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                                                                 EXHIBIT 10.6

                             PRICE ENTERPRISES, INC.

                      ARTICLES OF AMENDMENT AND RESTATEMENT

     I. Price Enterprises, Inc., a Maryland corporation (the "CORPORATION"),
desires to amend and restate its charter as currently in effect and as
hereinafter amended.

     II. The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:

     FIRST: The name of the corporation (which is hereinafter called the
"CORPORATION") is:

                            Price Legacy Corporation

     SECOND: Unless otherwise provided in this charter of the Corporation (the
"CHARTER"), all capitalized terms used herein shall have the respective meanings
ascribed thereto in Article TENTH hereof.

     THIRD: (a) The purposes for which and any of which the Corporation is
formed and the business and objects to be carried on and promoted by it are:

          (1) To engage in any lawful act or activity (including, without
     limitation or obligation, engaging in business as a real estate investment
     trust under the Internal Revenue Code of 1986, as amended, or any successor
     statute (the "CODE")) for which corporations may be organized under the
     general laws of the State of Maryland as now or hereafter in force. For
     purposes of this Charter, "REIT" means a real estate investment trust under
     Sections 856 through 860 of the Code.

          (2) To engage in any one or more businesses or transactions, or to
     acquire all or any portion of any entity engaged in any one or more
     businesses or transactions which the Board of Directors may from time to
     time authorize or approve, whether or not related to the business described
     elsewhere in this Article or to any other business at the time or
     theretofore engaged in by the Corporation.

     (b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the Charter, and each shall be regarded
as independent; and they are intended to be and shall be construed as powers as
well as purposes and objects of the Corporation and shall be in addition to and
not in limitation of the general powers of corporations under the General Laws
of the State of Maryland.

     FOURTH: The present address of the principal office of the Corporation in
this State is c/o The Corporation Trust Incorporated, 300 East Lombard Street,
Baltimore, Maryland 21202.

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     FIFTH: The name and address of the resident agent of the Corporation in
this State are The Corporation Trust Incorporated, 300 East Lombard Street,
Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.

     SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 150,000,000 shares of capital stock, par
value $.0001 per share, amounting in aggregate par value of $15,000, 97,038,596
of which shares are classified as "Common Stock" (the "COMMON STOCK"),
27,849,771 of which shares are classified as "8 3/4% Series A Cumulative
Redeemable Preferred Stock" (the "SERIES A PREFERRED STOCK") and 25,111,633 of
which shares are classified as "9% Series B Junior Convertible Redeemable
Preferred Stock" (the "SERIES B PREFERRED STOCK"). The Board of Directors may
classify and reclassify any unissued shares of capital stock by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of capital stock. If shares
of one class of stock are classified or reclassified into shares of another
class of stock pursuant to this Article SIXTH, the number of authorized shares
of the former class shall be automatically decreased and the number of shares of
the latter class shall be automatically increased, in each case by the number of
shares so classified or reclassified, so that the aggregate number of shares of
stock of all classes that the Corporation has authority to issue shall not be
more than the total number of shares of stock set forth in the first sentence of
this paragraph. Without any action by the stockholders of the Corporation, the
Board of Directors may amend the Charter to increase or decrease the aggregate
number of shares of stock of the Corporation or the number of shares of stock of
any class or any series that the Corporation has authority to issue; PROVIDED,
HOWEVER, that such amendment shall have been approved by a majority of the Board
of Directors, which majority, prior to the Warburg Termination Date, shall
include both Warburg Directors.

     (b) Subject to the provisions of Article SEVENTH and Article TENTH, the
following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Common Stock of the Corporation:

          (1) Each share of Common Stock shall have one vote, and, except as
     otherwise provided in respect of any class of stock herein or hereafter
     classified or reclassified, the exclusive voting power for all purposes
     shall be vested in the holders of the Common Stock. Shares of Common Stock
     shall not have cumulative voting rights.

          (2) Subject to the provisions of law and any preferences of any class
     of stock herein or hereafter classified or reclassified, dividends,
     including dividends payable in shares of another class of the Corporation's
     stock, may be paid ratably on the Common Stock at such time and in such
     amounts as the Board of Directors may deem advisable.

          (3) In the event of any liquidation, dissolution or winding up of the
     Corporation, whether voluntary or involuntary, the holders of the Common
     Stock shall be entitled, together with the holders of any other class of
     stock herein or hereafter classified or reclassified not having a
     preference on distributions in the liquidation, dissolution or winding up
     of the Corporation, to share ratably in the net assets of the Corporation

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     remaining, after payment or provision for payment of the debts and other
     liabilities of the Corporation and the amount to which the holders of any
     class of stock herein or hereafter classified or reclassified having a
     preference on distributions in the liquidation, dissolution or winding up
     of the Corporation shall be entitled.

     (c) Subject to the provisions of Article SEVENTH and Article TENTH, the
following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Series A Preferred Stock:

          (1) Distributions.

               a. The holders of Series A Preferred Stock shall be entitled to
          receive, when, as and if declared by the Board of Directors out of
          funds legally available for that purpose, cumulative distributions
          payable in cash in an amount per share of Series A Preferred Stock
          equal to $1.40 per annum (or at the rate of 8 3/4% per annum of the
          Series A Liquidation Preference). Such distributions shall accrue and
          be cumulative from August 1, 1998, whether or not in any Series A
          Distribution Period or Periods such distributions shall be declared or
          there shall be funds of the Corporation legally available for the
          payment of such distributions, and shall be payable quarterly in
          arrears on the Series A Distribution Payment Dates, commencing on
          November 15, 1998. Each such distribution shall be payable in arrears
          to the holders of record of the Series A Preferred Stock, as they
          appear on the stock records of the Corporation at the close of
          business on the Series A Record Date for such distribution.
          Accumulated, accrued and unpaid distributions for any past Series A
          Distribution Periods may be declared and paid at any time, without
          reference to any regular Series A Distribution Payment Date, to
          holders of record on the Series A Record Date therefor. The amount of
          accumulated, accrued and unpaid distributions on any share of Series A
          Preferred Stock, or fraction thereof, at any date shall be the amount
          of any distributions thereon calculated at the applicable rate to and
          including such date, whether or not earned or declared, which have not
          been paid in cash. Any distribution payment made on shares of Series A
          Preferred Stock shall be first credited against the earliest accrued
          but unpaid distribution due which remains payable.

               b. The amount of distributions payable per share of Series A
          Preferred Stock for each full Series A Distribution Period shall be
          computed by dividing the annual distribution by four (4). The amount
          of distributions payable per share of Series A Preferred Stock for any
          period shorter or longer than a full Series A Distribution Period,
          shall be computed ratably on the basis of a 360-day year consisting of
          twelve (12) 30-day months. Holders of Series A Preferred Stock shall
          not be entitled to any distributions, whether payable in cash,
          property or stock, in excess of cumulative distributions, as herein
          provided, on the Series A Preferred Stock, except for distributions
          upon liquidation, dissolution or winding up of the Corporation to
          which the holders of Series A Preferred Stock are entitled pursuant to
          Section 2 below. No interest, or sum of money in lieu of interest,

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          shall be payable in respect of any distribution payment or payments on
          the Series A Preferred Stock that may be in arrears.

               c. So long as any of the shares of Series A Preferred Stock are
          outstanding, no distributions, except as described in the immediately
          following sentence, shall be declared or paid or set apart for payment
          by the Corporation or other distribution of cash or other property
          declared or made directly or indirectly by the Corporation with
          respect to any class or series of Series A Parity Stock for any period
          unless distributions equal to the full amount of accumulated, accrued
          and unpaid distributions have been or contemporaneously are declared
          and paid or declared and a sum sufficient for the payment thereof have
          been or contemporaneously are set apart for such payment on the Series
          A Preferred Stock for all Series A Distribution Periods terminating on
          or prior to the Series A Distribution Payment Date with respect to
          such class or series of Series A Parity Stock. When distributions are
          not paid in full or a sum sufficient for such payment is not set
          apart, as aforesaid, all distributions declared upon the Series A
          Preferred Stock and all distributions declared upon any other class or
          series of Series A Parity Stock shall be declared ratably in
          proportion to the respective amounts of distributions accumulated,
          accrued and unpaid on the Series A Preferred Stock and accumulated,
          accrued and unpaid on such Series A Parity Stock.

               d. Unless full distributions on the Series A Preferred Stock have
          been or contemporaneously are declared and paid or declared and a sum
          sufficient for the payment thereof set apart for payment for all past
          Series A Distribution Periods and the then current Series A
          Distribution Period (i) except as set forth in Section 1(a) above, no
          distributions (other than in Series A Junior Stock or options,
          warrants or rights to subscribe therefor) shall be declared or paid or
          set aside for payment, or other distribution of cash or property
          declared or made directly or indirectly by the Corporation with
          respect to any shares of Series A Junior Stock or Series A Parity
          Stock, and (ii) no Series A Junior Stock or Series A Parity Stock
          (including less than all of the Series A Preferred Stock) shall be
          redeemed, purchased or otherwise acquired for any consideration (or
          any moneys be paid or made available for a sinking fund for the
          redemption of any shares of such stock) directly or indirectly by the
          Corporation except by conversion into or exchange for Series A Junior
          Stock and except for a redemption or purchase or other acquisition of
          Common Stock or other equity securities of the Corporation for
          purposes of an employee benefit plan of the Corporation or any
          subsidiary or as provided under the Charter to protect the
          Corporation's status as a REIT.

               e. Notwithstanding anything contained herein to the contrary, no
          distributions on shares of Series A Preferred Stock shall be
          authorized or declared by the Board of Directors of the Corporation or
          paid or set apart for payment by the Corporation at such time as the
          terms and provisions of any agreement of the Corporation, including
          any agreement relating to its indebtedness, prohibits such
          authorization, declaration, payment or setting apart for payment or
          provides that such authorization, declaration, payment or setting
          apart for payment would

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          constitute a breach thereof or a default thereunder, or to the extent
          such declaration or payment shall be restricted or prohibited by law.

               f. Notwithstanding anything contained herein to the contrary,
          distributions on the Series A Preferred Stock, if not paid on the
          applicable Series A Distribution Payment Date, will accrue whether or
          not distributions are authorized or declared for such Series A
          Distribution Payment Date, whether or not the Corporation has
          earnings, whether or not there are funds legally available for the
          payment of such distributions and whether or not any agreement of the
          Corporation prohibits the payment of such distributions.

               g. If, for any taxable year, the Corporation elects to designate
          as a "capital gain dividend" (as defined in Section 857 of the Code)
          any portion (the "CAPITAL GAIN AMOUNT") of the distributions paid or
          made available for the year to holders of all classes of stock (the
          "TOTAL DISTRIBUTIONS"), then the portion of the Capital Gain Amount
          that shall be allocable to holders of the Series A Preferred Stock
          shall be the amount that the total distributions paid or made
          available to the holders of the Series A Preferred Stock for the year
          bears to the Total Distributions.

          (2) Liquidation Preference.

               a. In the event of any liquidation, dissolution or winding up of
          the Corporation, whether voluntary or involuntary, before any payment
          or distribution of the assets of the Corporation (whether capital or
          surplus) shall be made to or set apart for holders of Series A Junior
          Stock, the holders of shares of Series A Preferred Stock shall be
          entitled to receive Sixteen Dollars ($16.00) per share of Series A
          Preferred Stock plus an amount equal to all distributions (whether or
          not declared) accumulated, accrued and unpaid thereon to the date of
          final distribution to such holders, but such holders shall not be
          entitled to any further payment. Until the holders of the Series A
          Preferred Stock have been paid the liquidation preference in full, no
          payment will be made to any holder of Series A Junior Stock upon the
          liquidation, dissolution or winding up of the Corporation. If, upon
          any liquidation, dissolution or winding up of the Corporation, the
          assets of the Corporation, or proceeds thereof, distributable among
          the holders of Series A Preferred Stock shall be insufficient to pay
          in full the preferential amount aforesaid and liquidating payments on
          any other shares of any class or series of Series A Parity Stock, then
          such assets, or the proceeds thereof, shall be distributed among the
          holders of Series A Preferred Stock and any such other Series A Parity
          Stock ratably in the same proportion as the respective amounts that
          would be payable on such Series A Preferred Stock and any such other
          Series A Parity Stock if all amounts payable thereof were paid in
          full. For purposes of this Section 2, (i) a consolidation or merger of
          the Corporation with one or more corporations, (ii) a sale, lease,
          transfer or conveyance of all or substantially all of the
          Corporation's assets, or (iii) a statutory share exchange shall not be
          deemed to be a liquidation, dissolution or winding, voluntary or
          involuntary, of the Corporation.

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               b. Subject to the rights of the holders of any shares of Series A
          Parity Stock, upon any liquidation, dissolution or winding up of the
          Corporation, after payment shall have been made in full to the holders
          of Series A Preferred Stock and any Series A Parity Stock, as provided
          in this Section 2, any other series or class or classes of Series A
          Junior Stock shall, subject to the respective terms thereof, be
          entitled to receive any and all assets remaining to be paid or
          distributed, and the holders of the Series A Preferred Stock and any
          Series A Parity Stock shall not be entitled to share therein.

               c. In determining whether a distribution (other than upon
          voluntary or involuntary liquidation) by distribution, redemption or
          other acquisition of shares of stock of the Corporation or otherwise
          is permitted under the MGCL, no effect shall be given to amounts that
          would be needed, if the Corporation were to be dissolved at the time
          of the distribution, to satisfy the preferential rights upon
          dissolution of holders of shares of stock of the Corporation whose
          preferential rights upon dissolution are superior to those receiving
          the distribution.

          (3) Redemption.

               a. Except as otherwise permitted under Article TENTH of the
          Charter and except as provided by paragraph (b) of this Section 3,
          shares of Series A Preferred Stock shall not be redeemable by the
          Corporation prior to August 15, 2003. On and after August 15, 2003,
          the Corporation, at its option, may redeem shares of Series A
          Preferred Stock in whole or, from time to time, in part at the
          Redemption Price.

               b. Notwithstanding the foregoing, the outstanding shares of
          Series A Preferred Stock may be redeemed in whole, but not in part, at
          the Series A Redemption Price at the option of the Corporation upon
          the occurrence of a Change of Control; provided that in no event shall
          such redemption occur more than ninety days (90) after the occurrence
          of such Change of Control. For purposes of paragraphs (b), (c), (d)
          and (e) of this Section 3, the "Corporation" shall include, upon a
          Change of Control, the successor to all or substantially all of the
          assets of the Corporation or the surviving corporation in a merger,
          consolidation or share exchange.

               c. Shares of Series A Preferred Stock shall be redeemed by the
          Corporation on the date specified in the notice to holders required
          under paragraph (d) of this Section 3 (the "SERIES A CALL DATE"). The
          Series A Call Date shall be selected by the Corporation, shall be
          specified in the notice of redemption and shall be not less than
          thirty (30) nor more than sixty (60) days after the date notice of
          redemption is sent by the Corporation. Upon any redemption of shares
          of Series A Preferred Stock pursuant to the second sentence of
          paragraph (a) or the first sentence of paragraph (b) of this Section
          3, the Corporation shall pay in cash to the holder of such shares an
          amount equal to all accumulated, accrued and unpaid distributions, if
          any, to the Series A Call Date, whether or not earned or declared.
          Immediately prior to authorizing any

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          redemption of the Series A Preferred Stock, and as a condition
          precedent for such redemption, the Corporation, by resolution of its
          Board of Directors, shall declare a mandatory distribution on the
          Series A Preferred Stock payable in cash on the Series A Call Date in
          an amount equal to all accumulated, accrued and unpaid distributions
          as of the Series A Call Date on the Series A Preferred Stock to be
          redeemed, which amount shall be added to the redemption price. If the
          Series A Call Date falls after a distribution Series A Record Date and
          prior to the corresponding Series A Distribution Payment Date, then
          each holder of Series A Preferred Stock at the close of business on
          such distribution Series A Record Date shall be entitled to the
          distribution payable on such shares on the corresponding Series A
          Distribution Payment Date notwithstanding the redemption of such
          shares prior to such Series A Distribution Payment Date. Except as
          provided above, the Corporation shall make no payment or allowance for
          accumulated or accrued distributions on shares of Series A Preferred
          Stock called for redemption.

               d. If the Corporation shall redeem shares of Series A Preferred
          Stock pursuant to the second sentence of paragraph (a) or the first
          sentence of paragraph (b) of this Section 3, notice of such redemption
          shall be given to each holder of record of the shares to be redeemed.
          Such notice shall be provided by first class mail, postage prepaid, at
          such holder's address as the same appears on the stock records of the
          Corporation, or by publication in The Wall Street Journal or The New
          York Times, or if neither such newspaper is then being published, any
          other daily newspaper of general circulation in The City of New York,
          such publication to be made once a week for two (2) successive weeks
          commencing not less than thirty (30) nor more than sixty (60) days
          prior to the Series A Call Date. If the Corporation elects to provide
          such notice by publication, it shall also promptly mail notice of such
          redemption to the holders of the shares of Series A Preferred Stock to
          be redeemed. Neither the failure to give any notice required by this
          paragraph (d), nor any defect therein or in the mailing thereof, to
          any particular holder, shall affect the sufficiency of the notice or
          the validity of the proceedings for redemption with respect to the
          other holders. Any notice which was mailed in the manner herein
          provided shall be conclusively presumed to have been duly given on the
          date mailed whether or not the holder receives the notice.

               e. Each such mailed or published notice shall state, as
          appropriate: (i) the Series A Call Date; (ii) the Series A Redemption
          Price; (iii) the number of shares of Series A Preferred Stock to be
          redeemed and, if fewer than all such shares held by such holder are to
          be redeemed, the number of such shares to be redeemed from such
          holder; (iv) the place or places at which the certificates evidencing
          the shares of Series A Preferred Stock are to be surrendered for
          payment of the Series A Redemption Price; and (v) that distributions
          on the shares of Series A Preferred Stock to be redeemed shall cease
          to accrue on such Series A Call Date except as otherwise provided
          herein. Notice having been published or mailed as aforesaid, and
          provided that on or before the Series A Call Date specified in such
          notice the amount of cash necessary to effect such redemption shall
          have been set aside by the Corporation, separate and apart from its
          other funds in trust for the pro rata benefit of the holders of the
          shares of Series A

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          Preferred Stock so called for redemption, from and after the Series A
          Call Date, including all accumulated, accrued and unpaid distributions
          to the Series A Call Date, whether or not earned or declared, (i)
          except as otherwise provided herein, distributions on the shares of
          Series A Preferred Stock so called for redemption shall cease to
          accumulate or accrue on the shares of Series A Preferred Stock called
          for redemption (except that, in the case of a Series A Call Date after
          a distribution Series A Record Date and prior to the related Series A
          Distribution Payment Date, holders of Series A Preferred Stock on the
          distribution Series A Record Date will be entitled on such Series A
          Distribution Payment Date to receive the distribution payable on such
          shares), (ii) said shares shall no longer be deemed to be outstanding,
          (iii) all rights of the holders thereof as holders of Series A
          Preferred Stock of the Corporation shall cease (except the rights to
          receive the cash payable upon such redemption, without interest
          thereon, upon surrender and endorsement of their certificates if so
          required and to receive any distributions payable thereon). The
          Corporation's obligation to provide cash in accordance with the
          preceding sentence shall be deemed fulfilled if, on or before the
          Series A Call Date, the Corporation shall deposit with a bank or trust
          company (which may be an affiliate of the Corporation) that has an
          office in the Borough of Manhattan, The City of New York, or in Los
          Angeles or San Diego, California, and that has or is an affiliate of a
          bank or trust company that has, a capital and surplus of at least
          $50,000,000, such amount of cash as is necessary for such redemption,
          in trust, with irrevocable instructions that such cash be applied to
          the redemption of the shares of Series A Preferred Stock so called for
          redemption. No interest shall accrue for the benefit of the holders of
          shares of Series A Preferred Stock to be redeemed on any cash so set
          aside by the Corporation. Subject to applicable escheat laws, any such
          cash unclaimed at the end of two (2) years from the Series A Call Date
          shall revert to the general funds of the Corporation, after which
          reversion the holders of shares of Series A Preferred Stock so called
          for redemption shall look only to the general funds of the Corporation
          for the payment of such cash.

               f. As promptly as practicable after the surrender in accordance
          with said notice of the certificates for any such shares of Series A
          Preferred Stock so redeemed (properly endorsed or assigned for
          transfer, if the Corporation shall so require and if the notice shall
          so state), such certificates shall be exchanged for cash (without
          interest thereon) for which such shares have been redeemed in
          accordance with such notice. If fewer than all the outstanding shares
          of Series A Preferred Stock are to be redeemed, shares to be redeemed
          shall be selected by the Corporation from outstanding shares of Series
          A Preferred Stock not previously called for redemption by lot or, with
          respect to the number of shares of Series A Preferred Stock held of
          record by each holder of such shares, pro rata (as nearly as may be)
          or by any other method as may be determined by the Board of Directors
          in its discretion to be equitable. If fewer than all the shares of
          Series A Preferred Stock represented by any certificates are redeemed,
          then a new certificate representing the unredeemed shares of Series A
          Preferred Stock shall be issued without cost to the holders thereof.

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          (4) Status of Acquired Stock. All shares of Series A Preferred Stock
     which shall have been issued and reacquired in any manner by the
     Corporation shall be restored to the status of authorized but unissued
     shares of Series A Preferred Stock.

          (5) Ranking. Any class or series of capital stock of the Corporation
     shall be deemed to rank:

               a. prior or senior to the Series A Preferred Stock, as to the
          payment of distributions and as to the distribution of assets upon
          liquidation, dissolution or winding up, if the holders of such class
          or series of stock shall be entitled to the receipt of distributions
          or of amounts distributable upon liquidation, dissolution or winding
          up, as the case may be, in preference or priority to the holders of
          Series A Preferred Stock (such stock, "SERIES A SENIOR STOCK");

               b. on a parity with the Series A Preferred Stock, as to the
          payment of distributions and as to the distribution of assets upon
          liquidation, dissolution or winding up, whether or not the
          distribution rates, distribution payment dates or redemption or
          liquidation prices per share thereof be different from those of the
          Series A Preferred Stock, if the holders of such class or series of
          stock and the Series A Preferred Stock shall be entitled to the
          receipt of distributions and of amounts distributable upon
          liquidation, dissolution or winding up in proportion to their
          respective amounts of accrued and unpaid distributions per share or
          liquidation preferences, without preference or priority one over the
          other (such stock, "SERIES A PARITY STOCK"); and

               c. junior to the Series A Preferred Stock, as to the payment of
          distributions or as to the distribution of assets upon liquidation,
          dissolution or winding up, if such class or series of stock shall be
          Common Stock or Series B Preferred Stock or if the holders of Series A
          Preferred shall be entitled to receipt of distributions or of amounts
          distributable upon liquidation, dissolution or winding up, as the case
          may be, in preference or priority to the holders of shares of such
          class or series of stock (such stock, "SERIES A JUNIOR STOCK").

          (6) Voting Rights.

               a. In any matter in which the Series A Preferred Stock is
          entitled to vote as expressly provided herein, each share of Series A
          Preferred Stock shall be entitled to one-tenth (1/10) of one vote,
          except that when any other class or series of preferred stock shall
          have the right to vote together with the Series A Preferred Stock as
          if they were a single class on any matter, then the Series A Preferred
          Stock and such other class or series shall have with respect to such
          matters one (1) vote per $16.00 of stated liquidation preference and
          fractional votes shall be ignored.

               b. The holders of the Series A Preferred Stock shall have the
          right to vote with the Common Stock on all matters on which the
          holders of the Common Stock are entitled to vote, as though part of
          the same class as holders of the

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          Common Stock. The holders of the Series A Preferred Stock shall
          receive all notices of meetings of the holders of the Common Stock,
          and all other notices and correspondence to the holders of the
          Common Stock provided by the Corporation, and shall be entitled to
          take such actions, and shall have such rights, as are set forth
          herein or are otherwise available to the holders of the Common
          Stock in the Charter and in the Bylaws of the Corporation as are in
          effect on the date hereof and from time to time hereafter.

               c. If and whenever six quarterly distributions (whether or not
          consecutive) payable on the Series A Preferred Stock shall be in
          arrears (which shall, with respect to any such quarterly distribution,
          mean that any such distribution has not been paid in full), whether or
          not earned or declared, the number of directors then constituting the
          Board of Directors shall be increased by two (2) (if not already
          increased by reason of a similar arrearage with respect to any Series
          A Parity Stock) and the holders of shares of Series A Preferred Stock,
          together with the holders of shares of every other class or series of
          Series A Parity Stock (any other such class or series, the "VOTING
          PREFERRED STOCK") entitled to vote on the matter, voting together as
          if they were a single class, shall be entitled, in order to fill the
          vacancies thereby created, to elect two (2) additional directors at
          the next annual meeting of stockholders or special meeting held in
          place thereof, or at a special meeting of the holders of the Series A
          Preferred Stock and the Voting Preferred Stock entitled to vote
          thereon, called as hereinafter provided, and at each succeeding annual
          meeting at which their respective successors are to be elected. Each
          such director, as a qualification for election as such (and regardless
          of how elected) shall submit to the Board of Directors a
          duly-executed, valid, binding and enforceable letter of resignation
          from the Board, to be effective immediately upon the date on which all
          arrears in distributions on the Series A Preferred Stock and the
          Voting Preferred Stock then outstanding and holding similar rights in
          respect of the election of additional directors shall have been paid
          and distributions thereon for the current quarterly distribution
          period shall have been paid or declared and set apart for payment,
          whereupon the right of the holders of the Series A Preferred Stock and
          the Voting Preferred Stock to elect such additional two (2) directors
          shall cease (but subject always to the same provision for the vesting
          of such voting rights in the case of any similar future arrearages in
          six (6) quarterly distributions), and the terms of office of all
          persons elected as directors by the holders of the Series A Preferred
          Stock and the Voting Preferred Stock shall, upon the effectiveness of
          their respective letters of resignation, forthwith terminate, and the
          number of the Board of Directors shall be reduced accordingly. At any
          time after such voting power shall have been so vested in the holders
          of Series A Preferred Stock and the Voting Preferred Stock, the
          Secretary of the Corporation may, and upon the written request of any
          holder of Series A Preferred Stock (addressed to the Secretary at the
          principal office of the Corporation) shall, call a special meeting of
          the holders of the Series A Preferred Stock and of the Voting
          Preferred Stock for the election of the two (2) directors to be
          elected by them as herein provided, such call to be made by notice
          similar to that provided in the Bylaws of the Corporation for a
          special meeting of the stockholders or as required by law. If any such
          special meeting required to be

                                       10
<PAGE>

          called as above provided shall not be called by the Secretary within
          twenty (20) days after receipt of any such request, then any holder of
          Series A Preferred Stock may call such meeting, upon the notice above
          provided, and for that purpose shall have access to the stock books of
          the Corporation. The directors elected at any such special meeting
          shall hold office until the next annual meeting of the stockholders at
          which their respective successors are to be elected. If any vacancy
          shall occur among the directors elected by the holders of the Series A
          Preferred Stock and the Voting Preferred Stock entitled to vote
          thereon, a successor shall be elected by the Board of Directors, upon
          the nomination of the then remaining Director elected by the holders
          of the Series A Preferred Stock and such Voting Preferred Stock or the
          successor of such remaining Director, to serve for the remainder of
          the term of the director creating the vacancy, subject however to
          earlier resignation as herein provided.

               d. So long as any shares of Series A Preferred Stock remain
          outstanding, the Corporation will not, without the affirmative vote or
          consent of the holders of at least 66 2/3% of the shares of Series A
          Preferred Stock outstanding at the time, given in person or by proxy,
          either in writing or at a meeting (such series voting separately as a
          class), (A) authorize or create, or increase the authorized or issued
          amount of, any class or series of shares of capital stock ranking
          prior or senior to the Series A Preferred Stock with respect to the
          payment of distributions or the distribution of assets upon
          liquidation, dissolution or winding-up or reclassify any authorized
          shares of capital stock of the Corporation into such shares, or
          create, authorize or issue any obligation or security convertible into
          or evidencing the right to purchase any such shares; or (B) amend,
          alter or repeal the provisions of the Corporation's Charter whether by
          merger, consolidation or otherwise (an "EVENT"), so as to materially
          and adversely affect any right, preference, privilege or voting power
          of the Series A Preferred Stock or the holders thereof; PROVIDED,
          HOWEVER, with respect to the occurrence of any of the Events set forth
          in (B) above, so long as the shares of Series A Preferred Stock (or
          shares of any equivalent class or series of stock issued by the
          surviving corporation in any merger, consolidation or share exchange
          to which the Corporation became a party) remain outstanding with the
          terms thereof materially unchanged, the occurrence of any such Event
          shall not be deemed to materially and adversely affect such rights,
          preferences, privileges or voting power of holders of Series A
          Preferred Stock and provided further that (x) any increase in the
          amount of the authorized preferred stock or the creation or issuance
          of any other shares of Series A Preferred Stock, or (y) any increase
          in the amount of authorized Series A Preferred Stock or any other
          preferred stock, in each case ranking on a parity with or junior to
          the Series A Preferred Stock with respect to payment of distributions
          or the distribution of assets upon liquidation, dissolution or
          winding-up, shall not be deemed to materially and adversely affect
          such rights, preferences, privileges or voting powers. The foregoing
          voting provisions will not apply if, at or prior to the time when the
          act with respect to which such vote would otherwise be required shall
          be effected, all outstanding shares of Series A Preferred Stock shall
          have been redeemed or called for redemption upon proper notice and
          sufficient funds shall have been irrevocably

                                       11
<PAGE>

          deposited in trust to effect such redemption. Nothing in this
          paragraph (d) shall be deemed to limit the Corporation's ability to
          issue debt securities (other than debt securities convertible into a
          class of capital stock ranking prior or senior to the Series A
          Preferred Stock) or otherwise incur additional indebtedness or alter
          the terms of any existing or future indebtedness during the period any
          shares of Series A Preferred Stock are outstanding.

          (7) Restrictions on Transfer, Acquisition and Redemption of Shares.
     The Series A Preferred Stock constitutes a class of preferred stock of the
     Corporation, and shares of preferred stock constitute Capital Shares of the
     Corporation. Therefore, shares of Series A Preferred Stock, being Capital
     Shares, are governed by and issued subject to all of the limitations, terms
     and conditions of the Charter applicable to Capital Shares generally,
     including but not limited to the terms and conditions (including exceptions
     and exemptions) of Article TENTH hereto; PROVIDED, HOWEVER, that the terms
     and conditions (including exceptions and exemptions) of Article TENTH
     hereof applicable to Capital Shares shall also be applied to the Series A
     Preferred Stock separately and without regard to any other series or class.
     The foregoing sentence shall not be construed to limit the applicability to
     the Series A Preferred Stock of any other term or provision of the Charter.

          (8) Severability of Provisions. If any preference, conversion or other
     right, voting power, restriction, limitation as to distributions,
     qualification or term or condition of redemption of the Series A Preferred
     Stock set forth herein is invalid, unlawful or incapable of being enforced
     by reason of any rule of law or public policy, all other preferences,
     conversion or other distributions, qualifications or terms or conditions of
     redemption of Series A Preferred Stock set forth herein which can be given
     effect without the invalid, unlawful or unenforceable provision thereof
     shall, nevertheless, remain in full force and effect, and no preferences,
     conversion or other rights, voting powers, restrictions, limitations as to
     distributions, qualifications or terms or conditions or redemption of
     Series A Preferred Stock herein set forth shall be deemed dependent upon
     any other provision thereof unless so expressed therein.

     (d) Subject to the provisions of Article SEVENTH and Article TENTH, the
following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Series B Preferred Stock;

          (1) Distributions.

               a. The holders of Series B Preferred Stock shall be entitled to
          receive, when, as and if declared by the Board of Directors out of
          funds legally available for that purpose, cumulative distributions in
          an amount per share of Series B Preferred Stock equal to 9% per annum
          of the Series B Liquidation Preference until the date which is 45
          months after the Series B Initial Issuance Date (as defined herein)
          and 10% per annum of the Series B Liquidation Preference thereafter.
          Prior to the date which is 45 months after the Series B Initial
          Issuance Date, all such distributions shall be payable in shares of
          Series B Preferred Stock valued at the Series B Liquidation
          Preference. At any time after the date which is

                                       12
<PAGE>

          45 months after the Series B Initial Issuance Date, such distributions
          shall be payable in cash. Such distributions shall accrue (compounded
          quarterly) and be cumulative from the date on which the Series B
          Preferred Stock is first issued (the "SERIES B INITIAL ISSUANCE
          DATE"), whether or not in any Series B Distribution Period or Periods
          such distributions shall be declared or there shall be funds of the
          Corporation legally available for the payment of such distributions,
          and shall be payable quarterly in arrears on the Series B Distribution
          Payment Dates, commencing on [_______] 15, 2001. Each such
          distribution shall be payable in arrears to the holders of record of
          the Series B Preferred Stock, as they appear on the stock records of
          the Corporation at the close of business on the Series B Record Date
          for such distribution. Accumulated, accrued and unpaid distributions
          for any past Series B Distribution Periods may be declared and paid at
          any time, without reference to any regular Series B Distribution
          Payment Date, to holders of record on the Series B Record Date
          therefor. The amount of accumulated, accrued and unpaid distributions
          on any share of Series B Preferred Stock, or fraction thereof, at any
          date shall be the amount of any distributions thereon calculated at
          the applicable rate to and including such date, whether or not earned
          or declared, which have not been paid in cash or in shares of Series B
          Preferred Stock, as the case may be. Any distribution payment made on
          shares of Series B Preferred Stock shall be first credited against the
          earliest accrued but unpaid distribution due which remains payable.

               b. The amount of distributions payable per share of Series B
          Preferred Stock for each full Series B Distribution Period shall be
          computed by dividing the annual distribution applicable during such
          Series B Distribution Period by four (4). The amount of distributions
          payable per share of Series B Preferred Stock for any period shorter
          or longer than a full Series B Distribution Period, shall be computed
          ratably on the basis of a 360-day year consisting of twelve (12)
          30-day months. Holders of Series B Preferred Stock shall not be
          entitled to any distributions, whether payable in cash, property or
          stock, in excess of cumulative distributions, as herein provided, on
          the Series B Preferred Stock, except for distributions upon
          liquidation, dissolution or winding up of the Corporation to which the
          holders of Series B Preferred Stock are entitled pursuant to Section 2
          below. No interest, or sum of money in lieu of interest, shall be
          payable in respect of any distribution payment or payments on the
          Series B Preferred Stock that may be in arrears.

               c. So long as any of the shares of Series B Preferred Stock are
          outstanding, no distributions, except as described in the immediately
          following sentence, shall be declared or paid or set apart for payment
          by the Corporation or other distribution of cash or other property
          declared or made directly or indirectly by the Corporation with
          respect to any class or series of Series B Parity Stock for any period
          unless distributions equal to the full amount of accumulated, accrued
          and unpaid distributions have been or contemporaneously are declared
          and paid or declared and a sum sufficient for the payment thereof have
          been or contemporaneously are set apart for such payment on the Series
          B Preferred Stock for all Series B Distribution Periods terminating on
          or prior to the Series B

                                       13
<PAGE>

          Distribution Payment Date with respect to such class or series of
          Series B Parity Stock. When distributions are not paid in full or a
          sum sufficient for such payment is not set apart, as aforesaid, all
          distributions declared upon the Series B Preferred Stock and all
          distributions declared upon any other class or series of Series B
          Parity Stock shall be declared ratably in proportion to the respective
          amounts of distributions accumulated, accrued and unpaid on the Series
          B Preferred Stock and accumulated, accrued and unpaid on such Series B
          Parity Stock.

               d. Without the affirmative vote or consent of the holders of at
          least 66 2/3% of the outstanding shares of Series B Preferred Stock
          (i) no distributions (other than in Series B Junior Stock, or options,
          warrants or rights to subscribe therefor) shall be declared or paid or
          set aside for payment, or other distribution of cash or property
          declared or made directly or indirectly by the Corporation with
          respect to any shares of Series B Junior Stock or Series B Parity
          Stock; PROVIDED, HOWEVER, that if full distributions on the Series B
          Preferred Stock have been or contemporaneously are declared and paid
          or declared and a sum sufficient for the payment thereof set apart for
          payment for all past Series B Distribution Periods and the then
          current Series B Distribution Period, the Corporation may make such
          distributions (A) if the amount of all distributions on all classes of
          capital stock of the Corporation for the fiscal year does not exceed
          100% of the Corporation's "real estate investment trust taxable
          income" (as defined in Section 857(b)(2) of the Code) for such fiscal
          year or (B) if required to protect the Corporation's status as a REIT
          or to avoid imposition of income tax or excise tax on the Corporation
          and (ii) no Series B Junior Stock or Series B Parity Stock (including
          less than all of the Series B Preferred Stock) shall be redeemed,
          purchased or otherwise acquired for any consideration (or any moneys
          be paid or made available for a sinking fund for the redemption of any
          shares of such stock) directly or indirectly by the Corporation except
          by conversion into or exchange for Series B Junior Stock and except
          for a redemption or purchase or other acquisition of Common Stock or
          other equity securities of the Corporation for purposes of an employee
          benefit plan of the Corporation or any subsidiary or as provided under
          the Charter to protect the Corporation's status as a REIT.

               e. Notwithstanding anything contained herein to the contrary, no
          distributions on shares of Series B Preferred Stock shall be
          authorized or declared by the Board of Directors of the Corporation or
          paid or set apart for payment by the Corporation at such time as the
          terms and provisions of any agreement of the Corporation, including
          any agreement relating to its indebtedness, prohibits such
          authorization, declaration, payment or setting apart for payment or
          provides that such authorization, declaration, payment or setting
          apart for payment would constitute a breach thereof or a default
          thereunder, or to the extent such declaration or payment shall be
          restricted or prohibited by law.

               f. Notwithstanding anything contained herein to the contrary,
          distributions on the Series B Preferred Stock, if not paid on the
          applicable Series B Distribution Payment Date, will accrue whether or
          not distributions are

                                       14
<PAGE>

          authorized or declared for such Series B Distribution Payment Date,
          whether or not the Corporation has earnings, whether or not there are
          funds legally available for the payment of such distributions and
          whether or not any agreement of the Corporation prohibits the payment
          of such distributions.

               g. If, for any taxable year, the Corporation elects to designate
          as a "capital gain dividend" (as defined in Section 857 of the Code)
          any Capital Gain Amount with respect to the Total Distributions, then
          the portion of the Capital Gain Amount that shall be allocable to
          holders of the Series B Preferred Stock shall be the amount that the
          total distributions paid or made available to the holders of the
          Series B Preferred Stock for the year bears to the Total
          Distributions.

          (2) Liquidation Preference.

               a. In the event of any liquidation, dissolution or winding up of
          the Corporation, whether voluntary or involuntary, after payment or
          distributions of assets to the holders of Series B Senior Stock to
          satisfy the liquidation preference with respect to such Series B
          Senior Stock and before any payment or distribution of the assets of
          the Corporation (whether capital or surplus) shall be made to or set
          apart for holders of Series B Junior Stock, the holders of shares of
          Series B Preferred Stock shall be entitled to receive the Series B
          Liquidation Preference per share of Series B Preferred Stock (subject
          to adjustment in the event of any stock dividend, stock split, stock
          distribution or combination with respect to such shares) plus an
          amount equal to all distributions (whether or not declared)
          accumulated, accrued and unpaid thereon to the date of final
          distribution to such holders, but such holders shall not be entitled
          to any further payment. Until the holders of the Series B Preferred
          Stock have been paid the Series B Liquidation Preference in full, no
          payment will be made to any holder of Series B Junior Stock upon the
          liquidation, dissolution or winding up of the Corporation. If, upon
          any liquidation, dissolution or winding up of the Corporation, the
          assets of the Corporation, or proceeds thereof, distributable among
          the holders of Series B Preferred Stock shall be insufficient to pay
          in full the preferential amount aforesaid and liquidating payments on
          any other shares of any class or series of Series B Parity Stock, then
          such assets, or the proceeds thereof, shall be distributed among the
          holders of Series B Preferred Stock and any such other Series B Parity
          Stock ratably in the same proportion as the respective amounts that
          would be payable on such Series B Preferred Stock and any such other
          Series B Parity Stock if all amounts payable thereof were paid in
          full. For purposes of this Section 2, (i) a consolidation or merger of
          the Corporation with one or more corporations, (ii) a sale, lease,
          transfer or conveyance of all or substantially all of the
          Corporation's assets, (iii) a statutory share exchange, or (iv) a
          liquidation or winding up of the Corporation shall be deemed to be a
          liquidation, dissolution or winding up, voluntary or involuntary, of
          the Corporation, unless the holders of 66 2/3% of Series B Preferred
          Stock approve such transaction in accordance with Article SIXTH,
          Section (d)(8)c hereto or the persons who were holders of the
          outstanding capital stock of the Corporation outstanding immediately
          prior to

                                       15
<PAGE>

          such transaction are immediately after such transaction holders of
          at least a majority of the aggregate voting power of the voting
          capital stock of the surviving corporation (or a majority of the
          aggregate equivalent equity interests in the surviving entity if
          such entity is not a corporation).

               b. Subject to the rights of the holders of any shares of Series B
          Parity Stock, upon any liquidation, dissolution or winding up of the
          Corporation, after payment shall have been made in full to the holders
          of Series B Preferred Stock and any Series B Parity Stock, as provided
          in this Section 2, any other series or class or classes of Series B
          Junior Stock shall, subject to the respective terms thereof, be
          entitled to receive any and all assets remaining to be paid or
          distributed, and the holders of the Series B Preferred Stock and any
          Series B Parity Stock shall not be entitled to share therein.

               c. In determining whether a distribution (other than upon
          voluntary or involuntary liquidation) by distribution, redemption or
          other acquisition of shares of stock of the Corporation or otherwise
          is permitted under the MGCL, no effect shall be given to amounts that
          would be needed, if the Corporation were to be dissolved at the time
          of the distribution, to satisfy the preferential rights upon
          dissolution of holders of shares of stock of the Corporation whose
          preferential rights upon dissolution are superior to those receiving
          the distribution.

          (3) Conversion.

               a. Conversion by the Corporation. At the option of the
          Corporation, all, but not less than all, shares of Series B Preferred
          Stock may be converted on the Series B Conversion Date into the number
          of fully-paid and nonassessable shares of Common Stock obtained by
          dividing $5.56 by the Series B Conversion Price then in effect (the
          "SERIES B CONVERSION RATE"), PROVIDED, THAT the average closing price
          of a share of Common Stock for the 40 consecutive trading days
          preceding the date which is three business days prior to the Series B
          Notice Date on the principal national securities exchange on which the
          shares of Common Stock or securities are listed or admitted to trading
          or, if not listed or admitted to trading on any national securities
          exchange, the average of the reported bid and asked prices during such
          40 trading day period in the over-the-counter market as furnished by
          the National Quotation Bureau, Inc., or, if such firm is not then
          engaged in the business of reporting such prices, as furnished by any
          member of the National Association of Securities Dealers, Inc.
          selected by the Corporation (such average price, the "40 DAY AVERAGE
          PRICE") is equal to or greater than $7.50; PROVIDED FURTHER THAT, if
          such 40 Day Average Price is less than $7.50 and the Corporation
          elects at its option to convert the Series B Preferred Stock, the
          Series B Conversion Rate shall be adjusted to grant the holders of the
          Series B Preferred Stock that number of shares of Common Stock equal
          to the number otherwise issuable in accordance with the Series B
          Conversion Rate then in effect, multiplied by a fraction equal to (i)
          $8.25 divided by (ii) the 40 Day Average Price. Notwithstanding
          anything to the contrary herein, upon any redemption of any Series B
          Preferred Stock or any liquidation of the Corporation, the right of

                                       16
<PAGE>

          conversion shall terminate at the close of business on the full
          business day next preceding the date fixed for such redemption or for
          the payment of any amounts distributable on liquidation to the holders
          of Series B Preferred Stock.

               b. Conversion by the Holders. Each share of Series B Preferred
          Stock may be converted at any time after the date which is 24 months
          after the Series B Initial Issuance Date, at the option of the holder
          thereof, into the number of fully-paid and nonassessable shares of
          Common Stock obtained at the Series B Conversion Rate then in effect,
          PROVIDED, HOWEVER that on any redemption of any Series B Preferred
          Stock or any liquidation of the Corporation, the right of conversion
          shall terminate at the close of business on the full business day next
          preceding the date fixed for such redemption or for the payment of any
          amounts distributable on liquidation to the holders of Series B
          Preferred Stock.

               c. The initial Series B Conversion Rate for the Series B
          Preferred Stock shall be one share of Common Stock for each one share
          of Series B Preferred Stock surrendered for conversion representing an
          initial Series B Conversion Price (for purposes of Section 4) of $5.56
          per share of Common Stock. The applicable Series B Conversion Rate and
          Series B Conversion Price from time to time in effect is subject to
          adjustment as hereinafter provided.

               d. The Corporation shall not issue fractions of shares of Common
          Stock upon conversion of Series B Preferred Stock or scrip in lieu
          thereof. If any fraction of a share of Common Stock would, except for
          the provisions of this Section 3(d), be issuable upon conversion of
          any Series B Preferred Stock, the Corporation shall in lieu thereof
          pay to the person entitled thereto an amount in cash equal to the
          current value of such fraction, calculated to the nearest
          one-hundredth (1/100) of a share, to be computed (i) if the Common
          Stock is listed on any national securities exchange, on the basis of
          the last sales price of the Common Stock on such exchange (or the
          quoted closing bid price if there shall have been no sales) on the
          date of conversion, or (ii) if the Common Stock shall not be listed,
          on the basis of the mean between the closing bid and asked prices for
          the Common Stock on the date of conversion as reported by NASDAQ, or
          its successor, and if there are not such closing bid and asked prices,
          on the basis of the fair market value per share as determined by the
          Board of Directors.

               e. Whenever the Series B Conversion Rate and Series B Conversion
          Price shall be adjusted as provided in Section 4 hereof, the
          Corporation shall forthwith file at each office designated for the
          conversion of Series B Preferred Stock, a statement, signed by the
          Chairman of the Board, the President, any Vice President or Treasurer
          of the Corporation, showing in reasonable detail the facts requiring
          such adjustment and the Series B Conversion Rate that will be
          effective after such adjustment. The Corporation shall also cause a
          notice setting forth any such adjustments to be sent by mail, first
          class, postage prepaid, to each record holder of Series B Preferred
          Stock at his or its address appearing on the stock register. If such
          notice relates to an adjustment resulting from an event referred to

                                       17
<PAGE>

          in Section 4(g) hereof, such notice shall be included as part of the
          notice required to be mailed and published under the provisions of
          Section 4(g) hereof.

               f. In order to exercise the conversion privilege set forth in
          Section 3(a) above, the Corporation shall give the holder of any
          Series B Preferred Stock notice (the "SERIES B CONVERSION NOTICE") of
          such conversion and the holder of the Series B Preferred Stock to be
          converted shall promptly surrender his or its certificate or
          certificates therefor to the principal office of the transfer agent
          for the Series B Preferred Stock (or if no transfer agent be at the
          time appointed, then the Corporation at its principal office) with a
          notice stating the name or names (with address) in which the
          certificate or certificates for shares of Common Stock which shall be
          issuable on such conversion shall be issued, subject to any
          restrictions on transfer relating to shares of the Series B Preferred
          Stock or shares of Common Stock upon conversion thereof. If so
          required by the Corporation, certificates surrendered for conversion
          shall be endorsed or accompanied by written instrument or instruments
          of transfer, in form satisfactory to the Corporation, duly authorized
          in writing. The Series B Conversion Notice shall be sent by the
          Corporation no more than seven (7) and no less than three (3) days
          prior to the Series B Conversion Date. The Series B Conversion Date
          shall be the conversion date. As soon as practicable after receipt of
          such notice and the surrender of the certificate or certificates for
          Series B Preferred Stock as aforesaid, the Corporation shall cause to
          be issued and delivered at such office to such holder, or on his or
          its written order, a certificate or certificates for the number of
          full shares of Common Stock issuable on such conversion in accordance
          with the provisions hereof, cash as provided in Section 3(d) hereof in
          respect of any fraction of a share of Common Stock otherwise issuable
          upon such conversion.

               g. In order to exercise the conversion privilege set forth in
          Section 3(b) above, the holder of any Series B Preferred Stock to be
          converted shall surrender his or its certificate or certificates
          therefor to the principal office of the transfer agent for the Series
          B Preferred Stock (or if no transfer agent be at the time appointed,
          then the Corporation at its principal office), and shall give written
          notice to the Corporation at such office that the holder elects to
          convert the Series B Preferred Stock represented by such certificates,
          or any number thereof. Such notice shall also state the name or names
          (with address) in which the certificate or certificates for shares of
          Common Stock which shall be issuable on such conversion shall be
          issued, subject to any restrictions on transfer relating to shares of
          the Series B Preferred Stock or shares of Common Stock upon conversion
          thereof. If so required by the Corporation, certificates surrendered
          for conversion shall be endorsed or accompanied by written instrument
          or instruments of transfer, in form satisfactory to the Corporation,
          duly authorized in writing. The date of receipt by the transfer agent
          (or by the Corporation if the Corporation serves as its own transfer
          agent) of the certificates and notice shall be the conversion date. As
          soon as practicable after receipt of such notice and the surrender of
          the certificate or certificates for Series B Preferred Stock as
          aforesaid, the Corporation shall cause to be issued and delivered at
          such office to

                                       18
<PAGE>

          such holder, or on his or its written order, a certificate or
          certificates for the number of full shares of Common Stock issuable on
          such conversion in accordance with the provisions hereof, cash as
          provided in Section 3(d) hereof in respect of any fraction of a share
          of Common Stock otherwise issuable upon such conversion and, if less
          than all shares of Series B Preferred Stock represented by the
          certificate or certificates so surrendered are being converted, a
          residual certificate or certificates representing shares of Series B
          Preferred Stock not converted.

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

               i. Upon any such conversion each holder of shares of Series B
          Preferred Stock shall be entitled to elect to receive (x) in shares of
          Common Stock, any distributions accrued and unpaid up to the date
          which is 45 months after the Series B Initial Issuance Date, and (y)
          in cash, any distributions accrued and unpaid following the date which
          is 45 months after the Series B Initial Issuance Date. Any holder of
          shares of Series B Preferred Stock who has elected to receive such
          distributions in shares of Common Stock shall be entitled to receive
          in satisfaction of such distributions that number of fully-paid and
          nonassessable shares of Common Stock obtained by dividing the total
          amount of accrued and unpaid distributions by the Series B Conversion
          Price then in effect.

               j. Upon the conversion date as determined pursuant to (f) or (g)
          hereof, all shares of Series B Preferred Stock to be converted on such
          date shall no longer be deemed to be outstanding and all rights with
          respect to such shares, including the rights, if any, to receive
          notices and to vote, shall forthwith cease and terminate except only
          the right of the holder thereof to receive shares of Common Stock in
          exchange therefor and payment of any accrued and unpaid distributions
          thereon. Any shares of Series B Preferred Stock so converted shall be
          retired and canceled.

               k. No shares of Series B Preferred Stock may be converted into
          shares of Common Stock if such conversion would result in a violation
          of the applicable restrictions on Ownership set forth in Article
          TENTH.

          (4) Anti-Dilution Provisions.

                                       19
<PAGE>

               a. In order to prevent dilution of the right granted hereunder,
          the Series B Conversion Price shall be subject to adjustment from time
          to time in accordance with this Section 4(a). At any given time the
          "SERIES B CONVERSION PRICE," whether as the initial Series B
          Conversion Price ($5.56 per share) or as last adjusted, shall be that
          dollar (or part of a dollar) amount the payment of which shall be
          sufficient at the given time to acquire one share of Common Stock upon
          conversion of shares of Series B Preferred Stock.

               b. Except as provided in Section 4(c) or 4(f) hereof, if and
          whenever on or after the Series B Initial Issuance Date, the
          Corporation shall issue or sell, or shall in accordance with
          paragraphs 4(b)(i) to (ix), inclusive, be deemed to have issued or
          sold any shares of its Common Stock for a consideration per share less
          than the Market Price in effect immediately prior to the time of such
          issue or sale, then forthwith upon such issue or sale (the "SERIES B
          TRIGGERING TRANSACTION"), the Series B Conversion Price shall, subject
          to paragraphs (i) to (ix) of this Section 4(b), be reduced to the
          Series B Conversion Price (calculated to the nearest tenth of a cent)
          determined by dividing:

          (x)  amount equal to the sum of (x) the product derived by multiplying
               the Number of Common Shares Deemed Outstanding immediately prior
               to such Series B Triggering Transaction by the Series B
               Conversion Price then in effect, plus (y) the consideration, if
               any, received by the Corporation upon consummation of such Series
               B Triggering Transaction, by

          (y)  an amount equal to the sum of (x) the Number of Common Shares
               Deemed Outstanding immediately prior to such Series B Triggering
               Transaction plus (y) the number of shares of Common Stock issued
               (or deemed to be issued in accordance with paragraphs 4(b)(i) to
               (ix)) in connection with the Series B Triggering Transaction.

               For purposes of determining the adjusted Series B Conversion
          Price under this Section 4(b), the following paragraphs (i) to (ix),
          inclusive, shall be applicable:

          (i)  In case the Corporation at any time shall in any manner grant
               (whether directly or by assumption in a merger or otherwise) any
               rights to subscribe for or to purchase, or any options for the
               purchase of, Common Stock or any stock or other securities
               convertible into or exchangeable for Common Stock (such right or
               options being herein called "OPTIONS" and such convertible or
               exchangeable stock or securities being herein called "CONVERTIBLE
               SECURITIES"), whether or not such Options or the right to convert
               or exchange any such Convertible Securities are immediately
               exercisable and the price per share for which the Common Stock is
               issuable upon exercise, conversion or exchange (determined by
               dividing (x) the total amount, if any, received or receivable by
               the Corporation as consideration for the granting of such
               Options, plus the minimum

                                       20
<PAGE>

               aggregate amount of additional consideration payable to the
               Corporation upon the exercise of all such Options, plus, in the
               case of such Options which relate to Convertible Securities, the
               minimum aggregate amount of additional consideration, if any,
               payable upon the issue or sale of such Convertible Securities and
               upon the conversion or exchange thereof, by (y) the total maximum
               number of shares of Common Stock issuable upon the exercise of
               such Options or the conversion or exchange of such Convertible
               Securities) shall be less than the Market Price in effect
               immediately prior to the time of the granting of such Options,
               then the total maximum amount of Common Stock issuable upon the
               exercise of such Options or in the case of Options for
               Convertible Securities, upon the conversion or exchange of such
               Convertible Securities shall (as of the date of granting of such
               Options) be deemed to be outstanding and to have been issued and
               sold by the Corporation for such price per share. No adjustment
               of the Series B Conversion Price shall be made upon the actual
               issue of such shares of Common Stock or such Convertible
               Securities upon the exercise of such Options, except as otherwise
               provided in paragraph (iii) below.

          (ii) In case the Corporation at any time shall in any manner issue
               (whether directly or by assumption in a merger or otherwise) or
               sell any Convertible Securities, whether or not the rights to
               exchange or convert thereunder are immediately exercisable, and
               the price per share for which Common Stock is issuable upon such
               conversion or exchange (determined by dividing (x) the total
               amount received or receivable by the Corporation as consideration
               for the issue or sale of such Convertible Securities, plus the
               minimum aggregate amount of additional consideration, if any,
               payable to the Corporation upon the conversion or exchange
               thereof, by (y) the total maximum number of shares of Common
               Stock issuable upon the conversion or exchange of all such
               Convertible Securities) shall be less than the Market Price in
               effect immediately prior to the time of such issue or sale, then
               the total maximum number of shares of Common Stock issuable upon
               conversion or exchange of all such Convertible Securities shall
               (as of the date of the issue or sale of such Convertible
               Securities) be deemed to be outstanding and to have been issued
               and sold by the Corporation for such price per share. No
               adjustment of the Series B Conversion Price shall be made upon
               the actual issue of such Common Stock upon exercise of the rights
               to exchange or convert under such Convertible Securities, except
               as otherwise provided in paragraph (iii) below.

         (iii) If the purchase price provided for in any Options referred to in
               paragraph (i), the additional consideration, if any, payable upon
               the conversion or exchange of any Convertible Securities referred
               to in paragraphs (i) or (ii), or the rate at which any
               Convertible Securities referred to in paragraphs (i) or (ii) are
               convertible into or exchangeable for Common Stock shall change at
               any time (other than under or by reason of

                                       21
<PAGE>

               provisions designed to protect against dilution of the type set
               forth in Sections 4(b) or 4(d)), the Series B Conversion Price in
               effect at the time of such change shall forthwith be readjusted
               to the Series B Conversion Price which would have been in effect
               at such time had such Options or Convertible Securities still
               outstanding provided for such changed purchase price, additional
               consideration or conversion rate, as the case may be, at the time
               initially granted, issued or sold. If the purchase price provided
               for in any Option referred to in paragraph (i) or the rate at
               which any Convertible Securities referred to in paragraphs (i) or
               (ii) are convertible into or exchangeable for Common Stock, shall
               be reduced at any time under or by reason of provisions with
               respect thereto designed to protect against dilution, then in
               case of the delivery of Common Stock upon the exercise of any
               such Option or upon conversion or exchange of any such
               Convertible Security, the Series B Conversion Price then in
               effect hereunder shall forthwith be adjusted to such respective
               amount as would have been obtained had such Option or Convertible
               Security never been issued as to such Common Stock and had
               adjustments been made upon the issuance of the shares of Common
               Stock delivered as aforesaid, but only if as a result of such
               adjustment the Series B Conversion Price then in effect hereunder
               is hereby reduced.

          (iv) On the expiration of any Option or the termination of any right
               to convert or exchange any Convertible Securities, the Series B
               Conversion Price then in effect hereunder shall forthwith be
               increased to the Series B Conversion Price which would have been
               in effect at the time of such expiration or termination had such
               Option or Convertible Securities, to the extent outstanding
               immediately prior to such expiration or termination, never been
               issued.

          (v)  In case any Options shall be issued in connection with the issue
               or sale of other securities of the Corporation, together
               comprising one integral transaction in which no specific
               consideration is allocated to such Options by the parties
               thereto, such Options shall be deemed to have been issued without
               consideration.

          (vi) In case any shares of Common Stock, Options or Convertible
               Securities shall be issued or sold or deemed to have been issued
               or sold for cash, the consideration received therefor shall be
               deemed to be the amount received by the Corporation therefor;
               PROVIDED, HOWEVER, that in the event of an offering pursuant to
               an effective registration statement under the Securities Act of
               1933, as amended, the consideration received therefor shall be
               deemed to include any monies paid to underwriters in connection
               with such offering in an amount up to five percent (5%) of the
               per share gross proceeds of such offering. In case any shares of
               Common Stock, Options or Convertible Securities shall be issued
               or sold for a consideration other than cash, the amount of the
               consideration other than cash received by the Corporation shall
               be the fair value of such consideration as determined in

                                       22
<PAGE>

               good faith by the Board of Directors. In case any shares of
               Common Stock, Options or Convertible Securities shall be issued
               in connection with any merger in which the Corporation is the
               surviving corporation, the amount of consideration therefor shall
               be deemed to be the fair value of such portion of the net assets
               and business of the non-surviving corporation as shall be
               attributable to such Common Stock, Options or Convertible
               Securities, as the case may be.

         (vii) The number of shares of Common Stock outstanding at any given
               time shall not include shares owned or held by or for the account
               of the Corporation, and the disposition of any shares so owned or
               held (other than the cancellation of any such shares in
               connection with the Exchange Offer) shall be considered an issue
               or sale of Common Stock for the purpose of this Section 4(b).

        (viii) In case the Corporation shall declare a dividend or make any
               other distribution upon the stock of the Corporation payable in
               Options or Convertible Securities, then in such case any Options
               or Convertible Securities, as the case may be, issuable in
               payment of such dividend or distribution shall be deemed to have
               been issued or sold without consideration.

          (ix) For purposes of this Section 4(b), in case the Corporation shall
               take a record of the holders of its Common Stock for the purpose
               of entitling them (x) to receive a dividend or other distribution
               payable in Common Stock, Options or in Convertible Securities, or
               (y) to subscribe for or purchase Common Stock, Options or
               Convertible Securities, then such record date shall be deemed to
               be the date of the issue or sale of the shares of Common Stock
               deemed to have been issued or sold upon the declaration of such
               dividend or the making of such other distribution or the date of
               the granting of such right or subscription or purchase, as the
               case may be.

               c. In the event the Corporation shall declare a dividend upon the
          Common Stock (other than a dividend payable in Common Stock) payable
          otherwise than out of earnings or earned surplus, determined in
          accordance with generally accepted accounting principles, including
          the making of appropriate deductions for minority interests, if any,
          in subsidiaries (herein referred to as "LIQUIDATING DIVIDENDS") then,
          as soon as possible after the conversion of any shares of Series B
          Preferred Stock, the Corporation shall pay to the person converting
          such shares of Series B Preferred Stock an amount equal to the
          aggregate value at the time of such exercise of all Liquidating
          Dividends (including but not limited to the Common Stock which would
          have been issued at the time of such earlier exercise and all other
          securities which would have been issued with respect to such Common
          Stock by reason of stock splits, stock dividends, mergers or
          reorganizations, or for any other reason). For the purposes of this
          Section 4(c), a dividend other than in cash shall be considered
          payable out

                                       23
<PAGE>

          of earnings or earned surplus only to the extent that such earnings or
          earned surplus are charged an amount equal to the fair value of such
          dividend as determined in good faith by the Board of Directors.

               d. In case the Corporation shall at any time (i) subdivide the
          outstanding Common Stock or (ii) issue a dividend on its outstanding
          Common Stock payable in shares of Common Stock, the number of shares
          of Common Stock issuable upon conversion of the Series B Preferred
          Stock shall be proportionately increased by the same ratio as the
          subdivision or dividend (with appropriate adjustments to the Series B
          Conversion Price in effect immediately prior to such subdivision or
          dividend). In case the Corporation shall at any time combine its
          outstanding Common Stock, the number of shares issuable upon
          conversion of the Series B Preferred Stock immediately prior to such
          combination shall be proportionately decreased by the same ratio as
          the combination (with appropriate adjustments to the Series B
          Conversion Price in effect immediately prior to such combination).

               e. If any capital reorganization or reclassification of the
          capital stock of the Corporation, or consolidation or merger of the
          Corporation with another corporation, or the sale of all or
          substantially all of its assets to another corporation shall be
          effected in such a way that holders of Common Stock shall be entitled
          to receive stock, securities, cash or other property with respect to
          or in exchange for Common Stock, then, as a condition of such
          reorganization, reclassification, consolidation, merger or sale,
          lawful and adequate provision shall be made whereby the holders of the
          Series B Preferred Stock shall have the right to acquire and receive
          upon conversion of the Series B Preferred Stock, which right shall be
          prior to the rights of the holders of Series B Junior Stock (but after
          and subject to the rights of holders of Senior Preferred Stock, if
          any), such shares of stock, securities, cash or other property
          issuable or payable (as part of the reorganization, reclassification,
          consolidation, merger or sale) with respect to or in exchange for such
          number of outstanding shares of Common Stock as would have been
          received upon conversion of the Series B Preferred Stock at the Series
          B Conversion Price then in effect. The Corporation will not effect any
          such consolidation, merger or sale, unless prior to the consummation
          thereof the successor corporation (if other than the Corporation)
          resulting from such consolidation or merger or the corporation
          purchasing such assets shall assume by written instrument mailed or
          delivered to the holders of the Series B Preferred Stock at the last
          address of each such holder appearing on the books of the Corporation,
          the obligation to deliver to each such holder such shares of stock,
          securities or assets as, in accordance with the foregoing provisions,
          such holder may be entitled to purchase. If a purchase, tender or
          exchange offer is made to and accepted by the holders of more than 50%
          of the outstanding shares of Common Stock, the Corporation shall not
          effect any consolidation, merger or sale with the person having made
          such offer or with any Affiliate of such person, unless prior to the
          consummation of such consolidation, merger or sale the holders of the
          Series B Preferred Stock shall have been given a reasonable
          opportunity to then elect to receive upon conversion of the Series B
          Preferred

                                       24
<PAGE>

          Stock either the stock, securities or assets then issuable with
          respect to the Common Stock or the stock, securities or assets, or the
          equivalent, issued to previous holders of the Common Stock in
          accordance with such offer.

               f. The provisions of this Section 4 shall not apply to any Common
          Stock issued, issuable or deemed outstanding under paragraphs 4(b)(i)
          to (ix) inclusive: (i) to any person pursuant to any stock option,
          stock purchase, dividend reinvestment or similar plan or arrangement
          for the benefit of employees, consultants or directors of the
          Corporation or its subsidiaries in effect on the Series B Initial
          Issuance Date or thereafter adopted by the Board of Directors, (ii)
          pursuant to options, warrants, conversion or subscription rights in
          existence on the Series B Initial Issuance Date, (iii) on conversion
          of the Series B Preferred Stock, (iv) on exercise of the Warrant or
          (v) if the holders of a majority of the Series B Preferred Stock then
          outstanding agree in writing that the provisions of this Section 4
          shall not apply.

               g. In the event that:

          (i)  the Corporation shall declare any cash dividend upon its Common
               Stock, or

          (ii) the Corporation shall declare any dividend upon its Common Stock
               payable in stock or make any special dividend or other
               distribution to the holders of its Common Stock, or

         (iii) the Corporation shall offer for subscription pro rata to the
               holders of its Common Stock any additional shares of stock of any
               class or other rights, or

          (iv) there shall be any capital reorganization or reclassification of
               the capital stock of the Corporation, including any subdivision
               or combination of its outstanding shares of Common Stock, or
               consolidation or merger of the Corporation with, or sale of all
               or substantially all of its assets to, another corporation, or

          (v)  there shall be a voluntary or involuntary dissolution,
               liquidation or winding up of the Corporation;

          then, in connection with such event, the Corporation shall give to the
          holders of the Series B Preferred Stock:

          a.   at least fifteen (15) days prior written notice of the date on
               which the books of the Corporation shall close or a record shall
               be taken for such dividend, distribution or subscription rights
               or for determining rights to vote in respect of any such
               reorganization, reclassification, consolidation, merger, sale,
               dissolution, liquidation or winding up. Such notice (i) shall
               also specify, in the case of any such dividend, distribution or
               subscription rights, the date on which the holders of Common
               Stock shall be entitled

                                       25
<PAGE>

               thereto and (ii) shall be given by first class mail, postage
               prepaid, addressed to the holders of the Series B Preferred Stock
               at the address of each such holder as shown on the books of the
               Corporation; And,

          b.   in the case of any such reorganization, reclassification,
               consolidation, merger, sale, dissolution, liquidation or winding
               up, at least fifteen (15) days prior written notice of the date
               when the same shall take place. Such notice (i) shall also
               specify the date on which the holders of Common Stock shall be
               entitled to exchange their Common Stock for securities or other
               property deliverable upon such reorganization, reclassification,
               consolidation, merger, sale, dissolution, liquidation or winding
               up, as the case may be and (ii) shall be given by first class
               mail, postage prepaid, addressed to the holders of the Series B
               Preferred Stock at the address of each such holder as shown on
               the books of the Corporation.

               h. If at any time or from time to time on or after the Series B
          Initial Issuance Date, the Corporation shall grant, issue or sell any
          Options, Convertible Securities or rights to purchase property (the
          "PURCHASE RIGHTS") pro rata to the record holders of any class of
          Common Stock and such grants, issuances or sales do not result in an
          adjustment of the Series B Conversion Price under Section 4(b) hereof,
          then each holder of Series B Preferred Stock shall be entitled to
          acquire (within thirty (30) days after the later to occur of the
          initial exercise date of such Purchase Rights or receipt by such
          holder of the notice concerning Purchase Rights to which such holder
          shall be entitled under Section 4(g)) and upon the terms applicable to
          such Purchase Rights either:

          (i)  the aggregate Purchase Rights which such holder could have
               acquired if it had held the number of shares of Common Stock
               acquirable upon conversion of the Series B Preferred Stock
               immediately before the grant, issuance or sale of such Purchase
               Rights; provided that if any Purchase Rights were distributed to
               holders of Common Stock without the payment of additional
               consideration by such holders, corresponding Purchase Rights
               shall be distributed to the exercising holders of the Series B
               Preferred Stock as soon as possible after such exercise and it
               shall not be necessary for the exercising holder of the Series B
               Preferred Stock specifically to request delivery of such rights;
               or

          (ii) in the event that any such Purchase Rights shall have expired or
               shall expire prior to the end of said thirty (30) day period, the
               number of shares of Common Stock or the amount of property which
               such holder could have acquired upon such exercise at the time or
               times at which the Corporation granted, issued or sold such
               expired Purchase Rights.

               i. If any event occurs as to which, in the opinion of the Board
          of Directors, the provisions of this Section 4 are not strictly
          applicable or if strictly applicable would not fairly protect the
          rights of the holders of the Series B Preferred Stock in accordance
          with the essential intent and principles of such provisions, then the
          Board of Directors shall make an adjustment in the application of such

                                       26
<PAGE>

          provisions, in accordance with such essential intent and principles,
          so as to protect such rights as aforesaid, but in no event shall any
          adjustment have the effect of increasing the Series B Conversion Price
          as otherwise determined pursuant to any of the provisions of this
          Section 4 except in the case of a combination of shares of a type
          contemplated in Section 4(d) hereof and then in no event to an amount
          larger than the Series B Conversion Price as adjusted pursuant to
          Section 4(d) hereof.

          (5) Redemption.

               a. Except as otherwise permitted under Article TENTH hereof,
          shares of Series B Preferred Stock shall not be redeemable prior to
          the date which is 60 months after the Series B Initial Issuance Date.
          All, but not less than all, of the shares of Series B Preferred Stock
          may be redeemed by the Corporation, at its option, at the Series B
          Redemption Price within sixty (60) days after the date which is 60
          months after the Series B Initial Issuance Date if the 40 Day Average
          Price is less than $7.50 per share. Such redemption shall be made in
          five equal annual installments (the date of each such installment, a
          "SERIES B REDEMPTION DATE"), the first of which shall be the Series B
          Call Date (as defined below). On each Series B Redemption Date, the
          Corporation shall redeem the outstanding shares of Series B Preferred
          Stock pro rata among all holders of Series B Preferred Stock.
          Notwithstanding anything to the contrary contained in this Charter, at
          any time prior to the first Series B Redemption Date each holder of
          Series B Preferred Stock may convert such holder's shares of Series B
          Preferred Stock in accordance with Article SIXTH, Section (d)(3)b
          hereof and no such holder may convert such Shares of Series B
          Preferred Stock on or after the first Series B Redemption Date.

               b. Shares of Series B Preferred Stock shall be redeemed by the
          Corporation on the date specified in the notice to holders required
          under paragraph (c) of this Section (5) (the "SERIES B CALL DATE").
          The Series B Call Date shall be selected by the Corporation, shall be
          specified in the notice of redemption and shall be not less than
          thirty (30) nor more than sixty (60) days after the date notice of
          redemption is sent by the Corporation. Upon any redemption of shares
          of Series B Preferred Stock pursuant to the second sentence of
          paragraph (a) of this Section (5), the Corporation shall pay in cash
          to the holder of such shares an amount equal to all accumulated,
          accrued and unpaid distributions, if any, to the Series B Call Date,
          whether or not earned or declared. Immediately prior to authorizing
          any redemption of the Series B Preferred Stock, and as a condition
          precedent for such redemption, the Corporation, by resolution of its
          Board of Directors, shall declare a mandatory distribution on the
          Series B Preferred Stock payable in cash on the Series B Call Date in
          an amount equal to all accumulated, accrued and unpaid distributions
          as of the Series B Call Date on the Series B Preferred Stock to be
          redeemed, which amount shall be added to the redemption price. If the
          Series B Call Date falls after a distribution Series B Record Date and
          prior to the corresponding Series B Distribution Payment Date,

                                       27
<PAGE>

          then each holder of Series B Preferred Stock at the close of business
          on such distribution Series B Record Date shall be entitled to the
          distribution payable on such shares on the corresponding Series B
          Distribution Payment Date notwithstanding the redemption of such
          shares prior to such Series B Distribution Payment Date.

               c. If the Corporation shall redeem shares of Series B Preferred
          Stock pursuant to paragraph (a) of this Section (5), notice of such
          redemption shall be given to each holder of record of the shares to be
          redeemed. Such notice shall be provided by first class mail, postage
          prepaid, at such holder's address as the same appears on the stock
          records of the Corporation, or by publication in The Wall Street
          Journal or The New York Times, or if neither such newspaper is then
          being published, any other daily newspaper of general circulation in
          The City of New York, such publication to be made once a week for two
          (2) successive weeks commencing not less than thirty (30) nor more
          than sixty (60) days prior to the Series B Call Date. If the
          Corporation elects to provide such notice by publication, it shall
          also promptly mail notice of such redemption to the holders of the
          shares of Series B Preferred Stock to be redeemed. Neither the failure
          to give any notice required by this paragraph (c), nor any defect
          therein or in the mailing thereof, to any particular holder, shall
          affect the sufficiency of the notice or the validity of the
          proceedings for redemption with respect to the other holders. Any
          notice which was mailed in the manner herein provided shall be
          conclusively presumed to have been duly given on the date mailed
          whether or not the holder receives the notice.

               d. Each such mailed or published notice shall state, as
          appropriate: (i) the Series B Call Date; (ii) the Series B Redemption
          Price; (iii) the number of shares of Series B Preferred Stock to be
          redeemed; (iv) the place or places at which the certificates
          evidencing the shares of Series B Preferred Stock are to be
          surrendered for payment of the Series B Redemption Price; and (v) that
          distributions on the shares of Series B Preferred Stock to be redeemed
          shall cease to accrue on such Series B Call Date except as otherwise
          provided herein. Notice having been published or mailed as aforesaid,
          and provided that on or before the Series B Call Date specified in
          such notice the amount of cash necessary to pay the first annual
          installment of such redemption shall have been set aside by the
          Corporation, separate and apart from its other funds in trust for the
          pro rata benefit of the holders of the shares of Series B Preferred
          Stock so called for redemption, from and after the Series B Call Date,
          including all accumulated, accrued and unpaid distributions to the
          Series B Call Date, whether or not earned or declared, (i) except as
          otherwise provided herein, distributions on the shares of Series B
          Preferred Stock so called for redemption shall cease to accumulate or
          accrue on the shares of Series B Preferred Stock called for redemption
          (except that, in the case of a Series B Call Date after a distribution
          Series B Record Date and prior to the related Series B Distribution
          Payment Date, holders of Series B Preferred Stock on the distribution
          Series B Record Date will be entitled on such Series B Distribution
          Payment Date to receive the distribution payable on such shares), (ii)
          said shares shall no longer be deemed to be outstanding, (iii) all
          rights

                                       28
<PAGE>

          of the holders thereof as holders of Series B Preferred Stock of
          the Corporation shall cease (except the rights to receive the cash
          payable upon such redemption, without interest thereon, upon
          surrender and endorsement of their certificates if so required and
          to receive any distributions payable thereon). The Corporation's
          obligation to provide cash in accordance with the preceding
          sentence shall be deemed fulfilled if, on or before the Series B
          Call Date, the Corporation shall deposit with a bank or trust
          company (which may be an affiliate of the Corporation) that has an
          office in the Borough of Manhattan, The City of New York, or in Los
          Angeles or San Diego, California, and that has or is an affiliate
          of a bank or trust company that has, a capital and surplus of at
          least $50,000,000, such amount of cash as is necessary to pay the
          first annual installment of such redemption, in trust, with
          irrevocable instructions that such cash be applied to the
          redemption of the shares of Series B Preferred Stock so called for
          redemption. No interest shall accrue for the benefit of the holders
          of shares of Series B Preferred Stock to be redeemed on any cash so
          set aside by the Corporation. Subject to applicable escheat laws,
          any such cash unclaimed at the end of two (2) years from the Series
          B Call Date shall revert to the general funds of the Corporation,
          after which reversion the holders of shares of Series B Preferred
          Stock so called for redemption shall look only to the general funds
          of the Corporation for the payment of such cash.

               e. As promptly as practicable after the surrender in accordance
          with said notice of the certificates for any such shares of Series B
          Preferred Stock so redeemed (properly endorsed or assigned for
          transfer, if the Corporation shall so require and if the notice shall
          so state), such certificates shall be exchanged for cash (without
          interest thereon) for which such shares have been redeemed in
          accordance with such notice. If fewer than all the shares of Series B
          Preferred Stock represented by any certificates are redeemed on any
          Series B Redemption Date, then a new certificate representing the
          unredeemed shares of Series B Preferred Stock shall be issued to the
          holder of such unredeemed shares on such Series B Redemption Date
          without cost to the holders thereof.

          (6) Status of Acquired Stock. All shares of Series B Preferred Stock
     which shall have been issued and reacquired in any manner by the
     Corporation shall be restored to the status of authorized but unissued
     shares of Series B Preferred Stock.

          (7) Ranking. Any class or series of capital stock of the Corporation
     shall be deemed to rank:

               a. prior or senior to the Series B Preferred Stock, as to the
          payment of distributions and as to the distribution of assets upon
          liquidation, dissolution or winding up, if such class or series of
          stock shall be Series A Preferred Stock or if the holders of such
          class or series of stock shall be entitled to the receipt of
          distributions or of amounts distributable upon liquidation,
          dissolution or winding up, as the case may be, in preference or
          priority to the holders of Series B Preferred Stock (such stock,
          "SERIES B SENIOR STOCK");

                                       29
<PAGE>

               b. on a parity with the Series B Preferred Stock, as to the
          payment of distributions and as to the distribution of assets upon
          liquidation, dissolution or winding up, whether or not the
          distribution rates, distribution payment dates or redemption or
          liquidation prices per share thereof be different from those of the
          Series B Preferred Stock, if the holders of such class or series of
          stock and the Series B Preferred Stock shall be entitled to the
          receipt of distributions and of amounts distributable upon
          liquidation, dissolution or winding up in proportion to their
          respective amounts of accrued and unpaid distributions per share or
          liquidation preferences, without preference or priority one over the
          other (such stock, "SERIES B PARITY STOCK"); and

               c. junior to the Series B Preferred Stock, as to the payment of
          distributions or as to the distribution of assets upon liquidation,
          dissolution or winding up, if such class or series of stock shall be
          Common Stock or if the holders of Series B Preferred Stock shall be
          entitled to receipt of distributions or of amounts distributable upon
          liquidation, dissolution or winding up, as the case may be, in
          preference or priority to the holders of shares of such class or
          series of stock (such stock, "SERIES B JUNIOR STOCK").

          (8) Voting Rights.

               a. In any matter in which the Series B Preferred Stock is
          entitled to vote as expressly provided herein, each share of Series B
          Preferred Stock shall be entitled to the number of votes equal to the
          number of shares of Common Stock into which each such share of Series
          B Preferred Stock is then convertible (as adjusted from time to time
          pursuant to Sections (3) and (4) hereto).

               b. The holders of the Series B Preferred Stock shall have the
          right to vote with the Common Stock on all matters, except the
          election of Common Directors, on which the holders of the Common Stock
          are entitled to vote, as though part of the same class as holders of
          the Common Stock. The holders of the Series B Preferred Stock shall
          not be entitled to vote in the election of the directors other than
          the election of the Warburg Directors as set forth in Article SEVENTH
          hereto. The holders of the Series B Preferred Stock shall receive all
          notices of meetings of the holders of the Common Stock, and all other
          notices and correspondence to the holders of the Common Stock provided
          by the Corporation, and shall be entitled to take such actions, and
          shall have such rights, as are set forth herein or are otherwise
          available to the holders of the Common Stock in the Charter and in the
          Bylaws of the Corporation as are in effect on the date hereof and from
          time to time hereafter.

               c. So long as any shares of Series B Preferred Stock remain
          outstanding, the Corporation will not, without the affirmative vote or
          consent of the holders of at least 66 2/3% of the shares of Series B
          Preferred Stock outstanding at the time, given in person or by proxy,
          either in writing or at a meeting (such series voting separately as a
          class), (A) other than in connection with the Exchange Offer or the
          Preferred Offer, authorize or create, or increase

                                       30
<PAGE>

          the authorized or issued amount of, any class or series of shares of
          capital stock ranking prior or senior to the Series B Preferred Stock
          with respect to the payment of distributions or the distribution of
          assets upon liquidation, dissolution or winding-up or reclassify any
          authorized shares of capital stock of the Corporation into such
          shares, or create, authorize or issue any obligation or security
          convertible into or evidencing the right to purchase any such shares;
          or (B) amend, alter or repeal the provisions of the Corporation's
          Charter by any Event, so as to materially and adversely affect any
          right, preference, privilege or voting power of the Series B Preferred
          Stock or the holders thereof; PROVIDED, HOWEVER, with respect to the
          occurrence of any of the Events set forth in (B) above, so long as the
          shares of Series B Preferred Stock (or shares of any equivalent class
          or series of stock issued by the surviving corporation in any merger,
          consolidation or share exchange to which the Corporation became a
          party) remain outstanding with the terms thereof materially unchanged,
          the occurrence of any such Event shall not be deemed to materially and
          adversely affect such rights, preferences, privileges or voting power
          of holders of Series B Preferred Stock and provided further that (x)
          any increase in the amount of the authorized preferred stock or the
          creation or issuance of any other shares of Series B Preferred Stock,
          or (y) any increase in the amount of authorized Series B Preferred
          Stock or any other preferred stock, in each case ranking on a parity
          with or junior to the Series B Preferred Stock with respect to payment
          of distributions or the distribution of assets upon liquidation,
          dissolution or winding-up, shall not be deemed to materially and
          adversely affect such rights, preferences, privileges or voting
          powers. The foregoing voting provisions will not apply if, at or prior
          to the time when the act with respect to which such vote would
          otherwise be required shall be effected, all outstanding shares of
          Series B Preferred Stock shall have been redeemed or called for
          redemption upon proper notice and sufficient funds shall have been
          irrevocably deposited in trust to effect such redemption. Nothing in
          this paragraph (d) shall be deemed to limit the Corporation's ability
          to issue debt securities (other than debt securities convertible into
          a class of capital stock ranking prior or senior to the Series B
          Preferred Stock) or otherwise incur additional indebtedness or alter
          the terms of any existing or future indebtedness during the period any
          shares of Series B Preferred Stock are outstanding.

          (9) Restrictions on Transfer, Acquisition and Redemption of Shares.
     The Series B Preferred Stock constitutes a class of preferred stock of the
     Corporation, and shares of preferred stock constitute Capital Shares of the
     Corporation. Therefore, shares of Series B Preferred Stock, being Capital
     Shares, are governed by and issued subject to all of the limitations, terms
     and conditions of the Charter applicable to Capital Shares generally,
     including but not limited to the terms and conditions (including exceptions
     and exemptions) of Article TENTH hereto; PROVIDED, HOWEVER, that the terms
     and conditions (including exceptions and exemptions) of Article TENTH
     hereof applicable to Capital Shares shall also be applied to the Series B
     Preferred Stock separately and without regard to any other series or class.
     The foregoing sentence shall not be construed to limit the applicability to
     the Series B Preferred Stock of any other term or provision of the Charter.

                                       31
<PAGE>

          (10) Severability of Provisions. If any preference, conversion or
     other right, voting power, restriction, limitation as to distributions,
     qualification or term or condition of redemption of the Series B Preferred
     Stock set forth herein is invalid, unlawful or incapable of being enforced
     by reason of any rule of law or public policy, all other preferences,
     conversion or other distributions, qualifications or terms or conditions of
     redemption of Series B Preferred Stock set forth herein which can be given
     effect without the invalid, unlawful or unenforceable provision thereof
     shall, nevertheless, remain in full force and effect, and no preferences,
     conversion or other rights, voting powers, restrictions, limitations as to
     distributions, qualifications or terms or conditions or redemption of
     Series B Preferred Stock herein set forth shall be deemed dependent upon
     any other provision thereof unless so expressed therein.

     (e) Subject to the foregoing and to the provisions of Article TENTH, the
power of the Board of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the provisions of
the Charter, authority to classify or reclassify any unissued shares of such
stock into a class or classes of preferred stock, preference stock, special
stock or other stock, and to divide and classify shares of any class into one or
more series of such class, by determining, fixing, or altering one or more of
the following:

          (1) The distinctive designation of such class or series and the number
     of shares to constitute such class or series; provided that, unless
     otherwise prohibited by the terms of such or any other class or series, the
     number of shares of any class or series may be decreased by the Board of
     Directors in connection with any classification or reclassification of
     unissued shares and the number of shares of such class or series may be
     increased by the Board of Directors in connection with any such
     classification or reclassification, and any shares of any class or series
     which have been redeemed, purchased, otherwise acquired or converted into
     shares of Common Stock or any other class or series shall become part of
     the authorized capital stock and be subject to classification and
     reclassification as provided in this sub-paragraph.

          (2) Whether or not and, if so, the rates, amounts and times at which,
     and the conditions under which, dividends shall be payable on shares of
     such class or series, whether any such dividends shall rank senior or
     junior to or on a parity with the dividends payable on any other class or
     series of stock, and the status of any such dividends as cumulative,
     cumulative to a limited extent or non-cumulative and as participating or
     non-participating.

          (3) Whether or not shares of such class or series shall have voting
     rights, in addition to any voting rights provided by law and, if so, the
     terms of such voting rights.

          (4) Whether or not shares of such class or series shall have
     conversion or exchange privileges and, if so, the terms and conditions
     thereof, including provision for adjustment of the conversion or exchange
     rate in such events or at such times as the Board of Directors shall
     determine.

          (5) Whether or not shares of such class or series shall be subject to
     redemption and, if so, the terms and conditions of such redemption,
     including the date or

                                       32
<PAGE>

     dates upon or after which they shall be redeemable and the amount per share
     payable in case of redemption, which amount may vary under different
     conditions and at different redemption dates; and whether or not there
     shall be any sinking fund or purchase account in respect thereof, and if
     so, the terms thereof.

          (6) The rights of the holders of shares of such class or series upon
     the liquidation, dissolution or winding up of the affairs of, or upon any
     distribution of the assets of, the Corporation, which rights may vary
     depending upon whether such liquidation, dissolution or winding up is
     voluntary or involuntary and, if voluntary, may vary at different dates,
     and whether such rights shall rank senior or junior to or on a parity with
     such rights of any other class or series of stock.

          (7) Whether or not there shall be any limitations applicable, while
     shares of such class or series are outstanding, upon the payment of
     dividends or making of distributions on, or the acquisition of, or the use
     of moneys for purchase or redemption of, any stock of the Corporation, or
     upon any other action of the Corporation, including action under this
     sub-paragraph, and, if so, the terms and conditions thereof.

          (8) Any other preferences, rights, restrictions, including
     restrictions on transferability, and qualifications of shares of such class
     or series, not inconsistent with law and the Charter of the Corporation.

     (f) For the purposes hereof and of any articles supplementary to the
Charter providing for the classification or reclassification of any shares of
capital stock or of any other Charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:

          (1) prior to another class or series either as to dividends or upon
     liquidation, if the holders of such class or series shall be entitled to
     the receipt of dividends or of amounts distributable on liquidation,
     dissolution or winding up, as the case may be, in preference or priority to
     holders of such other class or series;

          (2) on a parity with another class or series either as to dividends or
     upon liquidation, whether or not the dividend rates, dividend payment dates
     or redemption or liquidation price per share thereof be different from
     those of such others, if the holders of such class or series of stock shall
     be entitled to receipt of dividends or amounts distributable upon
     liquidation, dissolution or winding up, as the case may be, in proportion
     to their respective dividend rates or redemption or liquidation prices,
     without preference or priority over the holders of such other class or
     series; and

          (3) junior to another class or series either as to dividends or upon
     liquidation, if the rights of the holders of such class or series shall be
     subject or subordinate to the rights of the holders of such other class or
     series in respect of the receipt of dividends or the amounts distributable
     upon liquidation, dissolution or winding up, as the case may be.

     SEVENTH: (a) The business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. The number of directors of the
Corporation shall be eight (8), which number may be increased or decreased
pursuant to the Bylaws of the Corporation or

                                       33
<PAGE>

upon the termination of the term of office of any such directors as set forth
below, but shall never be less than the minimum number permitted by the MGCL now
or hereafter in force; PROVIDED THAT, from and after the Series B Initial
Issuance Date until the Warburg Termination Date, except as required pursuant to
Article SIXTH, Section (c)(6)c, the Corporation and its Board of Directors shall
not increase or decrease the number of directors of the Corporation without the
consent of a majority of the Board of Directors of the Corporation, which
majority shall include the Warburg Directors (as defined below). The names of
the directors who shall serve until the next annual meeting and until their
successors are duly elected and qualified are:

                              --------------------

                              --------------------

                              --------------------

                              --------------------

                              --------------------

                              --------------------

                              --------------------

                              --------------------

     (b) The members of the Board of Directors shall be elected as follows: (i)
two (2) members (the "WARBURG DIRECTORS") shall be elected by the Warburg
Investors until the occurrence of the Warburg Termination Date, (ii) four (4)
members (the "SERIES A DIRECTORS") (at least one of which shall be an
"independent director" within the meaning of the Nasdaq Marketplace Rules
governing audit committees) shall be elected by the holders of the Series A
Preferred Stock until the occurrence of the Series A Preferred Rights
Termination Date and (iii) the remaining directors (the "COMMON DIRECTORS")
shall be elected by the holders of the Series A Preferred Stock and the Common
Stock voting together as a single class. The right of the Warburg Investors to
elect the Warburg Directors and the term of office of the Warburg Directors
shall terminate upon the occurrence of the Warburg Termination Date, and the
number of directors shall be reduced accordingly. The right of the holders of
the Series A Preferred Stock to elect the Series A Directors and the term of
office of the Series A Directors shall terminate upon the occurrence of the
Series A Preferred Rights Termination Date, and the number of directors shall be
reduced accordingly.

     (c) Any vacancy on the Board of Directors may be filled by vote of (i) the
Warburg Investors if such vacancy occurs in the directorship of a Warburg
Director, (ii) the remaining Series A Directors if such vacancy occurs in the
directorship of a Series A Director or (iii) the remaining Common Directors if
such vacancy occurs in the directorship of a Common Director.

     (d) Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause, by the affirmative vote of the holders
of a majority of the outstanding shares entitled to vote generally or by class,
in the election of directors. For the purpose of this

                                       34
<PAGE>

paragraph, "cause" shall mean with respect to any particular director a final
judgment of a court of competent jurisdiction holding that such director caused
demonstrable, material harm to the Corporation through bad faith or active and
deliberate dishonesty.

     EIGHTH: (a) The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and the stockholders:

          (1) The Board of Directors is hereby empowered to authorize the
     issuance from time to time of shares of its stock of any class, whether now
     or hereafter authorized, or securities convertible into shares of its stock
     of any class or classes, whether now or hereafter authorized, for such
     consideration as may be deemed advisable by the Board of Directors and
     without any action by the stockholders, subject to the limitations set
     forth in the Charter or the Bylaws.

          (2) No holder of any stock or any other securities of the Corporation,
     whether now or hereafter authorized, (A) shall have any preemptive right to
     subscribe for or purchase any stock or any other securities of the
     Corporation other than such, if any, as the Board of Directors, in its sole
     discretion, may determine and at such price or prices and upon such other
     terms as the Board of Directors, in its sole discretion, may fix; and any
     stock or other securities which the Board of Directors may determine to
     offer for subscription may, as the Board of Directors in its sole
     discretion shall determine, be offered to the holders of any class, series
     or type of stock or other securities at the time outstanding to the
     exclusion of the holders of any or all other classes, series or types of
     stock or other securities at the time outstanding, or (B) shall, other than
     the holders of Series A Preferred Stock, be entitled to the appraisal
     rights of an objecting stockholder under Title 3, Subtitle 2 of the MGCL.

          (3) The Board of Directors of the Corporation shall, consistent with
     applicable law, have power in its sole discretion to determine from time to
     time in accordance with sound accounting practice or other reasonable
     valuation methods what constitutes annual or other net profits, earnings,
     surplus or net assets in excess of capital; to fix and vary from time to
     time the amount to be reserved as working capital, or determine that
     retained earnings or surplus shall remain in the hands of the Corporation;
     to set apart out of any funds of the Corporation such reserve or reserves
     in such amount or amounts and for such proper purpose or purposes as it
     shall determine and to abolish any such reserve or any part thereof; to
     redeem or purchase its stock or to distribute and pay distributions or
     dividends in stock, cash or other securities or property, out of surplus or
     any other funds or amounts legally available therefor, at such times and to
     the stockholders of record on such dates as it may, from time to time,
     determine; to determine the amount, purpose, time of creation, increase or
     decrease, alteration or cancellation of any reserves or charges and the
     propriety thereof (whether or not any obligation or liability for which
     such reserves or charges shall have been created shall have been paid or
     discharged); to determine the fair value and any matters relating to the
     acquisition, holding and disposition of any assets by the Corporation; to
     determine whether and to what extent and at what times and places and under
     what conditions and regulations the books, accounts and documents of the
     Corporation, or any of them, shall be open to the inspection of

                                       35
<PAGE>

     stockholders, except as otherwise provided by statute or by the Bylaws,
     and, except as so provided, no stockholder shall have any right to inspect
     any book, account or document of the Corporation unless authorized so to do
     by resolution of the Board of Directors; and to determine any other matter
     relating to the business and affairs of the Corporation.

          (4) Except as provided in Article SIXTH, Sections (c) and (d)
     notwithstanding any provision of law requiring the authorization of any
     action by a greater proportion than a majority of all the votes entitled to
     be cast on the matter, such action shall be valid and effective if
     authorized by the affirmative vote of the holders of a majority of all
     votes entitled to be cast on the matter.

          (5) The Corporation shall indemnify (A) its present or former
     directors and officers, whether serving the Corporation or at its request
     any other entity, to the full extent required or permitted by the MGCL now
     or hereafter in force, including the advance of expenses under the
     procedures and to the full extent permitted by law and (B) other employees
     and agents to such extent as shall be authorized by the Board of Directors
     or the Corporation's Bylaws and be permitted by law. The foregoing rights
     of indemnification shall not be exclusive of any other rights to which
     those seeking indemnification may be entitled. The Board of Directors may
     take such action as is necessary to carry out these indemnification
     provisions and is expressly empowered to adopt, approve and amend from time
     to time such bylaws, resolutions or contracts implementing such provisions
     or such further indemnification arrangements as may be permitted by law. No
     amendment of the Charter of the Corporation or repeal of any of its
     provisions shall limit or eliminate the right to indemnification provided
     hereunder with respect to acts or omissions occurring prior to such
     amendment or repeal.

          (6) To the fullest extent permitted by Maryland law, no director or
     officer of the Corporation shall be personally liable to the Corporation or
     its stockholders for money damages. No amendment of the Charter of the
     Corporation or repeal of any of its provisions shall limit or eliminate the
     limitation on liability provided to directors and officers hereunder with
     respect to any act or omission occurring prior to such amendment or repeal.

          (7) The Corporation reserves the right from time to time to make any
     amendments to the Charter which may now or hereafter be authorized by law,
     including any amendments changing the terms or contract rights, as
     expressly set forth in the Charter, of any of its outstanding stock.

          (8) The Board of Directors shall use its reasonable best efforts to
     take such actions as are necessary or appropriate to preserve the status of
     the Corporation as a REIT; however, if the Board of Directors determines
     that it is no longer in the best interests of the Corporation to qualify or
     continue to be qualified as a REIT, the Board of Directors may revoke or
     otherwise terminate the Corporation's REIT election pursuant to Section
     856(g) of the Code.

          (9) Subject to such conditions, if any, as may be required by any
     applicable statute, rule or regulation, and except as otherwise prohibited
     herein, the Board of

                                       36
<PAGE>

     Directors may authorize the execution and performance by the Corporation of
     one or more agreements with any person, corporation, association, company,
     trust, partnership (limited or general) or other organization whereby,
     subject to the supervision and control of the Board of Directors, any such
     other person, corporation, association, company, trust, partnership
     (limited or general) or other organization shall render or make available
     to the Corporation managerial, investment, advisory and/or related
     services, office space and other services and facilities (including, if
     deemed advisable by the Board of Directors, the management or supervision
     of the investments of the Corporation) upon such terms and conditions as
     may be provided in such agreement or agreements (including, if deemed fair
     and equitable by the Board of Directors, the compensation payable
     thereunder by the Corporation).

     (b) At any time prior to the date which is six months after the conversion
or redemption of all outstanding shares of Series B Preferred Stock issued on
the Series B Initial Issuance Date, the Corporation shall not, without the prior
approval of the majority of the Board of Directors, which majority, until the
Warburg Termination Date, includes both Warburg Directors:

          (1) amend or repeal any provision of the Corporation's Charter or
     By-Laws;

          (2) other than in connection with the Preferred Offer, authorize or
     effect the issuance by the Corporation of any equity securities, or rights
     to acquire equity securities, of any class of Series B Senior Stock or
     Series B Parity Stock;

          (3) authorize or effect (a) any sale, lease, transfer or other
     disposition of assets in an amount greater than an aggregate $50 million in
     any nine (9) month period; (b) any merger, consolidation, recapitalization
     or other reorganization of the Corporation with or into another
     corporation, (c) the acquisition by the Corporation of another corporation
     by means of a purchase of all or substantially all of the capital stock or
     assets of such corporation for an amount greater than an aggregate $50
     million in any nine (9)month period, or (d) a liquidation, winding up or
     dissolution of the Corporation or adoption of any plan for the same.

          (4) other than in connection with the Exchange Offer or the Preferred
     Offer, authorize or effect the issuance by the Corporation of any equity
     securities or rights to acquire equity securities of any class other than
     an issuance (w) to the holders of the Series B Preferred Stock pursuant
     Article SIXTH hereto, (x) pursuant to options, warrants, conversion or
     subscription rights in existence on the Series B Initial Issuance Date, (y)
     pursuant to any stock option, stock purchase, dividend reinvestment or
     similar plan or arrangement for the benefit of employees, consultants or
     directors of the Corporation or its subsidiaries in existence as of the
     Series B Initial Issuance Date or thereafter approved by the Board of
     Directors or (z) taken together with all other issuances since the date
     hereof, that does not exceed five percent (5%) of the securities of such
     class, on a fully diluted basis, immediately prior to the Series B Initial
     Issuance Date.

                                       37
<PAGE>

          (5) other than in connection with the Preferred Offer or the
     redemption of the Series B Preferred Stock in accordance with Article
     SIXTH, Section (d)(5) hereof, authorize or effect the redemption or
     repurchase of any equity securities of the Corporation or rights to acquire
     equity securities of the Corporation (other than the repurchase of stock
     from employees of the Corporation or its subsidiaries pursuant to
     repurchase rights under vesting provisions related to the length of period
     of employment of such employees at purchase prices initially paid by such
     employees for such shares) in an amount greater than an aggregate
     $10,000,000 in any twelve (12) month period;

          (6) authorize or effect the incurrence of any indebtedness for
     borrowed money or guarantee any such indebtedness (other than Project Debt)
     in an amount greater than an aggregate $25,000,000 in any twelve (12) month
     period.

     (c) Except as set forth in Section (b) above, the enumeration and
definition of particular powers of the Board of Directors included in the
foregoing shall in no way be limited or restricted by reference to or inference
from the terms of any other clause of this or any other Article of the Charter
of the Corporation, or construed as or deemed by inference or otherwise in any
manner to exclude or limit any powers conferred upon the Board of Directors
under the General Laws of the State of Maryland now or hereafter in force.

     NINTH: The duration of the Corporation shall be perpetual.

     TENTH: (a) DEFINITIONS. As used in the Charter, the following terms shall
have the following meanings:

     "AFFILIATE" of a person means a person that, directly or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.

     "AGGREGATE CONVERTIBLE SECURITIES" shall mean all Options, Convertible
Securities and any other securities or instruments of the Corporation which are
convertible into or exchangeable for Common Stock.

     "BENEFICIAL OWNERSHIP" shall mean ownership of Capital Shares by a Person
who is or would be treated as an owner of such Capital Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Own," "Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.

     "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Corporation's capital stock.

     "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New
York are not required to be open.

     "CAPITAL GAIN AMOUNT" shall have the meaning set forth in Article SIXTH,
Section g.

                                       38
<PAGE>

     "CAPITAL SHARES" shall mean shares of the Corporation's capital stock,
whether common, preferred, preference, special or other stock, or a combination
thereof.

     "CHANGE OF CONTROL" shall mean one or more of the following transactions
unless the persons who were holders of the outstanding capital stock of the
Corporation outstanding immediately prior to such transaction are immediately
after such transaction holders of at least a majority of the aggregate voting
power of the voting capital stock of the surviving corporation (or a majority of
the aggregate equivalent equity interests in the surviving entity if such entity
is not a corporation): (i) a merger or consolidation of the Corporation with or
into another entity or the merger of another entity with or into the
Corporation; (ii) a tender offer or other transaction or series of related
transactions resulting in a change of ownership of more than 50% of the voting
capital stock of the Corporation; (iii) a share exchange (with or without a
stockholder vote) in which 95% or more of the outstanding capital stock of the
Corporation is exchanged for capital stock of another corporation; or (iv) the
sale, transfer or other disposition of all or substantially all of the
Corporation's assets.

     "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section (c)(6) of this Article.

     "CHARTER" shall have the meaning set forth in the preamble hereto.

     "CODE" shall have the meaning set forth in Article THIRD hereto. All
section references to the Code shall include any successor provisions thereof as
may be adopted from time to time.

     "COMMON STOCK" shall mean the Common Stock, $.0001 par value per share, of
the Corporation.

     "CONSTRUCTIVE OWNERSHIP" shall mean ownership of Capital Shares by a Person
who is or would be treated as an owner of such Capital Shares either actually or
constructively through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Own," "Constructively Owns" and "Constructively Owned" shall
have the correlative meanings.

     "CONVERTIBLE SECURITIES" shall have the meaning set forth in Article SIXTH,
Section(d)(4)b(i).

     "CORPORATION" shall have the meaning set forth in Article FIRST hereto.

     "EVENT" shall have the meaning set forth in Article SIXTH, Section (c)(6)d
hereto.

     "EXCHANGE OFFER" shall have the meaning set forth in the Merger Agreement.

     "40 DAY AVERAGE PRICE" shall have the meaning set forth in Article SIXTH,
Section (d)(3)a hereto.

     "IRS" means the United States Internal Revenue Service.

     "LEGACY" shall mean Excel Legacy Corporation, a Delaware corporation.

                                       39
<PAGE>

     "LIQUIDATING DIVIDENDS" shall have the meaning set forth in Article SIXTH,
Section (d)(4)c.

     "MARKET PRICE" shall mean the average sales price on the most recent
trading day ending prior to the relevant time as reported on the Nasdaq National
Market of the applicable Capital Shares, or if not then traded on the Nasdaq
National Market, such average sales price as reported on any exchange or
quotation system over which the applicable Capital Shares may be traded, or if
not then traded over any exchange or quotation system, then the market price of
the applicable Capital Shares on the relevant date as determined in good faith
by the Board of Directors.

     "MARKET VALUE" shall mean the last reported sales price reported on the
Nasdaq National Market of the applicable Capital Shares on the trading day
immediately preceding the relevant date, or if the applicable Capital Shares are
not then traded on the Nasdaq National Market, the last reported sales price of
the applicable Capital Shares on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over which the
applicable Capital Shares may be traded, or if the applicable Capital Shares are
not then traded over any exchange or quotation system, then the market price of
the applicable Capital Shares on the relevant date as determined in good faith
by the Board of Directors.

     "MERGER AGREEMENT" shall mean that certain Agreement and Plan of Merger
dated as of [__________], 2001 by and among the Corporation, Legacy and PEI
Merger Sub, Inc.

     "MGCL" shall mean the Maryland General Corporation Law.

     "NASDAQ NATIONAL MARKET" shall mean the Nasdaq Stock Market's National
Market System.

     "NUMBER OF COMMON SHARES DEEMED OUTSTANDING" at any given time shall mean
the sum of (x) the number of shares of Common Stock outstanding at such time,
(y) the number of shares of Common Stock issuable assuming conversion of all
Aggregate Convertible Securities then outstanding and (z) the number of shares
of Common Stock deemed to be outstanding under paragraphs 4(b)(i) to (ix),
inclusive, at such time.

     "OPTIONS" shall have the meaning set forth in Article SIXTH, Section
(d)(4)b(i).

     "OWNERSHIP LIMIT" shall mean 5% (by value or by number of shares, whichever
is more restrictive) of the outstanding Capital Shares of the Corporation. The
number and value of the outstanding Capital Shares of the Corporation shall be
determined by the Board of Directors in good faith, which determination shall be
conclusive for all purposes hereof.

     "PERSON" shall mean an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity; but does not include an
underwriter acting in a capacity as such in a public offering of any Capital
Shares provided that the ownership of Capital Shares by such underwriter would
not result in the Corporation being

                                       40
<PAGE>

"closely held" within the meaning of Section 856(h) of the Code, or otherwise
result in the Corporation failing to qualify as a REIT.

     "PREFERRED OFFER" shall mean the offer to purchase the Series A Preferred
Stock contemplated in clause (ii) of the definition of "Series A Preferred
Rights Termination Date" below; provided that such offer is financed through the
issuance of (i) perpetual preferred stock with a coupon of 8 3/4% or less which
may be Series B Senior Stock, or (ii) debt with an interest rate of 8 3/4% or
less and a term of seven years or more, or (iii) any other financing arrangement
that (A) costs the Corporation (on an annual basis) no more than the cost (on an
annual basis) to the Corporation to maintain the Series A Preferred Stock then
outstanding and (B) the Board of Directors deems to be at least as beneficial to
the Corporation as the terms of the Series A Preferred Stock.

     "PROJECT DEBT" shall mean any debt represented by capital lease
obligations, mortgage financing or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property or incurred to refinance any
such purchase price or cost of construction or improvement, in each case
incurred no later than 365 days after the date of such acquisition or the date
of completion of such construction or improvement.

     "PURCHASE RIGHTS" shall have the meaning set forth in Article SIXTH,
Section (d)(4)h hereto.

     "PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect to any purported
Transfer (or other event) which results in a transfer to a Trust, as provided in
Section (b)(2) of this Article, the Purported Record Transferee, unless such
Purported Record Transferee would have acquired or owned any Capital Shares for
another Person who is the beneficial transferee or owner of such Capital Shares,
in which case the Purported Beneficial Transferee shall be such Person.

     "PURPORTED RECORD TRANSFEREE" shall mean, with respect to any purported
Transfer which results in a transfer to a Trust, as provided in Section (b)(2)
of this Article, the record holder of the Capital Shares if such Transfer had
been valid under Section (b)(1) of this Article.

     "REINCORPORATION" shall mean the merger of Price Enterprises, Inc., a
Delaware corporation, into its wholly-owned subsidiary, Price Enterprises of
Maryland, Inc., a Maryland corporation.

     "REIT" shall have the meaning set forth in Article THIRD hereto.

     "RESTRICTION TERMINATION DATE" shall mean the first day after the date of
the Reincorporation on which the Board of Directors of the Corporation
determines that it is no longer in the best interests of the Corporation to
attempt to, or continue to, qualify as a REIT.

     "SERIES A CALL DATE" shall have the meaning set forth in Article SIXTH,
Section (c)(3)c hereto.

     "SERIES A DIRECTORS" shall have the meaning set forth in Article SEVENTH,
Section (b) hereto.

                                       41
<PAGE>

     "SERIES A DISTRIBUTION PAYMENT DATE" shall mean, with respect to each
Series A Distribution Period, the fifteenth day of February, May, August and
November, in each year, commencing on November 15, 1998; PROVIDED, HOWEVER, that
if any Series A Distribution Payment Date falls on any day other than a Business
Day, the distribution payment due on such Series A Distribution Payment Date
shall be paid on the Business Day immediately following such Series A
Distribution Payment Date.

     "SERIES A DISTRIBUTION PERIODS" shall mean quarterly distribution periods
commencing February 1, May 1, August 1 and November 1 of each year and ending on
and including the day preceding the first day of the next succeeding Series A
Distribution Period.

     "SERIES A JUNIOR STOCK" shall have the meaning set forth in Article SIXTH,
Section (c)(5)c hereto.

     "SERIES A LIQUIDATION PREFERENCE" shall mean a price per share equal to
Sixteen Dollars ($16.00) (subject to adjustment in the event of any stock
dividend, stock split, stock distribution or combination with respect to such
shares).

     "SERIES A PARITY STOCK" shall have the meaning set forth in Article SIXTH,
Section (c)(5)b hereto.

     "SERIES A PREFERRED RIGHTS TERMINATION DATE" shall mean the earliest to
occur of (i) less than 2,000,000 shares of Series A Preferred Stock (adjusted
for stock splits, dividends, reverse stock splits, etc.) remain outstanding,
(ii) the Corporation, Legacy or any of their Affiliates shall have made an offer
to purchase any and all outstanding shares of Series A Preferred Stock at a cash
price of $16.00 per share, and shall have purchased all shares duly tendered and
not withdrawn, (iii) the Board of Directors shall have (a) issued or agreed to
issue any equity securities or securities convertible or exchangeable into or
exercisable for equity securities, in any case, without the unanimous approval
of the members of the Board of Directors, or (b) failed in any fiscal year to
declare or to pay dividends on the Common Stock as and when requested by Legacy
or its designees (1) to distribute 100% of the Corporation's taxable income with
respect to such fiscal year (including dividends on the Series A Preferred
Stock) or otherwise to maintain the Corporation's status as a REIT or (2) in an
amount equal to the excess, if any, of (x)(A) funds from operations less
straight line accrual of future rents (rent smoothing) for such fiscal year,
minus (B) the amount required to pay dividends on the Series A Preferred Stock
for such fiscal year, over (y) $7,500,000, or (iv) the Board of Directors, by
unanimous vote of the members of the Board of Directors, shall have adopted a
resolution to terminate the right of the holders of the Series A Preferred Stock
to elect the Series A Directors pursuant to Article SEVENTH, Section (b) hereto.

     "SERIES A PREFERRED STOCK" shall have the meaning set forth in Article
SIXTH, Section (a) hereto.

     "SERIES A RECORD DATE" shall mean the date designated by the Board of
Directors of the Corporation at the time a distribution is declared; PROVIDED,
HOWEVER, that such Series A Record Date shall be the first day of the calendar
month in which the applicable Series A Distribution Payment Date falls or such
other date designated by the Board of Directors for the payment of

                                       42
<PAGE>

distributions that is not more than thirty (30) days nor less than ten (10) days
prior to such Series A Distribution Payment Date.

     "SERIES A REDEMPTION PRICE" shall mean a price per share equal to Sixteen
Dollars ($16.00) together with accrued and unpaid distributions, if any, thereon
to the Series A Call Date.

     "SERIES A SENIOR STOCK" shall have the meaning set forth in Article SIXTH,
Section (c)(5)a hereto.

     "SERIES B CALL DATE" shall have the meaning set forth in Article SIXTH,
Section (d)(5)b.

     "SERIES B CONVERSION DATE" shall mean either (i) the date which is 45
months after the Series B Initial Issuance Date or (ii) the date which is 60
months after the Series B Initial Issuance Date.

     "SERIES B CONVERSION NOTICE" shall have the meaning set forth in Article
SIXTH, Section 3(d)(3)f hereto.

     "SERIES B CONVERSION PRICE" shall have the meaning set forth in Article
SIXTH, Section (d)(4)a hereto.

     "SERIES B CONVERSION RATE" shall have the meaning set forth in Article
SIXTH, Section (d)(3)a hereto.

     "SERIES B DISTRIBUTION PAYMENT DATE" shall mean, with respect to each
Series B Distribution Period, the fifteenth day of February, May, August and
November, in each year, commencing on _______, 15, 2001; PROVIDED, HOWEVER,
that if any Series B Distribution Payment Date falls on any day other than a
Business Day, the distribution payment due on such Series B Distribution Payment
Date shall be paid on the Business Day immediately following such Series B
Distribution Payment Date.

     "SERIES B DISTRIBUTION PERIODS" shall mean quarterly distribution periods
commencing February 1, May 1, August 1 and November 1 of each year and ending on
and including the day preceding the first day of the next succeeding Series B
Distribution Period.

     "SERIES B INITIAL ISSUANCE DATE" shall have the meaning set forth in
Article SIXTH, Section (d)(1)a hereto.

     "SERIES B JUNIOR STOCK" shall have the meaning set forth in Article SIXTH,
Section (d)(7)c hereto.

     "SERIES B LIQUIDATION PREFERENCE" shall mean a price per share equal to
$5.56 (subject to adjustment in the event of any stock dividend, stock split,
stock distribution or combination with respect to such shares; PROVIDED,
HOWEVER, that there shall be no such adjustment pursuant hereto in respect of
any dividends paid in additional shares of Series B Preferred Stock issued
pursuant to Article SIXTH, Section (d)(1)(a) hereof).

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<PAGE>

     "SERIES B NOTICE DATE" shall mean the date on which the Corporation shall
deliver to the holders of the Series B Preferred Stock notice of conversion of
the Series B Preferred Stock pursuant to Article SIXTH, Section (d)(3)f hereto.

     "SERIES B PARITY STOCK" shall have the meaning set forth in Article SIXTH,
Section (d)(7)b hereto.

     "SERIES B PREFERRED STOCK" shall have the meaning set forth in Article
SIXTH, Section (a) hereto.

     "SERIES B RECORD DATE" shall mean the date designated by the Board of
Directors of the Corporation at the time a distribution is declared; PROVIDED,
HOWEVER, that such Series B Record Date shall be the first day of the calendar
month in which the applicable Series B Distribution Payment Date falls or such
other date designated by the Board of Directors for the payment of distributions
that is not more than thirty (30) days nor less than ten (10) days prior to such
Series B Distribution Payment Date.

     "SERIES B REDEMPTION DATE" shall have the meaning set forth in Article
SIXTH, Section (d)(5)a hereto.

     "SERIES B REDEMPTION PRICE" shall mean a price per share equal to $5.56
together with accrued and unpaid distributions, if any, thereon to the Series B
Call Date.

     "SERIES B SENIOR STOCK" shall have the meaning set forth in Article SIXTH,
Section (d)(7)a hereto.

     "SERIES B TRIGGERING TRANSACTION" shall have the meaning set forth in
Article SIXTH, Section (d)(4)b hereto.

     "SET APART FOR PAYMENT" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of distributions by the Board of Directors, the allocation of funds
to be so paid on any series or class of capital stock of the Corporation.

     "TOTAL DISTRIBUTIONS" shall have the meaning set forth in Article SIXTH,
Section g hereto.

     "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of Capital Shares, including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Capital Shares or (ii) the sale, transfer, assignment or other disposition of
any securities (or rights convertible into or exchangeable for Capital Shares),
whether voluntary or involuntary, whether of record or beneficially or
Beneficially or Constructively (including but not limited to transfers of
interests in other entities which result in changes in Beneficial or
Constructive Ownership of Capital Shares), and whether by operation of law or
otherwise. The terms "Transfers" and "Transferred" shall have correlative
meanings.

     "TRUST" shall mean each of the trusts provided for in Section (c) of this
Article.

                                       44
<PAGE>

     "TRUSTEE" shall mean the Person unaffiliated with the Corporation, the
Purported Beneficial Transferee, and the Purported Record Transferee, that is
appointed by the Corporation to serve as trustee of the Trust, and any successor
trustee appointed by the Corporation.

     "VOTING PREFERRED STOCK" shall have the meaning set forth in Article SIXTH,
Section (c)(6)c hereof.

     "WARBURG DIRECTORS" shall have the meaning set forth in Article SEVENTH,
Section (b) hereto.

     "WARBURG INVESTORS" shall mean Warburg, Pincus Equity Partners, L.P., a
Delaware limited partnership, Warburg, Pincus Netherlands Equity Partners I,
C.V., a Netherlands limited partnership, Warburg, Pincus Netherlands Equity
Partners II, C.V., a Netherlands limited partnership, and Warburg, Pincus
Netherlands Equity Partners III, C.V., a Netherlands limited partnership and
affiliates thereof.

     "WARBURG TERMINATION DATE" shall mean the initial date on which the Warburg
Investors and their Affiliates, in the aggregate, beneficially own (within the
meaning of Rule 13d-3 of the Exchange Act; PROVIDED, HOWEVER, that the Warburg
Investors and their Affiliates shall be deemed to beneficially own Common Stock
with respect to which any of the Warburg Investors and its Affiliates has the
right to acquire beneficial ownership at any time prior to, on or subsequent to
sixty days, notwithstanding the provisions set forth in Rule 13d-3(1)(i)
limiting such time period to within sixty days) less than 10% of the Common
Stock.

     "WARRANT" shall mean that certain warrant issued by the Corporation to the
Warburg Investors to purchase 2,500,000 shares of Common Stock on ___________,
2001.

     (b) Restriction on Ownership and Transfers.

          (1) From the date of Reincorporation and prior to the Restriction
     Termination Date:

               a. except as provided in Section (i) of this Article, no Person
          shall Beneficially Own Capital Shares in excess of the Ownership
          Limit;

               b. except as provided in Section (i) of this Article, no Person
          shall Constructively Own in excess of 9.8% (by value or by number of
          shares, whichever is more restrictive) of the outstanding Capital
          Shares of the Corporation; and

               c. no Person shall Beneficially or Constructively Own Capital
          Shares to the extent that such Beneficial or Constructive Ownership
          would result in the Corporation being "closely held" within the
          meaning of Section 856(h) of the Code, or otherwise failing to qualify
          as a REIT (including but not limited to Constructive Ownership that
          would result in the Corporation owning (actually or Constructively) an
          interest in a tenant that is described in Section 856(d)(2)(B) of

                                       45
<PAGE>

          the Code if the income derived by the Corporation (either directly or
          indirectly through one or more partnerships or limited liability
          companies) from such tenant would cause the Corporation to fail to
          satisfy any of the gross income requirements of Section 856(c) of the
          Code or comparable provisions of state law).

          (2) If, during the period commencing on the date of the
     Reincorporation and prior to the Restriction Termination Date, any Transfer
     (whether or not such Transfer is the result of a transaction entered into
     through the facilities of the Nasdaq National Market) or other event
     (including value fluctuations) occurs that, if effective, would result in
     any Person Beneficially or Constructively Owning Capital Shares in
     violation of Section (b)(1) of this Article, (1) then that number of
     Capital Shares that otherwise would cause such Person to violate Section
     (b)(1) of this Article (rounded up to the nearest whole share) shall be
     automatically transferred to a Trust for the benefit of a Charitable
     Beneficiary, as described in Section (c) of this Article, effective as of
     the close of business on the business day prior to the date of such
     Transfer or other event, and such Purported Beneficial Transferee shall
     thereafter have no rights in such Capital Shares or (2) if, for any reason,
     the transfer to the Trust described in clause (1) of this sentence is not
     automatically effective as provided therein to prevent any Person from
     Beneficially or Constructively Owning Capital Shares in violation of
     Section (b)(1) of this Article, then the Transfer of that number of Capital
     Shares that otherwise would cause any Person to violate Section (b)(1) of
     this Article shall be void ab initio, and each of the Purported Beneficial
     Transferee shall have no rights in such Capital Shares.

          (3) Notwithstanding any other provisions contained herein, during the
     period commencing on the date of the Reincorporation and prior to the
     Restriction Termination Date, any Transfer (whether or not such Transfer is
     the result of a transaction entered into through the facilities of the
     Nasdaq National Market) that, if effective, would result in the capital
     stock of the Corporation being beneficially owned by less than 100 Persons
     (determined without reference to any rules of attribution) shall be void ab
     initio, and the intended transferee shall acquire no rights in such Capital
     Shares.

          (4) It is expressly intended that the restrictions on ownership and
     Transfer described in this Section (b) of this Article shall apply to
     restrict the rights of any members or partners in limited liability
     companies or partnerships to exchange their interest in such entities for
     Capital Shares of the Corporation.

     (c) Transfers of Capital Shares in Trust.

          (1) Upon any purported Transfer or other event described in Section
     (b)(2) of this Article, such Capital Shares shall be deemed to have been
     transferred to the Trustee in his capacity as trustee of a Trust for the
     exclusive benefit of one or more Charitable Beneficiaries. Such transfer to
     the Trustee shall be deemed to be effective as of the close of business on
     the business day prior to the purported Transfer or other event that
     results in a transfer to the Trust pursuant to Section (b)(2) of this
     Article. The Trustee shall be appointed by the Corporation and shall be a
     Person unaffiliated with the Corporation, any Purported Beneficial
     Transferee, and any Purported Record Transferee. Each Charitable

                                       46
<PAGE>

     Beneficiary shall be designated by the Corporation as provided in Section
     (c)(6) of this Article.

          (2) Capital Shares held by the Trustee shall be issued and outstanding
     shares of capital stock of the Corporation. The Purported Beneficial
     Transferee or Purported Record Transferee shall have no rights in the
     Capital Shares held by the Trustee. The Purported Beneficial Transferee or
     Purported Record Transferee shall not benefit economically from ownership
     of any Capital Shares held in trust by the Trustee, shall have no rights to
     dividends and shall not possess any rights to vote or other rights
     attributable to the Capital Shares held in the Trust.

          (3) The Trustee shall have all voting rights and rights to dividends
     with respect to Capital Shares held in the Trust, which rights shall be
     exercised for the exclusive benefit of the Charitable Beneficiary. Any
     dividend or distribution paid prior to the discovery by the Corporation
     that the Capital Shares have been transferred to the Trustee shall be paid
     to the Trustee upon demand, and any dividend or distribution declared but
     unpaid shall be paid when due to the Trustee with respect to such Capital
     Shares. Any dividends or distributions so paid over to the Trustee shall be
     held in trust for the Charitable Beneficiary. The Purported Record
     Transferee and Purported Beneficial Transferee shall have no voting rights
     with respect to the Capital Shares held in the Trust and, subject to
     Maryland law, effective as of the date the Capital Shares have been
     transferred to the Trustee, the Trustee shall have the authority (at the
     Trustee's sole discretion) (i) to rescind as void any vote cast by a
     Purported Record Transferee with respect to such Capital Shares prior to
     the discovery by the Corporation that the Capital Shares have been
     transferred to the Trustee and (ii) to recast such vote in accordance with
     the desires of the Trustee acting for the benefit of the Charitable
     Beneficiary; PROVIDED, HOWEVER, that if the Corporation has already taken
     irreversible corporate action, then the Trustee shall not have the
     authority to rescind and recast such vote. Notwithstanding any other
     provision of this Charter to the contrary, until the Corporation has
     received notification that the Capital Shares have been transferred into a
     Trust, the Corporation shall be entitled to rely on its share transfer and
     other stockholder records for purposes of preparing lists of stockholders
     entitled to vote at meetings, determining the validity and authority of
     proxies and otherwise conducting votes of stockholders.

          (4) Within 20 days of receiving notice from the Corporation that
     Capital Shares have been transferred to the Trust, the Trustee of the Trust
     shall sell the Capital Shares held in the Trust to a Person, designated by
     the Trustee, whose ownership of the Capital Shares will not violate the
     ownership limitations set forth in Section (b)(1) of this Article. Upon
     such sale, the interest of the Charitable Beneficiary in the Capital Shares
     sold shall terminate and the Trustee shall distribute the net proceeds of
     the sale to the Purported Record Transferee and to the Charitable
     Beneficiary as provided in this Section (c)(4). The Purported Record
     Transferee shall receive the lesser of (1) the price paid by the Purported
     Record Transferee for the Capital Shares in the transaction that resulted
     in such transfer to the Trust (or, if the event which resulted in the
     transfer to the Trust did not involve a purchase of such Capital Shares at
     Market Value, the Market Value of such Capital Shares on the day of the
     event which resulted in the transfer of such Capital Shares to the Trust)
     and (2) the price per share received by the Trustee (net of any

                                       47
<PAGE>

     commissions and other expenses of sale) from the sale or other disposition
     of the Capital Shares held in the Trust. Any net sales proceeds in excess
     of the amount payable to the Purported Record Transferee shall be
     immediately paid to the Charitable Beneficiary together with any dividends
     or other distributions thereon. If, prior to the discovery by the
     Corporation that such Capital Shares have been transferred to the Trustee,
     such Capital Shares are sold by a Purported Record Transferee then (i) such
     Capital Shares shall be deemed to have been sold on behalf of the Trust and
     (ii) to the extent that the Purported Record Transferee received an amount
     for such Capital Shares that exceeds the amount that such Purported Record
     Transferee was entitled to receive pursuant to this Section (c)(4), such
     excess shall be paid to the Trustee upon demand.

          (5) Capital Shares transferred to the Trustee shall be deemed to have
     been offered for sale to the Corporation, or its designee, at a price per
     share equal to the lesser of (i) the price paid by the Purported Record
     Transferee for the Capital Shares in the transaction that resulted in such
     transfer to the Trust (or, if the event which resulted in the transfer to
     the Trust did not involve a purchase of such Capital Shares at Market
     Value, the Market Value of such Capital Shares on the day of the event
     which resulted in the transfer of such Capital Shares to the Trust) and
     (ii) the Market Value on the date the Corporation, or its designee, accepts
     such offer. The Corporation shall have the right to accept such offer until
     the Trustee has sold the Capital Shares held in the Trust pursuant to
     Section (c)(4) of this Article. Upon such a sale to the Corporation, the
     interest of the Charitable Beneficiary in the Capital Shares sold shall
     terminate and the Trustee shall distribute the net proceeds of the sale to
     the Purported Record Transferee and any dividends or other distributions
     held by the Trustee with respect to such Capital Shares shall thereupon be
     paid to the Charitable Beneficiary.

          (6) By written notice to the Trustee, the Corporation shall designate
     one or more nonprofit organizations to be the Charitable Beneficiary of the
     interest in the Trust such that (i) the Capital Shares held in the Trust
     would not violate the restrictions set forth in Section (b)(1) of this
     Article in the hands of such Charitable Beneficiary and (ii) each
     Charitable Beneficiary is an organization described in Sections
     170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.

     (d) Remedies for Breach. If the Board of Directors, or a committee thereof
(or other designees if permitted by the MGCL) shall at any time determine in
good faith that a Transfer or other event has taken place in violation of
Section (b) of this Article or that a Person intends to acquire, has attempted
to acquire or may acquire beneficial ownership (determined without reference to
any rules of attribution), Beneficial Ownership or Constructive Ownership of any
Capital Shares of the Corporation in violation of Section (b) of this Article,
the Board of Directors, or a committee thereof (or other designees if permitted
by the MGCL) shall take such action as it deems advisable to refuse to give
effect or to prevent such Transfer, including, but not limited to, causing the
Corporation to redeem Capital Shares, refusing to give effect to such Transfer
on the books of the Corporation or instituting proceedings to enjoin such
Transfer; PROVIDED, HOWEVER, that any Transfers (or, in the case of events other
than a Transfer, ownership or Constructive Ownership or Beneficial Ownership) in
violation of Section (b)(1) of this Article, shall automatically result in the
transfer to a Trust or be void ab initio as described in Section (b)(2) of this
Article and any Transfer in violation of Section (b)(3) of this Article shall

                                       48
<PAGE>

automatically be void ab initio irrespective of any action (or non-action) by
the Board of Directors.

     (e) Notice of Restricted Transfer. Any Person who acquires or attempts to
acquire Capital Shares in violation of Section (b) of this Article or any Person
who is a Purported Beneficial Transferee such that an automatic transfer to a
Trust results under Section (b)(2) of this Article, shall immediately give
written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted Transfer on the
Corporation's status as a REIT.

     (f) Owners Required To Provide Information. From the date of the
Reincorporation and prior to the Restriction Termination Date, each Person who
is a beneficial owner or Beneficial Owner or Constructive Owner of Capital
Shares and each Person (including the stockholder of record) who is holding
Capital Shares for a beneficial owner or a Beneficial Owner or Constructive
Owner shall, on demand, provide to the Corporation a completed questionnaire
containing the information regarding their ownership of such shares, as set
forth in the regulations (as in effect from time to time) of the U.S. Department
of Treasury under the Code. In addition, each Person who is a beneficial owner
or Beneficial Owner or Constructive Owner of Capital Shares and each Person
(including the stockholder of record) who is holding Capital Shares for a
beneficial owner or Beneficial Owner or Constructive Owner shall, on demand, be
required to disclose to the Corporation in writing such information as the
Corporation may request in order to determine the effect, if any, of such
stockholder's actual and constructive ownership of Capital Shares on the
Corporation's status as a REIT and to ensure compliance with Section (b)(1) of
this Article, or as otherwise permitted by the Board of Directors.

     (g) Remedies Not Limited. Nothing contained in this Article (but subject to
Section (b)(1) of this Article and Section (a)(8) of Article EIGHTH) shall limit
the authority of the Board of Directors to take such other action as it deems
necessary or advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as a REIT.

     (h) Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Article, including any definition contained in Section (a) of
this Article, the Board of Directors shall have the power to determine the
application of the provisions of this Article with respect to any situation
based on the facts known to it (subject, however, to the provisions of Section
(1) of this Article). In the event this Article requires an action by the Board
of Directors and the Charter fails to provide specific guidance with respect to
such action, the Board of Directors shall have the power to determine the action
to be taken so long as such action is not contrary to the provisions of this
Article. Absent a decision to the contrary by the Board of Directors (which the
Board may make in its sole and absolute discretion), if a Person would have (but
for the remedies set forth in Section (b) of this Article) acquired Beneficial
or Constructive Ownership of Capital Shares in violation of Section (b)(1) of
this Article, such remedies (as applicable) shall apply first to the Capital
Shares which, but for such remedies, would have been actually owned by such
Person, and second to Capital Shares which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such

                                       49
<PAGE>

Person, pro rata among the Persons who actually own such Capital Shares based
upon the relative value of the Capital Shares held by each such Person.

     (i) Exceptions.

          (1) Subject to Section (b)(1)(c) of this Article, the Board of
     Directors, in its sole discretion, may exempt a Person from the limitation
     on a Person Beneficially Owning Capital Shares in excess of the Ownership
     Limit if the Board of Directors determines that such exemption will not
     cause any individual's Beneficial Ownership of such Capital Shares to
     violate the Ownership Limit or that any such violation will not cause the
     Corporation to fail to qualify as a REIT under the Code.

          (2) Subject to Section (b)(1)(c) of this Article, the Board of
     Directors, in its sole discretion, may exempt a Person from the limitation
     on a Person Constructively Owning Capital Shares in excess of 9.8% (by
     value or by number of Capital Shares, whichever is more restrictive) of the
     outstanding Capital Shares of the Corporation, if the Board of Directors
     determines that such Person does not and will not own, actually or
     Constructively, an interest in a tenant of the Corporation (or a tenant of
     any entity owned in whole or in part by the Corporation) that would cause
     the Corporation to own, actually or Constructively, more than a 9.8%
     interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant,
     or that any such ownership would not cause the Corporation to fail to
     qualify as a REIT under the Code. Notwithstanding the foregoing, the
     inability of the Board of Directors to make the determination described in
     this Section (i)(2) shall not prevent the Board of Directors, in its sole
     discretion, from exempting such Person from the limitation on a Person
     Constructively Owning in excess of 9.8% (by value or by number of Capital
     Shares, whichever is more restrictive) of the outstanding Capital Shares of
     the Corporation if the Board of Directors determines that the resulting
     application of Section 856(d)(2)(B) of the Code would adversely affect the
     characterization of an amount of the gross income (as such term is used in
     Section 856(c)(2) of the Code) of the Corporation in any taxable year that
     would not cause the Corporation to fail to qualify as a REIT under the
     Code.

          (3) Prior to granting any exception pursuant to Section (i)(1) or (2)
     of this Article to any Person, the Board of Directors may require (i) a
     ruling from the IRS, or an opinion of counsel, in either case in form and
     substance satisfactory to the Board of Directors in its sole discretion, as
     it may deem necessary or advisable in order to determine or ensure the
     Corporation's status as a REIT; and (ii) such Person to make certain
     representations or undertakings, or to agree that any violation or
     attempted violation of any such representations or undertakings (or other
     action which is contrary to the restrictions contained in Section (b) of
     this Article) will result in such Capital Shares being transferred to a
     Trust in accordance with Section (b)(2) of this Article.

          (4) During the period commencing on the date of the Reincorporation
     and prior to the Restriction Termination Date, the Board of Directors may
     from time to time increase or decrease the Ownership Limit provided:

                                       50
<PAGE>

               a. After giving effect to any such increase, five Beneficial
          Owners of Capital Shares could not (taking into account the Ownership
          Limit and any exceptions granted to such limit pursuant to this
          Section (i) of this Article) Beneficially Own, in the aggregate, more
          than 49% of the Capital Shares;

               b. The Ownership Limit may not be increased to a percentage which
          is greater than 9.8%; and

               c. Any such increase or decrease will not adversely affect the
          Corporation's ability to qualify as a REIT.

     (j) Legend. Each certificate for Capital Shares shall bear substantially
the following legend in addition to any legends required to comply with the MGCL
and applicable federal and state securities laws:

     (i)  "The shares represented by this certificate are subject to
          restrictions on Beneficial and Constructive Ownership and Transfer for
          the purpose of the Corporation's maintenance of its status as a Real
          Estate Investment Trust under the Internal Revenue Code of 1986, as
          amended (the "Code"). Subject to certain further restrictions and
          except as expressly provided in the Corporation's Charter, (i) no
          Person may Beneficially Own in excess of 5% of the outstanding Capital
          Shares of the Corporation (by value or by number of shares whichever
          is more restrictive); (ii) no Person may Constructively Own in excess
          of 9.8% of the outstanding Capital Shares of the Corporation (by value
          or by number of shares, whichever is more restrictive); (iii) no
          Person may Beneficially or Constructively Own Capital Shares that
          would result in the Corporation being "closely held" under Section
          856(h) of the Code or otherwise cause the Corporation to fail to
          qualify as a REIT; and (iv) no Person may Transfer Capital Shares if
          such Transfer would result in the capital stock of the Corporation
          being owned by fewer than 100 Persons. Any Person who Beneficially or
          Constructively Owns or attempts to Beneficially or Constructively Own
          Capital Shares which causes or will cause a Person to Beneficially or
          Constructively Own Capital Shares in excess of the above limitations
          must immediately notify the Corporation. If any of the restrictions on
          transfer or ownership are violated, the Capital Shares represented
          hereby will be automatically transferred to a Trustee of a Trust for
          the benefit of one or more Charitable Beneficiaries. In addition, the
          Corporation may redeem shares upon the terms and conditions specified
          by the Board of Directors in its sole discretion if the Board of
          Directors determines that ownership or a Transfer or other event may
          violate the restrictions described above. Furthermore, upon the
          occurrence of certain events, attempted Transfers in violation of the
          restrictions described above may be void ab initio. All capitalized
          terms in this legend have the meanings defined in the Charter of the
          Corporation, as the same may be amended from time to time, a copy of
          which, including the restrictions on transfer and ownership, will be
          furnished to each holder of Capital Shares on request and without
          charge.

                                       51
<PAGE>

          Requests for such a copy may be directed to the Secretary of the
          Corporation, at the Corporation's principal office."

     (k) Severability. If any provision of this Article or any application of
any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.

     (l) The Nasdaq National Market. Nothing in this Article shall preclude the
settlement of any transaction entered into through the facilities of the Nasdaq
National Market or any other automated inter-dealer quotation system or national
securities exchange. The fact that the settlement of any transaction is so
permitted shall not negate the effect of any other provision of this Article and
any transferee in such a transaction shall be subject to all the provisions and
limitations of this Article.

     (m) The provisions of this Article shall apply to the Capital Shares
notwithstanding any contrary provisions of the Capital Shares (or any of them)
provided elsewhere in this Charter.

     III. The amendment to and restatement of the charter as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.

     IV. The amendments to the charter effected by the Articles of Amendment of
the Corporation which were accepted for record by the State Department of
Assessments and Taxation of Maryland on July 7, 2000 (the "Amendments") are not
in effect by operation of the terms thereof and the Amendments have therefore
been omitted from the above amendment and restatement of the charter.

     V. The total number of shares of stock which the Corporation had authority
to issue immediately prior to this amendment and restatement was 100,000,000,
consisting of 74,000,000 shares of Common Stock, $.0001 par value per share, and
26,000,000 shares of Preferred Stock, $.0001 par value per share. The aggregate
par value of all shares of stock having par value was $10,000.

     VI. The total number of shares of stock which the Corporation has authority
to issue pursuant to the foregoing amendment and restatement of the charter is
__________, consisting of __________ shares of Common Stock, $.0001 par value
per share, and __________ shares of Preferred Stock, $.0001 par value per share.
The aggregate par value of all authorized shares of stock having par value is
$__________.

     VII. The undersigned President acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and as to all matters or
facts required to be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.

                                       52
<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this _____ day of ____________, 2001.

_____________________________          ___________________________________
Name:                                  Name:
Title:  Secretary                      Title:  President

       Return Address:

                                       53Prepared by MERRILL CORPORATION www.edgaradvantage.com

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Exhibit 4.1  

 
 

Gateway, Inc.
  2000 Equity Incentive Plan    
  

    1.  Purpose.  The 2000 Equity Incentive Plan (the "Plan") is intended to promote the
long-term success of Gateway, Inc. (the "Company") and its stockholders by strengthening the Company's ability to attract and retain highly competent officers, directors, managers
and other selected employees, consultants and advisors and to provide a means to encourage stock ownership and proprietary interest in the Company. 

    2.  Term.  The Plan shall become effective upon its ratification and approval by the affirmative vote of
the holders of a majority of the securities of the Company present or represented, and entitled to vote at, a meeting of stockholders of the Company, and shall terminate at the close of business on
January 18, 2010 unless terminated earlier by the Compensation Committee (as defined in Section 3). After termination of the Plan, no future awards may be granted, but previously granted
awards shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Plan. 

    3.  Plan Administration.  A committee (the "Compensation Committee") appointed by the Board of Directors
of the Company (the "Board") shall be responsible for administering the Plan. The Compensation Committee shall be comprised of two or more members of the Board who shall qualify as both
(1) "Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
rules and (2) "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation Committee shall have full and
exclusive power to interpret the Plan and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or proper, and such power shall be executed in the best
interests of the Company and in keeping with the objectives of the Plan. This power includes but is not limited to selecting award recipients, establishing all award terms and conditions and adopting
modifications, amendments and procedures, as well as rules and regulations governing awards under the Plan. The interpretation and construction of any provision of the Plan or any option or right
granted hereunder and all determinations by the
Compensation Committee in each case shall be final, binding and conclusive with respect to all interested parties. Notwithstanding the foregoing, in its absolute discretion, the Board (or any
committee selected by the Board) may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under
Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. 

    4.  Eligibility.  Any officer, employee, director, consultant or advisor of the Company shall be eligible
to receive one or more awards under the Plan. "Company" includes for this purpose any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a
significant equity interest, as determined by the Compensation Committee. 

    5.  Shares of Common Stock Subject to the Plan.  Subject to the provisions of Section 6 of the
Plan, the aggregate number of shares of Common Stock, $.01 par value, of the Company ("Shares") which shall be reserved for issuance to participants under the Plan shall be 16,000,000; provided;
however, that on January 1 of each fiscal year of the Company during which the Plan is effective (commencing January 1, 2001), the aggregate number of shares reserved for issuance to
participants under the Plan shall be increased by the lesser of (i) 5% of the total number of shares of Common Stock outstanding on such date and (ii) an amount determined by the Board. 

1

 

    In addition, upon and after stockholder approval of this Plan, (i) all then remaining Shares reserved and available for issuance under the Company's 1996 Long-Term
Incentive Equity Plan (the "1996 Plan") and the 1993 Stock Option Plan (the "1993 Plan") and (ii) any Shares underlying outstanding awards under the 1996 Plan and the 1993 Plan that expire
without being exercised or would otherwise again be available for issuance under the 1996 Plan or the 1993 Plan, shall in each case be transferred to this Plan and shall be reserved and available for
issuance hereunder. 

    Subject
to adjustment as provided in Section 6, no more than 50% of the aggregate number of Shares issued pursuant to awards under the Plan annually may be issued under awards
pursuant to Section 8.3 of the Plan. The aggregate number of Shares that may be covered by awards granted to any single individual under the Plan shall not exceed 3,000,000 Shares per fiscal
year of the Company. 

    Shares
subject to awards under the Plan which expire, terminate, or are canceled prior to exercise or, in the case of awards granted under Section 8.3, do not vest, shall
thereafter be available for the granting of other awards. Shares which have been exchanged by a participant as full or partial payment to the Company in connection with any award under the Plan, also
shall thereafter be available for the
granting of other awards. In instances where a stock appreciation right ("SAR") or other award is settled in cash, the Shares covered by such award shall remain available for issuance under the Plan.
Likewise, the payment of cash dividends and dividend equivalents paid in cash in conjunction with outstanding awards shall not be counted against the Shares available for issuance. Any Shares that are
issued by the Company, and any awards that are granted through the assumption of, or in substitution for, outstanding awards previously granted by an acquired entity shall not be counted against the
Shares available for issuance under the Plan. 

    Any
Shares issued under the Plan may consist in whole or in part of authorized and unissued Shares or of treasury Shares. No fractional Shares shall be issued under the Plan. Cash may
be paid in lieu of any fractional Shares in settlements of awards under the Plan. 

    6.  Adjustments.  In the event of any stock dividend, stock split, combination or exchange of Shares,
merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or
the Share price, such proportionate adjustments, if any, as the Compensation Committee in its discretion may deem appropriate to reflect such change shall be made with respect to (1) the
aggregate number of Shares that may be issued under the Plan, the aggregate number of Shares that may be issued pursuant to Section 8.3 of the Plan, and the aggregate number of Shares that may
be granted to any single individual under the Plan during any fiscal year of the Company; (2) the number of shares issuable pursuant to each outstanding award made under the Plan; and
(3) the exercise price per Share for any outstanding stock options, SARs or similar awards under the Plan. In connection with any event described in this Section 6, the Compensation
Committee may provide for the cancellation of any outstanding awards upon payment in cash, securities or other property therefor based on the then Fair Market Value of the Common Stock. 

    7.  Fair Market Value.  "Fair Market Value," for all purposes under the Plan, shall mean the closing
price of a Share as reported daily in The Wall Street Journal or similar, readily available public source for the date in question. If no sales of Shares were made on such date, the closing price of a
Share as reported for the preceding day on which a sale of Shares occurred shall be used. Notwithstanding the foregoing, the Committee may use any other definition of Fair Market Value consistent with
applicable tax, accounting and other rules. 

    8.  Awards.  The Compensation Committee shall determine the type or types of award(s) to be made to each
participant. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to or as the payment form for
grants or rights under any other compensation plan or individual contract or agreement of the 

2

 

Company including those of any acquired entity. The types of awards that may be granted under the Plan are: 

    8.1  Stock Options.  A stock option is a right to purchase a specified number of Shares during a
specified period as determined by the Compensation Committee. The purchase price per Share for each stock option shall be not less than 100% of Fair Market Value on the date of grant, except if a
stock option is granted retroactively in tandem with or as a substitution for a SAR, the exercise price may be no lower than the Fair Market Value of a Share as set forth in award agreements for such
tandem or replaced SAR. The price at which Shares may be purchased under a stock option shall be paid in full by the optionee at the time of the exercise in cash or such other method permitted by the
Compensation Committee, including (1) tendering Shares (with prior approval of the Chief Executive Officer if Shares are owned less than six months); (2) authorizing a third party broker
to sell the Shares (or a sufficient portion thereof) acquired upon exercise of a stock option and assigning the delivery to the Company of a sufficient amount of the sale proceeds to pay for all the
Shares acquired through such exercise; or (3) any combination of the above. 

    8.2  SARs.  A SAR is a right to receive a payment, in cash and/or Shares, equal to the excess of the Fair
Market Value of a specified number of Shares on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable award agreement; except that if
a SAR is granted retroactively in tandem with or in substitution for a stock option, the designated Fair Market Value set forth in the award agreement shall be no lower than the Fair Market Value of a
Share for such tandem or replaced stock option. 

    8.3  Stock Awards.  A stock award is a grant made or denominated in Shares or units equivalent in value
to Shares. All or part of any stock award may be subject to conditions and restrictions established by the Compensation Committee, as set forth in the applicable award agreement, which may include,
but are not limited to, continuous service with the Company and/or the achievement of performance goals. The performance criteria that may be used by the Compensation Committee in granting a stock
award contingent on performance goals shall consist of earnings, earnings per share, revenues, profit growth, profit-related return ratios, cash flow or total stockholder return. The Compensation
Committee may select one criterion or multiple criteria for measuring performance, and the measurement may be stated in absolute terms or relative to comparable companies. 

    Notwithstanding
anything to the contrary contained in the Plan, the Compensation Committee may grant a stock award which is not contingent on performance goals or which is contingent
on performance goals other than those specified in this Section 8.3, provided the Compensation Committee shall have determined that such award is not required to satisfy the requirements for
"qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 

    9.  Dividends and Dividend Equivalents.  The Compensation Committee may provide that any awards under the
Plan earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to a participant's account. Any crediting of dividends or dividend
equivalents may be subject to such restrictions and conditions as the Compensation Committee may establish, including reinvestment in additional Shares or Share equivalents. 

    10.  Deferrals and Settlements.  Payment of awards may be in the form of cash, stock, other awards or
combinations thereof as the Compensation Committee shall determine at the time of grant, and with such restrictions as it may impose. The Compensation Committee also may require or permit participants
to elect to defer the issuance of Shares or the settlement of awards in cash under such rules and procedures as it may establish under the Plan. It also may provide that deferred settlements include
the payment or crediting of interest on the deferral amounts, or the payment or crediting of dividend equivalents where the deferral amounts are denominated in Shares. 

3

 

    11.  Transferability and Exercisability.  Awards granted under the Plan shall not be transferable or
assignable other than (1) by will or the laws of descent and distribution; (2) to the extent provided in any individual award agreement, by gift or other transfer of an award to any
trust or estate in which the original award recipient or such recipient's spouse or other immediate relative has a substantial beneficial interest, or to a spouse or other immediate relative, provided
that any such transfer is permitted by Rule 16b-3 under the Exchange Act as in effect when such transfer occurs and the Board does not rescind this provision prior to such transfer;
or (3) pursuant to a qualified domestic relations order (as defined by the Code). However, any award so transferred shall continue to be subject to all the terms and conditions contained in the
instrument evidencing such award. 

    In
the event that a participant terminates employment with the Company to assume a position with a governmental, charitable, educational or other non-profit institution,
the Compensation Committee may subsequently authorize a third party, including but not limited to a "blind" trust, to act on behalf of and for the benefit of such participant regarding any outstanding
awards held by the participant subsequent to such termination of employment. If so permitted by the Compensation Committee, a participant may designate a beneficiary or beneficiaries to exercise the
rights of the participant and receive any distribution under the Plan upon the death of the participant. 

    12.  Award Agreements.  Awards under the Plan shall be evidenced by agreements as approved by the
Compensation Committee that set forth the terms, conditions and limitations for each award, which may include the term of an award, the provisions applicable in the event the participant's employment
terminates, and the Compensation Committee's authority to unilaterally or bilaterally amend, modify, accelerate the vesting of, suspend, cancel or rescind any award. The Compensation Committee need
not require the execution of any such agreement, in which case acceptance of the award by the participant shall constitute agreement to the terms of the award. 

    13.  Foreign Participation.  In order to assure the viability of awards granted to participants employed
in foreign countries, the Compensation Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover,
the Compensation Committee may approve such supplements to, or amendments, restatements or alternative versions of the Plan as it may consider necessary or appropriate for such purposes without
thereby affecting the terms of the Plan as in effect for any other purposes; provided that, no such supplements, amendments, restatements or alternative versions shall increase the Share limitations
contained in Section 5 of the Plan. 

    14.  Change of Control  

    (a)  Additional Option Grant.  If a Change of Control (as defined in paragraph (d)) occurs, then,
except as otherwise agreed by the Company and any participant by separate contract or award, all employees who received one or more grants of stock options under this Plan during the twelve months
immediately preceding the effective date of such Change of Control shall receive an additional grant of stock options (the "Additional Grant Option"), effective immediately prior to such Change of
Control. The number of Shares subject to the Additional Grant Option made to each such optionee shall be equal to the total number of Shares subject to the grant(s) of stock options made to such
optionee during the twelve months immediately preceding the effective date of such Change of Control, and the exercise price of the Additional Grant Option shall be equal to the Fair Market Value of
the Shares immediately prior to such Change of Control. Such grant shall be made regardless of whether there would otherwise be available Shares under Section 5. All Additional Grant Options
shall vest in full twenty-four months following the date of such Change of Control, unless vesting is accelerated as provided below. 

    (b)  Accelerated Vesting of Awards upon a Change of Control.  Except as otherwise agreed by the Company
and any participant by separate contract or award, all outstanding options and SARS, including the Additional Grant Options, shall become immediately exercisable and vested in 

4

 

full (and all restrictions and conditions upon all stock awards shall immediately lapse and be deemed satisfied) upon the occurrence of a Change of Control unless, in the case of a Change of Control
described in paragraph (d)(i) or (iii), the acquiring or surviving entity shall have agreed in writing prior to the date of such Change of Control to assume the award obligation by substituting
awards of its own which are comparable in all respects to the outstanding awards under the Plan (including without
limitation the provisions of paragraph (c) below), with each such substituted award equitably and appropriately adjusted in accordance with Section 6 above. 

    (c)  Accelerated Vesting upon Involuntary Termination of Employment.  Notwithstanding anything to the
contrary in this Plan, in the event of a participants's Involuntary Termination (as defined in paragraph (e)), in either case within three years following the date of a Change of Control, all
outstanding awards under the Plan held by the participant that have not previously vested (or with respect to which restrictions have not lapsed or conditions have not been satisfied) shall become
immediately vested and exercisable in full as of the date of such termination of employment (which shall include, without limitation, the immediate lapse of all restrictions and deemed satisfaction of
all conditions on stock awards). 

    (d)  Definition of Change in Control.  For purposes hereof, the term "Change in Control" shall mean the
first to occur of the following events: 

     (i) Any
Person (as defined below) is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing a percentage of the combined voting power of the Company's then outstanding securities that is at least equal to the  greater of (x) 30% and (y)
 the percentage of such combined voting power then owned by Theodore Waitt and his affiliates and associates
(within the meaning of Rule 12b-2 under the Exchange Act); or 

    (ii) The
following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a
vote of at least two-thirds of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so
approved or recommended; or 

    (iii) There
is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing a percentage of the
combined voting power of the Company's then outstanding securities that is at least equal to the greater of (x) 30% and (y) the percentage
of such combined voting power then owned by Theodore Waitt and his affiliates and associates (within the meaning of Rule 12b-2 under the Exchange Act); or 

    (iv) The
stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or
disposition 

5

 

by the Company of all or substantially all of the Company's assets, other than any such sale or disposition to an entity, at least 50% of the combined voting power of the voting securities of which
are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. 

    For
purposes of this Section 14, "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) Theodore Waitt or any of his affiliates or associates (within the meaning of Rule 12b-2 under the Exchange Act),
(ii) the Company or any of its subsidiaries, (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates (within the
meaning of Rule 12b-2 under the Exchange Act), (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or (v) a corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 

    (e)  Definition of Involuntary Termination.  For purposes of the Plan, "Involuntary Termination" of a
participant's employment shall mean (x) termination of the participant's employment by the Company other than by reason of death or disability (within the meaning of the Company's
long-term disability plan) and other than for Cause or (y) the occurrence, following a Change of Control, any of the following acts or omissions by the Company or changes in the
terms and conditions of a participant's employment or service with the Company without the participant's express written consent: 

     (i) The
assignment to the participant of any duties inconsistent with the participant's position with the Company or a substantial adverse alteration in the nature or
status of the participant's responsibilities from those in effect immediately prior to the Change of Control; 

    (ii) A
reduction by the Company in the participant's annual base salary or hourly wage rate as in effect on the date of grant of the award or as the same may be
increased from time to time; 

    (iii) The
relocation of the participant's principal place of employment to a location more than 50 miles from the participant's principal place of employment
immediately prior to the Change of Control or the Company's requiring the participant to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent substantially consistent with the participant's business travel obligations at the time of the Change of Control; 

    (iv) The
failure by the Company to pay to the participant any portion of the participant's current compensation, or to pay to the participant any portion of an
installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; 

    (v) The
failure by the Company to continue in effect any compensation plan in which the participant participates immediately prior to the Change of Control which is
material to the participant's total compensation, or any substitute plans adopted prior to the Change of Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the Company to continue the participant's participation therein (or in such substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the participant's participation relative to other participants, as existed immediately prior to
the Change of Control; or 

    (vi) The
failure by the Company to continue to provide the participant with benefits substantially similar to those enjoyed by the participant under any of the
Company's pension, 

6

 

savings, life insurance, medical, health and accident, or disability plans in which the participant was participating immediately prior to the Change of Control, the taking of any other action by the
Company which would directly or indirectly materially reduce any of such benefits or deprive the participant of any material fringe benefit enjoyed by the participant at the time of the Change of
Control, or the failure by the Company to provide the participant with the number of paid vacation days to which the participant is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time of the Change of Control. 

    The
participant's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Involuntary Termination
hereunder. 

    (f)  Definition of Cause.  For purposes of the Plan, "Cause" shall mean: 

     (i) The
willful and continued failure by the participant to substantially perform the participant's duties with the Company or an affiliate (other than any such failure
resulting from the participant's incapacity due to physical or mental illness) that has not been cured within 30 days after a written demand for substantial performance is delivered to the
participant by the Company, which demand specifically identifies the manner in which the Company believes that the participant has not substantially performed the participant's duties; 

    (ii) The
willful engaging by the participant in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise; 

    (iii) The
commission of any act of fraud, embezzlement or dishonesty by a participant; or 

    (iv) Any
unauthorized use or disclosure by a participant of confidential information or trade secrets of the Company or any subsidiary. 

    For
purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the part of the participant shall be deemed "willful" unless done, or omitted to
be done, by the participant not in good faith and without reasonable belief that the participant's act, or failure to act, was in the best interest of the Company. 

    (g)  Parachute Payments.  In the event that the aggregate present value of payments to a participant
under this Plan and/or under any other plan, program, or arrangement maintained by the Company constitutes an "excess parachute payment" (within the meaning of Code Section 280G(b)(1)) and the
excise tax on such payment would cause the net parachute payments (after taking into account federal and state income and excise taxes) to which such participant would otherwise be entitled to be less
than what such participant would have netted (after taking into account federal and state income taxes) had the present value of such participant's total parachute payments equaled $1.00 less than
three times his or her "base amount" (within the meaning of Code Section 280G(b)(3)(A)), unless the Company and the affected individual(s) otherwise have agreed by separate contract or award,
his or her total "parachute payments" (within the meaning of Code Section 280G(b)(2)(A)) shall be reduced (but by the minimum possible amount) so that their aggregate present value equals $1.00
less than three times such base amount. For purposes of this calculation, unless it would be inequitable to a participant to do so, it shall be assumed that such participant's tax rate will be the
maximum marginal federal and state income tax rate on earned income, with such maximum federal rate to be computed with regard to Code Section 1(g), if applicable. In the event that the
participant and the Company are unable to agree
as to the amount of the reduction described above, if any, the participant shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately
prior to the relevant change of control) by the Company regarding federal income tax matters, and such law firm or accounting firm shall determine the amount of such reduction and such determination
shall be final and binding upon the participant and the Company. 

7

 

    15.  Plan Amendment.  The Plan may be amended by the Compensation Committee as it deems necessary or
appropriate to better achieve the purposes of the Plan. Shareholder approval shall be required as a condition of such action only to the extent required by applicable law, regulation. The Board may
suspend the Plan or terminate the Plan at any time; provided, that no such action adversely affects any outstanding award. Any Shares authorized under Section 5 (or any amendment thereof) with
respect to which no award is granted prior to termination of the Plan, or with respect to which an award is terminated, forfeited or canceled after termination of the Plan, shall automatically be
transferred to any subsequent long-term incentive equity plan for employees of the Company. 

    16.  Tax Withholding.  The Company shall have the right to deduct from any settlement of an award made
under the Plan, including the delivery or vesting of Shares, up to the minimum amount necessary to cover withholding of any federal, state or local taxes required by law, or to take such other action
as may be necessary to satisfy any such withholding obligations. The Compensation Committee may, in its discretion and subject to such rules as it may adopt, permit participants to use Shares to
satisfy the minimum required tax withholding (with prior approval of the Company's Chief Executive Officer if Shares are owned less than six months) and such Shares shall be valued at the Fair Market
Value as of the settlement date of the applicable award. 

    17.  Registration of Shares.  Notwithstanding any other provision of the Plan, the Company shall not be
obligated to offer or sell any Shares unless such Shares are at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") and the
offer and sale of such Shares are otherwise in compliance with all applicable federal and state securities laws and the requirements of any stock exchange or similar agency on which the Company's
securities may then be listed or quoted. The Company shall have no obligation to register the Shares under the federal securities laws or take any other steps as may be necessary to enable the Shares
to be offered and sold under federal or other securities laws. Prior to receiving Shares, a Plan participant may be required to furnish representations or undertakings deemed appropriate by the
Company to enable the offer and sale of the Shares or subsequent transfers of any interest in such Shares to comply with the Securities Act and other applicable securities laws. Certificates
evidencing Shares shall bear any legend required by, or useful for the purposes of compliance with, applicable securities laws, this Plan or award agreements. 

    18.  Other Benefit and Compensation Programs.  Unless otherwise specifically determined by the
Compensation Committee, settlements of awards received by participants under the Plan shall not be deemed a part of a participant's regular, recurring compensation for purposes of calculating payments
or benefits from any Company benefit plan, severance program or the severance pay law of any country. Further, the Company may adopt other compensation programs, plans or arrangements as it deems
appropriate or necessary. 

    19.  Unfunded Plan.  Unless otherwise determined by the Compensation Committee, the Plan shall be
unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any participant or other
person. To the extent any person holds any rights by virtue of an award granted under the Plan, such rights shall be no greater than the rights of an unsecured general creditor of the Company. 

    20.  Use of Proceeds.  The cash proceeds received by the Company from the issuance of Shares pursuant to
awards under the Plan shall constitute general funds of the Company. 

    21.  Regulatory Approvals.  The implementation of the Plan, the granting of any award under the Plan, and
the issuance of Shares upon the exercise or settlement of any award shall be subject to the Company's procurement of all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the awards granted under it or the Shares issued pursuant to it. 

8

 

    22.  Employment Rights.  The Plan does not constitute a contract of employment, and participation in the
Plan will not give a participant the right to continue in the employ of the Company on a full-time, part-time or any other basis. Participation in the Plan will not give any
participant any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. 

    23.  Governing Law.  The validity, construction and effect of the Plan and any actions taken relating to
the Plan shall be determined in accordance with the laws of the State of Delaware and applicable federal law. 

    24.  Successors and Assigns.  The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the participant's
creditors. 

9

QuickLinks

Gateway, Inc. 2000 Equity Incentive Plan

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