<PAGE>

                                                                     Exhibit 3.1

                         CERTIFICATE OF INCORPORATION

                                      OF

                            SYCAMORE NETWORKS, INC.


     FIRST.  The name of the Corporation is: Sycamore Networks, Inc.

     SECOND.  The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle.  The name of its registered agent at such address is The
Corporation Trust Company.

     THIRD.  The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:

     To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.

     FOURTH.  The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 22,500,000 shares, consisting of
(i) 15,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and (ii) 7,500,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").

     The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.

A.   COMMON STOCK.
     ------------

     1.   General.  The voting, dividend and liquidation rights of the holders
          -------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

     2.   Voting.  The holders of the Common Stock are entitled to one vote for
          ------
each share held at all meetings of stockholders (and written actions in lieu of
meetings).  There shall be no cumulative voting.

     The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled
<PAGE>

to vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware .

     3.   Dividends.  Dividends may be declared and paid on the Common Stock
          ---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.

     4.   Liquidation.  Upon the dissolution or liquidation of the Corporation,
          -----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.

B.   PREFERRED STOCK.
     ---------------

     1.   Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided.  Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law.  Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.

     Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware.  Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law.  Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.

                                      -2-
<PAGE>

     FIFTH.  The name and mailing address of the sole incorporator are as
follows:

               NAME                 MAILING ADDRESS
               ----                 ---------------

               Mark G. Borden       60 State Street
                                    Boston, MA 02109

     SIXTH.  In furtherance of and not in limitation of powers conferred by
statute, it is further provided:

          1.   Election of directors need not be by written ballot.

          2.   The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.

     SEVENTH.  Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability.  No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.

     EIGHTH.  The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by or on
behalf of an Indemnitee in connection with such action, suit or proceeding and
any appeal therefrom.

     As a condition precedent to his right to be indemnified, the Indemnitee
must notify the Corporation in writing as soon as practicable of any action,
suit, proceeding or investigation involving him for which indemnity will or
could be sought.  With respect to any action, suit, proceeding or investigation
of which the Corporation is so notified, the Corporation will be entitled to
participate therein at its

                                      -3-
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own expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee.

     In the event that the Corporation does not assume the defense of any
action, suit, proceeding or investigation of which the Corporation receives
notice under this Article, the Corporation shall pay in advance of the final
disposition of such matter any expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; provided, however, that the payment of
                                       --------  -------
such expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf of
the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article, which undertaking shall be
accepted without reference to the financial ability of the Indemnitee to make
such repayment; and further provided that no such advancement of expenses shall
                    ------- --------
be made if it is determined that (i) the Indemnitee did not act in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, or (ii) with respect to any criminal action or
proceeding, the Indemnitee had reasonable cause to believe his conduct was
unlawful.

     The Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by such Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.  In addition, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.

     All determinations hereunder as to the entitlement of an Indemnitee to
indemnification or advancement of expenses shall be made in each instance by (a)
a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the Corporation), or (d) a court of competent
jurisdiction.

     The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which an Indemnitee may be entitled under any
law, agreement or vote of stockholders or disinterested directors or otherwise,
and

                                      -4-
<PAGE>

(ii) shall inure to the benefit of the heirs, executors and administrators of
the Indemnitees. The Corporation may, to the extent authorized from time to time
by its Board of Directors, grant indemnification rights to other employees or
agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.

     NINTH.  The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.

     EXECUTED at Boston, Massachusetts, on February 17, 1998.

                                    /s/ Mark G. Borden
                                    --------------------
                                    Mark G. Borden
                                    Incorporator

                                      -5-
<PAGE>

              Certificate of Designations of the Preferred Stock
                                      of
                            Sycamore Networks, Inc.
                               To be Designated
                     Series A Convertible Preferred Stock
              --------------------------------------------------


     Sycamore Networks, Inc., a Delaware corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, certifies
that the Board of Directors of the Corporation duly adopted the following
resolution:

     RESOLVED:  That, pursuant to the authority expressly granted to and vested
     --------
in the Board of Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and hereby is established, consisting of 5,830,000 shares, to be
designated "Series A Convertible Preferred Stock" (hereinafter "Series A
Preferred Stock"); that the Board of Directors be and hereby is authorized to
issue such shares of Series A Preferred Stock from time to time and for such
consideration and on such terms as the Board of Directors shall determine; and
that, subject to the limitations provided by law and by the Certificate of
Incorporation, the powers, designations, preferences and relative,
participating, optional or other special rights of, and the qualifications,
limitations or restrictions upon, the Series A Preferred Stock shall be as
follows:

     1.   Dividends.
          ---------

          (a) The Corporation shall not declare or pay any dividends or
distributions (as defined below) on shares of Common Stock until the holders of
the Series A Preferred Stock then outstanding shall have first received, or
simultaneously receive, a like distribution on each outstanding share of Series
A Preferred Stock, in an amount at least equal to the product of (i) the per
share amount, if any, of the dividends or distributions to be declared, paid or
set aside for the Common Stock, multiplied by (ii) the number of whole shares of
Common Stock into which such share of Series A Preferred Stock is convertible as
of the record date for such dividend or distribution.

          (b) For purposes of this Section 1, "distribution" shall mean the
transfer of cash or property without consideration, whether by way of dividend
or otherwise, payable other than in Common Stock or other securities of the
Corporation, or the purchase or redemption of shares of the Corporation (other
than repurchases of Common Stock held by employees or directors of, or
consultants to,
<PAGE>

the Corporation upon termination of their employment or services pursuant to
agreements approved by the Board of Directors providing for such repurchase at a
price equal to the original issue price of such shares) for cash or property,
including any such transfer, purchase or redemption by a subsidiary of the
Corporation.

     2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations
        -----------------------------------------------------------------------
        and Asset Sales.
        ---------------

        (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock, but before
any payment shall be made to the holders of Common Stock or any other class or
series of stock ranking on liquidation junior to the Series A Preferred Stock by
reason of their ownership thereof, an amount equal to $0.91 per share (subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
dividends declared but unpaid on such shares.  If upon any such liquidation,
dissolution or winding up of the Corporation the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series A Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock
and any class or series of stock ranking on liquidation on a parity with the
Series A Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.

        (b) After the payment of all preferential amounts required to be paid
to the holders of any class or series of stock of the Corporation ranking on
liquidation prior to and in preference to the Common Stock, upon the
dissolution, liquidation or winding up of the Corporation, the remaining assets
and funds of the Corporation available for distribution to its stockholders
shall be distributed among the holders of shares of Common Stock.

        (c) Any (i) merger or consolidation which results in the voting
securities of the Corporation outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than a
majority of the combined voting power of the voting securities of the
Corporation or such surviving or acquiring entity outstanding immediately after
such merger or consolidation,

                                      -2-
<PAGE>

(ii) sale of all or substantially all of the assets of the Corporation or (iii)
sale of shares of capital stock of the Corporation, in a single transaction or
series of related transactions, representing at least 80% of the of the voting
power of the voting securities of the Corporation, shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation (net of obligations owed by the
Corporation), together with all other available assets of the Corporation (in
the case of an asset sale), shall be distributed to the holders of capital stock
of the Corporation in accordance with Subsections 2(a) and 2(b) above. The
Corporation shall promptly provide to the holders of shares of Series A
Preferred Stock such information concerning the terms of such merger,
consolidation or asset sale and the value of the assets of the Corporation as
may reasonably be requested by the holders of Series A Preferred Stock. If
applicable, the Corporation shall cause the agreement or plan of merger or
consolidation to provide for a rate at which the shares of capital stock of the
Corporation are converted into or exchanged for cash, new securities or other
property which gives effect to this provision. The amount deemed distributed to
the holders of Series A Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the Corporation and/or by the acquiring person, firm or other
entity. The value of such property, rights or other securities shall be
determined in good faith by the Board of Directors of the Corporation.

     3.   Voting.
          ------

          (a) Each holder of outstanding shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series A Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Section 4
hereof) as of the record date, at each meeting of stockholders of the
Corporation (and written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration.  Except as provided by law or by the
provisions of Section 3(b) or Section 7 below or by the provisions establishing
any other series of stock, holders of Series A Preferred Stock and of any other
outstanding series of stock shall vote together with the holders of Common Stock
as a single class.

          (b) For so long as at least 1,375,000 shares of Series A Preferred
Stock (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalizations affecting such shares) are
outstanding (or such lesser number of shares of Series A Preferred Stock as are
then outstanding if the Corporation has, prior to such time, failed to redeem
shares of Series A Preferred Stock when such redemption was due in accordance
with Section 6 below), the holders of record of the shares of Series A Preferred
Stock, exclusively and as a separate class, shall be entitled to elect two
members of the Board of Directors of the

                                      -3-
<PAGE>

Corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the purpose of electing directors by holders of the
Series A Preferred Stock. A vacancy in any directorship filled by the holders of
Series A Preferred Stock shall be filled only by vote or written consent in lieu
of a meeting of the holders of the Series A Preferred Stock .

     4.   Optional Conversion.  The holders of the Series A Preferred Stock
          -------------------
shall have conversion rights as follows (the "Conversion Rights"):

          (a) Right to Convert.  Each share of Series A Preferred Stock shall be
              ----------------
convertible, at the option of the holder thereof, at any time and from time to
time, and without the payment of additional consideration by the holder thereof,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $0.91 by the Conversion Price (as defined below) in
effect at the time of conversion.  The "Conversion Price" shall initially be
$0.91.  Such Conversion Price, and the rate at which shares of Series A
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.

     In the event of a notice of redemption of any shares of Series A Preferred
Stock pursuant to Section 6 hereof, the Conversion Right of the shares
designated for redemption shall terminate at the close of business on the first
full day preceding the date fixed for redemption, unless the redemption price is
not paid when due, in which case the Conversion Right for such shares shall
continue until such price is paid in full.  In the event of a liquidation of the
Corporation (or deemed liquidation under Section 2(c) hereof), the Conversion
Right shall terminate at the close of business on the first full business day
preceding the date fixed for the payment of any amounts distributable on
liquidation (or deemed liquidation under Section 2(c) hereof) to the holders of
Series A Preferred Stock.

          (b) Fractional Shares.  No fractional shares of Common Stock shall be
              -----------------
issued upon conversion of the Series A Preferred Stock.  In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.

          (c)  Mechanics of Conversion.
               -----------------------

               (i) In order for a holder of Series A Preferred Stock to convert
shares of Series A Preferred Stock into shares of Common Stock, such holder
shall surrender the certificate or certificates for such shares of Series A
Preferred Stock, at the office of the transfer agent for the Series A Preferred
Stock (or at the principal office of the Corporation if the Corporation serves
as its own transfer agent), together with written notice that such holder elects
to convert all or any number of the shares

                                      -4-
<PAGE>

of the Series A Preferred Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share.

          (ii) The Corporation shall at all times when the Series A Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock.  Before taking any action which would
cause an adjustment reducing the Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.

          (iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid dividends on the
Series A Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.

          (iv) All shares of Series A Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any dividends
declared but unpaid thereon. Any shares of Series A Preferred Stock so converted
shall be retired and cancelled and shall not be reissued, and the Corporation
(without the need for stockholder action) may from time to time take such
appropriate action as may be necessary to reduce the authorized number of shares
of Series A Preferred Stock accordingly.

          (v) The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issuance or delivery of shares of

                                      -5-
<PAGE>

Common Stock upon conversion of shares of Series A Preferred Stock pursuant to
this Section 4. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series A Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.

          (d) Adjustments to Conversion Price for Diluting Issues:
              ---------------------------------------------------

              (i) Special Definitions.  For purposes of this Subsection 4(d),
                  -------------------
the following definitions shall apply:

                  (A) "Option" shall mean rights, options or warrants to
                       ------
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.

                  (B) "Original Issue Date" shall mean the date on which a
                       -------------------
share of Series A Preferred Stock was first issued.

                  (C) "Convertible Securities" shall mean any evidences of
                       ----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.

                  (D) "Additional Shares of Common Stock" shall mean all shares
                       ---------------------------------
of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below, deemed to be
issued) by the Corporation after the Original Issue Date, other than:

                       (I)   shares of Common Stock issued or issuable as a
                             dividend or other distribution on Series A
                             Preferred Stock;

                       (II)  shares of Common Stock issued or issuable by reason
                             of a dividend or other distribution on shares of
                             Common Stock that is covered by Subsection 4(e) or
                             4(f) below;

                       (III) shares of Common Stock issued or issuable upon
                             conversion of those shares of Series A Preferred
                             Stock sold pursuant to the Series A Preferred Stock
                             Purchase Agreement dated as of February 19, 1998,
                             as the same may be amended from time to time;

                                      -6-
<PAGE>

                       (IV)  up to 2,525,000 shares of Common Stock (subject to
                             appropriate adjustment for stock splits, stock
                             dividends, combinations and other similar
                             recapitalizations affecting such shares), plus such
                             additional number of shares as may be approved by a
                             majority of the non-employee members of the Board
                             of Directors of the Corporation, issued or issuable
                             to employees or directors of, or consultants to,
                             the Corporation; and

                       (V)   shares of Common Stock issued to equipment lessors,
                             as approved by a majority of the non-employee
                             members of the Board of Directors of the
                             Corporation.

               (ii) No Adjustment of Conversion Price. No adjustment in the
                    ---------------------------------
number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made (a) unless the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the applicable Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares, or (b) if prior to or within 60 days subsequent to such
issuance, the Corporation receives written notice from the holders of at least
66 2/3% of the then outstanding shares of Series A Preferred Stock, agreeing
that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.

               (iii) Issue of Securities Deemed Issue of Additional Shares
                     ---------------------------------------------- ------
                     of Common Stock.
                     ---------------

     If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to

                                      -7-
<PAGE>

such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:

          (A) No further adjustment in the Conversion Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities;

          (B) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase or decrease in the
consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;

          (C) Upon the expiration or termination of any unexercised Option, the
Conversion Price shall not be readjusted, but the Additional Shares of Common
Stock deemed issued as the result of the original issue of such Option shall not
be deemed issued for the purposes of any subsequent adjustment of the Conversion
Price;

          (D) In the event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any Option or Convertible
Security, including, but not limited to, a change resulting from the anti-
dilution provisions thereof, the Conversion Price then in effect shall forthwith
be readjusted to such Conversion Price as would have obtained had the adjustment
which was made upon the issuance of such Option or Convertible Security not
exercised or converted prior to such change been made upon the basis of such
change; and

          (E) No readjustment pursuant to clause (B) or (D) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original adjustment date, or (ii) the
Conversion Price that would have resulted from any issuances of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date.

     In the event the Corporation, after the Original Issue Date, amends any
Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on the Original Issue Date or were issued after the
Original Issue Date) to increase the number of shares issuable thereunder or
decrease the consideration to be paid upon exercise or conversion thereof, then
such Options or

                                      -8-
<PAGE>

Convertible Securities, as so amended, shall be deemed to have been issued
after the Original Issue Date and the provisions of this Subsection 4(d)(iii)
shall apply.

               (iv) Adjustment of Conversion Price Upon Issuance of Additional
                    -------------------------------------------- -------------
                    Shares of Common Stock.
                    ----------------------

     In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction, (A) the numerator of which
shall be (1) the number of shares of Common Stock outstanding immediately prior
to such issue plus (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Corporation for the total number
of Additional Shares of Common Stock so issued would purchase at such Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

          (v) Determination of Consideration.  For purposes of this Subsection
              ------------------------------
4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:

                    (A) Cash and Property:  Such consideration shall:
                        -----------------

                        (I) insofar as it consists of cash, be computed at the
aggregate of cash received by the Corporation, excluding amounts paid or payable
for accrued interest;

                        (II) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and

                                      -9-
<PAGE>

                        (III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.

                    (B) Options and Convertible Securities. The consideration
                        ----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing

                        (x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by

                        (y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.

             (vi) Multiple Closing Dates.  In the event the Corporation shall
                  ----------------------
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Convertible Securities, and
such issuance dates occur within a period of no more than 120 days, then, upon
the final such issuance, the Conversion Price shall be adjusted to give effect
to all such issuances as if they occurred on the date of the final such issuance
(and without giving effect to any adjustments as a result of such prior
issuances within such period).

          (e) Adjustment for Stock Splits and Combinations.  If the Corporation
              --------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased.  If the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.

                                     -10-
<PAGE>

          (f)  Adjustment for Certain Dividends and Distributions.  In the event
               --------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series A Preferred Stock then in effect by a fraction:

               (1)  the numerator of which shall be the total number of shares
          of Common Stock issued and outstanding immediately prior to the time
          of such issuance or the close of business on such record date, and

               (2)  the denominator of which shall be the total number of shares
          of Common Stock issued and outstanding immediately prior to the time
          of such issuance or the close of business on such record date plus the
          number of shares of Common Stock issuable in payment of such dividend
          or distribution;

provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series A Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series A Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series A Preferred Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event.

          (g)  Adjustments for Other Dividends and Distributions.  In the event
               -------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
for the Series A Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series A Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had the
Series A Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, giving

                                     -11-
<PAGE>

application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of the Series A Preferred
Stock; and provided further, however, that no such adjustment shall be made if
the holders of Series A Preferred Stock simultaneously receive a dividend or
other distribution of such securities in an amount equal to the amount of such
securities as they would have received if all outstanding shares of Series A
Preferred Stock had been converted into Common Stock on the date of such event.

          (h)  Adjustment for Reclassification, Exchange, or Substitution.  If
               --------------------------------------------- ------------
the Common Stock issuable upon the conversion of the Series A Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Series A Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable, upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into which such
shares of Series A Preferred Stock might have been converted immediately prior
to such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.

          (i)  Adjustment for Merger or Reorganization, etc.  In case of any
               --------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is covered by
Subsection 2(c)), each share of Series A Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series A Preferred Stock would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of the Series A Preferred
Stock, to the end that the provisions set forth in this Section 4 (including
provisions with respect to changes in and other adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series A Preferred Stock.

          (j)  No Impairment.  The Corporation will not, by amendment of its
               -------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to

                                     -12-
<PAGE>

be observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.

          (k)  Certificate as to Adjustments.  Upon the occurrence of each
               -----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.  The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.

          (l)  Notice of Record Date.  In the event:
               ---------------------

               (i)   that the Corporation declares a dividend (or any other
                     distribution) on its Common Stock payable in Common Stock
                     or other securities of the Corporation;

               (ii)  that the Corporation subdivides or combines its outstanding
                     shares of Common Stock;

               (iii) of any reclassification of the Common Stock of the
                     Corporation (other than a subdivision or combination of its
                     outstanding shares of Common Stock or a stock dividend or
                     stock distribution thereon), or of any consolidation or
                     merger of the Corporation into or with another corporation,
                     or of the sale of all or substantially all of the assets of
                     the Corporation; or

               (iv)  of the involuntary or voluntary dissolution, liquidation or
                     winding up of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating

                                     -13-
<PAGE>

          (A)  the record date of such dividend, distribution, subdivision or
               combination, or, if a record is not to be taken, the date as of
               which the holders of Common Stock of record to be entitled to
               such dividend, distribution, subdivision or combination are to be
               determined, or

          (B)  the date on which such reclassification, consolidation, merger,
               sale, dissolution, liquidation or winding up is expected to
               become effective, and the date as of which it is expected that
               holders of Common Stock of record shall be entitled to exchange
               their shares of Common Stock for securities or other property
               deliverable upon such reclassification, consolidation, merger,
               sale, dissolution or winding up.

     5.   Mandatory Conversion.
          --------------------

          (a)  Upon the earlier of (x) the closing of the sale of shares of
Common Stock, at a price of at least $5.00 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of
proceeds to the Corporation (net of the underwriting discounts or commissions
and offering expenses) and (y) the first date on which at least 3,750,000 shares
of Series A Preferred Stock have been converted into Common Stock pursuant to
Section 5 above (the "Mandatory Conversion Date"), (i) all outstanding shares of
Series A Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate, and (ii) all provisions hereof
included under the caption "Series A Convertible Preferred Stock", and all
references herein to the Series A Preferred Stock, shall be deleted and shall be
of no further force or effect.

          (b)  All holders of record of shares of Series A Preferred Stock shall
be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Series A Preferred
Stock, pursuant to this Section 5.  Such notice need not be given in advance of
the occurrence of a Mandatory Conversion Date.  Such notice shall be sent by
first class or registered mail, postage prepaid, to each record holder of Series
A Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Series A Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent).  Upon receipt of such
notice, each holder of shares of Series A Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Common Stock to which such holder is entitled pursuant
to this Section 5.  On the Mandatory Conversion Date, all rights

                                     -14-
<PAGE>

with respect to the Series A Preferred Stock so converted, including the rights,
if any, to receive notices and vote (other than as a holder of Common Stock)
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted, and payment of any declared but unpaid dividends thereon. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.

          (c)  All certificates evidencing shares of Series A Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Series A Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date.  The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Series A Preferred Stock accordingly.

     6.   Redemption.
          ----------

          (a)  The Corporation will, subject to the conditions set forth below,
on February 15, 2003,  February 15, 2004 and February 15, 2005 (each, a
"Mandatory Redemption Date"), upon receipt not less than 30 nor more than 120
days prior to the applicable Mandatory Redemption Date of written request(s) for
redemption from holders of at least 66 2/3% of the shares of Series A Preferred
Stock then outstanding (a "Series A Redemption Request"), redeem from each
holder of shares of Series A Preferred Stock, at a price equal to $0.91 per
share (subject to appropriate adjustment in the event of any dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus any declared but unpaid dividends thereon (the "Mandatory Redemption
Price"), the following respective portions of the number of shares of Series A
Preferred Stock held by such holder set forth opposite the applicable Mandatory
Redemption Date:

                                     -15-
<PAGE>

                                          Portion of then
                                         Outstanding Shares of
               Mandatory                Series A Preferred Stock
            Redemption Date                 To Be Redeemed
            ---------------            ------------------------

            February 15, 2003                    33 1/3%
            February 15, 2004                    50%
            February 15, 2005            All Shares then held

The Corporation shall provide notice of its redemption obligations under this
Section 6, by first class or registered mail, postage prepaid, to each holder of
record of Series A Preferred Stock at the address for such holder last shown on
the records of the transfer agent therefor (or the records of the Corporation,
if it serves as its own transfer agent), not less than 120 nor more than 180
days prior to the applicable Mandatory Redemption Date.  The Corporation shall
provide notice of any Series A Redemption Request, specifying the time and place
of redemption and the Mandatory Redemption Price, by first class or registered
mail, postage prepaid, to each holder of record of Series A Preferred Stock at
the address for such holder last shown on the records of the transfer agent
therefor (or the records of the Corporation, if it serves as its own transfer
agent), not less than 20 days prior to the Mandatory Redemption Date.

          (b)  If the funds of the Corporation legally available for redemption
of Series A Preferred Stock on any Mandatory Redemption Date are insufficient to
redeem the number of shares of Series A Preferred Stock required under this
Section 6 to be redeemed on such date, those funds which are legally available
will be used to redeem the maximum possible number of such shares of Series A
Preferred Stock ratably on the basis of the number of shares of Series A
Preferred Stock which would be redeemed on such date if the funds of the
Corporation legally available therefor had been sufficient to redeem all shares
of Series A Preferred Stock required to be redeemed on such date.  At any time
thereafter when additional funds of the Corporation become legally available for
the redemption of Series A Preferred Stock, such funds will be used, at the end
of the next succeeding fiscal quarter, to redeem, to the extent of the available
funds, the balance of the shares which the Corporation was theretofore obligated
to redeem.

          (c)  Unless there shall have been a default in payment of the
Mandatory Redemption Price, on such Mandatory Redemption Date all rights of each
holder of shares of Series A Preferred Stock as a stockholder of the Corporation
by reason of the ownership of such shares will cease, except the right to
receive the Mandatory Redemption Price for such shares, without interest, upon
presentation and surrender of the certificate representing such shares, and such
shares will not from and after such Mandatory Redemption Date be deemed to be
outstanding.

                                     -16-
<PAGE>

          (d)  Any Series A Preferred Stock redeemed pursuant to this Section 6
will be cancelled and will not under any circumstances be reissued, sold or
transferred and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized number of shares of Series A
Preferred Stock accordingly.

     7.   Negative Covenants.
          ------------------

          (a)  The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock so as to affect
adversely the Series A Preferred Stock, without the written consent or
affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization of
any shares of capital stock with preference or priority over the Series A
Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series A Preferred Stock and the
authorization of any shares of capital stock on a parity with Series A Preferred
Stock as to the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation shall not be deemed to
affect adversely the Series A Preferred Stock.

          (b)  So long as at least 1,375,000 shares of Series A Preferred Stock
(subject to appropriate adjustment in the event of any dividend, stock split,
combination or other similar recapitalization affecting such shares) are
outstanding (or such lesser number of shares of Series A Preferred Stock as are
then outstanding if the Corporation has, prior to such time, failed to redeem
shares of Series A Preferred Stock when such redemption was due in accordance
with Section 6 above), the Corporation shall not, without the prior written
consent of the holders of at least 66 2/3% of the then outstanding shares of
Series A Preferred Stock:

               (i)    adopt any amendment to the Corporation's Certificate of
Incorporation adversely affecting the Series A Preferred Stock;

               (ii)   amend the Corporation's By-laws in a manner adverse to the
holders of Series A Preferred Stock;

               (iii)  declare or pay any dividends on Common Stock other than
dividends payable solely in Common Stock;

               (iv)   repurchase shares of Common Stock at a price greater than
the price at which they were originally issued;

                                     -17-
<PAGE>

               (v)    liquidate, dissolve or wind-up the Corporation;

               (vi)   make (or permit any subsidiary to make) any loan or
advance to any person, including without limitation, any employee or director of
the Corporation or any subsidiary, except (A) advances and similar expenditures
in the ordinary course of business or (B) as approved by the Board of Directors;
or

               (vii)  (A) merge with or into or consolidate with any other
corporation (other than a merger of consolidation in which the stockholders of
the Company immediately prior thereto own at least 80% of the outstanding voting
stock of the surviving or acquiring corporation), (B) sell, lease, or otherwise
dispose of all or substantially all, or a Significant Portion (as defined
below), of its properties or assets (for this purpose, "Significant Portion"
shall mean properties or assets with a fair market value equal to more than 35%
of the book value of the Company's total properties or assets as of the end of
the most recent fiscal quarter), or (C) acquire all or substantially all of the
properties or assets of any other corporation or entity (except for
consideration of less than 20% of the Corporation's consolidated net worth as of
the end of the prior fiscal quarter.

     8.   Waiver.  Any of the rights of the holders of Series A Preferred Stock
          ------
set forth herein may be waived by the affirmative vote of the holders of more
than 66 2/3% of the shares of Series A Preferred Stock then outstanding.

                                     -18-
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its President this 19th day of February, 1998.

                                             Sycamore Networks, Inc.



                                             By: /s/ Gururaj Deshpande
                                                ------------------------------
                                                   Gururaj Deshpande
                                                   President

                                     -19-
<PAGE>

                            CERTIFICATE OF INCREASE

                                      TO

                          CERTIFICATE OF DESIGNATIONS

                                      OF

                            SYCAMORE NETWORKS, INC.

                                March 31, 1998


     Sycamore Networks, Inc., a Delaware corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation and in accordance with the provisions of
Section 151(g) of the general Corporation Law of the State of Delaware,
certifies that the Board of Directors of the Corporation has duly adopted the
following resolution:

RESOLVED:      That the number of shares of Preferred Stock of the Corporation
--------
               designated as "Series A Convertible Preferred Stock" be, and
               hereby is, increased from 5,830,000 shares to 6,380,000 shares,
               and the Certificate of Designations designating the Series A
               Convertible Preferred Stock is hereby amended accordingly.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase
to be signed by its President on this 31st day of March, 1998.


                                   SYCAMORE NETWORKS, INC.



                                   By: /s/  Gururaj Deshpande
                                      --------------------------------
                                       Gururaj Deshpande
                                       President
<PAGE>

                           CERTIFICATE OF AMENDMENT
                                      OF
                         CERTIFICATE OF INCORPORATION
                                      OF
                            SYCAMORE NETWORKS, INC.

                            Pursuant to Section 242
                       of the General Corporation Law of
                             the State of Delaware

________________________________________________________________________________

     Sycamore Networks, Inc. (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:

     At a meeting of the Board of Directors of the Corporation, a resolution was
duly adopted pursuant to Section 242 of the General Corporation Law of the State
of Delaware, setting forth an amendment to the Certificate of Incorporation of
the Corporation declaring said amendment to be advisable.  The stockholders of
the Corporation duly approved said proposed amendment by written consent in
accordance with Sections 228 and 242 of the General Corporation Law of the State
of Delaware.  The resolution setting forth the amendment is as follows:

RESOLVED:      That the first paragraph of Article FOURTH of the Certificate of
--------
               Incorporation of the Corporation be and hereby is deleted and the
               following paragraph is inserted in lieu thereof:

                    "FOURTH:  The total number of shares of all classes of stock
                    which the Corporation shall have authority to issue is
                    29,500,000 shares, consisting of (i) 20,000,000 shares of
                    Common Stock, $.001 par value per share ("Common Stock"),
                    and (ii) 9,500,000 shares of Preferred Stock, $.01 par value
                    per share ("Preferred Stock")."
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 19 of October, 1998.


                                        SYCAMORE NETWORKS, INC.



                                        By: /s/ Gururaj Deshpande
                                           -------------------------------
                                            Gururaj Deshpande
                                            President

                                      -2-
<PAGE>

                            CERTIFICATE OF INCREASE

                                      TO

                          CERTIFICATE OF DESIGNATIONS

                                      OF

                            SYCAMORE NETWORKS, INC.

                               October 19, 1998

     Sycamore Networks, Inc., a Delaware corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation and in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware,
certifies that the Board of Directors of the Corporation has duly adopted the
following resolution:

RESOLVED:      That the number of shares of Preferred Stock of the Corporation
--------
               designated as "Series A Convertible Preferred Stock" be, and
               hereby is, increased from 6,380,000 shares to 9,155,000 shares,
               and the Certificate of Designations designating the Series A
               Convertible Preferred Stock is hereby amended accordingly.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase
to be signed by its President on this 19 day of October, 1998.

                                        SYCAMORE NETWORKS, INC.


                                        By: /s/ Gururaj Deshpande
                                           -----------------------------------
                                            Gururaj Deshpande
                                            President
<PAGE>

                           CERTIFICATE OF AMENDMENT
                                      OF
                        CERTIFICATE OF INCORPORATION
                                      OF
                            SYCAMORE NETWORKS,INC.


     Sycamore Networks, Inc. (the "Corporation"), organized and existing under
and by virtue of the General Law of the State of Delaware, does hereby certify
as follows:

     The Board of Directors of the Corporation duly adopted, pursuant to Section
242 of the General Corporation Law of Delaware, a resolution setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved said proposed amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware by written consent in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware,
and written notice of such consent has been given to all stockholders who have
not consented in writing to said amendment. The resolution setting forth the
amendment is as follows:

     RESOLVED:      That Article FOURTH of the Certificate of Incorporation of
     --------
the Corporation be and hereby is deleted in its entirety and the following
Article FOURTH is inserted in lieu thereof:

          FOURTH:  The total number of shares of all classes of stock which the
          ------
     Corporation shall have authority to issue is 40,000,000 shares, consisting
     of (i) 25,000,000 shares of Common Stock, $.001 par value per share
     ("Common Stock"), and (ii) 15,000,000 shares of Preferred Stock, $.01 par
     value per share ("Preferred Stock"), 9,155,000 shares of which have been
     designated as Series A Convertible Preferred Stock ("Series A Preferred
     Stock") and 4,000,000 shares of which have been designated as Series B
     Convertible Preferred Stock ("Series B Preferred Stock").
<PAGE>

     The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.

A.   Common Stock.
     ------------

     1.General.  The voting, dividend and liquidation rights of the holders of
       -------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

     2.Voting.  The holders of the Common Stock are entitled to one vote for
       ------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.

     The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

     3.Dividends.  Dividends may be declared and paid on the Common Stock from
       ---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.

     4.Liquidation.  Upon the dissolution or liquidation of the Corporation,
       -----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.

B.   Preferred Stock.
     ---------------

     Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided.  Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law.  Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.

     Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the

                                      -2-
<PAGE>

creation of any such series, by resolution or resolutions providing for the
issue of the shares thereof, to determine and fix such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.

C.   Series A Preferred Stock and Series B Preferred Stock.
     -----------------------------------------------------

     1.   Dividends.
          ---------

          (a)  The Corporation shall not declare or pay any dividends or
distributions (as defined below) on shares of Common Stock until the holders of
the Series A Preferred Stock and the Series B Preferred Stock then outstanding
shall have first received, or simultaneously receive, a like distribution on
each outstanding share of Series A Preferred Stock and Series B Preferred Stock,
in an amount at least equal to the product of (i) the per share amount, if any,
of the dividends or distributions to be declared, paid or set aside for the
Common Stock, multiplied by (ii) the number of whole shares of Common Stock into
which such share of Series A Preferred Stock or Series B Preferred Stock, as the
case may be, is convertible as of the record date for such dividend or
distribution.

          (b)  For purposes of this Section 1, "distribution" shall mean the
transfer of cash or property without consideration, whether by way of dividend
or otherwise, payable other than in Common Stock or other securities of the
Corporation, or the purchase or redemption of shares of the Corporation (other
than repurchases of Common Stock held by employees or directors of, or
consultants to, the Corporation upon termination of their employment or services
pursuant to agreements approved by the Board of Directors providing for such
repurchase at a price equal to the original issue price of such shares) for cash
or property, including any such transfer, purchase or redemption by a subsidiary
of the Corporation.

                                      -3-
<PAGE>

     2.  Liquidation, Dissolution or Winding Up; Certain Mergers,
         -------------------------------------------------------
Consolidations and Asset Sales.
------------------------------

          (a)  In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock and Series B Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders, after and subject to the payment in full of all amounts
required to be distributed to the holders of any other class or series of stock
of the Corporation ranking on liquidation prior and in preference to the Series
A Preferred Stock and the Series B Preferred Stock, but before any payment shall
be made to the holders of Common Stock or any other class or series of stock
ranking on liquidation junior to the Series A Preferred Stock and the Series B
Preferred Stock by reason of their ownership thereof, an amount equal to $0.91
per share in the case of the Series A Preferred Stock and $3.50 per share in the
case of the Series B Preferred Stock (subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares), plus any dividends declared but unpaid
on such shares. If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock and Series B Preferred Stock the full amount to which they
shall be entitled, the holders of shares of Series A Preferred Stock and Series
B Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Series A Preferred Stock and Series B Preferred Stock shall
share ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.

          (b)  After the payment of all preferential amounts required to be paid
to the holders of any class or series of stock of the Corporation ranking on
liquidation prior to and in preference to the Common Stock, upon the
dissolution, liquidation or winding up of the Corporation, the remaining assets
and funds of the Corporation available for distribution to its stockholders
shall be distributed among the holders of shares of Common Stock.

          (c)  Any (i) merger or consolidation which results in the voting
securities of the Corporation outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than a
majority of the combined voting power of the voting securities of the
Corporation or such surviving or acquiring entity outstanding immediately after
such merger or consolidation, (ii) sale of all or substantially all of the
assets of the Corporation or (iii) sale of shares of capital stock of the
Corporation, in a single transaction or series of related

                                      -4-
<PAGE>

transactions, representing at least 80% of the of the voting power of the voting
securities of the Corporation, shall be deemed to be a liquidation of the
Corporation, and all consideration payable to the stockholders of the
Corporation (in the case of a merger or consolidation), or all consideration
payable to the Corporation (net of obligations owed by the Corporation),
together with all other available assets of the Corporation (in the case of an
asset sale), shall be distributed to the holders of capital stock of the
Corporation in accordance with Subsections 2(a) and 2(b) above. The Corporation
shall promptly provide to the holders of shares of Series A Preferred Stock and
Series B Preferred Stock such information concerning the terms of such merger,
consolidation or asset sale and the value of the assets of the Corporation as
may reasonably be requested by the holders of Series A Preferred Stock and
Series B Preferred Stock. If applicable, the Corporation shall cause the
agreement or plan of merger or consolidation to provide for a rate at which the
shares of capital stock of the Corporation are converted into or exchanged for
cash, new securities or other property which gives effect to this provision. The
amount deemed distributed to the holders of Series A Preferred Stock and Series
B Preferred Stock upon any such merger or consolidation shall be the cash or the
value of the property, rights or securities distributed to such holders by the
Corporation and/or by the acquiring person, firm or other entity. The value of
such property, rights or other securities shall be determined in good faith by
the Board of Directors of the Corporation.

     3.   Voting.
          ------

          (a)  Each holder of outstanding shares of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to the number of votes equal to the
number of whole shares of Common Stock into which the shares of Series A
Preferred Stock and Series B Preferred Stock held by such holder are convertible
(as adjusted from time to time pursuant to Section 4 hereof) as of the record
date, at each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration.
Except as provided by law or by the provisions of Section 3(b) or Section 7
below or by the provisions establishing any other series of stock, holders of
Series A Preferred Stock and Series B Preferred Stock and of any other
outstanding series of stock shall vote together with the holders of Common Stock
as a single class.

          (b)  For so long as at least 1,375,000 shares of Series A Preferred
Stock and Series B Preferred Stock (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares) are outstanding (or such lesser number of shares of
Series A Preferred Stock and Series B Preferred Stock as are then outstanding if
the Corporation has, prior to such time, failed to redeem shares of Series A
Preferred Stock and Series B Preferred Stock when such redemption was due in
accordance with Section 6 below), the holders of record of the shares of Series
A Preferred Stock and Series B Preferred Stock,

                                      -5-
<PAGE>

exclusively and as a separate class, shall be entitled to elect two members of
the Board of Directors of the Corporation. At any meeting held for the purpose
of electing directors, the presence in person or by proxy of the holders of a
majority of the shares of Series A Preferred Stock and Series B Preferred Stock
then outstanding shall constitute a quorum of the Series A Preferred Stock and
the Series B Preferred Stock for the purpose of electing directors by holders of
the Series A Preferred Stock and the Series B Preferred Stock. A vacancy in any
directorship filled by the holders of Series A Preferred Stock and Series B
Preferred Stock shall be filled only by vote or written consent in lieu of a
meeting of the holders of the Series A Preferred Stock and the Series B
Preferred Stock.

     4.  Optional Conversion.  The holders of the Series A Preferred Stock and
         -------------------
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):

             (a)  Right to Convert. Each share of Series A Preferred Stock shall
                  ----------------
be convertible, at the option of the holder thereof, at any time and from time
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $0.91 by the Series A Conversion Price (as defined
below) in effect at the time of conversion. The "Series A Conversion Price"
shall initially be $0.91. Such Series A Conversion Price, and the rate at which
shares of Series A Preferred Stock may be converted into shares of Common Stock,
shall be subject to adjustment as provided below. Each share of Series B
Preferred Stock shall be convertible, at the option of the holder thereof at any
time and from time to time and without the payment of additional consideration
by the holder thereof, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $3.50 by the Series B Conversion
Price (as defined below) in effect at the time of conversion. The "Series B
Conversion Price" shall initially be $3.50. Such Series B Conversion Price, and
the rate at which shares of Series B Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below.

     In the event of a notice of redemption of any shares of Series A Preferred
Stock or Series B Preferred Stock pursuant to Section 6 hereof, the Conversion
Rights of the shares designated for redemption shall terminate at the close of
business on the first full day preceding the date fixed for redemption, unless
the redemption price is not paid when due, in which case the Conversion Rights
for such shares shall continue until such price is paid in full. In the event of
a liquidation of the Corporation (or deemed liquidation under Section 2(c)
hereof), the Conversion Rights shall terminate at the close of business on the
first full business day preceding the date fixed for the payment of any amounts
distributable on liquidation (or deemed liquidation under Section 2(c) hereof)
to the holders of such series of Preferred Stock.

                                      -6-
<PAGE>

          (b)  Fractional Shares.  No fractional shares of Common Stock shall be
               -----------------
issued upon conversion of the Series A Preferred Stock or the Series B Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then effective Series A Conversion Price or Series B Conversion Price, as
the case may be.

          (c)  Mechanics of Conversion.
               -----------------------

                  (i)    In order for a holder of Series A Preferred Stock or
Series B Preferred Stock to convert shares of Series A Preferred Stock or Series
B Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Preferred Stock, at the office of
the transfer agent for such shares of Preferred Stock (or at the principal
office of the Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of the Series A Preferred Stock or Series B Preferred Stock
represented by such certificate or certificates. Such notice shall state such
holder's name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share.

                  (ii)  The Corporation shall at all times when the Series A
Preferred Stock or the Series B Preferred Stock shall be outstanding, reserve
and keep available out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series A Preferred Stock and the Series B
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock and Series B Preferred Stock. Before taking
any action which would cause an adjustment reducing the Series A Conversion
Price or the Series B Conversion Price below the then par value of the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock or the
Series B Preferred Stock, as the case may be, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Series A Conversion Price or Series B
Conversion Price.

                                      -7-
<PAGE>

                  (iii) Upon any such conversion, no adjustment to the Series
A Conversion Price or the Series B Conversion Price shall be made for any
declared but unpaid dividends on the Series A Preferred Stock or the Series B
Preferred Stock surrendered for conversion or on the Common Stock delivered upon
conversion.

                  (iv)  All shares of Series A Preferred Stock or Series B
Preferred Stock which shall have been surrendered for conversion as herein
provided shall no longer be deemed to be outstanding and all rights with respect
to such shares, including the rights, if any, to receive notices and to vote,
shall immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any dividends declared but unpaid thereon. Any shares of
Series A Preferred Stock or Series B Preferred Stock so converted shall be
retired and cancelled and shall not be reissued, and the Corporation (without
the need for stockholder action) may from time to time take such appropriate
action as may be necessary to reduce the authorized number of shares of Series A
Preferred Stock or Series B Preferred Stock accordingly.

                  (v)   The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series A Preferred Stock or Series B
Preferred Stock pursuant to this Section 4. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name other
than that in which the shares of Series A Preferred Stock or Series B Preferred
Stock so converted were registered, and no such issuance or delivery shall be
made unless and until the person or entity requesting such issuance has paid to
the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.

          (d)  Adjustments to Conversion Price for Diluting Issues:
               ---------------------------------------------------

                  (i)   Special Definitions. For purposes of this Subsection
                        -------------------
4(d), the following definitions shall apply:

                              (A)  "Option" shall mean rights, options or
                                    ------
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.

                              (B)  "Original Issue Date" shall mean the date on
                                    -------------------
which a share of Series A Preferred Stock was first issued.

                              (C)  "Convertible Securities" shall mean any
                                    ----------------------
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.

                                      -8-
<PAGE>

                              (D)  "Additional Shares of Common Stock" shall
                                    ---------------------------------
mean all shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii)
below, deemed to be issued) by the Corporation after the Original Issue Date,
other than:

                                        (I)   shares of Common Stock issued or
                                              issuable as a dividend or other
                                              distribution on Series A Preferred
                                              Stock or Series B Preferred Stock;

                                        (II)  shares of Common Stock issued or
                                              issuable by reason of a dividend
                                              or other distribution on shares of
                                              Common Stock that is covered by
                                              Subsection 4(e) or 4(f) below;

                                        (III) shares of Common Stock issued or
                                              issuable upon conversion of those
                                              shares of (1) Series A Preferred
                                              Stock sold pursuant to the Series
                                              A Preferred Stock Purchase
                                              Agreement dated as of February 19,
                                              1998, as the same may be amended
                                              from time to time and (2) Series B
                                              Preferred Stock sold pursuant to
                                              the Series B Preferred Stock
                                              Purchase Agreement dated as of
                                              December 3, 1998, as the same may
                                              be amended from time to time;

                                        (IV)  up to 4,025,000 shares of Common
                                              Stock (subject to appropriate
                                              adjustment for stock splits, stock
                                              dividends, combinations and other
                                              similar recapitalizations
                                              affecting such shares), plus such
                                              additional number of shares as may
                                              be approved by a majority of the
                                              non-employee members of the Board
                                              of Directors of the Corporation,
                                              issued or issuable to employees or
                                              directors of, or consultants to,
                                              the Corporation; and

                                        (V)   shares of Common Stock issued to
                                              equipment lessors, as approved by
                                              a majority of the non-employee
                                              members of the Board of Directors
                                              of the Corporation.

                  (ii)  No Adjustment of Conversion Price. No adjustment in the
                        ---------------------------------
number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made (a) unless the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to


                                      -9-
<PAGE>

be issued by the Corporation is less than the applicable Series A Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares, or (b) if prior to or within 60 days subsequent to such
issuance, the Corporation receives written notice from the holders of at least
66 2/3% of the then outstanding shares of Series A Preferred Stock, agreeing
that no such adjustment shall be made as a result of the issuance of Additional
Shares of Common Stock. No adjustment in the number of shares of Common Stock
into which the Series B Preferred Stock is convertible shall be made (a) unless
the consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series B Conversion Price in effect on
the date of, and immediately prior to, the issue of such Additional Shares, or
(b) if prior to or within 60 days subsequent to such issuance, the Corporation
receives written notice from the holders of at least 66 2/3% of the then
outstanding shares of Series B Preferred Stock, agreeing that no such adjustment
shall be made as a result of the issuance of Additional Shares of Common Stock.

                  (iii)  Issue of Securities Deemed Issue of Additional Shares
                         -----------------------------------------------------
of Common Stock.
---------------

     If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that (x)
for the purpose of adjusting the Series A Conversion Price, Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 4(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the applicable Series A Conversion
Price in effect on the date of and immediately prior to such issue, or such
record date, as the case may be, and (y) for the purpose of adjusting the Series
B Conversion Price, Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant to
Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the applicable Series B Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:

                        (A)  No further adjustment in the Series A
Conversion Price or the Series B Conversion Price shall be made upon subsequent
issue of Convertible

                                     -10-
<PAGE>

Securities or shares of Common Stock upon exercise of such Options or conversion
or exchange of such Convertible Securities;

                        (B)  If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Series A Conversion Price and the Series B
Conversion Price, as applicable, computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;

                        (C)  Upon the expiration or termination of any
unexercised Option, the Series A Conversion Price and the Series B Conversion
Price shall not be readjusted, but the Additional Shares of Common Stock deemed
issued as the result of the original issue of such Option shall not be deemed
issued for the purposes of any subsequent adjustment of the Series A Conversion
Price or the Series B Conversion Price;

                        (D)  In the event of any change in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange of any Option
or Convertible Security, including, but not limited to, a change resulting from
the anti-dilution provisions thereof, the Series A Conversion Price and the
Series B Conversion Price then in effect shall forthwith be readjusted to such
Series A Conversion Price and the Series B Conversion Price as would have
obtained had the adjustment which was made upon the issuance of such Option or
Convertible Security not exercised or converted prior to such change been made
upon the basis of such change; and

                        (E)  No readjustment pursuant to clause (B) or (D) above
shall have the effect of increasing the Series A Conversion Price or the Series
B Conversion Price to an amount which exceeds the lower of (i) the Series A
Conversion Price or the Series B Conversion Price, as the case may be, on the
original adjustment date, or (ii) the Series A Conversion Price or the Series B
Conversion Price that would have resulted from any issuances of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date.

     In the event the Corporation, after the Original Issue Date, amends any
Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on the Original Issue Date or were issued after the
Original Issue Date) to increase the number of shares issuable thereunder or
decrease the consideration to be paid upon exercise or conversion thereof, then
such Options or

                                     -11-
<PAGE>

Convertible Securities, as so amended, shall be deemed to have been issued after
the Original Issue Date and the provisions of this Subsection 4(d)(iii) shall
apply.

                  (iv)  Adjustment of Conversion Price Upon Issuance of
                        -----------------------------------------------
Additional Shares of Common Stock.
---------------------------------

                           (A)  In the event the Corporation shall at any
time after the Original Issue Date issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Subsection 4(d)(iii), but excluding shares issued as a stock split or
combination as provided in Subsection 4(e) or upon a dividend or distribution as
provided in Subsection 4(f)), without consideration or for a consideration per
share less than the applicable Series A Conversion Price in effect on the date
of and immediately prior to such issue, then and in such event, such Series A
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series A Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                           (B)  In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series B Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series B
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series B
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration

                                     -12-
<PAGE>

received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series B Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------------
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                  (v)   Determination of Consideration. For purposes of this
                        ------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:

                            (A)  Cash and Property:  Such consideration shall:
                                 -----------------

                                    (I)   insofar as it consists of cash, be
computed at the aggregate of cash received by the Corporation, excluding amounts
paid or payable for accrued interest;

                                    (II)  insofar as it consists of property
other than cash, be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and

                                    (III) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.

                            (B)  Options and Convertible Securities. The
                                 ----------------------------------
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing

                                    (x)   the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration)

                                     -13-
<PAGE>

payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by

                                    (y)   the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

                  (vi)  Multiple Closing Dates. In the event the Corporation
                        ----------------------
shall issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Convertible Securities, and
such issuance dates occur within a period of no more than 120 days, then, upon
the final such issuance, the Series A Conversion Price and the Series B
Conversion Price shall be adjusted to give effect to all such issuances as if
they occurred on the date of the final such issuance (and without giving effect
to any adjustments as a result of such prior issuances within such period).

          (e)  Adjustment for Stock Splits and Combinations. If the Corporation
               --------------------------------------------

shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Series A Conversion Price and
the Series B Conversion Price then in effect immediately before that subdivision
shall be proportionately decreased. If the Corporation shall at any time or from
time to time after the Original Issue Date combine the outstanding shares of
Common Stock, the Series A Conversion Price and the Series B Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.

          (f)  Adjustment for Certain Dividends and Distributions. In the event
               --------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series A
Conversion Price and the Series B Conversion Price for the Series A Preferred
Stock or the Series B Preferred Stock, as the case may be, then in effect shall
be decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Series A Conversion Price and the Series B Conversion Price for
the Series A Preferred Stock or the Series B Preferred Stock, as the case may
be, then in effect by a fraction:

                                     -14-
<PAGE>

               (1)  the numerator of which shall be the total number of shares
          of Common Stock issued and outstanding immediately prior to the time
          of such issuance or the close of business on such record date, and

               (2)  the denominator of which shall be the total number of shares
          of Common Stock issued and outstanding immediately prior to the time
          of such issuance or the close of business on such record date plus the
          number of shares of Common Stock issuable in payment of such dividend
          or distribution;

provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price and the Series B Conversion Price
for the Series A Preferred Stock or the Series B Preferred Stock, as the case
may be, shall be recomputed accordingly as of the close of business on such
record date and thereafter the Series A Conversion Price or the Series B
Conversion Price, as the case may be, shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions;
and provided further, however, that no such adjustment shall be made if the
holders of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A Preferred Stock or Series B
Preferred Stock, as the case may be, had been converted into Common Stock on the
date of such event.

          (g)  Adjustments for Other Dividends and Distributions. In the event
               -------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of the Series A
Preferred Stock or the Series B Preferred Stock, as the case may be, shall
receive upon conversion thereof in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Corporation that
they would have received had the Series A Preferred Stock or the Series B
Preferred Stock been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called for
during such period under this paragraph with respect to the rights of the
holders of the Series A Preferred Stock or the Series B Preferred Stock, as the
case may be; and provided further, however, that no such adjustment shall be
made if the holders of Series A Preferred Stock or Series B Preferred Stock, as
the case may be, simultaneously receive a dividend or other distribution of such
securities in an amount equal to the amount of such securities as they would
have received if all

                                     -15-
<PAGE>

outstanding shares of Series A Preferred Stock or Series B Preferred Stock had
been converted into Common Stock on the date of such event.

          (h)  Adjustment for Reclassification, Exchange, or Substitution. If
               ----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series A Preferred Stock
and the Series B Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a reorganization,
merger, consolidation, or sale of assets provided for below), then and in each
such event the holder of each such share of Series A Preferred Stock and Series
B Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable,
upon such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Series A Preferred
Stock and Series B Preferred Stock might have been converted immediately prior
to such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.

          (i)  Adjustment for Merger or Reorganization, etc. In case of any
               --------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is covered by
Subsection 2(c)), each share of Series A Preferred Stock and Series B Preferred
Stock shall thereafter be convertible (or shall be converted into a security
which shall be convertible) into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series A Preferred Stock
and Series B Preferred Stock would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions in this Section 4 set forth with respect to the rights and interest
thereafter of the holders of the Series A Preferred Stock and the Series B
Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Price and the Series B Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Series A
Preferred Stock and the Series B Preferred Stock, as the case may be.

          (j)  No Impairment. The Corporation will not, by amendment of its
               -------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking

                                     -16-
<PAGE>

of all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and the Series
B Preferred Stock against impairment.

          (k)  Certificate as to Adjustments.  Upon the occurrence of each
               -----------------------------
adjustment or readjustment of the Series A Conversion Price or the Series B
Conversion Price pursuant to this Section 4, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series A Preferred Stock or Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock or Series B Preferred Stock furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A Conversion Price or the Series
B Conversion Price then in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which then would be received
upon the conversion of Series A Preferred Stock or Series B Preferred Stock, as
the case may be.

          (l)  Notice of Record Date.  In the event:
               ---------------------

                  (i)   that the Corporation declares a dividend (or any other
                        distribution) on its Common Stock payable in Common
                        Stock or other securities of the Corporation;

                  (ii)  that the Corporation subdivides or combines its
                        outstanding shares of Common Stock;

                  (iii) of any reclassification of the Common Stock of the
                        Corporation (other than a subdivision or combination of
                        its outstanding shares of Common Stock or a stock
                        dividend or stock distribution thereon), or of any
                        consolidation or merger of the Corporation into or with
                        another corporation, or of the sale of all or
                        substantially all of the assets of the Corporation; or

                  (iv)  of the involuntary or voluntary dissolution, liquidation
                        or winding up of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock and the Series B
Preferred Stock, and shall cause to be mailed to the holders of the Series A
Preferred Stock and the Series B Preferred Stock at their last addresses as
shown on the records of the

                                     -17-
<PAGE>

Corporation or such transfer agent, at least ten days prior to the date
specified in (A) below or twenty days before the date specified in (B) below, a
notice stating

          (A)  the record date of such dividend, distribution, subdivision or
               combination, or, if a record is not to be taken, the date as of
               which the holders of Common Stock of record to be entitled to
               such dividend, distribution, subdivision or combination are to be
               determined, or

          (B)  the date on which such reclassification, consolidation, merger,
               sale, dissolution, liquidation or winding up is expected to
               become effective, and the date as of which it is expected that
               holders of Common Stock of record shall be entitled to exchange
               their shares of Common Stock for securities or other property
               deliverable upon such reclassification, consolidation, merger,
               sale, dissolution or winding up.

     5. Mandatory Conversion.
        --------------------

          (a) Upon the earlier of (x) the closing of the sale of shares of
Common Stock, at a price of at least $10.50 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of
proceeds to the Corporation (net of the underwriting discounts or commissions
and offering expenses) and (y) the first date on which at least 8,300,000 shares
of Series A Preferred Stock and Series B Preferred Stock have been converted
into Common Stock pursuant to Section 4 above (the "Mandatory Conversion Date"),
(i) all outstanding shares of Series A Preferred Stock and Series B Preferred
Stock shall automatically be converted into shares of Common Stock, at the then
effective conversion rate, and (ii) all provisions hereof included under the
captions "Series A Convertible Preferred Stock" and "Series B Convertible
Preferred Stock," and all references herein to the Series A Preferred Stock and
the Series B Preferred Stock, shall be deleted and shall be of no further force
or effect.

          (b) All holders of record of shares of Series A Preferred Stock and
Series B Preferred Stock shall be given written notice of the Mandatory
Conversion Date and the place designated for mandatory conversion of all such
shares of Series A Preferred Stock and Series B Preferred Stock, pursuant to
this Section 5. Such notice need not be given in advance of the occurrence of a
Mandatory Conversion Date. Such notice shall be sent by first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Stock and Series B Preferred Stock at such holder's address last shown on the
records of the transfer agent for the Series A Preferred Stock and the Series B
Preferred Stock (or the records of the

                                     -18-
<PAGE>

Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series A Preferred Stock and Series B Preferred
Stock shall surrender his or its certificate or certificates for all such shares
to the Corporation at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Common Stock to which such
holder is entitled pursuant to this Section 5. On the Mandatory Conversion Date,
all rights with respect to the Series A Preferred Stock and the Series B
Preferred Stock so converted, including the rights, if any, to receive notices
and vote (other than as a holder of Common Stock) will terminate, except only
the rights of the holders thereof, upon surrender of their certificate or
certificates therefor, to receive certificates for the number of shares of
Common Stock into which such Series A Preferred Stock or Series B Preferred
Stock, as the case may be, has been converted, and payment of any declared but
unpaid dividends thereon. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his or its attorney duly authorized
in writing. As soon as practicable after the Mandatory Conversion Date and the
surrender of the certificate or certificates for Series A Preferred Stock or
Series B Preferred Stock, as the case may be, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.

          (c) All certificates evidencing shares of Series A Preferred Stock or
Series B Preferred Stock which are required to be surrendered for conversion in
accordance with the provisions hereof shall, from and after the Mandatory
Conversion Date, be deemed to have been retired and cancelled and the shares of
Series A Preferred Stock or Series B Preferred Stock represented thereby
converted into Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such appropriate action (without the
need for stockholder action) as may be necessary to reduce the authorized Series
A Preferred Stock and Series B Preferred Stock accordingly.

     6. Redemption.
        ----------

          (a) The Corporation will, subject to the conditions set forth below,
on February 15, 2003, February 15, 2004 and February 15, 2005 (each, a "Series A
Mandatory Redemption Date"), upon receipt not less than 30 nor more than 120
days prior to the applicable Series A Mandatory Redemption Date of written
request(s) for redemption from holders of at least 66 2/3% of the shares of
Series A Preferred Stock then outstanding (a "Series A Redemption Request"),
redeem from each holder of shares of Series A Preferred Stock, at a price equal
to $0.91 per share (subject to

                                     -19-
<PAGE>

appropriate adjustment in the event of any dividend, stock split, combination or
other similar recapitalization affecting such shares), plus any declared but
unpaid dividends thereon (the "Series A Mandatory Redemption Price"), the
following respective portions of the number of shares of Series A Preferred
Stock held by such holder set forth opposite the applicable Series A Mandatory
Redemption Date:

<TABLE>
<CAPTION>
                                                 Portion of then
                                              Outstanding Shares of
            Series A Mandatory               Series A Preferred Stock
            Redemption Date                       To Be Redeemed
            ---------------                  ------------------------
            <S>                              <C>
            February 15, 2003                        33 1/3%
            February 15, 2004                           50%
            February 15, 2005                  All Shares then held
</TABLE>


The Corporation shall provide notice of its redemption obligations under this
Section 6, by first class or registered mail, postage prepaid, to each holder of
record of Series A Preferred Stock at the address for such holder last shown on
the records of the transfer agent therefor (or the records of the Corporation,
if it serves as its own transfer agent), not less than 120 nor more than 180
days prior to the applicable Series A Mandatory Redemption Date. The Corporation
shall provide notice of any Series A Redemption Request, specifying the time and
place of redemption and the Series A Mandatory Redemption Price, by first class
or registered mail, postage prepaid, to each holder of record of Series A
Preferred Stock at the address for such holder last shown on the records of the
transfer agent therefor (or the records of the Corporation, if it serves as its
own transfer agent), not less than 20 days prior to the Series A Mandatory
Redemption Date.

          (b) The Corporation will, subject to the condition set forth below, on
December 3, 2003, December 3, 2004 and December 3, 2005 (each a "Series B
Mandatory Redemption Date," collectively the Series A Mandatory Redemption Date
and the Series B Mandatory Redemption Date shall be referred to as the
"Mandatory Redemption Date"), upon receipt not less than 30 nor more than 120
days prior to the applicable Series B Mandatory Redemption Date of written
request(s) for redemption from holders of at least 50% of the shares of Series B
Preferred Stock then outstanding (a "Series B Redemption Request"), redeem from
each holder of shares of Series B Preferred Stock, at a price equal to $3.50 per
share (subject to appropriate adjustment in the event of any dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus any declared but unpaid dividends thereon (the "Series B Mandatory
Redemption Price"), the following respective portions of the number of shares of
Series B Preferred Stock held by such holder set forth opposite the applicable
Series B Mandatory Redemption Date:

                                     -20-
<PAGE>

<TABLE>
<CAPTION>
                                                     Portion of then
                                                  Outstanding Shares of
            Series B Mandatory                   Series B Preferred Stock
             Redemption Date                           To Be Redeemed
             ---------------                     ------------------------
             <S>                                 <C>
             December 3, 2003                            33 1/3%
             December 3, 2004                              50%
             December 3, 2005                     All Shares then held
</TABLE>

The Corporation shall provide notice of its redemption obligations under this
Section 6, by first class or registered mail, postage prepaid, to each holder of
record of Series B Preferred Stock at the address for such holder last shown on
the records of the transfer agent therefor (or the records of the Corporation,
if it serves as its own transfer agent), not less than 120 nor more than 180
days prior to the applicable Series B Mandatory Redemption Date. The Corporation
shall provide notice of any Series B Redemption Request, specifying the time and
place of redemption and the Series B Mandatory Redemption Price, by first class
or registered mail, postage prepaid, to each holder of record of Series B
Preferred Stock at the address for such holder last shown on the records of the
transfer agent therefor (or the records of the Corporation, if it serves as its
own transfer agent), not less than 20 days prior to the Series B Mandatory
Redemption Date.

          (c) If the funds of the Corporation legally available for redemption
of Series A Preferred Stock or Series B Preferred Stock on any Mandatory
Redemption Date are insufficient to redeem the number of shares of Series A
Preferred Stock or Series B Preferred Stock required under this Section 6 to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares ratably in proportion to the
respective amounts which would otherwise be payable to the holders of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, if the funds of
the Corporation legally available therefor had been sufficient to redeem all
shares required to be redeemed on such date. At any time thereafter when
additional funds of the Corporation become legally available for the redemption
of Series A Preferred Stock or Series B Preferred Stock, such funds will be
used, at the end of the next succeeding fiscal quarter, to redeem, to the extent
of the available funds and in the same proportion as set forth in the preceding
sentence, the balance of the shares which the Corporation was theretofore
obligated to redeem.

          (d) Unless there shall have been a default in payment of the Series A
Mandatory Redemption Price or the Series B Mandatory Redemption Price, on the
applicable Mandatory Redemption Date all rights of each holder of shares of
Series A Preferred Stock or Series B Preferred Stock as a stockholder of the
Corporation by reason of the ownership of such shares will cease, except the
right to receive the

                                     -21-
<PAGE>

Series A Mandatory Redemption Price or the Series B Mandatory Redemption Price,
as the case may be, for such shares, without interest, upon presentation and
surrender of the certificate representing such shares, and such shares will not
from and after such Mandatory Redemption Date be deemed to be outstanding.

          (e) Any Series A Preferred Stock or Series B Preferred Stock redeemed
pursuant to this Section 6 will be cancelled and will not under any
circumstances be reissued, sold or transferred and the Corporation may from time
to time take such appropriate action as may be necessary to reduce the
authorized number of shares of Series A Preferred Stock or Series B Preferred
Stock accordingly.

     7. Negative Covenants.
        ------------------

          (a) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series A Preferred Stock so as to affect
adversely the Series A Preferred Stock, without the written consent or
affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a meeting,
consenting or voting, as the case may be, separately as a class.

          (b) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series B Preferred Stock so as to affect
adversely the Series B Preferred Stock, without the written consent or
affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a meeting,
consenting or voting, as the case may be, separately as a class.

          (c) So long as at least 3,000,000 shares of Series A Preferred Stock
and Series B Preferred Stock (subject to appropriate adjustment in the event of
any dividend, stock split, combination or other similar recapitalization
affecting such shares) are outstanding (or such lesser number of shares of
Series A Preferred Stock and Series B Preferred Stock as are then outstanding if
the Corporation has, prior to such time, failed to redeem shares of Series A
Preferred Stock and Series B Preferred Stock when such redemption was due in
accordance with Section 6 above), the Corporation shall not, without the prior
written consent of the holders of shares of Series A Preferred Stock and Series
B Preferred Stock representing at least 66 2/3 % of the combined votes
represented by the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock:

                 (i) authorize any shares of capital stock with preference or
priority over the Series A Preferred Stock or Series B Preferred Stock as to the
right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation;

                                     -22-
<PAGE>

               (ii)  amend the Corporation's By-laws in a manner adverse to the
holders of Series A Preferred Stock and/or Series B Preferred Stock;

               (iii) declare or pay any dividends on Common Stock other than
dividends payable solely in Common Stock;

               (iv)  repurchase shares of Common Stock at a price greater than
the price at which they were originally issued;

               (v)   liquidate, dissolve or wind-up the Corporation;

               (vi)  make (or permit any subsidiary to make) any loan or advance
to any person, including without limitation, any employee or director of the
Corporation or any subsidiary, except (A) advances and similar expenditures in
the ordinary course of business or (B) as approved by the Board of Directors; or

               (vii)(A) merge with or into or consolidate with any other
corporation (other than a merger of consolidation in which the stockholders of
the Company immediately prior thereto own at least 80% of the outstanding voting
stock of the surviving or acquiring corporation), (B) sell, lease, or otherwise
dispose of all or substantially all, or a Significant Portion (as defined
below), of its properties or assets (for this purpose, "Significant Portion"
shall mean properties or assets with a fair market value equal to more than 35%
of the book value of the Company's total properties or assets as of the end of
the most recent fiscal quarter), or (C) acquire all or substantially all of the
properties or assets of any other corporation or entity (except for
consideration of less than 20% of the Corporation's consolidated net worth as of
the end of the prior fiscal quarter.

FURTHER
RESOLVED:      That the terms of the Series A Preferred Stock set forth in the
--------
               Certificate of Designations filed with the Secretary of State of
               the State of Delaware on February 19, 1998 ("Certificate of
               Designations") be and hereby are superseded in their entirety by
               the terms set forth in this Certificate of Amendment and said
               Certificate of Designations shall be of no further force or
               effect.

                                     -23-
<PAGE>

          IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President this 3rd day of December, 1998.



                                             Sycamore Networks, Inc.



                                             By: /s/ Daniel Smith
                                                 -------------------
                                                   Daniel Smith
                                                   President

                                     -24-
<PAGE>

                           CERTIFICATE OF AMENDMENT
                                      OF
                          CERTIFICATE OF INCORPORATION
                                      OF
                            SYCAMORE NETWORKS, INC.


     Sycamore Networks, Inc. (the "Corporation"), organized and existing under
and by virtue of the General Law of the State of Delaware, does hereby certify
as follows:

     The Board of Directors of the Corporation duly adopted, pursuant to Section
242 of the General Corporation Law of Delaware, a resolution setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable.  The stockholders of the Corporation duly
approved said proposed amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware by written consent in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware,
and written notice of such consent has been given to all stockholders who have
not consented in writing to said amendment.  The resolution setting forth the
amendment is as follows:

     RESOLVED:      That Article FOURTH of the Certificate of Incorporation of
     --------
the Corporation be and hereby is deleted in its entirety and the following
Article FOURTH is inserted in lieu thereof:

         FOURTH: The total number of shares of all classes of stock
         ------
     which the Corporation shall have authority to issue is 40,500,000
     shares, consisting of (i) 25,000,000 shares of Common Stock,
     $.001 par value per share ("Common Stock"), and (ii) 15,500,000
     shares of Preferred Stock, $.01 par value per share ("Preferred
     Stock"), 8,975,000 shares of which have been designated as Series
     A Convertible Preferred Stock ("Series A Preferred Stock"),
     3,625,000 shares of which have been designated as Series B
     Convertible Preferred Stock ("Series B Preferred Stock") and

<PAGE>

     2,500,000 shares of which have been designated as Series C
     Convertible Preferred Stock ("Series C Preferred Stock", the
     Series A Preferred Stock, Series B Preferred Stock and the Series
     C Preferred Stock shall collectively be referred to as the
     "Designated Preferred Stock").

     The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.

A. Common Stock.
   ------------

     1. General. The voting, dividend and liquidation rights of the holders of
        -------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

     2. Voting.  The holders of the Common Stock are entitled to one vote for
        ------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.

     The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

     3. Dividends.  Dividends may be declared and paid on the Common Stock from
        ---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.

     4. Liquidation.  Upon the dissolution or liquidation of the Corporation,
        -----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.

B. Preferred Stock.
   ---------------

     Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided.  Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law.  Different series of
Preferred Stock shall not be construed

                                      -2-
<PAGE>

to constitute different classes of shares for the purposes of voting by classes
unless expressly provided.

     Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware.  Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law.  Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.

C. Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
   -------------------------------------------------------------------------
Stock.
-----

     1. Dividends.
        ---------

           (a) The Corporation shall not declare or pay any dividends or
distributions (as defined below) on shares of Common Stock until the holders of
the Designated Preferred Stock then outstanding shall have first received, or
simultaneously receive, a like distribution on each outstanding share of
Designated Preferred Stock, in an amount at least equal to the product of (i)
the per share amount, if any, of the dividends or distributions to be declared,
paid or set aside for the Common Stock, multiplied by (ii) the number of whole
shares of Common Stock into which such share of Designated Preferred Stock is
convertible as of the record date for such dividend or distribution.

           (b) For purposes of this Section 1, "distribution" shall mean the
transfer of cash or property without consideration, whether by way of dividend
or otherwise, payable other than in Common Stock or other securities of the
Corporation, or the purchase or redemption of shares of the Corporation (other
than repurchases of Common Stock held by employees or directors of, or
consultants to, the Corporation upon termination of their employment or services
pursuant to agreements approved by the Board of Directors providing for such
repurchase at a price equal to the

                                     -3-
<PAGE>

original issue price of such shares) for cash or property, including any such
transfer, purchase or redemption by a subsidiary of the Corporation.

     2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations
        -----------------------------------------------------------------------
and Asset Sales.
---------------

            (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Designated Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Designated
Preferred Stock, but before any payment shall be made to the holders of Common
Stock or any other class or series of stock ranking on liquidation junior to the
Designated Preferred Stock by reason of their ownership thereof, an amount equal
to $0.91 per share in the case of the Series A Preferred Stock, $3.50 per share
in the case of the Series B Preferred Stock and $8.00 per share in the case of
the Series C Preferred Stock (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares), plus any dividends declared but unpaid on such shares.
If upon any such liquidation, dissolution or winding up of the Corporation the
remaining assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Designated
Preferred Stock the full amount to which they shall be entitled, the holders of
shares of Designated Preferred Stock and any class or series of stock ranking on
liquidation on a parity with the Designated Preferred Stock shall share ratably
in any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full.

            (b) After the payment of all preferential amounts required to be
paid to the holders of any class or series of stock of the Corporation ranking
on liquidation prior to and in preference to the Common Stock, upon the
dissolution, liquidation or winding up of the Corporation, the remaining assets
and funds of the Corporation available for distribution to its stockholders
shall be distributed among the holders of shares of Common Stock.

            (c) Any (i) merger or consolidation which results in the voting
securities of the Corporation outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than a
majority of the combined voting power of the voting securities of the
Corporation or such surviving or acquiring entity outstanding immediately after
such merger or consolidation, (ii) sale

                                      -4-
<PAGE>

of all or substantially all of the assets of the Corporation or (iii) sale of
shares of capital stock of the Corporation, in a single transaction or series of
related transactions, representing at least 80% of the voting power of the
voting securities of the Corporation, shall be deemed to be a liquidation of the
Corporation, and all consideration payable to the stockholders of the
Corporation (in the case of a merger or consolidation), or all consideration
payable to the Corporation (net of obligations owed by the Corporation),
together with all other available assets of the Corporation (in the case of an
asset sale), shall be distributed to the holders of capital stock of the
Corporation in accordance with Subsections 2(a) and 2(b) above. The Corporation
shall promptly provide to the holders of shares of Designated Preferred Stock
such information concerning the terms of such merger, consolidation or asset
sale and the value of the assets of the Corporation as may reasonably be
requested by the holders of Designated Preferred Stock. If applicable, the
Corporation shall cause the agreement or plan of merger or consolidation to
provide for a rate at which the shares of capital stock of the Corporation are
converted into or exchanged for cash, new securities or other property which
gives effect to this provision. The amount deemed distributed to the holders of
Designated Preferred Stock upon any such merger or consolidation shall be the
cash or the value of the property, rights or securities distributed to such
holders by the Corporation and/or by the acquiring person, firm or other entity.
The value of such property, rights or other securities shall be determined in
good faith by the Board of Directors of the Corporation.

     3. Voting.
        ------

            (a) Each holder of outstanding shares of the Designated Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Designated Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 4 hereof) as of the record date, at each meeting of stockholders of the
Corporation (and written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration. Except as provided by law or by the
provisions of Section 3(b) or Section 7 below or by the provisions establishing
any other series of stock, holders of Designated Preferred Stock and of any
other outstanding series of stock shall vote together with the holders of Common
Stock as a single class.

            (b) For so long as at least 2,500,000 shares of Designated Preferred
Stock (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalizations affecting such shares) are
outstanding (or such lesser number of shares of Designated Preferred Stock as
are then outstanding if the Corporation has, prior to such time, failed to
redeem shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, as the case may be, when such redemption was due in accordance
with Section 6 below), the holders of record of the shares of Designated
Preferred Stock, exclusively and as a separate

                                      -5-
<PAGE>

class, shall be entitled to elect two members of the Board of Directors of the
Corporation. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the shares of
Designated Preferred Stock then outstanding shall constitute a quorum of the
Designated Preferred Stock for the purpose of electing directors by holders of
Designated Preferred Stock. A vacancy in any directorship filled by the holders
of Designated Preferred Stock shall be filled only by vote or written consent in
lieu of a meeting of the holders of Designated Preferred Stock.

     4. Optional Conversion.  The holders of Designated Preferred Stock shall
       -------------------
have conversion rights as follows (the "Conversion Rights"):

            (a) Right to Convert. Each share of Series A Preferred Stock shall
                ----------------
be convertible, at the option of the holder thereof, at any time and from time
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $0.91 by the Series A Conversion Price (as defined
below) in effect at the time of conversion. The "Series A Conversion Price"
shall initially be $0.91. Such Series A Conversion Price, and the rate at which
shares of Series A Preferred Stock may be converted into shares of Common Stock,
shall be subject to adjustment as provided below. Each share of Series B
Preferred Stock shall be convertible, at the option of the holder thereof at any
time and from time to time and without the payment of additional consideration
by the holder thereof, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $3.50 by the Series B Conversion
Price (as defined below) in effect at the time of conversion. The "Series B
Conversion Price" shall initially be $3.50. Such Series B Conversion Price, and
the rate at which shares of Series B Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below. Each
share of Series C Preferred Stock shall be convertible, at the option of the
holder thereof at any time and from time to time and without the payment of
additional consideration by the holder thereof, into such number of fully paid
and nonassessable shares of common stock as is determined by dividing $8.00 by
the Series C Conversion Price (as defined below) in effect at the time of the
conversion. The "Series C Conversion Price" shall initially be $8.00. Such
Series C Conversion Price, and the rate at which shares of Series C Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below.

     In the event of a notice of redemption of any shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock pursuant to Section
6 hereof, the Conversion Rights of the shares designated for redemption shall
terminate at the close of business on the first full day preceding the date
fixed for redemption, unless the redemption price is not paid when due, in which
case the Conversion Rights for such shares shall continue until such price is
paid in full.  In the event of a liquidation of the Corporation (or deemed
liquidation under Section 2(c) hereof), the

                                      -6-
<PAGE>

Conversion Rights shall terminate at the close of business on the first full
business day preceding the date fixed for the payment of any amounts
distributable on liquidation (or deemed liquidation under Section 2(c) hereof)
to the holders of Designated Preferred Stock.

          (b) Fractional Shares.  No fractional shares of Common Stock shall be
              -----------------
issued upon conversion of the Designated Preferred Stock.  In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series A Conversion Price, Series B Conversion Price or Series C
Conversion Price, as the case may be.

          (c) Mechanics of Conversion.
              -----------------------

                  (i) In order for a holder of Designated Preferred Stock to
convert shares of Designated Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Designated Preferred Stock, at the office of the transfer agent for such shares
of Designated Preferred Stock (or at the principal office of the Corporation if
the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of Designated
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Designated
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.

                  (ii) The Corporation shall at all times when Designated
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
Designated Preferred Stock, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding Designated Preferred Stock. Before taking any action which would
cause an adjustment reducing the Series A Conversion Price, the Series B
Conversion Price or the Series C Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Series B Preferred Stock or the Series C Preferred Stock, as the case
may be, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the

                                      -7-
<PAGE>

Corporation may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Series A Conversion Price, Series B Conversion
Price or the Series C Conversion Price.

                  (iii) Upon any such conversion, no adjustment to the Series A
Conversion Price, the Series B Conversion Price or the Series C Conversion Price
shall be made for any declared but unpaid dividends on the Series A Preferred
Stock, the Series B Preferred Stock or Series C Preferred Stock, as the case may
be, surrendered for conversion or on the Common Stock delivered upon conversion.

                  (iv)  All shares of Designated Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor and payment of any
dividends declared but unpaid thereon. Any shares of Designated Preferred Stock
so converted shall be retired and cancelled and shall not be reissued, and the
Corporation (without the need for stockholder action) may from time to time take
such appropriate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock accordingly.

                  (v)   The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Designated Preferred Stock pursuant to
this Section 4. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Designated Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.

          (d) Adjustments to Conversion Price for Diluting Issues:
              ---------------------------------------------------

                 (i)Special Definitions.  For purposes of this Subsection 4(d),
                  -------------------
the following definitions shall apply:

                        (A) "Option" shall mean rights, options or warrants to
                             ------
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.

                        (B) "Original Issue Date" shall mean the date on which a
                             -------------------
share of Series A Preferred Stock was first issued.

                                      -8-
<PAGE>

               (C)  "Convertible Securities" shall mean any evidences of
                     ----------------------
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.

               (D)  "Additional Shares of Common Stock" shall mean all shares of
                     ---------------------------------
Common Stock issued (or, pursuant to Subsection 4(d)(iii) below, deemed to be
issued) by the Corporation after the Original Issue Date, other than:

                         (I)       shares of Common Stock issued or issuable as
                                   a dividend or other distribution on
                                   Designated Preferred Stock;

                         (II)      shares of Common stock issued or issuable by
                                   reason of a dividend or other distribution on
                                   shares of common stock that is covered by
                                   subsection 4(e) or 4(f) below;

                         (III)     shares of Common Stock issued or issuable
                                   upon conversion of those shares of (1) Series
                                   A Preferred Stock sold pursuant to the Series
                                   A Preferred Stock Purchase Agreement dated as
                                   of February 19, 1998, as the same may be
                                   amended from time to time, (2) Series B
                                   Preferred Stock sold pursuant to the Series B
                                   Preferred Stock Purchase Agreement dated as
                                   of December 3, 1998, as the same may be
                                   amended from time to time and (3) Series C
                                   Preferred Stock sold pursuant to the Series C
                                   Preferred Stock Purchase Agreement dated as
                                   of February 26, 1999, as the same may be
                                   amended from time to time;

                         (IV)      up to 5,995,604 shares of Common Stock
                                   (subject to appropriate adjustment for stock
                                   splits, stock dividends, combinations and
                                   other similar recapitalizations affecting
                                   such shares), plus such additional number of
                                   shares as may be approved by a majority of
                                   the non-employee members of the Board of
                                   Directors of the Corporation, issued or
                                   issuable to employees or directors of, or
                                   consultants to, the Corporation; and

                                      -9-
<PAGE>

                         (V)       shares of Common Stock issued to equipment
                                   lessors, as approved by a majority of the
                                   non-employee members of the Board of
                                   Directors of the Corporation.

               (ii)  No Adjustment of Conversion Price. No adjustment in the
                     ---------------------------------
number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made (a) unless the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the applicable Series A
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares, or (b) if prior to or within 60 days subsequent to
such issuance, the Corporation receives written notice from the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock,
agreeing that no such adjustment shall be made as a result of the issuance of
Additional Shares of Common Stock. No adjustment in the number of shares of
Common Stock into which the Series B Preferred Stock is convertible shall be
made (a) unless the consideration per share (determined pursuant to Subsection
4(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued
by the Corporation is less than the applicable Series B Conversion Price in
effect on the date of, and immediately prior to, the issue of such Additional
Shares, or (b) if prior to or within 60 days subsequent to such issuance, the
Corporation receives written notice from the holders of at least a majority of
the then outstanding shares of Series B Preferred Stock, agreeing that no such
adjustment shall be made as a result of the issuance of Additional Shares of
Common Stock. No adjustment in the number of shares of Common Stock into which
the Series C Preferred Stock is convertible shall be made (a) unless the
consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series C Conversion Price in effect on
the date of, and immediately prior to, the issue of such Additional Shares, or
(b) if prior to or within 60 days subsequent to such issuance, the Corporation
receives written notice from the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock, agreeing that no such adjustment
shall be made as a result of the issuance of Additional Shares of Common Stock.

               (iii)  Issue of Securities Deemed Issue of Additional Shares of
                     --------------------------------------------------------
Common Stock.
------------

     If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options

                                     -10-
<PAGE>

therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that (x) for the purpose of adjusting the
Series A Conversion Price, Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the applicable Series A Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, (y) for the purpose of
adjusting the Series B Conversion Price, Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock
would be less than the applicable Series B Conversion Price in effect on the
date of and immediately prior to such issue, or such record date, and (z) for
the purpose of adjusting the Series C Conversion Price, Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 4(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the applicable Series C Conversion
Price in effect on the date of and immediately prior to such issue, or such
record date, and provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:

               (A)  No further adjustment in the Series A Conversion Price, the
Series B Conversion Price or the Series C Conversion Price shall be made upon
subsequent issue of Convertible Securities or shares of Common Stock upon
exercise of such Options or conversion or exchange of such Convertible
Securities;

               (B)  If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Series A Conversion Price, the Series B Conversion Price
or the Series C Conversion Price, as applicable, computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;

               (C)  Upon the expiration or termination of any unexercised
Option, the Series A Conversion Price, the Series B Conversion Price and Series
C Conversion Price, as applicable, shall not be readjusted, but the Additional
Shares of Common Stock deemed issued as the result of the original issue of such
Option shall not be deemed issued for the purposes of any subsequent adjustment
of the Series A Conversion Price, the Series B Conversion Price or Series C
Conversion Price, as applicable;

                                     -11-
<PAGE>

                         (D)  In the event of any change in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange of any Option
or Convertible Security, including, but not limited to, a change resulting from
the anti-dilution provisions thereof, the Series A Conversion Price, the Series
B Conversion Price and Series C Conversion Price then in effect shall forthwith
be readjusted to such Series A Conversion Price, Series B Conversion Price and
Series C Conversion Price as would have obtained had the adjustment which was
made upon the issuance of such Option or Convertible Security not exercised or
converted prior to such change been made upon the basis of such change; and

                         (E)  No readjustment pursuant to clause (B) or (D)
above shall have the effect of increasing the Series A Conversion Price, the
Series B Conversion Price or Series C Conversion Price, as applicable, to an
amount which exceeds the lower of (i) the Series A Conversion Price, the Series
B Conversion Price or the Series C Conversion Price, as the case may be, on the
original adjustment date, or (ii) the Series A Conversion Price, the Series B
Conversion Price or Series C Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original adjustment
date and such readjustment date.

     In the event the Corporation, after the Original Issue Date, amends any
Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on the Original Issue Date or were issued after the
Original Issue Date) to increase the number of shares issuable thereunder or
decrease the consideration to be paid upon exercise or conversion thereof, then
such Options or Convertible Securities, as so amended, shall be deemed to have
been issued after the Original Issue Date and the provisions of this Subsection
4(d)(iii) shall apply.

               (iv)  Adjustment of Conversion Price Upon Issuance of Additional
                     ----------------------------------------------------------
Shares of Common Stock.
----------------------

                         (A)  In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series A Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series A

                                     -12-
<PAGE>

Conversion Price; and (B) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued; provided that, (i) for the
                                                  -------------
purpose of this Subsection 4(d)(iv), all shares of Common Stock issuable upon
exercise or conversion of Options or Convertible Securities outstanding
immediately prior to such issue shall be deemed to be outstanding, and (ii) for
the purpose of this Subsection 4(d)(iv), the number of shares of Common Stock
deemed issuable upon conversion of such outstanding Convertible Securities shall
not give effect to any adjustments to the conversion price or conversion rate of
such Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                         (B)  In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series B Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series B
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series B
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series B Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                         (C)  In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series C

                                     -13-
<PAGE>

Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Series C Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Series C Conversion Price by a fraction, (A) the
numerator of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Series C Conversion Price; and (B) the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued;
provided that, (i) for the purpose of this Subsection 4(d)(iv), all shares of
-------- ----
Common Stock issuable upon exercise or conversion of Options or Convertible
Securities outstanding immediately prior to such issue shall be deemed to be
outstanding, and (ii) for the purpose of this Subsection 4(d)(iv), the number of
shares of Common Stock deemed issuable upon conversion of such outstanding
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Convertible Securities resulting
from the issuance of Additional Shares of Common Stock that is the subject of
this calculation.

                    (v)  Determination of Consideration. For purposes of this
                         ------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:

                              (A)  Cash and Property:  Such consideration shall:
                                   -----------------

                                     (I)    insofar as it consists of cash, be
computed at the aggregate of cash received by the Corporation, excluding amounts
paid or payable for accrued interest;

                                     (II)   insofar as it consists of property
other than cash, be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and

                                     (III)  in the event Additional Shares of
Common Stock are issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.

                              (B)  Options and Convertible Securities. The
                                   ----------------------------------
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing

                                     -14-
<PAGE>

                         (x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by

                         (y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.

               (vi)  Multiple Closing Dates. Notwithstanding any adjustments to
                     ----------------------
the Series A Conversion Price, the Series B Conversion Price and the Series C
Conversion Price pursuant to Section 4(d) hereof, in the event the Corporation
shall issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Convertible Securities, and
such issuance dates occur within a period of no more than 180 days, then, upon
the final such issuance, the Series A Conversion Price, the Series B Conversion
Price and the Series C Conversion Price, as the case may be, shall be readjusted
to give effect to all such issuances as if they occurred on the date of the
final such issuance (and without giving effect to any adjustments as a result of
such prior issuances within such period).

       (e)  Adjustment for Stock Splits and Combinations.  If the Corporation
            --------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Series A Conversion Price, the
Series B Conversion Price and the Series C Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased.  If the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Series A Conversion Price,
the Series B Conversion Price and the Series C Conversion Price then in effect
immediately before the combination shall be proportionately increased.  Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.

       (f)  Adjustment for Certain Dividends and Distributions.  In the event
            --------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series A
Conversion Price, the

                                     -15-
<PAGE>

Series B Conversion Price and the Series C Conversion Price, as the case may be,
then in effect shall be decreased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying the Series A Conversion Price, the Series B
Conversion Price and the Series C Conversion Price, as the case may be, then in
effect by a fraction:

                    (1)     the numerator of which shall be the total number of
               shares of Common Stock issued and outstanding immediately prior
               to the time of such issuance or the close of business on such
               record date, and

                    (2)     the denominator of which shall be the total number
               of shares of Common Stock issued and outstanding immediately
               prior to the time of such issuance or the close of business on
               such record date plus the number of shares of Common Stock
               issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price, the Series B Conversion Price and
the Series C Conversion Price, as the case may be, shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Conversion Price, the Series B Conversion Price or Series C Conversion
Price, as the case may be, shall be adjusted pursuant to this paragraph as of
the time of actual payment of such dividends or distributions; and provided
further, however, that no such adjustment shall be made if the holders of the
applicable Designated Preferred Stock simultaneously receive a dividend or other
distribution of shares of Common Stock in a number equal to the number of shares
of Common Stock as they would have received if all outstanding shares of the
applicable Designated Preferred Stock had been converted into Common Stock on
the date of such event.

               (g)  Adjustments for Other Dividends and Distributions. In the
                    -------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Designated
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Designated Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of Designated
Preferred Stock; and provided further,

                                     -16-
<PAGE>

however, that no such adjustment shall be made if the holders of Designated
Preferred Stock simultaneously receive a dividend or other distribution of such
securities in an amount equal to the amount of such securities as they would
have received if all outstanding shares of Designated Preferred Stock had been
converted into Common Stock on the date of such event.

               (h)  Adjustment for Reclassification, Exchange, or Substitution.
                    ----------------------------------------------------------
If the Common Stock issuable upon the conversion of the Designated Preferred
Stock shall be changed into the same or a different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification,
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation, or sale
of assets provided for below), then and in each such event the holder of each
such share of Designated Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable, upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Designated Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.

               (i)  Adjustment for Merger or Reorganization, etc. In case of any
                    ---------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is covered by
Subsection 2(c)), each share of Designated Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Designated Preferred Stock would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of Designated Preferred Stock,
to the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Series A Conversion
Price, the Series B Conversion Price and Series C Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the applicable Designated Preferred Stock.

               (j)  No Impairment. The Corporation will not, by amendment of its
                    -------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good

                                     -17-
<PAGE>

faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Designated Preferred Stock
against impairment.

               (k)  Certificate as to Adjustments.  Upon the occurrence of each
                    -----------------------------
adjustment or readjustment of the Series A Conversion Price, the Series B
Conversion Price or Series C Conversion Price pursuant to this Section 4, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Designated Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.  The Corporation shall, upon the written request at any
time of any holder of Designated Preferred Stock furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A Conversion Price, the Series B
Conversion Price or Series C Conversion Price then in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
then would be received upon the conversion of the applicable Designated
Preferred Stock.

               (l)  Notice of Record Date.  In the event:
                    ---------------------

                         (i)     that the Corporation declares a dividend (or
                                 any other distribution) on its Common Stock
                                 payable in Common Stock or other securities of
                                 the Corporation;

                         (ii)    that the Corporation subdivides or combines its
                                 outstanding shares of Common Stock;

                         (iii)   of any reclassification of the Common Stock of
                                 the Corporation (other than a subdivision or
                                 combination of its outstanding shares of Common
                                 Stock or a stock dividend or stock distribution
                                 thereon), or of any consolidation or merger of
                                 the Corporation into or with another
                                 corporation, or of the sale of all or
                                 substantially all of the assets of the
                                 Corporation; or

                         (iv)    of the involuntary or voluntary dissolution,
                                 liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Designated Preferred Stock, and shall cause
to be mailed to the holders of Designated Preferred Stock at their last
addresses as shown on the records of the Corporation or such transfer agent, at
least ten days prior to the date

                                     -18-
<PAGE>

specified in (A) below or twenty days before the date specified in (B) below, a
notice stating

               (A)  the record date of such dividend, distribution, subdivision
                    or combination, or, if a record is not to be taken, the date
                    as of which the holders of Common Stock of record to be
                    entitled to such dividend, distribution, subdivision or
                    combination are to be determined, or

               (B)  the date on which such reclassification, consolidation,
                    merger, sale, dissolution, liquidation or winding up is
                    expected to become effective, and the date as of which it is
                    expected that holders of Common Stock of record shall be
                    entitled to exchange their shares of Common Stock for
                    securities or other property deliverable upon such
                    reclassification, consolidation, merger, sale, dissolution
                    or winding up.

     5.Mandatory Conversion.
       --------------------

               (a)  Upon the earlier of (x) the closing of the sale of shares of
Common Stock, at a price of at least $12.00 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of
proceeds to the Corporation (net of the underwriting discounts or commissions
and offering expenses) and (y) the first date on which at least 10,000,000
shares of Designated Preferred Stock have been converted into Common Stock
pursuant to Section 4 above (the "Mandatory Conversion Date"), (i) all
outstanding shares of Designated Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective conversion rate,
and (ii) all provisions hereof included under the captions "Series A Convertible
Preferred Stock", "Series B Convertible Preferred Stock" and "Series C
Convertible Preferred Stock" and all references herein to the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock (including
all references to Designated Preferred Stock), shall be deleted and shall be of
no further force or effect.

               (b)  All holders of record of shares of Designated Preferred
Stock shall be given written notice of the Mandatory Conversion Date and the
place designated for mandatory conversion of all such shares of Designated
Preferred Stock, pursuant to this Section 5. Such notice need not be given in
advance of the occurrence of a Mandatory Conversion Date. Such notice shall be
sent by first class or registered mail, postage prepaid, to each record holder
of Designated Preferred Stock at such holder's address last shown on the records
of the transfer agent for the applicable


                                     -19-
<PAGE>

Designated Preferred Stock (or the records of the Corporation, if it serves as
its own transfer agent). Upon receipt of such notice, each holder of shares of
Designated Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 5. On
the Mandatory Conversion Date, all rights with respect to the Designated
Preferred Stock so converted, including the rights, if any, to receive notices
and vote (other than as a holder of Common Stock) will terminate, except only
the rights of the holders thereof, upon surrender of their certificate or
certificates therefor, to receive certificates for the number of shares of
Common Stock into which such Designated Preferred Stock has been converted, and
payment of any declared but unpaid dividends thereon. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or certificates
for Designated Preferred Stock the Corporation shall cause to be issued and
delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on such
conversion in accordance with the provisions hereof and cash as provided in
Subsection 4(b) in respect of any fraction of a share of Common Stock otherwise
issuable upon such conversion.

          (c)  All certificates evidencing shares of Designated Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Designated Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Designated Preferred Stock accordingly.

     6. Redemption.
        ----------

          (a)  The Corporation will, subject to the conditions set forth below,
on February 26, 2004, February 26, 2005 and February 26, 2006 (each, a
"Mandatory Redemption Date"), upon receipt not less than 30 nor more than 120
days prior to the applicable Mandatory Redemption Date of written request(s) for
redemption from holders of at least a majority of the shares of Designated
Preferred Stock then outstanding (a "Redemption Request"), redeem from each
holder of shares of Designated Preferred Stock, at a price equal to $0.91 per
share in the case of the Series A Preferred Stock, $3.50 per share in the case
of the Series B Preferred Stock and $8.00 per share in the case of the Series C
Preferred Stock (subject to appropriate

                                     -20-
<PAGE>

adjustment in the event of any dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any declared but unpaid
dividends thereon (the "Redemption Price"), the following respective portions of
the number of shares of Designated Preferred Stock held by such holder set forth
opposite the applicable Redemption Date:


<TABLE>
<CAPTION>
                                                  Portion of then
                                                Outstanding Shares of
               Mandatory                     Designated Preferred Stock
            Redemption Date                       To Be Redeemed
            ---------------                  ------------------------
            <S>                              <C>
            February 26, 2004                         33 1/3%
            February 26, 2005                          50%
            February 26, 2006                   All Shares then held
</TABLE>

The Corporation shall provide notice of its redemption obligations under this
Section 6, by first class or registered mail, postage prepaid, to each holder of
record of Designated Preferred Stock at the address for such holder last shown
on the records of the transfer agent therefor (or the records of the
Corporation, if it serves as its own transfer agent), not less than 120 nor more
than 180 days prior to the applicable Mandatory Redemption Date.  The
Corporation shall provide notice of any Redemption Request, specifying the time
and place of redemption and the Mandatory Redemption Price, by first class or
registered mail, postage prepaid, to each holder of record of Designated
Preferred Stock at the address for such holder last shown on the records of the
transfer agent therefor (or the records of the Corporation, if it serves as its
own transfer agent), not less than 20 days prior to the Mandatory Redemption
Date.

          (b)  If the funds of the Corporation legally available for redemption
of the Designated Preferred Stock on any Mandatory Redemption Date are
insufficient to redeem the number of shares of the Designated Preferred Stock
required under this Section 6 to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably in proportion to the respective amounts which would otherwise be
payable to the holders of Designated Preferred Stock if the funds of the
Corporation legally available therefor had been sufficient to redeem all shares
required to be redeemed on such date. At any time thereafter when additional
funds of the Corporation become legally available for the redemption of the
Designated Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem, to the extent of the available funds and
in the same proportion as set forth in the preceding sentence, the balance of
the shares which the Corporation was theretofore obligated to redeem.


                                     -21-
<PAGE>

               (c)  Unless there shall have been a default in payment of the
Mandatory Redemption Price, on the applicable Mandatory Redemption Date all
rights of each holder of shares of Designated Preferred Stock as a stockholder
of the Corporation by reason of the ownership of such shares will cease, except
the right to receive the Mandatory Redemption Price for such shares, without
interest, upon presentation and surrender of the certificate representing such
shares, and such shares will not from and after such Mandatory Redemption Date
be deemed to be outstanding.

               (d)  Any Designated Preferred Stock redeemed pursuant to this
Section 6 will be cancelled and will not under any circumstances be reissued,
sold or transferred and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized number of shares
of Designated Preferred Stock accordingly.

     7.  Negative Covenants.
         ------------------

               (a)  The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock, without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock, given in writing or by vote at a
meeting, consenting or voting, as the case may be, separately as a class;
provided that if any such amendment, alteration or repeal adversely affects all
of the Designated Preferred Stock in the same manner, such amendment or repeal
shall require only the written consent or affirmative vote of the holders of at
least a majority of the then outstanding shares of Designated Preferred Stock,
acting as a single class.

               (b)  The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock, without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock, given in writing or by vote at a
meeting, consenting or voting, as the case may be, separately as a class;
provided that if any such amendment, alteration or repeal adversely affects all
of the Designated Preferred Stock in the same manner, such amendment or repeal
shall require only the written consent or affirmative vote of the holders of at
least a majority of the then outstanding shares of Designated Preferred Stock,
acting as a single class.

               (c)  The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series C Preferred Stock so
as to affect adversely the Series C Preferred Stock, without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock, given in writing or by vote at a
meeting, consenting or voting, as the case may be, separately as a class;
provided that if any such amendment, alteration or repeal

                                     -22-
<PAGE>

adversely affects all of the Designated Preferred Stock in the same manner, such
amendment or repeal shall require only the written consent or affirmative vote
of the holders of at least a majority of the then outstanding shares of
Designated Preferred Stock, acting as a single class.

          (d)  So long as at least 5,000,000 shares of Designated Preferred
Stock (subject to appropriate adjustment in the event of any dividend, stock
split, combination or other similar recapitalization affecting such shares) are
outstanding (or such lesser number of shares of Designated Preferred Stock as
are then outstanding if the Corporation has, prior to such time, failed to
redeem shares of Designated Preferred Stock when such redemption was due in
accordance with Section 6 above), the Corporation shall not, without the prior
written consent of the holders of shares of Designated Preferred Stock
representing at least a majority of the combined votes represented by the
outstanding shares of Designated Preferred Stock:

               (i)   authorize any shares of capital stock with preference or
priority over the Designated Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation or with superior vesting or redemption rights;

               (ii)  amend the Corporation's By-laws in a manner adverse to  the
holders of the Designated Preferred Stock;

               (iii) declare or pay any dividends on Common Stock other than
dividends payable solely in Common Stock;

               (iv)  redeem, repurchase or otherwise acquire (or pay into or set
aside a sinking fund for such purpose) any shares of Common Stock at a price
greater than the price at which they were originally issued;

               (v)   liquidate, dissolve or wind-up the Corporation;

               (vi)  make (or permit any subsidiary to make) any loan or advance
to any person, including without limitation, any employee or director of the
Corporation or any subsidiary, except (A) advances and similar expenditures in
the ordinary course of business or (B) as approved by the Board of Directors; or

               (vii) (A) merge with or into or consolidate with any other
corporation (other than a merger of consolidation in which the stockholders of
the Company immediately prior thereto own at least 80% of the outstanding voting
stock of the surviving or acquiring corporation), (B) sell, lease, or otherwise
dispose of all or substantially all, or a Significant Portion (as defined
below), of its properties or assets (for this purpose, "Significant Portion"
shall mean properties or assets with a fair market value equal to more than 35%
of the book value of the Company's total

                                     -23-
<PAGE>

properties or assets as of the end of the most recent fiscal quarter), or (C)
acquire all or substantially all of the properties or assets of any other
corporation or entity (except for consideration of less than 20% of the
Corporation's consolidated net worth as of the end of the prior fiscal quarter.

                                     -24-
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President this 25th day of February, 1999.

                                         Sycamore Networks, Inc.



                                         By:  /s/ Daniel Smith
                                            ------------------
                                                Daniel Smith
                                                President

                                     -25-
<PAGE>

                           CERTIFICATE OF CORRECTION
                                      OF
                           CERTIFICATE OF AMENDMENT
                                      OF
                            SYCAMORE NETWORKS, INC.

________________________________________________________________________________

     Sycamore Networks, Inc., organized and existing under and by virtue of the
General Corporation Law of the State of Delaware

     Does Hereby Certify THAT:

     1.   The name of the corporation is Sycamore Networks, Inc. (hereinafter
called the "Corporation").

     2.   A Certificate of Amendment of the Corporation (the "Certificate") was
filed by the Secretary of State of the State of Delaware on February 25, 1999
and that said Certificate requires correction as permitted by Section 103 of the
General Corporation Law of the State of Delaware.

     3.   The inaccuracy in said Certificate is as follows:

     That as a result of a typographical error, the word "vesting" described in
the last sentence of Section C.7(d)(i) of ARTICLE FOURTH of the Certificate
setting forth the amending resolution was incorrect, and should be replaced with
the word "voting."

     4.   That the corrected version of the resolution setting forth the
amendment to be effected by the original Certificate of Amendment is as follows:

RESOLVED:      That Section C.7(d)(i) of ARTICLE FOURTH of the Certificate of
--------
               Incorporation of the Corporation be and hereby is deleted and the
               following paragraph is inserted in lieu thereof:

                    "(i)  authorize any shares of capital stock with preference
                    or priority over the Designated Preferred Stock as to the
                    right to receive either dividends or amounts distributable
                    upon liquidation, dissolution or winding up of the
                    Corporation or with superior voting or redemption rights;"
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be signed by its President this 4th of April, 1999.

                                        SYCAMORE NETWORKS, INC.



                                        By: /s/Daniel Smith
                                           ----------------
                                           Daniel Smith
                                           President

                                      -2-
<PAGE>

                           CERTIFICATE OF AMENDMENT
                                      OF
                         CERTIFICATE OF INCORPORATION
                                      OF
                            SYCAMORE NETWORKS, INC.


     Sycamore Networks, Inc. (the "Corporation"), organized and existing under
and by virtue of the General Law of the State of Delaware, does hereby certify
as follows:

     The Board of Directors of the Corporation duly adopted, pursuant to Section
242 of the General Corporation Law of Delaware, a resolution setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable.  The stockholders of the Corporation duly
approved said proposed amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware by written consent in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware,
and written notice of such consent has been given to all stockholders who have
not consented in writing to said amendment.  The resolution setting forth the
amendment is as follows:

     RESOLVED:      That Article FOURTH of the Certificate of Incorporation of
     --------
the Corporation be and hereby is deleted in its entirety and the following
Article FOURTH is inserted in lieu thereof:

          FOURTH: The total number of shares of all classes of stock which the
          ------
     Corporation shall have authority to issue is 48,000,000 shares, consisting
     of (i) 32,000,000 shares of Common Stock, $.001 par value per share
     ("Common Stock"), and (ii) 16,000,000 shares of Preferred Stock, $.01 par
     value per share ("Preferred Stock"), 8,975,000 shares of which have been
     designated as Series A Convertible Preferred Stock ("Series A Preferred
     Stock"), 3,625,000 shares of which have been designated as
<PAGE>

     Series B Convertible Preferred Stock ("Series B Preferred Stock"),
     2,500,000 shares of which have been designated as Series C Convertible
     Preferred Stock ("Series C Preferred Stock"), and 692,201 shares of which
     have been designated as Series D Convertible Preferred Stock ("Series D
     Preferred Stock", together with the Series A Preferred Stock, Series B
     Preferred Stock and the Series C Preferred Stock the "Designated Preferred
     Stock").

     The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.

A. Common Stock.
   ------------

     1. General.  The voting, dividend and liquidation rights of the holders of
        -------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

     2. Voting.  The holders of the Common Stock are entitled to one vote for
        ------
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.

     The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

     3. Dividends.  Dividends may be declared and paid on the Common Stock from
        ---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.

     4. Liquidation.  Upon the dissolution or liquidation of the Corporation,
        -----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.

B. Preferred Stock.
   ---------------

     Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of

                                      -2-
<PAGE>

the Corporation as hereinafter provided. Any shares of Preferred Stock which may
be redeemed, purchased or acquired by the Corporation may be reissued except as
otherwise provided by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of voting
by classes unless expressly provided.

     Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware.  Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law.  Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.

C. Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
   ----------------------------------------------------------------------------
and Series D Preferred Stock.
----------------------------

     1. Dividends.
        ---------

          (a)  The Corporation shall not declare or pay any dividends or
distributions (as defined below) on shares of Common Stock until the holders of
the Designated Preferred Stock then outstanding shall have first received, or
simultaneously receive, a like distribution on each outstanding share of
Designated Preferred Stock, in an amount at least equal to the product of (i)
the per share amount, if any, of the dividends or distributions to be declared,
paid or set aside for the Common Stock, multiplied by (ii) the number of whole
shares of Common Stock into which such share of Designated Preferred Stock is
convertible as of the record date for such dividend or distribution.

          (b)  For purposes of this Section 1, "distribution" shall mean the
transfer of cash or property without consideration, whether by way of dividend
or otherwise, payable other than in Common Stock or other securities of the
Corporation, or the purchase or redemption of shares of the Corporation (other
than repurchases of

                                      -3-
<PAGE>

Common Stock held by employees or directors of, or consultants to, the
Corporation upon termination of their employment or services pursuant to
agreements approved by the Board of Directors providing for such repurchase at a
price equal to the original issue price of such shares) for cash or property,
including any such transfer, purchase or redemption by a subsidiary of the
Corporation.

     2.  Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations
         -----------------------------------------------------------------------
and Asset Sales.
---------------

          (a)  In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Designated Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other class or series of stock of the
Corporation ranking on liquidation prior and in preference to the Designated
Preferred Stock, but before any payment shall be made to the holders of Common
Stock or any other class or series of stock ranking on liquidation junior to the
Designated Preferred Stock by reason of their ownership thereof, an amount equal
to $0.91 per share in the case of the Series A Preferred Stock, $3.50 per share
in the case of the Series B Preferred Stock, $8.00 per share in the case of the
Series C Preferred Stock and $21.67 per share in the case of the Series D
Preferred Stock (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid on such shares.  If upon
any such liquidation, dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of shares of Designated Preferred Stock the
full amount to which they shall be entitled, the holders of shares of Designated
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Designated Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.

          (b)  After the payment of all preferential amounts required to be paid
to the holders of any class or series of stock of the Corporation ranking on
liquidation prior to and in preference to the Common Stock, upon the
dissolution, liquidation or winding up of the Corporation, the remaining assets
and funds of the Corporation available for distribution to its stockholders
shall be distributed among the holders of shares of Common Stock.

          (c)  Any (i) merger or consolidation which results in the voting
securities of the Corporation outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting

                                      -4-
<PAGE>

securities of the surviving or acquiring entity) less than a majority of the
combined voting power of the voting securities of the Corporation or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all of the assets of the
Corporation or (iii) sale of shares of capital stock of the Corporation, in a
single transaction or series of related transactions, representing at least 80%
of the voting power of the voting securities of the Corporation, shall be deemed
to be a liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation (net of obligations owed by the
Corporation), together with all other available assets of the Corporation (in
the case of an asset sale), shall be distributed to the holders of capital stock
of the Corporation in accordance with Subsections 2(a) and 2(b) above. The
Corporation shall promptly provide to the holders of shares of Designated
Preferred Stock such information concerning the terms of such merger,
consolidation or asset sale and the value of the assets of the Corporation as
may reasonably be requested by the holders of Designated Preferred Stock. If
applicable, the Corporation shall cause the agreement or plan of merger or
consolidation to provide for a rate at which the shares of capital stock of the
Corporation are converted into or exchanged for cash, new securities or other
property which gives effect to this provision. The amount deemed distributed to
the holders of Designated Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the Corporation and/or by the acquiring person, firm or other
entity. The value of such property, rights or other securities shall be
determined in good faith by the Board of Directors of the Corporation.

     3.  Voting.
         ------

          (a)  Each holder of outstanding shares of the Designated Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Designated Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 4 hereof) as of the record date, at each meeting of stockholders of the
Corporation (and written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration. Except as provided by law or by the
provisions of Section 3(b) or Section 7 below or by the provisions establishing
any other series of stock, holders of Designated Preferred Stock and of any
other outstanding series of stock shall vote together with the holders of Common
Stock as a single class.

          (b)  For so long as at least 2,700,000 shares of Designated Preferred
Stock (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalizations affecting such shares) are
outstanding (or such lesser number of shares of Designated Preferred Stock as
are then outstanding if the Corporation has, prior to such time, failed to
redeem shares of Series A Preferred

                                      -5-
<PAGE>

Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, as the case may be, when such redemption was due in accordance with
Section 6 below), the holders of record of the shares of Designated Preferred
Stock, exclusively and as a separate class, shall be entitled to elect two
members of the Board of Directors of the Corporation. At any meeting held for
the purpose of electing directors, the presence in person or by proxy of the
holders of a majority of the shares of Designated Preferred Stock then
outstanding shall constitute a quorum of the Designated Preferred Stock for the
purpose of electing directors by holders of Designated Preferred Stock. A
vacancy in any directorship filled by the holders of Designated Preferred Stock
shall be filled only by vote or written consent in lieu of a meeting of the
holders of Designated Preferred Stock.

     4.  Optional Conversion.  The holders of Designated Preferred Stock shall
         -------------------
have conversion rights as follows (the "Conversion Rights"):

               (a)  Right to Convert. Each share of Series A Preferred Stock
                    ----------------
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $0.91 by the Series A Conversion Price (as defined
below) in effect at the time of conversion. The "Series A Conversion Price"
shall initially be $0.91. Such Series A Conversion Price, and the rate at which
shares of Series A Preferred Stock may be converted into shares of Common Stock,
shall be subject to adjustment as provided below. Each share of Series B
Preferred Stock shall be convertible, at the option of the holder thereof at any
time and from time to time and without the payment of additional consideration
by the holder thereof, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $3.50 by the Series B Conversion
Price (as defined below) in effect at the time of conversion. The "Series B
Conversion Price" shall initially be $3.50. Such Series B Conversion Price, and
the rate at which shares of Series B Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below. Each
share of Series C Preferred Stock shall be convertible, at the option of the
holder thereof at any time and from time to time and without the payment of
additional consideration by the holder thereof, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $8.00 by
the Series C Conversion Price (as defined below) in effect at the time of the
conversion. The "Series C Conversion Price" shall initially be $8.00. Such
Series C Conversion Price, and the rate at which shares of Series C Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below. Each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof at any time and from time to
time and without the payment of additional consideration by the holder thereof
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $21.67 by the Series D Conversion Price (as defined
below) in effect at the time of the conversion. The

                                      -6-
<PAGE>

"Series D Conversion Price" shall initially be $21.67. Such Series D Conversion
Price, and the rate at which shares of Series D Preferred Stock may be converted
into shares of Common Stock shall be subject to adjustment as provided below.

     In the event of a notice of redemption of any shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock pursuant to Section 6 hereof, the Conversion Rights of the shares
designated for redemption shall terminate at the close of business on the first
full day preceding the date fixed for redemption, unless the redemption price is
not paid when due, in which case the Conversion Rights for such shares shall
continue until such price is paid in full.  In the event of a liquidation of the
Corporation (or deemed liquidation under Section 2(c) hereof), the Conversion
Rights shall terminate at the close of business on the first full business day
preceding the date fixed for the payment of any amounts distributable on
liquidation (or deemed liquidation under Section 2(c) hereof) to the holders of
Designated Preferred Stock.

          (b)  Fractional Shares.  No fractional shares of Common Stock shall be
               -----------------
issued upon conversion of the Designated Preferred Stock.  In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price, as the case may be.

          (c)  Mechanics of Conversion.
               -----------------------

                    (i)  In order for a holder of Designated Preferred Stock to
convert shares of Designated Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Designated Preferred Stock, at the office of the transfer agent for such shares
of Designated Preferred Stock (or at the principal office of the Corporation if
the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of Designated
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Designated
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.

                                      -7-
<PAGE>


          (ii)  The Corporation shall at all times when Designated Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of Designated
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Designated Preferred Stock. Before taking any action which would
cause an adjustment reducing the Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price or the Series D Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock or the Series D Preferred Stock, as the case may be, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Series A Conversion Price, Series B Conversion Price, the Series C Conversion
Price or the Series D Conversion Price.

          (iii)  Upon any such conversion, no adjustment to the Series A
Conversion Price, the Series B Conversion Price, the Series C Conversion Price
or the Series D Conversion Price shall be made for any declared but unpaid
dividends on the Series A Preferred Stock, the Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock, as the case may be, surrendered
for conversion or on the Common Stock delivered upon conversion.

          (iv)  All shares of Designated Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any dividends
declared but unpaid thereon. Any shares of Designated Preferred Stock so
converted shall be retired and cancelled and shall not be reissued, and the
Corporation (without the need for stockholder action) may from time to time take
such appropriate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock, Series B Preferred Stock Series C Preferred
Stock or Series D Preferred Stock accordingly.

          (v)  The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issuance or delivery of shares of Common Stock
upon conversion of shares of Designated Preferred Stock pursuant to this Section
4. The Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of
Designated Preferred Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person or entity requesting such
issuance has paid to

                                      -8-
<PAGE>

the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.

          (d)  Adjustments to Conversion Price for Diluting Issues:
               ---------------------------------------------------

                    (i)  Special Definitions. For purposes of this Subsection
                         -------------------
4(d), the following definitions shall apply:

                              (A)  "Option" shall mean rights, options or
                                    ------
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.

                              (B)  "Original Issue Date" shall mean the date on
                                    -------------------
which a share of Series A Preferred Stock was first issued.

                              (C)  "Convertible Securities" shall mean any
                                    ----------------------
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.

                              (D)  "Additional Shares of Common Stock" shall
                                    ---------------------------------
mean all shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii)
below, deemed to be issued) by the Corporation after the Original Issue Date,
other than:

                                   (I)    shares of Common Stock issued or
                                          issuable as a dividend or other
                                          distribution on Designated Preferred
                                          Stock;

                                   (II)   shares of Common Stock issued or
                                          issuable by reason of a dividend or
                                          other distribution on shares of Common
                                          Stock that is covered by Subsection
                                          4(e) or 4(f) below;

                                   (III)  shares of Common Stock issued or
                                          issuable upon conversion of those
                                          shares of (1) Series A Preferred Stock
                                          sold pursuant to the Series A
                                          Preferred Stock Purchase Agreement
                                          dated as of February 19, 1998, as the
                                          same may be amended from time to time,
                                          (2) Series B Preferred Stock sold
                                          pursuant to the Series B Preferred
                                          Stock Purchase Agreement dated as of
                                          December 3, 1998, as the same may be
                                          amended from time to time, (3) Series
                                          C Preferred Stock sold pursuant to the
                                          Series C Preferred Stock Purchase
                                          Agreement dated as of February 26,
                                          1999, as

                                      -9-
<PAGE>

                                          the same may be amended from
                                          time to time, and (4) Series D
                                          Preferred Stock sold pursuant to the
                                          Series D Preferred Stock Purchase
                                          Agreement dated as of July 23 1999, as
                                          the same may be amended from time to
                                          time.

                                   (IV)   up to 8,855,000 shares of Common Stock
                                          (subject to appropriate adjustment for
                                          stock splits, stock dividends,
                                          combinations and other similar
                                          recapitalizations affecting such
                                          shares), plus such additional number
                                          of shares as may be approved by a
                                          majority of the non-employee members
                                          of the Board of Directors of the
                                          Corporation, issued or issuable to
                                          employees or directors of, or
                                          consultants to, the Corporation; and

                                   (V)    shares of Common Stock issued to
                                          equipment lessors, as approved by a
                                          majority of the non-employee members
                                          of the Board of Directors of the
                                          Corporation.

                    (ii)  No Adjustment of Conversion Price. No adjustment in
                          ---------------------------------
the number of shares of Common Stock into which the Series A Preferred Stock is
convertible shall be made (a) unless the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the applicable Series A
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares, or (b) if prior to or within 60 days subsequent to
such issuance, the Corporation receives written notice from the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock,
agreeing that no such adjustment shall be made as a result of the issuance of
Additional Shares of Common Stock. No adjustment in the number of shares of
Common Stock into which the Series B Preferred Stock is convertible shall be
made (a) unless the consideration per share (determined pursuant

                                     -10-
<PAGE>


to Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the applicable Series B Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares, or (b) if prior to or within 60 days subsequent to such
issuance, the Corporation receives written notice from the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock, agreeing
that no such adjustment shall be made as a result of the issuance of Additional
Shares of Common Stock. No adjustment in the number of shares of Common Stock
into which the Series C Preferred Stock is convertible shall be made (a) unless
the consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series C Conversion Price in effect on
the date of, and immediately prior to, the issue of such Additional Shares, or
(b) if prior to or within 60 days subsequent to such issuance, the Corporation
receives written notice from the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock, agreeing that no such adjustment
shall be made as a result of the issuance of Additional Shares of Common Stock.
No adjustment in the number of shares of Common Stock into which the Series D
Preferred Stock is convertible shall be made (a) unless the consideration per
share (determined pursuant to Subsection 4(d)(v) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
applicable Series D Conversion Price in effect on the date of, and immediately
prior to, the issuance of such Additional Shares, or (b) if prior to or within
60 days subsequent to such issuance, the Corporation receives written notice
from the holders of at least a majority of the then outstanding shares of Series
D Preferred Stock, agreeing that no such adjustment shall be made as a result of
the issuance of Additional Shares of Common Stock.

               (iii)  Issue of Securities Deemed Issue of Additional Shares of
                      --------------------------------------------------------
Common Stock.
------------

     If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that (1)
for the purpose of adjusting the Series A Conversion Price, Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 4(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the applicable Series

                                     -11-

<PAGE>

C Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, and (4) for the purpose of adjusting the Series D
Conversion Price, Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the applicable Series D Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:

               (A)  No further adjustment in the Series A Conversion Price, the
Series B Conversion Price, the Series C Conversion Price or Series D Conversion
Price shall be made upon subsequent issue of Convertible Securities or shares of
Common Stock upon exercise of such Options or conversion or exchange of such
Convertible Securities;

               (B)  If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Series A Conversion Price, the Series B Conversion Price,
the Series C Conversion Price or Series D Conversion Price, as applicable,
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;

               (C)  Upon the expiration or termination of any unexercised
Option, the Series A Conversion Price, the Series B Conversion Price, Series C
Conversion Price and Series D Conversion Price, as applicable, shall not be
readjusted, but the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Option shall not be deemed issued for the
purposes of any subsequent adjustment of the Series A Conversion Price, the
Series B Conversion Price, Series C Conversion Price or Series D Conversion
Price, as applicable;

               (D)  In the event of any change in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Series A Conversion Price, the Series B
Conversion Price, Series C Conversion Price and Series D Conversion Price then
in effect shall forthwith be readjusted to such Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price and Series D Conversion
Price as would have obtained had the adjustment which was made upon the issuance
of such Option or Convertible Security not exercised or converted prior to such
change been made upon the basis of such change; and

                                     -12-
<PAGE>

                    (E)  No readjustment pursuant to clause (B) or (D) above
shall have the effect of increasing the Series A Conversion Price, the Series B
Conversion Price, Series C Conversion Price or Series D Conversion Price, as
applicable, to an amount which exceeds the lower of (i) the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price or Series D
Conversion Price, as the case may be, on the original adjustment date, or (ii)
the Series A Conversion Price, the Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original adjustment
date and such readjustment date.

     In the event the Corporation, after the Original Issue Date, amends any
Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on the Original Issue Date or were issued after the
Original Issue Date) to increase the number of shares issuable thereunder or
decrease the consideration to be paid upon exercise or conversion thereof, then
such Options or Convertible Securities, as so amended, shall be deemed to have
been issued after the Original Issue Date and the provisions of this Subsection
4(d)(iii) shall apply.

               (iv)  Adjustment of Conversion Price Upon Issuance of Additional
                     ----------------------------------------------------------
Shares of Common Stock.
----------------------

                         (A)  In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series A Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series A Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any
                                     -13-
<PAGE>

adjustments to the conversion price or conversion rate of such Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that
is the subject of this calculation.

                    (B)  In the event the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series B Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series B
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series B
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series B Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                    (C)  In the event the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series C Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series C
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series C
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series C

                                     -14-
<PAGE>

Conversion Price; and (B) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued; provided that, (i) for the
                                                  -------- ----
purpose of this Subsection 4(d)(iv), all shares of Common Stock issuable upon
exercise or conversion of Options or Convertible Securities outstanding
immediately prior to such issue shall be deemed to be outstanding, and (ii) for
the purpose of this Subsection 4(d)(iv), the number of shares of Common Stock
deemed issuable upon conversion of such outstanding Convertible Securities shall
not give effect to any adjustments to the conversion price or conversion rate of
such Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

                    (D)  In the event the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a stock split or combination as
provided in Subsection 4(e) or upon a dividend or distribution as provided in
Subsection 4(f)), without consideration or for a consideration per share less
than the applicable Series D Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series D
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series D
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Series D Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose
                                             -------- ----
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) for the purpose of
this Subsection 4(d)(iv), the number of shares of Common Stock deemed issuable
upon conversion of such outstanding Convertible Securities shall not give effect
to any adjustments to the conversion price or conversion rate of such
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.

               (v)  Determination of Consideration. For purposes of this
                    ------------------------------
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:


                                     -15-
<PAGE>

                    (A)  Cash and Property:  Such consideration shall:
                         -----------------

                           (I)     insofar as it consists of cash, be computed
at the aggregate of cash received by the Corporation, excluding amounts paid or
payable for accrued interest;

                           (II)    insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and

                           (III)   in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.

                    (B)  Options and Convertible Securities. The consideration
                         ----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing

                              (x)  the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by

                              (y)  the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

               (vi)  Multiple Closing Dates.  Notwithstanding any adjustments to
                     ----------------------
the Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price and the Series D Conversion Price pursuant to Section 4(d)
hereof, in the event the Corporation shall issue on more than one date
Additional Shares of Common Stock which are comprised of shares of the same
series or class of Convertible Securities, and such issuance dates occur within
a period of no more than 180 days, then, upon the final such issuance, the
Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price and the Series D Conversion Price, as

                                     -16-
<PAGE>

the case may be, shall be readjusted to give effect to all such issuances as if
they occurred on the date of the final such issuance (and without giving effect
to any adjustments as a result of such prior issuances within such period).

          (e)  Adjustment for Stock Splits and Combinations.  If the Corporation
               --------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Series A Conversion Price, the
Series B Conversion Price, the Series C Conversion Price, and the Series D
Conversion Price then in effect immediately before that subdivision shall be
proportionately decreased.  If the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of Common
Stock, the Series A Conversion Price, the Series B Conversion Price, the Series
C Conversion Price and the Series D Conversion Price then in effect immediately
before the combination shall be proportionately increased.  Any adjustment under
this paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          (f)  Adjustment for Certain Dividends and Distributions.  In the event
               --------------------------------------------------
the Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series A
Conversion Price, the Series B Conversion Price, the Series C Conversion Price
and the Series D Conversion Price, as the case may be, then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price and the Series D Conversion Price, as the case may be,
then in effect by a fraction:

                    (1) the numerator of which shall be the total number of
               shares of Common Stock issued and outstanding immediately prior
               to the time of such issuance or the close of business on such
               record date, and

                    (2) the denominator of which shall be the total number of
               shares of Common Stock issued and outstanding immediately prior
               to the time of such issuance or the close of business on such
               record date plus the number of shares of Common Stock issuable in
               payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price, the Series B Conversion Price,
the Series C Conversion Price and the Series D Conversion Price, as the case may
be, shall be recomputed accordingly as of the close of business on such record
date and thereafter the Series A

                                     -17-
<PAGE>

Conversion Price, the Series B Conversion Price, Series C Conversion Price or
Series D Conversion Price, as the case may be, shall be adjusted pursuant to
this paragraph as of the time of actual payment of such dividends or
distributions; and provided further, however, that no such adjustment shall be
made if the holders of the applicable Designated Preferred Stock simultaneously
receive a dividend or other distribution of shares of Common Stock in a number
equal to the number of shares of Common Stock as they would have received if all
outstanding shares of the applicable Designated Preferred Stock had been
converted into Common Stock on the date of such event.

          (g)  Adjustments for Other Dividends and Distributions.  In the event
               -------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Designated
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Designated Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of Designated
Preferred Stock; and provided further, however, that no such adjustment shall be
made if the holders of Designated Preferred Stock simultaneously receive a
dividend or other distribution of such securities in an amount equal to the
amount of such securities as they would have received if all outstanding shares
of Designated Preferred Stock had been converted into Common Stock on the date
of such event.

          (h)  Adjustment for Reclassification, Exchange, or Substitution. If
               ----------------------------------------------------------
the Common Stock issuable upon the conversion of the Designated Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Designated Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable, upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into which such
shares of Designated Preferred Stock might have been converted immediately prior
to such reorganization, reclassification, or change, all subject to further
adjustment as provided herein.

                                     -18-
<PAGE>

          (i)  Adjustment for Merger or Reorganization, etc.  In case of any
               --------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is covered by
Subsection 2(c)), each share of Designated Preferred Stock remaining outstanding
after such consolidation, merger or sale, if any, shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Designated Preferred Stock would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of Designated Preferred Stock,
to the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Series A Conversion
Price, the Series B Conversion Price, Series C Conversion Price) and Series D
Conversion Price shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares of stock or other property thereafter deliverable upon
the conversion of the applicable Designated Preferred Stock.

          (j)  No Impairment.  The Corporation will not, by amendment of its
               -------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Designated Preferred Stock against impairment.

          (k)  Certificate as to Adjustments.  Upon the occurrence of each
               -----------------------------
adjustment or readjustment of the Series A Conversion Price, the Series B
Conversion Price, Series C Conversion Price or Series D Conversion Price
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Designated Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.  The Corporation shall, upon the written
request at any time of any holder of Designated Preferred Stock furnish or cause
to be furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price or the Series D Conversion Price
then in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which then would be received upon the conversion of
the applicable Designated Preferred Stock.

                                     -19-
<PAGE>

          (l)  Notice of Record Date.  In the event:
               ---------------------

                    (i)    that the Corporation declares a dividend (or any
                           other distribution) on its Common Stock payable in
                           Common Stock or other securities of the Corporation;

                    (ii)   that the Corporation subdivides or combines its
                           outstanding shares of Common Stock;

                    (iii)  of any reclassification of the Common Stock of the
                           Corporation (other than a subdivision or combination
                           of its outstanding shares of Common Stock or a stock
                           dividend or stock distribution thereon), or of any
                           consolidation or merger of the Corporation into or
                           with another corporation, or of the sale of all or
                           substantially all of the assets of the Corporation;
                           or

                    (iv)   of the involuntary or voluntary dissolution,
                           liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Designated Preferred Stock, and shall cause
to be mailed to the holders of Designated Preferred Stock at their last
addresses as shown on the records of the Corporation or such transfer agent, at
least ten days prior to the date specified in (A) below or twenty days before
the date specified in (B) below, a notice stating

          (A)    the record date of such dividend, distribution, subdivision or
                 combination, or, if a record is not to be taken, the date as of
                 which the holders of Common Stock of record to be entitled to
                 such dividend, distribution, subdivision or combination are to
                 be determined, or

          (B)   the date on which such reclassification, consolidation, merger,
                sale, dissolution, liquidation or winding up is expected to
                become effective, and the date as of which it is expected that
                holders of Common Stock of record shall be entitled to exchange
                their shares of Common Stock for securities or other property
                deliverable upon such reclassification, consolidation, merger,
                sale, dissolution or winding up.

                                     -20-
<PAGE>

     5.  Mandatory Conversion.
         --------------------

               (a)  Upon the earlier of (x) the closing of the sale of shares of
Common Stock, at a price of at least $29.00 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, resulting in at least $10,000,000 of
proceeds to the Corporation (net of the underwriting discounts or commissions
and offering expenses) and (y) the first date on which at least 10,000,000
shares of Designated Preferred Stock have been converted into Common Stock
pursuant to Section 4 above (the "Mandatory Conversion Date"), (i) all
outstanding shares of Designated Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective conversion rate,
and (ii) all provisions hereof included under the captions "Series A Convertible
Preferred Stock", "Series B Convertible Preferred Stock", "Series C Convertible
Preferred Stock" and "Series D Convertible Preferred Stock" and all references
herein to the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock and Series D Preferred Stock (including all references to
Designated Preferred Stock), shall be deleted and shall be of no further force
or effect.

          (b)  All holders of record of shares of Designated Preferred Stock
shall be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Designated Preferred
Stock, pursuant to this Section 5. Such notice need not be given in advance of
the occurrence of a Mandatory Conversion Date. Such notice shall be sent by
first class or registered mail, postage prepaid, to each record holder of
Designated Preferred Stock at such holder's address last shown on the records of
the transfer agent for the applicable Designated Preferred Stock (or the records
of the Corporation, if it serves as its own transfer agent). Upon receipt of
such notice, each holder of shares of Designated Preferred Stock shall surrender
his or its certificate or certificates for all such shares to the Corporation at
the place designated in such notice, and shall thereafter receive certificates
for the number of shares of Common Stock to which such holder is entitled
pursuant to this Section 5. On the Mandatory Conversion Date, all rights with
respect to the Designated Preferred Stock so converted, including the rights, if
any, to receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Designated Preferred Stock has
been converted, and payment of any declared but unpaid dividends thereon. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Designated Preferred Stock the

                                     -21-
<PAGE>

Corporation shall cause to be issued and delivered to such holder, or on his or
its written order, a certificate or certificates for the number of full shares
of Common Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in Subsection 4(b) in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion.

          (c)  All certificates evidencing shares of Designated Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Designated Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Designated Preferred Stock accordingly.

     6.Redemption.
       ----------

          (a)  The Corporation will, subject to the conditions set forth below,
on February 26, 2004, February 26, 2005 and February 26, 2006 (each, a
"Mandatory Redemption Date"), upon receipt not less than 30 nor more than 120
days prior to the applicable Mandatory Redemption Date of written request(s) for
redemption from holders of at least a majority of the shares of Designated
Preferred Stock then outstanding (a "Redemption Request"), redeem from each
holder of shares of Designated Preferred Stock, at a price equal to $0.91 per
share in the case of the Series A Preferred Stock, $3.50 per share in the case
of the Series B Preferred Stock, $8.00 per share in the case of the Series C
Preferred Stock and $21.67 per share in the case of Series D Preferred Stock
(subject to appropriate adjustment in the event of any dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
declared but unpaid dividends thereon (the "Redemption Price"), the following
respective portions of the number of shares of Designated Preferred Stock held
by such holder set forth opposite the applicable Redemption Date:

<TABLE>
<CAPTION>
                                                      Portion of then
                                                   Outstanding Shares of
               Mandatory                        Designated Preferred Stock
            Redemption Date                           To Be Redeemed
            ---------------                      ------------------------
            <S>                                 <C>
            February 26, 2004                             33 1/3%
            February 26, 2005                               50%
            February 26, 2006                        All Shares then held
</TABLE>

The Corporation shall provide notice of its redemption obligations under this
Section 6, by first class or registered mail, postage prepaid, to each holder of
record

                                     -22-
<PAGE>

of Designated Preferred Stock at the address for such holder last shown on the
records of the transfer agent therefor (or the records of the Corporation, if it
serves as its own transfer agent), not less than 120 nor more than 180 days
prior to the applicable Mandatory Redemption Date. The Corporation shall provide
notice of any Redemption Request, specifying the time and place of redemption
and the Mandatory Redemption Price, by first class or registered mail, postage
prepaid, to each holder of record of Designated Preferred Stock at the address
for such holder last shown on the records of the transfer agent therefor (or the
records of the Corporation, if it serves as its own transfer agent), not less
than 20 days prior to the Mandatory Redemption Date.

          (b)  If the funds of the Corporation legally available for redemption
of the Designated Preferred Stock on any Mandatory Redemption Date are
insufficient to redeem the number of shares of the Designated Preferred Stock
required under this Section 6 to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably in proportion to the respective amounts which would otherwise be
payable to the holders of Designated Preferred Stock if the funds of the
Corporation legally available therefor had been sufficient to redeem all shares
required to be redeemed on such date. At any time thereafter when additional
funds of the Corporation become legally available for the redemption of the
Designated Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem, to the extent of the available funds and
in the same proportion as set forth in the preceding sentence, the balance of
the shares which the Corporation was theretofore obligated to redeem.

          (c)  Unless there shall have been a default in payment of the
Mandatory Redemption Price, on the applicable Mandatory Redemption Date all
rights of each holder of shares of Designated Preferred Stock as a stockholder
of the Corporation by reason of the ownership of such shares will cease, except
the right to receive the Mandatory Redemption Price for such shares, without
interest, upon presentation and surrender of the certificate representing such
shares, and such shares will not from and after such Mandatory Redemption Date
be deemed to be outstanding.

          (d)  Any Designated Preferred Stock redeemed pursuant to this Section
6 will be cancelled and will not under any circumstances be reissued, sold or
transferred and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized number of shares of
Designated Preferred Stock accordingly.

     7.  Negative Covenants.
         ------------------

               (a)  The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely

                                     -23-
<PAGE>

the Series A Preferred Stock, without the written consent or affirmative vote of
the holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, given in writing or by vote at a meeting, consenting or voting,
as the case may be, separately as a class; provided that if any such amendment,
alteration or repeal adversely affects all of the Designated Preferred Stock in
the same manner, such amendment or repeal shall require only the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Designated Preferred Stock, acting as a single class.

          (b)  The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series B Preferred Stock so as to affect
adversely the Series B Preferred Stock, without the written consent or
affirmative vote of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a meeting,
consenting or voting, as the case may be, separately as a class; provided that
if any such amendment, alteration or repeal adversely affects all of the
Designated Preferred Stock in the same manner, such amendment or repeal shall
require only the written consent or affirmative vote of the holders of at least
a majority of the then outstanding shares of Designated Preferred Stock, acting
as a single class.

          (c)  The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series C Preferred Stock so as to affect
adversely the Series C Preferred Stock, without the written consent or
affirmative vote of the holders of at least a majority of the then outstanding
shares of Series C Preferred Stock, given in writing or by vote at a meeting,
consenting or voting, as the case may be, separately as a class; provided that
if any such amendment, alteration or repeal adversely affects all of the
Designated Preferred Stock in the same manner, such amendment or repeal shall
require only the written consent or affirmative vote of the holders of at least
a majority of the then outstanding shares of Designated Preferred Stock, acting
as a single class.

          (d)  The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series D Preferred Stock so as to affect
adversely the Series D Preferred Stock, without the written consent or
affirmative vote of the holders of at least a majority of the then outstanding
shares of Series D Preferred Stock, given in writing or by vote at a meeting,
consenting or voting, as the case may be, separately as a class; provided that
if any such amendment, alteration or repeal adversely affects all of the
Designated Preferred Stock in the same manner, such amendment or repeal shall
require only the written consent or affirmative vote of the holders of at least
a majority of the then outstanding shares of Designated Preferred Stock, acting
as a single class.

          (e) So long as at least 5,500,000 shares of Designated Preferred Stock
(subject to appropriate adjustment in the event of any dividend, stock split,

                                     -24-
<PAGE>

combination or other similar recapitalization affecting such shares) are
outstanding (or such lesser number of shares of Designated Preferred Stock as
are then outstanding if the Corporation has, prior to such time, failed to
redeem shares of Designated Preferred Stock when such redemption was due in
accordance with Section 6 above), the Corporation shall not, without the prior
written consent of the holders of shares of Designated Preferred Stock
representing at least a majority of the combined votes represented by the
outstanding shares of Designated Preferred Stock:

               (i)   authorize any shares of capital stock with preference or
priority over the Designated Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation or with superior vesting or redemption rights;

               (ii)  amend the Corporation's By-laws in a manner adverse to the
holders of the Designated Preferred Stock;

               (iii) declare or pay any dividends on Common Stock other than
dividends payable solely in Common Stock;

               (iv)  redeem, repurchase or otherwise acquire (or pay into or set
aside a sinking fund for such purpose) any shares of Common Stock at a price
greater than the price at which they were originally issued;

               (v)   liquidate, dissolve or wind-up the Corporation;

               (vi)  make (or permit any subsidiary to make) any loan or advance
to any person, including without limitation, any employee or director of the
Corporation or any subsidiary, except (A) advances and similar expenditures in
the ordinary course of business or (B) as approved by the Board of Directors; or

               (vii) (A) merge with or into or consolidate with any other
corporation (other than a merger of consolidation in which the stockholders of
the Company immediately prior thereto own at least 80% of the outstanding voting
stock of the surviving or acquiring corporation), (B) sell, lease, or otherwise
dispose of all or substantially all, or a Significant Portion (as defined
below), of its properties or assets (for this purpose, "Significant Portion"
shall mean properties or assets with a fair market value equal to more than 35%
of the book value of the Company's total properties or assets as of the end of
the most recent fiscal quarter), or (C) acquire all or substantially all of the
properties or assets of any other corporation or entity (except for
consideration of less than 20% of the Corporation's consolidated net worth as of
the end of the prior fiscal quarter.

                                     -25-
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President this 23rd day of July, 1999.

                                           Sycamore Networks, Inc.



                                           By:  /s/ Daniel Smith
                                              ------------------
                                                  Daniel Smith
                                                  President


                                     -26-