Document:

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                                                                     EXHIBIT 4.1

                                AMENDMENT TO THE

                            ARTICLES OF INCORPORATION

                                       OF

                                  T-NETIX, INC.

                      (Pursuant to Section 7-106-102 of the
                       Colorado Business Corporation Act)

                  T-Netix, Inc., a corporation organized and existing under the
Colorado Business Corporation Act (the "CORPORATION"), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Corporation
on April 14, 2000 pursuant to authority of the Board of Directors as required by
Section 7-106-102 of the Colorado Business Corporation Act (the "CBCA"):

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "BOARD OF DIRECTORS" or the
"BOARD") in accordance with the provisions of its Articles of Incorporation, the
Board of Directors hereby amends the Articles of Incorporation by adding a new
paragraph (d) to Section A of Article V of such Articles of Incorporation,
pursuant to which the Corporation authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $0.01 per share (the "PREFERRED
STOCK"), to read in its entirety as follows:

                  (d) The designation, number of shares, relative rights,
preferences, privileges, powers and limitations of such series of the Series A
Convertible Preferred Stock shall be as follows:

                  Series A Convertible Preferred Stock:

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                           I. DESIGNATION AND AMOUNT

                  The designation of this series, which consists of 3,750 shares
of Preferred Stock, is Series A Convertible Preferred Stock (the "SERIES A
PREFERRED STOCK") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "STATED VALUE").

                                    II. RANK

                  The Series A Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $0.01 per share (the "COMMON STOCK"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series A Preferred Stock
obtained in accordance with Section IX of Article V.A(d) of the Articles of
Incorporation, such class or series of capital stock specifically, by its terms,
ranks senior to or pari passu with the Series A Preferred Stock) (collectively,
with the Common Stock, "JUNIOR SECURITIES"); (iii) pari passu with any class or
series of capital stock of the Corporation hereafter created (with the consent
of the holders of Series A Preferred Stock obtained in accordance with Section
IX of Article V.A(d) of the Articles of Incorporation) specifically ranking, by
its terms, on parity with the Series A Preferred Stock ("PARI PASSU
SECURITIES"); and (iv) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series A
Preferred Stock obtained in accordance with Section IX of Article V.A(d) of the
Articles of Incorporation) specifically ranking, by its terms, senior to the
Series A Preferred Stock ("SENIOR SECURITIES"), in each case as to distribution
of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.

                                 III. DIVIDENDS

                  The Series A Preferred Stock shall not bear any dividends. In
no event, so long as any Series A Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of Junior
Securities be purchased or redeemed by the Corporation nor shall any moneys be
paid to or made available for a sinking fund for the purchase or redemption of
any Junior Securities (other than a distribution of Junior Securities), without,
in each such case, the written consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting together as a class.

                           IV. LIQUIDATION PREFERENCE

                  A. LIQUIDATION EVENT. If the Corporation shall commence a
voluntary case under the Federal bankruptcy laws or any other applicable Federal
or State bankruptcy, insolvency or similar law, or consent to the entry of an
order for relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its

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property, or make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due, or if a
decree or order for relief in respect of the Corporation shall be entered by a
court having jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of thirty (30) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (each such event being considered a "LIQUIDATION EVENT"), no
distribution shall be made to the holders of any shares of capital stock of the
Corporation (other than Senior Securities) upon liquidation, dissolution or
winding up unless prior thereto, the holders of shares of Series A Preferred
Stock, subject to Section VI, shall have received the Liquidation Preference (as
defined in Section IV.C of Article V.A(d) of the Articles of Incorporation) with
respect to each share. If upon the occurrence of a Liquidation Event, the assets
and funds available for distribution among the holders of the Series A Preferred
Stock and holders of Pari Passu Securities (including any dividends or
distribution paid on any Pari Passu Securities after the Issue Date (as defined
in Section IV.C) of Article V.A(d) of the Articles of Incorporation) shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series A Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate liquidation preference payable on all such shares. Any prior dividends
or distribution made after the Issue Date (as defined in Section IV.C of Article
V.A(d) of the Articles of Incorporation) shall offset, dollar for dollar, the
amount payable to the class or series to which such distribution was made.

                  B. CERTAIN ACTS DEEMED LIQUIDATION EVENT. Subject to Section
V.E of Article V.A(d) of the Articles of Incorporation, at the option of any
holder of Series A Preferred Stock, the sale, conveyance or disposition of all
or substantially all of the assets of the Corporation, the effectuation by the
Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation with or
into any other Person (as defined below) or Persons when the Corporation is not
the survivor (each, a "MAJOR TRANSACTION") shall either: (i) be deemed to be a
liquidation, dissolution or winding up of the Corporation pursuant to which the
Corporation shall be required to distribute upon consummation of and as a
condition to such transaction an amount equal to 120% of the Liquidation
Preference with respect to each outstanding share of Series A Preferred Stock or
(ii) be treated pursuant to Section VI.C(b) of Article V.A(d) of the Articles of
Incorporation. "PERSON" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.

                  C. LIQUIDATION PREFERENCE. For purposes hereof, the
"LIQUIDATION PREFERENCE" with respect to a share of the Series A Preferred Stock
shall mean an amount equal to the sum of (i) the Stated Value thereof plus (ii)
an amount equal to eight percent (8%) per

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annum of such Stated Value for the period beginning on the date of issuance of
the Series A Preferred Stock (the "ISSUE DATE") and ending on the date of final
distribution to the holder thereof (prorated for any portion of such period)
plus (iii) all Conversion Default Payments (as defined in Section VI.E of
Article V.A(d) of the Articles of Incorporation), Delivery Default Payments (as
defined in Section VI.D of Article V.A(d) of the Articles of Incorporation) and
any other amounts owed to such holder pursuant to Section 2(c) of the
Registration Rights Agreement. The liquidation preference with respect to any
Pari Passu Securities shall be as set forth in the Amendment to the Articles of
Incorporation filed in respect thereof.

                                 V. REDEMPTION

                  A. MANDATORY REDEMPTION. If any of the following events (each,
a "MANDATORY REDEMPTION EVENT") shall occur:

                     (i) The  Corporation (a) fails to issue shares of Common
Stock to the holders of Series A Preferred Stock upon exercise by the holders of
their conversion rights in accordance with the terms of this Article V.A(d) of
the Articles of Incorporation (for a period of at least sixty (60) days if such
failure is solely as a result of the circumstances governed by the second
paragraph of Section VI.E of Article V.A(d) of the Articles of Incorporation and
the Corporation is using its best efforts to authorize a sufficient number of
shares of Common Stock as soon as practicable), (b) fails to transfer or to
cause its transfer agent to transfer (electronically or in certificated form)
any certificate for shares of Common Stock issued to the holders upon conversion
of the Series A Preferred Stock as and when required by this Article V.A(d) of
the Articles of Incorporation or by the Registration Rights Agreement, dated as
of April 17, 2000, by and among the Corporation and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), (c) fails to remove any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate or any shares of Common Stock issued to the holders
of Series A Preferred Stock upon conversion of the Series A Preferred Stock as
and when required by this Article V.A(d) of the Articles of Incorporation or by
the Securities Purchase Agreement, dated as of April 17, 2000, by and between
the Corporation and the other signatories thereto (the "PURCHASE AGREEMENT") or
the Registration Rights Agreement, or (d) fails to fulfill its obligations
pursuant to Sections 4(c), 4(d), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement (or makes any announcement, statement or threat that it does not
intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for ten (10) days after
the Corporation shall have been notified thereof in writing by any holder of
Series A Preferred Stock;

                     (ii) The Corporation fails to obtain effectiveness with the
Securities and Exchange Commission (the "SEC"), prior to August 17, 2000, of the
Registration Statement (as defined in the Registration Rights Agreement, the
"REGISTRATION STATEMENT") required to be filed pursuant to Section 2(a) of the
Registration Rights Agreement, or fails to obtain the effectiveness of any
additional Registration Statement (required to be filed pursuant to Section 3(b)
of the Registration Rights Agreement) within sixty (60) days after the
Registration Trigger

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Date (as defined in the Registration Rights Agreement), or any such Registration
Statement, after its initial effectiveness and during the Registration Period
(as defined in the Registration Rights Agreement), lapses in effect or sales of
all of the Registrable Securities (as defined in the Registration Rights
Agreement, the "REGISTRABLE SECURITIES") otherwise cannot be made thereunder
(whether by reason of the Corporation's failure to amend or supplement the
prospectus included therein in accordance with the Registration Rights
Agreement, the Corporation's failure to file and obtain effectiveness with the
SEC of an additional Registration Statement required to be filed pursuant to
Section 3(b) of the Registration Rights Agreement or otherwise) for more than
twenty (20) consecutive days or more than forty-five (45) days in any twelve
(12) month period after such Registration Statement becomes effective;

                     (iii) The Corporation or any subsidiary of the Corporation
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for all or substantially
all of its property or business; or such a receiver or trustee shall otherwise
be appointed;

                     (iv) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation; or

                     (v) The Corporation shall fail to maintain the listing of
the Common Stock on the Nasdaq National Market ("NNM"), the Nasdaq SmallCap
Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE") or the American
Stock Exchange ("AMEX"),

then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii) or (v), at the option of
the holders of at least 50% of the then outstanding shares of Series A Preferred
Stock exercisable by delivery of written notice (the "MANDATORY REDEMPTION
NOTICE") to the Corporation of such Mandatory Redemption Event, or upon the
occurrence of any Mandatory Redemption Event specified in subparagraphs (iii) or
(iv), the then outstanding shares of Series A Preferred Stock shall become
immediately redeemable and the Corporation shall purchase each holder's
outstanding shares of Series A Preferred Stock for an amount per share equal to
the greater of (1) 120% multiplied by the sum of (a) the Stated Value of the
shares to be redeemed plus (b) an amount equal to eight percent (8%) per annum
of such Stated Value for the period beginning on the Issue Date and ending on
the date of payment of the Mandatory Redemption Amount (the "MANDATORY
REDEMPTION DATE") plus (c) all Conversion Default Payments (as defined in
Section VI.E of Article V.A(d) of the Articles of Incorporation), Delivery
Default Payments (as defined in Section VI.D of Article V.A(d) of the Articles
of Incorporation) and any other amounts owed to such holder pursuant to Section
2(c) of the Registration Rights Agreement, and (2) the "PARITY VALUE" of the
shares to be redeemed, where parity value for purposes of this Section V.A of
Article V.A(d) of the Articles of Incorporation means the product of (a) the
highest number of shares of Common Stock issuable upon conversion of such shares
of Series A Preferred Stock in accordance with Section VI of Article V.A(d) of
the Articles of Incorporation (without giving any effect to any limitations on
conversions of shares contained herein, and treating the Trading Day (as defined
in Section VI.B

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of Article V.A(d) of the Articles of Incorporation) immediately preceding the
Mandatory Redemption Date as the "CONVERSION DATE" (as defined in Section
VI.D(d) of Article V.A(d) of the Articles of Incorporation) for purposes of
determining the lowest applicable Conversion Price, unless the Mandatory
Redemption Event arises as a result of a breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the Conversion
Date), multiplied by (b) the highest Closing Price (as defined below) for the
Common Stock during the period beginning on the date of first occurrence of the
Mandatory Redemption Event and ending one day prior to the Mandatory Redemption
Date (the greater of such amounts being referred to as the "MANDATORY REDEMPTION
AMOUNT"). "CLOSING PRICE," as of any date, means the last sale price of the
Common Stock on the NNM as reported by Bloomberg Financial Markets or an
equivalent reliable reporting service mutually acceptable to and hereafter
designated by the holders of a majority in interest of the shares of Series A
Preferred Stock and the Corporation ("BLOOMBERG") or, if NNM is not the
principal trading market for such security, the last sale price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing do not apply, the
last sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
last sale price of such security is available in the over-the-counter market on
the electronic bulletin board for such security or in any of the foregoing
manners, the average of the bid prices of any market makers for such security
that are listed in the "pink sheets" by the National Quotation Bureau, Inc. If
the Closing Price cannot be calculated for such security on such date in the
manner provided above, the Closing Price shall be the fair market value as
mutually determined by the Corporation and the holders of a majority in interest
of shares of Series A Preferred Stock for which the calculation of the Closing
Price is required.

                  B. TRADING MARKET REDEMPTION. If the Series A Preferred Stock
ceases to be convertible by any holder as a result of the limitations described
in Section VI.A(c) of Article V.A(d) of the Articles of Incorporation (a
"TRADING MARKET REDEMPTION EVENT"), and the Corporation has not, prior to, or
within thirty (30) days of, the date that such Trading Market Redemption Event
arises, (i) obtained the Stockholder Approval (as defined in Section VI.A(c) of
Article V.A(d) of the Articles of Incorporation) or (ii) eliminated any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Corporation or any of its securities on the
Corporation's ability to issue shares of Common Stock in excess of the Maximum
Share Amount (as defined in Section VI.A(c) of Article V.A(d) of the Articles of
Incorporation), then the Corporation shall be obligated to redeem immediately
all of the then outstanding Series A Preferred Stock in accordance with this
Section V.B of Article V.A(d) of the Articles of Incorporation. An irrevocable
redemption notice (the "TRADING MARKET REDEMPTION NOTICE") shall be delivered
promptly to the holders of Series A Preferred Stock at their registered address
appearing on the records of the Corporation and shall state (i) that the Maximum
Share Amount (as defined in Section VI.A of Article V.A(d) of the Articles of
Incorporation) has been issued upon exercise of the Series A Preferred Stock,
(ii) that the Corporation is obligated to redeem all of the outstanding Series A
Preferred Stock and (iii) the Mandatory Redemption Date, which shall be a date
within five (5) business days of the earlier of (a) the date of the Trading
Market Redemption Notice or (b) the date on which the holders of the Series A
Preferred Stock notify

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the Corporation of the occurrence of a Trading Market Redemption Event. On the
Mandatory Redemption Date, the Corporation shall make payment of the Mandatory
Redemption Amount (as defined in Section V.A of Article V.A(d) of the Articles
of Incorporation) in cash.

                  C. OPTIONAL REDEMPTION. So long as for at all times during the
period beginning thirty (30) Trading Days prior to the date of the Optional
Redemption Notice (as defined below) and ending on the Optional Redemption Date
(as defined below) (i) all of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock are then (x) authorized and reserved
for issuance, (y) registered for resale under the 1933 Act by the holders of the
Series A Preferred Stock and sales of such shares may be made thereunder (or
such shares may otherwise be resold publicly without restriction) and (z)
eligible to be traded on the NNM, the Nasdaq SmallCap, the NYSE or the AMEX and
(ii) no Mandatory Redemption Event or Trading Market Redemption Event shall have
occurred and be continuing, then at any time after the Issue Date, on any day on
which, and for a period of ten (10) consecutive Trading Days prior thereto, the
Closing Price (as defined in Section V.A of Article V.A(d) of the Articles of
Incorporation) is less than or equal to $4.00 (subject to adjustment from time
to time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the Issue Date),
the Corporation shall have the right to deliver written notice to the holders of
Series A Preferred Stock of its intention to redeem all of the outstanding
shares of Series A Preferred Stock in accordance with this Section V.C of
Article V.A(d) of the Articles of Incorporation. Any notice (the "OPTIONAL
REDEMPTION NOTICE") of redemption hereunder (an "OPTIONAL REDEMPTION") shall be
delivered to the holders of the Series A Preferred Stock at their registered
addresses appearing on the books and records of the Corporation and shall state
(1) that the Corporation is exercising its right to redeem all of the
outstanding shares of Series A Preferred Stock and (2) the date of redemption
(the "OPTIONAL REDEMPTION DATE"), which date shall be ten (10) Trading Days
after the date of delivery of the Optional Redemption Notice. No such Optional
Redemption Notice may be sent to the holders of Series A Preferred Stock (a)
until the Corporation is permitted to redeem the Series A Preferred Stock
pursuant to this Section V.C of Article V.A(d) of the Articles of Incorporation
and (b) during any period of time in which the Corporation is in possession of
any nonpublic information, the disclosure of which would reasonably be expected
to cause a material increase in the trading price of the Corporation's Common
Stock. On the Optional Redemption Date, the Corporation shall purchase each
holder's outstanding shares of Series A Preferred Stock for an amount per share
equal to the greater of (1) 120% multiplied by the sum of (a) the Stated Value
of the shares to be redeemed, plus (b) an amount equal to eight percent (8%) per
annum of such Stated Value for the period beginning on the Issue Date and ending
on the Optional Redemption Date, plus (c) all Conversion Default Payments (as
defined in Section VI.E of Article V.A(d) of the Articles of Incorporation),
Delivery Default Payments (as defined in Section VI.D of Article V.A(d) of the
Articles of Incorporation) and any other amounts owed to such holder pursuant to
Section 2(c) of the Registration Rights Agreement, and (2) the "PARITY VALUE" of
the shares to be redeemed, where parity value for purposes of this Section V.C
of Article V.A(d) of the Articles of Incorporation means the product of (a) the
number of shares of Common Stock issuable upon conversion of such shares of
Series A Preferred Stock in accordance with Section VI of Article V.A(d) of the
Articles of Incorporation (without giving effect to any limitations on
conversions of shares contained herein, and treating the Trading Day (as defined
in Section VI.B of Article

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V.A(d) of the Articles of Incorporation) immediately preceding the date of
delivery of the Optional Redemption Notice as the "CONVERSION DATE" (as defined
in Section VI.D(d) of Article V.A(d) of the Articles of Incorporation) for
purposes of determining the applicable Conversion Price), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the
date of delivery of the Optional Redemption Notice and ending one day prior to
the Optional Redemption Date (the greater of such amounts being referred to as
the "OPTIONAL REDEMPTION AMOUNT"). Notwithstanding notice of an Optional
Redemption, the holders shall at all times prior to the Optional Redemption Date
maintain the right to convert all or any shares of Series A Preferred Stock at
the Conversion Price then in effect in accordance with Section VI of Article
V.A(d) of the Articles of Incorporation, and any shares of Series A Preferred
Stock so converted after receipt of an Optional Redemption Notice and prior to
the Optional Redemption Date set forth in such notice and payment of the
aggregate Optional Redemption Amount shall be deducted from the shares of Series
A Preferred Stock which are otherwise subject to redemption pursuant to such
notice. If the Corporation delivers an Optional Redemption Notice and fails to
pay the Optional Redemption Amount due to the holders of Series A Preferred
Stock within two (2) business days following the Optional Redemption Date, the
Corporation shall forever forfeit its right to redeem the Series A Preferred
Stock pursuant to this Section V.C of Article V.A(d) of the Articles of
Incorporation.

                  D. REDEMPTION IN LIEU OF CONVERSION. Notwithstanding anything
to the contrary contained in this Section V of Article V.A(d) of the Articles of
Incorporation and subject to the terms of this Section V.D of Article V.A(d) of
the Articles of Incorporation, if, on or after October 14, 2000, the Closing
Price (as defined in Section V.A of Article V.A(d) of the Articles of
Incorporation) of the Common Stock is less than the Fixed Conversion Price on
any day a Notice of Conversion (as defined in Section VI of Article V.A(d) of
the Articles of Incorporation) is given, the Corporation shall have the option,
in lieu of issuing shares of Common Stock to the holders upon conversion in
accordance with the terms of Section VI of Article V.A(d) of the Articles of
Incorporation, to redeem all or any portion of the shares of Series A Preferred
Stock submitted for conversion for an amount in cash equal to the number of
shares of Common Stock that would have otherwise been issued upon conversion of
the Series A Preferred Stock at the applicable Conversion Price (as defined in
Section VI of Article V.A(d) of the Articles of Incorporation) multiplied by the
Redemption Market Price (as defined herein) (the "REDEMPTION IN LIEU OF
CONVERSION AMOUNT"). "REDEMPTION MARKET PRICE" shall be equal to the Closing
Price of the Common Stock on the Conversion Date. On or before the first day of
each calendar month, the Corporation shall notify the holders of the Series A
Preferred Stock, in writing, as to whether the Corporation will issue shares of
Common Stock, deliver cash in redemption or any combination thereof in respect
of the shares of Series A Preferred Stock submitted for conversion pursuant to
Section VI of Article V.A(d) of the Articles of Incorporation. The Corporation
will be bound by such notice for the proceeding calendar month (the "TERM"), at
the end of which the Corporation may elect to renew such notice. A failure to
issue or renew within one (1) business day after the expiration of the Term
shall be deemed to be an election to issue Common Stock upon conversion of the
Series A Preferred Stock during the subsequent Term. Any redemption amounts
payable hereunder shall be paid to the converting holder within two (2) Trading
Days of the Conversion Date.

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                  E. MAJOR TRANSACTION REDEMPTION. Notwithstanding anything to
the contrary contained in this Article V.A(d) of the Articles of Incorporation
and subject to the terms of this Section V.E of Article V.A(d) of the Articles
of Incorporation, so long as for at all times during the period beginning thirty
(30) Trading Days prior to the date of the Major Transaction Redemption Notice
(as defined below) and ending on the Major Transaction Redemption Date (as
defined below) (i) all of the shares of Common Stock issuable upon conversion of
the Series A Preferred Stock are then (x) authorized and reserved for issuance,
(y) registered for resale under the 1933 Act by the holders of the Series A
Preferred Stock and sales of such shares may be made thereunder (or such shares
may otherwise be resold publicly without restriction) and (z) eligible to be
traded on the NNM, the Nasdaq SmallCap, the NYSE or the AMEX and (ii) no
Mandatory Redemption Event or Trading Market Redemption Event shall have
occurred and be continuing, then, in the event the Corporation publicly
announces its intention to consummate a Major Transaction, the Corporation shall
have the right to deliver written notice to the holders of Series A Preferred
Stock of its intention to redeem all of the outstanding shares of Series A
Preferred Stock in accordance with this Section V.E of Article V.A(d) of the
Articles of Incorporation. Any notice (the "MAJOR TRANSACTION REDEMPTION
NOTICE") of redemption hereunder (an "MAJOR TRANSACTION REDEMPTION") shall be
delivered to the holders of the Series A Preferred Stock at their registered
addresses appearing on the books and records of the Corporation within one (1)
business day following the public announcement of such Major Transaction and
shall state (1) that the Corporation is exercising its right to redeem all of
the outstanding shares of Series A Preferred Stock and (2) if known, the date of
redemption (the "MAJOR TRANSACTION REDEMPTION DATE"), which date shall be (A) at
least twenty (20) Trading Days after the date of delivery of the Major
Transaction Redemption Notice and (B) the date of consummation of the Major
Transaction. In the event that the Major Transaction Notice is delivered to the
holders of the Series A Preferred Stock but the Major Transaction is not
consummated, the Major Transaction Notice shall be deemed to be withdrawn. On
the Major Transaction Redemption Date, the Corporation shall make payment of the
Major Transaction Redemption Amount (as defined below) to or upon the order of
the holders as specified by the holders in writing to the Corporation at least
one (1) business day prior to the Major Transaction Redemption Date. If the
Corporation exercises its right to redeem the Series A Preferred Stock pursuant
to this Section V.E of Article V.A(d) of the Articles of Incorporation, the
Corporation shall make payment to the holders of an amount in cash (the "MAJOR
TRANSACTION REDEMPTION AMOUNT") equal to the greater of (x) the Major
Transaction Percentage (as defined below), multiplied by the sum of (a) the
Stated Value of the shares of Series A Preferred Stock to be redeemed, plus (b)
an amount equal to eight percent (8%) per annum of such Stated Value for the
period beginning on the Issue Date and ending on the Major Transaction
Redemption Date, plus (c) all Conversion Default Payments (as defined in Section
VI.E of Article V.A(d) of the Articles of Incorporation), Delivery Default
Payments (as defined in Section VI.D of Article V.A(d) of the Articles of
Incorporation) and any other amounts owed to such holder pursuant to Section
2(c) of the Registration Rights Agreement, and (y) the "EQUIVALENT VALUE" of the
shares to be redeemed, where equivalent value means the product of (a) the
number of shares of Common Stock issuable upon conversion of such shares of
Series A Preferred Stock in accordance with Section VI of Article V.A(d) of the
Articles of Incorporation (without giving effect to any limitations on
conversions of shares contained herein, and treating the Trading Day (as defined
in Section VI.B of Article V.A(d) of the Articles of Incorporation) immediately
preceding the

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date of public announcement of such Major Transaction as the Conversion Date (as
defined in Section VI.D(d) of Article V.A(d) of the Articles of Incorporation)
for purposes of determining the applicable Conversion Price (provided that, if
the per share consideration to be paid to the stockholders of the Corporation in
such Major Transaction as calculated pursuant to clause (b) below exceeds the
product of the Major Transaction Percentage multiplied by the Fixed Conversion
Price, then the Conversion Price for purposes of this clause (a) shall equal the
Fixed Conversion Price)), multiplied by (b) the price per share of Common Stock
paid to stockholders of the Corporation in such Major Transaction (with the
value of any non-cash consideration being equal to the Market Value (as defined
in Section VI.C(f)(ii) of Article V.A(d) of the Articles of Incorporation) of
such consideration on the date of consummation of such Major Transaction). The
"MAJOR TRANSACTION PERCENTAGE" shall be (A) 165%, in the case of a Major
Transaction which is consummated on or prior to the date which is twelve (12)
months following the Issue Date and (B) 200%, in the case of a Major Transaction
which is consummated after the date which is twelve (12) months following the
Issue Date. Notwithstanding notice of a Major Transaction Redemption, the
holders shall at all times prior to the Major Transaction Redemption Date
maintain the right to convert all or any shares of Series A Preferred Stock at
the Conversion Price then in effect (including any adjustments pursuant to
Section VI.B(b) of Article V.A(d) of the Articles of Incorporation and Section
VI.C of Article V.A(d) of the Articles of Incorporation) in accordance with
Section VI of Article V.A(d) of the Articles of Incorporation, and any shares of
Series A Preferred Stock so converted after receipt of a Major Transaction
Redemption Notice and prior to the Major Transaction Redemption Date set forth
in such notice and payment of the aggregate Major Transaction Redemption Amount
shall be deducted from the shares of Series A Preferred Stock which are
otherwise subject to redemption pursuant to such notice. If the Corporation
delivers a Major Transaction Redemption Notice and fails to pay the Major
Transaction Redemption Amount due to the holders of Series A Preferred Stock on
the Major Transaction Redemption Date, the Corporation (and any Successor Entity
(as defined in Section VI.C(b) of Article V.A(d) of the Articles of
Incorporation) shall forever forfeit its right to redeem the Series A Preferred
Stock pursuant to this Section V.D of Article V.A(d) of the Articles of
Incorporation and such Successor Entity shall assume the obligations of the
Corporation under this Article V.A(d) of the Articles of Incorporation in
accordance with Section VI.C(b) of Article V.A(d) of the Articles of
Incorporation.

                  F. FAILURE TO PAY REDEMPTION AMOUNTS. In the case of a
Mandatory Redemption Event or the delivery of an Optional Redemption Notice,
Redemption In Lieu of Conversion Notice or Major Transaction Redemption Notice,
if the Corporation fails to pay the Mandatory Redemption Amount, the Optional
Redemption Amount, the Redemption In Lieu of Conversion Amount or the Major
Transaction Redemption Amount, as applicable, within five (5) business days of
written notice that such amount is due and payable, then (assuming there are
sufficient authorized shares) in addition to all other available remedies, each
holder of Series A Preferred Stock shall have the right at any time and from
time to time after the failure to timely pay the Mandatory Redemption Amount,
the Optional Redemption Amount, the Redemption In Lieu of Conversion Amount or
the Major Transaction Redemption Amount, as applicable, to require the
Corporation, upon written notice, to immediately issue (in accordance with and
subject to the terms of Section VI of Article V.A(d) of the Articles of
Incorporation), in lieu of the portion of the Mandatory Redemption Amount, the
Optional Redemption Amount, the

                                     - 10 -
<PAGE>   11

Redemption In Lieu of Conversion Amount or the Major Transaction Redemption
Amount, as applicable, with respect to which such election is made, the number
of shares of Common Stock of the Corporation equal to such applicable redemption
amount divided by any Conversion Price (as defined below), as chosen in the sole
discretion of the holder of Series A Preferred Stock, in effect from the date of
the Mandatory Redemption Event (or the date of delivery of an Optional
Redemption Notice, Redemption In Lieu of Conversion Notice or Major Transaction
Redemption Notice) until the date such holder elects to exercise its rights
pursuant to this Section V.F of Article V.A(d) of the Articles of Incorporation.

                   VI. CONVERSION AT THE OPTION OF THE HOLDER

                  A. OPTIONAL CONVERSION

                     (a) CONVERSION AMOUNT. Subject to the restrictions set
forth in Section V1.A(b) of Article V.A(d) of the Articles of Incorporation,
each holder of shares of Series A Preferred Stock may, at its option at any time
and from time to time on or prior to 5:00 p.m., Eastern Standard Time, on the
Maturity Date (as defined in Section VII of Article V.A(d) of the Articles of
Incorporation), upon surrender of the certificates therefor, convert any or all
of its shares of Series A Preferred Stock into Common Stock as set forth below
(an "OPTIONAL CONVERSION"). Each share of Series A Preferred Stock shall be
convertible into such number of fully paid and nonassessable shares of Common
Stock as such Common Stock exists on the Issue Date, or any other shares of
capital stock or other securities of the Corporation into which such Common
Stock is thereafter changed or reclassified, as is determined by dividing (1)
the sum of (a) the Stated Value thereof plus (b) the Premium Amount (as defined
below), by (2) the then effective Conversion Price (as defined below); provided,
however, that in no event shall a holder of shares of Series A Preferred Stock
be entitled to convert any such shares in excess of that number of shares upon
conversion of which the sum of (x) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the shares of Series A Preferred Stock or the unexercised
or unconverted portion of any other securities of the Corporation (including,
without limitation, the warrants issued by the Corporation pursuant to the
Securities Purchase Agreement (the "WARRANTS")) subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (y)
the number of shares of Common Stock issuable upon the conversion of the shares
of Series A Preferred Stock with respect to which the determination of this
proviso is being made, would result in beneficial ownership by a holder and such
holder's affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (x) of such proviso. The "PREMIUM AMOUNT" means the
product of the Stated Value, multiplied by .08, multiplied by (N/365), where "N"
equals the number of days elapsed from the Issue Date to and including the
Conversion Date (as defined in Section VI.B of Article V.A(d) of the Articles of
Incorporation).

                                     - 11 -
<PAGE>   12

                     (b) CONVERSION RESTRICTIONS. No conversions may occur prior
to October 17, 2000; provided, however, that the restrictions on conversion set
forth above shall not apply to conversions taking place on any Conversion Date
(i) on which the Trade Price (as defined below) of the Common Stock is greater
than or equal to either the Fixed Conversion Price (as defined below) or 115% of
the Variable Conversion Price (as defined below) or (ii) occurring on or after
the date the Corporation makes a public announcement that it intends to merge or
consolidate with any other corporation or sell or transfer substantially all of
the assets of the Corporation or (iii) occurring on or after the date any
person, group or entity (including the Corporation) publicly announces a tender
offer to purchase 50% or more of the Corporation's Common Stock (or any other
takeover scheme) or (iv) occurring on or after there is a material adverse
change in the business, operations, assets, financial condition or prospects of
the Corporation or its subsidiaries, taken as a whole, or (v) following the
occurrence of any Mandatory Redemption Event. "TRADE PRICE" means, for any
security as of any date, the highest sale price of the Common Stock on the NNM
as reported by Bloomberg or, if the NNM is not the principal trading market for
such security, the highest sale price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or, if the foregoing do not apply, the highest sale price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no highest sale price of such
security is available in the over-the-counter market on the electronic bulletin
board for such security or in any of the foregoing manners, the highest bid
price of any market maker for such security that is listed in the "pink sheet"
by the National Quotation Bureau, Inc. If the Trade Price cannot be calculated
for such security on such date in the manner provided above, the Trade Price
shall be the fair market value as mutually determined by the Corporation and the
holders of a majority in interest of shares of Series A Preferred Stock being
redeemed in lieu of conversion for which the calculation of the Trade Price is
required in order to determine the Redemption Market Price of such Series A
Preferred Stock.

                     (c) TRADING MARKET LIMITATION. Unless the Corporation
either (i) is permitted by the applicable rules and regulations of the principal
securities market on which the Common Stock is listed or traded or (ii) has
obtained approval of the issuance of the Common Stock upon conversion of or
otherwise pursuant to the Series A Preferred Stock in accordance with applicable
law and the rules and regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Corporation or any of its securities (the "STOCKHOLDER APPROVAL"), in no event
shall the total number of shares of Common Stock issued upon conversion of or
otherwise pursuant to the Series A Preferred Stock (including any shares of
capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued or
issuable upon conversion of or otherwise pursuant to the Series A Preferred
Stock for purposes of any such rule or regulation) exceed the maximum number of
shares of Common Stock that the Corporation can so issue pursuant to any rule of
the principal United States securities market on which the Common Stock trades
(including Rule 4460 of the NNM or any successor rule)(the "MAXIMUM SHARE
AMOUNT") which, as of the Issue Date, shall be 2,545,043 (19.99% of the total
shares of Common Stock outstanding on the Issue Date), subject to equitable
adjustments from time to

                                     - 12 -
<PAGE>   13

time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the Issue Date.
With respect to each holder of Series A Preferred Stock, the Maximum Share
Amount shall refer to such holder's pro rata share thereof determined in
accordance with Section X of Article V.A(d) of the Articles of Incorporation. In
the event that the sum of (x) the aggregate number of shares of Common Stock
actually issued upon conversion of or otherwise pursuant to the Series A
Preferred Stock plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of or otherwise pursuant to the outstanding
Series A Preferred Stock at the then effective Conversion Price, represents at
least one hundred percent (100%) of the Maximum Share Amount (the "TRIGGERING
EVENT"), the Corporation will use its best efforts to seek and obtain
Stockholder Approval (or obtain such other relief as will allow conversions
hereunder in excess of the Maximum Share Amount) as soon as practicable
following the Triggering Event.

                  B. CONVERSION PRICE.

                     (a) CALCULATION OF CONVERSION PRICE. Subject to
subparagraph (b) below, the "CONVERSION PRICE" shall be the lesser of the
Variable Conversion Price (as defined herein) and the Fixed Conversion Price (as
defined herein), subject to adjustments pursuant to the provisions of Section
VI.C of Article V.A(d) of the Articles of Incorporation. The "VARIABLE
CONVERSION PRICE" shall mean 100% of the Market Price (as defined below).
"MARKET PRICE" shall mean the average of the lowest Closing Bid Prices for any
five (5) consecutive Trading Days (the "MARKET PRICE DAYS") during the
twenty-two (22) consecutive Trading Day period ending one (1) Trading Day prior
to the date the Notice of Conversion (as defined in Section VI.E of Article
V.A(d) of the Articles of Incorporation) is sent by a holder to the Corporation
via facsimile (the "PRICING PERIOD"). The Market Price Days shall be designated
by the converting holder (from among the days comprising the Pricing Period) in
the Notice of Conversion. "FIXED CONVERSION PRICE" shall initially mean $6.05
(the "INITIAL FIXED CONVERSION PRICE"), provided, that, in the event that the
"ADJUSTED FIXED CONVERSION PRICE" (as defined below) is less than the Initial
Fixed Conversion Price, then the Fixed Conversion Price shall equal the Adjusted
Fixed Conversion Price. The Fixed Conversion Price shall be subject to
adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring after the Issue Date. "ADJUSTED FIXED CONVERSION PRICE " shall equal
110% of the average of the Closing Bid Prices of the Common Stock for the ten
(10) consecutive Trading Days ending on August 17, 2000 (subject to extension by
one (1) Trading Day for each Trading Day after the Registration Deadline (as
defined in the Registration Rights Agreement) that the Registration Statement
(as defined in the Registration Rights Agreement) required to be filed pursuant
to Section 2(a) of the Registration Rights Agreement is first declared
effective). "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price on the NNM as reported by Bloomberg or, if the NNM is not the
principal trading market for such security, the closing bid price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the closing bid price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price of such security is available in the over-the-counter
market on the electronic bulletin board for such security or in any of the
foregoing manners, the average of the

                                     - 13 -
<PAGE>   14

bid prices of any market makers for such security that are listed in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date in the manner provided above, the
Closing Bid Price shall be the fair market value as mutually determined by the
Corporation and the holders of a majority in interest of shares of Series A
Preferred Stock being converted for which the calculation of the Closing Bid
Price is required in order to determine the Conversion Price of such Series A
Preferred Stock. "TRADING DAY" shall mean any day on which the Common Stock is
traded for any period on the NNM, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded.

                     (b) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in subparagraph (a) of this Paragraph B to
the contrary, in the event the Corporation (i) makes a public announcement that
it intends to consolidate or merge with any other corporation (other than a
merger in which the Corporation is the surviving or continuing corporation and
its capital stock is unchanged) or sell or transfer all or substantially all of
the assets of the Corporation or (ii) any person, group or entity (including the
Corporation) publicly announces a tender offer to purchase 50% or more of the
Corporation's Common Stock (or any other takeover scheme) (the date of the
announcement referred to in clause (i) or (ii) is hereinafter referred to as the
"ANNOUNCEMENT DATE"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal, for each such date, to the lower
of (x) the Conversion Price which would have been applicable for an Optional
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
subparagraph (a) of this Section VI.B of Article V.A(d) of the Articles of
Incorporation. For purposes hereof, "ADJUSTED CONVERSION PRICE TERMINATION DATE"
shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this
subparagraph (b) has been made, the date upon which the Corporation (in the case
of clause (i) above) or the person, group or entity (in the case of clause (ii)
above) consummates or publicly announces the termination or abandonment of the
proposed transaction or tender offer (or takeover scheme) which caused this
subparagraph (b) to become operative.

                  C. ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price shall
be subject to adjustment from time to time as follows:

                     (a) ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK SPLIT,
STOCK DIVIDEND, ETC. If at any time when Series A Preferred Stock is issued and
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Trading Price (as defined below) to all holders of
Common Stock or other similar event, which event shall have taken place during
the reference period for determination of the Conversion Price for any Optional
Conversion of the Series A Preferred Stock, then the Conversion Price shall be
calculated giving appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar event. In such event, the
Corporation shall notify the Transfer Agent of such change on or

                                     - 14 -
<PAGE>   15

before the effective date thereof. "TRADING PRICE," which shall be measured as
of the record date in respect of the rights offering, means (i) the average of
the last reported sale prices for the shares of Common Stock on the NNM as
reported by Bloomberg, as applicable, for the five (5) Trading Days immediately
preceding such date, or (ii) if the NNM is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Trading Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or (b) at the option of a majority-in-interest of the holders of the
outstanding Series A Preferred Stock, by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Corporation.

                     (b) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at
any time when Series A Preferred Stock is issued and outstanding and prior to
the conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation (each, a "CHANGE OF CONTROL TRANSACTION"), then the holders of
Series A Preferred Stock shall thereafter have the right to receive upon
conversion of the Series A Preferred Stock, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the holders of Series A Preferred Stock would have been entitled to
receive in such transaction had the Series A Preferred Stock been converted in
full immediately prior to such transaction (without regard to any limitations on
conversion contained herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the holders of Series A
Preferred Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the number
of shares of Common Stock issuable upon conversion of the Series A Preferred
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion
of Series A Preferred Stock. The Corporation shall not effect any transaction
described in this subsection (b) unless (a) it first gives, to the extent
practical, thirty (30) days' prior written notice (but in any event at least
fifteen (15) business days prior written notice) of the record date of the
special meeting of stockholders to approve, or if there is no such record date,
the consummation of, such Change of Control Transaction (during which time the
holders of Series A Preferred Stock shall be entitled to convert the Series A
Preferred Stock) and (b) the resulting successor or acquiring entity (if not the
Corporation) and, if an entity different from the successor or acquiring entity,
the entity whose capital stock or assets the holders of the Common Stock are
entitled to receive as a result of such Change of Control Transaction (each, a
"SUCCESSOR ENTITY"), assumes by written instrument the obligations under this
Article V.A(d) of the Articles of Incorporation (including this subsection (b)).
The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.

                                     - 15 -
<PAGE>   16

                     (c) ADJUSTMENT DUE TO DISTRIBUTION. Subject to Section III,
if the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a
"DISTRIBUTION"), then the holders of Series A Preferred Stock shall be entitled,
upon any conversion of shares of Series A Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.

                     (d) PURCHASE RIGHTS. Subject to Section III, if at any time
when any Series A Preferred Stock is issued and outstanding, the Corporation
issues any convertible securities or rights to purchase stock, warrants,
securities or other property (the "PURCHASE RIGHTS") pro rata to the record
holders of any class of Common Stock, then the holders of Series A Preferred
Stock will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
complete conversion of the Series A Preferred Stock (without regard to any
limitations on conversion contained herein) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.

                     (e) ADJUSTMENT FOR RESTRICTED PERIODS. In the event that
(i) the Corporation fails to obtain effectiveness with the SEC of any
Registration Statement required to be filed pursuant to the Registration Rights
Agreement on or prior to the date on which such Registration Statement is
required to become effective pursuant to the terms of the Registration Rights
Agreement, or (ii) any such Registration Statement after its initial
effectiveness and during the Registration Period (as defined in the Registration
Rights Agreement) lapses in effect, or sales of all the Registrable Securities
otherwise cannot be made thereunder, whether by reason of the Corporation's
failure or inability to amend or supplement the prospectus (the "PROSPECTUS")
included therein in accordance with the Registration Rights Agreement or
otherwise, after such Registration Statement becomes effective (including,
without limitation, during an Allowed Delay (as defined in Section 3(f) of the
Registration Rights Agreement)) (each of such events described in clauses (i)
and (ii) being referred to as an "EXTENDED LOOKBACK EVENT"), then, at the
election of each holder of Series A Preferred Stock exercisable with respect to
any Optional Conversion occurring within twenty-two (22) Trading Days after the
end of the Extended Pricing Period (as defined below), the Pricing Period shall
be comprised of, (x) in the case of an event described in clause (i), the
twenty-two (22) Trading Days preceding the date on which such Registration
Statement is required to become effective pursuant to the terms of the
Registration Rights Agreement, plus all Trading Days through and including the
fifth (5th) Trading Day following the date of actual effectiveness of such
Registration Statement; and (y) in the case of an event described in clause
(ii), the twenty-two

                                     - 16 -
<PAGE>   17

(22) Trading Days preceding the date on which the holder of the Series A
Preferred Stock is first notified that sales may not be made under the
Prospectus, plus all Trading Days through and including the fifth (5th) Trading
Day following the date on which the Holder is first notified that such sales may
again be made under the Prospectus (each of such periods referred to in (x) and
(y) being defined as an "EXTENDED PRICING PERIOD"). If a holder of Series A
Preferred Stock determines that sales may not be made pursuant to the Prospectus
(whether by reason of the Corporation's failure or inability to amend or
supplement the Prospectus or otherwise) it shall so notify the Corporation in
writing and, unless the Corporation provides such holder with a written opinion
of the Corporation's counsel to the contrary, such determination shall be
binding for purposes of this paragraph. In the event that an Extended Lookback
Event occurs during the Extended Pricing Period with respect to any other
Extended Lookback Event, the Extended Pricing Periods shall be cumulative.

                     (f) ADJUSTMENT OF FIXED CONVERSION PRICE. If, during the
twelve (12) month period following the Issue Date (or, if later, until the
effective date of the Registration Statement required to be filed pursuant to
Section 2(a) of the Registration Rights Agreement), the Corporation issues or
sells, or in accordance with Section VI.C(f)(i) of Article V.A(d) of the
Articles of Incorporation is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Fixed Conversion Price in effect on the date
of such issuance (or deemed issuance) of such shares of Common Stock (a
"DILUTIVE ISSUANCE"), then immediately upon the Dilutive Issuance, the Fixed
Conversion Price will be reduced to the amount of the consideration per share
received by the Corporation in such Dilutive Issuance.

                         (i) EFFECT ON FIXED CONVERSION PRICE OF CERTAIN EVENTS.
For purposes of determining the Fixed Conversion Price under Section VI.C(f) of
Article V.A(d) of the Articles of Incorporation, the following will be
applicable:

                  A. ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Fixed Conversion Price then in effect, then the Fixed
Conversion Price shall be equal to such price per share. For purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
the exercise of such Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming

                                     - 17 -
<PAGE>   18

full conversion of Convertible Securities, if applicable). No further adjustment
to the Fixed Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.

                  B. ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options), and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Fixed Conversion Price then in
effect, then the Fixed Conversion Price shall be equal to such price per share.
For the purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Corporation
as consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to the Fixed
Conversion Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.

                  C. CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Corporation upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Fixed Conversion Price in effect at the time of such change will
be readjusted to the Fixed Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.

                  D. TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Fixed Conversion Price then in effect will be readjusted to the
Fixed 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 (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.

                  E. CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes hereof will be the amount received
by the Corporation therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid

                                     - 18 -
<PAGE>   19

or incurred by the Corporation in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Corporation will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation will be the Market Value (as defined below) thereof as of the date
of receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection with any acquisition, merger or consolidation in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined in good faith
by the Board of Directors of the Corporation.

                  F. EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. No adjustment
to the Fixed Conversion Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the Issue Date, (ii) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee benefit plan of the
Corporation now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the independent
members of the Board of Directors of the Corporation or a majority of the
members of a committee of independent directors established for such purpose; or
(iii) upon the conversion of the Series A Preferred Stock.

                         (ii) DEFINITION OF MARKET VALUE. "MARKET VALUE," for
any security as of any date, (i) means the average of the last reported sale
prices for such security on the NNM for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the NNM is not the
principal trading market for such security, the average of the last reported
sale prices on the principal trading market for such security during the same
period as reported by Bloomberg, or (iii) if market value cannot be calculated
as of such date on any of the foregoing bases, the Market Price shall be the
fair market value as reasonably determined in good faith by (a) the Board of
Directors of the Corporation or (b) at the option of a majority of the holders
of the then outstanding shares of Series A Preferred Stock, by an independent
investment bank of nationally recognized standing in the valuation of businesses
similar to the business of the issuing corporation.

                  D. MECHANICS OF CONVERSION. In order to convert Series A
Preferred Stock into full shares of Common Stock, a holder of Series A Preferred
Stock shall: (i) submit a copy of the fully executed notice of conversion in the
form attached hereto as Exhibit A ("NOTICE OF CONVERSION") to the Corporation by
facsimile dispatched prior to Midnight, New York City time (the "CONVERSION
NOTICE DEADLINE"), on the date specified therein as the Conversion Date (as
defined in Section VI.D(d) of Article V.A(d) of the Articles of Incorporation)
(or by other means resulting in, or reasonably expected to result in, notice to
the Corporation on the Conversion Date) to the office of the Corporation or its
designated Transfer Agent for the Series A Preferred Stock, which notice shall
specify the number of shares of Series A Preferred Stock to be converted, the
applicable Conversion Price and a calculation of the number of shares of Common

                                     - 19 -
<PAGE>   20

Stock issuable upon such conversion (together with a copy of the first page of
each certificate to be converted); and (ii) surrender the original certificates
representing the Series A Preferred Stock being converted (the "PREFERRED STOCK
CERTIFICATES"), duly endorsed, along with a copy of the Notice of Conversion to
the office of the Corporation or the Transfer Agent for the Series A Preferred
Stock as soon as practicable thereafter. The Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion, unless either the Preferred Stock Certificates are delivered to the
Corporation or its Transfer Agent as provided above, or the holder notifies the
Corporation or its Transfer Agent that such certificates have been lost, stolen
or destroyed (subject to the requirements of subparagraph (a) below). In the
case of a dispute as to the calculation of the Conversion Price, the Corporation
shall promptly issue such number of shares of Common Stock that are not disputed
in accordance with subparagraph (b) below. The Corporation shall submit the
disputed calculations to its outside accountant via facsimile within two (2)
business days of receipt of the Notice of Conversion. The accountant shall audit
the calculations and notify the Corporation and the holder of the results no
later than 48 hours from the time it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive absent manifest error.

                  (a) LOST OR STOLEN CERTIFICATES. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series A Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.

                  (b) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the
surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (a) above)
(the "DELIVERY PERIOD"), deliver (or cause its Transfer Agent to so issue and
deliver) in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirements of Section
2(g) of the Purchase Agreement) to or upon the order of the holder (i) that
number of shares of Common Stock for the portion of the shares of Series A
Preferred Stock converted as shall be determined in accordance herewith and (ii)
a certificate representing the balance of the shares of Series A Preferred Stock
not converted, if any. In addition to any other remedies available to the
holder, including actual damages and/or equitable relief, the Corporation shall
pay to a holder $2,000 per business day in cash for each day beyond a two (2)
business day grace period following the Delivery Period that the Corporation
fails to deliver Common Stock (a "DELIVERY DEFAULT") issuable upon surrender of
shares of Series A Preferred Stock with a Notice of Conversion until such time
as the Corporation has delivered all such Common Stock (the "DELIVERY DEFAULT
PAYMENTS"). Such Delivery Default Payments shall be paid to such holder by the
fifth day of the month following the month in which it has accrued or, at the
option of the holder (by written notice to the Corporation by the first day of
the month following the month in which it has accrued), shall be convertible
into Common Stock in accordance with the terms of this Section VI of Article
V.A(d) of the Articles of Incorporation.

                                     - 20 -
<PAGE>   21

         In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Corporation's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the holder and its compliance with
the provisions contained in Section VI.A of Article V.A(d) of the Articles of
Incorporation and in this Section VI.D of Article V.A(d) of the Articles of
Incorporation, the Corporation shall use its best efforts to cause its Transfer
Agent to electronically transmit the Common Stock issuable upon conversion to
the holder by crediting the account of holder's Prime Broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for
delivery and penalties described in the immediately preceding paragraph shall
apply to the electronic transmittals described herein.

                  (c) NO FRACTIONAL SHARES. If any conversion of Series A
Preferred Stock would result in a fractional share of Common Stock or the right
to acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon Conversion of
the Series A Preferred Stock shall be the next higher number of shares.

                  (d) CONVERSION DATE. The "CONVERSION DATE" shall be the date
specified in the Notice of Conversion, provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Corporation or its Transfer Agent before Midnight,
New York City time, on the date so specified, otherwise the Conversion Date
shall be the first business day after the date so specified on which the Notice
of Conversion is actually received by the Corporation or its Transfer Agent. The
person or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such securities as of the Conversion Date and all rights with respect to the
shares of Series A Preferred Stock surrendered shall forthwith terminate except
the right to receive the shares of Common Stock or other securities or property
issuable on such conversion and except that the holders preferential rights as a
holder of Series A Preferred Stock shall survive to the extent the Corporation
fails to deliver such securities.

         E. RESERVATION OF SHARES. A number of shares of the authorized but
unissued Common Stock sufficient to provide for the conversion of the Series A
Preferred Stock outstanding (based on the lesser of the Variable Conversion
Price and the Fixed Conversion Price in effect from time to time) shall at all
times be reserved by the Corporation, free from preemptive rights, for such
conversion or exercise. As of the date of issuance of the Series A Preferred
Stock, 2,500,000 authorized and unissued shares of Common Stock have been duly
reserved for issuance upon conversion of the Series A Preferred Stock (the
"RESERVED AMOUNT"). The Reserved Amount shall be increased from time to time in
accordance with the Corporation's obligations pursuant to Section 4(h) of the
Purchase Agreement. In addition, if the Corporation shall issue any securities
or make any change in its capital structure which would change the number of
shares of Common Stock into which each share of the Series A Preferred Stock
shall be convertible, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and

                                     - 21 -
<PAGE>   22

reserved, free from preemptive rights, for conversion of the outstanding Series
A Preferred Stock.

         If at any time a holder of shares of Series A Preferred Stock submits a
Notice of Conversion, and the Corporation does not have sufficient authorized
but unissued shares of Common Stock available to effect such conversion in
accordance with the provisions of this Section VI of Article V.A(d) of the
Articles of Incorporation (a "CONVERSION DEFAULT"), subject to Section X of
Article V.A(d) of the Articles of Incorporation, the Corporation shall issue to
the holder all of the shares of Common Stock which are available to effect such
conversion. The number of shares of Series A Preferred Stock included in the
Notice of Conversion which exceeds the amount which is then convertible into
available shares of Common Stock (the "EXCESS AMOUNT") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by the holder in respect thereof. The Corporation shall
use its best efforts to effect an increase in the authorized number of shares of
Common Stock as soon as possible following the earlier of (i) such time that a
holder of Series A Preferred Stock notifies the Corporation or that the
Corporation otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof and
(ii) a Conversion Default. In addition, the Corporation shall pay to the holder
payments ("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in the amount
of (a) .24, multiplied by (b) the sum of the Stated Value plus the Premium
Amount per share of Series A Preferred Stock held by such holder through the
Authorization Date (as defined below), multiplied by (c) (N/365), where N = the
number of days from the day the holder submits a Notice of Conversion giving
rise to a Conversion Default (the "CONVERSION DEFAULT DATE") to the date (the
"AUTHORIZATION DATE") that the Corporation authorizes a sufficient number of
shares of Common Stock to effect conversion of the full number of shares of
Series A Preferred Stock. The Corporation shall send notice to the holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of holder's accrued Conversion Default Payments. The accrued
Conversion Default Payment for each calendar month shall be paid in cash or
shall be convertible into Common Stock at the applicable Conversion Price, at
the holder's option, as follows:

                  (a) In the event the holder elects to take such payment in
cash, cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and

                  (b) In the event the holder elects to take such payment in
Common Stock, the holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of Conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Section VI of Article V.A(d) of the Articles
of Incorporation (so long as there is then a sufficient number of authorized
shares of Common Stock).

                                     - 22 -
<PAGE>   23

                  The holder's election shall be made in writing to the
Corporation at any time prior to 5:00 p.m, New York City Time, on the third
(3rd) day of the month following the month in which Conversion Default payments
have accrued. If no election is made, the holder shall be deemed to have elected
to receive cash. Nothing herein shall limit the holder's right to pursue actual
damages (to the extent in excess of the Conversion Default Payments) for the
Corporation's failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance and/or
injunctive relief).

                  F. NOTICE OF CONVERSION PRICE ADJUSTMENTS. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section VI of Article V.A(d) of the Articles of Incorporation, the Corporation,
at its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of a share of
Series A Preferred Stock.

                  G. STATUS AS STOCKHOLDERS. Upon submission of a Notice of
Conversion by a holder of Series A Preferred Stock, (i) the shares covered
thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such holder's allocated portion of the Reserved Amount or
Maximum Share Amount) shall be deemed converted into shares of Common Stock and
(ii) the holder's rights as a holder of such converted shares of Series A
Preferred Stock shall cease and terminate, excepting only the right to receive
certificates for such shares of Common Stock and to any remedies provided herein
or otherwise available at law or in equity to such holder because of a failure
by the Corporation to comply with the terms of this Article V.A(d) of the
Articles of Incorporation. Notwithstanding the foregoing, if a holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of shares of Series A Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series A Preferred Stock with respect to such unconverted shares
of Series A Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series A Preferred Stock to the holder or, if
such shares of Series A Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Series A Preferred Stock have not been
converted. In all cases, the holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive Delivery Default
Payments pursuant to Section VI.E of Article V.A(d) of the Articles of
Incorporation to the extent required thereby for such Delivery Default and any
subsequent Delivery Default and (ii) the right to have the Conversion Price with
respect to subsequent conversions determined in accordance with Section VI.E.of
Article V.A(d) of the Articles of Incorporation) for the Corporation's failure
to convert the Series A Preferred Stock.

                                     - 23 -
<PAGE>   24

                               VII. MATURITY DATE

         Each share of Series A Preferred Stock issued and outstanding (or not
subject to a Notice of Conversion submitted with respect thereto) at 5:00 p.m.,
Eastern Standard Time, on April 17, 2003 (the "MATURITY DATE"), shall be
redeemed by the Corporation for an amount in cash equal to the Liquidation
Preference. At the option of the holders of a majority of the Series A Preferred
Stock outstanding, exercisable by the delivery of written notice to the
Corporation prior to April 17, 2003, the Maturity Date shall be delayed by one
(1) Trading Day for each Trading Day occurring prior thereto and prior to the
full conversion of the Series A Preferred Stock that (i) any Registration
Statement required to be filed and to be effective pursuant to the Registration
Rights Agreement is not effective or sales of all of the Registrable Securities
otherwise cannot be made thereunder during the Registration Period (as defined
in the Registration Rights Agreement) (whether by reason of the Corporation's
failure to properly supplement or amend the prospectus included therein in
accordance with the terms of the Registration Rights Agreement or otherwise),
(ii) any Mandatory Redemption Event or Trading Market Redemption Event exists,
without regard to whether any cure periods shall have run, or (iii) that the
Corporation is in breach of any of its obligations pursuant to Section 4(h) or
4(i) of the Purchase Agreement.

                              VIII. VOTING RIGHTS

         The holders of the Series A Preferred Stock have no voting power
whatsoever, except as otherwise provided by the CBCA, in this Section VIII of
Article V.A(d) of the Articles of Incorporation, and in Section IX of Article
V.A(d) of the Articles of Incorporation below.

         Notwithstanding the above, the Corporation shall provide each holder of
Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.

         To the extent that under the CBCA the vote of the holders of the Series
A Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a

                                     - 24 -
<PAGE>   25

given action of the Corporation, the affirmative vote or consent of the holders
of at least a majority of the shares of the Series A Preferred Stock represented
at a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series A Preferred Stock (except as otherwise may be
required under the CBCA shall constitute the approval of such action by the
class. To the extent that under the CBCA holders of the Series A Preferred Stock
are entitled to vote on a matter with holders of Common Stock, voting together
as one class, each share of Series A Preferred Stock shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it is
then convertible using the record date for the taking of such vote of
shareholders as the date as of which the Conversion Price is calculated. Holders
of the Series A Preferred Stock shall be entitled to notice of all shareholder
meetings or written consents (and copies of proxy materials and other
information sent to shareholders) with respect to which they would be entitled
to vote, which notice would be provided pursuant to the Corporation's bylaws and
the CBCA.

                           IX. PROTECTIVE PROVISIONS

         So long as shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the CBCA) of the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock:

                  (a) alter, amend or repeal (whether by merger, consolidation
or otherwise) the rights, preferences or privileges of the Series A Preferred
Stock or any capital stock of the Corporation so as to affect adversely the
Series A Preferred Stock;

                  (b) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Section II of Article V.A(d) of the Articles of Incorporation, "SENIOR
SECURITIES");

                  (c) create any new class or series of capital stock ranking
pari passu with the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Section II of Article V.A(d) of the Articles of Incorporation, "PARI PASSU
SECURITIES");

                  (d) increase the authorized number of shares of Series A
Preferred Stock;

                  (e) issue any Senior Securities or Pari Passu Securities;

                  (f) increase the par value of the Common Stock, or

                  (g) do any act or thing not authorized or contemplated by this
Article V.A(d) of the Articles of Incorporation which would result in taxation
of the holders of shares of the Series A Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as

                                     - 25 -
<PAGE>   26

amended (or any comparable provision of the Internal Revenue Code as hereafter
from time to time amended).

         In the event holders of at least a majority of the then outstanding
shares of Series A Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series A Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series A Preferred
Stock, then the Corporation will deliver notice of such approved change to the
holders of the Series A Preferred Stock that did not agree to such alteration or
change (the "DISSENTING HOLDERS") and Dissenting Holders shall have the right
for a period of thirty (30) days to convert pursuant to the terms of this
Article V.A(d) of the Articles of Incorporation as they exist prior to such
alteration or change or continue to hold their shares of Series A Preferred
Stock.

                            X. PRO RATA ALLOCATIONS

         The Maximum Share Amount and the Reserved Amount (including any
increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series A Preferred Stock based on the number of shares of Series A
Preferred Stock issued to each holder. Each increase to the Maximum Share Amount
and the Reserved Amount shall be allocated pro rata among the holders of Series
A Preferred Stock based on the number of shares of Series A Preferred Stock held
by each holder at the time of the increase in the Maximum Share Amount or
Reserved Amount. In the event a holder shall sell or otherwise transfer any of
such holder's shares of Series A Preferred Stock, each transferee shall be
allocated a pro rata portion of such transferor's Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains allocated to any person or entity which does not hold any Series A
Preferred Stock shall be allocated to the remaining holders of shares of Series
A Preferred Stock, pro rata based on the number of shares of Series A Preferred
Stock then held by such holders.

                                  XI. REMEDIES

         The Corporation acknowledges that a breach by it of its obligations
under this Article V.A(d) of the Articles of Incorporation will cause
irreparable harm to each holder of Series A Preferred Stock by vitiating the
intent and purpose of the transactions contemplated hereby. Accordingly, the
Corporation acknowledges that the remedy at law for a breach of its obligations
under this Article V.A(d) of the Articles of Incorporation will be inadequate
and agrees, in the event of a breach or threatened breach by the Corporation of
the provisions of this Article V.A(d) of the Articles of Incorporation, that
each holder of Series A Preferred Stock shall be entitled, in addition to all
other available remedies in law or in equity, to any injunction or injunctions
to prevent or cure any breaches of the provisions of this Article V.A(d) of the
Articles of Incorporation and to enforce specifically the terms and provisions
of this Article V.A(d) of the Articles of Incorporation, without the necessity
of showing economic loss and without any bond or other security being required.

                                     - 26 -
<PAGE>   27

                  IN WITNESS WHEREOF, this Amendment is executed on behalf of
the Corporation this 17th day of April, 2000.

                                         T-NETIX, INC.

                                         By:
                                            ------------------------------------

                                                  Alvyn A. Schopp
                                                  Chief Executive Officer

                                     - 27 -
<PAGE>   28

                                                                       EXHIBIT A
                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder
                in order to Convert the Series A Preferred Stock)

         The undersigned hereby irrevocably elects to convert ______ shares of
Series A Preferred Stock, represented by stock certificate No(s). __________
(the "PREFERRED STOCK CERTIFICATES") into shares of common stock ("COMMON
STOCK") of T-NETIX, Inc., a Colorado corporation (the "CORPORATION"), according
to the conditions of the Amendment to the Articles of Incorporation relating to
the Series A Preferred Stock, as of the date written below. If securities are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates. No fee will be charged to the Holder for any
conversion, except for transfer taxes, if any. A copy of each Preferred Stock
Certificate is attached hereto (or evidence of loss, theft or destruction
thereof).

         The undersigned hereby irrevocably elects to convert $___________ in
Conversion Default Payments, $__________ in Delivery Default Payments and/or
$___________ in payments pursuant to Section 2(c) of the Registration Rights
Agreement at the Applicable Conversion Price set forth below.

         The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC
TRANSFER").

         Name of DTC Prime Broker:
         Account Number:
                         ---------------------------------------

[ ]      In lieu of receiving shares of Common Stock issuable pursuant to this
         Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
         requests that the Corporation issue a certificate or certificates for
         the number of shares of Common Stock set forth above (which numbers are
         based on the Holder's calculation attached hereto) in the name(s)
         specified immediately below or, if additional space is necessary, on an
         attachment hereto:

         Name:
              ---------------------------------------
         Address:
                 ------------------------------------

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

                                     - 28 -
<PAGE>   29

         The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Series A Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "ACT"), or pursuant
to an exemption from registration under the Act.

                  Date of Conversion:
                                      --------------------------------
                  Market Price Days:
                                     ---------------------------------
                  Applicable Conversion Price:
                                              ------------------------
                  Number of Shares of
                  Common Stock to be Issued pursuant to:
                  (i) Conversion of Series A Preferred Stock:

                  ----------------------------------------------------
                  (ii) Conversion of Conversion Default Payments, Delivery
                  Default Payments and/or payments pursuant to Section 2(c) of
                  the Registration Rights Agreement:

                  -----------------------------------------------------
                  Signature:
                            -------------------------------------------
                  Name:
                        -----------------------------------------------
                  Address:
                          ---------------------------------------------

*The Corporation is not required to issue shares of Common Stock until the
original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments pursuant to the Amendment to the Articles of Incorporation relating to
the Series A Preferred Stock for the number of business days such issuance and
delivery is late.

                                     - 29 -<PAGE>   1
                                                                     EXHIBIT 4.2

         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
         AGREEMENT DATED AS OF APRIL 17, 2000, NEITHER THIS WARRANT NOR ANY OF
         SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
         AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
         SUCH ACT.

                                                                  Right to
                                                                  Purchase
                                                                  340,909
                                                                  Shares of
                                                                  Common
                                                                  Stock, par
                                                                  value $0.01
                                                                  per share

                             STOCK PURCHASE WARRANT

                  THIS CERTIFIES THAT, for value received, RGC International
Investors, LDC or its registered assigns, is entitled to purchase from T-NETIX,
Inc., a Colorado corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, Three Hundred Forty Thousand,
Nine Hundred Nine (340,909) fully paid and nonassessable shares of the Company's
Common Stock, par value $0.01 per share (the "Common Stock"), at an exercise
price of $6.60 per share (the "Exercise Price"). The term "Warrant Shares," as
used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The term Warrants means this Warrant and the other warrants
issued pursuant to that certain Securities Purchase Agreement, dated April 17,
2000, by and among the Company and the Buyers listed on the execution page
thereof (the "Securities Purchase Agreement").

                  This Warrant is subject to the following terms, provisions,
and conditions:

                  1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. Subject to the provisions hereof, this Warrant may be exercised by the
holder hereof, in whole or

<PAGE>   2

in part, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"), to the Company
during normal business hours on any trading day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), and upon (i) payment to the Company
in cash, by certified or official bank check or by wire transfer for the account
of the Company of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement or (ii) if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), delivery to the
Company of a written notice of an election to effect a "Cashless Exercise" (as
defined in Section 11(c) below) for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such shares (or an election to effect a
Cashless Exercise has been made) as set forth above. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding two (2) trading days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.

                  Notwithstanding anything in this Warrant to the contrary, in
no event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the shares of Series A Preferred Stock (as
defined in the Securities Purchase Agreement)) subject to a limitation on
conversion or exercise analogous to the limitation contained herein) and (ii)
the number of shares of Common Stock issuable upon exercise of the Warrants (or
portions thereof) with respect to which the determination described herein is
being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (i) hereof. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.

                                       2

<PAGE>   3

                  2. PERIOD OF EXERCISE. This Warrant is exercisable at any time
or from time to time on or after the date on which this Warrant is issued and
delivered pursuant to the terms of the Securities Purchase Agreement (the "Issue
Date") and before 5:00 p.m., New York City time, on the fifth (5th) anniversary
of the Issue Date (the "Exercise Period").

                  3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:

                           (a) SHARES TO BE FULLY PAID. All Warrant Shares will,
upon issuance in accordance with the terms of this Warrant, be validly issued,
fully paid, and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof.

                           (b) RESERVATION OF SHARES. During the Exercise
Period, the Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number of shares
of Common Stock to provide for the exercise of this Warrant.

                           (c) LISTING. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of the Warrant upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.

                           (d) CERTAIN ACTIONS PROHIBITED. The Company will not,
by amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.

                           (e) SUCCESSORS AND ASSIGNS. This Warrant will be
binding upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.

                                       3

<PAGE>   4

                  4. ANTIDILUTION PROVISIONS. During the Exercise Period, the
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.

                  In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise Price shall be
rounded up to the nearest cent.

                           (a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
UPON ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c)
and 4(e) hereof, if and whenever on or after the Issue Date of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (or deemed
issuance) of such Common Stock (a "Dilutive Issuance"), then immediately upon
the Dilutive Issuance, the Exercise Price will be reduced to a price determined
by multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.

                           (b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Exercise Price under Paragraph 4(a) hereof,
the following will be applicable:

                                (i) ISSUANCE OF RIGHTS OR OPTIONS. If the
Company in any manner issues or grants any warrants, rights or options, whether
or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the

                                       4

<PAGE>   5

conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

                                (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance of such Convertible Securities, then the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.

                                (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE.
If there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.

                                (iv) TREATMENT OF EXPIRED OPTIONS AND
UNEXERCISED CONVERTIBLE SECURITIES. If, in any case, the total number of shares
of Common Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to convert or exchange such Convertible Securities shall
have expired or terminated, the Exercise Price then in effect will be readjusted
to the Exercise 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 (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.

                                       5

<PAGE>   6

                                (v) CALCULATION OF CONSIDERATION RECEIVED. If
any Common Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this Warrant will
be the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.

                                (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE.
No adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.

                           (c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If
the Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares of
Common Stock acquirable hereunder into a greater number of shares, then, after
the date of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.

                           (d) ADJUSTMENT IN NUMBER OF SHARES. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph 4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.

                                       6

<PAGE>   7

                           (e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor or acquiring entity (if other than the Company) and, if
an entity different from the successor or acquiring entity, the entity whose
capital stock or assets the holders of the Common Stock of the Company are
entitled to receive as a result of such consolidation, merger or sale or
conveyance assumes by written instrument the obligations under this Warrant
(including under this Paragraph 4) and the obligations to deliver to the holder
of this Warrant such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the holder may be entitled to acquire.

                           (f) DISTRIBUTION OF ASSETS. In case the Company shall
declare or make any distribution of its assets (including cash) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

                           (g) NOTICE OF ADJUSTMENT. Upon the occurrence of any
event which requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares purchasable at such
price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.

                           (h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No
adjustment of the Exercise Price shall be made in an amount of less than 1% of
the Exercise Price in effect at the time such adjustment is otherwise required
to be made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment

                                       7

<PAGE>   8

which, together with any adjustments so carried forward, shall amount to not
less than 1% of such Exercise Price.

                           (i) NO FRACTIONAL SHARES. No fractional shares of
Common Stock are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.

                           (j) OTHER NOTICES. In case at any time:

                                (i) the Company shall declare any dividend upon
the Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;

                                (ii) the Company shall offer for subscription
pro rata to the holders of the Common Stock any additional shares of stock of
any class or other rights;

                                (iii) there shall be any capital reorganization
of the Company, or reclassification of the Common Stock, or consolidation or
merger of the Company with or into, or sale of all or substantially all its
assets to, another corporation or entity; or

                                (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

                           (k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.

                                       8

<PAGE>   9

                           (l) CERTAIN DEFINITIONS.

                                (i) "COMMON STOCK DEEMED OUTSTANDING" shall mean
the number of shares of Common Stock actually outstanding (not including shares
of Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
maximum total number of shares of Common Stock issuable upon conversion or
exchange of Convertible Securities, as of the date of issuance of such
Convertible Securities, if any.

                                (ii) "MARKET PRICE," as of any date, (i) means
the average of the last reported sale prices for the shares of Common Stock on
the Nasdaq National Market (the "NNM") for the five (5) trading days immediately
preceding such date as reported by Bloomberg Financial Markets or an equivalent
reliable reporting service mutually acceptable to and hereafter designated by
the holder of this Warrant and the Company ("Bloomberg"), or (ii) if the NNM is
not the principal trading market for the shares of Common Stock, the average of
the last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good faith by
(a) the Board of Directors of the Corporation or (b) at the option of a
majority-in-interest of the holders of the outstanding Warrants, by an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.

                                (iii) "COMMON STOCK," for purposes of this
Paragraph 4, includes the Common Stock, par value $0.01 per share, and any
additional class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only shares of Common Stock, par value $0.01 per
share, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or other securities or
property provided for in such Paragraph.

                  5. ISSUE TAX. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of this Warrant.

                  6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No

                                       9

<PAGE>   10

provision of this Warrant, in the absence of affirmative action by the holder
hereof to purchase Warrant Shares, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

                  7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

                           (a) RESTRICTION ON TRANSFER. This Warrant and the
rights granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Paragraph 7(f) hereof and to the
applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
April 17, 2000, by and among the Company and the other signatories thereto (the
"Registration Rights Agreement").

                           (b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.

                           (c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

                           (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any,
incurred by the Holder or transferees) and charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this Paragraph
7.

                           (e) REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and

                                       10

<PAGE>   11

address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee and each prior owner of this Warrant.

                           (f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at
the time of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the case of any
exercise, the Warrant Shares issuable hereunder), shall not be registered under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may be,
furnish to the Company a written opinion of counsel, which opinion and counsel
are acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance acceptable
to the Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act; provided that no
such opinion, letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act. The
first holder of this Warrant, by taking and holding the same, represents to the
Company that such holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.

                  8. REGISTRATION RIGHTS. The initial holder of this Warrant
(and certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.

                  9. NOTICES. All notices, requests, and other communications
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have been furnished
to the Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 67 Inverness Drive East,
Suite 100, Englewood, Colorado 80112, Attention: Chief Executive Officer, or at
such other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.

                  10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE

                                       11

<PAGE>   12

APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY
CONSENT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND
THE STATE COURTS LOCATED IN DELAWARE WITH RESPECT TO ANY SUIT OR PROCEEDING
BASED ON OR ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE
DETERMINED IN SUCH COURTS. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A
FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY
OTHER LAWFUL MANNER.

                  11. MISCELLANEOUS.

                           (a) AMENDMENTS. This Warrant and any provision hereof
may only be amended by an instrument in writing signed by the Company and the
holder hereof.

                           (b) DESCRIPTIVE HEADINGS. The descriptive headings of
the several paragraphs of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the provisions
hereof.

                           (c) CASHLESS EXERCISE. Notwithstanding anything to
the contrary contained in this Warrant, if the resale of the Warrant Shares by
the holder is not then registered pursuant to an effective registration
statement under the Securities Act, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number
of shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the then current Market Price per share of the
Common Stock and the Exercise Price, and the denominator of which shall be the
then current Market Price per share of Common Stock.

                                       12

<PAGE>   13

                           (d) REMEDIES. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the holder, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Warrant will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Warrant,
that the holder shall be entitled, in addition to all other available remedies
at law or in equity, to an injunction or injunctions restraining, preventing or
curing any breach of this Warrant and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss and without
any bond or other security being required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       13

<PAGE>   14

                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.

                                     T-NETIX, INC.

                                     By:
                                        ---------------------------------------
                                        Alvyn A. Schopp
                                        Chief Executive Officer

Dated as of April 17, 2000

                                       14

<PAGE>   15

                           FORM OF EXERCISE AGREEMENT

                                                     Dated:  ________ __, 200_

To:      T-NETIX, Inc.

                  The undersigned, pursuant to the provisions set forth in the
within Warrant, hereby agrees to purchase ________ shares of Common Stock
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by such Warrant in cash or by certified or official
bank check in the amount of, or, if the resale of such Common Stock by the
undersigned is not currently registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, by surrender of
securities issued by the Company (including a portion of the Warrant) having a
market value (in the case of a portion of this Warrant, determined in accordance
with Section 11(c) of the Warrant) equal to $_________. Please issue a
certificate or certificates for such shares of Common Stock in the name of and
pay any cash for any fractional share to:

Name:
     ---------------------------------------------

Signature:
          ----------------------------------------
Address:
          ----------------------------------------

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

                                    Note: The above signature should correspond
                                    exactly with the name on the face of the
                                    within Warrant.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.

                                       15

<PAGE>   16

                               FORM OF ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:

Name of Assignee                    Address                        No of Shares

, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.

Dated:  ________ __, 200_

In the presence of:

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

Name:
     ------------------------------------------------

Signature:
          -------------------------------------------

Title of Signing Officer or Agent (if any):

----------------------------------
Address:
        --------------------------------------------

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

                                    Note: The above signature should correspond
                                    exactly with the name on the face of the
                                    within Warrant.

                                       16

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