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                         EQUALNET COMMUNICATIONS CORP.

                      STATEMENT OF RESOLUTION OF BOARD OF
                      DIRECTORS ESTABLISHING AND DESIGNATING
                      SERIES A CONVERTIBLE PREFERRED STOCK
                      AND  FIXING THE RIGHTS AND PREFERENCES
                      OF SUCH SERIES

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

TO THE SECRETARY OF STATE
   OF THE STATE OF TEXAS:

          Equalnet Communications Corp., pursuant to the provisions of Articles
2.13 and 2.19B of the Texas Business Corporation Act, submits the following
statement for the purpose of establishing and designating a series of shares and
fixing and determining the relative rights and preferences thereof:

          1.  The name of the Corporation is Equalnet Communications Corp.

          2.  The following is a true and correct copy of an extract from the
minutes of a meeting of the Board of Directors of the Corporation held on June
15, 1999, and includes a true and correct copy of certain resolutions duly
adopted  thereat.

          RESOLVED, that pursuant to authority vested in the Board of Directors
by the Articles of Incorporation of the Corporation, the Board of Directors does
hereby provide that the Statement of Resolution of Board of Directors
Establishing and Designating Series A Convertible Preferred Stock and Fixing the
Rights and Preferences of Such Series that was filed with the Secretary of State
of the State of Texas on March 25, 1999 is cancelled and deleted in its entirety
and shall be replaced with the following:

                      SERIES A CONVERTIBLE PREFERRED STOCK

          SECTION 1.  DEFINITIONS.  As used herein, the following terms shall
have the following meanings:

          "Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person; for purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
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          "Aggregated Person" means, with respect to any person, any person
whose beneficial ownership of shares of Common Stock would be aggregated with
the beneficial ownership of shares of Common Stock by such person for purposes
of Section 13(d) of the Exchange Act, and Regulation 13D-G thereunder.

          "Amendment Agreement" means the Amendment Agreement, dated as of
_______________, by and between the Corporation and the original holder of
Series A Convertible Preferred Stock.

          "AMEX" means the American Stock Exchange, Inc.

          "Average Market Price" for any date means the arithmetic average of
the Market Price on each of the five Trading Days, whether or not consecutive,
during the applicable Measurement Period having the lowest Market Prices.

          "Board of Directors" or "Board" means the Board of Directors of the
Corporation.

          "Ceiling Price" means $1.228 (subject to equitable adjustments from
time to time on terms reasonably acceptable to the Majority Holders for stock
splits, stock dividends, combinations, recapitalizations, reclassifications and
similar events occurring or with respect to which "ex-" trading commences on or
after the date of filing of this Statement of Resolution with the Secretary of
State of the State of Texas); provided, however, that, notwithstanding any other
provision hereof, the Ceiling Price applicable to a particular conversion shall
be subject to reduction as provided in Section 10(b)(6); provided further,
however, that if a Registration Event occurs, then, in addition to any other
right or remedy of any holder of shares of Series A Convertible Preferred Stock
thereafter the Ceiling Price shall be permanently reduced on each Computation
Date by an amount equal to two percent of the amount that the Ceiling Price
otherwise would have been without any reduction pursuant to this proviso (pro
rated in the case of any Computation Date which is less than 30 days after a
Registration Event occurs or less than 30 days after another Computation Date).

          "Closing Bid Price" of the Common Stock on any date means the closing
bid price for one share of Common Stock on such date on the first applicable
among the following:  (a) the national securities exchange on which the shares
of Common Stock are listed which constitutes the principal securities market for
the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the principal market
for the common Stock on such date, or (c) the Nasdaq SmallCap, if the Nasdaq
SmallCap constitutes the principal securities market for the Common Stock on
such date, in any such case as reported by Bloomberg, L.P.

          "Common Stock" means the Common Stock, $.01 par value, of the
Corporation.

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          "Computation Date" means, if a Registration Event occurs, any of (1)
the date which is 30 days after such Registration Event occurs, if any
Registration Event is continuing on such date, (2) each date which is 30 days
after a Computation Date, if any Registration Event is continuing on such date,
and (3) the date on which all Registration Events cease to continue.

          "Conversion Agent" means American Stock Transfer & Trust Company, or
its duly appointed successor, as conversion agent for the Series A Convertible
Preferred Stock pursuant to the Transfer Agent Instruction.

          "Conversion Amount" initially shall be equal to $1,000.00, subject to
adjustment as herein provided.

          "Conversion Date" means, with respect to each conversion of shares of
Series A Convertible Preferred Stock pursuant to Section 10, the date on which
the Conversion Notice relating to such conversion is actually received by the
Conversion Agent, whether by mail, courier, personal service, telephone line,
facsimile transmission or other means.

          "Conversion Notice" means a written notice, duly signed by or on
behalf of a holder of shares of Series A Convertible Preferred Stock, stating
the number of shares of Series A Convertible Preferred Stock to be converted in
the form specified in the Amendment Agreements.

          "Conversion Percentage" means 85%; provided, however, that,
notwithstanding any other provision hereof, if a Registration Event occurs, then
such percentage stated above shall be permanently reduced by two percentage
points on each Computation Date (pro rated in the case of any Computation Date
which is less than 30 days after a Registration Event occurs or less than 30
days after another Computation Date).

          "Conversion Price" means, for any Conversion Date, the lesser of:

          (1) the product of (a) the Average Market Price for such Conversion
Date multiplied by (b) the applicable Conversion Percentage; and

          (2)  the Ceiling Price;

          provided, however, that so long as (x) the Common Stock is listed or
quoted on the Nasdaq, the Nasdaq SmallCap, the NYSE or the Amex and (y) the
Corporation is in compliance in all material respects with its obligations to
the holders of Series A Convertible Preferred Stock (including, without
limitation, its obligations under the Amendment Agreement, the Registration
Rights Agreements and the provisions of this Statement of Resolution), the
Conversion Price shall not be less than:

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          (a) from the Issuance Date to the Initial Reset Date, $0.75 (subject
to equitable adjustments on the Reverse Stock Split Date and from time to time
before or after the Reverse Stock Split Date on terms reasonably acceptable to
the Majority Holders for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring or with
respect to which "ex-" trading commences on or after the date of filing this
Statement of Resolution with the Secretary of the State of Texas);

          (b) from the Initial Reset Date to the first Semi-Annual Reset Date,
the lesser of (1) the price determined in clause (a) or (2) 75% of the
arithmetic average of the closing Bid Price of the Common Stock for the five
Trading Day period immediately prior to the Initial Reset Date (subject to
equitable adjustments from time to time on terms reasonably acceptable to the
Majority Holders for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring or with
respect to which "ex-" trading commences on or after the Reverse Stock Split
Date); and

          (c) on and after each Semi-Annual Reset Date, the lesser of (1) the
price determined in clause (a) or (2) 75% of the arithmetic average of the
closing Bid Price of the Common Stock for the five Trading Day period
immediately prior to the Semi-Annual Reset Date (subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which "ex-"
trading commences on or after the Reverse Stock Split Date).

          provided further, however, that the Conversion Price applicable to a
particular conversion shall be subject to reduction as provided in Section
10(b)(6).

           "Conversion Rate" shall have the meaning provided in Section 10(a).

          "Converted Market Price" means, for any share of Series A Convertible
Preferred Stock as of any date of determination, an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would, at
the time of such determination, be issuable on conversion in accordance with
Section 10(a) of one share of Series A Convertible Preferred Stock and any
accrued and unpaid dividends thereon and any accrued and unpaid interest on
dividends thereon in arrears if a Conversion Notice were given by the holder of
such share of Series A Convertible Preferred Stock on the date of such
determination (determined without regard to any limitation on conversion based
on beneficial ownership contained in Section 10(a)) times (y) the arithmetic
average of the Market Price of the Common Stock for the five consecutive Trading
Days ending on the Trading Day prior to the date of such determination.

          "Corporation Optional Redemption Notice" means a notice given by the
Corporation to the holders of shares of Series A Convertible Preferred Stock
pursuant to Section 9(a) which notice shall state (1) that the Corporation is
exercising its right to redeem all or a portion of the outstanding shares of
Series A Convertible Preferred Stock pursuant to Section 9(a), (2) the number of
shares of Series A Convertible Preferred

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Stock held by such holder which are to be redeemed, (3) the Redemption Price per
share of Series A Convertible Preferred Stock to be redeemed or the formula for
determining the same, determined in accordance herewith, and (4) the applicable
Redemption Date.

          "Current Price" means with respect to any date the arithmetic average
of the Market Price of the Common Stock on the 30 consecutive Trading Days
commencing 45 Trading Days before such date.

          "Dividend Shares" means shares of Series A Convertible Preferred Stock
issued as dividends on outstanding shares of Series A Convertible Preferred
Stock in accordance with Section 5(b).

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

          "Amendment Agreements" means the several Note Purchase and Amendment
Agreements by and between the Corporation and the original holders of shares of
Series A Convertible Preferred Stock pursuant to which the shares of Series A
Convertible Preferred Stock were issued.

          "Final Redemption Date" means the date of redemption of shares of
Series A Convertible Preferred Stock pursuant to Section 9(b), determined in
accordance therewith.

          "Final Redemption Notice" means a notice given by the Corporation to
each holder of Series A Convertible Preferred Stock pursuant to Section 9(b),
which notice shall state (1) that the Corporation is exercising its right to
redeem all outstanding shares of Series A Convertible Preferred Stock pursuant
to Section 9(b), (2) the number of shares of Series A Convertible Preferred
Stock held by such holder which are to be redeemed, (3) the Final Redemption
Price per share of Series A Convertible Preferred Stock held by such holder
which are to be redeemed, determined in accordance herewith, and (4) the Final
Redemption Date.

          "Final Redemption Price" on any date means an amount equal to the
product obtained by multiplying (a) the sum of (1) $1,000 plus (2) an amount
equal to the accrued but unpaid dividends on the share of Series A Convertible
Preferred Stock to be redeemed to the Final Redemption Date, plus (3) an amount
equal to the accrued and unpaid interest on dividends in arrears on such share
of Series A Convertible Preferred Stock to the Final Redemption Date (determined
as provided in Section 5) times (b) the Premium Percentage.

          "Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).

          "Initial Reset Date" means the 31st Trading Day after the Reverse
Stock Split Date.

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<PAGE>

          "Issuance Date" means the first date of original issuance of any
shares of Series A Convertible Preferred Stock.

          "Junior Dividend Stock" means, collectively, the Common Stock and any
other class or series of capital stock of the Corporation ranking junior as to
dividends to the Series A Convertible Preferred Stock.

          "Junior Liquidation Stock" means the Common Stock or any other class
or series of the Corporation's capital stock ranking junior as to liquidation
rights to the Series A Convertible Preferred Stock.

          "Liquidation Preference" means, for each share of Series A Convertible
Preferred Stock, the sum of (i) all dividends accrued and unpaid thereon to the
date of final distribution to such holders, (ii) accrued and unpaid interest on
dividends in arrears (computed in accordance with Section 5(a)) to the date of
such distribution, and (iii) $1,000.00.

          "Majority Holders" means at any time the holders of shares of Series A
Preferred Stock which shares constitute a majority of the outstanding shares of
Series A Preferred Stock.

          "Market Price" of the Common Stock on any date means the lowest sale
price (regular way) for one share of Common Stock on such date on the first
applicable among the following:  (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the
principal market for the Common Stock on such date, or (c) the Nasdaq SmallCap,
if the Nasdaq SmallCap constitutes the principal securities market for the
Common Stock on such date, in any such case as reported by Bloomberg, L.P.;
provided, however, that if during any Measurement Period or other period during
which the Market Price is being determined:

          (i) The Corporation shall declare or pay a dividend or make a
     distribution to all holders of the outstanding Common Stock in shares of
     Common Stock or fix any record date for any such action, then the Market
     Price for each day in such Measurement Period or such other period which
     day is prior to the earlier of (1) the date fixed for the determination of
     stockholders entitled to receive such dividend or other distribution and
     (2) the date on which ex-dividend trading in the Common Stock with respect
     to such dividend or distribution begins shall be reduced by multiplying the
     Market Price (determined without regard to this proviso) for each such day
     in such Measurement Period or such other period by a fraction, the
     numerator of which shall be the number of shares of Common Stock
     outstanding at the close of business on the earlier of (1) the record date
     fixed for such determination and (2) the date on which ex-dividend trading
     in the Common Stock with respect to such dividend or distribution begins
     and the denominator of which shall be the sum of such number of shares and
     the total number of shares constituting such dividend or other
     distribution;

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<PAGE>

          (ii) The Corporation shall issue rights or warrants to all holders of
     its outstanding shares of Common Stock, or fix a record date for such
     issuance, which rights or warrants entitle such holders (for a period
     expiring within forty-five (45) days after the date fixed for the
     determination of stockholders entitled to receive such rights or warrants)
     to subscribe for or purchase shares of Common Stock at a price per share
     less than the Market Price (determined without regard to this proviso) for
     any day in such Measurement Period or such other period which day is prior
     to the end of such 45-day period, then the Market Price for each such day
     shall be reduced so that the same shall equal the price determined by
     multiplying the Market Price (determined without regard to this proviso) by
     a fraction, the numerator of which shall be the number of shares of Common
     Stock outstanding at the close of business on the record date fixed for the
     determination of stockholders entitled to receive such rights or warrants
     plus the number of shares which the aggregate offering price of the total
     number of shares so offered would purchase at such Market Price, and the
     denominator of which shall be the number of shares of Common Stock
     outstanding on the close of business on such record date plus the total
     number of additional shares of Common Stock so offered for subscription or
     purchase.  In determining whether any rights or warrants entitle the
     holders to subscribe for or purchase shares of Common Stock at less than
     the Market Price (determined without regard to this proviso), and in
     determining the aggregate offering price of such shares of Common Stock,
     there shall be taken into account any consideration received for such
     rights or warrants, the value of such consideration, if other than cash, to
     be determined in good faith by a resolution of the Board of Directors of
     the Corporation;

          (iii)  The outstanding shares of Common Stock shall be subdivided into
     a greater number of shares of Common Stock or a record date for any such
     subdivision shall be fixed, then the Market Price of the Common Stock for
     each day in such Measurement Period or such other period which day is prior
     to the earlier of (1) the day upon which such subdivision becomes effective
     and (2) the date on which ex-dividend trading in the Common Stock with
     respect to such subdivision begins shall be proportionately reduced, and
     conversely, in case the outstanding shares of Common Stock shall be
     combined into a smaller number of shares of Common Stock, the Market Price
     each trade (regular way) on for each day in such Measurement Period or such
     other period which day is prior to the earlier of (1) the date on which
     such combination becomes effective and (2) the date on which trading in the
     Common Stock on a basis which gives effect to such combination begins,
     shall be proportionately increased;

          (iv) The Corporation shall, by dividend or otherwise, distribute to
     all holders of its Common Stock shares of any class of capital stock of the
     Corporation (other than any dividends or distributions to which clause (i)
     of this proviso applies) or evidences of its indebtedness, cash or other
     assets (including securities, but excluding any rights or warrants referred
     to in clause (ii) of this

                                       7
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     proviso and dividends and distributions paid exclusively in cash and
     excluding any capital stock, evidences of indebtedness, cash or assets
     distributed upon a merger or consolidation) (the foregoing hereinafter in
     this clause (iv) of this proviso called the "Securities"), or fix a record
     date for any such distribution, then, in each such case, the Market Price
     for each day in such Measurement Period or such other period which day is
     prior to the earlier of (1) the record date for such distribution and (2)
     the date on which ex-dividend trading in the Common Stock with respect to
     such distribution begins shall be reduced so that the same shall be equal
     to the price determined by multiplying the Market Price (determined without
     regard to this proviso) by a fraction, the numerator of which shall be the
     Market Price (determined without regard to this proviso) for such date less
     the fair market value (as determined in good faith by resolution of the
     Board of Directors of the Corporation) on such date of the portion of the
     Securities so distributed or to be distributed applicable to one share of
     Common Stock and the denominator of which shall be the Market Price
     (determined without regard to this proviso) for such date; provided,
     however, that in the event the then fair market value (as so determined) of
     the portion of the Securities so distributed applicable to one share of
     Common Stock is equal to or greater than the Market Price (determined
     without regard to this clause (iv) of this proviso) for any such Trading
     Day, in lieu of the foregoing adjustment, adequate provision shall be made
     so that the holders of shares of Series A Preferred Stock shall have the
     right to receive upon conversion of the shares of Series A Preferred Stock
     the amount of Securities the holders of shares of Series A Preferred Stock
     would have received had the holders of shares of Series A Preferred Stock
     converted the shares of Series A Preferred Stock immediately prior to the
     record date for such distribution. If the Board of Directors of the
     Corporation determines the fair market value of any distribution for
     purposes of this clause (iv) by reference to the actual or when issued
     trading market for any securities comprising all or part of such
     distribution, it must in doing so consider the prices in such market on the
     same day for which an adjustment in the Market Price is being determined.

     For purposes of this clause (iv) and clauses (i) and (ii) of this proviso,
     any dividend or distribution to which this clause (iv) is applicable that
     also includes shares of Common Stock, or rights or warrants to subscribe
     for or purchase shares of Common Stock to which clause (i) or (ii) of this
     proviso applies (or both), shall be deemed instead to be (1) a dividend or
     distribution of the evidences of indebtedness, assets, shares of capital
     stock, rights or warrants other than such shares of Common Stock or rights
     or warrants to which clause (i) or (ii) of this proviso applies (and any
     Market Price reduction required by this clause (iv) with respect to such
     dividend or distribution shall then be made) immediately followed by (2) a
     dividend or distribution of such shares of Common Stock or such rights or
     warrants (and any further Market Price reduction required by clauses (i)
     and (ii) of this proviso with respect to such dividend or distribution
     shall then be made), except that any shares of Common Stock included in
     such dividend or distribution

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     shall not be deemed "outstanding at the close of business on the date fixed
     for such determination" within the meaning of clause (i) of this proviso;

          (v) The Corporation or any subsidiary of the Corporation shall (x) by
     dividend or otherwise, distribute to all holders of its Common Stock cash
     in (or fix any record date for any such distribution), or (y) repurchase or
     reacquire shares of its Common Stock (other than an Option Share Surrender)
     for, in either case, an aggregate amount that, combined with (1) the
     aggregate amount of any other such distributions to all holders of its
     Common Stock made exclusively in cash after the Issuance Date and within
     the 12 months preceding the date of payment of such distribution, and in
     respect of which no adjustment pursuant to this clause (v) has been made,
     (2) the aggregate amount of any cash plus the fair market value (as
     determined in good faith by a resolution of the Board of Directors of the
     Corporation) of consideration paid in respect of any repurchase or other
     reacquisition by the Corporation or any subsidiary of the Corporation of
     any shares of Common Stock (other than an Option Share Surrender) made
     after the Issuance Date and within the 12 months preceding the date of
     payment of such distribution or making of such repurchase or reacquisition,
     as the case may be, and in respect of which no adjustment pursuant to this
     clause (v) has been made, and (3) the aggregate of any cash plus the fair
     market value (as determined in good faith by a resolution of the Board of
     Directors of the Corporation) of consideration payable in respect of any
     Tender Offer by the Corporation or any of its subsidiaries for all or any
     portion of the Common Stock concluded within the 12 months preceding the
     date of payment of such distribution or completion of such repurchase or
     reacquisition, as the case may be, and in respect of which no adjustment
     pursuant to clause (vi) of this proviso has been made (such aggregate
     amount combined with the amounts in clauses (1), (2) and (3) above being
     the "Combined Amount"), exceeds 10% of the product of the Market Price
     (determined without regard to this proviso) for any day in such Measurement
     Period or such other period which day is prior to the earlier of (A) the
     record date with respect to such distribution and (B) the date on which ex-
     dividend trading in the Common Stock with respect to such distribution
     begins or the date of such repurchase or reacquisition, as the case may be,
     times the number of shares of Common Stock outstanding on such date, then,
     and in each such case, the Market Price for each such day shall be reduced
     so that the same shall equal the price determined by multiplying the Market
     Price (determined without regard to this proviso) for such day by a
     fraction (i) the numerator of which shall be equal to the Market Price
     (determined without regard to this proviso) for such day less an amount
     equal to the quotient of (x) the excess of such Combined Amount over such
     10% and (y) the number of shares of Common Stock outstanding on such day
     and (ii) the denominator of which shall be equal to the Market Price
     (determined without regard to this proviso) for such day; provided,
     however, that in the event the portion of the cash so distributed or paid
     for the repurchase or reacquisition of shares (determined per share based
     on the number of shares of Common Stock outstanding) applicable to one
     share of Common Stock is equal to

                                       9
<PAGE>

     or greater than the Market Price (determined without regard to this clause
     (v) of this proviso) of the Common Stock for any such day, then in lieu of
     the foregoing adjustment with respect to such day, adequate provision shall
     be made so that the holders of shares of Series A Preferred Stock shall
     have the right to receive upon conversion of shares of Series A Preferred
     Stock the amount of cash the holders of shares of Series A Preferred Stock
     would have received had the holders of shares of Series A Preferred Stock
     converted shares of Series A Preferred Stock immediately prior to the
     record date for such distribution or the payment date of such repurchase,
     as applicable; or

          (vi) A Tender Offer made by the Corporation or any of its subsidiaries
     for all or any portion of the Common Stock shall expire and such Tender
     Offer (as amended upon the expiration thereof) shall require the payment to
     stockholders (based on the acceptance (up to any maximum specified in the
     terms of the Tender Offer) of Purchased Shares (as defined below)) of an
     aggregate consideration having a fair market value (as determined in good
     faith by resolution of the Board of Directors of the Corporation) that
     combined together with (1) the aggregate of the cash plus the fair market
     value (as determined in good faith by a resolution of the Board of
     Directors of the Corporation), as of the expiration of such Tender Offer,
     of consideration payable in respect of any other Tender Offers, by the
     Corporation or any of its subsidiaries for all or any portion of the Common
     Stock expiring within the 12 months preceding the expiration of such Tender
     Offer and in respect of which no adjustment pursuant to this clause (vi)
     has been made, (2) the aggregate amount of any cash plus the fair market
     value (as determined in good faith by a resolution of the Board of
     Directors of the Corporation) of consideration paid in respect of any
     repurchase or other reacquisition by the Corporation or any subsidiary of
     the Corporation of any shares of Common Stock (other than an Option Share
     Surrender) made after the Issuance Date and within the 12 months preceding
     the expiration of such Tender Offer and in respect of which no adjustment
     pursuant to clause (v) of this proviso has been made, and (3) the aggregate
     amount of any distributions to all holders of Common Stock made exclusively
     in cash within 12 months preceding the expiration of such Tender Offer and
     in respect of which no adjustment pursuant to clause (v) of this proviso
     has been made, exceeds 10% of the product of the Market Price (determined
     without regard to this proviso) for any day in such period times the number
     of shares of Common Stock outstanding on such day, then, and in each such
     case, the Market Price for such day shall be reduced so that the same shall
     equal the price determined by multiplying the Market Price (determined
     without regard to this proviso) for such day by a fraction, the numerator
     of which shall be the number of shares of Common Stock outstanding on such
     day multiplied by the Market Price (determined without regard to this
     proviso) for such day and the denominator of which shall be the sum of (x)
     the fair market value (determined as aforesaid) of the aggregate
     consideration payable to stockholders based on the acceptance (up to any
     maximum specified in the terms of the Tender Offer) of all shares validly
     tendered and not withdrawn as of the last time tenders could have

                                       10
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     been made pursuant to such Tender Offer (the "Expiration Time") (the shares
     deemed so accepted, up to any such maximum, being referred to as the
     "Purchased Shares") and (y) the product of the number of shares of Common
     Stock outstanding (less any Purchased Shares) on such day times the Market
     Price (determined without regard to this proviso) of the Common Stock on
     the Trading Day next succeeding the Expiration Time. If the application of
     this clause (vi) to any Tender Offer would result in an increase in the
     Market Price (determined without regard to this proviso) for any trade, no
     adjustment shall be made for such Tender Offer under this clause (vi) for
     such day.

          "Maximum Share Amount" means 5,661,995 shares, (such amount to be
subject to equitable adjustment from time to time on terms reasonably acceptable
to the Majority Holders for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring or
with respect to which "ex-" trading commences after the date of filing this
Statement of Resolution with the Secretary of State of the State of Texas), of
Common Stock, or such greater number as permitted by the rules of the Nasdaq;
provided, however, that if for purposes of Rule 4460(i) of the Nasdaq (or any
successor or replacement provision of any stock exchange or stock market on
which the Common Stock is listed or traded) the (x) the issuance of the Notes
and the issuance of shares of Common Stock upon conversion thereof or (y) the
issuance of the common stock purchase warrants issued in connection with the
issuance of the Notes and the issuance of shares of Common Stock upon exercise
thereof is not required to be integrated with the issuance of the shares of
Series A Convertible Preferred Stock and the issuance of shares of Common Stock
upon conversion thereof, then in each such case the "Maximum Share Amount" shall
mean such greater number as equals the maximum number of shares of Common Stock
permitted by the rules of the Nasdaq (determined by pro rata allocation of any
increase thereof among the shares of Series A Convertible Preferred Stock based
on the number of shares of Series A Convertible Preferred Stock originally
represented by each certificate therefor) (such amount to be subject to
equitable adjustment in terms reasonably acceptable to the Majority Holders from
time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the date of filing of this Statement of Resolution with the Secretary of State
of the State of Texas).

          "Measurement Period" means, with respect to any date, the period of 25
consecutive Trading Days ending on the Trading Day prior to such date.

          "Nasdaq" means the Nasdaq National Market.

          "Nasdaq SmallCap" means the Nasdaq SmallCap Market.

          "NYSE" means the New York Stock Exchange, Inc.

          "Option Share Surrender" means the surrender of shares of Common Stock
to the Corporation in payment of the exercise price or tax obligations incurred
in

                                       11
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connection with the exercise of a stock option granted by the Corporation to
any of its employees, directors or consultants.

          "Optional Redemption Event" means the occurrence on or before August
31, 2001 of any one of the following events:

          (1)  [intentionally omitted];

          (2)  [intentionally omitted];

          (3) The Corporation shall (A) default in the timely performance of the
     obligation to issue shares of Common Stock upon conversion of shares of
     Series A Convertible Preferred Stock as and when required by Section 10 or
     shall default in the timely performance of its obligations under Section
     12(d)(7) or (B) the Corporation shall fail or default in the timely
     performance of any material obligation (other than as specifically set
     forth elsewhere in this definition) to a holder of shares of Series A
     Convertible Preferred Stock under the terms of this Statement of Resolution
     or under the Registration Rights Agreements or any other agreement or
     document entered into in connection with the issuance of shares of Series A
     Convertible Preferred Stock, as such instruments may be amended from time
     to time and such failure or default shall continue for ten business days
     after notice thereof from any holder of shares of Series A Convertible
     Preferred Stock to the Corporation;

          (4)  [intentionally omitted]; or

          (5) The taking of any action, including any amendment to the
     Corporation's Articles of Incorporation, without the consent of the
     Majority Holders which materially and adversely affects the rights of any
     holder of shares of Series A Convertible Preferred Stock.

          "Optional Redemption Notice" means a notice from a holder of shares of
Series A Convertible Preferred Stock to the Corporation which states (1) that
the holder delivering such notice is thereby requiring the Corporation to redeem
shares of Series A Convertible Preferred Stock pursuant to Section 11, (2) in
general terms the Optional Redemption Event giving rise to such redemption, and
(3) the number of shares of Series A Convertible Preferred Stock held by such
holder which are to be redeemed.

          "Optional Redemption Price" means the Premium Price on the applicable
redemption date.

          "Parity Dividend Stock" means any class or series or the Corporation's
capital stock ranking, as to dividends, on a parity with the Series A
Convertible Preferred Stock.

                                       12
<PAGE>

          "Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series A Convertible Preferred Stock.

          "Premium Percentage" means 115%.

          "Premium Price" means, for any share of Series A Convertible Preferred
Stock as of any date of determination, the product obtained by multiplying (a)
the sum of (1) the Conversion Amount plus (2) an amount equal to the accrued but
unpaid dividends on such share of Series A Convertible Preferred Stock to the
date of determination, plus (3) an amount equal to the accrued and unpaid
interest on dividends in arrears (as provided in Section 5) to the date of
determination times (b) the Premium Percentage.

          "Redemption Date" means the date of a redemption of shares of Series A
Convertible Preferred Stock pursuant to Section 9(a) determined in accordance
therewith.

          "Redemption Price" means the greater of:

          (1) the Premium Price on the applicable Redemption Date; and

          (2) the Converted Market Price on the applicable Redemption Date;
     provided, however, that if in connection with any determination of the
     Redemption Price the amount specified in clause (y) of the definition of
     the term Converted Market Price is greater than 200% of the Ceiling Price
     on the date as of which such amount is determined, then for purposes of
     computing the Redemption Price in such instance, the amount otherwise
     specified in clause (y) of the definition of the term Converted Market
     Price shall be reduced by 20% of the amount by which (A) the amount
     otherwise specified in clause (y) of the definition of the term Converted
     Market Price exceeds (B) the Ceiling Price on the date as of which such
     amount is determined.

          "Registration Event" shall mean (1) the Registration Statement is not
effective by December 15, 2001, (2) the Company fails to file the Registration
Statement with the SEC on or before January 1, 2001, (3) the Company fails to
submit a request for acceleration of the effective date of the Registration
Statement in accordance with Section 3(a) of the Registration Rights Agreement,
(4) the Registration Statement shall cease to be available for use by any holder
of shares of Series A Convertible Preferred Stock who is named therein as a
selling stockholder for any reason (including, without limitation, by reason of
an SEC stop order, a material misstatement or omission in the Registration
Statement or the information contained in the Registration Statement having
become outdated); provided, however, that no Registration Event pursuant to this
clause (4) shall be deemed to occur prior to the SEC Effective Date, (5) the
Common Stock is not listed for trading on any of the NYSE, the AMEX, the Nasdaq
or the Nasdaq SmallCap, or (6) a holder of shares of Series A Preferred Stock
having become unable to convert any shares of Series A Preferred Stock in
accordance with Section 10(a) for any reason (other than

                                       13
<PAGE>

by reason of the 4.9% limitation on beneficial ownership set forth therein or a
redemption or repurchase thereof).

          "Registration Rights Agreements" means the several Registration Rights
Agreements entered into between the Corporation and the original holders of the
shares of Series A Convertible Preferred Stock, as amended or modified from time
to time in accordance with their respective terms.

          "Registration Statement" means the Registration Statement required to
be filed by the Corporation with the SEC pursuant to Section 2(a) of the
Registration Rights Agreements.

          "Reverse Stock Split Date" means the first date after the Issuance
Date and prior to December 31, 1999 on which the outstanding shares of the
Corporation's Common Stock are combined into a smaller amount of shares of
Common Stock.

          "SEC" means the United States Securities and Exchange Commission.

          "SEC Effective Date" means the date the Registration Statement is
first declared effective by the SEC.

          "Semi-Annual Reset Date" means the first Trading Day that occurs on or
after six months following the Initial Reset Date or the previous Semi-Annual
Reset Date as the case may be.

          "Senior Dividend Stock" means any class or series of capital stock of
the Corporation ranking senior as to dividends to the Series A Convertible
Preferred Stock.

          "Senior Liquidation Stock" means any class or series of capital stock
of the Corporation ranking senior as to liquidation rights to the Series A
Convertible Preferred Stock.

          "Series A Convertible Preferred Stock" means the Series A Convertible
Preferred Stock, $.01 par value, of the Corporation.

          "Share Limitation Redemption Date" shall mean each date on which the
Corporation is required to redeem shares of Series A Convertible Preferred Stock
as provided in Section 7(a).

          "Share Limitation Redemption Price" means the Premium Price on the
applicable Share Limitation Redemption Date.

          "Stockholder Approval" shall mean the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the

                                       14
<PAGE>

Common Stock of the Corporation outstanding on the Issuance Date for less than
the greater of the book or market value of such Common Stock on conversion of
the Series A Convertible Preferred Stock, as and to the extent required under
Rule 4460(i) of the Nasdaq as in effect from time to time or any successor
provision.

          "Tender Offer" means a tender offer or exchange offer.

          "Trading Day" means a day on whichever of (x) the national securities
exchange, (y) the Nasdaq or (z) the Nasdaq SmallCap which at the time
constitutes the principal securities market for the Common Stock is open for
general trading of securities.

          "Transfer Agent Instruction" means the Transfer Agent Instruction from
the Corporation to the Conversion Agent for the benefit of the holders from time
to time of shares of Series A Convertible Preferred Stock, provided for in the
Amendment Agreements.

          SECTION 2.  DESIGNATION AND AMOUNT.  The shares of such series shall
be designated as "Series A Convertible Preferred Stock", and the number of
shares constituting the Series A Convertible Preferred Stock shall be 2,500, and
shall not be subject to increase.  Of the authorized shares of Series A
Convertible Preferred Stock, 500 shares may be issued only as dividends on the
outstanding shares of Series A Convertible Preferred Stock.

          SECTION 3.  SERIES A PREFERRED STOCK CAPITAL.  The amount to be
represented in the Series A Convertible Preferred Stock capital of the
Corporation at all times for each outstanding share of Series A Convertible
Preferred Stock shall be the greater of (i) the Premium Price and (ii) the
Converted Market Price.  The Corporation shall take such action as may be
required to maintain the amount required by this Section 3 to be represented in
stated capital for the Series A Convertible Preferred Stock capital not less
frequently than monthly.

          SECTION 4.  RANK.  All Series A Convertible Preferred Stock shall rank
(i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, (ii) junior to the
Series B Senior Convertible Preferred Stock, both as to payment of dividends and
as to distributions of assets upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary and (iii) senior to any
additional series of the class of Preferred Stock which series the Board of
Directors may from time to time authorize and any additional class of preferred
stock (or series of preferred stock of such class) which the Board of Directors
or the stockholders may from time to time authorize in accordance herewith.

          SECTION 5.  DIVIDENDS AND DISTRIBUTIONS.  (a) The holders of shares of
Series A Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the

                                       15
<PAGE>

rate of $60.00 per annum per share, and no more, which shall be fully
cumulative, shall accrue without interest (except as otherwise provided herein
as to dividends in arrears) from the date of original issuance of each share of
Series A Convertible Preferred Stock and shall be payable quarterly on February
15, May 15, August 15, and November 15 of each year commencing November 15, 1998
(except that if any such date is a Saturday, Sunday, or legal holiday, then such
dividend shall be payable on the next succeeding day that is not a Saturday,
Sunday, or legal holiday) to holders of record as they appear on the stock books
of the Corporation on such record dates, not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
Dividends on the Series A Convertible Preferred Stock shall be paid in cash or,
subject to the limitations in Section 5(b) hereof, Dividend Shares or any
combination of cash and Dividend Shares, at the option of the Corporation as
hereinafter provided. The amount of the dividends payable per share of Series A
Convertible Preferred Stock for each quarterly dividend period shall be computed
by dividing the annual dividend amount by four. The amount of dividends payable
for the initial dividend period and any period shorter than a full quarterly
dividend period shall be computed on the basis of a 360-day year of twelve 30-
day months. Dividends not paid on a payment date, whether or not such dividends
have been declared, will bear interest at the rate of 14% per annum until paid
(or such lesser rate as shall be the maximum rate allowable by applicable law).
No dividends or other distributions, other than the dividends payable solely in
shares of any Junior Dividend Stock, shall be paid or set apart for payment on
any shares of Junior Dividend Stock, and no purchase, redemption, or other
acquisition shall be made by the Corporation of any shares of Junior Dividend
Stock (except for Option Share Surrenders), unless and until all accrued and
unpaid dividends on the Series A Convertible Preferred Stock and interest on
dividends in arrears at the rate specified herein shall have been paid or
declared and set apart for payment.

          If at any time any dividend on any Senior Dividend Stock shall be in
arrears, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series A Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividends for the then current dividend period, shall have
been paid or declared and set apart for payment, without interest.  No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series A Convertible Preferred Stock.  No full dividends shall be paid or
declared and set apart for payment on the Series A Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends.  When dividends are not paid in full upon the
Series A Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series A
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the

                                       16
<PAGE>

amount of dividends paid or declared and set apart for payment per share on the
Series A Convertible Preferred Stock and the Parity Dividend Stock shall in all
cases bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of Series A Convertible Preferred Stock and the Parity
Dividend Stock bear to each other.

          Any references to "distribution" contained in this Section 5 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.

          (b) If the Corporation elects in the exercise of its sole discretion
to issue Dividend Shares in payment of dividends on the Series A Convertible
Preferred Stock in respect of any dividend payment date, the Corporation shall
issue and deliver, or cause to be issued and delivered, by the third Trading Day
after such dividend payment date to each holder of shares of Series A
Convertible Preferred Stock a certificate representing the number of whole
Dividend Shares arrived at by dividing (x) the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series A Convertible Preferred Stock held by such holder which are being paid in
Dividend Shares were being paid in cash by  (y) $1,000.00; provided, however,
that if certificates representing Dividend Shares are issued and delivered to
holders of Series A Convertible Preferred Stock subsequent to the third Trading
Day after a dividend payment date, the amount so divided into such total amount
of cash dividends will be reduced by $10.00 for each Trading Day after the third
Trading Day following such dividend payment date to the date of delivery of
Dividend Shares.  No fractional Dividend Shares shall be issued in payment of
dividends.  In lieu thereof, the Corporation shall pay cash in an amount equal
to the balance of such dividend which is not paid in Dividend Shares.  The
Corporation shall not exercise its right to issue Dividend Shares in payment of
dividends on Series A Convertible Preferred Stock if:

          (i) the number of shares of Series A Convertible Preferred Stock at
     the time authorized, unissued and unreserved for all purposes, or held in
     the Corporation's treasury, is insufficient to permit the conversion of
     such Dividend Shares into shares of Common Stock;

          (ii) the issuance or delivery of Dividend Shares as a dividend payment
     or the issuance of shares of Common Stock upon conversion of such Dividend
     Shares by the holder thereof would require registration with or approval of
     any governmental authority under any law or regulation, and such
     registration or approval has not been effected or obtained or is not in
     effect or the Registration Statement is unavailable for use by such holder
     for the resale of such shares of Common Stock; provided, however, that this
     limitation shall not be deemed to be applicable at any time prior to the
     date which is 105 days after the Issuance Date, if the Registration
     Statement is on Form S-3, or 120 days after the Issuance Date, if the
     Registration Statement is on Form S-1, if this limitation otherwise would
     be applicable solely because the Registration Statement shall not yet have
     been

                                       17
<PAGE>

     declared effective, so long as the Corporation shall be in compliance in
     all material respects with its obligations under the Registration Rights
     Agreements;

          (iii)  the shares of Common Stock issuable upon conversion of such
     Dividend Shares have not been authorized for listing, upon official notice
     of issuance, on any securities exchange or market on which the Common Stock
     is then listed; or have not been approved for quotation if the Common Stock
     is traded in the over-the-counter market;

          (iv) the number of shares of Common Stock registered pursuant to
     Section 2(a) of the Registration Rights Agreements for resale upon issuance
     upon conversion of Dividend Shares shall be sufficient (after taking into
     account the number of shares of Common Stock issued or issuable upon
     conversion of Dividend Shares theretofore issued) to prevent the resale
     pursuant to the Registration Statement of the shares of Common Stock
     issuable upon conversion of such Dividend Shares;

          (v) the shares of Common Stock issuable upon conversion of such
     Dividend Shares (A) cannot be sold or transferred without restriction by
     unaffiliated holders who receive such Dividend Shares or (B) are no longer
     listed on any of the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap; or

          (vi) an Optional Redemption Event shall have occurred and any holder
     of shares of Series A Convertible Preferred Stock shall have exercised
     optional redemption rights under Section 11 by reason of such Optional
     Redemption Event and the Corporation shall not have paid the Optional
     Redemption Price to each holder.

          Dividend Shares issued in payment of dividends on Series A Convertible
Preferred Stock pursuant to this Section and shares of Common Stock issuable
upon conversion of such Dividend Shares shall be, and for all purposes shall be
deemed to be, validly issued, fully paid and nonassessable shares of the
Corporation; the issuance and delivery thereof is hereby authorized; and the
delivery will be, and for all purposes shall be deemed to be, payment in full of
the cumulative dividends to which holders are entitled on the applicable
dividend payment date.

          (c) Neither the Corporation nor any subsidiary of the Corporation
shall redeem, repurchase or otherwise acquire in any one transaction or series
of related transactions any shares of Common Stock, Junior Dividend Stock or
Junior Liquidation Stock if the number of shares so repurchased, redeemed or
otherwise acquired in such transaction or series of related transactions
(excluding any Option Share Surrender) is more than either (x) 5.0% of the
number of shares of Common Stock, Junior Dividend Stock or Junior Liquidation
Stock, as the case may be, outstanding immediately prior to such transaction or
series of related transactions or (y) 1% of the number of shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions if such

                                       18
<PAGE>

transaction or series of related transactions is with any one person or group of
affiliated persons, unless the Corporation or such subsidiary offers to purchase
for cash from each holder of shares of Series A Convertible Preferred Stock at
the time of such redemption, repurchase or acquisition the same percentage of
such holder's shares of Series A Convertible Preferred Stock as the percentage
of the number of outstanding shares of Common Stock, Junior Dividend Stock or
Junior Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series A Convertible Preferred Stock
equal to the greater of (i) the Premium Price in effect on the date of purchase
pursuant to this Section 5(c) and (ii) the Converted Market Price on the date of
purchase pursuant to this Section 5(c); provided, however, that if in connection
with any determination of the purchase price payable pursuant to this Section
5(c) the amount specified in clause (y) of the definition of the term Converted
Market Price is greater than 200% of the Ceiling Price on the date as of which
such amount is determined, then for purposes of computing the purchase price
payable pursuant to this Section 5(c) in such instance, the amount otherwise
specified in clause (y) of the definition of the term Converted Market Price
shall be reduced by 20% of the amount by which (A) the amount otherwise
specified in clause (y) of the definition of the term Converted Market Price
exceeds (B) the Ceiling Price on the date as of which such amount is determined.

          (d) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any Tender Offer for outstanding shares of Common Stock, unless
the Corporation contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Corporation or any subsidiary of the Corporation, unless
such person agrees with the Corporation to make an offer, in either such case to
each holder of outstanding shares of Series A Convertible Preferred Stock to
purchase for cash at the time of purchase in such Tender Offer the same
percentage of shares of Series A Convertible Preferred Stock held by such holder
as the percentage of outstanding shares of Common Stock offered to be purchased
in such Tender Offer at a price per share of Series A Convertible Preferred
Stock equal to the greater of (i) the Premium Price in effect on the date of
purchase pursuant to this Section 5(d) and (ii) the Converted Market Price on
the date of purchase pursuant to this Section 5(d).

          SECTION 6.  LIQUIDATION PREFERENCE.  In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series A Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series A Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; provided, however, that such rights shall accrue to the
holders of Series A Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met.  After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for

                                       19
<PAGE>

distribution shall be distributed ratably among the holders of the Series A
Convertible Preferred Stock and any Parity Liquidation Stock in proportion to
the respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the Liquidation
Preference of the shares of Series A Convertible Preferred Stock and the
liquidation preference of the shares of Parity Liquidation Stock, the holders of
such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities, or other property in and of
itself will be considered a liquidation, dissolution or winding up of the
Corporation.

          SECTION 7.  MANDATORY REDEMPTION.

          (a) MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT.  (1)
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the Nasdaq, so long as the Common Stock is listed on the Nasdaq, the Nasdaq
SmallCap, the NYSE or the AMEX, the Corporation shall not be required to issue
upon conversion of shares of Series A Convertible Preferred Stock pursuant to
Section 10 more than the Maximum Share Amount.  The Maximum Share Amount shall
be allocated among the shares of Series A Convertible Preferred Stock at the
time of initial issuance thereof pro rata based on the initial issuance of 2,000
shares of Series A Convertible Preferred Stock.  Each certificate for shares of
Series A Convertible Preferred Stock initially issued shall bear a notation as
to the number of shares constituting the portion of the Maximum Share Amount
allocated to the shares of Series A Convertible Preferred Stock represented by
such certificate for purposes of conversion thereof.  The Corporation shall
maintain records which show the number of shares of Series A Convertible
Preferred Stock issued by the Corporation pursuant to Section 5 as dividends on
the shares of Series A Convertible Preferred Stock represented by each
certificate, which records shall be controlling in the absence of manifest
error.  Each such additional share of Series A Convertible Preferred Stock shall
be allocated a portion of the Maximum Share Amount allocated to the shares of
Series A Convertible Preferred Stock in respect of which such additional shares
of Series A Convertible Preferred Stock are issued as a dividend and the
certificate for such additional shares of Series A Convertible Preferred Stock
shall bear a notation as to the certificate number of the share of Series A
Convertible Preferred Stock in respect of which such additional share of Series
A Convertible Preferred Stock is issued as a dividend.  Upon surrender of any
certificate for shares of Series A Convertible Preferred Stock for transfer or
re-registration thereof (or, at the option of the holder, for conversion
pursuant to Section 10(a) of less than all of the shares of Series A Convertible
Preferred Stock represented thereby), the Corporation shall make a notation on
the new certificate issued upon such transfer or re-registration or evidencing
such unconverted shares, as the case may be, as to the remaining number of
shares of Common Stock from the Maximum Share Amount remaining available for
conversion of the shares of Series A Convertible Preferred Stock evidenced by
such new certificate.  If any certificate for shares of Series A Convertible
Preferred Stock is surrendered for split-up into two or

                                       20
<PAGE>

more certificates representing an aggregate number of shares of Series A
Convertible Preferred Stock equal to the number of shares of Series A
Convertible Preferred Stock represented by the certificate so surrendered (as
reduced by any contemporaneous conversion of shares of Series A Convertible
Preferred Stock represented by the certificate so surrendered), each certificate
issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining portion of the Maximum Share Amount allocated to the certificate so
surrendered. If any shares of Series A Convertible Preferred Stock represented
by a single certificate are converted in full pursuant to Section 10, all of the
portion of the Maximum Share Amount allocated to such shares of Series A
Convertible Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series A Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series A Convertible Preferred
Stock so converted, and if there shall be no other shares of Series A
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series A Convertible Preferred Stock
outstanding on such date.

          (2) The Corporation shall promptly, but in no event later than five
business days after the occurrence, give notice to each holder of shares of
Series A Convertible Preferred Stock (by telephone line facsimile transmission
at such number as such holder has specified in writing to the Corporation for
such purposes or, if such holder shall not have specified any such number, by
overnight courier or first class mail, postage prepaid, at such holder's address
as the same appears on the stock books of the Corporation) and any holder of
shares of Series A Convertible Preferred Stock may at any time after the
occurrence give notice to the Corporation, in either case, if at any time on or
after December 16, 1998 and on or prior to August 31, 2001 on any ten Trading
Days within any period of 20 consecutive Trading Days the Corporation would not
have been required to convert shares of Series A Convertible Preferred Stock of
such holder in accordance with Section 10(a) as a consequence of the limitations
set forth in Section 7(a)(1) had the shares of Series A Convertible Preferred
Stock held by such holder been converted in full into Common Stock on each such
day, determined without regard to the limitation, if any, on such holder
contained in the proviso to the second sentence of Section 10(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice").  If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten Trading Days after such Inconvertibility Notice is given
or was required to be given, the holder receiving or giving, as the case may be,
such Inconvertibility Notice shall have the right by written notice to the
Corporation (which written notice may be contained in the Inconvertibility
Notice given by such holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series A Convertible Preferred Stock (which,
if applicable, shall be all of such holder's outstanding shares of Series A
Convertible Preferred Stock) as shall not, on the business day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the

                                       21
<PAGE>

limitations set forth in Section 7(a)(1) (determined without regard to the
limitation, if any, on beneficial ownership of Common Stock by such holder
contained in the proviso to the second sentence of Section 10(a)), within ten
business days after such holder so directs the Corporation, at a price per share
equal to the Share Limitation Redemption Price.  If a holder of shares of Series
A Convertible Preferred Stock directs the Corporation to redeem outstanding
shares of Series A Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series A Convertible Preferred
Stock, the Corporation would have been able, within the limitations set forth in
Section 7(a)(1), to convert all of such holder's shares of Series A Convertible
Preferred Stock (determined without regard to the limitation, if any, on
beneficial ownership of shares of Common Stock by such holder contained in the
proviso to the second sentence of Section 10(a)) on any ten Trading Days within
any period of 15 consecutive Trading Days commencing after the period of 20
consecutive Trading Days which gave rise to the applicable Inconvertibility
Notice from the Corporation or such holder of shares of Series A Convertible
Preferred Stock, as the case may be, had such holder exercised its right to
convert all of such holder's shares of Series A Convertible Preferred Stock into
Common Stock on each of such ten Trading Days within such 15 Trading Day period,
then the Corporation shall not be required to redeem any shares of Series A
Convertible Preferred Stock by reason of such Inconvertibility Notice.

          (3) Notwithstanding the giving of any Inconvertibility Notice by the
Corporation to the holders of Series A Convertible Preferred Stock pursuant to
Section 7(a)(2) or the giving or the absence of any notice by the holders of the
Series A Convertible Preferred Stock in response thereto or any redemption of
shares of Series A Convertible Preferred Stock pursuant to Section 7(a)(2),
thereafter the provisions of Section 7(a)(2) shall continue to be applicable on
any occasion unless the Stockholder Approval shall have been obtained from the
stockholders of the Corporation or waived by the Nasdaq.

          (4) On each Share Limitation Redemption Date (or such later date as a
holder of shares of Series A Convertible Preferred Stock shall surrender to the
Corporation the certificate(s) for the shares of Series A Convertible Preferred
Stock being redeemed pursuant to this Section 7(a)), the Corporation shall make
payment in immediately available funds of the applicable Share Limitation
Redemption Price to such holder of shares of Series A Convertible Preferred
Stock to be redeemed to or upon the order of such holder as specified by such
holder in writing to the Corporation at least one business day prior to such
Share Limitation Redemption Date.  Upon redemption of less than all of the
shares of Series A Convertible Preferred Stock evidenced by a particular
certificate, promptly, but in no event later than three business days after
surrender of such certificate to the Corporation, the Corporation shall issue a
replacement certificate for the shares of Series A Convertible Preferred Stock
evidenced by such certificate which have not been redeemed.  Only whole shares
of Series A Convertible Preferred Stock may be redeemed.

                                       22
<PAGE>

          (b) NO OTHER MANDATORY REDEMPTION.  The shares of Series A Convertible
Preferred Stock shall not be subject to mandatory redemption by the Corporation
except as provided in Section 7(a).

          SECTION 8.  NO SINKING FUND.  The shares of Series A Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement
or sinking fund.

          SECTION 9.  OPTIONAL REDEMPTION.

          (a) CORPORATION OPTIONAL REDEMPTION.  If (1) the Corporation shall be
in compliance in all material respects with its obligations to the holders of
shares of Series A Convertible Preferred Stock (including, without limitation,
its obligations under the Amendment Agreement, the Registration Rights
Agreements and the provisions of this Statement of Resolution), (2) on the date
the Corporation Optional Redemption Notice is given and at all times until the
Redemption Date, the Registration Statement is effective and available for use
by each holder of shares of Series A Convertible Preferred Stock for the resale
of shares of Common Stock acquired by such holder upon conversion of all shares
of Series A Convertible Preferred Stock held by such holder and (3) no Optional
Redemption Event shall have occurred with respect to which, on the date a
Corporation Optional Redemption Notice is given or on the Redemption Date, any
holder of shares of Series A Convertible Preferred Stock shall have exercised
optional redemption rights under Section 11 by reason of such Optional
Redemption Event and the Corporation shall not have paid the Optional Redemption
Price to such holder, then the Corporation shall have the right, exercisable by
giving a Corporation Optional Redemption Notice not less than 30 days or more
than 60 days prior to the Redemption Date to all holders of record of the shares
of Series A Convertible Preferred Stock, at any time to redeem all or from time
to time to redeem any part of the outstanding shares of Series A Convertible
Preferred Stock in accordance with this Section 9(a).  If the Corporation shall
redeem less than all outstanding shares of Series A Convertible Preferred Stock,
such redemption shall be made as nearly as practical pro rata from all holders
of shares of Series A Convertible Preferred Stock.  Any Corporation Optional
Redemption Notice under this Section 9(a) shall be given to the holders of
record of the shares of Series A Convertible Preferred Stock at their addresses
appearing on the records of the Corporation; provided, however, that any failure
or defect in the giving of such notice to any such holder shall not affect the
validity of notice to or the redemption of shares of Series A Convertible
Preferred Stock of any other holder.  On the Redemption Date (or such later date
as a holder of shares of Series A Convertible Preferred Stock surrenders to the
Corporation the certificate(s) for shares of Series A Convertible Preferred
Stock to be redeemed pursuant to this Section 9(a)), the Corporation shall make
payment of the applicable Redemption Price to each holder of shares of Series A
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one business day prior to the Redemption Date.  A holder of shares of Series A
Convertible Preferred Stock to be redeemed pursuant to this Section 9(a) shall
be entitled to convert such shares of

                                       23
<PAGE>

Series A Convertible Preferred Stock in accordance with Section 10(a) through
the day prior to the Redemption Date and (2) if the Corporation shall fail to
pay the Redemption Price of any share of Series A Convertible Preferred Stock
when due, at any time after the due date thereof until such date as the
Corporation pays the Redemption Price of such share of Series A Convertible
Preferred Stock. No share of Series A Convertible Preferred Stock as to which
the holder exercises the right of conversion pursuant to Section 10 or the
optional redemption right pursuant to Section 11 may be redeemed by the
Corporation pursuant to this Section 9(a) on or after the date of exercise of
such conversion right or optional redemption right, as the case may be,
regardless of whether the Corporation Optional Redemption Notice shall have been
given prior to, or on or after, the date of exercise of such conversion right or
optional redemption right, as the case may be.

          (b) FINAL REDEMPTION.  The Corporation shall have the right to redeem
all, but not less than all, outstanding shares of Series A Convertible Preferred
Stock at any time on or after the date which is 1,080 days after the Issuance
Date so long as (1) the Corporation shall be in compliance in all material
respects with its obligations to the holders of the Series A Convertible
Preferred Stock (including, without limitation, its obligations under the
Amendment Agreements, the Registration Rights Agreements and this Statement of
Resolution) and (2) no Optional Redemption Event shall have occurred with
respect to which on the date a Final Redemption Notice is to be given or on the
Final Redemption Date, any holder of shares of Series A Convertible Preferred
Stock shall have exercised optional redemption rights under Section 11 by reason
of such Optional Redemption Event and the Corporation shall not have paid the
Optional Redemption Price to such holder.  In order to exercise its rights under
this Section 9(b), the Corporation shall give a Final Redemption Notice not less
than 20 or more than 40 Trading Days prior to the Final Redemption Date to all
holders of record of the shares of Series A Convertible Preferred Stock.  Any
Final Redemption Notice shall be given to the holders of record of the shares of
Series A Convertible Preferred Stock by telephone line facsimile transmission to
such number as shown on the records of the Corporation for such purpose;
provided, however, that any failure or defect in the giving of such notice to
any such holder shall not affect the validity of notice to or the redemption of
shares of Series A Convertible Preferred Stock of any other holder.  On the
Final Redemption Date (or such later date as a holder of shares of Series A
Convertible Preferred Stock surrenders to the Corporation the certificate(s) for
shares of Series A Convertible Preferred Stock to be redeemed pursuant to this
Section 9(b)), the Corporation shall make payment of the applicable Final
Redemption Price to each holder of shares of Series A Convertible Preferred
Stock to be redeemed in immediately available funds to such account as specified
by such holder in writing to the Corporation at least one business day prior to
the Final Redemption Date.  A holder of shares of Series A Convertible Preferred
Stock to be redeemed pursuant to this Section 9(b) shall be entitled to convert
such shares of Series A Convertible Preferred Stock in accordance with Section
10 through the day prior to the Final Redemption Date and (2) if the Corporation
shall fail to pay the Final Redemption Price of any share of Series A
Convertible Preferred Stock when due, at any time after the due date thereof
until such date as the Corporation pays the Final

                                       24
<PAGE>

Redemption Price of such share of Series A Convertible Preferred Stock to such
holder. No share of Series A Convertible Preferred Stock as to which a holder
exercises the right of conversion pursuant to Section 10 or the optional
redemption right pursuant to Section 11 may be redeemed by the Corporation
pursuant to this Section 9(b) on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Final Redemption Notice shall have been given prior to, or on or
after, the date of exercise of such conversion right or optional redemption
right, as the case may be. So long as during the period from the Issuance Date
through the date the Corporation pays the Final Redemption Price the Corporation
shall not have commenced a voluntary case or other proceeding, and no person
shall have commenced an involuntary case or other proceeding against the
Corporation, in any such case seeking liquidation, reorganization or other
relief with respect to the Corporation or its debts under any bankruptcy,
insolvency, receivership, moratorium, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian,
or other similar official of the Corporation or any substantial part of the
Corporation's property, the Corporation shall not have consented to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, and the Corporation
shall not have made a general assignment for the benefit of creditors, then the
Corporation shall have the right, exercisable by a statement to such effect in
the Final Redemption Notice, to pay the Final Redemption Price by the issuance
to the holders of shares of Series A Convertible Preferred Stock to be redeemed
of shares of Common Stock, valued for this purpose at the Conversion Price on
the Final Redemption Date, in lieu of payment of cash, so long as all shares of
Common Stock to be so issued would, if issued as dividends on shares of Series A
Convertible Preferred Stock, meet the criteria in clauses (i) through (vi) of
Section 5(b).

          (c) NO OTHER OPTIONAL REDEMPTION.  The shares of Series A Convertible
Preferred Stock shall not be subject to redemption at the option of the
Corporation except as provided in Sections 9(a) and 9(b).

          SECTION 10.  CONVERSION.

          (a) CONVERSION AT OPTION OF HOLDER.  The holders of the Series A
Convertible Preferred Stock may at any time on or after the earlier of (x) the
SEC Effective Date and (y) the date which is 90 days after the Issuance Date
convert at any time all or from time to time any part of their shares of Series
A Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as herein provided.  Each share of
Series A Convertible Preferred Stock may be converted at the office of the
Conversion Agent or at such other additional office or offices, if any, as the
Board of Directors may designate, into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) the
Conversion Amount, (ii) accrued but unpaid dividends to the applicable
Conversion Date on the share of Series A Convertible Preferred Stock being
converted, and (iii) accrued

                                       25
<PAGE>

but unpaid interest on the dividends on the share of Series A Convertible
Preferred Stock being converted in arrears to the applicable Conversion Date at
the rate provided in Section 5 by (y) the Conversion Price for such Conversion
Date (the "Conversion Rate"); provided, however, that in no event shall any
holder of shares of Series A Convertible Preferred Stock be entitled to convert
any shares of Series A Convertible Preferred Stock in excess of that number of
shares of Series A Convertible Preferred Stock upon conversion of which the sum
of (1) the number of shares of Common Stock beneficially owned by such holder
and all Aggregated Persons of such holder (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted shares of Series
A Convertible Preferred Stock) and (2) the number of shares of Common Stock
issuable upon the conversion of the number of shares of Series A Convertible
Preferred Stock with respect to which the determination in this proviso is being
made, would result in beneficial ownership by such holder and all Aggregated
Persons of such holder of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence.

          (b) OTHER PROVISIONS.  (1) Notwithstanding anything in this Section
10(b) to the contrary, no change in the Conversion Amount pursuant to this
Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Amount shall actually be changed to reflect all adjustments called
for by this Section 10(b) and not previously made.  Notwithstanding anything in
this Section 10(b), no change in the Conversion Amount shall be made that would
result in the price at which a share of Series A Convertible Preferred Stock is
converted being less than the par value of the Common Stock into which shares of
Series A Convertible Preferred Stock are at the time convertible.

          (2) The holders of shares of Series A Convertible Preferred Stock at
the close of business on the record date for any dividend payment to holders of
Series A Convertible Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series A
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder.  A holder of shares of
Series A Convertible Preferred Stock on a record date for a dividend payment who
(or whose transferee) tenders any of such shares for conversion into shares of
Common Stock on or after such dividend

                                       26
<PAGE>

payment date will receive the dividend payable by the Corporation on such shares
of Series A Convertible Preferred Stock on such date, and the converting holder
need not make any payment of the amount of such dividend in connection with such
conversion of shares of Series A Convertible Preferred Stock. Except as provided
above, no adjustment shall be made in respect of cash dividends on Common Stock
or Series A Convertible Preferred Stock that may be accrued and unpaid at the
date of surrender of shares of Series A Convertible Preferred Stock.

          (3)  (A)  The right of the holders of Series A Convertible Preferred
Stock to convert their shares shall be exercised by giving (which may be done by
telephone line facsimile transmission) a Conversion Notice to the Conversion
Agent.  If a holder of Series A Convertible Preferred Stock elects to convert
any shares of Series A Convertible Preferred Stock in accordance with Section
10(a), such holder shall not be required to surrender the certificate(s)
representing such shares of Series A Convertible Preferred Stock to the
Corporation unless all of the shares of Series A Convertible Preferred Stock
represented thereby are so converted.  Each holder of shares of Series A
Convertible Preferred Stock and the Corporation shall maintain records showing
the number of shares so converted and the dates of such conversions or shall use
such other method, satisfactory to such holder and the Corporation, so as to not
require physical surrender of such certificates upon each such conversion.  In
the event of any dispute or discrepancy, such records of the Corporation shall
be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any shares of Series A Convertible Preferred
Stock evidenced by a particular certificate therefor are converted as aforesaid,
the holder of Series A Convertible Preferred Stock may not transfer the
certificate(s) representing such shares of Series A Convertible Preferred Stock
unless such holder first physically surrenders such certificate(s) to the
Corporation, whereupon the Corporation will forthwith issue and deliver upon the
order of such holder of shares of Series A Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series A
Convertible Preferred Stock (upon payment by such holder of shares of Series A
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series A
Convertible Preferred Stock represented by such certificate(s).  Each holder of
shares of Series A Convertible Preferred Stock, by acceptance of a certificate
for such shares, acknowledges and agrees that (1) by reason of the provisions of
this paragraph, following conversion of any shares of Series A Convertible
Preferred Stock represented by such certificate, the number of shares of Series
A Convertible Preferred Stock represented by such certificate may be less than
the number of shares stated on such certificate, and (2) the Corporation may
place a legend on the certificates for shares of Series A Convertible Preferred
Stock which refers to or describes the provisions of this paragraph.

          (B) The Corporation shall pay any transfer tax arising in connection
with any conversion of shares of Series A Convertible Preferred Stock except
that the Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery upon
conversion of shares of Common Stock or other securities or property in a name
other than that of the holder of

                                       27
<PAGE>

the shares of the Series A Convertible Preferred Stock being converted, and the
Corporation shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid. The number of shares of Common Stock to be issued upon each
conversion of shares of Series A Convertible Preferred Stock shall be the number
set forth in the applicable Conversion Notice which number shall be conclusive
absent manifest error. The Corporation shall notify a holder who has given a
Conversion Notice of any claim of manifest error within one Trading Day after
such holder gives such Conversion Notice and no such claim of error shall limit
or delay performance of the Corporation's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Corporation notifies a holder of shares of Series A Convertible Preferred
Stock being converted within one Trading Day after a Conversion Notice has been
given (which notice shall specify all defects in the Conversion Notice) and any
Conversion Notice containing any such defect shall nonetheless be effective on
the date given if the converting holder promptly undertakes to correct all such
defects.

          (4) The Corporation shall reserve from its authorized, unissued and
otherwise unreserved Common Stock free from preemptive and similar rights
3,333,333 shares (such amount to be subject to equitable adjustment from time to
time on terms reasonably acceptable to the Holder for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring on or after the Issuance Date) to provide for the
issuance of Common Stock upon the conversion in full of the Series A Convertible
Preferred Stock, subject to reduction from time to time by the number of shares
of Common Stock issued on conversion of the Series A Convertible Preferred
Stock.  The Corporation (and any successor corporation) shall take all action
necessary so that a number of shares of the authorized but unissued Common Stock
(or common stock in the case of any successor corporation) sufficient to provide
for the conversion of the Series A Convertible Preferred Stock outstanding upon
the basis hereinbefore provided are at all times reserved by the Corporation (or
any successor corporation), free from preemptive rights, for such conversion,
subject to the provisions of the next succeeding paragraph.  If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
Series A Convertible Preferred Stock shall be convertible as herein provided,
the Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series A Convertible Preferred Stock on the new basis.  If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the outstanding shares of Series A
Convertible Preferred Stock, the Corporation promptly shall seek, and use its
best efforts to obtain and complete, such corporate action as may, in the
opinion of its counsel, be necessary to

                                       28
<PAGE>

increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.

          (5) In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, or in
the case of any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series A Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series A
Convertible Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series A Convertible Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis which preserves the economic benefits
of the conversion rights of the holders of shares of Series A Convertible
Preferred Stock on a basis as nearly as practical as such rights exist hereunder
prior thereto.  If, in connection with any such consolidation, merger, sale,
transfer, or share exchange, each holder of shares of Common Stock is entitled
to elect to receive securities, cash, or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series A Convertible Preferred Stock the right to elect the
securities, cash, or other assets into which the Series A Convertible Preferred
Stock held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election).  The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with.  The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.

          (6) If a holder shall have given a Conversion Notice for shares of
Series A Convertible Preferred Stock, the Corporation shall issue and deliver to
such person certificates for the Common Stock issuable upon such conversion
within three Trading Days after such Conversion Notice is given and the person
converting shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided.  If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of any action or inaction by
the converting holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to such

                                       29
<PAGE>

holder, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such holder or any other person of any
obligation to the Corporation or any violation or alleged violation of law by
such holder or any other person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Corporation to the holder in
connection with such conversion. If the Corporation fails to issue and deliver
the certificates for the Common Stock to the holder converting shares of Series
A Convertible Preferred Stock pursuant to the first sentence of this paragraph
as and when required to do so, in addition to any other liabilities the
Corporation may have hereunder and under applicable law (1) the Corporation
shall pay or reimburse such holder on demand for all out-of-pocket expenses
including, without limitation, reasonable fees and expenses of legal counsel
incurred by such holder as a result of such failure, (2) the Conversion
Percentage used to determine the Conversion Price applicable to such conversion
shall be reduced by one percentage point from the Conversion Percentage
otherwise used to calculate the Conversion Price applicable to such conversion
or, if such conversion is based on the Ceiling Price, the Ceiling Price used to
determine the Conversion Price applicable to such conversion shall be reduced by
one percentage point from the amount that the Conversion Price otherwise would
have been without reduction pursuant hereto, in either such case, for each
Trading Day after such third Trading Day until such shares of Common Stock are
delivered to such holder and (3) such holder may by written notice (which may be
given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing) given at any time
prior to delivery to such holder of the certificates for the shares of Common
Stock issuable upon such conversion of shares of Series A Convertible Preferred
Stock, rescind such conversion, whereupon such holder shall have the right to
convert such shares of Series A Convertible Preferred Stock thereafter in
accordance herewith.

          (7) No fractional shares of Common Stock shall be issued upon
conversion of Series A Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock to purchase fractional shares of Common Stock which
would otherwise be issuable in respect of the aggregate number of such shares
surrendered for conversion at one time by the same holder, the Corporation shall
pay in cash an amount equal to the product of (i) the arithmetic average of the
Market Price of one share of Common Stock on the three consecutive Trading Days
ending on the Trading Day immediately preceding the Conversion Date times (ii)
such fraction of a share.

          (8) The Conversion Amount shall be adjusted from time to time under
certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:

          (i) In case the Corporation shall issue rights or warrants on a pro
rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at a
price per share less than the Current Price for such record date, then in each
such case the Conversion Amount in effect on such record date shall be adjusted
in accordance with the formula

           C\\1\\ = C x O + N
                        -----

                                       30
<PAGE>

           O + N x P
               -----
                 M
where
        C\\1\\ = the adjusted Conversion Amount

        C      = the current Conversion Amount

        O      = the number of shares of Common Stock outstanding on the record
                 date.

        N      = the number of additional shares of Common Stock issuable
                 pursuant to the exercise of such rights or warrants.

        P      = the offering price per share of the additional shares (which
                 amount shall include amounts received by the Corporation in
                 respect of the issuance and the exercise of such rights or
                 warrants).

        M      = the Current Price per share of Common Stock on the record date.

              Such adjustment shall become effective immediately after the
        record date for the determination of stockholders entitled to receive
        such rights or warrants. If any or all such rights or warrants are not
        so issued or expire or terminate before being exercised, the Conversion
        Amount then in effect shall be readjusted appropriately.

          (ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined) evidences
of its indebtedness or assets (including securities, but excluding any warrants
or subscription rights referred to in subparagraph (i) above and any dividend or
distribution paid in cash out of the retained earnings of the Corporation), then
in each such case the Conversion Amount then in effect shall be adjusted in
accordance with the formula

        C\\1\\ = Cx  M
                    ----
                    M - F
where
        C\\1\\ = the adjusted Conversion Amount

        C      = the current Conversion Amount

        M      = the Current Price per share of Common Stock on the record date
                 mentioned below.

        F      = the aggregate amount of such cash dividend and/or the fair
                 market value on the record date of the assets or securities to
                 be distributed divided by the number of shares of Common Stock
                 outstanding on the record date.


                                       31
<PAGE>

               The Board of Directors shall determine such fair market value,
               which determination shall be conclusive.

Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series A Convertible Preferred Stock.

          (iii)  All calculations hereunder shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.

          (iv) If at any time as a result of an adjustment made pursuant to
Section 10(b)(5), the holder of any Series A Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.

          (9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable on
the Common Stock.

          (10) Whenever the Conversion Amount is adjusted as herein provided,
the Corporation shall send to each holder and each transfer agent, if any, for
the Series A Convertible Preferred Stock and the transfer agent for the Common
Stock, a statement signed by the Chairman of the Board, the President, or any
Vice President of the Corporation and by its Treasurer or its Secretary or an
Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation.
Whenever the Conversion Amount is adjusted, the Corporation will give notice by
mail to the holders of record of Series A Convertible Preferred Stock, which
notice shall be made within 15 days after the effective date of such adjustment
and shall state the adjustment and the Conversion Amount.  Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.

          (11) Whenever the Corporation shall propose to take any of the actions
specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of Section
10(b)(8) which would result in any adjustment in the Conversion Amount under
this Section 10(b), the Corporation shall cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series A Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the

                                       32
<PAGE>

Corporation and the date as of which holders of record of the Common Stock shall
participate in any such actions or be entitled to exchange their Common Stock
for securities or other property, as the case may be. Failure by the Corporation
to mail the notice or any defect in such notice shall not affect the validity of
the transaction.

          SECTION 11.  REDEMPTION AT OPTION OF HOLDERS.

          (a) REDEMPTION RIGHT.  If an Optional Redemption Event occurs, then,
in addition to any other right or remedy of any holder of shares of Series A
Convertible Preferred Stock, each holder of shares of Series A Convertible
Preferred Stock shall have the right, at such holder's option, to require the
Corporation to redeem all of such holder's shares of Series A Convertible
Preferred Stock, or any portion thereof, on the date that is 10 business days
after the date such holder gives the Corporation an Optional Redemption Notice
with respect to such Optional Redemption Event at any time while any of such
holder's shares of Series A Convertible Preferred Stock are outstanding, at a
price equal to the Optional Redemption Price.

          (b) NOTICES; METHOD OF EXERCISING OPTIONAL REDEMPTION RIGHTS, ETC.
(1) On or before the fifth business day after the occurrence of an Optional
Redemption Event, the Corporation shall give to each holder of outstanding
shares of Series A Convertible Preferred Stock a notice of the occurrence of
such Optional Redemption Event and of the redemption right set forth herein
arising as a result thereof.  Such notice from the Corporation shall set forth:

          (i) the date by which the optional redemption right must be exercised,
     and

          (ii) a description of the procedure (set forth below) which each such
     holder must follow to exercise such holder's optional redemption right.

          No failure of the Corporation to give such notice or defect therein
     shall limit the right of any holder of shares of Series A Convertible
     Preferred Stock to exercise the optional redemption right or affect the
     validity of the proceedings for the redemption of such holder's shares of
     Series A Convertible Preferred Stock.

          (2) To exercise its optional redemption right, each holder of
outstanding shares of Series A Convertible Preferred Stock shall deliver to the
Corporation on or before the thirtieth day after the notice required by Section
11(b)(1) is given to such holder (or if no such notice has been given by the
Corporation to such holder, within forty days after such holder first learns of
such Optional Redemption Event) an Optional Redemption Notice to the
Corporation.  An Optional Redemption Notice may be revoked by such holder giving
such Optional Redemption Notice by giving notice of such revocation to the
Corporation at any time prior to the time the Corporation pays the Optional
Redemption Price to such holder.

                                       33
<PAGE>

          (3) If a holder of shares of Series A Convertible Preferred Stock
shall have given an Optional Redemption Notice, on the date which is three
business days after the date such Optional Redemption Notice is given (or such
later date as such holder surrenders such holder's certificates for the shares
of Series A Convertible Preferred Stock redeemed) the Corporation shall make
payment in immediately available funds of the applicable Optional Redemption
Price to such account as specified by such holder in writing to the Corporation
at least one business day prior to the applicable redemption date.

          (c) OTHER.  (1) In connection with a redemption pursuant to this
Section 11 of less than all of the shares of Series A Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three Trading Days after surrender of such certificate to the Corporation,
the Corporation shall issue and deliver to such holder a replacement certificate
for the shares of Series A Convertible Preferred Stock evidenced by such
certificate which have not been redeemed.

          (2) An Optional Redemption Notice given by a holder of shares of
Series A Convertible Preferred Stock shall be deemed for all purposes to be in
proper form unless the Corporation notifies such holder in writing within three
business days after such Optional Redemption Notice has been given (which notice
shall specify all defects in such Optional Redemption Notice), and any Optional
Redemption Notice containing any such defect shall nonetheless be effective on
the date given if such holder promptly undertakes to correct all such defects.
No such claim of error shall limit or delay performance of the Corporation's
obligation to redeem all shares of Series A Convertible Preferred Stock not in
dispute whether or not such holder makes such undertaking.

          Section 12.  Voting Rights; Certain Restrictions.

          (a) VOTING RIGHTS.  Except as otherwise required by law or expressly
provided herein, shares of Series A Convertible Preferred Stock shall not be
entitled to vote on any matter.

          (b) ARTICLES OF INCORPORATION; CERTAIN STOCK.  The affirmative vote or
consent of the holders of a majority of the outstanding shares of the Series A
Convertible Preferred Stock, voting separately as a class, will be required for
(1) any amendment, alteration, or repeal, whether by merger or consolidation or
otherwise, of the Corporation's Articles of Incorporation if the amendment,
alteration, or repeal materially and adversely affects the powers, preferences,
or special rights of the Series A Convertible Preferred Stock, or (2) the
creation and issuance of any Senior Dividend Stock or Senior Liquidation Stock;
provided, however, that any increase in the authorized Preferred Stock of the
Corporation or the creation and issuance of any stock which is both Junior
Dividend Stock and Junior Liquidation Stock shall not be deemed to affect
materially and adversely such powers, preferences, or special rights and any
such increase

                                       34
<PAGE>

or creation and issuance may be made without any such vote by the holders of
Series A Convertible Preferred Stock except as otherwise required by law.

          (c) REPURCHASES OF SERIES A CONVERTIBLE PREFERRED STOCK.  The
Corporation shall not repurchase or otherwise acquire any shares of Series A
Convertible Preferred Stock (other than pursuant to Sections 7(a), 9(a), 9(b) or
11) unless the Corporation offers to repurchase or otherwise acquire
simultaneously a pro rata portion of each holder's shares of Series A
Convertible Preferred Stock for cash at the same price per share.

          (d) OTHER.  So long as any shares of Series A Convertible Preferred
Stock are outstanding:

          (1) PAYMENT OF OBLIGATIONS.  The Corporation will pay and discharge,
and will cause each subsidiary of the Corporation to pay and discharge, when due
all their respective obligations and liabilities which are material to the
Corporation and its subsidiaries taken as a whole, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.

          (2) MAINTENANCE OF PROPERTY; INSURANCE.  (A)  The Corporation will
keep, and will cause each subsidiary of the Corporation to keep, all material
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.

          (B) The Corporation will maintain, and will cause each subsidiary of
the Corporation to maintain, with financially sound and responsible insurance
companies, insurance against loss or damage by fire or other casualty and such
other insurance, including but not limited to, product liability insurance, in
such amounts and covering such risks as is reasonably adequate for the conduct
of their businesses and the value of their properties.

          (3) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.  The Corporation
will continue, and will cause each subsidiary of the Corporation to continue, to
engage in business of the same general type as conducted by the Corporation and
its operating subsidiaries at the time this Statement of Resolution filed with
the Secretary of State of the State of Texas, and will preserve, renew and keep
in full force and effect, and will cause each subsidiary of the Corporation to
preserve, renew and keep in full force and effect, their respective corporate
existence and their respective material rights, privileges and franchises
necessary or desirable in the normal conduct of business.

          (4) COMPLIANCE WITH LAWS.  The Corporation will comply, and will cause
each subsidiary of the Corporation to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to

                                       35
<PAGE>

have a material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Corporation
and its subsidiaries, taken as a whole.

          (5) INVESTMENT COMPANY ACT.  The Corporation will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended, or any successor provision.

          (6) TRANSACTIONS WITH AFFILIATES.  The Corporation will not, and will
not permit any subsidiary of the Corporation, directly or indirectly, to pay any
funds to or for the account of, make any investment (whether by acquisition of
stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any
indebtedness, or otherwise) in, lease, sell, transfer or otherwise dispose of
any assets, tangible or intangible, to, or participate in, or effect any
transaction in connection with, any joint enterprise or other joint arrangement
with, any Affiliate of the Corporation, except, on terms to the Corporation or
such subsidiary no less favorable than terms that could be obtained by the
Corporation or such subsidiary from a person that is not an Affiliate of the
Corporation, as determined in good faith by the Board of Directors.

          (7) COMPLIANCE.  The Corporation shall (a) use its commercially
reasonable best efforts to obtain knowledge of any failure or default by the
Corporation in the timely performance of any material obligation to the holders
of the Series A Convertible Preferred Stock under the terms of this Statement of
Resolution, the Amendment Agreements, the Registration Rights Agreement, the
Transfer Agent Instruction or any other document or instrument executed and
delivered by the Corporation in connection herewith or therewith and (b) shall
notify the holders of the Series A Convertible Preferred Stock promptly, but in
no event later than three Business Days after the Corporation first learns of
any such failure or default.

          SECTION 13.  OUTSTANDING SHARES.  For purposes of this Statement of
Resolution, all shares of Series A Convertible Preferred Stock shall be deemed
outstanding except (i) from the applicable Conversion Date, each share of Series
A Convertible Preferred Stock converted into Common Stock, unless the
Corporation shall default in its obligation to issue and deliver shares of
Common Stock upon such conversion as and when required by Section 10; (ii) from
the date of registration of transfer, all shares of Series A Convertible
Preferred Stock held of record by the Corporation or any subsidiary or Affiliate
of the Corporation (other than any original holder of shares of Series A
Convertible Preferred Stock) and (iii) from the applicable Redemption Date,
Share Limitation Redemption Date, Final Redemption Date or date of redemption
pursuant to Section 11, all shares of Series A Convertible Preferred Stock which
are redeemed or repurchased, so long as in each case the Redemption Price, the
Share Limitation Redemption Price, the Final Redemption Price, the Optional
Redemption Price or other repurchase price, as the case may be, of such shares
of Series

                                       36
<PAGE>

A Convertible Preferred Stock shall have been paid by the Corporation
as and when due hereunder.

          SECTION 14.  MISCELLANEOUS.

          (a) NOTICES.  Any notices required or permitted to be given under the
terms of this Statement of Resolution shall be in writing and shall be sent by
mail or delivered personally (which shall include telephone line facsimile
transmission) or by courier and shall be deemed given five days after being
placed in the mail, if mailed, or upon receipt, if delivered personally or by
courier (a) in the case of the Corporation, addressed to the Corporation at 1250
Wood Branch Park Drive, Houston, Texas, 77079, Attention:  Chief Executive
Officer (telephone line facsimile transmission number (281) 529-4650), or, in
the case of any holder of shares of Series A Convertible Preferred Stock, at
such holder's address or telephone line facsimile transmission number shown on
the stock books maintained by the Corporation with respect to the Series A
Convertible Preferred Stock or such other address as the Corporation shall have
provided by notice to the holders of shares of Series A Convertible Preferred
Stock in accordance with this Section or any holder of shares of Series A
Convertible Preferred Stock shall have provided to the Corporation in accordance
with this Section.

          (b) REPLACEMENT OF CERTIFICATES.  Upon receipt by the Corporation of
evidence reasonably satisfactory to the Corporation of the ownership of and the
loss, theft, destruction or mutilation of any certificate for shares of Series A
Convertible Preferred Stock and (1) in the case of loss, theft or destruction,
of indemnity from the record holder of the certificate for such shares of Series
A Convertible Preferred Stock reasonably satisfactory in form to the Corporation
(and without the requirement to post any bond or other security) or (2) in the
case of mutilation, upon surrender and cancellation of the certificate for such
shares of Series A Convertible Preferred Stock, the Corporation will execute and
deliver to such holder a new certificate for such shares of Series A Convertible
Preferred Stock without charge to such holder.

          (c) OVERDUE AMOUNTS.  Except as otherwise specifically provided in
Section 5 with respect to dividends in arrears on the Series A Convertible
Preferred Stock, whenever any amount which is due to any holder of shares of
Series A Convertible Preferred Stock is not paid to such holder when due, such
amount shall bear interest at the rate of 14% per annum ( or such other rate as
shall be the maximum rate allowable by applicable law) until paid in full.

                                       37
<PAGE>

          IN WITNESS WHEREOF, Equalnet Communications Corp. has caused this
certificate to be signed by Mitchell H. Bodian, its Chief Executive Officer, as
of the ___th day of ___________, 1999.

                            EQUALNET COMMUNICATIONS CORP.



                            By:
                               --------------------------
                              Mitchell H. Bodian

                                       38
<PAGE>

                                                                         Annex I

                              NOTICE OF CONVERSION
                                       OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                         EQUALNET COMMUNICATIONS CORP.

TO:  American Stock Transfer & Trust Company,
        as Transfer Agent and Registrar
     6201 Fifteenth Avenue
     Third Floor
     Brooklyn, New York 11219

     Attention:  Mr. Barry Rosenthal

     Facsimile No.:  (718) 259-1144

          (1) Pursuant to the terms of the Series A Convertible Preferred Stock
(the "Preferred Stock") of Equalnet Communications Corp., a Texas corporation
(the "Company"), the undersigned hereby elects to convert ________________
shares of the Preferred Stock together with accrued and unpaid dividends thereon
in the amount of $_______________ and interest on dividends in arrears in the
amount of $________________ into shares of Common Stock, $.01 par value (the
"Common Stock"), of the Company, or such other securities into which the
Preferred Stock is currently convertible.  Capitalized terms used in this Notice
and not otherwise defined herein have the respective meanings provided in the
Statement of Resolution of the Board of Directors Establishing and Designating
Series A Convertible Preferred Stock and Fixing the Rights and Preferences of
Such Series (the "Statement of Resolution").

          (2) Please issue a certificate or certificates for ________________
shares of Common Stock or other securities into which such number of shares of
Preferred Stock is convertible in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

     _____________________        _____________________
     Name                         Name

     _____________________        _____________________
     Address                      Address

     _____________________        _____________________
     SS or Tax ID Number          SS or Tax ID Number

          (3) The Conversion Date is ________________.  Check and complete one
 of the following:


<PAGE>

          [_]
                    The undersigned elects to convert based on the Average
          Market Price of the Common Stock.  The Market Price of the Common
          Stock on each of the five Trading Days (whether or not consecutive)
          during the 25 consecutive Trading Days preceding the Conversion Date
          having the lowest Market Prices, and the arithmetic average thereof
          are as follows:

     Date                       Market Price
     ----                       ------------

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

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

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

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

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


     Arithmetic Average: $

          OR


          [_]
                    The undersigned elects to convert based on the Ceiling Price
          of the Common Stock of $__________ applicable to conversions of
          Preferred Stock.

          (4) If the shares of Common Stock issuable upon conversion of the
Preferred Stock have not been registered for resale under the Securities Act of
1933, as amended (the "Act"), and this Notice is submitted prior to the date
which is two years after the Issuance Date, the undersigned represents and
warrants that (i) the shares of Common Stock not so registered are being
acquired for the account of the undersigned for investment, and not with a view
to, or for resale in connection with, the public distribution thereof other than
pursuant to registration under the Act, and that the undersigned has no present
intention of distributing or reselling the shares of Common Stock not so
registered other than pursuant to registration under the Act and (ii) the
undersigned is an "accredited investor" as defined in Regulation D under the
Act.  The undersigned further agrees that (A) the shares of Common Stock not so
registered shall not be sold or transferred unless either (i) they first shall
have been registered under the

                                       2
<PAGE>

Act and applicable state securities laws or (ii) the Company first shall have
been furnished with an opinion of legal counsel reasonably satisfactory to the
Company to the effect that such sale or transfer is exempt from the registration
requirements of the Act and (B) the Company may place a legend on the
certificate(s) for the shares of Common Stock not so registered to that effect
and place a stop-transfer restriction in its records relating to the shares of
Common Stock not so registered.

          Date _________________________
          ____________________________________
          Signature of Holder (Must be signed
          exactly as name appears on the Preferred
          Stock Certificate.)

                                       3