equal to the product of (i) the number of
shares of Series C Preferred  Stock then held by such holder  multiplied  by the
per  share  purchase  price  paid by such  holder  for its  shares  of  Series C
Preferred  Stock,  multiplied by (ii) two percent  (2.0%) for each 30 day period
(or portion  thereof)  after the Amendment Date and prior to the approval of the
Amendment by the Company's stockholders.

         B. Increases to Reserved  Amount.  If the Reserved Amount for any three
consecutive  trading  days  (the  last of such  three  trading  days  being  the
"AUTHORIZATION TRIGGER DATE") shall be less than one hundred twenty-five percent
(125%) of the number of shares of Common Stock issuable upon full  conversion of
the then  outstanding  shares of Series C Preferred Stock (without giving effect
to the limitations contained in Article IV.D), the Corporation shall immediately
notify the holders of Series C Preferred Stock of such occurrence and shall take
immediate  action  (including,  if necessary,  seeking  stockholder  approval to
increase  the  number of  authorized  shares of Common  Stock) to  increase  the
Reserved  Amount to one  hundred  twenty-five  percent  (125%) of the  number of
shares  of  Common  Stock  then  issuable  upon  full  conversion  of all of the
outstanding  Series  C  Preferred  Stock at the then  current  Conversion  Price
(without  giving effect to the  limitations  contained in Article IV.D).  In the
event the  Corporation  fails to so increase the Reserved  Amount within 90 days
after an  Authorization  Trigger Date,  each holder of Series C Preferred  Stock
shall  thereafter  have the option,  exercisable in whole or in part at any time
and from time to time, by delivery of a Redemption Notice (as defined in Article
VII.C) to the Corporation,  to require the Corporation to redeem for cash, at an
amount per share equal to the Redemption Amount (as defined in Article VII.B), a
number of the  holder's  shares of Series C  Preferred  Stock such  that,  after
giving effect to such  redemption,  the then  unissued  portion of such holder's
Reserved Amount is at least equal to one hundred  twenty-five  percent (125%) of
the total  number of shares of Common Stock  issuable  upon  conversion  of such
holder's shares of Series C Preferred Stock. If the Corporation  fails to redeem
any of  such  shares  within  five  business  days  after  its  receipt  of such
Redemption  Notice,  then such holder shall be entitled to the remedies provided
in Article VII.C.

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<PAGE>

VI. FAILURE TO SATISFY CONVERSIONS

         A.  Conversion  Defaults.  If, at any  time,  (i) a holder of shares of
Series C Preferred  Stock  submits a Notice of  Conversion  and the  Corporation
fails for any reason  (other  than  because  such  issuance  would  exceed  such
holder's  allocated  portion of the Cap  Amount or  Reserved  Amount,  for which
failures  the holders  shall have the  remedies  set forth in Articles V and VI,
respectively)  to deliver,  on or prior to the fifth  business day following the
expiration  of the Delivery  Period for such  conversion,  such number of freely
tradable  shares of Common  Stock to which  such  holder is  entitled  upon such
conversion,  or (ii) the  Corporation  provides  written notice to any holder of
Series C Preferred Stock (or makes a public  announcement  via press release) at
any time of its  intention not to issue freely  tradable  shares of Common Stock
upon  exercise by any holder of its  conversion  rights in  accordance  with the
terms of this Certificate of Designation (other than because such issuance would
exceed such holder's  allocated  portion of the Cap Amount or Reserved Amount or
Cap Amount) (each of (i) and (ii) being a "CONVERSION DEFAULT"), then the holder
may elect,  at any time and from time to time prior to the Default Cure Date for
such Conversion  Default, by delivery of a Redemption Notice to the Corporation,
to have all or any  portion  of such  holder's  outstanding  shares  of Series C
Preferred  Stock  redeemed by the  Corporation  for cash, at an amount per share
equal to the Redemption  Amount.  If the Corporation fails to redeem any of such
shares within five business  days after its receipt of such  Redemption  Notice,
then such holder shall be entitled to the remedies provided in Article VII.C.

         B. Buy-In Cure.  Unless the  Corporation  has  notified the  applicable
holder in writing prior to the delivery by such holder of a Notice of Conversion
that the Corporation is unable to honor conversions,  if (i) (a) the Corporation
fails to promptly deliver during the Delivery Period shares of Common Stock to a
holder  upon a  conversion  of shares of Series C  Preferred  Stock or (b) there
shall occur a Legend Removal Failure (as defined in Article  VII.A(i) below) and
(ii)  thereafter,  such  holder  purchases  (in an open  market  transaction  or
otherwise)  shares of Common Stock to make delivery in satisfaction of a sale by
such holder of the  unlegended  shares of Common Stock (the "SOLD SHARES") which
such  holder  anticipated  receiving  upon such  conversion  (a  "BUY-IN"),  the
Corporation shall pay such holder,  in addition to any other remedies  available
to the  holder,  the  amount by which (x) such  holder's  total  purchase  price
(including  brokerage  commissions,  if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by such holder from the
sale of the Sold Shares. For example, if a holder purchases unlegended shares of
Common  Stock  having a total  purchase  price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000,  the Corporation  will be
required  to pay the holder  $1,000.  A holder  shall  provide  the  Corporation
written notification and supporting documentation indicating any amounts payable
to such holder  pursuant to this Article VI.B.  The  Corporation  shall make any
payments  required  pursuant to this Article VI.B in accordance with and subject
to the provisions of Article XIV.E.


                     VII. REDEMPTION DUE TO CERTAIN EVENTS

         A. Redemption by Holder.  In the event (each of the events described in
clauses  (i)-(vi) below after  expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):


                                       8
<PAGE>

                  (i) the Corporation fails to remove any restrictive  legend on
any  certificate or any shares of Common Stock issued to the holders of Series C
Preferred  Stock upon  conversion  of the Series C  Preferred  Stock as and when
required by this Certificate of Designation,  the Securities  Purchase Agreement
or the Registration Rights Agreement (a "LEGEND REMOVAL FAILURE"),  and any such
failure  continues uncured for five business days after the Corporation has been
notified thereof in writing by the holder;

                  (ii) the  Corporation  or any  subsidiary  of the  Corporation
shall make an assignment  for the benefit of creditors,  or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial  part of
its  property or  business,  or such a receiver or trustee  shall  otherwise  be
appointed;

                  (iii) the  Corporation's  stockholders  do not (x) approve the
Amendment or (y) grant the Price Adjustment Approval, in each case no later than
ninety (90) days after the Issuance Date; provided,  however,  that in the event
the SEC  conducts a full  review of the  preliminary  proxy  statement  filed in
connection with the Company  soliciting proxies to approve the Amendment and the
Price Adjustment Approval, such period may be extended, if reasonably necessary,
by an additional thirty (30) days.;

                  (iv)  bankruptcy,  insolvency,  reorganization  or liquidation
proceedings or other  proceedings  for the relief of debtors shall be instituted
by or against  the  Corporation  or any  subsidiary  of the  Corporation  and if
instituted  against the  Corporation or any  subsidiary of the  Corporation by a
third party, shall not be dismissed within 60 days of their initiation;

                  (v) the Corporation shall:

                           (a) sell,  convey or dispose of all or  substantially
all of its assets (the  presentation  of any such  transaction  for  stockholder
approval being conclusive  evidence that such  transaction  involves the sale of
all or substantially all of the assets of the Corporation);

                           (b)  merge,   consolidate  or  engage  in  any  other
business  combination  with any other entity (other than pursuant to a migratory
merger  effected  solely  for  the  purpose  of  changing  the  jurisdiction  of
incorporation  of the  Corporation  and other than pursuant to a merger in which
the  Corporation is the surviving or continuing  entity and its capital stock is
unchanged) provided that such merger,  consolidation or business  combination is
required to be reported by the  Corporation on a Current Report pursuant to Item
1 of Form 8-K, or any successor form;

                           (c) engage in any  transaction or a series of related
transactions  resulting in the sale or issuance by the Corporation or any of its
stockholders  of any securities to any person or entity,  or the  acquisition or
right to  acquire  securities  by any person or entity,  in either  case  acting
individually or in concert with others, such that, following the consummation of
such  transaction(s),   such  person(s)  or  entity(ies)  (together  with  their
respective  affiliates,  as  such  term  is  used  under  Section  13(d)  of the
Securities  Exchange  Act of 1934,  as  amended)  would own or have the right to
acquire  greater than fifty  percent (50%) of the  outstanding  shares of Common
Stock (calculated on a fully-diluted basis).


                                       9
<PAGE>

                           (d) either (i) fail to pay,  when due,  or within any
applicable  grace period,  any payment with respect to any  indebtedness  of the
Corporation  in excess of $250,000 due to any third party,  other than  payments
contested  by the  Corporation  in good  faith,  or  otherwise  be in  breach or
violation  of any  agreement  for monies owed or owing in an amount in excess of
$250,000 which breach or violation  permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder,  or (ii) suffer to exist
any  other  default  or  event  of  default  under  any  agreement  binding  the
Corporation  which  default  or event of  default  would or is  likely to have a
material adverse effect on the business,  operations,  properties,  prospects or
financial condition of the Corporation; or

                  (vi) except with respect to matters  covered by  subparagraphs
(i) - (v) above,  as to which such  applicable  subparagraphs  shall apply,  the
Corporation  otherwise  shall  breach any material  term  hereunder or under the
Securities  Purchase  Agreement,   the  Registration  Rights  Agreement  or  the
Warrants,  including,  without  limitation,  the  representations and warranties
contained  therein (i.e.,  in the event of a material breach as of the date such
representation and warranty was made) and if such breach is curable,  shall fail
to cure such breach  within ten  business  days after the  Corporation  has been
notified thereof in writing by the holder;

then, upon the occurrence of any such Redemption Event, each holder of shares of
Series C Preferred Stock shall thereafter have the option,  exercisable in whole
or in part at any time and from time to time by delivery of a Redemption  Notice
(as defined in Paragraph C below) to the Corporation while such Redemption Event
continues,  to require the  Corporation  to purchase  for cash any or all of the
then  outstanding  shares of Series C Preferred Stock held by such holder for an
amount per share  equal to the  Redemption  Amount (as  defined in  Paragraph  B
below) in effect at the time of the redemption  hereunder.  For the avoidance of
doubt,  the occurrence of any event described in clauses (i), (ii),  (iii),  (v)
and (vi) above shall  immediately  constitute a Redemption Event and there shall
be no cure  period.  Upon the  Corporation's  receipt of any  Redemption  Notice
hereunder  (other  than  during  the three  trading  day  period  following  the
Corporation's delivery of a Redemption Announcement (as defined below) to all of
the holders in response to the  Corporation's  initial  receipt of a  Redemption
Notice  from a holder  of  Series C  Preferred  Stock),  the  Corporation  shall
immediately  (and in any event within one business day  following  such receipt)
deliver a written notice (a "REDEMPTION  ANNOUNCEMENT") to all holders of Series
C Preferred  Stock  stating the date upon which the  Corporation  received  such
Redemption  Notice and the amount of Series C Preferred  Stock covered  thereby.
The  Corporation  shall not redeem any shares of Series C Preferred Stock during
the three  trading day period  following  the delivery of a required  Redemption
Announcement  hereunder.  At any time and from time to time  during  such  three
trading day period,  each holder of Series C Preferred Stock may request (either
orally or in  writing)  information  from the  Corporation  with  respect to the
instant  redemption  (including,  but not  limited to, the  aggregate  number of
shares of Series C Preferred Stock covered by Redemption Notices received by the
Corporation) and the Corporation  shall furnish (either orally or in writing) as
soon as practicable such requested information to such requesting holder.


                                       10
<PAGE>

         B.  Definition  of  Redemption  Amount.  The  "REDEMPTION  AMOUNT" with
respect  to a share of Series C  Preferred  Stock  means an amount  equal to the
greater of:

                  (i)         V X M
                             --
                             C P

         and      (ii)         V        X        R

where:

                  "V" means the Face Amount  thereof plus all accrued  Dividends
thereon through the date of payment of the Redemption Amount;

                  "CP" means the Conversion Price in effect on the date on which
the Corporation receives the Redemption Notice;

                  "M" means  (i) with  respect  to all  redemptions  other  than
redemptions  pursuant to subparagraph (a) or (b) of Article VII.A(v) hereof, the
highest  Closing Bid Price of the  Corporation's  Common Stock during the period
beginning on the date on which the  Corporation  receives the Redemption  Notice
and  ending  on the  date  immediately  preceding  the  date of  payment  of the
Redemption Amount and (ii) with respect to redemptions  pursuant to subparagraph
(a) or (b) of Article VII.A(v) hereof,  the greater of (a) the amount determined
pursuant to clause (i) of this  definition or (b) the fair market  value,  as of
the date on  which  the  Corporation  receives  the  Redemption  Notice,  of the
consideration  payable to the holder of a share of Common Stock  pursuant to the
transaction  which  triggers the  redemption.  For purposes of this  definition,
"fair  market  value"  shall  be  determined  by  the  mutual  agreement  of the
Corporation  and the Majority  Holders,  or if such agreement  cannot be reached
within five  business  days prior to the date of  redemption,  by an  investment
banking  firm  selected by the  Corporation  and  reasonably  acceptable  to the
Majority  Holders,  with  the  costs  of  such  appraisal  to be  borne  by  the
Corporation; and

                  "R" means 120%.

Notwithstanding  the  foregoing,  with  respect  to a  redemption  of  Series  C
Preferred Stock pursuant to subparagraph (c) of Article VII.A(v), the Redemption
Amount with respect to such shares of Series C Preferred Stock shall be the Face
Amount thereof plus all accrued Dividends thereon through the date of payment of
the Redemption Amount.

         C. Redemption Defaults.  If the Corporation fails to pay any holder the
Redemption  Amount with respect to any share of Series C Preferred  Stock within
five business days after its receipt of a notice  requiring  such  redemption (a
"REDEMPTION  NOTICE"),  then the holder of Series C Preferred  Stock entitled to
redemption shall be entitled to interest on the Redemption Amount at a per annum
rate equal to the lower of  twenty-four  percent (24%) and the highest  interest
rate permitted by applicable law from the date on which the Corporation receives

                                       11
<PAGE>

the  Redemption  Notice  until  the date of  payment  of the  Redemption  Amount
hereunder.  In the event the Corporation is not able to redeem all of the shares
of Series C Preferred Stock subject to Redemption Notices delivered prior to the
date upon which such redemption is to be effected,  the Corporation shall redeem
shares of Series C Preferred Stock from each holder pro rata, based on the total
number  of  shares  of  Series  C  Preferred  Stock  outstanding  at the time of
redemption  included by such holder in all Redemption Notices delivered prior to
the date upon which such  redemption  is to be  effected  relative  to the total
number  of  shares  of  Series  C  Preferred  Stock  outstanding  at the time of
redemption included in all of the Redemption Notices delivered prior to the date
upon which such redemption is to be effected.

                                   VIII. RANK

         All shares of the Series C Preferred  Stock shall rank (i) prior to the
Corporation's  Common  Stock,  Series A Junior  Participating  Preferred  Stock,
Series B Convertible Preferred Stock and any class or series of capital stock of
the  Corporation  hereafter  created  (unless,  with the consent of the Majority
Holders obtained in accordance with Article XIII hereof, such class or series of
capital stock specifically, by its terms, ranks senior to or pari passu with the
Series C Preferred Stock)  (collectively  with the Common Stock and the Series B
Convertible Preferred Stock, the "JUNIOR SECURITIES");  (ii) pari passu with any
class or series of capital stock of the Corporation  hereafter created (with the
written consent of the Majority Holders obtained in accordance with Article XIII
hereof)  specifically  ranking,  by its  terms,  on  parity  with  the  Series C
Preferred Stock (the "PARI PASSU SECURITIES");  and (iii) junior to any class or
series of capital stock of the Corporation  hereafter  created (with the written
consent of the Majority Holders obtained in accordance with Article XIII hereof)
specifically  ranking,  by its  terms,  senior to the Series C  Preferred  Stock
(collectively,  the "SENIOR  Securities"),  in each case as to  distribution  of
assets upon liquidation,  dissolution or winding up of the Corporation,  whether
voluntary or involuntary.

                           IX. LIQUIDATION PREFERENCE

         A. If the  Corporation  shall  commence a voluntary case under the U.S.
Federal  bankruptcy  laws or any  other  applicable  bankruptcy,  insolvency  or
similar  law,  or consent to the entry of an order for relief in an  involuntary
case under any law or to the  appointment of a receiver,  liquidator,  assignee,
custodian,  trustee, sequestrator (or other similar official) of the Corporation
or of any  substantial  part of its  property,  or make  an  assignment  for the
benefit of its  creditors,  or admit in writing its  inability  to pay its debts
generally  as they  become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having  jurisdiction in the premises
in an  involuntary  case  under the U.S.  Federal  bankruptcy  laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver,  liquidator,  assignee,  custodian,  trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60  consecutive  days and,
on account of any such event, the Corporation shall liquidate,  dissolve or wind
up,  or if the  Corporation  shall  otherwise  liquidate,  dissolve  or wind up,
including,  but not limited to, the sale or transfer of all or substantially all
of the  Corporation's  assets  in one  transaction  or in a  series  of  related
transactions  (only in the event a holder does not elect its rights with respect

                                       12
<PAGE>

to such sale or transfer as set forth in Article  X.B,  if  applicable)  and the
consolidation  or merger of the Corporation  with or into any other entity (only
in the  event  a  holder  does  not  elect  its  rights  with  respect  to  such
consolidation  or  merger  as set  forth  in  Article  X.B,  if  applicable)  (a
"LIQUIDATION EVENT"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation  (other than Senior  Securities  pursuant to
the rights, preferences and privileges thereof) upon liquidation, dissolution or
winding up unless  prior  thereto  the  holders of shares of Series C  Preferred
Stock shall have received the Liquidation Preference with respect to each share.
If, upon the occurrence of a Liquidation  Event,  the assets and funds available
for  distribution  among the holders of the Series C Preferred Stock and holders
of Pari Passu Securities, if any, shall be insufficient to permit the payment to
such holders of the preferential amounts payable thereon, then the entire assets
and funds of the Corporation  legally available for distribution to the Series C
Preferred  Stock and the Pari Passu  Securities,  if any,  shall be  distributed
ratably  among  such  shares in  proportion  to the ratio  that the  Liquidation
Preference  payable  on each  such  share  bears  to the  aggregate  Liquidation
Preference  payable on all such shares. If, upon the occurrence of a Liquidation
Event,  the assets and funds  available  for  distribution  among the holders of
Senior  Securities,  if any, the holders of the Series C Preferred Stock and the
holders of Pari Passu  Securities,  if any,  shall be  sufficient  to permit the
payment to such holders of the preferential amounts payable thereon,  then after
such payment shall be made in full to the holders of Senior Securities,  if any,
the  holders  of the  Series C  Preferred  Stock and the  holders  of Pari Passu
Securities,  if any, the remaining  assets and funds available for  distribution
shall be  distributed  to the  holders of any Junior  Securities  entitled  to a
liquidation preference in payment of the aggregate liquidation preference of all
such  holders.  After such  payment  shall be made in full to the holders of any
Junior Securities entitled to a liquidation preference, the remaining assets and
funds available for distribution shall be distributed  ratably among the holders
of shares of Series C Preferred  Stock, the holders of any other class or series
of  Preferred  Stock  entitled  to  participate  with  the  Common  Stock  in  a
liquidating  distribution and the holders of the Common Stock,  with the holders
of shares of Preferred Stock deemed to hold the number of shares of Common Stock
into which such shares of Preferred Stock are then convertible.

         B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof,  be regarded
as a liquidation, dissolution or winding up of the Corporation.

         C. The  "LIQUIDATION  PREFERENCE"  with  respect to a share of Series C
Preferred  Stock  means an  amount  equal to the Face  Amount  thereof  plus all
accrued  Dividends  thereon  through  the  date  of  final   distribution.   The
Liquidation Preference with respect to any Pari Passu Securities,  if any, shall
be as set forth in the Certificate of Designation filed in respect thereof.


                     X. ADJUSTMENTS TO THE CONVERSION PRICE

         The Conversion  Price shall be subject to adjustment  from time to time
as follows:

         A. Stock Splits, Stock Dividends,  Etc. If, at any time on or after the
Issuance Date, the number of outstanding  shares of Common Stock is increased by
a stock split, stock dividend,  combination,  reclassification  or other similar
event, the Conversion Price shall be proportionately  reduced,  or if the number
of  outstanding  shares of Common Stock is  decreased by a reverse  stock split,
combination, reclassification or other similar event, the Conversion Price shall
be  proportionately  increased.  In such event, the Corporation shall notify the
Corporation's  transfer  agent of such  change on or before the  effective  date
thereof.


                                       13
<PAGE>

         B. Merger, Consolidation, Etc. If, at any time after the Issuance Date,
there shall be (i) any  reclassification  or change of the outstanding shares of
Common  Stock  (other  than a change in par  value,  or from par value to no par
value,  or from no par value to par value,  or as a result of a  subdivision  or
combination), (ii) any consolidation or merger of the Corporation with any other
entity  (other  than a merger  in which  the  Corporation  is the  surviving  or
continuing  entity  and its  capital  stock  is  unchanged),  (iii)  any sale or
transfer of all or  substantially  all of the assets of the  Corporation or (iv)
any share  exchange  pursuant to which all of the  outstanding  shares of Common
Stock are converted into other  securities or property (each of (i) - (iv) above
being a "CORPORATE CHANGE"),  then the holders of Series C Preferred Stock shall
thereafter have the right to receive upon  conversion,  in lieu of the shares of
Common Stock otherwise issuable,  such shares of stock,  securities and/or other
property  as would have been  issued or payable in such  Corporate  Change  with
respect to or in exchange  for the number of shares of Common  Stock which would
have been issuable upon  conversion  had such  Corporate  Change not taken place
(without giving effect to the limitations contained in Article IV.D), and in any
such case, appropriate provisions (in form and substance reasonably satisfactory
to the Majority  Holders) shall be made with respect to the rights and interests
of the  holders of the  Series C  Preferred  Stock to the end that the  economic
value of the shares of Series C Preferred Stock are in no way diminished by such
Corporate Change and that the provisions hereof (including,  without limitation,
in the case of any such  consolidation,  merger or sale in which  the  successor
entity or purchasing entity is not the Corporation,  an immediate  adjustment of
the  Conversion  Price  so that  the  Conversion  Price  immediately  after  the
Corporate  Change  reflects the same relative  value as compared to the value of
the surviving  entity's common stock that existed  between the Conversion  Price
and the  value  of the  Corporation's  Common  Stock  immediately  prior to such
Corporate Change shall thereafter be applicable, as nearly as may be practicable
in relation to any shares of stock or securities thereafter deliverable upon the
conversion  thereof).  The  Corporation  shall not effect any  Corporate  Change
unless (i) each holder of Series C Preferred  Stock has received  written notice
of such  transaction at least 45 days prior thereto,  but in no event later than
15 days prior to the record date for the determination of stockholders  entitled
to vote with respect thereto, (ii) if required by Section 4(i) of the Securities
Purchase  Agreement,  the consent of the  Purchasers (as such term is defined in
the Securities  Purchase  Agreement) shall have been obtained in accordance with
such Section 4(i), and (iii) the resulting successor or acquiring entity (if not
the  Corporation),  and, if an entity  different from the successor or acquiring
entity, the entity whose capital stock or assets the holders of the Common Stock
are entitled to receive as a result of such Corporate Change, assumes by written
instrument  (in form  and  substance  reasonable  satisfactory  to the  Majority
Holders) the obligations of this Certificate of Designation (including,  without
limitation,  the  obligation  to make  payments of Dividends  accrued but unpaid
through the date of such consolidation, merger or sale and accruing thereafter).
The above  provisions  shall apply regardless of whether or not there would have
been a sufficient  number of shares of Common Stock authorized and available for
issuance upon conversion of the shares of Series C Preferred  Stock  outstanding
as of the date of such  transaction,  and shall  similarly  apply to  successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.

         C.  Distributions.  If,  at any  time  after  the  Issuance  Date,  the
Corporation  shall declare or make any  distribution of its assets (or rights to
acquire  its  assets)  to  holders  of  Common  Stock as a  partial  liquidating
dividend,  by way of return of capital or otherwise  (including  any dividend or
distribution to the  Corporation's  stockholders in cash or shares (or rights to

                                       14
<PAGE>

acquire  shares)  of  capital  stock of a  subsidiary  (i.e.,  a  spin-off))  (a
"DISTRIBUTION"), then the holders of Series C Preferred Stock shall be entitled,
upon any  conversion  of shares of Series C  Preferred  Stock  after the date of
record for determining  stockholders  entitled to such Distribution,  to receive
the  amount of such  assets  which  would have been  payable to the holder  with
respect to the shares of Common Stock  issuable  upon such  conversion  (without
giving effect to the limitations contained in Article IV.D) had such holder been
the  holder  of  such  shares  of  Common  Stock  on the  record  date  for  the
determination of stockholders entitled to such Distribution. If the Distribution
involves Convertible Securities or Purchase Rights (as such terms are defined in
Paragraph D below) and the right to  exercise  or convert  any such  Convertible
Securities or Purchase  Rights would expire in accordance with their terms prior
to the  conversion  of the  Series C  Preferred  Stock,  then the  terms of such
Convertible  Securities  or Purchase  Rights shall provide that such exercise or
convertibility  right  shall  remain in effect  until 30 days after the date the
holder of Series C Preferred  Stock  receives  such  Convertible  Securities  or
Purchase Rights pursuant to the conversion hereof.

         D.  Purchase  Rights.  If, at any time  after the  Issuance  Date,  the
Corporation  issues any securities or other  instruments  which are  convertible
into or exercisable or exchangeable for Common Stock ("CONVERTIBLE  SECURITIES")
or options,  warrants or other rights to purchase or subscribe  for Common Stock
or Convertible  Securities ("PURCHASE RIGHTS") pro rata to the record holders of
any  class of  Common  Stock,  whether  or not such  Convertible  Securities  or
Purchase Rights are immediately convertible,  exercisable or exchangeable,  then
the holders of Series C Preferred  Stock shall be entitled to acquire,  upon the
terms  applicable  to  such  Convertible  Securities  or  Purchase  Rights,  the
aggregate number of Convertible  Securities or Purchase Rights which such holder
could have acquired if such holder had held the number of shares of Common Stock
acquirable  upon complete  conversion of the Series C Preferred  Stock  (without
giving effect to the limitations  contained in Article IV.D) immediately  before
the date on which a record  is taken  for the  grant,  issuance  or sale of such
Convertible  Securities or Purchase Rights,  or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Convertible Securities or Purchase Rights.

         E. Dilutive Issuances.

                  (i) If, at any time after the  Corporation  obtains  the Price
Adjustment  Approval,  the  Corporation  issues or sells,  or in accordance with
subparagraph  (ii) of this  Article  X.E is deemed to have  issued or sold,  any
shares of Common Stock for no  consideration  or for a  consideration  per share
less than the  Conversion  Price in effect on the date of  issuance  or sale (or
deemed  issuance or sale) (a "DILUTIVE  ISSUANCE"),  then effective  immediately
upon the Dilutive Issuance, the Conversion Price shall be adjusted in accordance
with the following formula:

                 ACP=      C x    O+P/C
                                 -------
                                  CSDO

         where:

         ACP      = the adjusted Conversion Price;
         C        = the  Conversion  Price  on  (a)  for  purposes  any  private
                  offering of securities  under  Section 4(2) of the  Securities

                                       15
<PAGE>

                  Act, the date that the Corporation enters into legally binding
                  definitive  agreements  for the  issuance of such Common Stock
                  and (b) for  purposes  of any other  such  issuance  of Common
                  Stock, the date of issuance thereof;
         O        = the number of shares of Common Stock outstanding immediately
                  prior   to  the   Dilutive   Issuance;   P  =  the   aggregate
                  consideration,  calculated  as set  forth in  Article  X.E(ii)
                  hereof,   received  by  the  Corporation  upon  such  Dilutive
                  Issuance; and
         CSDO     =  the  total  number  of  shares  of  Common  Stock  actually
                  outstanding (after giving effect to the Dilutive Issuance, and
                  not  including  shares of Common Stock held in the treasury of
                  the  Corporation),  plus  (a) in the  case  of any  adjustment
                  required  by  this  Article  X.E(i)  due  to the  issuance  of
                  Purchase Rights,  the maximum total number of shares of Common
                  Stock  issuable  upon the exercise of the Purchase  Rights for
                  which the  adjustment is required  (including any Common Stock
                  issuable  upon  the  conversion  of   Convertible   Securities
                  issuable upon the exercise of such Purchase  Rights),  and (y)
                  in the case of any adjustment  required by this Article X.E(i)
                  due to the  issuance of  Convertible  Securities,  the maximum
                  total  number  of shares of  Common  Stock  issuable  upon the
                  exercise, conversion or exchange of the Convertible Securities
                  for  which  the  adjustment  is  required,  as of the  date of
                  issuance of such Convertible Securities, if any.

Notwithstanding  the  foregoing,  no  adjustment  shall be made pursuant to this
Article X.E(i) if such adjustment  would result in an increase in the Conversion
Price.

                  (ii)  Effect  on  Conversion  Price  of  Certain  Events.  For
purposes of determining the adjusted  Conversion Price under subparagraph (i) of
this Article X.E, the following will be applicable:

                           (a) Issuance of Purchase  Rights.  If the Corporation
issues or sells any Purchase Rights, whether or not immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of such
Purchase Rights (and the price of any conversion of Convertible  Securities,  if
applicable) is less than the Conversion  Price in effect on the date of issuance
or sale of such  Purchase  Rights,  then the maximum  total  number of shares of
Common Stock  issuable upon the exercise of all such Purchase  Rights  (assuming
full conversion,  exercise or exchange of Convertible Securities, if applicable)
shall, as of the date of the issuance or sale of such Purchase Rights, be deemed
to be outstanding  and to have been issued and sold by the  Corporation for such
price per share.  For purposes of the preceding  sentence,  the "price per share
for which Common Stock is issuable  upon the exercise of such  Purchase  Rights"
shall be  determined  by  dividing  (A) the total  amount,  if any,  received or
receivable by the Corporation as  consideration  for the issuance or sale of all
such  Purchase  Rights,   plus  the  minimum   aggregate  amount  of  additional
consideration,  if any, payable to the Corporation upon the exercise of all such
Purchase Rights,  plus, in the case of Convertible  Securities issuable upon the
exercise of such Purchase  Rights,  the minimum  aggregate  amount of additional
consideration  payable  upon  the  conversion,   exercise  or  exchange  thereof
(determined in accordance with the calculation  method set forth in subparagraph
(ii)(b)  of this  Article  X.E) at the time such  Convertible  Securities  first
become convertible, exercisable or exchangeable, by (B) the maximum total number

                                       16
<PAGE>

of shares of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion,  exercise or exchange of Convertible  Securities,  if
applicable).  No further  adjustment to the Conversion  Price shall be made upon
the actual  issuance of such  Common  Stock upon the  exercise of such  Purchase
Rights or upon the  conversion,  exercise or exchange of Convertible  Securities
issuable upon exercise of such Purchase Rights.

                  (b) Issuance of Convertible Securities.

                           (1)  If  the   Corporation   issues   or  sells   any
Convertible  Securities,  which Convertible Securities do not have a fluctuating
conversion  or exercise  price or  exchange  ratio,  whether or not  immediately
convertible,  exercisable  or  exchangeable,  and the  price per share for which
Common Stock is issuable upon such conversion, exercise or exchange is less than
the  Conversion  Price  in  effect  on the  date  of  issuance  or  sale of such
Convertible Securities,  then the maximum total number of shares of Common Stock
issuable  upon the  conversion,  exercise or  exchange  of all such  Convertible
Securities  shall,  as of the date of the  issuance or sale of such  Convertible
Securities,  be deemed to be outstanding and to have been issued and sold by the
Corporation  for  such  price  per  share.  For the  purposes  of the  preceding
sentence,  the "price per share for which  Common  Stock is  issuable  upon such
conversion,  exercise or exchange" shall be determined by dividing (A) the total
amount,  if any,  received or receivable by the Corporation as consideration for
the  issuance  or sale of all such  Convertible  Securities,  plus  the  minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the conversion, exercise or exchange thereof (determined in accordance with
the calculation  method set forth in this  subparagraph  (ii)(b) of this Article
X.E)  at  the  time  such  Convertible   Securities  first  become  convertible,
exercisable or exchangeable, by (B) the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Conversion Price shall be made upon the
actual  issuance of such Common Stock upon  conversion,  exercise or exchange of
such Convertible Securities.

                           (2)  If  the   Corporation   issues   or  sells   any
Convertible  Securities  with a  fluctuating  conversion  or  exercise  price or
exchange ratio (a "VARIABLE  RATE  CONVERTIBLE  SECURITY"),  then the "price per
share for which  Common  Stock is  issuable  upon such  conversion,  exercise or
exchange"  for  purposes  of  the   calculation   contemplated  by  subparagraph
(b)(ii)(1)  of this Article X.E shall be deemed to be the lowest price per share
which would be applicable  (assuming all holding period and other  conditions to
any discounts  contained in such Variable  Rate  Convertible  Security have been
satisfied)  if the  Conversion  Price  on the date of  issuance  or sale of such
Variable  Rate  Convertible  Security  was  seventy-five  percent  (75%)  of the
Conversion Price on such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if
the  Conversion  Price at any time or times  thereafter is less than or equal to
the Assumed Variable Market Price last used for making any adjustment under this
Article  X.E  with  respect  to any  Variable  Rate  Convertible  Security,  the
Conversion  Price in  effect  at such  time  shall be  readjusted  to equal  the
Conversion  Price which would have resulted if the Assumed Variable Market Price
at the time of issuance  of the  Variable  Rate  Convertible  Security  had been
seventy-five  percent (75%) of the Conversion  Price existing at the time of the
adjustment required by this sentence.

                           (3) Change in Option  Price or  Conversion  Rate.  If
there is a change  at any time in (A) the  amount  of  additional  consideration
payable to the  Corporation  upon the exercise of any Purchase  Rights;  (B) the
amount of additional consideration,  if any, payable to the Corporation upon the
conversion,  exercise or exchange of any Convertible Securities; or (C) the rate

                                       17
<PAGE>

at which any  Convertible  Securities  are  convertible  into or  exercisable or
exchangeable  for Common Stock (in each such case, other than under or by reason
of provisions designed to protect against dilution and except when an adjustment
is made pursuant to subparagraph (ii)(b)(2) of this Article X.E), the Conversion
Price in effect at the time of such change shall be readjusted to the Conversion
Price which would have been in effect at such time had such  Purchase  Rights or
Convertible  Securities still outstanding  provided for such changed  additional
consideration or changed conversion,  exercise or exchange rate, as the case may
be, at the time initially issued or sold.

                           (4)  Calculation of  Consideration  Received.  If any
Common Stock,  Purchase Rights or Convertible  Securities are issued or sold for
cash, the  consideration  received  therefor will be the amount  received by the
Corporation  therefor,   after  deduction  of  all  underwriting   discounts  or
allowances in connection  with such issuance,  grant or sale. In case any Common
Stock,  Purchase  Rights  or  Convertible  Securities  are  issued or sold for a
consideration  part or all of which shall be other than cash,  including  in the
case of a  strategic  or  similar  arrangement  in which the other  entity  will
provide services to the Corporation,  purchase  services from the Corporation or
otherwise provide intangible consideration to the Corporation, the amount of the
consideration  other than cash received by the  Corporation  (including  the net
present value of the consideration  expected by the Corporation for the provided
or purchased  services)  shall be the fair market  value of such  consideration,
except where such consideration consists of securities, in which case the amount
of  consideration  received by the Corporation will be valued at the Closing Bid
Price  thereof as of the date of  receipt.  In case any Common  Stock,  Purchase
Rights or  Convertible  Securities  are issued in connection  with any merger or
consolidation in which the Corporation is the surviving corporation,  the amount
of  consideration  therefor  will be deemed to be the fair market  value of such
portion of the net assets and business of the  non-surviving  corporation  as is
attributable to such Common Stock, Purchase Rights or Convertible Securities, as
the case may be. Notwithstanding anything else herein to the contrary, if Common
Stock,  Purchase  Rights  or  Convertible  Securities  are  issued  or  sold  in
conjunction  with each other as part of a single  transaction  or in a series of
related  transactions,  any  holder  of  Series C  Preferred  Stock may elect to
determine the amount of  consideration  deemed to be received by the Corporation
therefor by deducting the fair value of any type of securities (the "DISREGARDED
SECURITIES")  issued or sold in such transaction or series of  transactions.  If
the holder makes an election pursuant to the immediately  preceding sentence, no
adjustment  to the  Conversion  Price shall be made pursuant to this Article X.E
for the issuance of the Disregarded Securities or upon any conversion,  exercise
or exchange thereof.  For example,  if the Corporation were to issue convertible
notes  having a face value of  $1,000,000  and  warrants to  purchase  shares of
Common  Stock at an exercise  price equal to the Closing Bid Price of the Common
Stock on the date of issuance of such  warrants in exchange  for  $1,000,000  of
consideration,  the fair  value of the  warrants  would be  subtracted  from the
$1,000,000  of  consideration  received by the  Corporation  for the purposes of
determining  whether the shares of Common Stock issuable upon  conversion of the
convertible  notes  shall be deemed to be issued at a price per share  below the
Conversion  Price and, if so, for purposes of determining  any adjustment to the
Conversion Price hereunder as a result of the issuance of the convertible notes.
The Corporation  shall calculate,  using standard  commercial  valuation methods
appropriate for valuing such assets,  the fair market value of any consideration
other than cash or securities;  provided,  however, that if the Majority Holders
do not agree to such fair market value  calculation  within three  business days
after receipt thereof from the Corporation, then such fair market value shall be

                                       18
<PAGE>

determined in good faith by an investment banker or other appropriate  expert of
national reputation selected by the Corporation and reasonably acceptable to the
Majority  Holders,  with  the  costs  of  such  appraisal  to be  borne  by  the
Corporation.

                           (5) Issuances Pursuant to Existing Securities. If the
Corporation  issues  (or  becomes  obligated  to issue)  shares of Common  Stock
pursuant to any antidilution or similar  adjustments  (other than as a result of
stock  splits,  stock  dividends  and the  like)  contained  in any  Convertible
Securities or Purchase Rights outstanding as of the date hereof but not included
in Section 3(c) of the Disclosure Schedule to the Securities Purchase Agreement,
then all shares of Common  Stock so issued  shall be deemed to have been  issued
for no consideration.  If the Corporation issues (or becomes obligated to issue)
shares of Common  Stock  pursuant  to any  antidilution  or similar  adjustments
contained in any  Convertible  Securities or Purchase Rights included in Section
3(c) of the Disclosure Schedule to the Securities Purchase Agreement as a result
of the  issuance of the Series C Preferred  Stock or Warrants  and the number of
shares that the  Corporation  issues (or is  obligated  to issue) as a result of
such  initial  issuance  exceeds  the amount  specified  in Section  3(c) of the
Disclosure  Schedule to the Securities  Purchase  Agreement,  such excess shares
shall be deemed to have been issued for no consideration.

         F.  Exceptions to Adjustment of Conversion  Price. No adjustment to the
Conversion  Price  shall  be made  (i)  upon  the  exercise  of any  Convertible
Securities or Purchase  Rights issued and  outstanding on the Issuance Date that
are set forth in  Section  3(c) of the  Disclosure  Schedule  to the  Securities
Purchase  Agreement in accordance with the terms of such Convertible  Securities
and  Purchase  Rights as of such date;  (ii) upon the grant or  exercise  of any
Common Stock,  Convertible Securities or Purchase Rights to employees,  officers
or directors  of, or  consultants  to, the  Corporation  which may  hereafter be
granted to or exercised by any employee,  officer,  director or consultant under
any equity  compensation or similar benefit plan of the Corporation now existing
or to be  implemented  in the future,  so long as such plan and the  issuance of
such Common  Stock,  Convertible  Securities  or Purchase  Rights is approved in
accordance with  reasonable  judgment by a majority of the Board of Directors of
the  Corporation  or a majority of the members of a  committee  of  non-employee
directors  established  for such purpose;  (iii) upon conversion of the Series C
Preferred  Stock or  exercise  of the  Warrants  or upon any  adjustment  to the
conversion  price of the Series C Preferred  Stock or the exercise  price of the
Warrants,  (iv) upon the issuance of  securities in  connection  with  strategic
business  partnerships or joint  ventures,  the primary purpose of which, in the
reasonable  judgment  of the  Board of  Directors,  is not to  raise  additional
capital, (v) the issuance of securities pursuant to any equipment financing from
a bank or similar  financial  or lending  institution  approved  by the Board of
Directors,  or (vi) the  issuance of any shares of Series C  Preferred  Stock or
Warrants to additional purchasers in one or more additional closings consummated
prior to the filing of the  Registration  Statement,  as contemplated by Section
1(b) of the Securities  Purchase Agreement (any such issuance in accordance with
one of the foregoing clauses (i) through (vi), an "EXCLUDED ISSUANCE").

         G. Other Action Affecting  Conversion  Price. If, at any time after the
Issuance Date, the Corporation  takes any action affecting the Common Stock that
would be  covered  by  Article  X.A  through E, but for the manner in which such
action is taken or structured,  which would in any way diminish the value of the
Series C Preferred  Stock,  then the Conversion  Price shall be adjusted in such
manner  as the  Board  of  Directors  of the  Corporation  shall  in good  faith

                                       19
<PAGE>

determine  to  be  equitable  under  the  circumstances.   Notwithstanding   the
foregoing,  no  adjustment  shall be made  pursuant to this  Article X.G if such
adjustment would result in an increase of the Conversion Price.

         H. Notice of  Adjustments.  Upon the  occurrence of each  adjustment or
readjustment  of the Conversion  Price pursuant to this Article X amounting to a
more than one percent (1%) change in such Conversion Price, the Corporation,  at
its expense,  shall promptly compute such adjustment or readjustment and prepare
and  furnish to each holder of Series C Preferred  Stock a  certificate  setting
forth such adjustment or readjustment and showing in detail the facts upon which
such  adjustment or  readjustment  is based.  The  Corporation  shall,  upon the
written request at any time of any holder of Series C Preferred  Stock,  furnish
to  such  holder  a like  certificate  setting  forth  (i)  such  adjustment  or
readjustment,  (ii) the  Conversion  Price at the time in  effect  and (iii) the
number of shares of Common Stock and the amount,  if any, of other securities or
property  which at the time  would be  received  upon  conversion  of a share of
Series C Preferred Stock.

                               XI. VOTING RIGHTS

         Except as otherwise expressly provided elsewhere in this Certificate of
Designation or as otherwise  required by the Delaware  General  Corporation  Law
(the "DGCL"),  (a) each holder of Series C Preferred  Stock shall be entitled to
vote on all matters  submitted to a vote of the  stockholders of the Corporation
and shall be  entitled  to that number of votes equal to the number of shares of
Common Stock into which such holder's  shares of Series C Preferred  Stock could
then be converted  (subject to the limitations set forth in Article IV.D) at the
record  date for the  determination  of  stockholders  entitled  to vote on such
matters  or, if no such  record  date is  established,  at the date such vote is
taken or any written consent of  stockholders is solicited,  and (b) the holders
of shares of Series C Preferred  Stock and Common Stock shall vote  together (or
tender  written  consents  in lieu of a vote) as a single  class on all  matters
submitted to the  stockholders of the  Corporation.  Fractional votes shall not,
however,  be  permitted  and  any  fractional  voting  rights  available  on  an
as-converted  basis  (after  aggregating  all shares of Common  Stock into which
shares of Series C Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number.

         The  Corporation  shall provide each holder of Series C Preferred Stock
with prior  notification of any meeting of the stockholders (and copies of proxy
materials and other information sent to stockholders).  If the Corporation takes
a  record  of its  stockholders  for the  purpose  of  determining  stockholders
entitled to (a) receive payment of any dividend or other distribution, any right
to subscribe  for,  purchase or otherwise  acquire  (including by way of merger,
consolidation  or  recapitalization)  any  share  of  any  class  or  any  other
securities  or  property,  or to  receive  any  other  right,  or (b) to vote in
connection with any proposed sale,  lease or conveyance of all or  substantially
all of the assets of the  Corporation,  or any proposed  merger,  consolidation,
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder of Series C Preferred Stock, at least 15 days prior
to the record date specified  therein (or 45 days prior to the  consummation  of
the  transaction  or event,  whichever is earlier,  but in no event earlier than
public announcement of such proposed transaction), of the date on which any such
record is to be taken for the  purpose  of such  vote,  dividend,  distribution,
right or other event,  and a brief statement  regarding the amount and character
of such vote, dividend,  distribution,  right or other event to the extent known
at such time.


                                       20
<PAGE>

         To the extent that under the DGCL the vote of the holders of the Series
C Preferred Stock,  voting  separately as a class or series,  as applicable,  is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the then outstanding  shares of
the  Series C  Preferred  Stock  represented  at a duly held  meeting at which a
quorum is present  or by written  consent  of the  Majority  Holders  (except as
otherwise may be required under the DGCL) shall  constitute the approval of such
action by the class.

                           XII. PROTECTION PROVISIONS

         So long as any shares of Series C Preferred Stock are outstanding,  the
Corporation  shall not take any of the following  corporate  actions (whether by
merger,  consolidation  or otherwise)  without first  obtaining the approval (by
vote or written consent, as provided by the DGCL) of the Majority Holders:

                  (i) alter or change the rights,  preferences  or privileges of
the Series C Preferred  Stock,  or increase the  authorized  number of shares of
Series C Preferred Stock;

                  (ii) alter or change the rights,  preferences or privileges of
any capital  stock of the  Corporation  so as to affect  adversely  the Series C
Preferred Stock;

                  (iii)  create or issue any  Senior  Securities  or Pari  Passu
Securities;

                  (iv) issue any shares of Series C  Preferred  Stock other than
pursuant to the Securities Purchase Agreement;

                  (v) redeem, repurchase or otherwise acquire, or declare or pay
any cash dividend or distribution on, any Junior Securities;

                  (vi) increase the par value of the Common Stock;

                  (vii) make any Dilutive Issuance; provided, however, that this
Article  XII(vii)  shall be of no further  force and  effect  from and after the
effective date of the Price Adjustment  Approval;  provided  further,  that this
Article  XII(vii)  shall  not in any way  limit  the  application  of the  other
provisions of this Article XII;

                  (viii)  issue  any  debt   securities   that  would  have  any
preferences   over  the  Series  C  Preferred  Stock  upon  liquidation  of  the
Corporation; or

                  (ix)  except  for  exclusive  or  non-exclusive   licenses  of
intellectual  property on arms' length  bases,  sell or  otherwise  transfer any
independently-significant  asset or intellectual property to any other person(s)
or entity(ies)  (including,  without  limitation,  to any subsidiary(ies) of the
Corporation).

Notwithstanding  the foregoing,  no change pursuant to this Article XII shall be
effective to the extent that,  by its terms,  it applies to less than all of the
holders of shares of Series C Preferred Stock then outstanding.


                                       21
<PAGE>

                   XIII. PARTICIPATION RIGHT; EXCHANGE RIGHT

         Subject to the terms and conditions specified in this Article XIII, the
holders  of Series C  Preferred  Stock  shall have a right to  participate  with
respect to the  issuance  or possible  issuance  of (i) equity or  equity-linked
securities,  or (ii) debt which is convertible  into equity or in which there is
an equity component  ("ADDITIONAL  SECURITIES") on the same terms and conditions
as offered by the Company to the other purchasers of such Additional Securities.
Each time the Company proposes to offer any Additional  Securities,  the Company
shall make an  offering  of such  Additional  Securities  to each  Purchaser  in
accordance with the following provisions:

                  (i) the Company shall  deliver a notice (the  "NOTICE") to the
holders of Series C Preferred Stock stating (A) its bona fide intention to offer
such Additional  Securities,  (B) the number of such Additional Securities to be
offered,  (C) the price and terms,  if any, upon which it proposes to offer such
Additional Securities,  and (D) the anticipated closing date of the sale of such
Additional Securities;

                  (ii)  until the first  anniversary  of the  Closing  Date,  by
written notification  received by the Company within five (5) trading days after
giving  of the  Notice,  any  holder of  Series C  Preferred  Stock may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such  Additional  Securities  that have a total  purchase  price
equal to one half of the Face  Amount of the  Series C  Preferred  Stock held by
such holder  (including  any shares of Series C  Preferred  Stock that have been
converted into Common Stock).  The Company shall  promptly,  in writing,  inform
each  holder of Series C  Preferred  Stock that  elects to  purchase  all of the
Additional  Shares  available  to it  ("FULLY-EXERCISING  HOLDER")  of any other
holder of Series C Preferred Stock's failure to do likewise. During the five (5)
trading  day  period   commencing   after  such   information  is  given,   each
Fully-Exercising  Holder  shall  be  entitled  to  obtain  that  portion  of the
Additional  Securities  for which the holders of Series C  Preferred  Stock were
entitled to subscribe but that were not  subscribed for by the holders of Series
C Preferred  Stock that is equal to the  proportion  that the Face Amount of the
Series C Preferred  Stock held by such  Fully-Exercising  Holder  (including any
shares of Series C Preferred  Stock that have been  converted into Common Stock)
bears to the total  Face  Amount of the  Series C  Preferred  Stock  held by all
holders of Series C Preferred Stock  (including any shares of Series C Preferred
Stock that have been converted into Common Stock);

                  (iii)  notwithstanding the provisions of Article XIII(ii),  at
any time after the Closing Date, by written notification received by the Company
within five (5) trading days after giving of the Notice,  any holder of Series C
Preferred  Stock may elect to purchase or obtain,  at the price and on the terms
specified in the Notice,  up to that portion of such Additional  Securities that
have a total  purchase  price equal to the Face Amount of the Series C Preferred
Stock held by such holder (including any shares of Series C Preferred Stock that
have been converted into Common Stock);  provided,  however,  that any holder of
Series C Preferred Stock who elects to purchase  Additional  Securities pursuant
to this Article XIII(iii) shall be required to surrender to the Company Series C
Preferred  Stock (or Common  Stock  issued on the  conversion  of such  Series C
Preferred  Stock)  for  which  the Face  Amount  (plus all  accrued  but  unpaid
Dividends)  equals the total purchase  price of the Additional  Securities to be
acquired  by such  holder of Series C Preferred  Stock,  and the  Company  shall
accept such Series C Preferred  Stock (or Common Stock issued on the  conversion
of such  Series C  Preferred  Stock)  as  payment  in full  for such  Additional
Securities.  The  provisions  of this Article  XIII(iii)  shall be of no further

                                       22
<PAGE>

force or effect  upon the  consummation  of any  transaction  (other  than those
transactions  contemplated by the Securities  Purchase Agreement entered into as
of the  Issuance  Date by and among the Company  and the initial  holders of the
Series C Preferred  Stock)  resulting  in the issuance of the  Company's  Common
Stock in  connection  with a bona fide  offering at an offering  price per share
(prior to any  underwriter's  commissions  and discounts) of not less than $0.12
(as  adjusted  to  reflect  any stock  dividends,  distributions,  combinations,
reclassifications  and other  similar  transactions  effected  by the Company in
respect to its Common  Stock) that  results in total net proceeds to the Company
of at least $5,000,000;


                  (iv) if all Additional  Securities which the holders of Series
C Preferred Stock are entitled to obtain pursuant to Article XIII(ii) or Article
XIII(iii)  are not elected to be obtained  as  provided  in  subsection  Article
XIII(ii) or Article XIII(iii) hereof,  the Company may, during the 75-day period
following the expiration of the period provided in subsection  Article  XIII(ii)
or Article XIII(iii) hereof,  offer the remaining  unsubscribed  portion of such
Additional  Securities  to any person or  persons at a price not less than,  and
upon terms no more favorable to the offeree than, those specified in the Notice.
If the Company does not consummate the sale of such Additional Securities within
such period, the right provided hereunder shall be deemed to be revived and such
Additional Securities shall not be offered or sold unless first reoffered to the
holders of Series C Preferred Stock in accordance herewith;


                  (v) the participation  right in this Article XIII shall not be
applicable  to (A) the  issuance  or sale of shares of Common  Stock (or options
therefor) to employees,  officers,  directors, or consultants of the Company for
the primary  purpose of  soliciting  or retaining  their  employment  or service
pursuant to a stock option plan (or similar equity  incentive  plan) approved in
good  faith by the Board of  Directors,  (B) the  issuance  of  Common  Stock in
connection  with a bona fide  underwritten  public offering at an offering price
per share (prior to  underwriter's  commissions  and discounts) of not less than
200% of the  Conversion  Price (as  adjusted  to  reflect  any stock  dividends,
distributions,  combinations,  reclassifications  and other similar transactions
effected  by the Company in respect to its Common  Stock) that  results in total
proceeds to the Company of at least $25,000,000, (C) the issuance or sale of the
Series C Preferred  Stock,  (D) the issuance of securities  in  connection  with
mergers,  acquisitions,   strategic  business  partnerships  or  joint  ventures
approved  by the Board of  Directors  and the primary  purpose of which,  in the
reasonable  judgment  of the  Board of  Directors,  is not to  raise  additional
capital or (E) any issuance of securities as to which the Majority Holders shall
have executed a written waiver of the rights contained in this Article XIII; and

                  (vi) the  participation  right set forth in this  Article XIII
may not be assigned or transferred, except that such right is assignable by each
holder of Series C Preferred Stock to any wholly-owned  subsidiary or parent of,
or to any  corporation  or entity that is, within the meaning of the  Securities
Act, controlling, controlled by or under common control with, any such holder of
Series C Preferred Stock.



                                       23
<PAGE>

                               XIV. MISCELLANEOUS

         A.  Cancellation of Series C Preferred Stock. If any shares of Series C
Preferred Stock are converted  pursuant to Article IV or redeemed or repurchased
by the Corporation, the shares so converted or redeemed shall be canceled, shall
return  to  the  status  of  authorized,  but  unissued  Preferred  Stock  of no
designated  series,  and shall not be  issuable by the  Corporation  as Series C
Preferred Stock.

         B. Lost or Stolen Certificates.  Upon receipt by the Corporation of (i)
evidence of the loss,  theft,  destruction or mutilation of any Preferred  Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, indemnity
(without any bond or other security) reasonably satisfactory to the Corporation,
or  (z)  in  the  case  of  mutilation,   the  Preferred  Stock   Certificate(s)
(surrendered for  cancellation),  the Corporation  shall execute and deliver new
Preferred Stock  Certificate(s) of like tenor and date. However, the Corporation
shall  not  be  obligated  to  reissue  such  lost  or  stolen  Preferred  Stock
Certificate(s)  if the holder  contemporaneously  requests  the  Corporation  to
convert such Series C Preferred Stock.

         C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved  Amount  shall be allocated  pro rata among the holders of Series C
Preferred Stock based on the number of shares of Series C Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated  pro rata among the holders of Series C  Preferred  Stock based on the
number of shares of Series C Preferred  Stock held by each holder at the time of
the increase in the Cap Amount or Reserved  Amount.  In the event a holder shall
sell or  otherwise  transfer any of such  holder's  shares of Series C Preferred
Stock,   each  transferee  shall  be  allocated  a  pro  rata  portion  of  such
transferor's  Cap Amount and Reserved  Amount.  Any portion of the Cap Amount or
Reserved  Amount which remains  allocated to any person or entity which does not
hold any Series C Preferred Stock shall be allocated to the remaining holders of
shares of Series C  Preferred  Stock,  pro rata based on the number of shares of
Series C Preferred Stock then held by such holders.

         D. Quarterly  Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed  pursuant  to Section  2(a) of the  Registration  Rights  Agreement  is
declared  effective  and  thereafter  for so  long as any  shares  of  Series  C
Preferred Stock are  outstanding,  the  Corporation  shall deliver (or cause its
transfer agent to deliver) to each holder a written report notifying the holders
of any occurrence that prohibits the Corporation  from issuing Common Stock upon
any conversion.  The report shall also specify (i) the total number of shares of
Series C Preferred  Stock  outstanding  as of the end of such quarter,  (ii) the
total number of shares of Common Stock issued upon all  conversions  of Series C
Preferred  Stock  prior to the end of such  quarter,  (iii) the total  number of
shares of Common Stock which are reserved for issuance  upon  conversion  of the
Series C Preferred Stock as of the end of such quarter and (iv) the total number
of shares of Common Stock which may thereafter be issued by the Corporation upon
conversion of the Series C Preferred Stock before the  Corporation  would exceed
the Cap Amount and the Reserved Amount.  The Corporation (or its transfer agent)
shall use its best efforts to deliver the report for each quarter to each holder
prior to the tenth day of the calendar month following the quarter to which such

                                       24
<PAGE>

report  relates.  In addition,  the  Corporation  (or its transfer  agent) shall
provide,  as promptly as practicable  following delivery to the Corporation of a
written request by any holder, any of the information  enumerated in clauses (i)
- (iv) of this Paragraph D as of the date of such request.

         E. Payment of Cash;  Defaults.  Whenever the Corporation is required to
make any cash  payment to a holder under this  Certificate  of  Designation  (as
payment of any Dividend, upon redemption or otherwise),  such cash payment shall
be made to the holder within five business days after delivery by such holder of
a notice  specifying  that the holder elects to receive such payment in cash and
the method (e.g., by check,  wire transfer) in which such payment should be made
and any  supporting  documentation  reasonably  requested by the  Corporation to
substantiate  the holder's claim to such cash payment or the amount thereof.  If
such payment is not delivered within such five business day period,  such holder
shall  thereafter  be entitled  to interest on the unpaid  amount at a per annum
rate equal to the lower of  twenty-four  percent (24%) and the highest  interest
rate  permitted  by  applicable  law  until  such  amount is paid in full to the
holder.

         F. Status as Stockholder.  Upon submission of a Notice of Conversion by
a holder of Series C Preferred Stock, (i) the shares covered thereby (other than
the shares,  if any,  which cannot be issued because their issuance would exceed
such holder's  allocated  portion of the Reserved Amount or Cap Amount) shall be
deemed  converted into shares of Common Stock and (ii) the holder's  rights as a
holder of such  converted  shares of Series C  Preferred  Stock  shall cease and
terminate,  excepting only the right to receive  certificates for such shares of
Common Stock and to any remedies  provided herein or otherwise  available at law
or in equity to such holder  because of a failure by the  Corporation  to comply
with the terms of this  Certificate of Designation.  In situations where Article
VI.B is applicable,  the number of shares of Common Stock referred to in clauses
(i) and (ii) of the  immediately  preceding  sentence shall be determined on the
date on  which  such  shares  of  Common  Stock  are  delivered  to the  holder.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the sixth  business day after the  expiration of
the Delivery Period with respect to a conversion of Series C Preferred Stock for
any reason,  then (unless the holder  otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five business days
after the  expiration  of such six business day period after  expiration  of the
Delivery  Period)  the  holder  shall  regain the rights of a holder of Series C
Preferred  Stock with respect to such  unconverted  shares of Series C Preferred
Stock and the Corporation shall, as soon as practicable, return such unconverted
shares to the holder.  In all cases,  the holder  shall retain all of its rights
and remedies for the Corporation's failure to convert Series C Preferred Stock.

         G. Remedies  Cumulative.  The remedies  provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies  available
under this Certificate of Designation,  at law or in equity  (including a decree
of specific  performance  and/or other  injunctive  relief),  and nothing herein
shall  limit a holder's  right to pursue  actual  damages for any failure by the
Corporation  to comply with the terms of this  Certificate of  Designation.  The
Corporation  acknowledges that a breach by it of its obligations  hereunder will
cause  irreparable  harm to the holders of Series C Preferred Stock and that the
remedy at law for any such breach may be inadequate.  The Corporation  therefore
agrees, in the event of any such breach or threatened  breach,  that the holders
of  Series C  Preferred  Stock  shall be  entitled,  in  addition  to all  other
available  remedies,  to an  injunction  restraining  any  breach,  without  the
necessity of showing  economic loss and without any bond or other security being
required.


                                       25
<PAGE>

         H.  Waiver.  Notwithstanding  any  provision  in  this  Certificate  of
Designation to the contrary, any provision contained herein and any right of the
holders of Series C Preferred  Stock  granted  hereunder may be waived as to all
shares of Series C Preferred  Stock (and the holders  thereof)  upon the written
consent of the  Majority  Holders,  unless a higher  percentage  is  required by
applicable  law,  in which case the  written  consent of the holders of not less
than such  higher  percentage  of shares of Series C  Preferred  Stock  shall be
required.

I. Notices. Any notices required or permitted to be given under the terms hereof
shall be sent by certified or  registered  mail (return  receipt  requested)  or
delivered   personally,   by  responsible  overnight  carrier  or  by  confirmed
facsimile,  and shall be effective  five days after being placed in the mail, if
mailed,  or upon receipt or refusal of receipt,  if delivered  personally  or by
responsible overnight carrier or confirmed facsimile,  in each case addressed to
a party. The addresses for such  communications are (i) if to the Corporation to
P-Com,  Inc.,  3175  Winchester  Blvd.,  Campbell,  CA 95008,  Telephone:  (408)
866-3666,  Facsimile:  (408) 874-4461,  Attention:  Chief Executive Officer, and
(ii) if to any holder to the address set forth under such  holder's  name on the
execution page to the Securities  Purchase  Agreement,  or such other address as
may be designated in writing hereafter, in the same manner, by such person.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       26
<PAGE>





         IN WITNESS  WHEREOF,  this  Certificate  of  Designation is executed on
behalf of the Corporation this 24th day of September, 2003.

                                     P-COM, INC.



                                      By: /s/ Daniel Rumsey
                                          -------------------------------------
                                      Name: Daniel W. Rumsey
                                      Title: Vice President


                                       27
<PAGE>


                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder
                in order to Convert the Series C Preferred Stock)

         The  undersigned  hereby  irrevocably  elects to  convert  ____________
shares of Series C  Preferred  Stock (the  "CONVERSION"),  represented  by Stock
Certificate No(s). ___________ (the "PREFERRED STOCK CERTIFICATES"), into shares
of common stock ("COMMON STOCK") of P-Com, Inc. (the "CORPORATION") according to
the conditions of the  Certificate  of  Designation,  Preferences  and Rights of
Series C Convertible  Preferred Stock (the "CERTIFICATE OF DESIGNATION"),  as of
the date written  below.  If securities are to be issued in the name of a person
other than the undersigned,  the undersigned will pay all transfer taxes payable
with respect  thereto.  No fee will be charged to the holder for any conversion,
except for transfer taxes, if any. Each Preferred Stock  Certificate is attached
hereto (or evidence of loss, theft or destruction thereof).

         Except as may be provided below, the Corporation  shall  electronically
transmit the Common Stock issuable  pursuant to this Notice of Conversion to the
account of the undersigned or its nominee (which is _________________)  with DTC
through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER").

         The  undersigned  acknowledges  and agrees that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the  Series C  Preferred  Stock  have been or will be made only  pursuant  to an
effective  registration of the transfer of the Common Stock under the Securities
Act  of  1933,  as  amended  (the  "ACT"),  or  pursuant  to an  exemption  from
registration under the Act.

|_|      In lieu of receiving  the shares of Common Stock  issuable  pursuant to
         this  Notice of  Conversion  by way of DTC  Transfer,  the  undersigned
         hereby  requests  that  the  Corporation   issue  and  deliver  to  the
         undersigned  physical  certificates  representing such shares of Common
         Stock.

                        Date of Conversion:
                                           ------------------------------
                        Applicable Conversion Price:
                                                    ---------------------
                        Signature:
                                 ----------------------------------------
                        Name:
                            ---------------------------------------------
                        Address:
                               ------------------------------------------