<PAGE>


                                                                     Exhibit 4.3


               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS

                                       OF

                           SERIES A-1 PREFERRED STOCK

                                       AND

                           SERIES A-2 PREFERRED STOCK

                                       OF

                        VISTA INFORMATION SOLUTIONS, INC.

            Pursuant to Section 151 of the General Corporation Law of
                              the State of Delaware
                              ---------------------

         The undersigned officer of VISTA Information Solutions, Inc.
(hereinafter called the "Company"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 9 thereof, does hereby certify as
follows:

         Pursuant to the authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation of the Company filed with the
Secretary of State of the State of Delaware on March 2, 1998, the Board of
Directors of the Company on December 9, 1999, adopted the following resolution
creating two series of Preferred Stock designated as Series A-1 Convertible
Preferred Stock and Series A-2 Convertible Preferred Stock on the terms set
forth in EXHIBIT A attached hereto:

RESOLVED:         That two series of Preferred Stock of the Company be and are
                  hereby created, and that the designation, powers, preferences
                  and rights of the shares of such series, and the
                  qualification, limitations or restrictions thereof are as set
                  forth in the Certificate of Designation, Preferences and
                  Rights attached as EXHIBIT A hereto.


                                       1
<PAGE>


         IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be signed on its behalf, this 9 day of December, 1999.

                                      VISTA INFORMATION SOLUTIONS, INC.



                                      By:
                                         ---------------------------------------
                                           Name:     E. Stevens Hamilton
                                           Title:    Vice President, Mergers and
                                                     Acquisitions and Secretary


                                       2
<PAGE>


                                                                       EXHIBIT A

                         DESCRIPTION AND DESIGNATION OF

                     SERIES A-1 CONVERTIBLE PREFERRED STOCK

                                       AND

                     SERIES A-2 CONVERTIBLE PREFERRED STOCK


1.       DESIGNATION; NUMBER.

         (a) SERIES A-1 CONVERTIBLE PREFERRED STOCK. Four Hundred Ten Thousand
(410,000) shares of the authorized and undesignated Preferred Stock of the
Company, $0.001 par value, are hereby designated as the "Series A-1 Convertible
Preferred Stock" (the "Series A-1 Preferred Stock"), such series to have the
powers, preferences and rights, and the qualifications, limitations and
restrictions set forth below; and

         (b) SERIES A-2 CONVERTIBLE PREFERRED STOCK. Three Hundred Twenty-Five
Thousand (325,000) of the authorized and undesignated Preferred Stock of the
Company, $0.001 par value, are hereby designated as the "Series A-2 Convertible
Preferred Stock" (the "Series A-2 Preferred Stock"), such series to have the
powers, preferences and rights, and the qualifications, limitations and
restrictions set forth below.

2.       DIVIDENDS.

         (a) GENERAL. If a dividend or distribution is declared or otherwise is
to be made (whether in liquidation or otherwise) on or in respect of the Common
Stock of the Company, the holders of shares of Series A-1 Preferred Stock and
Series A-2 Preferred Stock, respectively, shall be paid dividends or
distributions in an amount equal to the amount that would have been paid on or
in respect of the number of whole shares of Common Stock into which such shares
of Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively, are
then convertible, but without regard to Section 5(a)(ii) hereof with respect to
the Series A-2 Preferred Stock, as if all such Common Stock had been issued upon
conversion. The holders of shares of Series A-1 Preferred Stock and Series A-2
Preferred Stock, respectively, shall be entitled to be paid in full the
dividends and distributions provided in this Section 2(a) prior to the payment
of any dividends or distributions on or in respect of Common Stock of the
Company.

         (b) OTHER DIVIDENDS. In addition to dividends and distributions
referred to in Section 2(a) hereof, the holders of the shares of Series A-1
Preferred Stock and Series A-2 Preferred Stock, respectively, shall be paid such
other dividends or distributions on the shares of Series A-1 Preferred Stock and
Series A-2 Preferred Stock, respectively, when and as declared by the Board of
Directors of the Company, acting in its sole discretion, out of assets of the
Company legally available therefor, provided that any dividends payable pursuant
hereto shall be paid on a pro rata basis to each such series based on the number
of shares of Series A-1 Preferred Stock or Series A-2 Preferred Stock held.


                                       3
<PAGE>


3.       LIQUIDATION RIGHTS.

         (a) SENIOR PREFERRED STOCK PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary (a
"Liquidation") that is consummated before the shares of Series A-2 Preferred
Stock have become convertible into Common Stock pursuant to Section 5(a)(ii) and
have voting rights pursuant to Section 4(a)(ii) hereof, the holders of shares of
Series A-2 Preferred Stock shall thereupon be entitled to receive out of legally
available assets of the Company, before the payment, distribution or setting
apart for payment or distribution of any amount in respect of the Common Stock,
the Series A Preferred Stock or the Series A-1 Preferred Stock or any shares of
Preferred Stock not issued and outstanding on the date of issuance of the Series
A-2 Preferred Stock, a preferential amount (the "Senior Liquidation Amount") per
share of Series A-2 Preferred Stock, payable in cash equal to the GREATER of:

             (i) the Original Purchase Price (as defined in Section 9 hereof)
plus (x) all declared but unpaid dividends or distributions (if any), and (y) an
amount equal to 25% per annum of the Original Purchase Price compounded from the
date of the issuance of such share of Series A-2 Preferred Stock; or

             (ii) such amount per share of Series A-2 Preferred Stock as would
have been payable upon such Liquidation had each such share of Series A-2
Preferred Stock been converted into Common Stock immediately prior to such
Liquidation (without regard to Section 5(a)(ii) hereof), plus all declared but
unpaid dividends or distributions (if any).

         (b) PREFERRED STOCK PREFERENCE. In the event of a Liquidation, the
holders of the shares of Series A-1 Preferred Stock (and, when Section 3(a) does
not apply, the shares of Series A-2 Preferred stock) shall thereupon be entitled
to receive out of legally available assets of the Company, after any payment
pursuant to Section 3(a) but before the payment, distribution or setting apart
for payment or distribution of any amount in respect of the Common Stock or any
shares of Preferred Stock not issued and outstanding on the date of issuance of
the Series A-1 and Series A-2 Preferred Stock and pari passu with any shares of
Series A Preferred Stock, a preferential amount (the "Liquidation Amount") per
share of Series A-1 Preferred Stock or Series A-2 Preferred Stock, as the case
may be, payable in cash equal to the GREATER of:

             (i) the Original Purchase Price (as defined in Section 9 hereof)
plus (x) all declared but unpaid dividends or distributions (if any), and (y) an
amount equal to 9% per annum of the Original Purchase Price compounded from the
date of each respective holder's original purchase of the Series A-1 or Series
A-2 Preferred Stock, as the case may be; or

             (ii) such amount per share of Series A-1 or Series A-2 Preferred
Stock, as the case may, as would have been payable upon such Liquidation had
each such share of Series A-1 or Series A-2 Preferred Stock, as the case may be,
been converted into Common Stock immediately prior to such Liquidation, plus all
declared but unpaid dividends or distributions (if any).

         (c) PRORATION. If the assets of Company available for distribution to
holders of shares of Series A Preferred Stock and Series A-1 Preferred Stock
and, if Section 3(a) does not


                                       4
<PAGE>


apply, Series A-2 Preferred Stock are insufficient to pay the full preferential
amount payable to such holders, then all assets legally available for
distribution shall be distributed among the holders of Series A Preferred Stock
and Series A-1 Preferred Stock and, if Section 3(a) does not apply, Series A-2
Preferred Stock pro rata in proportion to the respective liquidation preference
amounts which would otherwise be payable upon liquidation if all amounts payable
on or with respect to such shares were paid in full.

         (d) TREATMENT OF MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. Unless the
holders of a majority of the outstanding shares of Series A Preferred Stock,
Series A-1 Preferred Stock and Series A-2 Preferred Stock, voting together as a
single class, elect to have the provisions of Section 5(c)(viii) apply, for
purposes of Section 3(a) and (b) above, a sale of all or substantially all of
the assets of the Company or a merger or consolidation of the Company with or
into another corporation, following which the holders of the Company's
outstanding capital stock immediately prior to such merger, consolidation or
sale of assets do not own a majority of the outstanding voting securities of the
surviving entity (a "Sale Event"), shall be treated as a Liquidation, entitling
the holders of Series A-1 Preferred Stock and Series A-2 Preferred Stock to
receive their respective Liquidation Amounts upon consummation of such Sale
Event; PROVIDED HOWEVER, that a Sale Event shall not be treated as a Liquidation
if either:

             (i) (A) payment of the Liquidation Amounts would prevent the Sale
Event from being accounted for as a "pooling of interests" transaction, (B) such
treatment is a necessary condition to accomplishing the Sale Event, and (C) the
holders of the Series A-1 Preferred Stock and Series A-2 Preferred Stock receive
securities or other property upon consummation of the Sale Event valued at an
amount per share equal to the Original Purchase Price plus a return of 20% of
the Original Purchase Price per annum compounded from the date of each
respective holder's original purchase of the Series A-1 Preferred Stock or the
Series A-2 Preferred Stock, or

             (ii) under Section 5(c)(viii) (without regard to Section 5(a)(ii)),
the holders of Series A-1 Preferred Stock and Series A-2 Preferred Stock would
receive freely tradable securities upon consummation of such Sale Event valued
at the time of receipt at no less than their respective Liquidation Amounts.

         (e) PAYMENT TO COMMON STOCKHOLDERS. After payment of the full Senior
Liquidation Amount, if applicable, and the full Liquidation Amount to the
holders of Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2
Preferred Stock, as the case may be, and of the liquidation preferences of any
other series of Preferred Stock, all remaining assets of the Company shall be
distributed to the holders of Common Stock.

4.       VOTING RIGHTS.

         (a) GENERAL.

             (i) Unless voting rights for shares of Series A-2 Preferred Stock
are provided by law or are otherwise provided herein, including without
limitation Section 4(b) hereof, the holders of the shares of Series A-2
Preferred Stock shall not have any voting rights until the holders of a majority
of the voting power of those classes and series of capital stock


                                       5
<PAGE>


outstanding prior to the date of issuance of the series A-2 Preferred Stock,
present in person or by proxy at a meeting at which a quorum is present, approve
the grant of voting rights to shares of Series A-2 Preferred Stock.

             (ii) After such stockholders approve the grant of voting rights to
the holders of Series A-2 Preferred Stock, then, except as expressly required by
law or as otherwise provided herein, including without limitation Sections 4(b)
and 4(c) hereof, the holders of shares of Series A-1 Preferred Stock and Series
A-2 Preferred Stock shall vote together with the holders of shares of Common
Stock as a single class on all matters as to which the holders of shares of the
Company may be entitled to vote. The holders of shares of Series A-1 Preferred
Stock and Series A-2 Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which their respective shares
of Series A-1 Preferred Stock and Series A-2 Preferred Stock are convertible on
the record date for such vote. The voting rights conferred upon the holders of
shares of Series A-1 Preferred Stock and Series A-2 Preferred Stock herein shall
be in addition to those provided by law, and neither any provision in the
Certificate of Incorporation of the Company or Bylaws nor any action taken by
the Company shall decrease or otherwise affect said voting rights provided by
law.

         (b) PROTECTIVE PROVISIONS. Except as expressly required by law or as
otherwise provided herein,

             (i) so long as any shares of Series A-1 Preferred Stock or Series
A-2 Preferred Stock are outstanding, the Company shall not, without first
obtaining the written consent or the affirmative vote of the holders of a
majority of the then outstanding shares of Series A-1 Preferred Stock or Series
A-2 Preferred Stock, as the case may be, voting separately as a class, take or
permit any of the following actions:

                  (A) any amendment to the Certificate of Incorporation of the
Company that would increase the authorized number of shares of Series A-1
Preferred Stock or Series A-2 Preferred Stock, as the case may be; or

                  (B) any amendment to the Certificate of Incorporation or the
Bylaws of the Company or any other action that would adversely affect any of the
rights, powers, preferences or privileges of the shares of Series A-1 Preferred
Stock or Series A-2 Preferred Stock, as the case may be;

             (ii) unless and until the shares of Series A-2 Preferred Stock
become convertible into Common Stock pursuant to Section 5(a)(ii) hereof, the
Company shall not, without first obtaining the written consent or the
affirmative vote of the holders of a majority of the then outstanding shares of
Series A-2 Preferred Stock, voting separately as a class, take or permit any of
the following actions:

                  (A) any authorization or issuance of any shares of capital
stock of the Company, or any securities or other instruments convertible into,
exchangeable or exercisable for shares of capital stock of the Company, having
rights to dividends or amounts payable upon liquidation or redemption ranking
senior to or pari passu with the common rights of the Series A-2 Preferred
Stock;


                                       6
<PAGE>


                  (B) any amendment of the terms of any existing shares of
capital stock of the Company, or any securities or other instruments convertible
into, exchangeable or exercisable for shares of capital stock of the Company, to
provide for rights to dividends or upon liquidation or redemption ranking senior
to or pari passu with the common rights of the Series A-2 Preferred Stock;

                  (C) any declaration or payment of a dividend on any shares of
capital stock of the Company other than the Series F Preferred Stock; or

                  (D) any direct or indirect redemption, repurchase or other
acquisition by the Company of any of its capital stock other than the Series F
Preferred Stock;

             (iii) so long as a majority of the aggregate number of shares of
Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred
Stock originally issued are outstanding, the Company shall not, without first
obtaining the written consent or the affirmative vote of the holders of
seventy-five percent (75%) of the then outstanding shares of Series A Preferred
Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock, voting
together as a single class, take or permit any of the following actions:

                  (A) any recapitalization of a type described in Section
5(c)(vii);

                  (B) any declaration or payment of a dividend on any shares of
capital stock of the Company other than the Series F Preferred Stock; or

                  (C) except for a redemption of Series A-2 Preferred Stock
pursuant to Section 6 hereof, which shall require no stockholder or director
approval, any direct or indirect redemption, repurchase or other acquisition by
the Company of any of its capital stock other than the Series F Preferred Stock;

             (iv) so long as a majority of the aggregate number of shares of
Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred
Stock originally issued are outstanding, the Company shall not, without first
obtaining the written consent or the affirmative vote of the holders of
sixty-five percent (65%) of the then outstanding shares of Series A Preferred
Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock, voting
together as a single class, take or permit any of the following actions:

                  (A) any authorization or issuance of any shares of capital
stock of the Company, or any securities or other instruments convertible into,
exchangeable or exercisable for shares of capital stock of the Company, having
rights to dividends or amounts payable upon liquidation or redemption ranking
senior to or pari passu with the common rights of the Series A Preferred Stock,
Series A-1 Preferred Stock and Series A-2 Preferred Stock;

                  (B) any amendment of the terms of any existing shares of
capital stock of the Company, or any securities or other instruments convertible
into, exchangeable or exercisable for shares of capital stock of the Company, to
provide for rights to dividends or upon liquidation or redemption ranking senior
to or pari passu with the common rights of the Series A Preferred Stock, Series
A-1 Preferred Stock and Series A-2 Preferred Stock;


                                       7
<PAGE>


                  (C) except for a redemption of Series A-2 Preferred Stock
pursuant to Section 6 hereof, which shall require no stockholder or director
approval, any direct or indirect redemption, repurchase or other acquisition by
the Company of any series of Preferred Stock (other than the Series F Preferred
Stock, the Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2
Preferred Stock) before September 7, 2006; or

                  (D) any Fundamental Change (as defined in Section 5(c)(viii)).

         (c) RIGHT TO ELECT DIRECTORS.

             (i) DEFINITION OF EVENT OF DEFAULT. An Event of Default will be
deemed to have occurred if the Company fails to comply with or breaches any
material provision hereof, of the Investor Rights Agreement or any Stock
Purchase Agreement, and such breach or failure is not cured by the Company
within 30 days after written notice thereof is furnished to the Company.

             (ii) CONSEQUENCES OF EVENTS OF DEFAULT.

                  (A) If any Event of Default occurs, the holders of the Series
A Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock,
voting together as a single class, shall thereupon be entitled to elect two
members to the Company's Board of Directors. Such right to elect two members to
the Board of Directors will continue until such time as the condition
constituting the Event of Default ceases to exist, at which time such right will
terminate subject to revesting upon the reoccurrence and continuation of any
Event of Default. Any director elected pursuant to this Section 4(c)(ii)(A) will
continue to serve as a director until three months following the date on which
there is no longer any Event of Default.

                  (B) If any Event of Default occurs, each holder of Series A
Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock will
also have any other rights which such holder may have been afforded under any
contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.

             (iii) REMOVAL; REPLACEMENT. Any director elected pursuant to
Section 4(c)(ii)(A) may be removed and replaced, with or without cause by the
vote of the holders of a majority of the shares of the Series A Preferred Stock,
Series A-1 Preferred Stock and Series A-2 Preferred Stock, voting together as a
single class. If any vacancy shall exist for any reason in any directorship that
the holders of such shares are entitled to appoint or elect, such vacancy may be
filled only by such holders, by delivery to the Company of a written instruction
by the affirmative vote of the holders of the Series A Preferred Stock, Series
A-1 Preferred Stock and Series A-2 Preferred Stock, voting together as a single
class, or in any other manner that is in accordance with the Certificate of
Incorporation and the Bylaws of the Company or otherwise authorized by law.

             (iv) SERIES A-2 PREFERRED STOCK. The rights of holders of shares of
Series A-2 Preferred Stock under this Section 4(c) shall be effective only
following the approval of the grant of voting rights to shares of Series A-2
Preferred Stock pursuant to Section 4(a)(i) hereof.


                                       8
<PAGE>


5.       CONVERSION.

         (a) OPTIONAL CONVERSION.

             (i) Subject to subsection (ii), each share of Series A-1 Preferred
Stock and Series A-2 Preferred Stock shall be convertible at any time at the
option of the holder thereof into such number of fully paid and non-assessable
shares of Common Stock as is determined by dividing the Original Purchase Price
of such Series by the Conversion Price then in effect for such Series (the
"Conversion Ratio"). The Conversion Price of the Series A-1 Preferred Stock and
the Series A-2 Preferred Stock shall initially equal 10% of the respective
Original Purchase Price, and may thereafter be adjusted from time to time in
accordance with Section 5(c) hereof.

             (ii) Each share of Series A-2 Preferred Stock shall be convertible
only at and after such time that the holders of a majority of the voting power
of those classes and series of the capital stock outstanding prior to the date
of issuance of the Series A-2 Preferred Stock, present in person or by proxy at
a meeting at which a quorum is present, approve the grant of such conversion
rights to shares of Series A-2 Preferred Stock.

         (b) AUTOMATIC CONVERSION.

             (i) MANDATORY CONVERSION (MARKET EVENTS). Subject to the provisions
of Sections 5(a)(ii) and 5(d), all outstanding shares of Series A-1 Preferred
Stock and Series A-2 Preferred Stock, shall be automatically converted into
shares of Common Stock at the then effective Conversion Ratio:

                  (A) upon the closing of an underwritten public offering on a
firm commitment basis pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Company in which the aggregate gross proceeds to the
Company are at least $50,000,000 and in which the price per share of Common
Stock equals or exceeds 15% of the Original Purchase Price; or

                  (B) upon written notice from the Company to the holders
thereof at any time within 10 days after the end of any period of 20 consecutive
Trading Days in which the Market Price of the Common Stock has exceeded twenty
percent (20%) of the respective Liquidation Amount (determined as of the close
of business on the last Trading Day before the beginning of such 20-day period);
PROVIDED THAT the shares of Common Stock issued upon conversion of the Series
A-1 Preferred Stock and Series A-2 Preferred Stock are then freely tradable in
the public markets without any restriction on the holder thereof (other than a
restriction resulting from participation on the Board of Directors of the
Company by any holder of the Series A-1 Preferred Stock or Series A-2 Preferred
Stock, as the case may be).

             (ii) MANDATORY CONVERSION (CONVERSION OF OTHER SHARES). Subject to
the provisions of Sections 5(a)(ii) and 5(d), all outstanding shares of Series
A-1 Preferred Stock or Series A-2 Preferred Stock, as the case may be, shall be
automatically converted into shares of Common Stock at the then effective
Conversion Ratio at such time as less than 20% of the shares of Series A-1
Preferred Stock or Series A-2 Preferred Stock, respectively, remain outstanding.


                                       9
<PAGE>


             (iii) SERIES A-2 PREFERRED STOCK. If any of the events described in
Sections 5(b)(i) or (ii) have previously occurred with respect to the Series A-2
Preferred Stock at the time such shares become convertible pursuant to Section
5(a)(ii), such shares shall thereupon automatically convert into shares of
Common Stock at the then effective Conversion Ratio.

         (c) ADJUSTMENT TO APPLICABLE CONVERSION PRICE. In order to prevent
dilution of the conversion rights granted under this Section 5, the Conversion
Price shall be subject to adjustment from time to time as provided in this
Section 5(c).

             (i) UPON OTHER SALES OF COMMON STOCK. If at any time while any
shares of the Series A-1 Preferred Stock or Series A-2 Preferred Stock are
outstanding, the Company issues or sells, or in accordance with Section 5(c)(ii)
is deemed to have issued or sold, any shares of Common Stock or Common Stock
Equivalents (as defined below) without consideration or at a price per share
less than the Conversion Price of the Series A-1 Preferred Stock or Series A-2
Preferred Stock, as the case may be, in effect immediately prior to such time,
then immediately upon such issue or sale, the Conversion Price shall be adjusted
to equal the product obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by a fraction:

                  (A) the numerator of which shall be (i) the number of shares
of Common Stock Deemed Outstanding (as defined in Section 9 hereof) immediately
prior to such issue or sale plus (ii) the number of shares of Common Stock or
Common Stock Equivalents which the aggregate purchase price of the total number
of additional shares so issued or sold would purchase at the then effective
Conversion Price, and

                  (B) the denominator of which shall be (i) the number of shares
of Common Stock Deemed Outstanding on the date immediately prior to such issue
or sale plus (ii) the number of additional shares of Common Stock or Common
Stock Equivalents so issued or sold.

Notwithstanding the foregoing, this Section 5(c)(i) shall not apply with respect
to the issuance of: (i) Common Stock upon the conversion of any shares of Series
A-1 Preferred Stock or Series A-2 Preferred Stock; (ii) the securities issuable
upon the exercise or conversion of any right, warrant, option or other
convertible security outstanding at the time of the issuance of the Series A-1
Preferred Stock and Series A-2 Preferred Stock; and (iii) up to 500,000 shares
of Common Stock or options to purchase such shares of Common Stock issued or
issuable at prices lower than the then current Conversion Price pursuant to any
employee benefit plans approved by the Board of Directors of the Company or the
Compensation Committee thereof.

             (ii) UPON ISSUANCES OF WARRANTS, OPTIONS AND RIGHTS TO PURCHASE
COMMON STOCK OR OTHER CONVERTIBLE Securities.

                  (A) COMMON STOCK EQUIVALENTS. If the Company in any manner
issues or sells any options, warrants or rights to subscribe for or to purchase
Common Stock or any stock or other securities convertible into or exercisable or
exchangeable for Common Stock (collectively, "Common Stock Equivalents") and the
price per share for which Common Stock is issuable upon the exercise, conversion
or exchange of such Common Stock


                                       10
<PAGE>


Equivalents is LESS THAN the respective Conversion Price of the Series A-1
Preferred Stock or Series A-2 Preferred Stock in effect immediately prior to the
time of such issuance or sale, then, for purposes of this Section 5(c), the
total maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such Common Stock Equivalents shall be deemed to be
outstanding and to have been issued and sold by the Company for the "Net
Consideration Per Share". For purposes of this paragraph, the "Net Consideration
Per Share" is determined by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of such
Common Stock Equivalents, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise, conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
exercise, conversion or exchange of all such Common Stock Equivalents. No
adjustment of the respective Conversion Price for the Series A-1 Preferred Stock
or Series A-2 Preferred Stock shall be made under Section 5(c)(i) upon the
issuance of any shares of Common Stock pursuant to the exercise, conversion or
exchange of any Common Stock Equivalents if any such adjustment shall previously
have been made upon the original issuance of any such Common Stock Equivalents
as provided above.

                  (B) DECREASES IN NET CONSIDERATION PER SHARE. Should the Net
Consideration Per Share of any such Common Stock Equivalents be decreased from
time to time, then, upon the effectiveness of each such change, the respective
Conversion Price of the Series A-1 Preferred Stock and Series A-2 Preferred
Stock will be adjusted to that which would have been obtained had (1) the
adjustments made upon the issuance of such Common Stock Equivalents been made
upon the basis of the decreased Net Consideration Per Share of such securities,
and (2) all other adjustments made to the respective Conversion Price of the
Series A-1 Preferred Stock and Series A-2 Preferred Stock since the date of
issuance of such Common Stock Equivalents been made to such Conversion Price as
adjusted pursuant to (1) above. Any adjustment of the respective Conversion
Price pursuant to this paragraph which relates to Common Stock Equivalents shall
be disregarded, in whole or in part, as applicable, if, as, and when all, or
such portion, of such Common Stock Equivalents expire or are cancelled without
being exercised, so that the respective Conversion Price of the Series A-1
Preferred Stock and Series A-2 Preferred Stock effective immediately upon such
cancellation or expiration shall be equal to the respective Conversion Price of
the Series A-1 Preferred Stock and Series A-2 Preferred Stock in effect at the
time of the issuance of the expired or cancelled Common Stock Equivalents, with
such additional adjustments as would have been made to the Conversion Price had
the expired or cancelled Common Stock Equivalents not been issued.

             (iii) CONSIDERATION OTHER THAN CASH. If any Common Stock or Common
Stock Equivalents are issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor shall be deemed to be the gross amount
received by the Company. If any Common Stock or Common Stock Equivalents are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be (A) the Market
Price, in the case of securities or (B) the fair value thereof, in the case of
any other consideration. The fair value of any consideration other than cash or
securities shall be determined jointly by the Company and the holders of a
majority of the Series A-1 Preferred Stock and Series A-2 Preferred Stock. If
such parties are unable to reach agreement within thirty (30) days, such fair
value shall be determined by an Appraisal.


                                       11
<PAGE>


             (iv) INTEGRATED TRANSACTIONS. In case any Common Stock Equivalents
are issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Common Stock Equivalents by the parties
thereto, the Common Stock Equivalents shall be deemed to have been issued
without consideration.

             (v) REACQUIRED SHARES. The disposition of any shares owned or held
by or for the account of the Company or any subsidiary of the Company shall be
considered an issue or sale of Common Stock.

             (vi) RECORD DATE. If the Company determines a record date of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or Common Stock
Equivalents or (B) to subscribe for or purchase Common Stock or Common Stock
Equivalents, then, for purposes of this Section 5(c), such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.

             (vii) STOCK SPLITS, STOCK DIVIDENDS AND RECAPITALIZATIONS. If the
Company, at any time while any shares of Series A-1 Preferred Stock or Series
A-2 Preferred Stock are outstanding, shall (A) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock payable in
shares of its capital stock (whether Common Stock or capital stock of any
class), (B) subdivide its outstanding shares of Common Stock into a larger
number of shares, (C) combine its outstanding shares of Common Stock into a
smaller number of shares, or (D) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the Conversion Price
designated in Section 5(a) shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock of the Company
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 5(c)(vii) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.

             (viii) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. Any
recapitalization, reorganization, or reclassification (other than as described
in Section 5(c)(vii)), or any consolidation, merger, sale of all or
substantially all of the assets of the Company to another person or entity or
other transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as a "Fundamental Change." Subject to the provisions of Section 3(d),
prior to the consummation of any Fundamental Change, the Company shall make
appropriate provision (in form and substance satisfactory to the holders of a
majority of the Series A Preferred Stock, Series A-1 Preferred Stock and Series
A-2 Preferred Stock) to ensure that all holders of shares of Series A Preferred
Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock shall
thereafter have the right to acquire and receive in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore issuable
upon conversion thereof, such shares of stock, securities


                                       12
<PAGE>


or assets as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock issuable upon conversion thereof immediately
before the Fundamental Change (without regard to Section 5(a)(ii) hereof). In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the holders of a majority of the Series A Preferred
Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock) with respect
to the rights and interests of all holders of shares of Series A Preferred
Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock to ensure that
the provisions of this Section 5 shall thereafter be applicable to the Series A
Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock,
respectively, including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Conversion Ratio taking into account the value of
the Common Stock reflected by the terms of such consolidation, merger or sale,
if the value per share so reflected is less than the Market Price of the Common
Stock in effect immediately prior to such consolidation, merger or sale. The
Company shall not effect any such consolidation, merger or sale unless prior to
the consummation thereof, the successor entity (if other than the Company)
resulting from such consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance satisfactory to the holders
of a majority of the Series A Preferred Stock, Series A-1 Preferred Stock and
Series A-2 Preferred Stock, respectively), the obligation to deliver to holders
of shares of Series A-1 Preferred Stock and Series A-2 Preferred Stock such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holders may be entitled to acquire.

             (ix) OTHER DILUTIVE ISSUANCES. If any event occurs of the type
contemplated by the provisions of this Section 5(c) but not expressly provided
for by such provisions, including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features,
then the Board of Directors shall make an appropriate adjustment in the
respective Conversion Price so as to protect the rights of the holders of shares
of Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively.

         (d) SURRENDER OF CERTIFICATES; PARTIAL CONVERSION. Upon a conversion
pursuant to Section 5(a) hereof, the holder of any shares of Series A-1
Preferred or Series A-2 Preferred Stock (after such time as shares of Series A-2
Preferred Stock may be converted to Common Stock) to be converted shall
surrender the certificates representing the shares of Series A-1 Preferred or
Series A-2 Preferred Stock, as the case may be, duly endorsed, at the office of
the Company or of its transfer agent and give written notice to the Company that
such holder elects to convert such shares of Series A-1 Preferred or Series A-2
Preferred Stock or specified portion thereof into shares of Common Stock as set
forth in such notice (the "Conversion Notice"). Each Conversion Notice shall be
given by facsimile or by mail, postage prepaid, addressed to the attention of
the Chief Financial Officer of the Company at the facsimile, telephone number or
address of the principal place of business of the Company. Any conversion of
shares of Series A-1 Preferred or Series A-2 Preferred Stock into Common Stock
shall be effective as of the date of the Company's receipt of such notice (the
"Conversion Date"). After such time as shares of Series A-1 Preferred or Series
A-2 Preferred Stock may be converted to Common Stock, upon an automatic
conversion pursuant to Section 5(b), the outstanding shares of Series A-1
Preferred or Series A-2 Preferred Stock, as the case may be, shall thereupon be
converted automatically without any further action by the Company or the holders
of such shares. At such time as the certificate or certificates representing
shares of Series A-1 Preferred or Series A-2 Preferred


                                       13
<PAGE>


Stock which have been converted are surrendered to the Company, a certificate or
certificates representing the number of shares of Common Stock issuable upon
conversion thereof shall be issued and delivered. In case of conversion of only
part of the shares of Series A-1 Preferred or Series A-2 Preferred Stock
represented by a certificate or certificates surrendered to the Company, the
Company also shall forthwith issue and deliver a new certificate for the number
of shares of Series A-1 Preferred or Series A-2 Preferred Stock, which had not
been converted. Until such time as the certificate or certificates representing
shares of Series A-1 Preferred or Series A-2 Preferred Stock which are being
converted are surrendered to the Company and a certificate or certificates
representing the shares of Common Stock into which such shares of Series A-1
Preferred or Series A-2 Preferred Stock have been converted have been issued and
delivered, the certificate or certificates representing the shares of Series A-1
Preferred or Series A-2 Preferred Stock which had been converted shall represent
the shares of Common Stock into which such shares of Series A-1 Preferred or
Series A-2 Preferred Stock, as the case may be, have been converted.

         (e) RESERVATION OF COMMON STOCK. The Company shall at all times reserve
from its authorized Common Stock a sufficient number of shares to provide for
conversion of all the shares of Series A-1 Preferred and Series A-2 Preferred
Stock (without regard to Section 5(a)(ii)) from time to time outstanding. As a
condition precedent to the taking of any action which would cause an adjustment
increasing the number of shares into which the outstanding shares of Series A-1
Preferred or Series A-2 Preferred Stock may be converted, the Company shall take
such corporate action as may be necessary in order that it may validly and
legally issue to the holders of shares of Series A-1 Preferred and Series A-2
Preferred Stock upon conversion fully paid and non-assessable shares of Common
Stock as may be required by this Section 5. If the Common Stock issuable upon
conversion of the shares of Series A-1 Preferred and Series A-2 Preferred Stock
is listed on any national securities exchange, the Company shall cause all
shares reserved for such conversion to be listed on such exchange, subject to
official notice of issuance upon such conversion.

         (f) FRACTIONAL SHARES. In lieu of any fractional shares to which the
holder of the Series A-1 Preferred or Series A-2 Preferred Stock otherwise would
be entitled, the Company shall pay cash equal to such fraction multiplied by the
Market Price of the Company's Common Stock on the applicable Conversion Date.

         (g) NO REISSUANCE OF SHARES. No shares of Series A-1 Preferred or
Series A-2 Preferred Stock acquired by the Company by reason of conversion or
otherwise shall be reissued, and all such shares shall be canceled and retired
and shall resume the status of authorized shares of Preferred Stock without
designation as to series.

6.       REDEMPTION.

         (a) MANDATORY REDEMPTION. If the shares of Series A-2 Preferred Stock
do not have both conversion rights pursuant to Section 5(a)(i) hereof and voting
rights pursuant to section 4(a)(ii) hereof by March 31, 2002, a holder of Series
A-2 Preferred Stock may, at its option and upon giving a Redemption Notice to
the Company, redeem all or any portion of such holder's shares of Series A-2
Preferred Stock on any date on or after September 30, 2002 (the "Redemption
Date") specified in such request. The redemption price for each share of Series
A-


                                       14
<PAGE>


2 Preferred Stock shall equal (i) the Original Purchase Price plus all declared
and unpaid dividends thereon, plus (ii) a redemption premium of 25% per annum of
the Original Purchase Price compounded annually from the date of the original
issuance of such shares of Series A-2 Preferred Stock up to and including the
date on which such shares are redeemed (the "Redemption Price"). Unless and
until redemption of any shares of Series A-2 Preferred Stock, such shares shall
continue to have all other rights of the Series A-2 Preferred Stock.

         (b) REDEMPTION NOTICE. At least 30 days before the Redemption Date,
written notice (the "Redemption Notice") shall be given by the holder of such
Series A-2 Preferred Stock to be redeemed by facsimile or by mail, postage
prepaid, addressed to the attention of the Chief Financial Officer of the
Company. The Redemption Notice shall state:

             (i) the number of shares of Series A-2 Preferred Stock held by the
holder that are to be redeemed by the Company;

             (ii) the Redemption Date and the Redemption Price; and

             (iii) that the holder will surrender to the Company, in the manner
and at the place designated by the Company, such holder's certificate or
certificates representing the shares of Series A-2 Preferred Stock that are
being redeemed.

         (c) INSUFFICIENT FUNDS FOR REDEMPTION. If the funds of the Company
legally available for redemption of any shares of Series A-2 Preferred Stock on
any Redemption Date are insufficient to redeem the number of shares of Series
A-2 Preferred Stock to be so redeemed pursuant to any Redemption Notice, the
holders of shares of Series A-2 Preferred Stock to be redeemed shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts that would be payable with respect to the number of
shares owned by them if the shares to be so redeemed were redeemed in full. The
shares of Series A-2 Preferred Stock not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Company are legally available for the redemption of
such shares of Series A-2 Preferred Stock, such funds will be used as soon as
practicable to redeem the balance of such shares, or such portion thereof for
which funds are then legally available, on the basis set forth above until such
redemption obligations have been fully discharged. For purposes of determining
whether funds are legally available for redemption of shares of the Series A
Preferred Stock as provided herein, the Company shall value its assets at the
highest amount permissible under applicable law.

         (d) SURRENDER OF CERTIFICATES. On or before a Redemption Date, each
holder of Series A-2 Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares to the Company, in the
manner and at the place designated by the Company (or if no such designation is
made, the Company's main office), and thereupon the Redemption Price for such
shares shall be payable on the Redemption Date to the order of the person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.


                                       15
<PAGE>


         (e) NO REISSUANCE OF SERIES A-2 PREFERRED STOCK. No shares of Series
A-2 Preferred Stock acquired by the Company by reason of redemption or otherwise
shall be reissued, and all such shares shall be canceled and retired and shall
resume the status of authorized shares of Preferred Stock without designation as
to series.

7.       LIMITATION OF LIABILITY.

         (a) To the maximum extent permitted by law, the Company does hereby
exonerate the holders of shares of Series A-1 Preferred Stock and Series A-2
Preferred Stock and their designees serving on the Board of Directors from time
to time, or any person or entity being represented by or acting on behalf of any
of the foregoing, directly and indirectly, and their respective successors and
assigns (collectively, "Indemnitees") and waives and releases any suit, claim,
demand or cause of action of any kind arising from any action taken or failure
to take any action by an Indemnitee, unless such action or failure to take
action constitutes self-dealing or willful misconduct, and to the maximum extent
permitted by law, no Indemnitee shall be personally liable for monetary damages
as such for any action or failure to take action.

         (b) The Company shall indemnify and hold harmless each Indemnitee made
or threatened to be made a party to, or having to appear as a witness in
connection with, a Proceeding (as hereinafter defined), to the fullest extent
permitted by law and against all expense, liability and loss, including without
limitation judgments, penalties, fines (including without limitation excise
taxes with respect to employee benefit plans, settlements and reasonable
expenses), and attorneys' fees and disbursements incurred or suffered by the
Indemnitee in connection with any Proceeding (as hereinafter defined), except to
the extent that the act or failure to act giving rise to the claim for
indemnification is determined by a court of competent jurisdiction without right
of appeal to have constituted bad faith or, in the case of a criminal
proceeding, unlawful conduct that the Indemnitee had reasonable cause to believe
was unlawful. The right to indemnification provided in this Section 7 shall
include the right, upon written request to the Company, to have the expenses
incurred by the Indemnitee in connection with any Proceeding (including without
limitation attorney's fees and disbursements) paid or reimbursed by the Company
in advance of the final disposition of the Proceeding to the fullest extent
permitted by law; provided that, if law so requires, the payment of such
expenses incurred by the Indemnitee in advance of the final disposition of a
Proceeding shall be made upon delivery to the Company of a written affirmation
by the Indemnitee of a good faith belief that the criteria for indemnification
have been satisfied and a written undertaking, by or on behalf of the
Indemnitee, to repay all amounts so advanced without interest if it shall
ultimately be determined that the Indemnitee was not entitled to be indemnified
under this Section 7 or otherwise. The written undertaking required by the
preceding sentence is an unlimited general obligation of the Indemnitee, but
need not be secured and shall be accepted without reference to financial ability
to make repayment. Indemnification pursuant to this Section 7 shall continue as
to an Indemnitee who has ceased to be a holder of shares of Series A-1 Preferred
Stock or Series A-2 Preferred Stock, a Director or an officer or ceased to have
any relationship with the Company and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators. For purpose of this Section 7,
"Proceeding" shall mean any threatened, pending or completed action, suit or
proceeding (including without limitation any action, suit or proceeding by or in
the right of the Company), whether civil, criminal, administrative or
investigative, against any one or more Indemnitees arising from or in connection
with any action or failure to take action pursuant


                                       16
<PAGE>


hereto or any right, power or privilege granted hereunder or in connection with
any duty of such Indemnitee to the Company. The rights to indemnification and to
the advancement of expenses provided in this Section 7 shall not be exclusive of
any other rights that any person or entity may have or hereafter acquire under
any statute, provision of the Company's Certificate of Incorporation or Bylaws,
agreement, vote of Shareholders or Directors, or otherwise.

         (c) The provisions of this Section 7 relating to the limitation of
Indemnitees' liability, to indemnification and to the advancement of expenses
shall constitute a contract between the Company and each of the Indemnitees
which may be modified as to any Indemnitee only with that person's or entity's
consent or as specifically provided in this Section 7. Notwithstanding any
provision in the Certificate of Incorporation of the Company relating to
amendment of the Certificate of Incorporation of the Company generally, no
repeal or amendment of this Section 7 can be effective without the prior written
consent of the holders of a majority of the Series A-1 Preferred Stock and
Series A-2 Preferred Stock, and any such amendment or repeal which is adverse to
any Indemnitee shall apply to such Indemnitee only on a prospective basis and
shall not reduce any limitation on the personal liability of an Indemnitee or
limit the rights of an Indemnitee to indemnification or to the advancement of
expenses with respect to any action or failure to act occurring prior to the
time of such repeal or amendment.

         (d) In the case of any change in law which expands the liability of an
Indemnitee or limits the indemnification rights or the rights to advancement of
expenses which the Company may provide, the right to limited liability, to
indemnification and to the advancement of expenses provided in this Section 7
shall continue as theretofore to the extent permitted by law. Conversely, if any
change in law permits the Company to limit further the liability of an
Indemnitee or to provide broader indemnification rights or rights to the
advancement of expenses than the Company was permitted to provide prior to such
change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.

8.       NOTICES OF RECORD DATE; SPECIAL MEETING.  In the event of

         (a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or

         (b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or

         (c) any voluntary or involuntary dissolution, liquidation or winding up
of the Company,

then and in each such event the Company shall mail or cause to be mailed to each
holder of Series A-1 Preferred Stock and Series A-2 Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a


                                       17
<PAGE>


description of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least thirty (30) days prior to the
date specified in such notice on which such action is to be taken.

         (d) Notwithstanding anything to the contrary in the Company's bylaws or
certificate of incorporation, the Company shall, upon the written request of
holders of a majority of the outstanding shares of Series A-2 Preferred Stock,
call one or more special meetings of the stockholders of the Company, from time
to time for the purpose of approving the provision of voting and/or conversion
rights to the holders of the shares of Class A-2 Preferred Stock.

9.       DEFINED TERMS.

         For purposes hereof:

         (a) "APPRAISAL" means the determination of fair value by an appraiser
selected by the Company and by the holders of a majority of the Series A-1
Preferred Stock and Series A-2 Preferred Stock. In the event that the Company
and the holders of a majority of the Series A-1 Preferred Stock and Series A-2
Preferred Stock are unable to agree upon an appraiser within five days, then the
Company and the holders of a majority of the Series A-1 Preferred Stock and
Series A-2 Preferred Stock shall each choose an appraiser within five days
thereafter who shall each complete their appraisals and provide a written report
of the results thereof to the Company and the holders of the Series A-1
Preferred Stock and Series A-2 Preferred Stock, respectively, within thirty (30)
days thereafter. If the appraisals made by such appraisers do not differ by more
than ten (10%) percent of the amount of the higher appraiser, the two appraisals
shall be averaged to determine the fair value. It the appraisals differ by more
than ten (10%) percent of the amount of the higher appraiser, then a third
appraiser shall be chosen by the first two appraisers within five days after the
report of the two appraisers has been submitted. If such appraisers are unable
to agree upon the third appraiser within such time, such third appraiser shall
be designated by the American Arbitration Association in San Diego, California
("AAA") upon application of the Company or the holders of a majority of the
Series A-1 Preferred Stock and Series A-2 Preferred Stock, and such third
appraiser shall complete its appraisal and provide a written report of the
results to the Company and the holders of the Series A-1 and Series A-2
Preferred Stock, within thirty (30) days after such third appraiser is selected.
If the appraisal of such third appraiser falls between the two prior appraisals,
then the third appraisal shall determine the fair value. If the third appraisal
is higher or lower than both of the prior appraisals, then the third appraisal
and the prior appraisal which is most similar in amount to the third appraisal
shall be averaged to determine the fair value: The determination of such
appraisers shall be final and binding on the Company and all holders of shares
of Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively, and
the fees and expenses of such appraisers shall be paid by the Company.


                                       18
<PAGE>


         (b) "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the
number of shares of Common Stock actually outstanding at such time (excluding
any shares held by or for the account of the Company or any subsidiary of the
Company), plus the number of shares of Common Stock deemed to be outstanding
upon the conversion of the Series A-1 Preferred Stock or Series A-2 Preferred
Stock, as the case may be, and upon the exercise, exchange or conversion of all
Common Stock Equivalents outstanding immediately prior to an issuance or sale of
Common Stock pursuant to Section 5(c) hereof.

         (c) "ORIGINAL PURCHASE PRICE" of the Series A-1 Preferred Stock and
Series A-2 Preferred Stock means the price per share at which the shares of
Series A-1 Preferred Stock and Series A-2 Preferred Stock were sold by the
Company (as adjusted for stock dividends, stock splits, combinations,
reclassifications or other similar events involving the Series A-1 Preferred
Stock and Series A-2 Preferred Stock).

         (d) "INVESTOR RIGHTS AGREEMENT" means that certain Investor Rights
Agreement entered into by and among the Company and the original purchasers of
the Series A-1 Preferred Stock and Series A-2 Preferred Stock on or about the
date(s) of the issuance of the Series A-1 Preferred Stock and Series A-2
Preferred Stock, as amended from time to time.

         (e) "MARKET PRICE" with respect to the Company's Common Stock means on
any particular date (i) the last sale price per share of the Common Stock on
such date on the Nasdaq National Market or other stock exchange on which the
Common Stock has been listed or if there is no such price on such date, then the
last price on such exchange on the last Trading Date preceding such date, or
(ii) if the Common Stock is not listed on the Nasdaq National Market or any
stock exchange, the average of the bid and asked price for a share of Common
Stock in the over-the-counter market, as reported by the Nasdaq SmallCap Market
at the close of business on such date, or (iii) if the Common Stock is not
quoted on the Nasdaq SmallCap Market, the average of the bid and asked price for
a share of Common stock in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices) or (iv) if the Common Stock is
not listed on any domestic securities exchange or quoted in the Nasdaq system or
the domestic over-the-counter market, the "Market Price" shall be the fair value
thereof determined jointly by the Company and the holders of a majority of the
Series A-1 Preferred Stock and Series A-2 Preferred Stock; provided that if such
parties are unable to reach agreement within thirty (30) days, such fair value
shall be determined by an Appraisal.

         (f) "STOCK PURCHASE AGREEMENT" means each agreement for the purchase
and sale of Series A Preferred Stock, Series A-1 Preferred Stock or Series A-2
entered into by and among the Company and the original purchasers thereof, as
amended from time to time.

         (g) "TRADING DAY" means (i) a day on which the Common Stock is traded
on the Nasdaq National Market or principal stock exchange on which the Common
Stock has been listed, or (ii) if the Common Stock is not listed on the Nasdaq
National Market or any stock exchange, a day on which the Common Stock is traded
in the over-the-counter market, as reported by the Nasdaq SmallCap Market, or
(c) if the Common Stock is not quoted on the Nasdaq SmallCap Market, a day on
which the Common Stock is quoted in the over-the-counter


                                       19
<PAGE>


market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).













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