STATE OF ARIZONA
                   STATEMENT OF MOUNTAIN STATES CAPITAL, INC.
                           PURSUANT TO SECTION 10-602

     By the authority of Article 4 of the Articles of  Incorporation of Mountain
States Capital,  Inc., an Arizona corporation (the "Corporation"),  the Board of
Directors of the Corporation  duly adopted the following  resolution on December
28, 1999, effective December 31, 1999:

     RESOLVED,  that pursuant to Article 4 of the Articles of  Incorporation  of
the Corporation,  effective  December 31, 1999, there be created a series of the
Preferred  Stock,  no par value per share,  of this  Corporation  consisting  of
500,000  shares to be designated as the Series A Preferred  Stock (the "Series A
Preferred  Stock") and that the  holders of such  shares  shall have the rights,
preferences  and  privileges  set  forth  on  Exhibit  A,  attached  hereto  and
incorporated herein by reference.


DATED: December 28, 1999.

                                        MOUNTAIN STATES CAPITAL, INC.
                                        an Arizona corporation



                                        By: /s/ Chad Collins
                                           -------------------------------------
                                           Chad Collins, President

                                        1
<PAGE>
                                   EXHIBIT "A"

                          Mountain States Capital, Inc.
                         Designation of Preferred Stock

     In accordance with Article 4 of the Articles of  Incorporation  of Mountain
States Capital,  Inc., an Arizona  corporation  (the  "Corporation"),  effective
December 31, 1999, there is hereby  established one series of preferred stock of
the Corporation,  consisting of 500,000 shares,  the designation and the powers,
preferences  and rights,  and the  qualifications,  limitations or  restrictions
thereof  are hereby  fixed  pursuant to this  Certificate  of  Designation  (the
"Certificate") as follows:

     1.  DESIGNATION.  The  designation of said series of preferred stock of the
Corporation  created  hereby,  consisting of 500,000  shares,  shall be Series A
Preferred Stock ("Series A Preferred Stock").

     2. DIVIDENDS.  Holders of the Series A Preferred Stock shall be entitled to
receive cumulative cash dividends at the rate of 18% per annum,  payable monthly
on the notional value thereof of $1.00 per share (the "Notional Value"), through
December  31,  2002.  Thereafter,  holders of Series A Preferred  Stock shall be
entitled  to  receive  cumulative  cash  dividends  at the rate of 9% per annum,
payable  monthly on the Notional  Value  thereof;  PROVIDED,  HOWEVER,  that the
dividend  rate shall  continue to be 18% per annum with respect to those shares,
if any, for which on or before  December  31,  2002,  the holder files a written
election with the  Corporation  granting the  Corporation  a perpetual  right to
redeem such shares upon 30 days prior written  notice at the par value  thereof.
Dividends on  outstanding  shares of Series A Preferred  Stock shall be paid and
set  apart  for  payment  before  any  dividends  shall be paid or set apart for
payment on the common stock of the Corporation (the "Common Stock").

     3.  REDEMPTION;  SINKING FUND.  Shares of Series A Preferred Stock shall be
redeemable  only if the holder has filed an election  permitting  redemption  as
provided in paragraph  2. The Series A Preferred  Stock shall not have a sinking
fund.

     4.  LIQUIDATION.  In  case 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,  prior and in
preference to any other  distribution  to the holders of Common Stock, an amount
equal  to  $1.00  per  share  of  Series  A  Preferred  Stock.  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 other series of preferred stock of the Corporation 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.

                                        2
<PAGE>
     5. CONVERSION.

          5A.  OPTIONAL  CONVERSION.  Subject to the  provisions  of paragraph 4
hereof  regarding  liquidation,  and subject to the terms and conditions of this
paragraph 5, the holder of any share or shares of Series A Preferred Stock shall
have the right,  at its option at any time, to convert any such shares of Series
A Preferred Stock (except that upon any liquidation of the Corporation the right
of conversion shall terminate at the close of business on the last full business
day next preceding the date fixed for payment of the amount distributable on the
Series A Preferred  Stock)  into fully paid and  nonassessable  whole  shares of
Common Stock on a ten (10) shares of Series A Preferred  Stock for one (1) share
of Common  Stock  basis.  Such rights of  conversion  shall be  exercised by the
holder  thereof by giving  written  notice  that the holder  elects to convert a
stated number of shares of Series A Preferred  Stock into Common  Stock,  and by
surrender of a certificate or  certificates  for the Series A Preferred Stock so
to be converted to the Corporation at its principal office (or such other office
or agency of the  Corporation  as the  Corporation  may  designate  by notice in
writing to the holder or  holders of the Series A  Preferred  Stock) at any time
during its usual business  hours on the date set forth in such notice,  together
with a statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.

          5B. ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. Promptly after
receipt of the written  notice  referred to in paragraph 5A and surrender of the
certificate or certificates  for the share or shares of Series A Preferred Stock
to be converted,  the Corporation shall issue and deliver, or cause to be issued
and  delivered,  to the holder,  registered in such name or names as such holder
may direct,  a  certificate  or  certificates  for the number of whole shares of
Common  Stock  issuable  upon the  conversion  of such share or shares  thereof,
subject,  in the case of  registration  in a name  other  than the holder of the
Series A  Preferred  Stock so  surrendered,  to  compliance  with any  agreement
relating to transfer by which such holder is bound.  To the extent  permitted by
law,  such  conversion  shall be deemed to have been effected as of the close of
business on the date on which such written  notice  shall have been  received by
the Corporation  and the  certificate or  certificates  for such share or shares
shall have been  surrendered  as  aforesaid,  and at such time the rights of the
holder of such share or shares as such  holder  shall  cease,  and the person or
persons in whose name or names any  certificate  or  certificates  for shares of
Common  Stock shall be  issuable  upon such  conversion  shall be deemed to have
become the holder or holders of record of the shares represented thereby.

          5C. FRACTIONAL SHARES;  DIVIDENDS;  PARTIAL CONVERSION.  No fractional
shares shall be issued upon  conversion of Series A Preferred  Stock into Common
Stock and no payment or adjustment  shall be made upon any conversion on account
of any cash  dividends on the Common Stock issued upon such  conversion.  At the
time of each  conversion,  to the extent and as soon as permitted by  applicable
law, the Corporation shall pay in cash an amount equal to all dividends declared
and unpaid on the shares  surrendered for conversion to the date upon which such
conversion  is deemed to take place as  provided  in  paragraph  5B. In case the
number of shares of Series A Preferred  Stock  represented by the certificate or
certificates  surrendered  pursuant to paragraph 5A exceeds the number of shares
of such Series converted,  the Corporation shall, upon such conversion,  execute
and  deliver to the holder  thereof,  at the expense of the  Corporation,  a new
certificate or certificates for the number of shares of Series A Preferred Stock
of such Series, represented by the certificate or certificates surrendered which
are not to be converted.  If any fractional  interest in a share of Common Stock

                                        3
<PAGE>
would,  except for the provisions of the first sentence of this paragraph 5C, be
deliverable upon any such conversion, the Corporation, in lieu of delivering the
fractional  share  thereof,  shall  pay  to the  holder  surrendering  Series  A
Preferred  Stock for  conversion  an amount in cash equal to the current  market
price of such fractional interest as determined by the Board of Directors.

          5D. SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation shall
at any time  subdivide  its  outstanding  shares of Common  Stock into a greater
number of shares,  the number of shares of Common Stock into which each share of
Series A Preferred  Stock shall be converted shall be  proportionately  reduced,
and conversely, in case the outstanding shares of Common Stock shall be combined
into a smaller number of shares, the number of Shares of Common Stock into which
each  Share  of  Series  A  Preferred   Stock  shall  be   converted   shall  be
proportionately increased.

          5E. REORGANIZATION,  RECLASSIFICATION,  MERGER, CONSOLIDATION OR SALE.
If any capital  reorganization or  reclassification  of the capital stock of the
Corporation  or any  merger or  consolidation  of the  Corporation  into or with
another   corporation,   or  the  sale  of  all  or  substantially  all  of  the
Corporation's assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Common  Stock,  then,  as a condition of such
reorganization,  reclassification,  consolidation,  merger or sale,  lawful  and
adequate  provisions  shall be made  whereby each holder of a share or shares of
such  respective  Series of Series A Preferred  Stock shall  thereafter have the
right to  receive,  upon the basis and upon the terms and  conditions  specified
herein  and in  lieu of the  shares  of  Common  Stock  immediately  theretofore
receivable  upon the  conversion  of such share or shares of Series A  Preferred
Stock  (determined in accordance with paragraph 5D, if applicable),  such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of  outstanding  shares of such Common Stock equal to said
number of shares of such stock  immediately  theretofore  so receivable had such
reorganization  or  reclassification  not  taken  place,  and in any  such  case
appropriate  provision shall be made with respect to the rights and interests of
such  holder  to  the  end  that  the  provisions  hereof  shall  thereafter  be
applicable,  as nearly as may be, in relation to any shares of stock, securities
or assets  thereafter  deliverable upon the exercise of such conversion  rights.
The Corporation will not effect any such  consolidation,  merger or sale, unless
prior to the consummation  thereof the successor  corporation (if other than the
Corporation)  resulting  from such  consolidation  or merger or the  corporation
purchasing such assets shall assume by written instrument executed and mailed or
delivered  to each  holder of shares  of  Series A  Preferred  Stock at the last
address of such holder appearing on the books of the Corporation, the obligation
to deliver to such  holder  such  shares of stock,  securities  or assets as, in
accordance  with the  foregoing  provisions,  such  holder  may be  entitled  to
receive.

          5F. STOCK TO BE RESERVED.  The  Corporation  will at all times reserve
and keep  available out of its authorized  Common Stock or its treasury  shares,
solely for the  purpose of issue upon the  conversion  of the Series A Preferred
Stock as herein provided, such number of shares of Common Stock as shall then be
issuable  upon the  conversion of all  outstanding  shares of Series A Preferred
Stock. The Corporation  covenants that all shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and  nonassessable and
free from all taxes,  liens and charges with respect to the issue  thereof.  The
Corporation  will take all such  action as may be  necessary  to assure that all

                                        4
<PAGE>
such shares of Common Stock may be so issued without violation of any applicable
law or regulation,  or of any requirements of any national  securities  exchange
upon which the Common  Stock may be listed,  provided  that it shall not have to
register any shares beyond any separate agreement to do so. If it is in the best
interests  of the  Corporation  as  determined  by the Board of  Directors,  the
Corporation  will take action to  increase  the number of  authorized  shares of
Common  Stock if the total  number of shares of Common Stock issued and issuable
upon conversion of the Series A Preferred Stock would exceed the total number of
shares  of  Common  Stock  then  authorized  by the  Corporation's  Articles  of
Incorporation.

          5G. NO  REISSUANCE  OF SERIES A  PREFERRED  STOCK.  Shares of Series A
Preferred  Stock which are  converted  into  shares of Common  Stock as provided
herein  shall be restored to the status of  authorized  and  unissued  shares of
Preferred  Stock,  undesignated  as to series,  and may be  reissued as Series A
Preferred Stock.

          5H. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon conversions of the Series A Preferred Stock shall be made without charge to
the  holders of such Series A Preferred  Stock for any  issuance  tax in respect
thereof,  provided  that the  Corporation  shall not be  required to pay any tax
which may be payable in respect of any  transfer  involved in the  issuance  and
delivery  of any  certificate  in a name  other  than that of the  holder of the
Series A Preferred Stock converted.

          5I.  CLOSING  OF  BOOKS.  The  Corporation  will at no time  close its
transfer  books  against the transfer of any Series A Preferred  Stock or of any
shares of Common Stock issued or issuable  upon the  conversion of any shares of
Series A  Preferred  Stock  in any  manner  which  interferes  with  the  timely
conversion of such Series A Preferred Stock.

     6.  AUTOMATIC  CONVERSION.  If that at any time  while any of the  Series A
Preferred  Stock shall be  outstanding,  the  Corporation  shall complete a firm
commitment underwritten public offering then, all outstanding shares of Series A
Preferred Stock shall,  automatically  and without further action on the part of
the holders of the Series A Preferred  Stock, be converted into shares of Common
Stock in accordance with the terms of paragraph 5 with the same effect as if the
certificates  evidencing such shares had been  surrendered for conversion,  such
conversion  to  be  effective   simultaneously   with  the  closing  under  such
underwritten public offering,  PROVIDED,  HOWEVER, that certificates  evidencing
the shares of Common Stock  issuable  upon such  conversion  shall not be issued
except on  surrender  of the  certificates  for the shares of Series A Preferred
Stock so converted.

     7.  NOTICES.   In  case  at  any  time  (a)  there  shall  be  any  capital
reorganization,  or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or substantially
all of its assets to, another corporation,  or (b) there shall be a voluntary or
involuntary dissolution,  liquidation or winding up of the Corporation; then, in
any one or more of said cases, the Corporation  shall give, by first class mail,
postage  prepaid,  addressed  to each holder of any shares of Series A Preferred
Stock at the address of such holder as shown on the books of the Corporation, at
least 20 days' prior written  notice of the date when the same shall take place.
Such  notice  shall  also  specify  the date on which  the  holders  of Series A
Preferred Stock shall be entitled to exchange their Series A Preferred Stock for
securities   or   other   property   deliverable   upon   such   reorganization,

                                        5
<PAGE>
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding up, as the case may be.

     8. NO GENERAL VOTING RIGHTS.  Except as otherwise  provided by law and this
Certificate, the holders of Series A Preferred Stock shall have no right to vote
on any matter to be voted on by the holders of Common  Stock of the  Corporation
(including any election of the directors of the Corporation).

     9. NO RESTRICTIONS.  Nothing herein contained shall require a class vote or
consent in connection with any increase in the total number of authorized shares
of Common Stock. The provisions of this  Certificate  shall not in any way limit
the right and power of the  Corporation  to issue the presently  authorized  but
unissued shares of its capital stock, or bonds, notes, mortgages, debentures, or
other obligations, or to incur indebtedness to banks or to other lenders.

     10.  AMENDMENT OF CERTIFICATE.  This  Certificate  constitutes an agreement
between the Corporation and the holders of the Series A Preferred  Stock. It may
be amended by vote of the Board of  Directors  and the  holders of a majority of
the outstanding shares of Series A Preferred Stock.

     11. OTHER AMENDMENTS.  The Corporation will not amend,  alter or repeal the
Corporation's  Articles of  Incorporation  or Bylaws in any manner,  or file any
certificate  pursuant  to  Section  10-602  of  the  Arizona  Revised  Statutes,
containing any provision, in any case, which affects the respective preferences,
qualifications,  special  or  relative  rights  or  privileges  of the  Series A
Preferred  Stock or the Common Stock or which in any manner affects the Series A
Preferred Stock, or the Common Stock or the holders thereof.

                                        6