<PAGE>   1

                                                                    EXHIBIT 10.2



                           STATEMENT RESPECTING RIGHTS

                                       OF

                            SERIES A PREFERRED STOCK

                                       OF

                           PEGASUS TECHNOLOGIES, INC.
<PAGE>   2


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                      PAGE
<S>     <C>                                                                                           <C>
1.      Dividend Rights..................................................................................1
         (a)      DECLARED DIVIDENDS.....................................................................1
         (b)      PREFERENCE.............................................................................2
         (c)      PARTIAL DIVIDENDS......................................................................2
2.      Voting Rights....................................................................................2
         (a)      GENERALLY..............................................................................2
         (b)      SEPARATE VOTE OF SERIES A PREFERRED....................................................2
3.      Liquidation Rights...............................................................................3
         (a)      LIQUIDATION VALUE......................................................................3
         (b)      PARTICIPATION..........................................................................3
         (c)      LIQUIDATION EVENTS.....................................................................3
         (d)      VALUATION.  ...........................................................................4
         (e)      PROPORTIONATE PAYMENTS.................................................................4
4.      Conversion Rights................................................................................4
         (a)      OPTIONAL CONVERSION....................................................................5
         (b)      AUTOMATIC CONVERSION...................................................................5
         (c)      SERIES A PREFERRED CONVERSION RATE.....................................................5
         (d)      CONVERSION PRICE.......................................................................5
         (e)      MECHANICS OF CONVERSION................................................................5
         (f)      ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS...........................................6
         (g)      ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS................................6
         (h)      ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS......................................7
         (i)      ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.............................8
         (j)      REORGANIZATIONS, ACQUISITIONS OR ASSET TRANSFERS.......................................8
         (k)      SALE OF SHARES BELOW SERIES A CONVERSION PRICE.........................................8
         (l)      CERTIFICATE OF ADJUSTMENT.............................................................11
         (m)      NOTICES OF RECORD DATE................................................................11
         (n)      FRACTIONAL SHARES.....................................................................11
         (o)      RESERVATION OF STOCK ISSUABLE UPON CONVERSION.........................................12
5.      Certain Definitions.............................................................................12
6.      Amendment and Waiver............................................................................13
7.      General Provisions..............................................................................13
         (a)      REGISTRATION OF TRANSFER..............................................................13
         (b)      REPLACEMENT...........................................................................13
         (c)      NOTICES...............................................................................14
         (d)      PAYMENT OF TAXES......................................................................14
         (e)      NO DILUTION OR IMPAIRMENT.............................................................14
         (f)      NO REISSUANCE OF SERIES A PREFERRED...................................................14
</TABLE>


                                       i
<PAGE>   3



                           STATEMENT RESPECTING RIGHTS
                                       OF
                            SERIES A PREFERRED STOCK
                                       OF
                           PEGASUS TECHNOLOGIES, INC.





                        DESIGNATION OF SERIES A PREFERRED





         Seven Million Two Hundred Thousand (7,200,000) of authorized shares of
Preferred Stock are hereby designated "Series A Preferred Stock" (the "SERIES A
PREFERRED"). The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred are as follows:

1.       DIVIDEND RIGHTS.

         (a) DECLARED DIVIDENDS. Holders of Series A Preferred, in preference to
the holders of Common Stock and any other stock of the Corporation that is not
by its terms expressly senior in right of payment to the Series A Preferred
(collectively, "JUNIOR STOCK"), shall be entitled to receive cash dividends that
accrue cumulatively during each fiscal year of the Corporation at the rate of 6%
of the Original Issue Price (as defined below) per annum on each outstanding
share of Series A Preferred (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares). The
"ORIGINAL ISSUE PRICE" of the Series A Preferred shall be $1.06872 per share.
Dividends on the Series A Preferred shall be cumulative and shall begin to
accumulate (whether or not declared) on the Original Issue Date of the Series A
Preferred (as defined in Section 4(f) below). Such dividends shall be payable
if, when and as declared by the Board of Directors, but only out of funds that
are legally available therefor. In the event that the Corporation declares or
pays any dividends upon the Common Stock (whether payable in cash, securities or
other property) other than dividends or portions thereof payable in shares of
Common Stock, the Corporation shall also declare and pay to the holders of the
Series A Preferred at the same time that it declares and pays such dividends to
the holders of the Common Stock, the dividends that would have been declared and
paid with respect to the Common Stock issuable upon conversion of the Series A
Preferred had all of the outstanding Series A Preferred been converted
immediately prior to the record date for such dividend, or if no record date is




<PAGE>   4

fixed, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined; provided, however, that such dividends shall
accrue and be paid to the holders of the Series A Preferred only in an amount
equal to the amount by which the dividends payable on the Common Stock exceed
the other dividends payable with respect to the Series A Preferred for the same
period.

         (b) PREFERENCE. So long as any Series A Preferred remains outstanding,
without the prior written unanimous consent of the holders of the outstanding
shares of Series A Preferred, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Stock, nor shall the Corporation directly or indirectly pay or declare
any dividend or make any distribution upon any Junior Stock. The provisions of
this Section 1(b) shall not, however, apply to (i) the acquisition of shares of
any Junior Stock in exchange for shares of any other Junior Stock, or (ii) the
payment of cash dividends on the Common Stock to the extent that (A) there are
no accrued but unpaid Series A Preferred dividends and (B) equivalent dividends
are paid on the Series A Preferred as provided above, or (iii) any repurchase of
the capital stock of the Corporation in accordance with the terms of any stock
incentive plan of the Corporation that has been approved by the Corporation's
Board of Directors.

         (c) PARTIAL DIVIDENDS. In the event the Board of Directors of the
Corporation declares dividends in a fiscal year in an amount less than the
aggregate amount of the dividend preference on the Series A Preferred set forth
in Section 1(a) above, then the entire amount of the dividends declared by the
Board of Directors shall be distributed ratably among the holders of the Series
A Preferred.

2.       VOTING RIGHTS.

         (a) GENERALLY. Except as otherwise provided herein or as required by
law, the Series A Preferred shall vote with the shares of the Common Stock of
the Corporation (and not as a separate class) at any annual or special meeting
of stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Series A Preferred shall be entitled to such number of votes as
shall be equal to the whole number of shares of Common Stock into which such
holder's aggregate number of shares of Series A Preferred are convertible
(pursuant to Section 4 below) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.

         (b) SEPARATE VOTE OF SERIES A PREFERRED. For so long as Kennecott
Energy Company owns at least four percent (4%) of the Common Stock Deemed
Outstanding (as defined in Section 4(k)(i)) or 400,000 shares of Series A
Preferred, the Corporation shall not, without first obtaining the unanimous
affirmative vote or written consent of the holders of the then outstanding
shares of Series A Preferred, voting together as a single class (the "REQUIRED
HOLDERS"), (i) amend or repeal any provision of, or add any



                                       2
<PAGE>   5

provision to, the Articles of Incorporation or Bylaws of the Corporation if such
action would alter or change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, or create a class of stock
senior in rights and preferences to, the Series A Preferred, (ii) effect any
Liquidation (as defined in Section 3(c)), (iii) issue equity securities other
than Junior Stock (or any securities convertible into or exchangeable for such
equity securities including, without limitation, debt securities containing
equity features), (iv) increase the number of the Corporation's fully diluted
equity authorized for issuance to employees pursuant to any incentive stock or
other plan, whether currently in effect or subsequently created, (v) effect the
buyback or repurchase of Common Stock of the Corporation (except for buybacks
from directors or employees), (vi) increase the authorized size of the Board of
Directors to more than five (5) members, (vii) pay a dividend on the Series A
Preferred in other than cash, or (viii) increase the Corporation's debt
financing beyond the amounts permitted in the Stockholders Agreement currently
in effect.

3.       LIQUIDATION RIGHTS.

         (a) LIQUIDATION VALUE. Upon any Liquidation, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of
any Junior Stock, the holders of Series A Preferred shall be entitled to be paid
out of the assets of the Corporation an amount with respect to each share of
Series A Preferred equal to the sum of (i) the Original Issue Price subject to
appropriate adjustment to reflect any stock dividend, stock split, combination
or any other similar reclassification, reorganization or recapitalization
affecting the shares of Series A Preferred plus (ii) all accumulated but unpaid
dividends thereon (the "SERIES A LIQUIDATION PREFERENCE"). Notwithstanding the
foregoing, upon any Liquidation, the holders of the Series A Preferred can
convert the Series A Preferred to Common Stock.

         (b) PARTICIPATION. Once the holders of Series A Preferred have received
payment of the Series A Liquidation Preference, the holders of the Series A
Preferred shall participate in any additional distributions proportionately with
the Common Stock as if such Series A Preferred was converted into Common Stock
on or prior to the Liquidation.

         (c) LIQUIDATION EVENTS. At the option of the Required Holders, the
following events shall be considered a "LIQUIDATION" for purposes of Section
3(a):

                  (i) the dissolution, liquidation or winding up of the
Corporation;

                  (ii) any merger, acquisition, sale of voting control,
consolidation, business combination, reorganization or recapitalization of the
Corporation (whether accomplished in a single transaction or a series of related
transactions) in which the stockholders of the Corporation immediately prior to
such transaction own capital stock


                                       3
<PAGE>   6


representing less than 50% of the Corporation's voting power immediately after
such transaction (an "ACQUISITION"); or

                  (iii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "ASSET TRANSFER").

         (d) VALUATION. In any of the events deemed to be a Liquidation, if the
consideration received by the Corporation is other than cash, its value will be
deemed to be its fair market value as determined in good faith by the Board of
Directors. Any securities shall be valued as follows:

                  (i) securities not subject to investment letter or other
similar restrictions on free marketability covered by (ii) below:

                                    (A) if traded on a securities exchange or
                  through the Nasdaq National Market, the value shall be deemed
                  to be the average of the closing prices of the securities on
                  such quotation system over the thirty (30) day period ending
                  three (3) days prior to the closing;

                                    (B) if actively traded over-the-counter, the
                  value shall be deemed to be the average of the closing bid or
                  sale prices (whichever is applicable) over the thirty (30) day
                  period ending three (3) days prior to the closing; and,

                                    (C) if there is no active public market, the
                  value shall be the fair market value thereof, as determined by
                  the Board of Directors.

                  (ii) the method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) may be to make an appropriate discount from the market
value determined as above in (i)(A), (B) or (C) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.

         (e) PROPORTIONATE PAYMENTS. If, upon any Liquidation, the assets of the
Corporation shall be insufficient to make payment in full to all holders of
Series A Preferred, then such assets shall be distributed among the holders of
Series A Preferred at the time outstanding ratably in proportion to the full
amounts to which they would otherwise respectively be entitled.

4.       CONVERSION RIGHTS.

         The holders of the Series A Preferred shall have the following rights
with respect to the conversion of the Series A Preferred into shares of Common
Stock:



                                       4

<PAGE>   7

         (a) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 4(c)) by the number of shares of Series A
Preferred being converted.

         (b) AUTOMATIC CONVERSION. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Conversion Price, at any time upon the earliest of (i)
the conversion by Kennecott Energy Company of all of the outstanding Series A
Preferred owned by it, and (ii) immediately prior to a Qualified IPO. Upon such
automatic conversion, all accrued but unpaid dividends, if any, shall be paid in
accordance with Section 4(e)(ii).

         (c) SERIES A PREFERRED CONVERSION RATE. The conversion rate in effect
at any time for conversion of the Series A Preferred (the "SERIES A CONVERSION
RATE") shall be the quotient obtained by dividing the Original Issue Price, by
the "Series A Conversion Price" calculated as provided in Section 4(d).

         (d) CONVERSION PRICE. The conversion price for the Series A Preferred
(the "SERIES A CONVERSION PRICE") shall initially be the Original Issue Price.
Such initial Series A Conversion Price shall be adjusted from time to time in
accordance with this Section 4. All references to the Series A Conversion Price
herein shall mean the Series A Conversion Price as so adjusted.

         (e) MECHANICS OF CONVERSION.

                  (i) OPTIONAL CONVERSION. Each holder of Series A Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series A Preferred,
and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series A Preferred being converted. Thereupon, the Corporation shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay (A) in cash or, to the extent sufficient funds are not then
legally available therefor, in Common Stock (at the Common Stock's fair market
value determined by the Board of Directors as of the date of such conversion),
any accrued but unpaid dividends and any declared but unpaid dividends on the
shares of Series A Preferred being converted, and (B) in cash (at the Common
Stock's fair market value determined by the Board of Directors as of the date of
conversion) the value of any fractional share of Common Stock otherwise issuable
to any holder of Series A Preferred. Such conversion shall be deemed to have
been made at the close of business on the date



                                       5
<PAGE>   8

of such surrender of the certificates representing the shares of Series A
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.

                  (ii) AUTOMATIC CONVERSION. Upon the occurrence of an event
specified in Section 4(b) above, the outstanding shares of Series A Preferred
shall be converted into Common Stock automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred are either delivered
to the Corporation or its transfer agent as provided below, or the holder
notifies the Corporation or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement reasonably satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon surrender by any holder of the
certificates formerly representing shares of Series A Preferred at the office of
the Corporation or any transfer agent for the Series A Preferred, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A Preferred surrendered were convertible on the date on which such
automatic conversion occurred, and the Corporation shall promptly pay in cash
(unless otherwise agreed by the holders of the Series A Preferred), all accrued
but unpaid dividends on the shares of Series A Preferred converted. Until
surrendered as provided above, each certificate formerly representing shares of
Series A Preferred shall be deemed for all corporate purposes to represent the
number of shares of Common Stock resulting from such automatic conversion.

         (f) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Corporation
shall at any time or from time to time after the date that the first share of
Series A Preferred is issued (the "ORIGINAL ISSUE DATE") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the Series A
Preferred, the Series A Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Series A Preferred, the Series A Conversion
Price in effect immediately before the combination shall be proportionately
increased. Any adjustment under this subsection (f) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.

         (g) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes


                                       6
<PAGE>   9

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, in each such event the Series A Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Series A Conversion Price then in effect by a fraction (1) the numerator of
which is 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 is 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 is 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 shall be recomputed accordingly as of the close of business
on such record date and thereafter the Series A Conversion Price shall be
adjusted pursuant to this subsection (g) to reflect the actual payment of such
dividend or distribution; provided, further, however, that no such adjustment
shall be made if, with the consent of the holders of the Series A Preferred the
holders of Series A Preferred simultaneously receive (i) a dividend or other
distribution of shares of Common Stock in a number equal to the number of shares
of Common Stock they would have received if all outstanding shares of Series A
Preferred had been converted into Common Stock on the date of such event or (ii)
a dividend or other distribution of shares of Series A Preferred, as of the date
of such event, convertible into such number of shares of Common Stock as is
equal to the number of additional shares of Common Stock being issued with
respect to each share of Common Stock in such dividend or distribution.

         (h) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes 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, in each such event provision
shall be made so that the holders of the Series A Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Series A Preferred 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, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred or with respect
to such other securities by their terms; provided, further, however, that no
such adjustment shall be made if the holders of Series A Preferred
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



                                       7
<PAGE>   10

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

         (i) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series A Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a Liquidation or a
subdivision or combination of shares or stock dividend provided for elsewhere in
this Section 4), each holder of Series A Preferred shall have the right
thereafter to convert the Series A Preferred into the kind and amount of stock
and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series A Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

         (j) REORGANIZATIONS, ACQUISITIONS OR ASSET TRANSFERS. If at any time or
from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock, an Acquisition or Asset Transfer (other than
a recapitalization, subdivision, combination, reclassification, or stock
dividend of shares provided for elsewhere in this Section 4), provision shall be
made so that the holders of the Series A Preferred shall thereafter be entitled
to receive upon conversion of the Series A Preferred the number of shares of
stock or other securities or property of the Corporation to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, Acquisition or Asset Transfer subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred after the capital reorganization, Acquisition or Asset Transfer to
the end that the provisions of this Section 4 (including adjustment of the
Series A Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Preferred) shall be applicable after that event and
be as nearly equivalent as practicable.

         (k) SALE OF SHARES BELOW SERIES A CONVERSION PRICE.

                  (i) If at any time or from time to time after the Original
Issue Date, the Corporation issues or sells, or is deemed by the express
provisions of this subsection (k) to have issued or sold, Additional Shares of
Common Stock (as hereinafter defined), other than as a dividend or other
distribution on any class of stock as provided in Section 4(g) above, and other
than a subdivision or combination of shares of Common Stock as provided in
Section 4(f) above, for an Effective Price (as hereinafter defined) that is less
than the then-effective Series A Conversion Price, then and in each such case
the then-existing Series A Conversion Price shall be reduced, as of the opening
of


                                       8
<PAGE>   11

business on the date of such issue or sale, to a price determined by multiplying
the Series A Conversion Price by a fraction (A) the numerator of which shall be
(x) the number of shares of Common Stock Deemed Outstanding (as defined below)
immediately prior to such issue or sale, plus (y) the number of shares of Common
Stock which the aggregate consideration received (as determined by paragraph
(ii) of this subsection (k) 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 Deemed Outstanding (as defined below) immediately prior to such
issue or sale plus the total number of Additional Shares of Common Stock so
issued.

                  (ii) For the purpose of making any adjustment required under
this subsection (k), the consideration received by the Corporation for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Corporation in connection with such issue or sale but without deduction
of any expenses payable by the Corporation, (B) to the extent it consists of
property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Corporation for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.

                  (iii) For the purpose of the adjustment required under this
subsection (k), if the Corporation issues or sells any rights or options for the
purchase of, stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"CONVERTIBLE SECURITIES") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Conversion Price, in each case the
Corporation shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided, that if in the case of Convertible


                                       9
<PAGE>   12

Securities the minimum amounts of such consideration cannot be ascertained, but
are a function of anti-dilution or similar protective clauses, the Corporation
shall be deemed to have received the minimum amounts of consideration without
reference to such clauses; provided further that if the minimum amount of
consideration payable to the Corporation upon the exercise or conversion of
rights, options or Convertible Securities is reduced over time or on the
occurrence or nonoccurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Corporation
upon the exercise or conversion of such rights, options or Convertible
Securities is subsequently increased, the Effective Price shall be again
recalculated using the increased minimum amount of consideration payable to the
Corporation upon the exercise or conversion of such rights, options or
Convertible Securities. No further adjustment of the Series A Conversion Price,
as adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Series A Conversion Price as adjusted upon the
issuance of such rights, options or Convertible Securities shall be readjusted
to the Series A Conversion Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the
Corporation upon the exercise, plus the consideration, if any, actually received
by the Corporation for the granting of all such rights or options, whether or
not exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities, provided that such readjustment shall not apply to
prior conversions of Series A Preferred.

                  (iv) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
of Common Stock issued by the Corporation or deemed to be issued pursuant to
this subsection (k), other than (A) shares of Common Stock issued upon
conversion of the Series A Preferred; (B) the Reserved Employee Stock and/or
options or other Common Stock purchase rights, and the Common Stock issued
pursuant to the Corporation's 1999 Stock Incentive Plan or any other such
options or other rights issued or to be issued to employees, officers or
directors of, or consultants to the Corporation or any Subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board; (C) shares of Common Stock issued in any merger, Acquisition,
strategic transaction, or equipment leasing or debt financing, any of which must
have been


                                       10
<PAGE>   13

unanimously approved by the members of the Board; (D) shares of Common Stock
issued or issuable by reason of a dividend, stock split or other distribution on
shares of Common Stock that is covered by Section 4(f), or Section 4(g); or (E)
shares of Common Stock issued or issuable as a dividend or distribution on the
on the Series A Preferred. The "EFFECTIVE PRICE" of Additional Shares of Common
Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold by the Corporation under this subsection (k), into the aggregate
consideration received, or deemed to have been received by the Corporation for
such issue under this subsection (k), for such Additional Shares of Common
Stock.

         (l) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price for the number of shares of Common
Stock or other securities issuable upon conversion of the Series A Preferred, if
the Series A Preferred is then convertible pursuant to this Section 4, the
Corporation, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Preferred at the
holder's address as shown in the Corporation's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (A) the
Series A Conversion Price at the time in effect, and (B) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series A Preferred.

         (m) NOTICES OF RECORD DATE. Upon (i) any taking by the Corporation 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 (ii) any Liquidation or other capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, or any merger or consolidation of the Corporation with or into
any other corporation, the Corporation shall mail to each holder of Series A
Preferred at least ten (10) days prior to the record date specified therein a
notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Liquidation, reorganization,
reclassification, transfer, consolidation, merger, is expected to become
effective, and (C) the date, 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 Liquidation, reorganization, reclassification,
transfer, consolidation, or merger.

         (n) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred by a holder thereof shall be aggregated for purposes of
determining whether the


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conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of any
fractional share, the Corporation shall, in lieu of issuing any fractional
share, pay cash equal to the product of such fraction multiplied by the Common
Stock's fair market value (as determined by the Board) on the date of
conversion.

         (o) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series A Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.

5.       CERTAIN DEFINITIONS.

         "ACQUISITION" has the meaning set forth in Section 3(c)(ii).

         "ASSET TRANSFER" has the meaning set forth in Section 3(c)(iii).

         "COMMON STOCK DEEMED OUTSTANDING" means, as of a given date, be the sum
of the number of shares of Common Stock actually outstanding, plus the number of
shares of Common Stock into which the then-outstanding shares of Series A
Preferred could be converted if fully converted on the day immediately preceding
the given date plus the number of shares of Common Stock issuable upon
conversion or exercise of all other rights, options and convertible securities
which were convertible or exercisable on the day immediately preceding the given
date.

         "CONVERTIBLE SECURITIES" has the meaning set forth in Section
4(k)(iii).

         "JUNIOR STOCK" has the meaning set forth in Section 1(a).

         "LIQUIDATION" has the meaning set forth in Section 3(c).

         "ORIGINAL ISSUE DATE" has the meaning set forth in Section 4(f).

         "ORIGINAL ISSUE PRICE" has the meaning set forth in Section 1(a).

         "QUALIFIED IPO" shall mean the closing of a firm commitment
underwritten public offering of Common Stock with aggregate gross proceeds of at
least $20 million and a per share price of $10.00.



                                       12
<PAGE>   15

         "REQUIRED HOLDERS" has the meaning set forth in Section 2(b).

         "RESERVED EMPLOYEE STOCK" means up to 1,211,605 of the Corporation's
outstanding shares of Common Stock on a fully diluted basis issuable to
employees, officers, directors or consultants of the Corporation pursuant to the
Corporation's 1999 Stock Incentive Plan.

         "SERIES A CONVERSION PRICE" has the meaning set forth in Section 4(d).

         "SERIES A CONVERSION RATE" has the meaning set forth in Section 4(c).

         "SERIES A LIQUIDATION PREFERENCE" has the meaning set forth in Section
3(a).

         "SERIES A PREFERRED" has the meaning set forth in the introductory
paragraph hereof.

         "SUBSIDIARY" means any corporation of which the shares of outstanding
capital stock possessing the voting power (under ordinary circumstances) in
electing the board of directors are, at the time as of which any determination
is being made, owned by the Corporation either directly or indirectly through
Subsidiaries.

6.       AMENDMENT AND WAIVER.

         No amendment, modification or waiver of any of the terms or provisions
of the Series A Preferred shall be binding or effective without the prior
written consent of the Required Holders and no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation or entity unless the Corporation has obtained the prior written
consent of the Required Holders.

7.       GENERAL PROVISIONS.

         (a) REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of the Series A Preferred. Upon
the surrender of any certificate representing Series A Preferred at such place,
the Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.

         (b) REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series A Preferred, and in the case of any such loss, theft
or destruction, upon receipt of


                                       13
<PAGE>   16

indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.

         (c) NOTICES. Any notice required by the provisions of this Certificate
of Designation shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (iii) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices to
stockholders shall be addressed to each holder of record at the address of such
holder appearing on the books of the Corporation.

         (d) PAYMENT OF TAXES. The Corporation shall pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.

         (e) NO DILUTION OR IMPAIRMENT. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation.

         (f) NO REISSUANCE OF SERIES A PREFERRED. No share or shares of Series A
Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued.



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