Document:

ESCROW AGREEMENT
                                     (STOCK)

     This ESCROW  AGREEMENT  is made as of this 21st day of August,  2000 by and
between  SB Merger  Corp.  with a place of  business  at 305 East  Grand  River,
Brighton, Michigan 48116 (the "Company"), and Continental Stock Transfer & Trust
Company with a principal place of business at 2 Broadway,  19th Floor, New York,
New York 10004, in its capacity as escrow agent only (the "Escrow Agent").

                              W I T N E S S E T H:
                               -------------------

     WHEREAS, the Company intends to consummate the initial public offering (the
"Offering")  of an aggregate of 125,000  shares (the  "Shares") of the Company's
common  stock,  par value  $.001 per share  (the  "Common  Stock") as more fully
described  in the  Company's  Registration  Statement  on Form  SB-2  under  the
Securities Act of 1933, as amended (File No.333-39044), as declared effective by
the  Securities  and Exchange  Commission  on _______,  2000 (the  "Registration
Statement");

     WHEREAS,  in accordance  with the terms of the offering as set forth in the
Registration  Statement,  the Shares are  required  to be placed  directly in an
escrow account; and

     WHEREAS, the Company wishes to appoint the Escrow Agent as the escrow agent
for such account, on the terms and conditions set forth below in order to comply
with the  requirements  of Rule 419 of Regulation C of the Rules and Regulations
established by the Securities and Exchange Commission;

     NOW, THEREFORE, in consideration of the mutual promises and obligations set
forth below, and for other valuable consideration the sufficiency and receipt of
which are hereby acknowledged, the parties hereto hereby agree as follows:

I.  Appointment  of Escrow  Agent and  Creation of Account.  The Company  hereby
appoints the Escrow Agent as escrow agent hereunder and directs it to hold those
assets  described in Exhibit A attached  hereto,  together  with any  additional
assets

<PAGE>

which  may be  deposited  with the  Escrow  Agent  from  time to time to be held
pursuant to this Agreement and any additions thereto (collectively,  the "Escrow
Assets"),  in a separate  account in the name of "SB Merger Corp. - Stock Escrow
Account" (the "Escrow  Account").  The Escrow Account shall be administered  and
distributed in accordance with the terms set forth below. Contemporaneously with
the closing of the  Offering,  the Company  shall  deposit with the Escrow Agent
those assets listed on Exhibit A.

     1.  Initial  Deposit into Escrow  Account.  Certificates  representing  all
Shares sold by the Company shall be deposited  directly in the Escrow Account by
the Company.

     2.  Distribution   from  Escrow  Account.   The  Escrow  Agent  shall  make
distributions  from the Escrow Account in accordance with the  requirements  set
forth in Exhibit D attached hereto.  Such instructions may be modified only by a
written  certificate  executed  by  authorized  officers  of  the  Company,  and
delivered to the Escrow  Agent.  In addition,  this Escrow  Agreement may not be
altered by the Board of  Directors  of the Company in terms of its  distribution
instructions,  except as may be  required by the Board of  Directors  to fulfill
their   fiduciary   obligations.   The  Escrow  Agent  is   authorized  to  make
distributions  in reliance on the  instructions  it receives.  Written notice of
each  distribution from the Escrow Agent shall be provided to the Company within
ten (10) days of each such  distribution.  Upon the final distribution of all of
the Escrow  Assets,  this Agreement  shall  terminate and the Escrow Agent shall
have no further obligations or liabilities hereunder.

     3.  Compensation  of Escrow  Agent.  The Escrow  Agent shall  receive  fees
determined in accordance with, and payable as specified in, the Schedule of Fees
attached hereto as Exhibit E (the "Fee  Schedule").  The Escrow Agent shall have
no duties or liabilities  under this Agreement  unless and until full payment of
the fee set forth in Exhibit  E. The Escrow  Agent  shall be  reimbursed  by the
Company for all  expenses,  disbursements  and advances  incurred or made by the
Escrow Agent in preparation,  administration  and enforcement of this Agreement,
including,  but not limited to, reasonable legal fees and expenses.  The Company
shall be liable for all payments due to the Escrow Agent under this Agreement.

     4.  Responsibilities  and Rights of the Escrow Agent.  To induce the Escrow
Agent to act hereunder, it is further agreed by the undersigned that:

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<PAGE>

     (a) The  Escrow  Agent  undertakes  to  perform  only  such  duties  as are
expressly set forth herein.  Without  limiting the  generality of the foregoing,
the Escrow  Agent  shall  have no duty or  responsibility  as  regards  any loss
occasioned by delay in the actual  receipt of notice of any payment,  redemption
or other  transaction  regarding any item in the Escrow Assets as to which it is
authorized to take action  hereunder.  The Escrow Agent may consult with counsel
and shall be fully  protected  with respect to any action taken in good faith in
accordance  with such  advice.  The  Escrow  Agent  shall have no  liability  or
responsibility for any misstatement in, or omission from, the Prospectus.

     (b) The  Escrow  Agent  shall  not be under  any duty to give the  Escrowed
Assets held by it  hereunder  any  greater  degree of care than it gives its own
similar property except as directed pursuant to this Escrow Agreement.

     (c) The Escrow  Agent does not make any  representation  or  warranty  with
regard to the  creation or  perfection,  hereunder or  otherwise,  of a security
interest in the Escrow Assets or regarding the negotiability or  transferability
of, or existence of other interests in the Escrow Assets. The Escrow Agent shall
have no  responsibility  at any time to  ascertain  whether or not any  security
interest  exists  in the  Escrow  Assets  or any  part  thereof  or to file  any
financing  statement under the Uniform Commercial Code of any state with respect
to the Escrow Assets or any part thereof.

     (d) The Escrow Agent is hereby authorized to comply with any judicial order
or legal process which stays, enjoins, directs or otherwise affects the transfer
or  delivery  of the  Escrow  Assets or any  party  hereto  and  shall  incur no
liability for any delay or loss which may occur as a result of such compliance.

     (e) The Escrow Agent need not maintain  any  insurance  with respect to the
Escrow Assets.

     (f) Except as  otherwise  expressly  provided  herein,  the Escrow Agent is
authorized  to execute  instructions  and take other  actions  pursuant  to this
Agreement in  accordance  with its  customary  processing  practices for similar
customers  and, in  accordance  with such  practices the Escrow Agent may retain
agents, including its own subsidiaries or affiliates, to perform certain of such
functions. The Escrow Agent shall have no liability under this Agreement for any
loss or expense other

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<PAGE>

than  those  occasioned  by the  Escrow  Agent's  gross  negligence  or  willful
misconduct and in any event its liability shall be limited to direct damages and
shall not include any  special or  consequential  damages.  All  collection  and
receipt of securities and all delivery of securities  under this Agreement shall
be made by the Escrow Agent as agent,  at the risk of the other  parties  hereto
with respect to their  actions or  omissions  and those of any person other than
the Escrow Agent.  In no event shall the Escrow Agent be  responsible  or liable
for any loss due to force  beyond its  control,  including,  but not limited to,
acts of God, flood, fire, nuclear fusion, fission or radiation, war (declared or
undeclared),   terrorism,  insurrection,   revolution,  riot,  strikes  or  work
stoppages  for any  reason,  embargo,  government  action,  including  any laws,
ordinances,  regulations or the like which restrict or prohibit the providing of
the services  contemplated by this Agreement,  inability to obtain  equipment or
communications  facilities,  or the  failure of  equipment  or  interruption  of
communications  facilities, and other causes whether or not of the same class or
kind as  specifically  named above. In the event that the Escrow Agent is unable
substantially  to perform for any of the reasons  described  in the  immediately
preceding  sentence,  it shall so  notify  the other  parties  hereto as soon as
reasonably practicable following its actual knowledge of the same.

     (g) This Escrow Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties or
obligations  shall  be read  into  this  agreement  against  the  Escrow  Agent.
Notwithstanding  any  provisions of this  Agreement to the contrary,  the Escrow
Agent  shall not be bound by, or have any  responsibility  with  respect to, any
other agreement or contract among the Company and the  Representatives  (whether
or not the Escrow Agent has knowledge thereof).

     (h) It is understood  and agreed that should any dispute arise with respect
to the payment and/or ownership or right of possession of the Escrow Assets,  or
should  the Escrow  Agent in good faith be in doubt as to what  action it should
take  hereunder,  the Escrow Agent is  authorized  and directed to retain in its
possession,  without  liability to anyone,  all or any part of the Escrow Assets
until such  dispute  shall have been settled  either by mutual  agreement by the
parties  concerned  or by the final  order,  decree or  judgment of any court or
other  tribunal of competent  jurisdiction  in the United  States of America and
time for appeal has  expired  and no appeal has been  perfected,  but the Escrow
Agent  shall  be  under no duty  whatsoever  to  institute  or

                                       4
<PAGE>

defend any such  proceedings.  Any such court  order shall be  accompanied  by a
legal opinion by counsel for the  presenting  party  satisfactory  to the Escrow
Agent to the effect that said court order is final and nonappealable.

     (i) The Escrow  Agent shall be  entitled to rely upon any order,  judgment,
certification,  demand,  notice,  instrument  or other  writing  delivered to it
hereunder   without  being  required  to  determine  the   authenticity  or  the
correctness  of any fact  stated  therein or the  propriety  or  validity of the
service thereof.  Without limiting the foregoing, in the event of any alteration
of distribution  instructions,  the Escrow Agent shall have no responsibility to
determine  whether  the  requested  alteration  was  required  by the  Board  of
Directors of the Company to fulfill its fiduciary obligations.  The Escrow Agent
may act in  reliance  upon any  instrument  or  signature  believed  by it to be
genuine and may assume that any person  purporting  to give receipt or advice or
make any  statement or execute any document in  connection  with the  provisions
hereof has been duly authorized to do so.

     (j) The Company shall hold the Escrow Agent and its agents  harmless  from,
and  indemnify  and  reimburse  the Escrow  Agent and its agents for all claims,
liability,  loss and expense (including reasonable  out-of-pocket and incidental
expenses  and legal fees),  incurred by the Escrow  Agent or them in  connection
with the Escrow Agent or their acting under this  Agreement,  provided  that the
Escrow Agent or they,  as the case may be, have not acted with gross  negligence
or willful  misconduct  with  respect to the events  resulting  in such  claims,
liability, loss, and expense.

     (k) The Company  acknowledges and agree that, except as otherwise  provided
in this Section 6(k), the Escrow Agent shall not be  responsible  for taking any
steps,  including  without  limitation,  the  filing  of  forms or  reports,  or
withholding of any amounts in connection with any tax obligations of the Company
or any other party in connection with the Escrow Assets; provided, however, that
the Escrow Agent shall be entitled to take any action such as withholding,  that
it deems  appropriate  to  ensure  compliance  with its  obligations  under  any
applicable tax laws.

     (l) The  Escrow  Agent  does not have any  interest  in the  Escrow  Assets
deposited  hereunder  but is  serving  as escrow  holder  only and  having  only
possession  thereof.  The Company  shall pay or reimburse  the Escrow Agent upon
request  for any

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<PAGE>

transfer  taxes or  other  taxes  relating  to the  Escrow  Assets  incurred  in
connection  herewith and shall indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. This paragraph
shall survive  notwithstanding  any termination of this Escrow  Agreement or the
resignation of the Escrow Agent.

     (m) The Escrow Agent makes no  representation  as to the  validity,  value,
genuineness  or  the  collectability  of  any  security  or  other  document  or
instrument held by or delivered to it.

     (n) The Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or  retaining  or taking or  refraining  from any action  with
respect to any securities or other property deposited hereunder.

     (o)  No  printed  or  other  matter  in  any  language  (including  without
limitation  prospectuses,  notices,  reports  and  promotional  material)  which
mentions the Escrow Agent's name or the rights,  powers, or duties of the Escrow
Agent shall be issued by the other  parties  hereto or on such  parties,  behalf
unless the Escrow  Agent shall  first have given its  specific  written  consent
thereto.  Notwithstanding  the  foregoing  sentence,  the  Escrow  Agent  hereby
specifically  consents to the use of its name as Escrow  Agent as  necessary  to
effectuate  the  Company's  public  offering and a business  combination  of the
Company.

     5.   Instructions: Fund Transfers.

     (a) The Escrow Agent is  authorized  to rely and act upon all  instructions
given or purported to be given by one or more  officers,  employees or agents of
the Company  (i)  authorized  by or in  accordance  with a corporate  resolution
delivered to the Escrow Agent or (ii)  described as  authorized in a certificate
delivered  to  the  Escrow  Agent  by the  appropriate  Secretary  or  Assistant
Secretary  or  similar  officer  (each  such  officer,   employee  or  agent  or
combination of officers,  employees and agents authorized pursuant to clause (i)
or  described  pursuant  to  clause  (ii) of this  Section  5(a) is  hereinafter
referred to as an  "Authorized  Officer").  (The term  "instructions"  includes,
without limitation, instructions to sell, assign, transfer, deliver, purchase or
receive for the Escrow Account any and all stocks, bonds and other securities or
to transfer all or any portion of the Escrow  Assets.) The Escrow Agent may also
rely and act upon  instructions when bearing or

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<PAGE>

purporting  to  bear  the  signature  or  facsimile  signature  of  any  of  the
individuals designated by an Authorized Officer regardless of by whom or by what
means the actual or purported facsimile signature or signatures thereon may have
been affixed  thereto if such  facsimile  signature or  signatures  resemble the
facsimile  specimen or specimens from time to time furnished to the Escrow Agent
by any of such  Authorized  Officers,  Secretary  or an  Assistant  Secretary or
similar officer). In addition, and subject to subsection 7(b) hereof, the Escrow
Agent may rely and act upon  instructions  received  by  telephone,  telex,  TXW
facsimile  transmission,  bank wire or other teleprocess  acceptable to it which
the Escrow  Agent  believes  in good  faith to have been given by an  Authorized
Officer or which are transmitted with proper testing or authentication  pursuant
to terms and  conditions  which the Escrow Agent may  specify.  The Escrow Agent
shall  incur no  liability  to the  Company or  otherwise  for  having  acted in
accordance  with  instructions on which it is authorized to rely pursuant to the
provisions hereof.  Any instructions  delivered to the Escrow Agent by telephone
shall promptly  thereafter be confirmed in writing by an Authorized  Officer but
the  Escrow  Agent  shall  incur  no  liability  for  a  failure  to  send  such
confirmation in writing, the failure of any such written confirmation to conform
to the telephone instruction which it received,  the failure of any such written
confirmation  to be signed or properly  signed,  or its failure to produce  such
confirmation  at any subsequent  time. The Escrow Agent shall incur no liability
for  refraining  from acting upon any  instructions  which for any reason it, in
good  faith,  is  unable to verify  to its own  satisfaction.  Unless  otherwise
expressly  provided,  all authorizations and instructions shall continue in full
force and effect until  canceled or superseded by subsequent  authorizations  or
instructions  received by the Escrow Agent's safekeeping account  administrator.
The Escrow Agent's  authorization to rely and act upon instructions  pursuant to
this  paragraph  shall be in  addition  to,  and  shall  not  limit,  any  other
authorization which the Company may give to it hereunder.

     (b) With respect to written or telephonic instructions or instructions sent
by facsimile  transmission  to transfer  securities  from the Escrow  Account in
accordance  herewith  (such  instructions  hereinafter  referred to as "Transfer
Instructions"),   the  security   procedure   agreed  upon  for   verifying  the
authenticity  of Transfer  Instructions is a callback by the Escrow Agent to any
of the persons designated below,  whether or not any such person has issued such
Transfer  Instruction.  (It is recommended that the persons designated below not
be persons who generally issue Transfer  Instructions;  whenever  possible,  the

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<PAGE>

Escrow Agent will endeavor to call someone other than the issuer of the Transfer
Instructions).

     With respect to Transfer  Instructions given by the Company pursuant to its
authority under this Agreement:

     Name/Title                                  Telephone No.
     ----------                                  -------------

     Judith Haselton, President                  (212) 678-6231
     Richard L. Campbell,Secretary               (810) 220-1220

     Alternatively,  at the Escrow Agent's  option,  the callback may be made to
any person  designated in the certified  resolutions  or other  certificates  or
documentation  furnished to it by a party in connection  with the Escrow Account
as authorized to issue Transfer Instructions or otherwise transact business with
respect to the Escrow  Account for that party.  The Company shall  implement any
other  authentication  method or  procedure or security  device  required by the
Escrow Agent at any time or from time to time.

     6. Stockholder Redemption.  In the event a stockholder exercises his or her
redemption  right upon the Business  Combination  of the Company,  following the
return of the funds to said  stockholder  from the Funds Escrow  created of even
date herewith between the Company and the Escorw Agent, the Shares which are the
subject of the redemption shall be cancelled.

     7.   Resignation or Removal of Escrow Agent.

     (a) The Escrow Agent may resign at any time by giving written notice to the
Company.  The Company  may remove the Escrow  Agent upon  written  notice to the
Escrow Agent. Such resignation or removal shall take effect upon delivery of the
Escrow Assets to a successor  escrow agent designated in writing by the Company,
and the Escrow Agent shall thereupon be discharged  from all  obligations  under
this  Agreement,  and  shall  have no  further  duties  or  responsibilities  in
connection herewith.  The obligations of the Company to the Escrow Agent and the
rights of the Escrow Agent under Sections 5, 6(c), and 6(h) hereof shall survive
termination of this Agreement or the resignation or removal of the Escrow Agent.

     (b) In the event that the Escrow Agent submits a notice of resignation, its
only duty,  until a successor  Escrow Agent shall have been  appointed and shall
have  accepted such

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<PAGE>

appointment,  shall be to  safekeep  the  Escrow  Assets,  and hold,  invest and
dispose of the Escrow Assets in accordance with this Agreement, until receipt of
a  designation  of  successor  Escrow  Agent  or  a  joint  written  disposition
instrument by the other parties  hereto or a Final Order of a court of competent
jurisdiction, but without regard to any notices, requests, instructions, demands
or the like received by it from the other parties hereto after such notice shall
have been given,  unless the same is a direction  that the Escrow Assets be paid
or delivered in its entirety out of the Escrow Account.  The Escrow Agent,  upon
submission of its  resignation  in  accordance  with this  subparagraph  (b) may
deposit the Escrow Assets with a court of competent  jurisdiction  if the Escrow
Agent deems such action advisable. The resignation of the Escrow Agent will take
effect on the earlier of (a) the  appointment of a successor  (including a court
of  competent  jurisdiction)  or (b) the day which is 30 days  after the date of
delivery of its written notice of resignation to the other parties  hereto.  If,
at the time the Escrow  Agent has not  received  a  designation  of a  successor
Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to
safe-keep the Escrow Assets until receipt of a designation of a successor Escrow
Agent or a joint written disposition instrument by the other parties hereto or a
final order of a court of competent jurisdiction.

     8. Notices.  Unless  expressly  provided  herein to the  contrary,  notices
hereunder shall be in writing,  and delivered by telecopier,  overnight  express
mail, first-class postage prepaid,  delivered personally or by receipted courier
service.  All such  notices  which are  mailed  shall be deemed  delivered  upon
receipt if the addressee is the Escrow Agent, but shall be deemed delivered upon
mailing if otherwise, all such notices shall be addressed as follows (or to such
other address as any party hereto may from time to time designate by notice duly
given in accordance with this paragraph):

          (a)  If to the Company, to:

               SB Merger Corp.
               305 East Grand River
               Brighton, Michigan 48116
               Attention: Judith Haselton, President

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<PAGE>

          If to the Escrow Agent, to:

               Continental Stock Transfer & Trust Co.
               2 Broadway 19th floor
               New York, New York 10004
               Attn: Steve Nelson

     9.   Miscellaneous.

     (a) Choice of Law and Jurisdiction. This Agreement shall be governed by and
construed  in  accordance  with the law of the State of New York  applicable  to
agreements  made and to be performed in New York.  The parties to this Agreement
hereby agree that  jurisdiction over such parties and over the subject matter of
any action or  proceeding  arising  under this  Agreement  may be exercised by a
competent Court of the State of New York sitting in New York City or by a United
States Court  sitting in the  Southern  District of New York,  exclusively.  The
parties  agree that  delivery or mailing of any  process or other  papers in the
manner  provided  herein,  or in such other  manner as may be  permitted by law,
shall be valid and sufficient service thereof.

     (b)  Benefits  and  Assignment.  Nothing in this  Agreement,  expressed  or
implied,  shall give or be  construed to give any person,  firm or  corporation,
other than the parties hereto and their successors and assigns,  any legal claim
under  any  covenant,   condition  or  provision  hereof;   all  the  covenants,
conditions,  and  provisions  contained  in this  Agreement  being  for the sole
benefit of the parties  hereto and their  successors  and assigns.  No party may
assign any of its rights or  obligations  under this  Agreement  without (i) the
written  consent of all the other parties,  which consent may be withheld in the
sole  discretion  of the party  whose  consent  is sought  and (ii) the  written
agreement  of the  transferee  that it will be bound by the  provisions  of this
Agreement.

     (c) Counterparts.  This Agreement may be executed in several  counterparts,
each one of which shall  constitute  an  original,  and all  collectively  shall
constitute but one instrument.

     (d) Amendment and Waiver.  This Agreement may be modified only by a written
amendment  signed by all the  parties  hereto,  and no  waiver of any  provision
hereof shall be effective  unless  expressed in a writing signed by the party to
be charged.

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<PAGE>

     (e)  Headings.  The  headings  of the  sections  hereof  are  included  for
convenience of reference only and do not form part of this Agreement.

     (f) Entire Agreement. This Agreement contains the complete agreement of the
parties  with  respect to its subject  matter and  supersedes  and  replaces any
previously  made  proposals,  representations,  warranties  or  agreements  with
respect thereto by any of the parties hereto.

     (g) Separability.  Any provisions of this Agreement which may be determined
by competent  authority to be prohibited or  unenforceable  in any  jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or enforceability  without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

     10.  Additional  Documentation.  This Agreement shall not become  effective
(and the Escrow Agent shall have not  responsibility  hereunder except to return
the Escrow  Assets to the Company)  until the Escrow  Agent shall have  received
from the Company the following:

          (i)  Certified  resolutions of its board of directors  authorizing the
               making and performance of this Agreement; and

          (ii) A  certificate  as to the names and  specimen  signatures  of its
               officers or representatives  authorized to sign the Agreement and
               notices, instructions and other communications hereunder.

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<PAGE>

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.

                                               SB Merger CORP.

                                              By:/s/ Richard L. Campbell
                                                 -------------------------------
                                                 Name:   Richard L. Campbell
                                                 Title:  Secretary

Agreed and accepted:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY

as Escrow Agent

By: /s/ Michael J. Nelson
    ------------------------
         Name:  Michael J. Nelson
         Title: President

                                       12
<PAGE>

                          EXHIBIT A to ESCROW AGREEMENT

                                  Escrow Assets

Up to One Hundred  Twenty-Five  Thousand (125,000) Shares of Common Stock of the
Company

                                       13
<PAGE>

                          EXHIBIT B to ESCROW AGREEMENT

                              INTENTIONALLY OMITTED

                                       14
<PAGE>

                          EXHIBIT C to ESCROW AGREEMENT

                             Investment Instructions

                            Intentionally Left Blank

                                       15
<PAGE>

                          EXHIBIT D to ESCROW AGREEMENT

                            Disbursement Instruction

1.      Release of Escrow Assets to the Company.  The Escrow Agent shall release
        the Escrow Assets to the  Shareholders  upon receipt by the Escrow Agent
        of:

        (a)     Written notice from the Company that the Company has completed a
                transaction  or series of  transactions  for the  acquisition or
                acquistions  of a business or businesses or assets for which the
                fair value(as  determined by the Company,  based upon  standards
                generally  accepted  by  the  financial   community,   including
                revenues,  earnings,  cash flow,  and book value) exceeds eighty
                percent  of the net  value  of the  assets  of the  Company,  as
                required by the Registration Statement; and

        (b)     An opinion of counsel of the Company,  reasonably  acceptable to
                the Escrow Agent, that:

                (i)     A  Business  Combination  was  approved  by a vote  of a
                        majority of the shares of Common  Stock of the  Company,
                        as required by the Registration Statement;

                (ii)    Not more than twenty percent of the  shareholders of the
                        Company have elected to redeem  their Common  Stock,  as
                        required by the Registration Statement;

                (iii)   All  other  actions  required  to be  performed  by  the
                        Company for the  release of the Escrow  Assets have been
                        met.

2.      Distribution  of Escrow  Assets back to the  Company.  The Escrow  Agent
        shall disburse the Escrow Assets back to the Company if:

        (a)     The Company delivers written notice to the Escrow Agent that all
                of the Escrow Assets should be returned to it as a result of the
                holders  of record of the  Company's  Common  Stock  sold in the
                Offering having not approved a

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<PAGE>

                Business Combination and following  return to such  shareholders
                of the funds also held in escrow by the Escrow Agent; or

        (b)     The Company  delivers  written  notice to the Escrow  Agent that
                part of the Escrow  Assets  should be cancelled  and returned to
                the  Company  as a  result  of less  than  20% of the  Company's
                holders of Common  Stock sold in the  Offering  electing to have
                their shares  redeemed in accordance with the terms set forth in
                the Registration Statement.

3.      Method of Release of Escrow Assets to the Company.  Upon the  occurrence
        of receipt by the Escrow Agent of the written notice required  paragraph
        1 above, the Escrow Agent shall delivery in customary fashion the Escrow
        Assets to the  shareholders in accordance with the shareholder list held
        by the Escrow Agent.

4.      Method of  Distribution  of  Escrow  Assets  to  Stockholders.  Upon the
        occurrence  of either of the events  specified  in Section  2(a) or 2(b)
        above,  the Escrow  Agent  shall  distribute  the  Escrow  Assets to the
        Company and/or the holders of record of the Company Common Stock sold in
        the offering by mail in accordance with and to the address  specified in
        the books and records of the  Company.  The written  notice  required by
        Section 2 (a) or 2(b),  as the case may be,  shall  include the name and
        address of each such holder,  together with the percentage of the Escrow
        Assets to be distributed thereto.

                                       17
<PAGE>

                          EXHIBIT E to ESCROW AGREEMENT

                                  Fee Schedule

One Thousand  ($1,000.00) Dollars Escrow Agent fee to CONTINENTAL STOCK TRANSFER
& TRUST COMPANY to be paid at Closing.AMENDED CERTIFICATE OF DESIGNATIONS OF
                   SERIES C 6% CONVERTIBLE PREFERRED STOCK OF
                             USA BIOMASS CORPORATION

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

     The undersigned, Fred H. Behrens and Hilly G. Jones, hereby certify that:

     I.  They  are  the  duly  elected  and  acting   Chairman  and   Secretary,
respectively,   of  USA  Biomass   Corporation,   a  Delaware  corporation  (the
"Corporation").

     II. The  Certificate of  Incorporation  of the  Corporation  authorizes the
Corporation to issue  preferred  stock,  and the  Corporation has authorized the
issuance of three thousand  (3,000) shares of Series C 6% Convertible  Preferred
Stock, $0.01 par value per share.

     III. The following is a true and correct copy of  resolutions  duly adopted
by the Board of Directors of the Corporation  (the "Board of Directors") on July
5, 2000  pursuant to the Articles of  Incorporation  of the  Corporation  and in
accordance  with the provisions of the General  Corporation  Law of the State of
Delaware.

RESOLUTIONS

     WHEREAS,  the Board of Directors is  authorized to provide for the issuance
of the shares of preferred  stock,  and by filing a certificate  pursuant to the
applicable law of the State of Delaware to establish and issue  preferred  stock
with  such  voting  powers,  full or  limited,  or no  voting  powers,  and such
designations, preferences and relative, participating, optional or other special
rights, and with such qualifications, limitations or restrictions thereon as the
Board of Directors may determine.

     WHEREAS,  the Board of  Directors  desires,  pursuant to its  authority  as
aforesaid,  to  designate  a new series of  preferred  stock,  set the number of
shares constituting such series and fix the rights, preferences,  privileges and
restrictions of such series.

     NOW,  THEREFORE,  BE IT  RESOLVED,  that  the  Board  of  Directors  hereby
designates a new series of preferred stock and the number of shares constituting
such  series and fixes the  rights,  preferences,  privileges  and  restrictions
relating to such series as follows:

     A.  Designation,  Amount and Par Value. The series of preferred stock shall
be  designated  as the Series C 6%  Convertible  Preferred  Stock (the "Series C
Preferred  Stock"),  and the  number  of  shares  so  designated  shall be three
thousand  (3,000)  (which  shall not be subject to increase or  decrease).  Each
share of Series C Preferred  Stock shall have a par value of $0.01 per share and
a  stated  value  (the  "Stated  Value")  of  the  Liquidation   Preference  (as
hereinafter defined in Section C(1)).

                                       1
<PAGE>

     B. Dividends.

     (1) Holders of the Series C  Preferred  Stock shall be entitled to receive,
out of funds legally  available  therefor,  dividends at a rate equal to 6% (the
"Dividend  Rate") of the Liquidation  Preference per share per annum (subject to
appropriate  adjustments  in the  event  of any  stock  dividend,  stock  split,
combination or other similar  recapitalization  affecting  such shares),  and no
more,  payable in accordance with the provisions of this Amended  Certificate of
Designations.

     (2) At the election of the Corporation, each dividend on Series C Preferred
Stock shall be paid either in shares of Common Stock of the Corporation,  $0.002
par value per share ("Common Stock") or in cash on the Delivery Date (as defined
in Subsection G(2)(a) of this Amended  Certificate of Designations) with respect
to any shares of Series C  Preferred  Stock which are the subject of a Notice of
Conversion  (as  defined  in  Subsection  G(2) of this  Amended  Certificate  of
Designations).  Dividends paid in shares of Common Stock shall be paid (based on
an assumed  value of $1,000 per share) in full shares only,  with a cash payment
equal to the value of any fractional shares. Each dividend paid in cash shall be
mailed to the holders of record of the Series C  Preferred  Stock as their names
and addresses  appear on the share register of the  Corporation or at the office
of the transfer agent on the  corresponding  dividend  payment date.  Holders of
Series C Preferred Stock will receive written  notification from the Corporation
or the transfer  agent if a dividend is paid in kind,  which  notification  will
specify  the  number  of  shares  of Common  Stock  paid as a  dividend  and the
recipient's  aggregate holdings of Common Stock as of that dividend payment date
and after giving effect to the  dividend.  All holders of shares of Common Stock
issued as dividends shall be entitled to all of the rights and benefits relating
to  shares  of  Common  Stock as set  forth  in the  Corporation's  Articles  of
Incorporation, as amended, and By-laws.

     (3) Holders of the Series C Preferred Stock shall be entitled to payment of
any dividends in preference  and priority to any payment of any cash dividend on
Common Stock or any other class or series of capital  stock of the  Corporation,
other than  holders of shares of the issued and  outstanding  Series A Preferred
Stock of the Company,  as of the date  hereof,  who shall be entitled to receive
such  dividends on a pari passu basis with the holders of the Series C Preferred
Stock.  Dividends  on the Series C Preferred  Stock shall accrue with respect to
each share of the Series C Preferred  Stock from the date on which such share is
issued and outstanding and thereafter  shall be deemed to accrue from day to day
whether or not earned or  declared  and  whether  or not there  exists  profits,
surplus or other funds legally available for the payment of dividends, and shall
be  cumulative so that if such  dividends on the Series C Preferred  Stock shall
not have been paid, or declared and set apart for payment,  the deficiency shall
be fully paid or declared and set apart for payment before any dividend shall be
paid or declared  or set apart for any Common  Stock or other class or series of
capital stock ranking  junior to the Series C Preferred  Stock (such stock being
collectively  referred to herein as the "Junior  Stock") and before any purchase
or  acquisition of any Junior Stock is made by the  Corporation.  At the earlier
of: (1) the redemption or conversion of the Series C Preferred  Stock or (2) the
liquidation of the  Corporation,  any accrued but undeclared  dividends shall be
paid to the holders of record of outstanding shares of

                                       2
<PAGE>

the Series C Preferred  Stock in accordance  with the provisions of this Amended
Certificate  of  Designations.  No  accumulation  of  dividends  on the Series C
Preferred Stock shall bear interest.

     C. Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary  liquidation,  dissolution  or  winding up of the  Corporation,  the
holders of shares of the Series C  Preferred  Stock  then  outstanding  shall be
entitled  to be  paid  out  of  the  assets  of the  Corporation  available  for
distribution  to its  stockholders,  before  any  payment  shall  be made to the
holders of Junior Stock by reason of their ownership thereof, an amount equal to
one  thousand  dollars  ($1,000)  per share of  Series C  Preferred  Stock  (the
"Liquidation  Preference") plus any accrued but unpaid dividends (whether or not
declared).  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 the
Series C Preferred  Stock the full amount to which they shall be  entitled,  the
holders of shares of the Series C Preferred  Stock  shall  share  ratably in any
distribution of the remaining  assets and funds of the Corporation in proportion
to the  respective  amounts  which would  otherwise be payable in respect of the
shares held by them upon such  distribution  if all  amounts  payable on or with
respect to such shares were paid in full.

     D. Voting.  Except for the limited voting rights  specified in Section J of
this Amended  Certificate of Designations,  each holder of outstanding shares of
Series C  Preferred  Stock  shall  not be  entitled  to vote at any  meeting  of
stockholders  of the  Corporation  (and with  respect  to  written  consents  of
stockholders in lieu of meetings) with respect to any and all matters  presented
to the stockholders of the Corporation for their action or consideration,  until
and unless the shares of Series C Preferred  Stock held by such holder have been
converted into shares of Common Stock,  at which time each holder shall have the
voting rights appurtenant to each whole share of Common Stock so converted.

     E. Other Securities.  Subject to any limitations  contained in this Amended
Certificate of Designations,  the Corporation's Articles of Incorporation and/or
the Primary Documents (as defined in the Securities Purchase Agreement, dated as
of March 14, 2000,  hereinafter the "Securities Purchase Agreement"),  the Board
of Directors  of the  Corporation  reserves  the right to  establish  additional
classes and/or series of capital stock of the  Corporation  and to designate the
preferences,  limitations and relative rights of any such classes and/or series;
provided,  however,  that no such  class  and/or  series  may have  preferences,
limitations  and  relative  rights  which  are  superior  to or  senior  to  the
preferences,  limitations  and  relative  rights  granted to the  holders of the
Series C Preferred Stock.

     F. Capital  Reorganization.  If the Corporation shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock,  declare a dividend
payable  in  Common  Stock,  or  in  case  of  any  capital   reorganization  or
reclassification of the shares of Common Stock of the Corporation, the number of
shares of the  Series C  Preferred  Stock and the  Stated  Value of the Series C
Preferred  Stock  shall be  adjusted  appropriately  to allow the holders of the
Series C Preferred Stock, as nearly as reasonably possible,  to maintain (i) the
aggregate  Stated Value of the Series C Preferred  Stock and (ii) their pro rata
interest  in the  Corporation  and in the

                                       3
<PAGE>

Common Stock upon conversion of the Series C Preferred  Stock,  that each holder
had prior to any such subdivision,  combination, stock dividend,  reorganization
or reclassification.

     G. Conversion.

     (1) The  holders  of the Series C  Preferred  Stock  shall have  conversion
rights as follows (the "Series C Preferred Stock Conversion Rights"):

          (a) Each share of Series C Preferred  Stock shall be  convertible,  at
     the option of the holder  thereof,  at any time and from time to time, into
     such number of fully paid and  nonassessable  shares of Common  Stock as is
     determined  by dividing  $1,000,  plus the amount of any accrued and unpaid
     dividends the Corporation  elects to pay in Common Stock, by the Conversion
     Price  (as  defined  below)  in  effect  at the  time  of  conversion.  The
     Conversion  Price at which shares of Common Stock shall be deliverable upon
     conversion  of Series C Preferred  Stock  without the payment of additional
     consideration by the holder thereof (the  "Conversion  Price") shall be the
     lower of (i) four and 65/100 dollars  ($4.65) or (ii) 85% of the average of
     the three  lowest  Closing Bid Prices of the shares of Common Stock for the
     fifteen  (15)  trading days  immediately  preceding  the Series C Preferred
     Stock  Conversion  Date (as  hereinafter  defined).  For  purposes of these
     Articles of Amendment, the term "Closing Bid Price" means, for any security
     as of any date, the closing bid price on the principal  securities exchange
     or trading market where the Common Stock is listed or traded as reported by
     Bloomberg,  L.P. ("Bloomberg") or, if applicable,  the closing bid price of
     the Common Stock in the over-the-counter  market on the electronic bulletin
     board for such  security as reported  by  Bloomberg,  or, if no closing bid
     price is reported  for the Common Stock by  Bloomberg,  then the average of
     the bid prices of any market  makers for such  security  as reported in the
     "pink  sheets" by the National  Quotation  Bureau,  Inc. If the Closing Bid
     Price of the Common Stock can not be  calculated on such date on any of the
     foregoing  bases,  the Closing  Bid Price of the Common  Stock on such date
     shall be the fair market value as  determined  by the holders of a majority
     of the  outstanding  shares of Series C Preferred Stock being converted for
     which the  calculation  of the  Closing  Bid Price is  required in order to
     determine the Conversion Price of such shares. "Trading day" shall mean any
     day on which the Corporation's Common Stock is traded for any period on the
     principal  securities  exchange  or other  securities  market  on which the
     Common Stock is then being traded.  If, during any period  following  March
     14, 2000 (the "Original Issue Date"),  as a result of the occurrence of any
     of the events set forth in Section 3(f) or 3(g) of the Registration  Rights
     Agreement,  dated as of March 14, 2000, by and between the  Corporation and
     the Purchaser set forth therein (the "Registration Rights Agreement"),  the
     Purchasers  set forth  therein are not able to sell shares of Common  Stock
     issuable upon conversion of, or in lieu of dividends on, shares of Series C
     Preferred Stock pursuant to a registration statement filed pursuant to such
     agreement, the holders of shares of Series C Preferred Stock shall have the
     right,  for any purpose during such period and thereafter,  to designate as
     the Conversion  Price any Conversion  Price that would have been applicable
     during such period had such Series C Preferred Stock shareholder  delivered
     a Notice of Conversion with respect to any such Series C Preferred Stock.

                                       4
<PAGE>

          (b) In no event shall the number of shares of Common  Stock issued (A)
     upon conversion of the Series C Preferred Stock and (B) in lieu of dividend
     payments  on the  Series  C  Preferred  Stock,  equal  20% or  more  of the
     Corporation's  outstanding  Common  Stock.  At such  time as the  Board  of
     Directors of the Corporation determines that it is necessary or appropriate
     to do so to  ensure  that the  number  of  shares  issued  to the  Series C
     Preferred  Stockholder resulting from conversion and dividend payments does
     not equal or exceed 20% of the  Corporation's  outstanding  Common Stock (a
     "Common Stock Redemption  Event"),  the Corporation  shall (x) redeem, at a
     price per share equal to (A) the quotient of (i) the Liquidation Preference
     per share of Series C Preferred Stock plus all accrued but unpaid dividends
     on such shares of Series C Preferred Stock and (ii) the Conversion Price as
     if the  Series  C  Preferred  Stock  had  been  converted  on the  Series C
     Preferred  Stock  Redemption Date multiplied by (B) the average Closing Bid
     Price of shares of Common Stock for the five (5) trading  days  immediately
     preceding  the  Series  C  Preferred  Stock  Redemption  Date,  all  of the
     outstanding  Series C Preferred  Stock or (y) call a special meeting of its
     stockholders for the purpose of approving the transactions  contemplated by
     the Securities Purchase  Agreement,  including the issuance of the Series C
     Preferred  Stock on the terms set forth  therein,  together  with any other
     approvals  that  shall  be  required  so  as  to  cause  the   transactions
     contemplated by the Securities  Purchase  Agreement to remain in compliance
     with the Rules and Regulations of The Nasdaq Stock Market  (including Rules
     4300  and  4310  of  Nasdaq's   Non-Qualitative   Designation  Criteria  in
     connection with conversions of Series C Preferred Stock; such approvals are
     referred to herein as the "Required  Approvals");  provided,  however, that
     the Corporation  shall not redeem the outstanding  Series C Preferred Stock
     pursuant to clause (x) above, until such time as the Corporation has issued
     that number of shares of the  Corporation's  Common Stock equal to at least
     16% of the Corporation's outstanding Common Stock to the Series C Preferred
     Stockholders . The  Corporation  shall  determine  within five (5) business
     days following the receipt of a Notice of Conversion  which of such actions
     it shall take, and shall promptly  furnish notice to each of the holders of
     Series  C  Preferred  Stock  as  to  such  determination,   including,   if
     applicable, a notice of redemption. In no event shall the Corporation issue
     shares of Common Stock upon conversion of, or in lieu of dividend  payments
     on, the Series C Preferred  Stock,  after the  occurrence of a Common Stock
     Redemption Event until the Required Approvals, if any, are obtained.

          (c)  If the  Corporation  elects  to  call a  special  meeting  of its
     stockholders  pursuant to Subsection G(1)(b) of this Amended Certificate of
     Designations to obtain the Required  Approvals,  the Corporation  shall use
     its best efforts to obtain such Required  Approvals within thirty (30) days
     of the Closing Date (as defined in the Securities Purchase Agreement) (such
     thirty (30) day period is referred to herein as an "Approval  Period").  If
     the Corporation does not obtain the Required  Approvals within the Approval
     Period  and the  Corporation  receives  a Notice  of  Conversion  after the
     termination  of the  Approval  Period,  the  Corporation  must  redeem,  in
     accordance  with  this   Subsection  G  of  this  Amended   Certificate  of
     Designations,  that number of shares of Series C Preferred  Stock necessary
     to  ensure  that the  number of shares  issued  to the  Series C  Preferred
     Stockholder  resulting

                                       5
<PAGE>

     from  conversion and dividend  payments does not equal or exceed 20% of the
     Corporation's outstanding Common Stock.

          (d) If the  Corporation  elects,  pursuant  to this  Subsection  G, to
     redeem the Series C Preferred  Stock on the  occurrence  of a Common  Stock
     Redemption  Event,  it shall  redeem such  Series C Preferred  Stock at the
     price  determined in  accordance  with  Subsection  G(1)(b) of this Amended
     Certificate  of  Designations.  If  the  Corporation  shall  have  elected,
     pursuant to this  Subsection  G(1),  to obtain the Required  Approvals  but
     shall not have done so by the later of the  occurrence  of the Common Stock
     Redemption Event or the expiration of the Approval Period, it shall furnish
     a redemption  notice to the Purchaser  within three (3) business days after
     the expiration of the Approval Period.

     (2) The Series C Preferred  Stock  Conversion  Rights shall be exercised as
follows:

          (e) The  Corporation  will  permit  each  holder of Series C Preferred
     Stock to  exercise  its right to convert  the Series C  Preferred  Stock by
     faxing an executed  and  completed  notice of  conversion  (the  "Notice of
     Conversion") to the Corporation,  and delivering  within three (3) business
     days  thereafter,  the original Notice of Conversion (and the  certificates
     representing  the  related  shares  of  Series C  Preferred  Stock)  to the
     Corporation by hand delivery or by express  courier,  duly  endorsed.  Each
     date on which a Notice  of  Conversion  is  faxed  in  accordance  with the
     provisions  hereof shall be deemed a "Series C Preferred  Stock  Conversion
     Date." The  Corporation  will transmit the  certificates  representing  the
     Common  Stock  issuable  upon  conversion  of the Series C Preferred  Stock
     (together  with  certificates  representing  the related shares of Series C
     Preferred Stock not so converted and, if applicable,  a check  representing
     any fraction of a share not  converted) to such holder via express  courier
     as soon as  practicable,  but in all  events no later  than (the  "Delivery
     Date")  three  (3)  business  days  after  the  Series  C  Preferred  Stock
     Conversion Date. For purposes of this Amended  Certificate of Designations,
     such  conversion  of the Series C  Preferred  Stock shall be deemed to have
     been  made  immediately  prior to the  close of  business  on the  Series C
     Preferred Stock Conversion Date.

          (f) In lieu  of  delivering  physical  certificates  representing  the
     Common Stock issuable upon the conversion of the Series C Preferred  Stock,
     provided that the  Corporation's  transfer  agent is  participating  in the
     Depository Trust  Corporation  ("DTC") Fast Automated  Securities  Transfer
     program, on the written request of a holder of Series C Preferred Stock who
     shall have previously instructed such holder's prime broker to confirm such
     request to the Corporation's  transfer agent, the Corporation shall use its
     best efforts to cause its transfer  agent to  electronically  transmit such
     Common Stock to such holder by crediting the account of the holder's  prime
     broker with DTC through its Deposit  Withdrawal Agent Commission  system no
     later than the applicable Delivery Date.

          (g) The Corporation will at all times have authorized and reserved for
     the purpose of issuance a  sufficient  number of shares of Common  Stock to
     provide for the conversion of the Series C Preferred Stock. The Corporation
     will use its best  efforts  at all times to  maintain a number of shares of
     Common Stock so reserved  for issuance  that is no

                                       6
<PAGE>

     less than the sum of (i) one and one-half (1.5) times the number that would
     then actually be issuable upon the  conversion  of three  thousand  (3,000)
     shares of Series C Preferred  Stock and (ii) the  exercise of the  Warrants
     (as defined in the Securities Purchase Agreement). Before taking any action
     which would cause an  adjustment  reducing the  Conversion  Price below the
     established  par  value  of  the  shares  of  Common  Stock  issuable  upon
     conversion of the Series C Preferred Stock, the Corporation  shall take any
     corporate action which may, in the opinion of its counsel or in the opinion
     of counsel to holders of the Series C  Preferred  Stock,  be  necessary  in
     order that the  Corporation  may validly  and legally  issue fully paid and
     nonassessable shares of Common Stock at such adjusted Conversion Price.

     (3) In  the  event  of a  liquidation  of the  Corporation,  the  Series  C
Preferred  Stock  Conversion  Rights shall terminate at the close of business on
the first  full day  preceding  the date fixed for the  payment  of any  amounts
distributable on liquidation to the holders of the Series C Preferred Stock.

     (4) If the  conversion  is in  connection  with an  underwritten  offer  of
securities  registered  pursuant to the Securities Act of 1933, as amended,  the
conversion may, at the option of any holder  tendering  Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriter of the sale
of securities  pursuant to such offering,  in which event the person(s) entitled
to receive  the  Common  Stock  issuable  upon such  conversion  of the Series C
Preferred  Stock shall not be deemed to have  converted  such Series C Preferred
Stock until immediately prior to the closing of the sale of securities.

     (5) At no time  shall any holder of the Series C  Preferred  Stock  convert
such  amount of Series C  Preferred  Stock as shall  result in such  Purchaser's
ownership,   after  such  conversion,   exceeding  4.99%  of  the  Corporation's
outstanding Common Stock.

     (6) No fractional shares of Common Stock shall be issued upon conversion of
the Preferred  Stock. In lieu of fractional  shares,  the Corporation  shall pay
cash equal to such  fraction  multiplied by the then  effective  and  applicable
Conversion Price.

     (7) The Corporation will not, by amendment of its Articles of Incorporation
or  through  any  reorganization,  transfer  of assets,  consolidation,  merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the  observance or  performance of any of the terms to be observed
or performed under this Amended  Certificate of Designations by the Corporation,
but will at all  times  in good  faith  assist  in the  carrying  out of all the
provisions of this Amended  Certificate of Designations and in the taking of all
such action as may be necessary or  appropriate in order to protect the Series C
Preferred Stock Conversion Rights of the holders of the Series C Preferred Stock
against impairment.

     (8) In the event (a) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation, (b) that the Corporation subdivides or combines its outstanding
shares of Common Stock, (c) of any  reclassification  of the Common Stock of the
Corporation  (other than a subdivision or combination of its outstanding  shares
of Common Stock or a stock dividend or stock distribution

                                       7
<PAGE>

thereon),  (d) of any  consolidation  or merger of the Corporation  into or with
another  corporation,  (e) of the sale of all or substantially all of the assets
of  the  Corporation,  or  (f)  of the  involuntary  or  voluntary  dissolution,
liquidation or winding up of the Corporation,  then the Corporation  shall cause
to be filed at its  principal  office or at the office of the transfer  agent of
the Series C Preferred Stock, and shall cause to be mailed to each holder of the
Series C  Preferred  Stock at their last  address as shown on the records of the
Corporation or such transfer  agent,  at least ten (10) days prior to the record
date  specified  in (i) below or twenty (20) days before the date  specified  in
(ii) below, a notice stating

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

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

     H.  Sinking  Fund.  There  shall  be no  sinking  fund for the  payment  of
dividends,  or liquidation  preferences  on the Series C Preferred  Stock or the
redemption of any shares thereof.

     I. Redemption  Events. In case one or more of the following events,  each a
redemption event, shall have occurred:

          (a)  failure to  deliver  the shares of Common  Stock  required  to be
     delivered upon  conversion of the shares of Series C Preferred Stock in the
     manner and at the time  required  by Section 5 of the  Securities  Purchase
     Agreement; or

          (c) failure of the Corporation to have authorized the number of shares
     of  Common  Stock  issuable  upon  conversion  of the  shares  of  Series C
     Preferred  Stock or exercise of the Stock Purchase  Warrants (as defined in
     the Securities Purchase Agreement); or

          (d) failure on the part of the  Corporation to duly observe or perform
     any of the provisions of this Amended Certificate of Designations or any of
     its other  covenants or  agreements  contained in the  Securities  Purchase
     Agreement,  or to cure any material breach in a material  representation or
     covenant contained in the Securities Purchase Agreement or the Registration
     Rights  Agreement  for a period  of ten (10)  days  after the date on which
     written notice of such failure or breach  requiring the same to be remedied
     has been given by a registered holder of shares of Series C Preferred Stock
     to the Corporation;

          then,  and in each and every  such  case,  so long as such  redemption
     event has not been remedied, the holders of not less than fifty-one percent
     (51%) of the shares of Series C Preferred Stock then outstanding, by notice
     in  writing to the  Corporation  (the date

                                       8
<PAGE>

     of  such  notice  the  "Redemption  Notice  Date"),  may  demand  that  the
     Corporation  redeem, and the Corporation shall redeem, each share of Series
     C  Preferred  Stock  then  outstanding  at a price per  share  equal to one
     hundred  twenty-five  percent (125%) of the sum of (x) the Stated Value and
     (y) the aggregate  accrued and unpaid  dividends on such Redemption  Notice
     Date

     For purposes of this Section I "Material  Subsidiary"  means any subsidiary
with  respect to which the  Corporation  has  directly or  indirectly  invested,
loaned, advanced or guaranteed the obligations of, an aggregate amount exceeding
fifteen percent (15%) of the  Corporation's  gross assets,  or the Corporation's
proportionate  share  of the  assets  or  net  income  of  which  (based  on the
subsidiary's most recent financial  statements)  exceed fifteen percent (15%) of
the  Corporation's  gross  assets  or net  income,  respectively,  or the  gross
revenues of which  exceed  fifteen  percent  (15%) of the gross  revenues of the
Corporation  based upon the most recent financial  statements of such subsidiary
and the Corporation.

     J.  Amendment.  This Amended  Certificate  of  Designations  constitutes an
agreement  between  the  Corporation  and the  holders of the Series C Preferred
Stock. The Corporation shall not amend this Amended  Certificate of Designations
or alter or repeal the preferences,  rights, powers or other terms of the Series
C  Preferred  Stock so as to affect  adversely  the  Series C  Preferred  Stock,
without  the  written  consent or  affirmative  vote of the  holders of at least
sixty-six and two-thirds  percent  (66-2/3%) of the then  outstanding  shares of
Series C Preferred Stock, given in writing or

                                       9
<PAGE>

by vote at a meeting,  consenting or voting (as the case may be) separately as a
class.

     IN WITNESS WHEREOF,  USA Biomass  Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Fred H. Behrens, its
Chairman,  and attested by Hilly G. Jones, its Secretary,  this 5th day of July,
2000.

                                       USA BIOMASS CORPORATION

                                       By: ______________________________
                                           Name:  Fred H. Behrens
                                           Title:  Chairman

Attest:

By:

     Name:  Hilly G. JonesTitle:  Secretary

                                       10

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