Document:

<PAGE>   1

                          ADVANCED VIRAL RESEARCH CORP.
                            PLACEMENT AGENT AGREEMENT

                                                 Dated as of: September 18, 2000

May Davis Group, Inc.
One World Trade Center - Suite 8735
New York, New York, 10048

Ladies and Gentlemen:

         The undersigned, Advanced Viral Research Corp. (the "Company"), hereby
agrees with May Davis Group, Inc. ("May Davis") as follows:

         1. OFFERING. The Company hereby engages May Davis to act as its
exclusive placement agent in a transaction involving the issuance and sale by
the Company (the "Offering") of the Company's Common Stock, $0.00001 par value
per share (the "Common Stock"), at a price per share equal to the Purchase
Price, as that term is defined in the Equity Line of Credit Agreement dated the
date hereof between the Company and the investor named therein ( the "Credit
Agreement"), for an aggregate price of $20,000,000. All capitalized terms used
herein and not otherwise defined shall have the same meaning ascribed to them as
in the Credit Agreement. The Investor will be granted certain registration
rights with respect to the Common Stock as more fully set forth in the
Registration Rights Agreement between the Company and the Investor dated the
date hereof, and May Davis will be granted common stock purchase warrants and
certain registration rights as described herein. The documents to be executed
and delivered in connection with the Offering, including but not limited to this
Agreement, the Credit Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent's Warrants (as hereinafter defined) and the
Placement Agent's Registration Rights Agreement (as hereinafter defined) are
referred to sometimes hereinafter collectively as the "Offering Materials." The
Company's Common Stock and the Placement Agent's Warrants are sometimes referred
to hereinafter collectively as the "Securities." May Davis shall not be
obligated to sell any Securities and this Offering by May Davis shall be solely
on a "best efforts basis." This engagement shall not prohibit the Company from
being involved in any other capital transaction not prohibited by the terms of
this engagement.

         2. INFORMATION.

         A. Upon the occurrence of each Closing, the funds received in respect
of the shares of Common Stock purchased by the Investor will be disbursed in
accordance with the terms of the Credit Agreement, net of (i) the commission
payable to May Davis, equal to five percent (5%) of the gross proceeds from the
sale of Common Stock, and (ii) legal fees and other expenses related thereto due
to May Davis's counsel.

<PAGE>   2

         B. In addition to the foregoing compensation, the Company shall issue
to May Davis upon the execution of the Credit Agreement the following: (i) a
warrant in substantially the form annexed hereto to purchase 5,000,000 shares of
Common Stock at an exercise price per share equal to the greater of $1.00 or
110% of the Bid Price of the Common Stock on the date of the execution of the
Credit Agreement, exercisable in part or in whole at any time by May Davis at
its discretion for a period of sixty (60) months from the date of issuance (the
"Class A Warrant"), and (ii) a warrant in substantially the same form annexed
hereto to purchase 5,000,000 shares of Common Stock at an exercise price equal
to the greater of $1.00 or 110% of the Bid Price of the Common Stock on the
applicable Advance Date, exercisable pro rata on the basis of the number of
shares of Common Stock issuable on each Advance Date for a period of sixty
months from the date of issuance (the "Class B Warrant"), (the Class A Warrant
and the Class B Warrant are referred to collectively as the "Placement Agent's
Warrants"). The Placement Agent's Warrants shall be issued to the individuals
and in the amounts set forth on Schedule A. The Company may redeem the Warrants
at a redemption price of $.01 per share provided that the Bid Price for the
Common Stock equals at least $4.00 per share for a period of ten (10)
consecutive Trading Days, as described in the Placement Agent's Warrants. May
Davis shall be entitled to certain "piggyback" registration rights with respect
to the shares of Common Stock issuable upon exercise of the Warrants pursuant to
a registration rights agreement in substantially the same form annexed hereto
(the "Placement Agent's Registration Rights Agreement").

         3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAY DAVIS.

         A. May Davis represents, warrants and covenants as follows:

                  (i) May Davis has the necessary power to enter into this
Agreement, the Placement Agent's Warrants, the Placement Agent's Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby.

                  (ii) The execution and delivery by May Davis of this
Agreement, the Placement Agent's Warrants, the Placement Agent's Registration
Rights Agreement and the consummation of the transactions contemplated herein
and therein will not result in any violation of, or be in conflict with, or
constitute a default under, any agreement or instrument to which May Davis is a
party or by which May Davis or its properties are bound, or any judgment,
decree, order or, to May Davis's knowledge, any statute, rule or regulation
applicable to May Davis. This Agreement, the Placement Agent's Warrants and the
Placement Agent's Registration Rights Agreement when executed and delivered by
May Davis, will constitute the legal, valid and binding obligations of May
Davis, enforceable in accordance with their respective terms, except to the
extent that (a) the enforceability hereof or thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect and affecting the rights of creditors generally, (b) the
enforceability hereof or thereof is subject to general principles of equity, or
(c) the indemnification provisions hereof or thereof may be held to violate
public policy.

                  (iii) Upon receipt of an executed Credit Agreement, a
Registration Rights Agreement and Escrow Agreement and the documents related
thereto, May Davis will, through the Escrow Agent, promptly forward executed
copies of the Credit Agreement, Registration Rights Agreement and Escrow
Agreement and the documents related thereto to the Company or its counsel.

                                       2
<PAGE>   3

                  (iv) May Davis will not deliver any documents related to the
Offering to any person it does not reasonably believe to be an Accredited
Investor based upon documentary evidence thereof, where appropriate.

                  (v) May Davis will not intentionally take any action that it
reasonably believes would cause the Offering to violate the provisions of the
1933 Act, the 1934 Act, the respective rules and regulations promulgated
thereunder (the "Rules and Regulations") or applicable "Blue Sky" laws of any
state or jurisdiction.

                  (vi) May Davis shall use all reasonable efforts to determine
(a) whether the Investor is an Accredited Investor and (b) that any information
furnished by the Investor is true and accurate. May Davis shall have no
obligation to insure that (x) any check, note, draft or other means of payment
for the Common Stock will be honored, paid or enforceable against the Investor
in accordance with its terms, or (y) subject to the performance of May Davis's
obligations and the accuracy of May Davis's representations and warranties
hereunder, the Offering is exempt from the registration requirements of the 1933
Act or any applicable state "Blue Sky" law.

                  (vii) May Davis is a member of the National Association of
Securities Dealers, Inc., and is a broker-dealer registered as such under the
1934 Act and under the securities laws of the states in which the Securities
will be offered or sold by May Davis, unless an exemption for such state
registration is available to May Davis. May Davis is in compliance with all
material rules and regulations applicable to May Davis generally and applicable
to May Davis's participation in the Offering.

         4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         A. The Company represents and warrants as follows:

                  (i) The execution, delivery and performance of each of this
Agreement, the Credit Agreement, the Escrow Agreement, the Placement Agent's
Registration Rights Agreements, the Placement Agent's Warrants and the
Investor's Registration Rights Agreement has been or will be duly and validly
authorized by the Company and is, or with respect to this Agreement, the Credit
Agreement, the Escrow Agreement, the Placement Agent's Registration Rights
Agreements, the Placement Agent's Warrants and the Investor's Registration
Rights Agreement will be, a valid and binding agreement of the Company,
enforceable in accordance with its respective terms, except to the extent that
(a) the enforceability hereof or thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, (b) the enforceability
hereof or thereof is subject to general principles of equity or (c) the
indemnification provisions hereof or thereof may be held to violate public
policy. The Securities to be issued pursuant to the transactions contemplated by
this Agreement, the Credit Agreement and the Placement Agent's Warrants have
been duly authorized and, when issued and paid for in accordance with (x) this
Agreement, the Credit Agreement and the Placement Agent's Warrants and the
certificates/instruments representing such Securities, (y) will be valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except to the extent that (1) the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, and
(2) the enforceability thereof is subject to general principles of equity. All
corporate action

                                       3
<PAGE>   4

required to be taken for the authorization, issuance and sale of the Securities
has been duly and validly taken by the Company.

                  (ii) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Credit Agreement. The Company is not a party
to or bound by any instrument, agreement or other arrangement providing for it
to issue any capital stock, rights, warrants, options or other securities,
except for this Agreement and the agreements described herein and as described
in the Credit Agreement. All issued and outstanding securities of the Company,
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission or preemptive
rights with respect thereto and are not subject to personal liability solely by
reason of being security holders; and none of such securities was issued in
violation of the preemptive rights of any holders of any security of the
Company. The Company has 1,000,000,000 shares of authorized Common Stock,
360,841,465 of which will be issued and outstanding as of the date hereof.

                  (iii) The Common Stock has been duly authorized and when
issued and paid for in accordance with the this Agreement, the Credit Agreement,
the Placement Agent's Warrants and the certificates/instruments representing
such Common Stock, will be validly issued, fully-paid and non-assessable; the
holders thereof will not be subject to personal liability solely by reason of
being such holders; such securities are not and will not be subject to the
preemptive rights of any holder of any security of the Company.

                  (iv) The Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal property
necessary to conduct its business (including, without limitation any real or
personal property stated in the Offering Materials to be owned or leased by the
Company), free and clear of all liens, encumbrances, claims, security interests
and defects of any material nature whatsoever, other than those set forth in the
Offering Materials and liens for taxes not yet due and payable.

                  (v) Except as set forth on Schedule 4A(v), there is no
litigation or governmental proceeding pending or, to the best of the Company's
knowledge, threatened against, or involving the properties or business of the
Company, except as set forth in the Offering Materials.

                  (vi) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. Except as set forth in the Offering Materials, the Company does not
own or control, directly or indirectly, an interest in any other corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction in which the character of its operations requires such
qualification or licensing and where failure to so qualify would have a material
adverse effect on the Company. The Company has all requisite corporate power and
authority, and all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies (domestic and foreign) to conduct its businesses (and
proposed business) as described in the Offering Materials, and the Company is
doing business in strict compliance with all such authorizations, approvals,
orders, licenses, certificates and permits and all foreign, federal, state and
local laws, rules and regulations concerning the business in which it is
engaged. Any disclosures in the Offering Materials concerning the effects of
foreign, federal, state and local regulation on the Company's businesses

                                       4
<PAGE>   5

as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact. The Company has all corporate power
and authority to enter into this Agreement, the Credit Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent's
Warrants and the Placement Agent's Registration Rights Agreement to carry out
the provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection herewith and
therewith have been obtained. No consent, authorization or order of, and no
filing with, any court, government agency or other body is required by the
Company for the issuance of the Securities or execution and delivery of the
Credit Agreement, Registration Rights Agreement, the Escrow Agreement, the
Placement Agent's Warrants and the Placement Agent's Registration Rights
Agreement except for applicable federal and state securities laws. The Company,
in the last three years, has not incurred any liability arising under or as a
result of the application of any of the provisions of the 1933 Act, the 1934 Act
or the Rules and Regulations.

                  (vii) There has been no material adverse change in the
condition or prospects of the Company, financial or otherwise, from the latest
dates as of which such condition or prospects, respectively, are set forth in
the Offering Materials, and the outstanding debt, the property and the business
of the Company conform in all material respects to the descriptions thereof
contained in the Offering Materials.

                  (viii) Except as set forth in the Offering Materials, the
Company is not in breach of, or in default under, any term or provision of any
material indenture, mortgage, deed of trust, lease, note, loan or credit
agreement or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which it is
a party or by which it or any of its properties may be bound or affected. The
Company is not in violation of any provision of its charter or by-laws (other
than the obligation to hold annual meetings of its shareholders and related
matters) or in violation of any franchise, license, permit, judgment, decree or
order, or in violation of any statute, rule or regulation. Neither the execution
and delivery of this Agreement, the Credit Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Placement Agent's Warrants, the Placement
Agent's Registration Rights Agreement nor the issuance and sale or delivery of
the Securities, nor the consummation of any of the transactions contemplated
herein or in the Credit Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent's Warrants, or the Placement Agent's Registration
Rights Agreement, nor the compliance by the Company with the terms and
provisions hereof or thereof, has conflicted with or will conflict with, or has
resulted in or will result in a breach of, any of the terms and provisions of,
or has constituted or will constitute a default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company may be bound or to which any
of the property or assets of the Company is subject except (a) where such
default, lien, charge or encumbrance would not have a material adverse effect on
the Company and (b) as described in the Offering Materials; nor will such action
result in any violation of the provisions of the charter or the by-laws of the
Company or, assuming the due performance by May Davis of its obligations
hereunder, any statute or any order, rule or regulation applicable to the
Company of any court or of any foreign, federal, state or other regulatory
authority or other government body having jurisdiction over the Company.

                                       5
<PAGE>   6

                  (ix) Subsequent to the dates as of which information is
given in the Offering Materials, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (a) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed money,
or (b) entered into any transaction other than in the ordinary course of
business, or (c) declared or paid any dividend or made any other distribution on
or in respect of its capital stock. Except as described in the Offering
Materials, the Company has no outstanding obligations to any officer or director
of the Company.

                  (x) There are no claims for services in the nature of a
finder's or origination fee with respect to the sale of the Common Stock or any
other arrangements, agreements or understandings that may affect May Davis's
compensation, as determined by the National Association of Securities Dealers,
Inc.

                  (xi) Except as set froth on Schedule 4A(v), the Company owns
or possesses, free and clear of all liens or encumbrances and rights thereto or
therein by third parties, the requisite licenses or other rights to use all
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses necessary to conduct its business (including,
without limitation, any such licenses or rights described in the Offering
Materials as being owned or possessed by the Company) and, except as set forth
in the Offering Materials, there is no claim or action by any person pertaining
to, or proceeding, pending or threatened, which challenges the exclusive rights
of the Company with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses used in
the conduct of the Company's businesses (including, without limitation, any such
licenses or rights described in the Offering Materials as being owned or
possessed by the Company) except any claim or action that would not have a
material adverse effect on the Company; the Company's current products, services
or processes do not infringe or will not infringe on the patents currently held
by any third party.

                  (xii) Except as described in the Offering Materials, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications, licenses
or technology it has developed, uses, employs or intends to use or employ, other
than to their respective licensors.

                  (xiii) Subject to the performance by May Davis of its
obligations hereunder, the Credit Agreement and the offer and sale of the
Securities comply, and will continue to comply, up to the Commitment Period in
all material respects with the requirements of Rule 506 of Regulation D
promulgated by the SEC pursuant to the 1933 Act and any other applicable federal
and state laws, rules, regulations and executive orders. Neither the Offering
Materials nor any amendment or supplement thereto nor any documents prepared by
the Company in connection with the Offering will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All statements of material facts in the
Offering Materials are true and correct as of the date of the Offering Materials
and will be true and correct on the date of the Closing.

                                       6
<PAGE>   7

                  (xiv) All taxes which are due and payable from the Company
have been paid in full and the Company does not have any tax deficiency or claim
outstanding assessed or proposed against it.

                  (xv) None of the Company nor any of its officers, directors,
employees or agents, nor any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (A) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Offering Materials, or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.

         5. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY.

         The Company covenants and agrees at its expense and without any expense
to May Davis as follows:

         A. To advise May Davis of any material adverse change in the Company's
financial condition, prospects or business or of any development materially
affecting the Company or rendering untrue or misleading any material statement
in the Offering Materials occurring at any time prior to any Advance Date as
soon as the Company is either informed or becomes aware thereof.

         B. To use its best efforts to cause the Common Stock issuable in
connection with the Credit Agreement and upon exercise of the Placement Agent's
Warrants to be qualified or registered for sale on terms consistent with those
stated in the Investor's Registration Rights Agreement and the Placement Agent's
Registration Rights Agreement, respectively, and under the securities laws of
such jurisdictions (up to 10) as May Davis and the Investor shall reasonably
request, provided that such states and jurisdictions do not require the Company
to qualify as a foreign corporation. Qualification, registration and exemption
charges and fees shall be at the sole cost and expense of the Company.

         C. Upon written request, to provide and continue to provide the to each
holder of Securities, copies of all quarterly financial statements and audited
annual financial statements prepared by or on behalf of the Company, other
reports prepared by or on behalf of the Company for public disclosure and all
documents delivered to the Company's stockholders.

         D. To deliver, during the Commitment Period, to May Davis, upon May
Davis's request, in the manner provided in Section 10(B) of this Agreement,
within forty five (45) days after the end of each of the first three quarters of
each fiscal year of the Company, commencing with the first quarter ending after
the Commitment Period, a statement of its income for each such quarterly period,
and its balance sheet and a statement of changes in stockholders' equity as of
the end of such quarterly

                                       7
<PAGE>   8

period, all in reasonable detail, certified by its principal financial or
accounting officer; (ii) within ninety (90) days after the close of each fiscal
year, its balance sheet as of the close of such fiscal year, together with a
statement of income, a statement of changes in stockholders' equity and a
statement of cash flow for such fiscal year, such balance sheet, statement of
income, statement of changes in stockholders' equity and statement of cash flow
to be in reasonable detail and accompanied by a copy of the certificate or
report thereon of independent auditors if audited financial statements are
prepared; and (iii) a copy of all documents, reports and information furnished
to its stockholders at the time that such documents, reports and information are
furnished to its stockholders.

         E. To comply with the terms of the Credit Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Placement Agent's Warrants and the
Placement Agent's Registration Rights Agreement.

         F. To keep available out of its authorized Common Stock solely for the
purpose of issuance upon the exercise of the Placement Agent's Warrant, such
number of shares of Common Stock as shall then be issuable upon the exercise or
conversion thereof.

         G. To issue to May Davis, or May Davis's designee, upon the execution
of the Credit Agreement, the Placement Agent Warrants to purchase 10,000,000
shares of Common Stock in the form substantially as annexed hereto.

         H. To ensure that any transactions between or among the Company, or any
of its officers, directors and affiliates be on terms and conditions that are no
less favorable to the Company, than the terms and conditions that would be
available in an "arm's length" transaction with an independent third party.

         6. INDEMNIFICATION.

                  A. The Company hereby agrees that it will indemnify and hold
May Davis and each officer, director, shareholder, employee or representative of
May Davis, and each person controlling, controlled by or under common control
with May Davis within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the SEC's rules and regulations promulgated thereunder (the
"Rules and Regulations"), harmless from and against any and all loss, claim,
damage, liability, cost or expense whatsoever (including, but not limited to,
any and all reasonable legal fees and other expenses and disbursements incurred
in connection with investigating, preparing to defend or defending any action,
suit or proceeding, including any inquiry or investigation, commenced or
threatened, or any claim whatsoever or in appearing or preparing for appearance
as a witness in any action, suit or proceeding, including any inquiry,
investigation or pretrial proceeding such as a deposition) to which May Davis or
such indemnified person of May Davis may become subject under the 1933 Act, the
1934 Act, the Rules and Regulations, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in (a)
Section 4 of this Agreement, (b) the Offering Materials (except those written
statements relating to May Davis given by an indemnified person for inclusion
therein), (c) any application or other document or written communication
executed by the Company or based upon written information furnished by the
Company filed in any

                                       8
<PAGE>   9

jurisdiction in order to qualify the Common Stock under the securities laws
thereof, or any state securities commission or agency; (ii) the omission or
alleged omission from documents described in clauses (a), (b) or (c) above of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Paragraph 6(A), any
such payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against May Davis or such indemnified person as a direct
result of May Davis or such person's gross negligence or willful misfeasance
will be promptly repaid to the Company.

         B. May Davis hereby agrees that it will indemnify and hold the Company
and each officer, director, shareholder, employee or representative of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations, harmless from and against any and all
loss, claim, damage, liability, cost or expense whatsoever (including, but not
limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Company or such indemnified person of the Company may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon (i) the conduct of May Davis or its officers, employees or
representatives in its acting as Placement Agent for the Offering or (ii) the
breach of any representation, warranty, covenant or agreement made by May Davis
in this Agreement.

         C. Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 6(A) or 6(B), the party to be
indemnified shall, within five (5) business days, notify the indemnifying party
of the commencement thereof; the omission by one indemnified party to so notify
the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 6(A) or 6(B) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, but the
indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other

                                       9
<PAGE>   10

statement to the contrary contained herein, the indemnified party or parties
shall have the right to choose its or their own counsel and control the defense
of any action, all at the expense of the indemnifying party if, (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action at the expense
of the indemnifying party, or (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying party; provided, however, that the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstance, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for all
such indemnified parties. No settlement of any action or proceeding against an
indemnified party shall be made without the consent of the indemnifying party.

         D. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 6(A) or 6(B)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and May Davis shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or defense of same) which the other may incur in such proportion so that May
Davis shall be responsible for such percent of the aggregate of such losses,
claims, damages and liabilities as shall equal the percentage of the gross
proceeds paid to May Davis and the Company shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 6(D), any person controlling, controlled by or under
common control with May Davis, or any partner, director, officer, employee,
representative or any agent of any thereof, shall have the same rights to
contribution as May Davis and each person controlling, controlled by or under
common control with the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act and each officer of the Company and each director
of the Company shall have the same rights to contribution as the Company. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against the other party under this
Section 6(D), notify such party from whom contribution may be sought, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any obligation they may have hereunder or
otherwise if the party from whom contribution may be sought is not materially
prejudiced thereby. The indemnity and contribution agreements contained in this
Section 6 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified person or any termination
of this Agreement.

                                       10
<PAGE>   11

         7. PAYMENT OF EXPENSES.

         The Company hereby agrees to bear all of the expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, postage and mailing expenses
with respect to the transmission of Offering Materials, registrar and transfer
agent fees, Escrow Agent fees and expenses, fees of the Company's counsel and
accountants, issue and transfer taxes, if any, and counsel fees and expenses
(such counsel fees not to exceed $35,000 plus out of pocket expenses).

         8. CONDITIONS OF EACH CLOSING

         Each Closing shall be held at the offices of May Davis or its counsel.
The obligations of May Davis hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of each Advance Date with respect to the Company as if it had
been made on and as of such Advance Date; the accuracy on and as of each Advance
Date of the statements of the officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of each Closing
of its covenants and obligations hereunder and to the following further
conditions:

         A. At each Closing, May Davis shall receive the opinion of Wolf Block
Schorr & Solis-Cohen, LLP and/or Berman, Wolf, Rennert, Vogel & Mandler, P.A and
Cohen, Pontani, Lieberman & Pavane (with respect to the opinion required
pursuant to paragraph 4.25(j) of the Credit Agreement) dated as of the date of
the Closing, which opinion shall be in the form set forth in the Credit
Agreement.

         B. At or prior to each Closing, counsel for May Davis shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Agreement and the Offering Materials or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.

         C. At and prior to each Closing, (i) there shall have been no material
adverse change in the condition or prospects or the business activities,
financial or otherwise, of the Company from the latest dates as of which such
condition is set forth in the Offering Materials; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
which has not been disclosed in the Offering Materials or to May Davis in
writing; (iii) except as set forth in the Offering Materials, the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness for which a waiver or extension has not been otherwise
received; (iv) except as set forth in the Offering Materials, the Company shall
not have issued any securities (other than those to be issued as provided in the
Offering Materials) or declared or paid any dividend or made any distribution of
its capital stock of any class and there shall not have been any change in the
indebtedness (long or short term) or liabilities or obligations of the Company
(contingent or otherwise); (v) no material amount of the assets of the Company
shall have been pledged or mortgaged, except as indicated in the Offering
Materials; and (v) no action, suit or proceeding, at law or in equity, against
the Company or affecting any of its properties or businesses shall be pending or
threatened before or by any court or federal or state commission, board or other
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding could materially adversely affect the businesses, prospects or
financial condition or income of the Company, except as set forth in the
Offering Materials.

                                       11
<PAGE>   12

         D. At each Closing, May Davis shall have received a certificate of the
Company signed by its chief executive officer and chief financial officer, dated
as of the applicable Advance Date, to the effect that the conditions set forth
in subparagraph (C) above have been satisfied and that, as of the applicable
Advance Date, the representations and warranties of the Company set forth herein
are true and correct.

         E. At the initial Closing, the Company shall have duly executed and
delivered to May Davis, or its designees, the Placement Agent's Warrants, in the
names and denominations specified by May Davis.

         9. TERMINATION.

         This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Credit Agreement. The rights of
the Investor and the obligations of the Company under the Registration Rights
Agreement, and the rights of May Davis and the obligations of the Company under
the Placement Agent's Warrants and the Placement Agent's Registration Rights
Agreement shall survive the termination of this Agreement unabridged.

         10. MISCELLANEOUS.

         A. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all which shall be deemed to be
one and the same instrument.

         B. Any notice required or permitted to be given hereunder shall be
given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered or faxed,
addressed as follows:

         To May Davis:

                  May Davis Group, Inc.
                  One World Trade Center - Suite 8735
                  New York, New York  10048
                  Attention: Mark Angelo
                  Telephone: 212-775-7400
                  Fax: 212-775-8166

         with a copy to:

                  Silverman, Collura & Chernis, P.C.
                  381 Park Avenue South - Suite 1601
                  New York, New York  10016
                  Attention:  Martin C. Licht, Esq.
                  Telephone: 212-779-8600
                  Fax: 212-779-8858

                                       12
<PAGE>   13

         To the Company:

                  Advanced Viral Research Corp.
                  200 Corporate Boulevard South
                  Yonkers, New York 10701
                  Attention: Shalom Hirschman, M.D.
                  Telephone: 914-376-7383
                  Facsimile: 914-376-7368

         with a copy to:

                  Wolf, Block, Schorr & Solis-Cohen, LLP
                  250 Park Avenue, 10th floor
                  New York, NY 10177
                  Attention: Robert Fischer
                  Telephone: 212-883-4901
                  Fax: 212-986-0604

or to such other address of which written notice is given to the others.

         C. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

         D. This Agreement and the other agreements referenced herein contain
the entire understanding between the parties hereto and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.

                                       13
<PAGE>   14

         E. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.

                                       14
<PAGE>   15

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

                                  ADVANCED VIRAL RESEARCH CORP.

                                  By:
                                     -----------------------------------
                                     Name:
                                     Title:

                                  MAY DAVIS GROUP, INC.

                                  By:
                                     -----------------------------------
                                     Name:
                                     Title:

                                       15
<PAGE>   16

                                   SCHEDULE A

CLASS A WARRANTS

Name                                                Amount
----                                                ------

Mark Angelo                                          995,000
Hunter Singer                                        995,000
Joseph Donahue                                       995,000
Robert Farrell                                       995,000
May Davis Group, Inc.                                995,000
Hamid Fashandi                                        25,000

CLASS B WARRANTS

Name                                                Amount
----                                                ------

Mark Angelo                                        1,000,000
Hunter Singer                                      1,000,000
Joseph Donahue                                     1,000,000
Robert Farrell                                     1,000,000
May Davis Group, Inc.                              1,000,000

                                       16<PAGE>   1

                                                                    Exhibit 4.10

                             BLUE RHINO CORPORATION

               CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES\
                     OF SERIES A CONVERTIBLE PREFERRED STOCK

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

         I, Billy D. Prim, President of Blue Rhino Corporation, a Delaware
corporation (the "COMPANY"), pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, do hereby make this
Certificate of Designation and do hereby state and certify that pursuant to the
authority expressly vested in the Company's Board of Directors by the Company's
Second Amended and Restated Certificate of Incorporation, as amended, the Board
of Directors duly adopted the following resolutions:

         RESOLVED, that, pursuant to Article FOURTH of the Company's Second
Amended and Restated Certificate of Incorporation, as amended (the "RESTATED
CERTIFICATE"), which Restated Certificate authorizes 20,000,000 shares of
Preferred Stock, $0.001 par value per share ("PREFERRED STOCK"), the Board of
Directors (the "BOARD") hereby designates 2,000,000 shares of Preferred Stock as
Series A Convertible Preferred Stock ("SERIES A PREFERRED") and hereby fixes the
designation and preferences and relative, participating, optional and other
special rights, qualifications, limitations and restrictions of the Series A
Preferred as set forth below:

                  1.       Dividends.

                  (a) The holders of the then outstanding shares of Series A
Preferred shall be entitled to receive, when, as and if declared by the Board
out of any funds legally available therefor, and in preference to the holders of
shares of any other class or series of capital stock of the Company ("JUNIOR
STOCK"), cumulative dividends (the "SERIES A DIVIDEND") at the annual rate per
share (and no more) of: (i) 5% of the Conversion Price (as defined in Section
4(b)) as of the Original Issue Date or the most recent anniversary of the
Original Issue Date, whichever is later, for the period beginning on September
7, 2000 (the "ORIGINAL ISSUE DATE") and ending on the third anniversary of the
Original Issue Date; (ii) 12% of the Conversion Price (as defined in Section
4(b)) as of the third anniversary of the Original Issue Date, for the period
beginning immediately following the third anniversary of the Original Issue Date
and ending on the fourth anniversary of the Original Issue Date; and (iii) 15%
of the Conversion Price (as defined in Section 4(b)) as of the most recent
anniversary of the Original Issue Date, for all periods after the fourth
anniversary of the Original Issue Date; in each case subject to equitable
adjustment for stock splits, stock dividends, reverse stock splits and other
similar corporate reorganizations or reclassifications that result in any change
in the number of outstanding shares of Series A Preferred; provided, that the
dividend rate per share attributable to the portion of any period in which the
Company is not fulfilling (or has not fulfilled) its obligations set forth in
Section 2(a) of its Registration Rights Agreement dated September 7, 2000 to (A)
cause the Initial Registration Statement (as defined therein) to be declared
effective under the Securities Act of 1933, as amended, on or before the first
anniversary of the Original Issue Date, (B) cause the Initial Registration
Statement to cover all of the Company's common stock, par value $0.001 ("COMMON
STOCK"), issuable upon conversion of the Series A Preferred and (C) permit the
holders of Series A Preferred to sell shares of Common Stock at any time during
the Effectiveness Period, except when sales are restricted by the Company's
insider trading policies approved by the Board, shall be 15% of the Conversion
Price (as defined in Section 4(b)) as of the most recent anniversary of the
Original Issue Date . The Series A Dividend shall accrue from the Original Issue
Date and shall be payable or accruable quarterly in arrears on the 20th day of
December, March, June and September of each year (each, an "ACCRUAL DATE"),
commencing December 20, 2000; provided, that the accrued but unpaid Series A
Dividend, if any, may be declared and paid at any time, whether or not on an
Accrual Date. The Series A

<PAGE>   2

Dividend shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the previous Accrual Date, except that the first
quarterly dividend shall accrue from the Original Issue Date.

                  (b) At the election of the Company, the Series A Dividend may
be paid in cash, in shares of Common Stock or in a combination of cash and
shares of Common Stock; provided, that no fractional share of Common Stock shall
be issued in payment of any portion of the Series A Dividend. If the Company
elects to pay all or any portion of the Series A Dividend in shares of Common
Stock, such shares shall be valued based on the Average Closing Price as of the
date on which the Board authorizes issuance of such shares. "AVERAGE CLOSING
PRICE" shall mean, as of any particular date:

                           (i) if the Common Stock is then traded on a
         securities exchange or the NASDAQ National Market, the average of the
         closing prices of the Common Stock on such securities exchange over the
         thirty trading days ending three (3) business days prior to such date,
         as reported in The Wall Street Journal - Eastern Edition listing for
         each such day (corrected for obvious typographical errors);

                           (ii) if the Common Stock is then traded
         over-the-counter, the average of the closing bid or sale prices
         (whichever are applicable) over the thirty trading days ending three
         (3) business days prior to such date as reported in The Wall Street
         Journal - Eastern Edition listing for each such day (corrected for
         obvious typographical errors); and

                           (iii) if there is no active public market for the
         Common Stock, the value shall be the fair market value thereof, as
         determined in good faith by the Board.

                  (c) Each holder of then outstanding shares of each Series A
Preferred shall be entitled to share ratably with the holders of Common Stock in
all dividends or other non-liquidating distributions declared and paid on the
Common Stock, other than those payable solely in shares of Common Stock (which
shall have the effects described in Section 4(f)), on the basis that such holder
held, on the record date for such dividend or distribution, the number of shares
of Common Stock into which such holder's shares would have been convertible on
such date upon exercise of the Conversion Rights described in Section 4.

                  2.       Liquidation.

                  (a)      Series A Liquidation Preference.

                           (i) In the event of any liquidation, dissolution or
         winding up of the affairs of the Company, whether voluntary or
         involuntary (a "GENERAL LIQUIDATION EVENT"), after payment or provision
         for payment of the debts and other liabilities and obligations of the
         Company as required by law, the holders of each share of Series A
         Preferred then outstanding shall be entitled to be paid out of the net
         assets of the Company available for distribution to its stockholders,
         before any payment or declaration and setting apart for payment of any
         amount shall be made in respect of Junior Stock, an amount equal to
         $6.00 per share of Series A Preferred, plus the accrued but unpaid
         Series A Dividend, if any, to and including the date full payment is
         tendered to the holders of the Series A Preferred with respect to such
         General Liquidation Event (the "SERIES A LIQUIDATION PREFERENCE"). If
         the Company shall at any time or from time to time effect a subdivision
         of the outstanding Series A Preferred (or declare and pay a dividend
         thereon payable in additional shares of Series A Preferred), the Series
         A Liquidation Preference then in effect immediately before that
         subdivision (or dividend) shall be proportionately decreased;
         conversely, if the Company shall at any time or from time to time
         reduce the outstanding shares of Series A Preferred by combination or
         reverse stock split, the Series A Liquidation Preference then in effect
         immediately before the combination shall be proportionately increased.
         Any such adjustment pursuant to the preceding sentence shall become
         effective at the close of business on the date the subdivision or
         combination becomes effective or the dividend is paid. If upon the
         occurrence of a General Liquidation Event, the

                                       2

<PAGE>   3

         assets and funds to be distributed among the holders of Series A
         Preferred shall be insufficient to permit the payment to such holders
         of the full Series A Liquidation Preference, then such assets and funds
         of the Company legally available for distribution shall be distributed
         ratably among the holders of Series A Preferred based upon the number
         of shares of Series A Preferred then held by them.

                           (ii) Unless the holders of a majority of then
         outstanding shares of Series A Preferred otherwise elect, a Fundamental
         Transaction (as defined in Section 2(a)(iii)) shall be treated as a
         General Liquidation Event with respect to the Series A Preferred. In
         such event, the holders of Series A Preferred shall have the right to
         receive payment of the Series A Liquidation Preference in lieu of
         receiving the consideration and other securities and property provided
         for under Section 4(i).

                           (iii) "FUNDAMENTAL TRANSACTION" shall mean the
         consummation of: (A) a share exchange, consolidation or merger of the
         Company with or into any other corporation or other entity or any other
         corporate reorganization in which the Company is not the surviving
         entity (unless the stockholders of the Company immediately prior to
         such share exchange, consolidation, merger or reorganization own or
         control in excess of fifty percent (50%) of the general voting power of
         either the surviving entity or an entity that owns or controls in
         excess of fifty percent (50%) of the general voting power of the
         surviving entity); or (B) a sale of all or substantially all of the
         assets of the Company (unless the stockholders of the Company
         immediately prior to such sale own or control in excess of fifty
         percent (50%) of the general voting power of either the purchasing
         party or parties or an entity that owns or controls in excess of fifty
         percent (50%) of the general voting power of the purchasing party or
         parties). The determination of "general voting power" shall be based on
         the aggregate number of votes that are attributable to outstanding
         securities entitled to vote in the election of directors, general
         partners, managers or persons performing analogous functions to
         directors of the entity in question, without regard to contractual
         arrangements that establish a management structure or that vest the
         right to designate directors in certain parties.

                  (b) Distribution of Remaining Liquidation Proceeds. After
payment in full of the Series A Liquidation Preference, the remaining net assets
of the Company shall next be distributed ratably per share to the holders of
Common Stock. Except as expressly set forth in Section 2(a)(i), holders of
Series A Preferred shall not be entitled to any distribution in the event of a
General Liquidation Event.

                  (c) Valuation of Securities. If the assets to be distributed
pursuant to this Section 2 consist of securities, such securities shall be
valued at their fair market value, determined as follows:

                           (i) if traded (and then tradable) on a securities
                  exchange or the NASDAQ National Market, the value shall be
                  deemed to be the average of the closing prices of the
                  securities on such exchange over the thirty (30) trading day
                  period ending three (3) business days prior to the date of the
                  Liquidation Notice (as defined in Section 2(d));

                           (ii) if traded (and then tradable) over-the-counter,
                  the value shall be deemed to be the average of the closing bid
                  or sale prices (whichever are applicable) over the thirty (30)
                  trading day period ending three (3) days prior to the date of
                  the Liquidation Notice; and

                           (iii) if there is no active public market (or if not
                  then tradable in a public market), the value shall be the fair
                  market value thereof, as determined in good faith by a
                  majority of the Board.

                           (iv) In the event that the holders of a majority of
                  the outstanding shares of Series A Preferred (a "DISPUTING
                  PARTY") give prompt written notice to the Company that they
                  dispute the determination of the Board made pursuant to
                  Section 2(c)(iii), each of the Company and the

                                       3

<PAGE>   4

                  Disputing Party shall select an investment banking firm or
                  other expert of recognized standing, and the two firms or
                  other experts so selected shall select a third firm or expert
                  who shall determine conclusively the fair market value (in the
                  case of Section 2(c)(iii). The cost of such firms or experts
                  shall be divided equally between the Disputing Party (jointly
                  and severally), on the one hand, and the Company, on the other
                  hand.

                  (d) Notice. Written notice (the "LIQUIDATION NOTICE") of any
General Liquidation Event, which states the payment date, the place where said
payments shall be made and the date on which Conversion Rights (as defined in
Section 4) terminate as to such shares (which shall be not less than five (5)
days after the date of such Liquidation Notice), or of the expected effective
date for a Fundamental Transaction, shall be given by first class mail, postage
prepaid, or by telecopy or facsimile, not less than ten (10) days prior to the
payment date stated therein (or, in the case of a Fundamental Transaction, the
expected effective date thereof), to holders of record of Series A Preferred,
such Liquidation Notice to be addressed to each such holder at its address as
shown on the records of the Company.

                  3.       Voting Rights.

                  (a) General. Except as otherwise required by law, the holders
of each share of Series A Preferred shall be entitled to: (i) notice of any
stockholders' meeting in accordance with the bylaws of the Company; (ii) vote on
all matters upon which holders of Common Stock have the right to vote and (iii)
a number of votes on such matters equal to the largest number of full shares of
Common Stock into which such shares of Series A Preferred could be converted
pursuant to Section 4 on the record date for determination of stockholders
entitled to vote on such matters or, if no such record date is established, on
the date such vote is taken or a written consent is effective; provided, that
for this purpose only, the Series A Preferred shall be deemed convertible as of
the Original Issue Date and not, as set forth in Section 4(a), after the first
anniversary of the Original Issue Date. Except to the extent class or series
voting is otherwise required by law or the Restated Certificate, the holders of
shares of Series A Preferred and Common Stock shall vote together as a single
voting group on all matters and not as separate voting groups.

                  (b) Class C Director. The Board shall consist of no more than
nine (9) members. Notwithstanding Section 3(a), for so long as shares of Series
A Preferred remain outstanding, the holders of a majority of the outstanding
shares of Series A Preferred, voting as a separate class, shall be entitled to
elect one (1) director to the Board, which director shall be a Class C Director,
at each meeting of the Company's stockholders for the election of Class C
Directors.

                  4.       Conversion.

                  The holders of the Series A Preferred shall have the following
conversion rights (the "CONVERSION RIGHTS"):

                  (a) Right to Convert. Each share of Series A Preferred shall
be convertible, at the option of the holder thereof at any time after the first
anniversary of the Original Issue Date and prior to the mandatory conversion as
set forth in Section 4(c), at the office of the Company or any transfer agent
for the Series A Preferred or Common Stock, into fully paid and nonassessable
shares of Common Stock, at the Conversion Price (as defined in Section 4(b))
therefor in effect at the time of conversion.

                  (b) Conversion Price. Shares of Series A Preferred shall be
convertible into the number of shares of Common Stock equal to $6.00 (the
"ORIGINAL ISSUE PRICE") divided by the Conversion Price per share in effect at
the time of conversion for each share of Series A Preferred being converted. The
"CONVERSION PRICE" per share for the Series A Preferred as of the Original Issue
Date shall be $6.00; provided, that, in the event that the Company's
consolidated EBITDA for the fiscal year ending July 31, 2001 is less than
$11,800,000, the Conversion

                                       4

<PAGE>   5

Price as of the Original Issue Date shall be deemed to have been the greatest
of: (i) $4.50; (ii) book value per share of the Common Stock as of the Original
Issue Date as determined in good faith by the Company or (iii) the closing bid
price per share of the Common Stock on the NASDAQ National Market on the
Original Issue Date, and any adjustments to the Conversion Price made pursuant
hereto between the Original Issue Date and the date on which such determination
of EBITDA is made shall be re-evaluated and, if applicable, re-adjusted. The
Conversion Price shall be subject to adjustment from time to time as provided
herein.

         For purposes hereof, "EBITDA" shall mean: the Company's Net Income less
the sum of (i) interest expense, (ii) provision for income taxes, (iii)
depreciation and amortization and (iv) nonrecurring expenses, in each case for
the Company's fiscal year ending July 31, 2001, all as shown on the Company's
audited consolidated Statement of Operations for the year ending July 31, 2001.

                  (c) Mandatory Conversion. At the option of the Company upon at
least fifteen (15) days written notice (the "NOTICE") to the holders of Series A
Preferred given at any time after the second anniversary of the Original Issue
Date, each then outstanding share of Series A Preferred shall be converted
automatically as of the effective date set forth in the Notice (the "MANDATORY
CONVERSION DATE"), without any action on the part of the holder thereof, into a
number of shares of Common Stock determined as provided in Section 4(b)
("MANDATORY CONVERSION"); provided that: (i) the Common Stock is then traded on
a national securities exchange or the NASDAQ National Market; (ii) the average
of the closing prices of the Common Stock on such national securities exchange
over the ten (10) trading days ending three (3) business days prior to the date
that the Notice is deemed given as provided in Section 4(n), as reported in The
Wall Street Journal - Eastern Edition listing for each such day (corrected for
obvious typographical errors), is at least equal to 160% of the then effective
Conversion Price; and (iii) the Company shall have no obligation to issue and
deliver to any such holder of Series A Preferred on such date a certificate for
the number of shares of Common Stock to which such holder shall be entitled
until such time as such holder has surrendered its certificate or certificates
for its Series A Preferred, duly endorsed, at the office of the Company or any
transfer agent for the Common Stock or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. All rights with respect to shares of Series A
Preferred outstanding as of the Mandatory Conversion Date shall forthwith
terminate, except only the right of the holders of such shares to receive Common
Stock upon surrender of their certificates for the Series A Preferred and their
rights with respect to the accrued but unpaid Series A Dividend, if any.

                  (d) Mechanics of Conversion; Unpaid Dividends. Before any
holder of Series A Preferred shall be entitled to convert the same into shares
of Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series A Preferred or Common Stock and shall give written notice by
mail, postage prepaid, to the Company at such office that such holder elects to
convert the same and shall state therein the number of shares of Series A
Preferred being converted and the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. Thereupon the Company
shall promptly issue and deliver at such office to such holder of Series A
Preferred or to the nominee or nominees of such holder a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled.

                  Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. Upon conversion of such shares of Series A Preferred,
the accrued but unpaid Series A Dividend, if any, shall be paid in cash or in
shares of Common Stock as provided in Section 1(b).

                  (e) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the

                                       5

<PAGE>   6

Conversion Price then in effect immediately before that subdivision shall be
proportionately decreased; conversely, if the Company shall at any time or from
time to time after the Original Issue Date reduce the outstanding shares of
Common Stock by combination or otherwise, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

                  (f) Adjustment for Certain Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price then in effect shall be decreased as of the time of such issuance or, in
the event such a record date shall have been fixed, as of the close of business
on such record date, by multiplying the Conversion Price then in effect by a
fraction:

                           (1) the numerator of which shall be the total number
         of shares of Common Stock issued and outstanding immediately prior to
         the time of such issuance or the close of business on such record date,
         and

                           (2) the denominator of which shall be the total
         number of shares of Common Stock issued and outstanding immediately
         prior to the time of such issuance or the close of business on such
         record date, plus the number of shares of Common Stock issuable in
         payment of such dividend or distribution; provided, however, if such
         record date shall have been fixed and such dividend is not fully paid
         or if such distribution is not fully made on the date fixed therefor,
         the Conversion Price shall be recomputed accordingly as of the close of
         business on such record date and thereafter the Conversion Price shall
         be adjusted pursuant to this Section 4(f) as of the time of actual
         payment of such dividends or distributions.

                  (g) Adjustments for Other Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of Series A Preferred
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company that
they would have received had their Series A Preferred been converted into Common
Stock on the date of such event and had thereafter, during the period from the
date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period giving application
to all adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred.

                  (h) Adjustment for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon the conversion of the Series A Preferred shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 4), then and in each such event the holders of
each share of Series A Preferred shall have the right thereafter to convert such
share into the kind and amounts of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the number of shares of Common Stock into which such shares of
Series A Preferred might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.

                  (i) Reorganization or Fundamental Transaction. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 4) or a Fundamental Transaction (as
defined in Section

                                       6

<PAGE>   7

2(a)(iii)) that the holders of at least a majority of the outstanding shares of
Series A Preferred have elected not to treat as a General Liquidation Event
under Section 2(a)(ii), then, as a part of such reorganization or Fundamental
Transaction, provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion thereof the
number of shares of stock or other securities or property of the Company, or of
the successor entity resulting from such Fundamental Transaction, to which a
holder of that number of shares of Common Stock deliverable upon conversion of
the Series A Preferred would have been entitled on such capital reorganization
or Fundamental Transaction. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 4 with respect to the
rights of the holders of the Series A Preferred after the reorganization or
Fundamental Transaction to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares of Common Stock into which each share of Series A Preferred is
convertible) shall be applicable after such reorganization or Fundamental
Transaction as nearly equivalent as may be practicable.

                  (j)      Sale of Shares Below Conversion Price.

                           (i) If at any time or from time to time after the
         Original Issue Date, the Company shall issue or sell Additional Shares
         of Common Stock (as defined in Section 4(j)(v)), other than as a
         dividend as provided in Section 4(f), and other than upon a subdivision
         or combination of shares of Common Stock as provided in Section 4(e),
         for a consideration per share less than the then effective Conversion
         Price, then and in each case the Conversion Price shall be reduced to
         the price per share at which such Additional Shares of Common Stock are
         issued (the "ISSUANCE PRICE"), provided that in no event shall the
         Company issue or sell Additional Shares of Common Stock for a
         consideration per share less than the then effective Conversion Price
         without (x) prior shareholder approval of both the issuance or sale of
         such Additional Shares of Common Stock and the resulting increase in
         the number of shares of Common Stock issuable upon conversion of the
         Series A Preferred at the Issuance Price or (y) the prior written
         consent of the holders of a majority of the outstanding shares of
         Series A Preferred, in which case upon issuance or sale of such
         Additional Shares of Common Stock, the Conversion Price shall be
         reduced not to the Issuance Price, but instead to the greatest of (A)
         the price per share at which such Additional Shares of Common Stock are
         issued; (B) book value per share of the Common Stock as of the Original
         Issue Date as determined in good faith by the Company or (C) the
         closing bid price per share of the Common Stock on the NASDAQ National
         Market on the Original Issue Date.

                           (ii) For the purpose of making the adjustments
         provided in Section 4(j)(i), the consideration received by the Company
         for any issue or sale of securities shall:

                                    (A) to the extent it consists of cash, be
                  computed at the net amount of cash received by the Company
                  after deduction of any underwriting or similar commissions,
                  concessions or compensation paid or allowed by the Company in
                  connection with such issue or sale;

                                    (B) to the extent it consists of services or
                  property other than cash, be computed at the fair value of
                  such services or property as determined in good faith by the
                  Board; and

                                    (C) if Additional Shares of Common Stock,
                  Convertible Securities (as hereinafter defined), or rights or
                  options to purchase either Additional Shares of Common Stock
                  or Convertible Securities are issued or sold together with
                  other stock or securities or other assets of the Company for a
                  consideration that covers both, be computed as the portion of
                  the consideration so received that may be reasonably
                  determined in good faith by the Board to be allocable to such
                  Additional Shares of Common Stock, Convertible Securities or
                  rights or options.

                                       7

<PAGE>   8

                           (iii) For the purpose of the adjustment provided in
         Section 4(j)(i), if at any time or from time to time, the Company shall
         issue any rights or options for the purchase of, or stock or other
         securities convertible into, Additional Shares of Common Stock (such
         convertible stock or securities being hereinafter referred to as
         "CONVERTIBLE SECURITIES"), then, in each case, if the Effective Price
         (as hereinafter defined) of such rights, options or Convertible
         Securities shall be less than then existing Conversion Price, the
         Company shall be deemed to have issued at the time of the issuance of
         such rights, options or Convertible Securities the maximum number of
         Additional Shares of Common Stock issuable upon exercise or conversion
         thereof and to have received as consideration for the issuance of such
         shares an amount equal to the total amount of the consideration, if
         any, received by the Company for the issuance of such rights, options
         or Convertible Securities, plus, in the case of such options or rights,
         the minimum amounts of consideration, if any, payable to the Company
         upon exercise or conversion of such options or rights. For purposes of
         the foregoing, "EFFECTIVE PRICE" shall mean the quotient determined by
         dividing the total of all such consideration by such maximum number of
         Additional Shares of Common Stock. No further adjustment of the
         existing Conversion Price adjusted upon the issuance of such rights,
         options or Convertible Securities shall be made as a result of the
         actual issuance of Additional Shares of Common Stock on the exercise of
         any such rights or options or the conversion of any such Convertible
         Securities.

                           If any such rights or options or the conversion
         privilege represented by any such Convertible Securities shall expire
         without having been exercised, the existing Conversion Price adjusted
         upon the issuance of such rights, options or Convertible Securities
         shall be readjusted to the Conversion Price that would have been in
         effect had an adjustment been made on the basis that the only
         Additional Shares of Common Stock so issued were the Additional Shares
         of Common Stock, if any, actually issued or sold upon the exercise of
         such rights or options, or upon the conversion of such Convertible
         Securities, and such Additional Shares of Common Stock, if any, were
         issued or sold for the consideration actually received by the Company
         upon such exercise, plus the consideration, if any, actually received
         by the Company for the granting of all such rights or options, whether
         or not exercised, or the consideration received for issuing or selling
         the Convertible Securities actually converted plus the consideration,
         if any, actually received by the Company on the conversion of such
         Convertible Securities.

                           (iv) For the purpose of the adjustment provided for
         in Section 4(j)(i), if at any time or from time to time, the Company
         shall issue any rights or options for the purchase of Convertible
         Securities, then in each such case, if the Effective Price thereof is
         less than then existing Conversion Price, the Company shall be deemed
         to have issued at the time of the issuance of such rights or options
         the maximum number of Additional Shares of Common Stock issuable upon
         conversion of the total amount of Convertible Securities covered by
         such rights or options and to have received as consideration for the
         issuance of such Additional Shares of Common Stock an amount equal to
         the amount of consideration, if any, received by the Company for the
         issuance of such rights or options, plus the minimum amounts of
         consideration, if any, payable to the Company upon the conversion of
         such Convertible Securities. For the purposes of the foregoing,
         "Effective Price" shall mean the quotient determined by dividing the
         total amount of such consideration by such maximum number of Additional
         Shares of Common Stock. No further adjustment of the Conversion Price
         adjusted upon the issuance of such rights or options shall be made as a
         result of the actual issuance of the Convertible Securities upon the
         exercise of such rights or options or upon the actual issuance of
         Additional Shares of Common Stock upon the conversion of such
         Convertible Securities.

                           The provisions of Section 4(j)(iii) for the
         readjustment of the Conversion Price upon the expiration of rights or
         options or the rights of conversion of Convertible Securities shall
         apply mutatis mutandis to the rights, options and Convertible
         Securities referred to in this Section 4(j)(iv).

                                       8

<PAGE>   9

                           (v) Definition. The term "Additional Shares of Common
         Stock" as used herein shall mean all shares of Common Stock issued or
         deemed issued by the Company after the Original Issue Date, whether or
         not subsequently reacquired or retired by the Company, other than: (A)
         pursuant to a stock split, stock dividend or reclassification or
         similar organic change involving the Company's capital stock; (B) upon
         conversion of the Series A Preferred; (C) to Thomas E. Brandtonies or
         to Gold Bank, or upon exercise of the warrant granted to Thomas E.
         Brandtonies, in connection with the Company's acquisition of shares of
         the capital stock of QuickShip, Inc.; (D) pursuant to the exercise of
         options or warrants approved by the Board; (E) as an inducement to
         lenders of the Company to advance sums or otherwise to make financial
         accommodations, or as compensation to lenders for advancing sums or
         otherwise making financial accommodations, to the Company or one or
         more of its subsidiaries, to the extent such issuance is approved by
         the Board; (F) as compensation to vendors or lessors of the Company in
         connection with, or as an inducement to vendors or lessors of the
         Company to enter into, agreements with the Company and not as part of
         an offering of the Company's securities, to the extent such issuance is
         approved by the Board; (G) to employees, officers, directors,
         distributors, consultants or other persons performing services for or
         on behalf of the Company, in each case to the extent issued solely in
         its status as such and not as part of an offering of the Company's
         securities, pursuant to any stock option plan, stock purchase plan,
         management incentive plan, consulting agreement or other contract or
         arrangement approved by the Board (collectively, "PLANS"); and (H) in
         consideration of the acquisition by the Company of the assets, capital
         stock or other equity interests of, or in connection with a joint
         venture with, another entity, to the extent such issuance is approved
         by the Board; provided, that such issuance (after giving effect
         thereto), when aggregated with all other issuances contemplated by this
         clause (H), does not constitute a number of shares (as equitably
         adjusted in the event of a stock split, stock dividend, combination or
         other similar recapitalization) greater than 20% of the number of
         shares of Common Stock outstanding (determined on a fully diluted,
         as-converted basis) as of the Original Issue Date (after giving effect
         to the issuance of Series A Preferred).

                  (k) Accountants' Certificate of Adjustment. In each case of an
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series A
Preferred, at the request of any holder of Series A Preferred, the Company, at
its expense, shall cause independent certified public accountants of recognized
standing selected by the Company (who may be the independent certified public
accountants then auditing the books of the Company) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of the Series A Preferred at
the holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in reasonable detail the facts
upon which such adjustment or readjustment is based.

                  (l) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of shares of Series A Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall pay cash equal to the product of such fraction multiplied by the fair
market value of one share of Common Stock on the date of conversion, as
determined in good faith by the Board. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.

                  (m) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. As a condition precedent to the
taking of any action which would cause an adjustment to the Conversion Price,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued

                                       9

<PAGE>   10

shares of Common Stock to such number of shares as shall be sufficient in order
that it may validly and legally issue the shares of its Common Stock issuable
based upon such adjusted Conversion Price.

                  (n) Notices. Any notice required by the provisions of this
Section 4 to be given to the holder of shares of the Series A Preferred shall be
deemed given when personally delivered to such holder or on the business day
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at its address appearing on the books of the Company.

                  (o) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series A Preferred) that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of the Series A
Preferred.

                  5. Protective Provisions. From the Original Issue Date until
such time as no shares of Series A Preferred remain outstanding, the Company
shall not, directly or indirectly, take any of the following actions without
first obtaining the affirmative vote or the written consent of the holders of a
majority of the then outstanding shares of Series A Preferred:

                  (a) create, authorize, designate, reclassify, issue or sell
any class or series of capital stock of the Company, or rights, options,
warrants or other securities convertible into or exchangeable for any capital
stock of the Company, or any "phantom" equity or stock appreciation rights, that
rank as to payment of dividends or distribution of assets upon liquidation
senior to or pari passu with the Series A Preferred;

                  (b) amend, repeal, alter or modify the terms, rights,
preferences or privileges of the shares of the Series A Preferred;

                  (c) increase or decrease the authorized number of shares of
Series A Preferred or Common Stock;

                  (d) amend or waive any provision of the Restated Certificate
or the bylaws of the Company if such amendment would adversely affect the rights
of the holders of Series A Preferred; or

                  (e) declare or pay any dividend with respect to Junior Stock,
or make any payment on account of, or set apart for payment money for a sinking
or other similar fund for, the repurchase, redemption or other retirement of any
shares of Common Stock or any warrants, rights or options exercisable for or
convertible into shares of Common Stock, or make any distribution in respect of
shares of Common Stock, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other than distributions
or dividends in Common Stock to the holders of Common Stock), except, in each
case: (i) pursuant to equity incentive agreements or arrangements with service
providers upon termination of their services to the Company; or (ii) pursuant to
agreements entered into to evidence grants or awards or other compensation under
any Plan.

                  6.       Preemptive Rights.

                  (a) The holders of outstanding shares of Series A Preferred
(the "PREEMPTIVE HOLDERS") shall have the preemptive rights described in this
Section 6 with regard to all issuances by the Company after the Original Issue
Date of shares of Common Stock or warrants, options or other rights to purchase
shares of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock (collectively, the "NEW SECURITIES"); provided, however,
that New Securities do not include:

                           (i) securities issued in connection with a stock
         split, stock dividend or reclassification or similar organic change
         involving the Company's capital stock;

                                       10

<PAGE>   11

                           (ii) Common Stock issued upon the conversion of
         Series A Preferred (as adjusted for all subsequent stock dividends,
         subdivisions and combinations, the "CONVERSION SHARES");

                           (iii) securities issued upon conversion of any other
         security so long as such other security was itself either a New
         Security or was outstanding as of the Original Issue Date;

                           (iv) securities issued upon the exercise of any
         warrant, option or other right to purchase securities so long as such
         warrant, option or other right was itself either a New Security, is
         excluded from the definition of New Security pursuant to Section
         6(a)(v) or was outstanding as of the Original Issue Date;

                           (v) warrants, options or other rights to purchase
         securities or securities convertible into or exchangeable for
         securities issued pursuant to any Plan to employees, officers,
         directors, distributors, consultants or other persons performing
         services for or on behalf of the Company, in each case to the extent
         issued solely in its status as such and not as part of an offering of
         the Company's securities;

                           (vi) securities issued to Thomas E. Brandtonies or to
         Gold Bank, or upon exercise of the warrant granted to Thomas E.
         Brandtonies, in connection with the Company's acquisition of shares of
         the capital stock of QuickShip, Inc.;

                           (vii) securities issued as an inducement to lenders
         of the Company to advance sums or otherwise to make financial
         accommodations, or to compensate lenders for advancing sums or
         otherwise making financial accommodations, to the Company or one or
         more of its subsidiaries, to the extent such issuance is approved by
         the Board;

                           (viii) securities issued as compensation to vendors
         or lessors of the Company in connection with, or as an inducement to
         vendors or lessors of the Company to enter into, agreements with the
         Company and not as part of an offering of the Company's securities, to
         the extent such issuance is approved by the Board; and

                           (ix) securities issued in consideration of the
         acquisition by the Company of the assets, capital stock or other equity
         interests of, or in connection with a joint venture with, another
         entity, to the extent such issuance is approved by the Board; provided,
         that such issuance (after giving effect thereto), when aggregated with
         all other issuances contemplated by this clause (ix), does not
         constitute a number of shares of Common Stock (on a fully diluted,
         as-converted basis and as equitably adjusted in the event of a stock
         split, stock dividend or other similar recapitalization) greater than
         20% of the number of shares of Common Stock outstanding (determined on
         a fully diluted, as-converted basis) as of the Original Issue Date
         (after giving effect to the issuance of Series A Preferred).

                  (b) In the event that the Company proposes to offer to sell
any New Securities, the Company shall first give to each of the Preemptive
Holders written notice stating such intention. The written notice shall contain
a full, accurate and complete description of the price and terms of such
proposed sale, and shall contain an unconditional offer to sell a Pro Rata Share
(as defined in Section 6(d)) of such New Securities to such Preemptive Holder on
the same terms and conditions as set forth in the notice. Each Preemptive Holder
shall have 20 days from the date such written notice is given to elect to
purchase all or a portion of such Preemptive Holder's Pro Rata share of the New
Securities, by giving written notice to the Company of such election and the
quantity of New Securities such Preemptive Holder will purchase. In addition,
each Preemptive Holder may elect to purchase more than its Pro Rata Share (an
"EXCESS ELECTION") and, to the extent one or more of the other Preemptive
Holders does not elect to purchase its full Pro Rata Share (the "UNALLOCATED
SHARE"), each Preemptive Holder so electing may

                                       11

<PAGE>   12

purchase such portion of the Unallocated Share equal to the percentage that its
Excess Election is of the aggregate amount of Excess Elections of all Preemptive
Holders.

                  (c) In the event that any Preemptive Holder elects to purchase
any of the New Securities within the election period described in Section 6(b),
the consideration for such purchases shall be paid to the Company and a
certificate or other instrument evidencing the New Securities shall be delivered
to the electing Preemptive Holder concurrently with the closing of the sale of
New Securities to the third party purchaser(s) thereof, subject in all cases to
the execution and delivery by the Company and the Preemptive Holder of a
purchase agreement or subscription agreement relating to such New Securities and
all other documents in form and substance substantially similar, to the extent
applicable, to those executed and delivered by the Company and the third party
purchaser(s). The Company shall provide notice of such date to the purchasing
Preemptive Holders at least three (3) days prior thereto.

                  (d) As used in this Section 6, the "PRO RATA SHARE" of the New
Securities that a Preemptive Holder will be offered an opportunity to purchase
is a fraction of the total New Securities proposed to be issued, the numerator
of which is the number of Conversion Shares and other shares of Common Stock
then owned by such Preemptive Holder plus the number of Conversion Shares and
other shares of Common Stock that could be obtained by conversion on such date
of all Series A Preferred held by such Preemptive Holder or by exercise of any
option, warrant or similar right, and the denominator of which is the number of
shares of Common Stock outstanding on such date on a fully diluted basis
(assuming conversion of all of the outstanding Series A Preferred and the
exercise of all outstanding options, warrants or similar rights).

                  (e) During the 90-day period following the expiration of the
20-day election period described in Section 6(b), the Company may issue the New
Securities that Preemptive Holders have not purchased pursuant to this Section
6, but only on terms and conditions and at a price no more favorable to the
purchasers thereof than was specified in the Company's notice to the Preemptive
Holders.

                  (f) All rights accorded to any Preemptive Holder under this
Section 6 may be waived or modified, either generally or in the case of any
particular issuance of New Securities, and either prospectively or
retroactively, if those Preemptive Holders who hold, in the aggregate, a
majority of the shares of Common Stock held by all Preemptive Holders (computed
on a fully diluted basis assuming the exercise of all options, warrants and
similar rights and the conversion and exchange of all securities convertible
into or exchangeable for Common Stock) execute and deliver to the Company a
written instrument to that effect.

                  7.       No Reissuance of Series A Preferred.

                  No share or shares of Series A Preferred acquired by the
Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Company shall be authorized to issue.

                                       12

<PAGE>   13

                  IN WITNESS WHEREOF, Blue Rhino Corporation caused this
Certificate to be signed by its President and attested by its Secretary on this
_____ day of September, 2000.

                                                  BLUE RHINO CORPORATION

                                                  By:
                                                     ---------------------------
                                                           Billy D. Prim
                                                           CEO and President

ATTEST:

-----------------------------
Mark Castaneda
Secretary

                                       13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}]]