Document:

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                                                                     Exhibit 4.1

                           ARTICLES OF INCORPORATION
                           TANISYS TECHNOLOGY, INC.
                              as Amended through
                               December 1, 2000

1.        The name of the corporation is:

               Tanisys Technology, Inc.

2.        It is incorporated under the laws of the Province of British Columbia.

3.        The date of its incorporation is January 27, 1984 and the period of
its duration is perpetual.

4.        The address of its principal office in the state under the laws of
which it is incorporated is:

               265 - 25th Street, West Vancouver, B.C., V7V 4H9

5.        The mailing address where correspondence and annual reports can be
sent is:

            12th Floor, 1190 Hornby Street, Vancouver, B.C., V6Z 2L3

6.        The physical address of its registered office in Wyoming and name of
its registered agent at that address is:

                 DRAY MADISON & THOMSON P.C., Attorneys at Law
                              204 East 22nd Street
                        Cheyenne, Wyoming, 82001 - 3799

7.        The purpose or purposes of the corporation which it proposes to pursue
in the transaction of business in this state.

Developing, manufacturing and marketing computer hardware and software.

8.        The names and respective addresses of its officers and directors are:

Office                            Name                 Address
------                            ----                 -------

Director/CEO/President/Chairman   Gerald F. Boudreau   849 Grenada Lane
                                                       Foster City, California
                                                       94404-3803
Director                          Mark Nussbaum        6081 Forsyth Crescent
                                                       Richmond, B.C.
                                                       V7C 2C4
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Director                          Thomas M. Taylor     House 4, Brunswick Beach
                                                       North Vancouver, B.C.
                                                       V7R 3T1
9.

A.        The aggregate number of shares or other ownership units which it has
the authority to issue, itemized by classes, par value of shares, shares without
par value and series, if any, within a class is:

Number of Shares         Class                       Par Value per Share
----------------         -----                       -------------------

50,000,000               Common                      No Par Value

10,000,000               Preferred                   $1.00

To the fullest extent permitted by law, the board of directors shall have the
authority, by resolution, to create and issue such series of preferred stock and
to fix with respect to any such series the number of shares of preferred stock
comprising such series and the powers, designations, preferences and rights (and
the qualifications, limitations and restrictions thereof) of the shares of such
series.

B.        The corporation is authorized to issue up to 400 shares of Preferred
Stock, par value $1.00 per share, to be known as 5% Series A Convertible
Preferred Stock (such Preferred Stock hereinafter being referred to as the
"Series A Preferred Stock").  The designations, powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitation and restrictions thereof, with respect to the Series A Preferred
Stock are as set forth in Exhibit "A" attached hereto and are incorporated
herein for all purposes.

C.        Effective as of the effective date of this Amendment, all outstanding
shares of Common Stock shall be reverse split on a one-for-two basis so that
each share of Common Stock issued and outstanding immediately prior to the
effective date shall automatically be converted into and reconstituted as one
half of a share of Common Stock ("Reverse Split").  No fractional shares will be
issued by the Corporation as a result of the Reverse Split.  In lieu thereof,
each shareholder whose shares of Common Stock are not evenly divisible by two
will receive one additional share of Common Stock for the fractional share such
shareholder would otherwise be entitled to as a result of the Reverse Split.

10.       The aggregate number of issued shares or other ownership units
itemized by classes, par value of shares, shares without par value and series,
if any, within a class is:

4,964,325                Common shares                    without par value

11.       The Corporation accepts the Constitution of this state in compliance
with the requirements of article 10, section 5 of the Wyoming constitution.
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12.       No director shall be personally liable to the Corporation or any
shareholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 17-16-834 of the Wyoming Business Corporation Act or any amendment
thereto or successor provision thereto or shall be liable by reason that, in
addition to any and all other requirements for such liability, he (i) shall have
breached his duty of loyalty to the Corporation or its shareholders, (ii) shall
not have acted in good faith or, in failing to act, shall not have acted in good
faith, (iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law, (iv) shall have
derived an improper personal benefit, or (v) shall have voted for or assented to
a distribution made in violation of Section 17-16-640 of the Wyoming Business
Corporation Act or the articles of incorporation of the Company if it is
established that he did not perform his duties in compliance with Section 17-16-
830 of the Wyoming Business Corporation Act.

13.       The members of the Board of Directors shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, as shall be provided in the manner specified
in the corporation's bylaws, one class to hold office initially for a term
expiring at the Annual General Meeting of Shareholders to be held in 1997,
another to hold office initially for a term expiring at the Annual General
Meeting of Shareholders to be held in 1998, and another to hold office initially
for a term expiring at the Annual General Meeting of Shareholders to be held in
1999, with the members of each new class to hold office until their successors
have been duly elected and have qualified.  At each Annual General Meeting of
Shareholders of the corporation, the successors to the class of directors whose
term expires at the meeting shall be elected to hold office for a term expiring
at the Annual General Meeting held in the third year following the year of their
election.

                              By: /s/ J. Stephen Barley
                              Title: Secretary
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                                   EXHIBIT A

                           TERMS OF PREFERRED STOCK

Section 1.   Designation, Amount and Par Value.
             ----------------------------------

             The series of preferred stock shall be designated as 5% Series A
Convertible Preferred Stock (the "Preferred Stock") and the number of shares so
designated shall be 400 (which shall not be subject to increase without the
consent of the holders of the Preferred Stock (each, a "Holder" and
collectively, the "Holders")); Each share of Preferred Stock shall have a par
value of $1.00 and a stated value of $10,000 (the "Stated Value").

Section 2.   Dividends.
             ----------

             (a) Holders shall be entitled to receive, when and as declared by
the Board of Directors out of funds legally available therefor, and the Company
shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) equal to 5% per annum, payable on a quarterly basis on
March 31, June 30, September 30 and December 31 of each year during the term
hereof (each a "Dividend Payment Date"), commencing on September 30, 1998, in
cash or shares of Common Stock (as defined in Section 8) at, subject to the
terms and conditions set forth herein, the option of the Company. Dividends on
the Preferred Stock shall be calculated on the basis of a 360-day year, shall
accrue daily commencing on the Original Issue Date (as defined in Section 8),
and shall be deemed to accrue from such date whether or not earned or declared
and whether or not there are profits, surplus or other funds of the Company
legally available for the payment of dividends. Any dividends not paid on any
Dividend Payment Date shall continue to accrue and shall be due and payable upon
conversion of the Preferred Stock. A party that holds shares of Preferred Stock
on a Dividend Payment Date will be entitled to receive such dividend payment and
any other accrued and unpaid dividends which accrued prior to such Dividend
Payment Date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date. All overdue accrued and unpaid
dividends and other amounts due herewith shall entail a late fee at the rate of
15% per annum (to accrue daily, from the date such dividend is due hereunder
through and including the date of payment). Except as otherwise provided herein,
if at any time the Company pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares held by each Holder.
Payment of dividends on the Preferred Stock is further subject to the provisions
of Section 5(c)(i). The Company shall provide the Holders notice of its
intention to pay dividends in cash or shares of Common Stock not less than 10
Trading Days prior to any Dividend Payment Date for so long as shares of
Preferred Stock are outstanding. If dividends are paid in shares of Common
Stock, the number of shares of Common Stock issuable on account of such dividend
shall equal the cash amount of such dividend on such Dividend Payment Date
divided by the Conversion Price (as defined below) on such date.

          (b) Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends on the
Preferred Stock (and must deliver cash in respect thereof) if:
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               (i)   the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay such
dividends in shares of Common Stock;

               (ii)  such shares of Common Stock are not registered for resale
pursuant to an effective registration statement that names the recipient of such
dividend as a selling stockholder thereunder and may not be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
in the form and substance acceptable to the Holders and such transfer agent;

               (iii) the Common Stock is not then listed or quoted on the Nasdaq
SmallCap Market ("NASDAQ") or on the New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market (each, a "Subsequent Market");

               (iv)  the Company has failed to timely satisfy its conversion
obligations hereunder; or

               (v)   the issuance of such shares of Common Stock would result in
the recipient thereof beneficially owning, as determined in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), more than 4.999% of the then issued and outstanding shares of
Common Stock.

          (c)  So long as any Preferred Stock shall remain outstanding, neither
the Company nor any subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 8),
nor shall the Company directly or indirectly pay or declare any dividend or make
any distribution (other than a dividend or distribution described in Section 5)
upon, nor shall any distribution be made in respect of, any Junior Securities,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities or shares pari
passu with the Preferred Stock, except for repurchases effected by the Company
on the open market, pursuant to a direct stock purchase plan.

Section 3.     Voting Rights.
               --------------

Except as otherwise provided herein and as otherwise required by law, the
Preferred Stock shall have no voting rights. However, so long as any shares of
Preferred Stock are outstanding, the Company shall not and shall cause its
subsidiaries not to, without the affirmative vote of the Holders of all of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock, (b) alter or
amend this Certificate of Designation, (c) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a Liquidation (as
defined in Section 4) senior to or otherwise pari passu with or senior to the
Preferred Stock, except for any series of Preferred Stock issued and sold in
accordance with the Purchase Agreement, (d) amend its Certificate of
Incorporation, bylaws or other charter documents so as to affect adversely any
rights of any Holders,(e) increase the authorized number of shares of Preferred
Stock, or (f) enter into any agreement with respect to the foregoing.
<PAGE>

Section 4.     Liquidation.
               ------------

Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to
receive out of the assets of the Company, whether such assets are capital or
surplus, for each share of Preferred Stock an amount equal to the Stated Value
plus all due but unpaid dividends per share, whether declared or not, before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the Holders shall be
distributed among the Holders ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 33% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.

Section 5.     Conversion.
               -----------

               (a)(i) Conversions at Option of Holder. Each share of Preferred
Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section 5(a)(ii) hereof) at the Conversion Ratio (as
defined in Section 8) at the option of the Holder, at any time and from time to
time, from and after the 90th day following the Original Issue Date (the
"Initial Conversion Date"). From and after the Initial Conversion Date until the
240th day following the Original Issue Date, the Holders may convert each month
on a cumulative basis such number of shares of Preferred Stock as is equal to or
less than the Initial Conversion Amount (for example, if no conversion is made
prior to the 3rd month after the Initial Conversion Date, then the Holders may
convert 3 times the Initial Conversion Amount on the first day of the 3rd month
after the Initial Conversion Date) so long as the total revenues generated by
the Company as reported on the Company's Form 10-Q filed with the Securities and
Exchange Commission (the "Commission") for (i) the quarter ended June 30, 1998
are equal to or in excess of $6,000,000, (ii) the quarter ended September 30,
1998 are equal to or in excess of $9,000,000 and (iii) the quarter ended
December 31, 1998 are equal to or less than $9,000,000 (the revenue amounts set
forth in clauses (i), (ii) and (iii) called, the "Revenue Targets").
Notwithstanding the foregoing, the conversion limitations set forth in this
Section shall immediately cease to apply, and the Holders shall be entitled to
convert all or any of the Preferred Stock from time to time thereafter, if the
Company fails to timely file with the Commission a Form 10-Q that meets the
Revenue Target applicable to such Form 10-Q. Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, together with the form of
conversion notice attached hereto as Exhibit 1 (a "Conversion Notice"). Each
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered hereunder. If the Holder is
<PAGE>

converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall promptly deliver to such Holder (in the manner and within the time
set forth in Section 5(b)) a certificate for such number of shares as have not
been converted.

               (ii) Certain Conversion Restrictions.

                         (A) The Holder agrees not to convert shares of
Preferred Stock to the extent such conversion would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon
conversion of the shares of Preferred Stock held by such Holder after
application of this Section. To the extent that the limitation contained in this
Section applies, the determination of whether shares of Preferred Stock are
convertible (in relation to other securities owned by a Holder) and of which
shares of Preferred Stock are convertible shall be in the sole discretion of the
Holder, and the submission of shares of Preferred Stock for conversion shall be
deemed to be the Holder's determination of whether such shares of Preferred
Stock are convertible (in relation to other securities owned by the Holder) and
of which portion of such shares of Preferred Stock are convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of the Holder to convert
shares of Preferred Stock at such time as such conversion will not violate the
provisions of this Section. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon not less than 75
days prior notice to the Company (in which case, the Holder shall make such
filings with the Commission, including under Rule 13D or 13G, as are required by
applicable law), and the provisions of this Section shall continue to apply
until such 75th day (or later, if stated in the notice of waiver). Other Holders
shall be unaffected by any such waiver.

                         (B) If on any Conversion Date (1) the Common Stock is
listed for trading on the NASDAQ or the Nasdaq National Market, (2) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion in full of all then
outstanding shares of Preferred Stock, together with any shares of the Common
Stock previously issued upon conversion of the shares of Preferred Stock and as
payment of dividends thereon, would equal or exceed 20% of the number of shares
of the Common Stock outstanding on the Original Issue Date (such number of
shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and
(3) the Company shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the rules and regulations
of The Nasdaq Stock Market (or successor thereto) applicable to approve the
issuance of Common Stock in excess of the Issuable Maximum in a private
placement whereby shares of Common Stock are deemed to have been issued at a
price that is less than the greater of book or fair market value of the Common
Stock, then the Company shall issue to the Holder so requesting a conversion a
number of shares of Common Stock equal to the Issuable Maximum and, with respect
to the remainder of the aggregate Stated Value of the shares of Preferred Stock
then held by such Holder for which a conversion in accordance with the
Conversion Price would result in an issuance of Common Stock in excess of
<PAGE>

the Issuable Maximum (the "Excess Stated Value"), the converting Holder shall
have the option to require the Company to either (a) use its best efforts to
obtain the Shareholder Approval applicable to such issuance as soon as is
possible, but in any event not later than the 60th day after such request, or
(b)(i) issue and deliver to such Holder a number of shares of Common Stock as
equals (x) the Excess Stated Value, plus accrued dividends on all shares of
Preferred Stock being converted, divided by (y) the closing sales price of the
Common Stock on the Original Issue Date, and (ii) cash in an amount equal to the
product of (x) the Per Share Market Value on the Conversion Date and (y) the
number of shares of Common Stock in excess of such Holder's pro rata portion of
the Issuable Maximum that would have otherwise been issuable to the Holder in
respect of such conversion but for the provisions of this Section (such amount
of cash being hereinafter referred to as the "Discount Equivalent"), or (c) pay
cash to the converting Holder in an amount equal to the Mandatory Redemption
Amount (as defined in Section 8) for the Excess Stated Value. If the Company
fails to pay the Discount Equivalent or the Mandatory Redemption Amount, as the
case may be, in full pursuant to this Section within seven (7) days after the
date payable, the Company will pay interest thereon at a rate of 15% per annum
to the converting Holder, accruing daily from the Conversion Date until such
amount, plus all such interest thereon, is paid in full.

          (b) (i) Not later than three (3) Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to the limitations set forth in Section 5(a)(ii)
hereof), (ii) one or more certificates representing the number of shares of
Preferred Stock not converted, (iii) a bank check in the amount of accrued and
unpaid dividends (if the Company has elected to pay accrued dividends in cash),
and (iv) if the Company has elected and is permitted hereunder to pay accrued
dividends in shares of Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1 (b) of the Purchase Agreement), representing such shares of Common
Stock; provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock until certificates evidencing such shares of
Preferred Stock are either delivered for conversion to the Company or any
transfer agent for the Preferred Stock or Common Stock, or the Holder of such
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid dividends hereunder, are not delivered to or as directed by the
applicable Holder by the third (3rd) Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
<PAGE>

               (ii)  If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, by the third (3rd) Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each day after such third
(3rd) Trading Day until such certificates are delivered. Nothing herein shall
limit a Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon conversion within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holders from seeking to enforce damages
pursuant to any other Section hereof or under applicable law. Further, if the
Company shall not have delivered any cash due in respect of conversions of
Preferred Stock or as payment of dividends thereon by the third (3rd) Trading
Day after the Conversion Date, the Holder may, by notice to the Company, require
the Company to issue Underlying Shares pursuant to Section 5(c), except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such Underlying Shares will be subject to the provision
of this Section.

               (iii) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, by the third (3rd) Trading Day after the Conversion Date,
and if after such third (3rd) Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then the Company shall
pay in cash to the Holder (in addition to any remedies available to or elected
by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the aggregate stated value of the shares of Preferred
Stock for which such conversion was not timely honored. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate
stated value of the shares of Preferred Stock, the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.

          (c)(i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
$2.31 (the "Initial Conversion Price") and (b) 80% (the "Discount Price")
multiplied by the average of the three (3) lowest Per Share Market Values (as
defined in Section 8) during the thirty (30) Trading Days immediately preceding
the applicable Conversion Date; provided, however, that such thirty (30) Trading
Day period shall be extended for the number of Trading Days during such period
in which (A) trading in the Common Stock was suspended on the NASDAQ or on such
Subsequent Market on which the Common Stock is then listed, or (B) after the
date declared effective by the Commission, the Underlying Securities
Registration Statement is not effective, or (C) after the date declared
<PAGE>

effective by the Commission, the Prospectus included in the Underlying
Securities Registration Statement may not be used by the Holder for the resale
of Underlying Shares; provided further, that prior to the 240th day following
the Original Issue Date, the Conversion Price may not be less than the Floor (as
defined in Section 8), except that (i) the Floor shall immediately cease to
apply if the Company fails to timely file with the Commission a Form 10-Q that
meets the Revenue Target applicable to such Form 10-Q described in Section
5(a)(i) and (ii) the Floor shall not apply to (and shall be lowered in
accordance with subparagraph (D) below) any adjustments of the Conversion Price
pursuant to subparagraph (D) below or to adjustments to the Conversion Price as
a result of the provisions of Section 5(c)(ii)-(v).

                         (A) If an Underlying Securities Registration Statement
is not filed on or prior to the Filing Date (as defined in the Registration
Rights Agreement) (if the Company files such Underlying Securities Registration
Statement without affording the Holder the opportunity to review and comment on
the same as required by Section 3(a) of the Registration Rights Agreement, the
Company shall not be deemed to have satisfied this clause (a)), then the Company
will pay to the Holders on the calendar day immediately following the Filing
Date an amount equal to 1% of the aggregate Stated Value of the Preferred Stock
purchased by the Holders in cash as liquidated damages, and not as a penalty.
Commencing on the 60th day following the Original Issue Date, and on expiration
of each succeeding 30-day period thereafter until the Underlying Securities
Registration Statement is filed, the Company will pay to the Holders an amount
equal to 3% of the aggregate Stated Value of the Preferred Stock purchased by
the Holders in cash as liquidated damages, and not as a penalty.

                         (B) If the Company fails to respond to questions or
comments from the Commission within ten (10) Business Days (as defined in the
Registration Rights Agreement) of receipt of such questions or comments (the
"Response Deadline"), the Company will pay to the Holders on the Business Day
immediately following the Response Deadline and on each of the four immediately
succeeding Business Days until the earlier to occur of the sixth Business Day
immediately following the Response Deadline or such time as a response is filed
with the Commission, an amount of $10,000 in cash as liquidated damages, and not
as a penalty. Commencing on the sixth Business Day immediately following the
Response Deadline, during every 5 Business Day period until a response is filed
with the Commission, the Company will pay to the Holders on each Business Day an
amount equal to the amount that was to be paid by the Company to the Holders on
each Business Day during the immediately preceding 5 Business Day period
pursuant to this subparagraph plus $2,500, in cash as liquidated damages, and
not as a penalty (for example, on each Business Day during the second 5 Business
Day period immediately following the Response Deadline, the Company shall pay to
the Holders $12,500 and on each Business Day during the third 5 Business Day
period immediately following the Response Deadline, the Company shall pay to the
Holders $15,000).

                         (C) If the Underlying Securities Registration Statement
is not declared effective by the Commission on or prior to the Effectiveness
Date (as defined in the Registration Rights Agreement), then the Company will
pay to the Holders on January 1, 1999, an amount equal to 1% of the aggregate
Stated Value of the Preferred Stock purchased by the Holders in cash as
liquidated damages, and not as a penalty. Thereafter, on February 1, 1999, and
on the first day of each succeeding month thereafter until the Underlying
Securities Registration
<PAGE>

Statement is declared effective by the Commission, the Company will pay to the
Holders an amount equal to 3% of the aggregate Stated Value of the Preferred
Stock purchased by the Holders in cash as liquidated damages, and not as a
penalty.

          (D) If (a) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that an Underlying Securities Registration Statement will not be
"reviewed," or not subject to further review, or (b) such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the "Effectiveness Period" (as defined in the
Registration Rights Agreement), without being succeeded within ten (10) days by
a subsequent Underlying Securities Registration Statement filed with and
declared effective by the Commission, or (c) trading in the Common Stock shall
be delisted or suspended from trading on the NASDAQ or on such Subsequent Market
on which the Common Stock is then listed for more than three Trading Days (which
need not be consecutive days) or (d) an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission within
ten (10) days of the Commission's notifying the Company that such amendment is
required in order for the Underlying Securities Registration Statement to be
declared effective or (e) if the conversion rights of the Holders are suspended
for any reason, or (f) if the Company is required to convene a shareholders
meeting pursuant to Section 5(a)(ii)(B) and fails to convene a meeting of
shareholders within the time periods specified in Section 5(a)(ii)(B) (any such
failure or breach being referred to as an "Event," for purposes of clause (a)
the date on which such five (5) day period is exceeded, or for purposes of
clause (b) and (d) the date which such 10 day-period is exceeded, or for
purposes of clause (c) the date on which such three (3) Trading Day-period is
exceeded, being referred to as "Event Date"), the Conversion Price shall be
decreased by 3% on the Event Date and each monthly anniversary thereof until the
earlier to occur of the second month anniversary after the Event Date and such
time as the applicable Event is cured (i.e., the Conversion Price would decrease
by 3% as of the Event Date and 5% as of the one month anniversary of such Event
Date). Commencing on the second month anniversary after the Event Date, the
Holder shall have the option to either (x) require further cumulative 3%
discounts to continue or (y) require the Company to pay to the Holder 3% of the
aggregate Stated Values of the shares of Preferred Stock then held by such
Holder, in cash, as liquidated damages and not as a penalty, on the first day of
each monthly anniversary of the Event Date, until such time as the applicable
Event is cured. Any decrease in the Conversion Price pursuant to this Section
shall remain in effect notwithstanding the fact that the Event causing such
decrease has been subsequently cured and further monthly decreases have ceased.

The provisions of this Section 5 (c)(i) are not exclusive and shall in no way
limit the Company's obligations under the Registration Rights Agreement.

          (ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall (a) pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities or pari passu securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine
<PAGE>

outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

          (iii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall issue rights, warrants or options to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Per Share Market Value at the record date
mentioned below, then the Initial Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, warrants or
options, plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right, warrant or option to purchase shares of Common Stock
the issuance of which resulted in an adjustment in the Conversion Price pursuant
to this Section 5(c)(iii), if any such right, warrant or option shall expire and
shall not have been exercised, the Conversion Price shall immediately upon such
expiration shall be recomputed and effective immediately upon such expiration
shall be increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the adjustment
of the Conversion Price made upon the issuance of such rights, warrants, or
options been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights, warrants or options actually exercised.

          (iv) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while any
shares of Preferred Stock are outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock at a price per share less
than the Conversion Price, then the Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of shares of Common Stock or such
Common Stock Equivalents plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common Stock Equivalents would
purchase at the Conversion Price, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock so
<PAGE>

issued or issuable, provided, that for purposes hereof, all shares of Common
Stock that are issuable upon exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued.

          (v) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at
which each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, if
the Holders of a majority in interest of the Preferred Stock dispute such
valuation, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the Holders of a majority in interest of the shares of Preferred
Stock then outstanding; and provided, further, that the Company, after receipt
of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the Holders
of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

          (vi) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

          (vii) Whenever the Conversion Price is adjusted pursuant to Section
5(c)(i),(ii),(iii),(iv), or (v) the Company shall promptly mail to each Holder,
a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.

          (viii) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such shares only
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such
<PAGE>

reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.

          (ix) If (a) the Company shall declare a dividend (or any other
distribution) on its Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock, (c) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property, or (e) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of Preferred Stock, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Preferred Stock during
the 20-day period commencing the date of such notice to the effective date of
the event triggering such notice.

          (x) If the Company (i) makes a public announcement that it intends to
enter into a Change of Control Transaction (as defined in Section 8) or (ii) any
person, group or entity (including the Company, but excluding a Holder or any
affiliate of a Holder) publicly announces a bona fide tender offer, exchange
offer or other transaction to purchase 33% or more of the Common Stock (such
announcement being referred to herein as a "Major Announcement" and the date on
which a Major Announcement is made, the "Announcement Date"), then, in the event
that a Holder seeks to convert shares of Preferred Stock on or following the
Announcement Date, the Conversion Price shall, effective upon the Announcement
Date and continuing through the earlier to occur of the consummation of the
proposed transaction or tender offer, exchange offer or other transaction and
the Abandonment Date (as defined below), be equal to the lower of (x) the
average Per Share Market Value on the five Trading Days immediately preceding
(but not including) the Announcement Date and (y) the Conversion Price that
would otherwise have been
<PAGE>

in effect on the Conversion Date for such Preferred Stock but for the
application of this section. "Abandonment Date" means with respect to any
proposed transaction or tender offer, exchange offer or other transaction for
which a public announcement as contemplated by this paragraph has been made, the
date upon which the Company (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) publicly announces the
termination or abandonment of the proposed transaction or tender offer, exchange
offer or another transaction which caused this paragraph to become operative.

          (d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock and payment of dividends on
Preferred Stock, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holders, not
less than such number of shares of Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(a) and Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock and payment of dividends
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and freely tradeable, subject to the legend requirements of
Section 3.1 (b) of the Purchase Agreement.

          (e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.

          (f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

          (g) Shares of Preferred Stock converted into Common Stock shall be
canceled. The Company may not reissue any shares of Preferred Stock.

          (h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company at the
facsimile telephone number or address of the principal place of business of
<PAGE>

the Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (Eastern Standard Time), (ii) the date after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (Eastern
Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time)
on such date, (iii) upon receipt, if sent by a nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.

Section 6.   Optional Redemption.
             --------------------

             (a) So long as the Conversion Price is less than $1.50, the Company
shall have the right, exercisable at any time upon 20 Trading Days' notice (an
"Optional Redemption Notice") to the Holders of the Preferred Stock given at any
time after the Original Issue Date to redeem all or any portion of the shares of
Preferred Stock which have not previously been converted or redeemed, at a price
equal to the Optional Redemption Price (as defined below), provided, that the
Company shall not be entitled to deliver an Optional Redemption Notice to the
Holders if: (i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes is insufficient to satisfy the
Company's conversion obligations of all shares of Preferred Stock then
outstanding, or (ii) the Underlying Shares then outstanding are not registered
for resale pursuant to an effective Underlying Securities Registration Statement
and may not be sold without volume restrictions pursuant to Rule 144 promulgated
under the Securities Act, as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the Company's transfer agent in the form
and substance acceptable to the Holders and such transfer agent, or (iii) the
Common Stock is not then listed for trading on the NASDAQ or a Subsequent
Exchange. The entire Optional Redemption Price shall be paid in cash. Holders
may convert (and the Company shall honor such conversions in accordance with the
terms hereof) any shares of Preferred Stock, including shares subject to an
Optional Redemption Notice, during the period from the date thereof through the
20th Trading Day after the receipt of an Optional Redemption Notice.

          (b) If any portion of the Optional Redemption Price shall not be paid
by the Company by the 20th Trading Day after the delivery of an Optional
Redemption Notice, interest shall accrue thereon at the rate of 15% per annum
until the Optional Redemption Price plus all such interest is paid in full. In
addition, if any portion of the Optional Redemption Price remains unpaid after
the date due, the Holder of the Preferred Stock subject to such redemption may
elect, by written notice to the Company given at any time thereafter, to either
(i) demand conversion of all or any portion of the shares of Preferred Stock for
which such Optional Redemption Price, plus interest thereof, has not been paid
in full (the "Unpaid Redemption Shares"), in which event the Per Share Market
Value for such shares shall be the lower of the Per
<PAGE>

Share Market Value calculated on the date the Optional Redemption Price was
originally due and the Per Share Market Value as of the Holder's written demand
for conversion, or (ii) invalidate ab initio such redemption, notwithstanding
anything herein contained to the contrary. If the Holder elects option (i)
above, the Company shall within three (3) Trading Days of its receipt of such
election deliver to the Holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such Holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Company shall promptly, and in any
event not later than three (3) Trading Days from receipt of Holder's notice of
such election, return to the Holder all of the Unpaid Redemption Shares.

             (c) The "Optional Redemption Price" shall equal the sum of (i) the
product of (A) the number of shares of Preferred Stock to be redeemed and (B)
$11,000, and (ii) all other amounts, costs, expenses and liquidated damages due
in respect of such shares of Preferred Stock.

Section 7.   Redemption Upon Triggering Events.
             ----------------------------------

             (a) Upon the occurrence of a Triggering Event, each Holder shall
(in addition to all other rights it may have hereunder or under applicable law),
has the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying Shares
issued in respect of conversions or as payment of dividends hereunder and then
held by the Holder and (B) the Per Share Market Value on the date such
redemption is demanded or the date the redemption price hereunder is paid in
full, whichever is greater. If the Company fails to pay the redemption price
hereunder in full pursuant to this Section within seven (7) days after the date
of a demand therefor, the Company will pay interest thereon at a rate of 15% per
annum, accruing daily from such seventh day until the redemption price, plus all
such interest thereon, is paid in full. For purposes of this Section, a share of
Preferred Stock is outstanding until such date as the Holder shall have received
Underlying Shares upon a conversion (or attempted conversion) thereof.

          A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgement, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body):

               (i) the failure of an Underlying Securities Registration
Statement to be declared effective by the Commission on or prior to March 31,
1999;

               (ii) if, during the Effectiveness Period, the effectiveness of
the Underlying Securities Registration Statement lapses for any reason, or the
Holder shall not be permitted to resell Registrable Securities under the
Underlying Securities Registration Statement;

               (iii) the failure of the Common Stock to be listed for trading on
the NASDAQ or on a Subsequent Market or the suspension of the Common Stock from
trading on
<PAGE>

the NASDAQ or on a Subsequent Market, in either case, for more than three (3)
consecutive days;

          (iv) (A) the Company shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder that comply
with the provisions hereof (x) prior to the 10th day after the Conversion Date
after receipt of notice from a Holder given on or prior to the 6th day after the
Conversion Date or (y) prior to the 3rd day after receipt of notice from a
Holder given on or after the 7th day after the Conversion Date or (B) the
Company shall provide notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any Preferred Stock in accordance with the terms hereof;

          (v) the Company shall be a party to any Change of Control Transaction,
shall agree to sell (in one or a series of related transactions) all or
substantially all of its assets (whether or not such sale would constitute a
Change of Control Transaction) or shall redeem more than a de minimis number of
shares of Common Stock or other Junior Securities (other than redemptions of
Underlying Shares);

          (vi) an Event shall not have been cured to the satisfaction of the
Holders prior to the expiration of thirty (30) days from the Event Date relating
thereto;

          (vii) the Company shall fail for any reason to pay in cash the amount
due pursuant to a Buy-In within seven (7) days after notice thereof is delivered
hereunder;

          (viii) the Company shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder; or

          (ix) the Company convenes a meeting of shareholders pursuant to
Section 5(a)(ii)(B), but fails to obtain Shareholder Approval at such meeting.

Section 8.   Definitions.
             ------------

             For the purposes hereof, the following terms shall have the
following meanings:

             "Change of Control Transaction" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 33% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 33% of such securities following such
transaction or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
<PAGE>

          "Common Stock" means the Company's common stock, no par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.

          "Conversion Ratio" means, at any time, a fraction, the numerator of
which is Stated Value plus accrued but unpaid dividends (including any accrued
but unpaid late fees thereon) but only to the extent not paid in shares of
Common Stock in accordance with the terms hereof, and the denominator of which
is the Conversion Price at such time.

          "Floor" means [50% of the Initial Conversion Price] (subject to
adjustment for stock splits and similar events in accordance with Sections
5(c)(ii), (iii), (iv) and (v)).

          "Initial Conversion Amount" means (i) 60 shares of Preferred Stock
(i.e., 15% of the number of shares of Preferred Stock originally issued on the
Original Issue Date, in the event the Underlying Securities Registration
Statement is declared effective by the Commission on or prior to October 15,
1998) and (ii) 100 shares of Preferred Stock (i.e., 25% of the number of shares
of Preferred Stock originally issued on the Original Issue Date), in the event
the Underlying Securities Registration Statement is declared effective by the
Commission after October 15, 1998.

          "Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.

          "Mandatory Redemption Amount" for each share of Preferred Stock means
the sum of (i) the greater of (A) 130% of the Stated Value and all accrued
dividends with respect to such share, and (B) the product of (a) the Per Share
Market Value on the Trading Day immediately preceding (x) the date of the
Triggering Event or the Conversion Date, as the case may be, or (y) the date of
payment in full by the Company of the applicable redemption price, whichever is
greater, and (b) the Conversion Ratio calculated on the date of the Triggering
Event, or the Conversion Date, as the case may be, and (ii) all other amounts,
costs, expenses and liquidated damages due in respect of such shares of
Preferred Stock.

          "Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

          "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the NASDAQ or on such
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on which the Common Stock is then listed or quoted on
the date nearest preceding such date, or (b) if the Common Stock is not then
listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then
<PAGE>

reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant conversion period, as determined in
good faith by the Holder, or (d) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the Holders of a majority of the shares of the
Preferred Stock.

          "Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

          "Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holder of the Preferred Stock.

          "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of the Preferred Stock.

          "Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ or on such Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.

          "Underlying Securities Registration Statement" means a registration
statement that meets the requirement of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the recipient thereof, who
shall be named as a "selling stockholder" thereunder.

          "Underlying Shares" means, collectively, the shares of Common Stock
into which the Shares are convertible and the shares of Common Stock issuable
upon payment of dividends thereon in accordance with the terms hereof.
<PAGE>

                                   EXHIBIT 1

                             NOTICE OF CONVERSION

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of 5% Series A
Convertible Preferred Stock indicated below, into shares of Common Stock, no par
value (the "Common Stock"), of Tanisys Technology, Inc. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.

                                                        Conversion calculations:

                                     ___________________________________________
                                                       Date to Effect Conversion

                                     ___________________________________________
                             Number of shares of Preferred Stock to be Converted

                                     ___________________________________________
                                   Number of shares of Common Stock to be Issued

                                     ___________________________________________
                                                     Applicable Conversion Price

                                     ___________________________________________
                                                                       Signature

                                     ___________________________________________
                                                                            Name

                                     ___________________________________________
                                                                         Address

[_] Check box if the Company should not issue shares of Common Stock in payment
   of dividends on the Preferred Stock because such issuance would result in the
   Holder beneficially owning more than 4.999% of the issued and outstanding
   shares of Common Stock in accordance with Section 2 (b)(v) of the Certificate
   of<PAGE>

                                                                     EXHIBIT 4.3

                            TANISYS TECHNOLOGY INC.

                             1993 Stock Option Plan
                       (As Amended through May 31, 2000)

     1.   Purpose.  This 1993 Stock Option Plan (the "Plan") of Tanisys
          -------
Technology, Inc., a Wyoming corporation (the "Company"), for key employees,
directors and consultants of the Company, is intended to advance the best
interest of the Company by providing such persons, who have substantial
responsibility for its management, success, and growth, with additional
incentive and by increasing their proprietary interest in the success of the
Company -- thereby encouraging them to remain in its employ or service.

     2.   Administration.  The Plan shall be administered by the Board of
          --------------
Directors of the Company (the "Board") or a committee to be appointed by the
Board (such committee or the Board acting as such committee is herein referred
to as the "Committee"); and all questions of interpretation and application of
the Plan, or of options granted hereunder (the "Options"), shall be subject to
the determination, which shall be final and binding, of a majority of the whole
Committee.  The Committee shall consist of not less than two members of the
Board of Directors.  Meetings shall be held at such times and places as shall be
determined by the Committee.  A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any questions brought
before that meeting.  In addition, the Committee may take any action otherwise
proper under the Plan by the unanimous written consent of its members.  No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his or her own part,
including but not limited to the exercise of any power or discretion given to
him or her under the Plan, except those resulting from his or her own gross
negligence or willful misconduct.

     3.   Option Shares.  The shares subject to the Options and other provisions
          -------------
of the Plan shall be shares of the Company's Common Stock, no par value (the
"Common Stock").  The total amount of the Common Stock with respect to which
Options may be granted shall not exceed in the aggregate 5,000,000 shares;
provided, however, that such aggregate number of shares shall be subject to
adjustment in accordance with the provisions of Paragraph 16 hereof.  Such
shares may be treasury shares or authorized but unissued shares.  In the event
that any outstanding Option granted under the Plan shall expire or terminate,
the shares of Common Stock allocable to the unexercised portion of such Option
may again be subject to an Option under the Plan.

     4.   Authority to Grant Options.  The Committee may grant the following
          --------------------------
Options from time to time as it shall from time to time determine:

          (a) "Incentive" Stock Options.  The Committee may grant to an eligible
     person an Option or Options to buy a stated number of shares of Common
     Stock under the terms and conditions of the Plan, so that the Option or
     Options will be an "incentive stock option" within the meaning of the
     Internal Revenue Code of 1986 (the "Code").
<PAGE>

          (b) "Nonqualified" Stock Options.  The Committee may grant to an
     eligible person an Option or Options to buy a stated number of shares of
     Common Stock under the terms and conditions of the Plan, even though such
     Option or Options would not constitute an "incentive stock option" within
     the meaning of the Code.

Subject only to any applicable limitations set forth in the Plan, the number of
shares of Common Stock to be covered by any Option shall be as determined by the
Committee; provided, however, that no individual may hold options to purchase a
number of shares of Common Stock in excess of five percent (5%) of the number of
issued and outstanding shares of Common Stock on the date of grant.  No tandem
Options may be issued, that is, no Option may be granted the exercise of which
would affect the exercisability of any other outstanding Option held by the
optionee.  The Committee shall, at its discretion, be entitled to grant multiple
or a series of options to a qualified recipient pursuant to this Plan.

     5.   Eligibility.  The individuals who shall be eligible to participate in
          -----------
the Plan shall be the key employees, directors and consultants of the Company,
or of any wholly owned subsidiary; provided, however, that no employee of the
Company who would be ineligible to receive an incentive stock Option by reason
of the provisions of Section 422(b)(6) of the Code (relating to ownership of
more than 10% of the total combined voting power of all classes of the Company's
stock) shall be eligible to receive an incentive stock Option under the Plan
unless it complies with Paragraphs 7 and 8 hereof.

     6.   Grants to Employees and Affiliates.  All key employees, directors and
          ----------------------------------
consultants of the Company shall be eligible to participate in the Plan and
shall be granted Options as determined by unanimous vote or consent of the
Committee.  In determining the number of shares to be purchasable pursuant to an
Option, the Committee shall consider the following factors: an equitable
distribution of available Options having regard to the number of employees,
directors and consultants, the frequency of optionee turnover, the size of
allocations to existing employees, directors and consultants, and the duties and
qualifications of the optionee.

     7.   Option Price.  The price at which shares may be purchased pursuant to
          ------------
Options shall be set at the discretion of the Committee, but in no event shall
be less than fair market value; provided, further, that an individual who owns
more than 10% of the total combined voting power of all classes of the stock of
the Company or of its parent or its subsidiaries shall not be eligible to
receive an incentive stock Option unless, on the date such Option is granted,
the Option price is at least 110% of the fair market value of a share of Common
Stock.

     The term "fair market value" on any day shall mean such amount last
determined in good faith by the Board of Directors of the Company or, in absence
of a determination by the Board, by the Committee; provided, however,  that, if
the Common Stock is traded on the NASDAQ quotation system or is listed on an
established U.S. stock exchange or exchanges, such fair market value shall be
deemed to be the closing price of the Common Stock as reported for that day in
The Wall Street Journal listing of composite transactions for such stock
-----------------------
exchange or exchanges, or if no sale of Common Stock shall have been made on any
stock exchange on that day, on the preceding day on which there was a sale of
such stock as reported.
<PAGE>

     8.   Duration of Options.  No Option shall be exercisable after the
          -------------------
expiration of ten years from the date such Option is granted, and the Committee
in its discretion may provide that an Option shall be exercisable during such
ten-year period or any lesser period of time; provided, however, that an
individual who owns more than 10% of the total combined voting power of all
classes of the stock of the Company or of its parent or subsidiaries shall not
be eligible to receive an incentive stock Option unless it is not exercisable
after the expiration of five years from the date such Option is granted.

     9.   Amount Exercisable.
          ------------------

          (a) Each Option may be exercised, so long as it is valid and
     outstanding, from time to time in part or as a whole, and subject to
     Paragraph 8 hereof and to such other conditions as the Committee in its
     discretion may provide.  All Options shall vest on an equal basis over a
     period not less than three years from the date of grant.

          (b) The foregoing provision notwithstanding, an individual may not be
     granted incentive stock Options so that the aggregate fair market value
     (determined at the time of grant) of the stock with respect to which
     incentive stock Options are exercisable for the first time by such
     individual during any calendar year under all plans of the Company and its
     parent and subsidiary corporations exceeds $100,000.

          (c) Without limiting the authority of the Committee under Paragraph
     9(a), if there is a change in the control of the Company while any Option
     remains outstanding under the Plan, then the Committee may waive any
     limitations set forth in or imposed pursuant to Paragraph 9(a) hereof so
     that any or all Options shall be exercisable in full.  For the purposes of
     the Plan, a "change in control" of the Company shall mean a change in
     control of a nature that is reportable in response to Item 5(f) of Schedule
     14A of Regulation 14A promulgated under the Securities Exchange Act of 1934
     (the "Exchange Act") as in effect on the date hereof, provided that,
     without limitation, such a change in control shall be deemed to have
     occurred if:  (i) any "person" (as such term is used in Sections 13(d) and
     14(d)(2) of the Exchange Act) that does not own, directly or indirectly,
     any shares of the Company's capital stock on the date of adoption of this
     Plan is or becomes the beneficial owner, directly or indirectly, of
     securities of the Company representing 20% or more of the combined voting
     power of the Company's then outstanding securities; or (ii) during any
     period of two consecutive years, individuals who at the beginning of such
     period constitute the Board of Directors of the Company cease for any
     reason to constitute at least a majority thereof.

     10.  Exercise of Options. Options shall be exercised by the delivery of
          -------------------
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised and specifying the address to which the
certificates for such shares are to be mailed, together with full payment of the
Option price of such shares and such other items as may be required pursuant to
Paragraph 13 hereof.  "Full payment" shall mean the full exercise price in cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company.  As promptly as practicable after receipt of such written
notification and payment, the
<PAGE>

Company shall deliver to the optionee certificates for the number of shares with
respect to which such Option has been so exercised, issued in the optionee's
name; provided, that such delivery shall be deemed effected for all purposes
when a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the optionee, at the
address specified pursuant to this Paragraph 10. The delivery of certificates
upon the exercise of Options may, in the discretion of the Committee, be
conditioned upon payment to the Company by the person exercising such Option of
the amount, determined by the Company, of any tax liability resulting from such
exercise, including, but not limited to, employment taxes required to be
withheld.

     11.  Transferability of Options; Stock Transfer Restrictions.  Options
          -------------------------------------------------------
shall not be transferable by the optionee otherwise than by will or under the
laws of descent and distribution and shall be exercisable, during his or her
lifetime, only by him or her.

     12.  Termination of Employment or Death of Optionee.  Except as may be
          ----------------------------------------------
otherwise expressly provided herein, Options shall terminate on the earlier of
the date specified pursuant to Paragraph 8 hereof or no later than thirty (30)
days following severance of the employment relationship or termination of
affiliation between the Company and the optionee for any reason, for or without
cause, other than death or disability.  Whether authorized leave of absence or
absence on military or government service constitute severance of the employment
relationship or termination of affiliation between the Company and the optionee
shall be determined by the Committee at the time thereof.  In the event of
termination because of the death or disability of the holder of an Option before
the date of expiration of such Option, such Option shall terminate on the
earlier of such date of expiration or one year following the date of such death.
In the event of such termination, the optionee shall have the right, prior to
the termination of such Option, to exercise the Option to the extent to which he
or she was entitled to exercise such Option immediately prior to such severance
of the employment relationship or termination of affiliation.  After the death
of the optionee, his or her executors, administrators, or any person or persons
to whom his or her Option may be transferred, by will or by the laws of descent
and distribution, shall have the right at any time prior to such termination to
exercise the Option, in whole or in part (without regard to any limitations set
forth in or imposed pursuant to Paragraph 9(a) hereof).  In the event that the
Committee grants an Option designating it as an incentive stock Option, and the
optionee's employment status changes, but such person continues as a director or
consultant of the Company, then the Company in its discretion may, upon request
of the optionee, elect that the Option previously granted shall continue in full
force and effect as a nonqualified stock Option.  In the event that the
Committee grants an Option designating it as a nonqualified stock Option, and
the person's status with the Company or its subsidiary corporations changes, but
such person continues as a key employee, director or consultant of the Company,
then the Option previously granted shall continue in full force and effect,
unless the Committee in its discretion may elect to terminate or modify the
Option.  The Committee shall be permitted, in its discretion, to grant to any
employee an Option which is an incentive stock Option or a nonqualified stock
Option with a provision that the Option shall continue in full force and effect
as a non-qualified stock Option if the person's status with the Company or its
subsidiary changes, but such person continues as a director or consultant of the
Company.  For the purpose of determining the employment relationship between the
Company and the optionee, employment by a wholly owned subsidiary shall be
considered employment by the Company.
<PAGE>

     13.  Requirements of Law.
          -------------------

          (a) The Company shall not be required to sell or issue any shares
     pursuant to any Option if the issuance of such shares shall constitute a
     violation by the optionee or the Company of any provisions of any law or
     regulation of any governmental authority.  If a registration statement
     under the Securities Act of 1933 and any applicable state securities or
     Blue Sky laws (the "Securities Laws") is not in effect with respect to the
     shares of Common Stock issuable pursuant to any Option, the Company may
     require the optionee to make certain representations and may require an
     opinion of counsel satisfactory to the Company to the effect that such
     registration is not required.  Any determination in this connection by the
     Committee shall be final, binding, and conclusive.

          (b) Upon exercise of any Option, the Company shall not be required to
     issue such shares unless the Committee has received evidence satisfactory
     to it to the effect that the holder of such Option will not transfer such
     shares except pursuant to a registration statement in effect under the
     Securities Laws or unless an opinion of counsel satisfactory to the Company
     has been received by the Company to the effect that such registration is
     not required.  Any determination in this connection by the Committee shall
     be final, binding, and conclusive.

          (c) In the event the shares issuable upon exercise of an Option are
     not registered under the Securities Laws, the Company may imprint the
     following legend or any other legend that counsel for the Company considers
     necessary or advisable to comply with the Securities Laws:

               THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
               NOT BEEN REGISTERED OR QUALIFIED UNDER THE FEDERAL
               SECURITIES ACT OF 1933 (THE "1933 ACT") OR THE
               APPLICABLE STATE SECURITIES LAWS AND ARE
               "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE
               144 PROMULGATED UNDER THE 1933 ACT. THE SECURITIES
               MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING
               WITH RULE 144, IN THE ABSENCE OF EFFECTIVE
               REGISTRATION UNDER THE 1933 ACT OR OTHER
               COMPLIANCE UNDER THE 1933 ACT AND APPLICABLE STATE
               SECURITIES LAWS.

     Such legend shall not be required if the shares issued upon exercise of an
     Option are not subject to the Securities Laws.

          (d) The Company may, but shall in no event be obligated to, register
     any securities covered hereby pursuant to the Securities Laws, and in the
     event any shares are so registered, the Company may remove any legend on
     certificates representing such shares.  The Company shall not be obligated
     to take any other affirmative action in order
<PAGE>

     to cause the exercise of an Option or the issuance of shares pursuant
     thereto to comply with any law or regulation of any governmental authority.

     14.  No Rights as Stockholder.  No optionee shall have rights as a
          ------------------------
stockholder with respect to shares covered by his or her Option until the date
of issuance of a stock certificate for such shares; no adjustment for dividends
(other than stock dividends under Paragraph 16) or otherwise shall be made if
the record date therefor is prior to the date of issuance of such certificate.

     15.  Employment Obligations.  The granting of any Option shall not impose
          ----------------------
upon the Company any obligation to employ or continue to employ any optionee,
and the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
Option has been granted to him or her.

     16.  Changes in the Company's Capital Structure.  The existence of
          ------------------------------------------
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred, or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding whether of a
similar character or otherwise.

     If, while there are outstanding Options, the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding without receiving compensation therefor
in money, services, or property, then:  (i) in the event of an increase in the
number of shares outstanding, the number of shares of Common Stock then subject
to Options hereunder shall be proportionately increased, and the cash
consideration payable per share shall be proportionately reduced; (ii) in the
event of a reduction in the number of such shares outstanding, the number of
shares of Common Stock then subject to Options hereunder shall be
proportionately reduced, and the cash consideration payable per share shall be
proportionately increased; and (iii) the number of shares then available for
Options hereunder shall be proportionately increased or decreased, as the case
may be.

     After a merger of one or more corporations into the Company, each holder of
an outstanding Option shall, at no additional cost, be entitled upon exercise of
such Option to receive (subject to any required action by stockholders) in lieu
of the number of shares as to which such Option shall then be so exercisable,
the number and class of shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the agreement of merger if,
immediately prior to such merger, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which such
Option shall be so exercised.

     If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or where
the Company will
<PAGE>

be a wholly owned subsidiary of another corporation, or if the Company sells or
otherwise disposes of all or substantially all of its property or assets to
another corporation while unexercised Options remain outstanding under the Plan,
then: (i) subject to the provisions of clause (ii) below, after the effective
date of such merger, consolidation, or sale, as the case may be, each holder of
an outstanding Option shall be entitled, upon exercise of such Option, to
receive, in lieu of shares of Common Stock, the number and class of shares of
such stock, other securities, cash, and other property or rights as the holders
of shares of Common Stock received pursuant to the terms of the merger,
consolidation, or sale and to which he or she would have been entitled if,
immediately prior to such merger, consolidation, or sale, he or she had been the
holder of record of a number of shares of Common Stock equal to the number of
shares as to which such Option shall be so exercised; and (ii) all outstanding
Options may be canceled by the Board of Directors of the Company as of the
effective date of any such merger, consolidation, or sale, provided that (x)
written notice of such cancellation is given to each holder of an Option not
later than 30 days prior to such effective date and (y) each holder of an Option
shall have the right to exercise such Option in full (without regard to any
limitations set forth in or imposed pursuant to Paragraph 9(a) hereof) during
the said 30-day period preceding the effective date of such merger,
consolidation, or sale.

     No adjustment provided for in this Paragraph 16 shall be made if such
adjustment would result in a modification of any incentive stock Option or cause
such incentive stock Option to fail to qualify as an "incentive stock option"
under the Code.

     Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.

     17.  Substitute Options.  Incentive stock Options may be granted under this
          ------------------
Plan from time to time in substitution for incentive stock options held by
employees of other corporations who are about to become employees of the Company
as the result of a merger or consolidation of the employing corporation with the
Company, or the acquisition by the Company of substantially all the assets of
the employing corporation, or the acquisition by the Company of the issued and
outstanding stock of the employing corporation as the result of which it becomes
a wholly owned subsidiary of the Company.  The terms and conditions of the
substitute incentive stock Options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Board of Directors of
the Company at the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the incentive stock options in substitution for which
they are granted, but no such variation shall be such as to affect the status of
any such substitute Option as an "incentive stock option" under the Code.

     18.  Amendment or Termination of Plan.  The Board of Directors may modify,
          --------------------------------
revise, or terminate this Plan at any time and from time to time; provided,
however, that without the further approval both of the holders of at least a
majority of the outstanding shares of Common
<PAGE>

Stock and of a majority of the outstanding shares of Common Stock held by the
disinterested shareholders of the Company (as defined by the VSE), the Board may
not: (i) increase the aggregate number of shares which may be issued under
Options and pursuant to the provisions of the Plan; (ii) reduce the Option price
at which an incentive stock Option may be granted to an amount less than the
fair market value per share at the time such Option is granted; (iii) change the
class of employees eligible to receive Options; (iv) materially modify the
requirements as to affiliate eligibility for participation in the Plan; (v)
materially increase the benefits accruing to participants under the Plan; or
(vi) effect an amendment that would cause incentive stock Options issued
pursuant to the Plan to fail to meet the requirements of "incentive stock
options" as defined in Section 422 of the Code; provided, however, that the
Board shall have the power to make such changes in the Plan and in the
regulations and administrative provisions hereunder or in any outstanding Option
as in the opinion of counsel for the Company may be necessary or appropriate
from time to time to enable any incentive stock Options granted pursuant to the
Plan to continue to qualify as "incentive stock options" under the Code and the
regulations which may be issued thereunder as in existence from time to time.

     19.  Written Agreement.  Each Option granted hereunder shall be embodied in
          -----------------
a written option agreement that shall be subject to the terms and conditions
prescribed above, and shall be signed by the optionee and by the Chairman of the
Board, the President or any Vice President of the Company for and in the name
and on behalf of the Company.  Such an option agreement shall contain such other
provisions as the Committee in its discretion shall deem advisable.

     20.  Indemnification of Committee.  The Company shall indemnify each
          ----------------------------
present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his or her part to indemnity
from the Company for, all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him or her in connection with or arising out of any action, suit, or
proceeding in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to be
such member of the Committee at the time of incurring such expenses; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee (i) in respect of matters as to which he or she shall be
finally adjudged in any such action, suit, or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his or her duty as
such member of the Committee or (ii) in respect of any matter in which any
settlement is effected, to an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no right
of indemnification under the provisions set forth herein shall be available to
or enforceable by any such member of the Committee unless, within sixty (60)
days after institution of any such action, suit, or proceeding, he or she shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense.  The foregoing right of indemnification shall inure to the
benefit of the heirs, executors, or administrators of each such member of the
Committee and shall be in addition to all other rights to which such member of
the Committee may be entitled as a matter of law, contract, or otherwise.
<PAGE>

     21.  Effective Date of Plan.  The Plan shall become effective and shall be
          ----------------------
deemed to have been adopted October 25, 1993 if, within one year of that date,
it shall have been approved by the holders of at least a majority of the
outstanding Common Stock.  No Option shall be granted pursuant to the Plan after
October 24, 2003.

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