<PAGE>

                                     CYNET, INC.

         STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF
               THE SERIES E CONVERTIBLE PREFERRED STOCK, NO PAR VALUE

           Pursuant to Section 2.13 of the Texas Business Corporation Act

       The following resolution was duly adopted by the Board of Directors of
CYNET, Inc. (the "Corporation"), pursuant to the provisions of Section 2.13 of
the Texas Business Corporation Act (the "TBCA"), on May 26, 2000, by the
unanimous written consent of the Board of Directors:

       WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Articles of Incorporation of the Corporation,
to provide by resolution or resolutions for the issuance of shares of
preferred stock, no par value, of the Corporation, in one or more series with
such voting powers, full or limited, or without voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions as shall be
stated and expressed in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated and
expressed in the Articles of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets and such other subjects or matters
as may be fixed by resolution or resolutions of the Board of Directors under
the TBCA;

              RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "BOARD OF DIRECTORS" or the
"BOARD") in accordance with the provisions of its Articles of Incorporation,
the Board of Directors hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, no par value per share (the "PREFERRED
STOCK"), and hereby states the designations and number of shares, and fixes
the relative rights, preferences, privileges, powers and restrictions thereof
as follows:

              Series E Convertible Preferred Stock:


                                     ARTICLE 1
                                    DEFINITIONS

              The terms defined in this Article whenever used in this
Statement of the Powers, Designations, Preferences and Rights of the Series E
Convertible Preferred Stock, No Par Value (the "Certificate of Designations")
have the following respective meanings:

              (a)    "ADDITIONAL CAPITAL SHARES" has the meaning set forth in
Section 6.1(c).

              (b)    "AFFILIATE" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.

              (c)    "BUSINESS DAY" means a day other than Saturday, Sunday or
any day on which banks located in the State of Delaware are authorized or
obligated to close.

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              (d)    "CAPITAL SHARES" means the Common Shares and any other
shares of any other class or series of capital stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Corporation.

              (e)    "CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement.

              (f)    "COMMON SHARES" or "COMMON STOCK" means shares of the
Corporation's Class A voting common stock, no par value per share.

              (g)    "COMMON STOCK ISSUED AT CONVERSION", when used with
reference to the securities issuable upon conversion of the Series E Preferred
Stock, means all Common Shares now or hereafter Outstanding and securities of
any other class or series into which the Series E Preferred Stock hereafter
shall have been changed or substituted, whether now or hereafter created and
however designated.

              (h)    "CONVERSION DATE" means any day on which all or any
portion of the shares of Series E Preferred Stock is converted in accordance
with the provisions hereof.

              (i)    "CONVERSION NOTICE" means a written notice of conversion
substantially in the form annexed hereto as Annex I.

              (j)    "CONVERSION PRICE" means on the applicable price for the
conversion of shares of Series E Preferred Stock into Common Shares on any
date of determination as set forth in Section 6.1.

              (k)    "CORPORATION" means CYNET, Inc., a Texas corporation, and
any successor or resulting corporation by way of merger, consolidation, sale
or exchange of all or substantially all of the Corporation's assets, or
otherwise.

              (l)    "CURRENT MARKET PRICE" means on any date of determination
the closing bid price of a Common Share on such day as reported on OTCBB;
PROVIDED, if such security is not listed or admitted to trading on OTCBB, as
reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by Bloomberg LP, or
a similar generally accepted reporting service, as the case may be.

              (m)    "DEFAULT DIVIDEND RATE" is equal to the Dividend Rate
plus an additional 4% per annum.

              (n)    "DIVIDEND PERIOD" means the semi-annual period commencing
on and including the Issue Date or, if a dividend has previously been paid,
the day after the immediately preceding Dividend Payment Due Date and ending
on and including the immediately subsequent Dividend Payment Due Date.

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              (o)    "DIVIDEND PAYMENT DUE DATE" means June 30 and December 31
of each year.

              (p)    "DIVIDEND RATE" means 8% per annum, computed on the basis
of a 360-day year.

              (q)    "HOLDER" means the initial holders of Series E Preferred
Stock, any successor thereto, or any Person or Persons to whom the Series E
Preferred Stock is subsequently transferred in accordance with the provisions
hereof.

              (r)    "ISSUE DATE" means, as to any share of Series E Preferred
Stock, the date of issuance of such share.

              (s)    "JUNIOR SECURITIES" means all capital stock of the
Corporation except for the Series D and E Preferred Stock.

              (t)    "LIQUIDATION PREFERENCE" means, with respect to a share
of the Series E Preferred Stock, an amount equal to the sum of (i) the Stated
Value thereof, PLUS (ii) an amount equal to 30% of such Stated Value, PLUS
(iii) the aggregate of all accrued and unpaid dividends (whether or not earned
or declared, whether or not there were funds legally available for the payment
of dividends and whether or not a Dividend Payment Due Date has occurred since
the last dividend payment) on such share of Series E Preferred Stock until the
most recent Dividend Payment Due Date; PROVIDED that, in the event of an
actual liquidation, dissolution or winding up of the Corporation, the amount
referred to in clause (iii) above shall be calculated by including accrued and
unpaid dividends to the actual date of such liquidation, dissolution or
winding up, rather than the Dividend Payment Due Date referred to above.

              (u)    "MANDATORY CONVERSION DATE" has the meaning set forth in
Section 6.5.

              (v)    "MARKET PRICE" per Common Share means the average of the
closing bid prices of the Common Shares as reported on OTCBB for the three
Trading Days on which the three lowest closing bid prices are reported during
any Valuation Period, it being understood that such three Trading Days need
not be consecutive; PROVIDED, if such security is not listed or admitted to
trading on OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such
security on the over-the-counter market on the day in question as reported by
Bloomberg LP, or a similar generally accepted reporting service, for the three
Trading Days on which the three lowest closing bid prices are reported during
any Valuation Period, it being understood that such three Trading Days need
not be consecutive.

              (w)     "OTCBB" means the OTC Bulletin Board service of the
National Association of Securities Dealers, Inc.

              (x)    "OUTSTANDING", when used with reference to Common Shares
or Capital Shares (collectively, "SHARES"), means, on any date of
determination, all issued and outstanding Shares, and includes all such Shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in such Shares; PROVIDED, HOWEVER, that any such Shares
directly

<PAGE>

or indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "OUTSTANDING" for purposes
hereof.

              (y)    "PERSON" means an individual, a corporation, a
partnership, an association, a limited liability company, an unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.

              (z)    "REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated as of May 26, 2000 between the Corporation
and the initial Holder.

              (aa)   "SEC" means the United States Securities and Exchange
Commission.

              (bb)   "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.

              (cc)   "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement to be dated May 26, 2000 between the Corporation
and the initial Holder.

              (dd)   "SERIES E PREFERRED SHARES" or "SERIES E PREFERRED STOCK"
means the shares of Series E Convertible Preferred Stock of the Corporation or
such other convertible preferred stock of the Corporation as may be exchanged
therefor.

              (ee)   "STATED VALUE" has the meaning set forth in Article 2.

              (ff)   "SUBSIDIARY" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.

              (gg)   "TRADING DAY" means any day on which (a) purchases and
sales of securities authorized for quotation on OTCBB are reported thereon,
(b) no event which results in a material suspension or limitation of trading
of the Common Shares on OTCBB has occurred and (c) at least one bid for the
trading of Common Shares is reported on OTCBB.

              (hh)   "VALUATION EVENT" has the meaning set forth in Section
6.1.

              (ii)   "VALUATION PERIOD" means the period of 30 Trading Days
immediately preceding the Conversion Date; PROVIDED, HOWEVER, that if a
Valuation Event occurs during a Valuation Period on a date less than 5 Trading
Days before the Conversion Date, the Valuation Period shall be extended until
the date 5 Trading Days after the occurrence of the Valuation Event.

              (jj)   "WARRANT" means the Common Stock Purchase Warrant to
purchase shares of Common Stock issued by the Company to the initial Holder.

              All references to "CASH" or "$" herein mean currency of the
United States of America.

<PAGE>

                                     ARTICLE 2
                               DESIGNATION AND AMOUNT

              The designation of this series, which consists of 1,635 shares
of Preferred Stock, shall be Series E Convertible Preferred Stock (the "SERIES
E PREFERRED STOCK") and the stated value shall be $1,000 per share (the
"STATED VALUE").


                                     ARTICLE 3
                                        RANK

              The Series E Preferred Stock shall rank pari passu with the
Series D Preferred Stock and senior to any other capital stock of the
Corporation.


                                     ARTICLE 4
                                     DIVIDENDS

              (a)    (i)    The Holder shall be entitled to receive (in the
       manner contemplated by clause (iii) below), when, as and if declared by
       the Board of Directors, out of funds legally available for the payment of
       dividends, dividends at the Dividend Rate on the Stated Value of each
       share of Series E Preferred Stock on and as of each Dividend Payment Due
       Date with respect to each Dividend Period; PROVIDED, HOWEVER, that if no
       funds are legally available for the payment of cash dividends and no
       shares of Common Stock are available for the payment of dividends under
       clause (iii), dividends shall thereafter accrue and be payable at the
       Default Dividend Rate on the Stated Value of each share of Series E
       Preferred Stock until all accrued dividends are paid in full.  Dividends
       on the Series E Preferred Stock shall be cumulative from the date of
       issue, whether or not declared for any reason, including if such
       declaration is prohibited under any outstanding indebtedness or
       borrowings of the Corporation or any of its Subsidiaries, or any other
       contractual provision binding on the Corporation or any of its
       Subsidiaries, and whether or not there shall be funds legally available
       for the payment thereof.

                     (ii)   Each dividend shall be payable on each Dividend
       Payment Due Date, commencing June 30, 2000, to the Holders of record of
       shares of the Series E Preferred Stock, as they appear on the stock
       records of the Corporation at the close of business on such record date,
       not more than 60 days or less than 10 days preceding the payment date
       thereof, as shall be fixed by the Board of Directors.  Accrued and
       unpaid dividends for any past Dividend Period may be declared and paid at
       any time, without reference to any Dividend Payment Due Date, to Holders
       of record, not more than 15 days preceding the payment date thereof, as
       may be fixed by the Board of Directors.

                   (iii)    At the option of the Corporation, the dividend shall
       be paid either (x) in cash or (y) through the issuance of duly and
       validly authorized and issued, fully paid and nonassessable shares of the
       Common Stock valued at 100% of the then applicable Conversion Price
       calculated in accordance with the provisions of Section 6.1, assuming for
       this purpose, that the applicable Dividend Payment Due Date is the
       applicable Conversion Date, and registered for resale in open market
       transactions on the

<PAGE>

       Registration Statement (as defined in the Registration Rights Agreement),
       which Registration Statement shall then be effective under the Securities
       Act; PROVIDED, HOWEVER, that if no funds are legally available for the
       payment of cash dividends on the Series E Preferred Stock, dividends
       shall be paid as provided in clause (y) above.

              (b)    Except as provided in Section 4(c) hereof, the Holder
shall not be entitled to any dividends in excess of the cumulative dividends,
as herein provided, on the Series E Preferred Stock.

              (c)    Except as otherwise provided in Section 4(e) hereof, so
long as any shares of the Series E Preferred Stock are outstanding, no
dividends shall be declared or paid or set apart for payment or other
distribution declared or made upon any Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any Subsidiary) for any consideration by the
Corporation, directly or indirectly, nor shall any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any Junior
Securities, unless in each case (i) the full cumulative dividends required to
be paid in cash on all outstanding shares of the Series E Preferred Stock
shall have been paid or set apart for payment for all past Dividend Periods
with respect to the Series E Preferred Stock and (ii) sufficient funds shall
have been paid or set apart for the payment of the dividend for the current
Dividend Period with respect to the Series E Preferred Stock.

              (d)    If the Corporation shall at any time or from time to time
after the Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Corporation or any of its Subsidiaries by way of dividend or spin-off)
on shares of its Common Stock in connection with a spin-off of assets or
businesses of the Corporation or any of its Subsidiaries to the Corporation's
shareholders, then, and in each such case, in addition to the dividend
obligation of the Corporation specified in Section 4(a) hereof, the
Corporation shall declare, order, pay and make the same dividend or
distribution to each Holder of Series E Preferred Stock as would have been
made with respect to the number of Common Shares the Holder would have
received had it converted all of its Series E Preferred Shares immediately
prior to such dividend or distribution; PROVIDED, HOWEVER, that
notwithstanding the foregoing, unless such dividend or distribution shall have
an expiration date, 100% of any such dividend or distribution due to the
Holder with respect to each share of Series E Preferred Stock shall be
deposited with an escrow agent reasonably acceptable to the Holder and the
Corporation pursuant to an escrow agreement reasonably acceptable to the
Holder and the Corporation, which escrow agreement will provide that  such
dividend or distribution deposited with such escrow agent with respect to each
share of Series E Preferred will be delivered to the Holder upon the earlier
to occur of (i) the applicable Conversion Date for such Series E Preferred and
(ii) the Redemption Date, if applicable for such Series E Preferred.

<PAGE>

                                     ARTICLE 5
               LIQUIDATION PREFERENCE; MERGERS, CONSOLIDATIONS, ETC.

              (a)    If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or other
similar official) of the Corporation or of any substantial part of its
property, or make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due, or if a
decree or order for relief in respect of the Corporation shall be entered by a
court having jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 30 consecutive days and,
on account of any such event, the Corporation shall liquidate, dissolve or
wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up,
no distribution shall be made to the holders of any Junior Securities upon
liquidation, dissolution or winding-up unless prior thereto, the Holders of
shares of Series E Preferred Stock, subject to this Article 5, shall have
received the Liquidation Preference with respect to each share.

              (b)    In case the Corporation shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another Person
(where the Corporation is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Corporation), sell,
convey, transfer or otherwise dispose of all or substantially all its
property, assets or business to another Person, or effectuate a transaction or
series of related transactions in which more than 50% of the voting power of
the Corporation is disposed of (each, a "FUNDAMENTAL CORPORATE CHANGE") and,
pursuant to the terms of such Fundamental Corporate Change, shares of common
stock of the successor or acquiring corporation, or any cash, shares of stock
or other securities or property of any nature whatsoever (including warrants
or other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation ("OTHER PROPERTY"), are to be
received by or distributed to the holders of Common Stock of the Corporation,
then each Holder of Series E Preferred Stock shall have the right thereafter,
at its sole option, either (x) to require the Corporation to deem such
Fundamental Corporate Change to be a liquidation, dissolution or winding up of
the Corporation pursuant to which the Corporation shall be required to
distribute, upon consummation of and as a condition to, such Fundamental
Corporate Change an amount equal to 100% of the Liquidation Preference with
respect to each outstanding share of Series E Preferred Stock, (y) to receive
the number of shares of common stock of the successor or acquiring corporation
or of the Corporation, if it is the surviving corporation, and Other Property
as is receivable upon or as a result of such Fundamental Corporate Change by a
holder of the number of shares of Common Stock into which such Series E
Preferred Stock may be converted at the Conversion Price applicable
immediately prior to such Fundamental Corporate Change or (z) require the
Corporation, or such successor, resulting or purchasing corporation, as the
case may be, to, without benefit of any additional consideration therefor, to
execute and deliver to the Holder shares of its Preferred Stock with
substantial identical rights, preferences, privileges, powers, restrictions
and other

<PAGE>

terms as the Series E Preferred Stock equal to the number of shares of Series
E Preferred Stock held by such Holder immediately prior to such Fundamental
Corporate Change; PROVIDED, that all Holders of Series E Preferred Stock shall
be deemed to elect the option set forth in clause (x) above if at least a
majority in interest of such Holders elect such option. For purposes of this
Section 5(b), "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidence of
indebtedness, shares of stock or other securities which are convertible into
or exchangeable for any such stock, either immediately or upon the arrival of
a specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 5(b) shall similarly apply to successive
Fundamental Corporate Changes. For purposes of this Section 5(b) and all of
places in this Certificate of Designations, the term "Fundamental Corporate
Change" shall not include the Company's proposed re-incorporation in the State
of Delaware which proposal shall be presented for approval at the June 2000
Annual Shareholders Meeting provided that the rights and preferences of the
Series E Preferred Stock relative to the Company's other classes of capital
stock are unaffected by such proposal.


                                     ARTICLE 6
                           CONVERSION OF PREFERRED STOCK

              SECTION 6.1   Conversion; Conversion Price

              At the option of the Holder, the shares of Series E Preferred
Stock may be converted, either in whole or in part, into Common Shares  (at
any time and from time to time on and following the Closing Date, at a
Conversion Price per share of Common Stock equal to the lesser of: (i) 110% of
the lowest of the closing bid prices for the Common Stock on the OTCBB for the
five Trading Days immediately preceding the Closing Date (subject to
adjustment for any stock-split or stock combination to occur after the date
hereof), or (ii) 75% of the Market Price (in this Section 6.1, the "Conversion
Percentage"); PROVIDED that, if the Registration Statement (as defined in the
Registration Rights Agreement) has not been declared effective on or before
August 26, 2000 (the "Due Date"), then the Conversion Percentage shall
decrease by two percent (2%) for each month (that is, each thirty (30) day
period beginning on the 30th day after the Due Date) or partial month in which
the said registration statement has not been declared, or does not remain,
effective; if such registration statement has not been declared and does not
remain effective on the date which is one (1) year after the Closing Date and
until the Series E Preferred Stock has been redeemed or converted in full,
then the Conversion Percentage shall be fifty percent (50%). At the
Corporation's option, the amount of accrued and unpaid dividends as of the
Conversion Date (whether or not earned or declared, whether or not there were
funds legally available for the payment of dividends and whether or not a
Dividend Payment Due Date has occurred since the last dividend payment) shall
not be subject to conversion but instead may be paid in cash as of the
Conversion Date; if the Corporation elects to convert the amount of such
accrued and unpaid dividends at the Conversion Date into Common Stock, the
Common Stock issued to the Holder shall be valued at the applicable Conversion
Price.

<PAGE>

              The number of shares of Common Stock due upon conversion of
Series E Preferred Stock shall be (i) the number of shares of Series E
Preferred Stock to be converted, multiplied by (ii) the Stated Value plus,
subject to the immediately preceding sentence, accrued and unpaid dividends
(whether or not earned or declared, whether or not there were funds legally
available for the payment of dividends and whether or not a Dividend Payment
Due Date has occurred since the last dividend payment), to the extent the
Corporation does not at its election pay such accrued and unpaid dividends in
cash, and divided by (iii) the applicable Conversion Price.

              Within two Business Days of the occurrence of a Valuation Event,
the Corporation shall send notice thereof to each Holder.  Notwithstanding
anything to the contrary contained herein, if a Valuation Event occurs during
any Valuation Period, the Holder may convert some or all of its Series E
Preferred Stock, at its sole option, at a Conversion Price equal to the
Current Market Price on any Trading Day during the Valuation Period.

              For purposes of this Section 6.1, a "VALUATION EVENT" shall mean
an event in which the Corporation takes any of the following actions:

              (a)    subdivides or combines its Capital Shares;

              (b)    makes any distribution on its Capital Shares;

              (c)    issues any additional Capital Shares (the "ADDITIONAL
CAPITAL SHARES"), otherwise than as provided in the foregoing clauses 6.1(a)
and 6.1(b) above, at a price per share less, or for other consideration lower,
than the Current Market Price in effect immediately prior to such issuances,
or without consideration, except for issuances under employee benefit plans
consistent with those presently in effect and issuances under presently
outstanding warrants, options or convertible securities;

              (d)    issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares if the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;

              (e)    issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares if the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable
pursuant to the terms of such convertible, exchangeable or exercisable
securities shall be less than the Current Market Price in effect immediately
prior to such issuance;

              (f)    announces or effects a Fundamental Corporate Change;

              (g)    makes any distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for the payment of dividends under
applicable law or any distribution to such holders made in respect of the sale
of all or substantially all of the Corporation's assets (other than under the
circumstances provided for in the foregoing Sections 6.1(a) through 6.1(e)).

<PAGE>

              SECTION 6.2   Exercise of Conversion Privilege

              (a)    Conversion of the Series E Preferred Stock may be
exercised, in whole or in part, by the Holder by telecopying an executed and
completed Conversion Notice to the Corporation.  Each date on which a
Conversion Notice is telecopied to the Corporation in accordance with the
provisions of this Section 6.2 shall constitute a Conversion Date.  The
Corporation shall convert the Series E Preferred Stock and issue the Common
Stock Issued at Conversion, and all voting and other rights associated with
the beneficial ownership of the Common Stock Issued at Conversion shall vest
with the Holder, effective as of the Conversion Date at the time specified in
the Conversion Notice.  The Conversion Notice also shall state the name or
names (with addresses) of the Persons who are to become the holders of the
Common Stock Issued at Conversion in connection with such conversion.  The
Holder shall deliver the shares of Series E Preferred Stock to the Corporation
by express courier within 30 days following the Conversion Date.  Upon
surrender for conversion, the Series E Preferred Stock shall be accompanied by
a proper assignment thereof to the Corporation or be endorsed in blank.
Except as otherwise stated in the Securities Purchase Agreement, as promptly
as practicable after the receipt of the Conversion Notice as aforesaid, but in
any event not more than five Business Days after the Corporation's receipt of
such Conversion Notice, the Corporation shall (i) issue the Common Stock
issued at Conversion in accordance with the provisions of this Article 6, and
(ii) cause to be mailed for delivery by overnight courier to the Holder (x) a
certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, and (y) if the
Corporation chooses to pay accrued and unpaid dividends in cash, cash in the
amount of accrued and unpaid dividends as of the Conversion Date.  Such
conversion shall be deemed to have been effected at the time at which the
Conversion Notice indicates so long as the Series E Preferred Stock shall have
been surrendered as aforesaid at such time, and at such time the rights of the
Holder of the Series E Preferred Stock, as such, shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
issuable shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest
with such Person or Persons.  The Conversion Notice shall constitute a
contract between the Holder and the Corporation, whereby the Holder shall be
deemed to subscribe for the number of Common Shares which it will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender the Series E Preferred Stock and to release the
Corporation from all liability thereon.  No cash payment aggregating less than
$2.00 shall be required to be given unless specifically requested by the
Holder.

              (b)    If, at any time the Corporation challenges, disputes or
denies the right of the Holder hereof to effect the conversion of the Series E
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2, then the
Holder shall have the right, by written notice to the Corporation, to require
the Corporation promptly to redeem the Series E Preferred Stock for cash at a
redemption price equal to 135% of the Stated Value thereof together with all
accrued and unpaid dividends (whether or not earned or declared, whether or
not there were funds legally available for the payment of dividends and
whether or not a Dividend Payment Due Date has occurred since the last
dividend payment) thereon (the "MANDATORY PURCHASE AMOUNT").  Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs

<PAGE>

and expenses of the Holder, including reasonable legal fees and expenses, as
and when incurred in disputing any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder).

              (c)    The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under 11 U.S.C. Section
101 ET SEQ. (the "BANKRUPTCY CODE").   In the event the Corporation is a
debtor under the Bankruptcy Code, the Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. Section 362
in respect of the conversion of the Series E Preferred Stock.  The Corporation
agrees, without cost or expense to the Holder, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. Section 362.

              SECTION 6.3   Fractional Shares

              No fractional Common Shares or scrip representing fractional
Common Shares shall be issued upon conversion of the Series E Preferred Stock.
Instead of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series E Preferred Stock, the number of Common Shares shall
be rounded up to the nearest whole share.

              SECTION 6.4   Adjustments to Conversion Price

              For so long as any shares of the Series E Preferred Stock are
outstanding, if the Corporation issues and sells pursuant to an exemption from
registration under the Securities Act (A) Common Shares at a purchase price
that is lower than the Conversion Price on the date of issuance of such Common
Shares, (B) warrants or options with an exercise price on the date of issuance
thereof that is lower than the Conversion Price for the Holder on such date,
except for warrants or options issued pursuant to employee stock option
agreements or stock incentive agreements of the Corporation, or (C)
convertible, exchangeable or exercisable securities with a right to exchange
at lower than the Current Market Price on the date of issuance or conversion,
as applicable, of such convertible, exchangeable or exercisable securities,
except for stock option agreements or stock incentive agreements, then the
Conversion Price shall be reduced to equal the lowest of any such purchase
price, exercise price or exchange price, and the number of shares of Common
Stock into which the Series E Preferred Stock is convertible pursuant to the
second paragraph of Section 6.1 shall be correspondingly adjusted.  After such
reduction, the Conversion Price shall never exceed the Conversion Price as so
reduced, in spite of any subsequent increase in the Market Price.

              SECTION 6.5   Mandatory Conversion

              On the third anniversary of the date of this Certificate of
Designations (the "MANDATORY CONVERSION DATE"), the Corporation shall convert
all Series E Preferred Stock outstanding, at the Conversion Price utilizing
the Stated Value (plus accrued and unpaid dividends (whether or not earned or
declared, whether or not there were funds legally available for the payment of
dividends and whether or not a Dividend Payment Due Date has occurred since
the last dividend payment)) as the value of each share of Series E Preferred
Stock, into shares of Common Stock registered for resale in open market
transactions on the Registration

<PAGE>

Statement (as defined in the Registration Rights Agreement), which
Registration Statement shall then be effective under the Securities Act.

              SECTION 6.6   Certain Conversion Limitations

              (a)    Notwithstanding anything herein to the contrary, the
Holder shall not have the right, and the Corporation shall not have the
obligation, to convert all or any portion of the Series E Preferred Stock (and
the Corporation shall not have the right to pay dividends on the Series E
Preferred Stock in shares of Common Stock) if and to the extent that the
issuance to the Holder of shares of Common Stock upon such conversion (or
payment of dividends) would result in the Holder being deemed the "beneficial
owner" of more than 5% of the then Outstanding shares of Common Stock within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder.  If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than 5% of the
then Outstanding shares of Common Stock, then the Corporation shall redeem so
many of such Holder's shares (the "REDEMPTION SHARES") of Series E Preferred
Stock as are necessary to cause such Holder to be deemed the beneficial owner
of not more than 5% of the then Outstanding shares of Common Stock.  Upon such
determination by a court of competent jurisdiction, the Redemption Shares
shall immediately and without further action be deemed returned to the status
of authorized but unissued shares of Series E Preferred Stock, and the Holder
shall have no interest in or rights under such Redemption Shares.  Any and all
dividends paid on or prior to the date of such determination shall be deemed
dividends paid on the remaining shares of Series E Preferred Stock held by the
Holder.  Such redemption shall be for cash at a redemption price equal to the
sum of (i) 125% of the Stated Value of the Redemption Shares and (ii) any
accrued and unpaid dividends (whether or not earned or declared, whether or
not there were funds legally available for the payment of dividends and
whether or not a Dividend Payment Due Date has occurred since the last
dividend payment) to the date of such redemption. The Corporation's duty to
redeem and the calculation of the status of the Holder as a "beneficial owner"
in this Section shall be made solely with respect to the Series E Preferred
Stock, any other Preferred Stock beneficially owned by the Holder, Common
Stock Issued at Conversion, Common Stock purchased through the exercise of
warrants issued by the Corporation and Common Stock issued as a dividend to
the Holder.

               (b)   Notwithstanding anything herein to the contrary, if and
to the extent that, on any date (the "SECTION 16 DETERMINATION DATE"), the
holding by the Holder of shares of the Series E Preferred Stock would result
in the Holder's becoming subject to the provisions of Section 16(b) of the
Exchange Act in virtue of being deemed the "beneficial owner" of more than 10%
of the then Outstanding shares of Common Stock, then the Holder shall not have
the right, and the Corporation shall not have the obligation, to convert so
many of such Holder's shares of Series E Preferred Stock (the "SECTION 16
REDEMPTION SHARES") as shall cause such Holder to be deemed the beneficial
owner of more than 10% of the then Outstanding shares of Common Stock during
the period ending 60 days after the Section 16 Determination Date.  If any
court of competent jurisdiction shall determine that the foregoing limitation
is ineffective to prevent a Holder from being deemed the beneficial owner of
more than 10% of the then Outstanding shares of Common Stock for the purposes
of such Section 16(b), then the Corporation shall redeem the Section 16
Redemption Shares.  Upon such determination by a

<PAGE>

court of competent jurisdiction, the Section 16 Redemption Shares shall
immediately and without further action be deemed returned to the status of
authorized but unissued shares of Series E Preferred Stock, and the Holder
shall have no interest in or rights under such Section 16 Redemption Shares.
Any and all dividends paid on or prior to the date of such determination shall
be deemed dividends paid on the remaining shares of Series E Preferred Stock
held by the Holder.  Such redemption shall be for cash at a redemption price
equal to the sum of (i) 125% of the Stated Value of the Section 16 Redemption
Shares and (ii) any declared and unpaid dividends to the date of such
redemption. The Corporation's duty to redeem and the calculation of the status
of the Holder as a "beneficial owner" in this Section shall be made solely
with respect to the Series E Preferred Stock, any other Preferred Stock
beneficially owned by the Holder, Common Stock Issued at Conversion, Common
Stock purchased through the exercise of warrants issued by the Corporation and
Common Stock issued as a dividend to the Holder.

              (c)    Unless the Corporation shall have obtained the approval
of its voting shareholders to such issuance in accordance with the rules of
OTCBB or any other stock market rules with which the Corporation shall be
required to comply, but only to the extent required thereby, the Corporation
shall not issue shares of Common Stock (i) upon conversion of any shares of
Series E Preferred Stock or (ii) as a dividend on the Series E Preferred
Stock, if such issuance of Common Stock, when added to the number of shares of
Common Stock previously issued by the Corporation (x) upon conversion of
shares of the Series E Preferred Stock, (y) upon exercise of the Warrants
issued pursuant to the terms of the Securities Purchase Agreement and (z) in
payment of dividends on the Series E Preferred Stock, would equal or exceed
20% of the number of shares of the Corporation's Common Stock which were
issued and Outstanding on the Issue Date (the "MAXIMUM ISSUANCE AMOUNT").  In
the event that a properly executed Conversion Notice is received by the
Corporation which would require the Corporation to issue shares of Common
Stock equal to or in excess of the Maximum Issuance Amount, the Corporation
shall honor such conversion request by (a) converting the number of shares of
Series E Preferred Stock stated in the Conversion Notice which is not in
excess of the Maximum Issuance Amount and (b) redeeming the remaining number
of shares of Series E Preferred Stock stated in the Conversion Notice in cash
at a price equal to 125% of the Stated Value thereof, together with all
accrued and unpaid dividends (whether or not earned or declared, whether or
not there were funds legally available for the payment of dividends and
whether or not a Dividend Payment Due Date has occurred since the last
dividend payment) on the total number of shares stated in the Conversion
Notice.  In the event that the Corporation shall elect to pay a dividend in
shares of Common Stock which would require the Corporation to issue shares of
Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall pay (1) a dividend in a number of shares of Common Stock
equal to one less than the Maximum Issuance Amount and (2) the balance of the
dividend in cash. The Corporation's duty to redeem and the calculation of the
status of the Holder as a "beneficial owner" in this Section shall be made
solely with respect to the Series E Preferred Stock, any other Preferred Stock
beneficially owned by the Holder, Common Stock Issued at Conversion, Common
Stock purchased through the exercise of warrants issued by the Corporation and
Common Stock issued as a dividend to the Holder.

<PAGE>

                                     ARTICLE 7
                                   VOTING RIGHTS

              The Holders of the Series E Preferred Stock have no voting
power, except as otherwise provided by the TBCA, in this Article 7, and in
Article 8 below.

              Notwithstanding the above, the Corporation shall provide each
Holder of Series E Preferred Stock with prior notification of any meeting of
the shareholders (and copies of all proxy materials and other information sent
to shareholders) except the June 14, 2000 Annual Shareholders Meeting.  In the
event of any taking by the Corporation of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed liquidation,
dissolution or winding up of the Corporation, the Corporation shall mail a
notice thereof to each Holder at least 30 days prior to the date on which any
such record is to be taken for the purpose of such dividend, distribution,
right or other event, together with a brief statement regarding the amount and
character of such dividend, distribution, right or other event to the extent
known at such time.

              To the extent that under the TBCA the vote of the Holders of the
Series E Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the Holders of at least a majority of the
outstanding shares of Series E Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of a majority of
the outstanding shares of Series E Preferred Stock (except as otherwise may be
required under the TBCA) shall constitute the approval of such action by the
class.  To the extent that under the TBCA Holders of the Series E Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Series E Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible using the record date for the taking of such
vote of shareholders as the date as of which the Conversion Price is
calculated.  Holders of the Series E Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents (and copies of all
proxy materials and other information sent to shareholders) with respect to
which they would be entitled to vote, which notice would be provided pursuant
to the Corporation's bylaws and the TBCA.


                                     ARTICLE 8
                               PROTECTIVE PROVISIONS

              So long as shares of Series E Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided in the TBCA) of the Holders of at least a two
thirds majority of the then outstanding shares of Series E Preferred Stock:

              (a)    alter or change the rights, preferences or privileges of
the Series E Preferred Stock;

<PAGE>

              (b)    issue any stock having a preference over the Series E
Preferred Stock as to distribution of assets upon liquidation, dissolution or
winding up of the Corporation ("SENIOR SECURITIES") or alter or change the
rights, preferences or privileges of any Senior Securities so as to affect
adversely the Series E Preferred Stock;

              (c)    increase the authorized number of shares of Series E
Preferred Stock; or

              (d)    do any act or thing not authorized or contemplated by
this Certificate of Designations which would result in taxation of the Holders
of shares of the Series E Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable provision of the Internal
Revenue Code of 1986, as hereafter from time to time amended).

              In the event Holders of at least a two thirds majority of the
then outstanding shares of Series E Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or privileges of the
shares of Series E Preferred Stock, pursuant to subsection (a) above, so as to
affect the Series E Preferred Stock, then the Corporation will deliver notice
of such approved change to the Holders of the Series Preferred Stock that did
not agree to such alteration or change (the "DISSENTING HOLDERS") and
Dissenting Holders shall have the right for a period of 30 days to convert
their shares of Series E Preferred Stock pursuant to the terms of this
Certificate of Designations as in effect prior to such alteration or change or
to continue to hold their shares of Series E Preferred Stock.


                                     ARTICLE 9
                                   MISCELLANEOUS

              SECTION 9.1   Loss, Theft, Destruction of Preferred Stock

              Upon receipt of evidence satisfactory to the Corporation of the
loss, theft, destruction or mutilation of shares of Series E Preferred Stock
and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Corporation, or, in the
case of any such mutilation, upon surrender and cancellation of the Series E
Preferred Stock, the Corporation shall make, issue and deliver, in lieu of
such lost, stolen, destroyed or mutilated shares of Series E Preferred Stock,
new shares of Series E Preferred Stock of like tenor.  The Series E Preferred
Stock shall be held and owned upon the express condition that the provisions
of this Section 9.1 are exclusive with respect to the replacement of
mutilated, destroyed, lost or stolen shares of Series E Preferred Stock and
shall preclude any and all other rights and remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without the
surrender thereof.

              SECTION 9.2   Who Deemed Absolute Owner

              The Corporation may deem the Person in whose name the Series E
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series E Preferred Stock
for the purpose of receiving payment of dividends on the Series E Preferred
Stock, for the conversion of the Series E Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.  All such

<PAGE>

payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series E Preferred Stock to the extent of the
sum or sums so paid or the conversion so made.

              SECTION 9.3   Fundamental Corporate Change

              In the case of the occurrence of any Fundamental Corporate
Change described in Section 5(b), the Corporation shall cause to be mailed to
the Holder of the Series E Preferred Stock at its last address as it appears
in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date specified in connection
therewith (or, if such 20 days notice is not possible, at the earliest
possible date prior to any such record, effective or expiration date), a
notice stating (x) the date on which a record is to be taken for the purpose
of such corporate action, or if a record is not to be taken, the date as of
which the Holders of record of Series E Preferred Stock to be entitled to any
dividend, distribution, issuance or granting of rights, options or warrants
are to be determined or the date on which such Fundamental Corporate Change is
expected to become effective, and (y) the date as of which it is expected that
Holders of record of Series E Preferred Stock will be entitled to exchange
their shares for securities, cash or other property deliverable upon such
Fundamental Corporate Change.

              SECTION 9.4   Register

              The Corporation shall keep at its principal office a register in
which the Corporation shall provide for the registration of the Series E
Preferred Stock.  Upon any transfer of the Series E Preferred Stock in
accordance with the provisions hereof, the Corporation shall register such
transfer on the register of Series E Preferred Stock.

              SECTION 9.5   Withholding

              To the extent required by applicable law, the Corporation may
withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the United States having jurisdiction over
the Corporation from any payments made pursuant to the Series E Preferred
Stock.

              SECTION 9.6   Headings

              The headings of the Articles and Sections of this Certificate of
Designations are inserted for convenience only and do not constitute a part of
this Certificate of Designations.

              SECTION 9.7   Severability

              If any provision of this Certificate of Designations, or the
application thereof to any person or entity or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (ii) the
remainder of this Certificate of Designations and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.

<PAGE>

              IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Designations to be signed by its duly authorized officers on May 26, 2000.


                                   CYNET, INC.



                                   By: /s/ Bernard B. Beale
                                      -----------------------------------------
                                      Bernard B. Beale, Executive Vice President






                                   By: /s/ Samuel C. Beale
                                      -----------------------------------------
                                      Samuel C. Beale
                                      Secretary

<PAGE>

                                                                         ANNEX I

                             FORM OF CONVERSION NOTICE

       TO:    CYNET, Inc.
              12777 Jones Road, Suite 400
              Houston, Texas 77070

              The undersigned owner of this Series E Convertible Preferred
Stock (the "SERIES E PREFERRED STOCK") issued by CYNET, Inc. (the
"CORPORATION") hereby irrevocably exercises its option to convert __________
shares of the Series E Preferred Stock into shares of the Series A voting
common stock, no par value per share ("COMMON STOCK"), of the Corporation in
accordance with the terms of the Statement of the Powers, Designations,
Preferences and Rights of the Series E Convertible Preferred Stock, No Par
Value (the "Certificate of Designations").  The undersigned hereby instructs
the Corporation to convert the number of shares of the Series E Preferred
Stock specified above into Shares of Common Stock Issued at Conversion in
accordance with the provisions of Article 6 of the Certificate of
Designations.  The undersigned directs that the Common Stock issuable and
certificates therefor deliverable upon conversion and the recertificated
Series E Preferred Stock, if any, not being surrendered for conversion hereby,
 be issued in the name of and delivered to the undersigned unless a different
name has been indicated below.  All capitalized terms used and not defined
herein have the respective meanings assigned to them in the Certificate of
Designations.  So long as the Series E Preferred Stock shall have been
surrendered for conversion hereby, the conversion pursuant hereto shall be
deemed to have been effected at the date and time specified below, and at such
time the rights of the undersigned as a Holder of the Series E Preferred Stock
shall cease and the Person or Persons in whose name or names the Common Stock
Issued at Conversion shall be issuable shall be deemed to have become the
holder or holders of record of the Common Shares represented thereby and all
voting and other rights associated with the beneficial ownership of such
Common Shares shall at such time vest with such Person or Persons.

Date and time:
              --------------------




                                     ------------------------------------------
                                                     Signature



Fill in for registration of Series E Preferred Stock:

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             Please print name and address (including zip code number)