Document:

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                                                                     EXHIBIT 4.2

                           STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT is made as of the 7th day of June 2000, by
and between Fusion Medical Technologies, Inc. (the "Company"), a corporation
organized under the laws of the State of Delaware, with its principal offices at
34175 Ardenwood Boulevard, Fremont, California 94555, and the purchaser whose
name and address is set forth on the signature page hereof (the "Purchaser").

     IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:

     SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
                -----------------------------------
conditions of this Agreement, the Company has authorized the sale of up to
1,200,000 shares of common stock (the "Shares"), par value $0.001 per share (the
"Common Stock"), of the Company. The Company proposes to enter into an agreement
with another purchaser (the "Other Purchaser"), which agreement shall be in
substantially identical form to this Agreement (the "Other Purchase Agreement").

     SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as
                -----------------------------------------
defined in Section 3), the Company shall sell to the Purchaser, and the
Purchaser shall buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares (at the purchase price) shown below:

                                   Price Per
Number Shares to Be                Share In                        Aggregate
    Purchased                       Dollars                          Price
    ---------                       -------                          -----

     SECTION 3. Delivery of the Shares at the Closing. (a) The completion of
                -------------------------------------
the purchase and sale of the portion of the Shares to be purchased by the
Purchaser (the "Closing") shall occur on the date immediately following
execution and delivery of this Agreement at the offices of Georgopoulos Pahlavan
& Prince, LLP, 935 Hamilton Avenue, Menlo Park, California 94025 at such time
and date to be agreed upon by the Company and the Purchaser (the "Closing
Date").

          (b) At the Closing, the Company shall deliver to the Purchaser a
certificate representing the number of Shares set forth in Section 2 above. The
name in which the stock certificate is to be registered is set forth in the
Stock Certificate Questionnaire attached hereto as part of Appendix I. Prior to
the Purchaser's delivery of payment for the Shares, the Company shall deliver
via facsimile a copy of the stock certificates to be issued to the Purchaser
upon the Closing. The Company's obligation to complete the purchase and sale of
the Shares and deliver such stock certificates to the Purchaser at the Closing
shall be subject to the following conditions: (i) receipt by the Company of
same-day funds in the full amount of the purchase price for the Shares being
purchased hereunder; (ii) completion of the purchase and sale under the Other
Purchase Agreement with the Other Purchaser; and (iii) the accuracy of the
representations and warranties made by the Purchaser as if made on the day of
such Closing and
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the fulfillment of those undertakings of the Purchaser to be fulfilled prior to
the Closing. The Purchaser's obligation to accept delivery of such stock
certificates and to pay for the Shares evidenced thereby shall be subject only
to the following conditions: (A) the accuracy in all material respects of the
representations and warranties made by the Company herein and the fulfillment in
all material respects of those undertakings of the Company to be fulfilled prior
to Closing and (B) the delivery by Georgopoulos Pahlavan & Prince, LLP, counsel
to the Company, to the Purchaser of a legal option.

     SECTION 4.  Representations and Warranties of the Company.  The Company
                 ----------------------------------------------
hereby represents and warrants as of the date hereof and as of the Closing to
the Purchaser as follows:

          4.1  Organization and Standing.  The Company is a corporation duly
               -------------------------
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is qualified to do business as a foreign
corporation in the State of California. Such qualification is not presently
required in any other jurisdiction where a failure to so qualify would have a
material adverse effect on the business, financial position or results of
operations of the Company ("Material Adverse Effect").

          4.2  Capitalization.  The authorized capital stock of the Company
               --------------
consists of 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. A total of 10,118,011 shares of Common Stock are issued and outstanding.
No shares of Preferred Stock are issued and outstanding. All such issued and
outstanding shares have been duly authorized and validly issued, and are fully
paid and nonassessable. Options to purchase 2,273,175 shares of the Company's
Common Stock are outstanding under the Company's 1993 Stock Option Plan and
789,294 shares are available for future grant. Options to purchase 56,668 shares
of the Company's Common Stock are outstanding under the Company's 1996 Director
Option Plan and 60,800 shares are available for future grant. The Company has
issued 107,778 shares of Common Stock under its Employee Stock Purchase Plan and
172,222 shares are available for future issuance. The Company also has warrants
outstanding for 12,785 shares of its Common Stock. Except as disclosed in the
Company SEC Documents (as defined below), there are no other options, warrants,
conversion privileges, or preemptive or other rights or agreements presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the capital stock or other securities of the Company.

          4.3  Authority.  The Company has full power and authority to execute
               ---------
and deliver this Agreement, and to consummate the transactions contemplated by
this Agreement. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the execution and delivery of, and the
consummation of the transactions contemplated by, this Agreement. This
Agreement, upon execution and delivery by the Company and assuming the due and
proper execution and delivery by the Purchaser, constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.

                                      -2-
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          4.4  Valid Issuance of Common Stock.  The Common Stock to be sold
               ------------------------------
hereby has been duly authorized and, when issued, delivered and paid for in the
manner set forth in this Agreement, shall be duly authorized, validly issued,
fully paid and nonassessable, and shall be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws. No preemptive rights, anti-dilution rights or
other rights to subscribe for or purchase exist with respect to the issuance and
sale of the Common Stock by the Company pursuant to this Agreement. No
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following the notification of the Company's
intent to file the Registration Statement (as defined below)) to request or
require the Company to register the sale of any shares owned by such stockholder
under the Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement.

          4.5  Governmental Consents.  Other than compliance with the Securities
               ---------------------
Act and other state or federal securities laws, and such filings as may be
required to be made under such laws or with the National Association of
Securities Dealers (the "NASD"), which shall be complied with and made at or
prior to the Closing, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement.

          4.6  Conflicts.  The execution and delivery of this Agreement shall
               ---------
not conflict with or result in a material breach of the terms, conditions or
provisions of, or constitute a material default under, any material contract,
material covenant or material instrument under which the Company is now
obligated.

          4.7  SEC Documents.  The Company has filed each statement, annual,
               -------------
quarterly and other report, registration statement and definitive proxy
statement ("Company SEC Documents") required to be filed (other than preliminary
material) by the Company with the SEC.  As of their respective filing dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by any subsequently filed Company SEC Document.

          4.8  Changes.  Since March 31, 2000, there has not been any event or
               -------
condition that would reasonably likely result in a Material Adverse Effect.

          4.9  Litigation.  There is no pending or, to the Company's knowledge,
               ----------
threatened lawsuit, administrative proceeding, arbitration, patent or licensing
challenge or infringement, labor dispute or governmental investigation to which
the Company is a party or by which any material portion of its assets, taken as
a whole, may be bound, which, if adversely determined, would have a Material
Adverse Effect.

                                      -3-
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     SECTION 5. Representations and Warranties of the Purchaser.  The Purchaser
                -----------------------------------------------
hereby represents and warrants as of the date hereof and as of the Closing to
the Company as follows:

          5.1   Organization and Standing. The Purchaser is an independent state
                -------------------------
agency created under and validly existing under the laws of the State of
Wisconsin. The Purchaser has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted.

          5.2   Authority.  The Purchaser has full power and authority to
                ---------
execute and deliver, and to consummate the transactions contemplated by this
Agreement. All corporate action on the part of the Purchaser, its officers,
directors and stockholders necessary for the execution and delivery of, and the
consummation of the transactions contemplated by, this Agreement. This
Agreement, upon execution and delivery by the Purchaser and assuming the due and
proper execution and delivery by the Company, constitutes a legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of equitable remedies.

          5.3   Purchase Entirely for Own Account.  This Agreement is made with
                ---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Shares to be acquired by the Purchaser shall be acquired for
investment for the Purchaser's own account, not as a nominee or agent, and not
with a view to the distribution of any part thereof, and that the Purchaser has
no present intention of selling, granting any participation in, or otherwise
taking an action that would constitute a distribution of the same.

          5.4   Disclosure of Information.  The Purchaser has received all the
                -------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Common Stock. The Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock and the business,
properties, prospects and financial condition of the Company.

          5.5   Investment Experience.  The Purchaser acknowledges that it is
                ---------------------
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Common
Stock. The Purchaser has not been organized for the purpose of acquiring the
Common Stock.

          5.6   Accredited Investor.  The Purchaser is an "accredited investor"
                -------------------
within the meaning of Rule 501 of Regulation D, promulgated under the Securities
Act.

          5.7   Restricted Securities.  The Purchaser understands that the
                ---------------------
Shares it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,

                                      -4-
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the Purchaser represents that it is familiar with SEC Rule 144 or Rule 144A, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.

     SECTION 6. Survival of Representations, Warranties and Agreements.
                ------------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive until the third anniversary of the Closing.

     SECTION 7. Covenants of the Company.
                ------------------------

          7.1   Sale of Common Stock.  The Company shall not, from the Closing
                --------------------
Date until after the date which is 90 days after the Closing Date, sell (a)
shares of Common Stock at a price per share less than $12.00 or (b) options,
warrants, convertible securities or any other instruments convertible or
otherwise exchangeable into shares of Common Stock at a price per share less
than $12.00 (other than at a price per share equal to the then fair market value
pursuant to the Company's 1993 Stock Option Plan, 1996 Director Option Plan or
Employee Stock Purchase Plan).

          7.2   Option Pricing.  The Company shall, within 30 days after the
                --------------
Closing Date, adopt such amendments to the Company's 1993 Stock Option Plan and
1996 Director Option Plan and the Company's By-laws to provide that: (a) the
exercise price of any option grants made under such Plans, or pursuant to other
arrangements or agreements, shall be equal to, or in excess of, the fair market
value of the Company's Common Stock on the date of such the grant; and (b) the
Company shall not, without the consent of the stockholders entitled vote
thereon, decrease the exercise price of any stock option grants made under the
such Plans or any other arrangements or agreements.

     SECTION 8. Covenants of the Purchaser.
                --------------------------

          8.1   Limitations on Disposition.  Without in any way limiting any
                --------------------------
other provision set forth herein, the Purchaser further agrees not to make any
disposition of all or any portion of the Shares unless and until:

                (a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement;

                (b) Such disposition shall be permitted under the provisions of
Rule 144; or

                (c) There is a valid exemption from registration under the
Securities Act and other applicable securities laws and, if requested by the
Company, the Purchaser shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition shall not
require registration.

          8.2   Prospectus Delivery.  The Purchaser hereby covenants with the
                -------------------
Company not to make any sale of any Shares under a registration statement
without effectively causing the prospectus delivery requirement under the
Securities Act to be satisfied. The Purchaser

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acknowledges and agrees that such Shares are not transferable on the books of
the Company pursuant to a resale under a registration statement unless the
certificate submitted to the transfer agent evidencing such Shares is
accompanied by a separate officer's certificate, (a) which may be in the form of
Appendix II hereto, (b) executed by an officer of, or other authorized person
designated by, the Purchaser, and (c) to the effect that (i) such Shares have
been sold in accordance with the registration statement and (ii) the requirement
of delivering a current prospectus has been satisfied. The Purchaser
acknowledges that there may occasionally be times when the Company must suspend
the use of the prospectus forming a part of the registration statement until
such time as an amendment to the registration statement has been filed by the
Company and declared effective by the Securities and Exchange Commission (the
"Commission"), or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants
that it shall not sell any Shares pursuant to such prospectus during the period
commencing at the time at which the Company gives the Purchaser written notice
of the suspension of the use of such prospectus and ending at the time the
Company gives the Purchaser written notice that the Purchaser may thereafter
effect sales pursuant to such prospectus and any amendments thereto. In no event
shall the Company suspend the use of the Prospectus for periods exceeding 45
days during any 12-month period.

     SECTION 9.  Legends.  Each certificate or instrument representing Shares
                 -------
delivered at the Closing shall bear legends in substantially the following
forms:

                    (i)  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT')
     AND ARE 'RESTRICTED SECURITIES' AS DEFINED IN RULE 144 PROMULGATED UNDER
     THE SECURITIES ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
     OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE
     REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (II)
     IN COMPLIANCE WITH RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL
     SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH REGISTRATION OR
     COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION."

                    (ii) Any other legends required by California law or other
     applicable blue sky or state securities laws.

The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register a transfer of any Shares, unless the
conditions specified in the foregoing legends are satisfied to the extent
applicable.

     SECTION 10. Registration of the Shares; Compliance with the Securities Act.
                 --------------------------------------------------------------

          10.1   Registration Procedures and Expenses.  The Company shall:
                 ------------------------------------

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               (a)  within 15 business days after the Closing Date, prepare and
                    file with the Commission a registration statement on Form S-
                    3 (the "Registration Statement") relating to the sale of
                    Shares by the Purchaser on the Nasdaq National Market or the
                    facilities of any national securities exchange on which the
                    Common Stock is then traded or in privately-negotiated
                    transactions;

               (b)  use its reasonable best efforts, subject to receipt of
                    necessary information from the Purchaser and the Other
                    Purchaser, to cause the staff of the Commission to notify
                    the Company of the staff's willingness to grant acceleration
                    of the effective date of the Registration Statement within
                    60 days after the Registration Statement is filed by the
                    Company;

               (c)  promptly notify the Purchaser upon the Registration
                    Statement being declared effective by the Commission;

               (d)  provide to the Purchaser any information necessary to permit
                    sale of Shares under Rule 144 or Rule 144A of the Securities
                    Act.

               (e)  prepare and file with the Commission such amendments and
                    supplements to the Registration Statement and the prospectus
                    used in connection therewith as may be necessary to keep the
                    Registration Statement effective until the date on which the
                    Purchaser's Shares may be resold in any three-month period
                    by the Purchaser without registration and without any
                    restrictions by reason of Rule 144(k) under the Securities
                    Act or any other rule of similar effect;

               (f)  promptly furnish to the Purchaser with respect to the Shares
                    registered under the Registration Statement (and to each
                    underwriter, if any, of such Shares) such number of copies
                    of prospectuses and such other documents as the Purchaser
                    may reasonably request, in order to facilitate the public
                    sale or other disposition of all or any of the Purchaser's
                    Shares by the Purchaser; provided, however, that the
                                             --------  -------
                    obligation of the Company to deliver copies of prospectuses
                    to the Purchaser shall be subject to the receipt by the
                    Company of reasonable assurances from the Purchaser that the
                    Purchaser shall comply with the applicable provisions of the
                    Securities Act and of such other securities or blue sky laws
                    as may be applicable in connection with any use of such
                    prospectuses;

               (g)  file documents required of the Company for normal blue sky
                    clearance in all states requiring blue sky clearance;
                    provided, however, that the Company shall not be required to
                    --------  -------
                    qualify to do

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                    business or consent to service of process in any
                    jurisdiction in which it is not now so qualified or has not
                    so consented; and

               (h)  bear all expenses in connection with the procedures in
                    paragraphs (a) through (g) of this Section 10.1 and the
                    registration of the Shares pursuant to the Registration
                    Statement, other than fees and expenses, if any, of counsel
                    or other advisers to the Purchaser or underwriting
                    discounts, brokerage fees and commissions incurred by the
                    Purchaser, if any.

          10.2 Transfer of Shares After Registration.  The Purchaser agrees that
               -------------------------------------
it shall not effect any disposition of any Shares or its right to purchase any
Shares that would constitute a sale within the meaning of the Securities Act,
except as contemplated in the Registration Statement referred to in Section 10.1
or as otherwise permitted by law, and that it shall promptly notify the Company
of any changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution.

          10.3 Indemnification.  In the event any securities are included in a
               ---------------
registration statement under this Section 10:

               (a)  To the extent permitted by law, the Company shall indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act or the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) in
connection with the sale or purchase of the Shares, any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
or the Exchange Act or any state securities law; and the Company shall pay to
the Purchaser or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 10.3(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by the Purchaser or controlling person.

               (b)  To the extent permitted by law, the Purchaser shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the

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Securities Act, its attorneys, its underwriters, and any controlling person of
any such underwriter, against any losses, claims, damages, or liabilities (joint
or several) to which any of the foregoing persons may become subject, under the
Securities Act, or the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by the Purchaser expressly for use
in connection with such registration; and the Purchaser shall pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 10.3(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
10.3(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Purchaser, which consent shall not be unreasonably withheld; provided,
that, in no event shall any indemnity under this subsection 10.3(b) exceed the
gross proceeds from the offering received by the Purchaser.

          (c) Promptly after receipt by an indemnified party under this Section
10.3 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 10.3, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
10.3, but the omission so to deliver written notice to the indemnifying party
shall not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10.3.

          (d) If the indemnification provided for in this Section 10.3 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided that in no event shall any contribution by the
                --------
Purchaser under this subsection 10.3(d) exceed the amount of the gross proceeds
received by the Purchaser from the offering. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement

                                      -9-
<PAGE>

of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

               (e) The obligations of the Company and the Purchaser under this
Section 10.3 shall survive the completion of any offering of securities in a
registration statement under this Section 10 or otherwise.

          10.4 Termination of Registration Obligations.  The obligations of the
               ---------------------------------------
Company set forth in Section 10.1 shall cease and terminate as to the
Purchaser's Shares on the date on which (i) all such Shares are eligible for
sale during any three-month period without restriction under Rule 144, (ii) all
such Shares have been effectively registered under the Securities Act and sold
or otherwise disposed of by the Purchaser in accordance with the intended method
of disposition set forth in the Registration Statement or (iii) the Company
receives an opinion of counsel satisfactory in form and substance to the Company
to the effect that such conditions are not necessary in order for a transfer of
such Shares to comply with the Securities Act.

          10.5 Information Available.  So long as the Registration Statement is
               ---------------------
effective covering the resale of Shares owned by the Purchaser, the Company
shall furnish to the Purchaser:

               (a)  as soon as practicable after the Company has made such
                    information available to the public through submission to
                    the SEC (but in the case of the Company's Annual Report to
                    Stockholders, within 120 days after the end of each fiscal
                    year of the Company), one copy of (i) its Annual Report to
                    Stockholders, (ii) if not included in substance in the
                    Annual Report to Stockholders, its Annual Report on Form 10-
                    K, (iii) its Quarterly Reports on Form 10-Q, (iv) its
                    Current Reports on Form 8-K, and (v) a full copy of the
                    particular Registration Statement covering the Shares (the
                    foregoing, in each case, excluding exhibits); and

               (b)  upon the written request of the Purchaser, a reasonable
                    number of copies of the prospectuses to supply to any other
                    party requiring such prospectuses in connection with the
                    Purchaser's prospectus delivery requirements under the
                    Securities Act;

and the Company, upon the reasonable request of the Purchaser, shall meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as the
Company may require.

     SECTION 11.  Brokers.  Each of the parties hereto hereby represents that,
                  -------
on the basis of any actions and agreements by it, there are no brokers or
finders entitled to compensation in connection with the sale of Shares to the
Purchaser.

     SECTION 12.  Notices.  All notices, requests, consents and other
                  -------
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail,

                                      -10-
<PAGE>

confirmed facsimile or nationally recognized overnight express courier postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:

               (a)  if to the Company, to:

                    Fusion Medical Technologies, Inc.
                    34175 Ardenwood Boulevard
                    Fremont, California 94555
                    Attention: Larry J. Strauss
                    Facsimile: (510) 818-4700

               with a copy to:

                    Georgopoulos Pahlavan & Prince, LLP

                    935 Hamilton Avenue
                    Menlo Park, CA  94025
                    Attention: Paul G. Prince, Esq.
                    Facsimile: (650) 473-9060

               or to such other person at such other place as the Company shall
               designate to the Purchaser in writing; and

               (b)  if to the Purchaser, at its address as set forth at the end
                    of this Agreement, or at such other address or addresses as
                    may have been furnished to the Company in writing.

     SECTION 13.  Changes.  This Agreement may not be modified or amended except
                  -------
pursuant to an instrument in writing signed by the Company and the Purchaser.

     SECTION 14.  Headings.  The headings of the various sections of this
                  --------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

     SECTION 15.  Severability.  In case any provision contained in this
                  ------------
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

     SECTION 16.  Governing Law.  This Agreement shall be governed by and
                  -------------
construed in accordance with the laws of the State of California.

     SECTION 17.  No Conflicts of Interest.  The Company represents, warrants
                  ------------------------
and covenants that, to the knowledge of the Company, no trustee, officer or
employee of the of the Purchaser will receive, directly or indirectly, any
personal interest in the Company or its property of anything of substantial
economic value for his or her private benefit from the Company, or anyone acting
its behalf, in connection with the investment made pursuant to this Agreement.

     SECTION 18.  Counterparts.  This Agreement may be executed in two or more
                  ------------
counterparts, each of which shall constitute an original, but all of which, when
taken together,

                                      -11-
<PAGE>

shall constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
parties.

                                      -12-
<PAGE>

          IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement or caused this Agreement to be executed by its duly authorized
representative as of the day and year first above written.

                              FUSION MEDICAL TECHNOLOGIES, INC.

                              By_________________________________
                                  Name:
                                  Title:

                                      -13-
<PAGE>

Print or Type:
                              Name of the Purchaser
                               (Individual or Institution):

                              _________________________________
                              Name of Individual representing
                               the Purchaser (if an Institution):

                              _________________________________
                              Title of Individual representing
                               the Purchaser (if an Institution):

                              _________________________________
Signature by:
                              Individual Purchaser or Individual
                               representing the Purchaser:

                              __________________________________________

                              Address:    ___________________________

                              Telephone:  ___________________________

                              Facsimile:  ___________________________

                                      -14-
<PAGE>

                                                                      Appendix I
                                                               (page one of two)

FUSION MEDICAL TECHNOLOGIES, INC.

STOCK CERTIFICATE QUESTIONNAIRE
-------------------------------

     Pursuant to Section 3 of the Agreement, please provide us with the
following information:

1. The exact name in which your Shares are
   to be registered (this is the name that
   shall appear on your stock certificate(s));
   you may use a nominee name if appropriate:          _______________________

2. The relationship between the Purchaser of
   the Shares and the Registered Holder
   listed in response to item 1 above:                 _______________________

3. The mailing address of the Registered Holder
   listed in response to item 1 above:                 _______________________

                                                       _______________________

                                                       _______________________

                                                       _______________________

4. The Social Security Number or Tax
   Identification Number of the Registered
   Holder listed in response to item 1 above:          _______________________
<PAGE>

                                                                      Appendix I
                                                               (page two of two)

                       FUSION MEDICAL TECHNOLOGIES, INC.

                      REGISTRATION STATEMENT QUESTIONNAIRE
                      ------------------------------------

     In connection with the preparation of the Registration Statement, please
provide us with the following information:

     1.   Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:

     ______________________________________________________________________

     2.   Please provide the number of shares that you shall beneficially own
immediately after Closing, including those Shares purchased by you pursuant to
the Agreement and those shares purchased by you or your affiliates through other
transactions:

     ______________________________________________________________________

     3.   Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates?

               _____ Yes         _____ No

     If yes, please indicate the nature of any such relationships below:

     _________________________________________________________________

     _________________________________________________________________

     _________________________________________________________________
<PAGE>

                                                                     APPENDIX II
Attention:

                   PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
                   ------------------------------------------
                     PURSUANT TO A REGISTERATION STATEMENT
                     -------------------------------------

     The undersigned, [an officer of, or other person duly authorized by]
________________________________________________________________________________
     [fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of the shares
evidenced by the attached certificate, and as such, sold such shares on
__________________ in accordance with Registration Statement number
      [date]
______________ and the requirement of delivering a current prospectus by the
[fill in the number of or otherwise identify Registration Statement]
Company has been complied with in connection with such sale.

Print or Type:

     Name of the Purchaser
     (Individual or
     Institution):       ______________________

     Name of Individual
     representing the
     Purchaser (if an
     Institution)         ______________________

     Title of Individual
     representing the
     Purchaser (if an
     Institution):        ______________________

Signature by:

     Individual Purchaser
     or Individual
     representing the Purchaser:   ______________________CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
                AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
             SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS,
                      LIMITATIONS AND RESTRICTIONS THEREOF
                                       OF
                 SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
                                       FOR
                                  NETGURU, INC.

                  NETGURU, INC., a Delaware corporation (the "CORPORATION"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, does hereby make this Certificate of Designations and does
hereby state and certify that pursuant to the authority expressly vested in the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following resolutions,
which resolutions remain in full force and effect as of the date hereof:

                  RESOLVED, that, pursuant to Article Fourth of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby authorizes
the issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
12,000 shares, par value $.01, to be designated Series B Cumulative Convertible
Preferred Stock (the "PREFERRED SHARES").

                  RESOLVED, that subject to the terms and conditions of the
Purchase Agreement (as defined herein), 12,000 Preferred Shares may be issued.

                  RESOLVED, that each of the Preferred Shares shall rank equally
in all respects and shall be subject to the following terms and provisions:

         1. DESIGNATION. There is hereby created out of the authorized and
unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the Series B Cumulative Convertible Preferred Stock (the
"PREFERRED SHARES"). The number of shares constituting such series shall be
12,000.

         2. DIVIDENDS.

                  (a) CUMULATIVE. The holders of the Preferred Shares shall be
entitled to receive cumulative dividends at the per share rate of five percent
(5%) of the Liquidation Preference (as defined below) of each Preferred Share,
per annum accruing daily and payable quarterly on March 31, June 30, September
30 and December 31 of each year (each a "DIVIDEND PAYMENT DATE") commencing with
the first Dividend Payment Date occurring after the original issuance date of
such share, in preference and priority to any payment of any dividend on the

<PAGE>
                                                                          Page 2

Common Stock (as defined below) or any other class or series of equity security
of the Corporation. Such dividends shall accrue (or shall be deemed to have
accrued) on any given share from the most recent date on which a dividend has
been paid with respect to such share, or if no dividends have been paid, from
March 8, 2000, and such dividends shall accrue from day to day whether or not
declared, based on the actual number of days elapsed. If at any time dividends
on the outstanding Preferred Shares at the rate set forth above shall not have
been paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of equity security of the Corporation. For
so long as any Preferred Shares are outstanding, the Corporation shall not pay
any dividends on any shares of Common Stock or any shares of any other capital
stock, or repurchase any shares of Common Stock or capital stock, without having
received written consent of two-thirds in interest of the holders of Preferred
Shares, except as otherwise provided herein or in the Purchase Agreement or
Registration Rights Agreement (as such terms are defined herein) with respect to
the Option Shares, Preferred Shares, Warrants and underlying Common Shares
thereof. For purposes of computing any per diem accrual, calculations shall be
made using a 360-day year.

                  (b) PIK PAYMENT OR CASH PAYMENT. Any dividend payable on the
outstanding Preferred Shares shall be paid by adding the amount thereof to the
Liquidation Preference (as defined below) of such Preferred Shares. Upon the
payment of dividends as required by the immediately preceding sentence, such
dividends will be deemed paid in full. Notwithstanding the foregoing, the
Corporation may pay dividends in cash if on 10 Trading Days' (as defined below)
irrevocable prior written notice, it informs the holders of the Preferred Shares
of its election to pay cash dividends. Following notice of payment of cash
dividends by the Corporation, all dividends on the Preferred Shares shall be
paid in cash, until such time as the Corporation provides 10 Trading Days'
irrevocable written notice to the holders of Preferred Shares of its election to
pay dividends in-kind.

         3. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Preferred Shares shall be entitled to receive, out of the assets of the
Corporation available for distribution to stockholders, prior and in preference
to any distribution of any assets of the Corporation to the holders of any other
class or series of equity securities, the amount of $1,000 per share plus (i)
dividends added to the Liquidation Preference in accordance with Section 2(b)
above; (ii) all accrued but unpaid dividends; and (iii) all "MONTHLY DELAY
PAYMENTS" payable under the Registration Rights Agreement (as defined below)
(the "LIQUIDATION PREFERENCE").

         4. ISSUANCE OF PREFERRED SHARES. The Preferred Shares shall be issued
by the Corporation pursuant to that certain Exchange Agreement dated on or about
the date hereof (the "EXCHANGE AGREEMENT") between the Corporation and the
initial subscriber(s) for the Preferred Shares thereunder (the "SUBSCRIBER") in
exchange for Series A Cumulative Convertible Preferred Stock, which were issued
to the subscribers pursuant to that certain Securities Purchase Agreement dated
as of March 8, 2000 ("PURCHASE AGREEMENT") between the Corporation and the
subscribers. The holders of Preferred Shares shall enjoy the benefits of the
Registration Rights Agreement, dated as of March 8, 2000 ("REGISTRATION RIGHTS
AGREEMENT") between such parties in connection with the Purchase Agreement.
<PAGE>
                                                                          Page 3

         5. CONVERSION. Each holder of the Preferred Shares shall have the right
at any time and from time to time, at the option of such holder, to convert any
or all Preferred Shares held by such holder, for such number of fully paid,
validly issued and nonassessable shares ("COMMON SHARES") of common stock, par
value $0.01, of the Corporation ("COMMON STOCK"), free and clear of any liens,
claims or encumbrances, as is determined by dividing (i) the Liquidation
Preference times the number of Preferred Shares being converted (the "CONVERSION
AMOUNT"), by (ii) the applicable Conversion Price determined as hereinafter
provided in effect on the Conversion Date. Immediately following such
conversion, the rights of the holders of converted Preferred Shares shall cease
and the persons entitled to receive the Common Shares upon the conversion of
Preferred Shares shall be treated for all purposes as having become the owners
of such Common Shares, subject to the rights provided herein to holders.

                  (a) MECHANICS OF CONVERSION. To convert Preferred Shares into
Common Shares, the holder shall give written notice ("CONVERSION NOTICE") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
may be given by facsimile transmission no later than the Conversion Date)
stating that such holder elects to convert the same and shall state therein the
number of Preferred Shares to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Shares to be issued
(the conversion date specified in such Conversion Notice shall be referred to
herein as the "CONVERSION DATE"). Either simultaneously with the delivery of the
Conversion Notice, or within one (1) Trading Day (as defined below) thereafter,
the holder shall deliver (which also may be done by facsimile transmission) page
2 to Exhibit A hereto indicating the computation of the number of Common Shares
to be received. As soon as possible after delivery of the Conversion Notice,
such holder shall surrender the certificate or certificates representing the
Preferred Shares being converted, duly endorsed, at the office of the
Corporation or, if identified in writing to all the holders by the Corporation,
at the offices of any transfer agent for such shares. The Corporation shall,
immediately upon receipt of such Conversion Notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing the
Preferred Shares which have been converted, a certificate or certificates for
the number of Common Shares to which such holder shall be entitled (with the
number of and denomination of such certificates designated by such holder), and
the Corporation shall immediately issue and deliver to such holder a certificate
or certificates for the number of Preferred Shares (including any fractional
shares) which such holder has not yet elected to convert hereunder but which are
evidenced in part by the certificate(s) delivered to the Corporation in
connection with such Conversion Notice. The Corporation shall effect such
issuance of Common Shares (and certificates for unconverted Preferred Shares)
within three (3) Trading Days of the Conversion Date and shall transmit the
certificates by messenger or overnight delivery service to reach the address
designated by such holder within three (3) Trading Days after the receipt of
such Conversion Notice ("T+3"). If certificates evidencing the Common Shares are
not received by the holder within five (5) Trading Days of the Conversion
Notice, then the holder will be entitled to revoke and withdraw its Conversion
Notice, in whole or in part, at any time prior to its receipt of those
certificates. In lieu of delivering physical certificates representing the
Common Shares issuable upon conversion of Preferred Shares, provided the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
holder, the Corporation shall use its best efforts to cause its transfer agent

<PAGE>
                                                                          Page 4

to electronically transmit the Common Shares issuable upon conversion or
exercise to the holder, by crediting the account of the holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with DTC
to accomplish this objective. The conversion pursuant to this Section 5 shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date. The person or persons entitled to receive the Common Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Shares at the close of business on the
Conversion Date.

                  The term "TRADING DAY" means a day on which there is trading
on the Nasdaq National Market or such other market or exchange on which the
Common Stock is then principally traded.

                  If a holder of Preferred Shares converts any of such holder's
Preferred Shares, the Corporation shall pay any documentary or stamp or similar
issue or transfer tax due on the issue of shares of Common Stock upon the
conversion. However, such holder shall pay any such tax that is due because the
shares of Common Stock are issued in a name other than such holder's name.

                  The Corporation's obligation to issue Common Shares upon
conversion of Preferred Shares shall, except as set forth below, be absolute, is
independent of any covenant of any holder of Preferred Shares, and shall not be
subject to: (i) any offset or defense; or (ii) any claims against the holders of
Preferred Shares whether pursuant to this Certificate, the Purchase Agreement,
the Registration Rights Agreement or otherwise.

                  (b) DETERMINATION OF CONVERSION PRICE.

                           The Conversion Price applicable with respect to the
         Preferred Shares (the "CONVERSION PRICE"), shall be as follows:

                           (i) Subject to clause (iii) below, beginning on the
         date of closing of the Purchase Agreement (the "CLOSING DATE") up until
         and including the 20th Trading Day following the Closing Date, the
         Conversion Price (subject to adjustment as hereinafter set forth as if
         such price were an Affected Conversion Price, as defined in Section
         5(c) below) shall be a price equal to 120% of the Closing Price;

                           (ii) Subject to clause (iii) below, on and after the
         21st Trading Day following the Closing Date up until but not including
         the 90th day following the Closing Date, the Conversion Price shall be
         a price equal to 120% of the Closing Price, subject to adjustment as
         hereinafter set forth (the "FIXED PRICE").

                           (iii) Beginning on the earlier of (a) the 90th day
         after the Closing Date or (b) the date of any announcement or public
         disclosure (or the event itself, if earlier) of any event described in
         Section 5(l) below, and at all times thereafter, the Conversion Price
         shall be the lesser of:
<PAGE>
                                                                          Page 5

                                    (A) the Fixed Price or

                                    (B) the Market Price.

                           As used herein "CLOSING PRICE" shall equal $23.75.

                           As used herein, "MARKET PRICE" shall mean the average
         of the lowest closing bid prices of the Common Stock recorded on the
         Principal Market (as reported by the Bloomberg financial network or any
         successor reporting service) on any 5 Trading Days out of the 20
         Trading Days (the "MARKET PRICE PERIOD") immediately prior to the
         Conversion Date (including the Trading Day immediately preceding the
         Conversion Date); PROVIDED, HOWEVER, that in the event of any default
         under Section 3.16 of the Purchase Agreement or, if earlier, upon any
         announcement or public disclosure that the transactions or events
         described in Section 3.16 of the Purchase Agreement will not occur or
         will not longer be in effect, the "MARKET PRICE" shall equal ninety
         percent (90%) of the average of the five (5) lowest closing bid prices
         of Common Stock during the Market Price Period.

                           As used herein, "PRINCIPAL MARKET" shall mean Nasdaq
         National Market or such other market where the Common Stock is then
         listed for trading.

                           From time to time and at any time there is an
         announcement or public disclosure that the transactions or events
         described in Section 3.16 of the Purchase Agreement will not occur or
         will not longer be in effect, and on June 30, 2000 or any subsequent
         time if there shall be any default under such Section 3.16 of the
         Purchase Agreement, the "Fixed Price" hereunder shall be adjusted
         downward to equal 120% of the lowest 5 closing bid prices of Common
         Stock recorded on the Principal Market for the 20 Trading Days
         immediately following such time or date. In no event shall the Fixed
         Price be increased, and no decrease shall be reversed upon any cure of
         any such default.

                  (c) STOCK SPLITS; DIVIDENDS; ADJUSTMENTS.

                           (i) If the Corporation, at any time while the
         Preferred Shares are outstanding, (A) shall pay a stock dividend or
         otherwise make a distribution or distributions on any equity securities
         (including instruments or securities convertible into or exchangeable
         for such equity securities) in shares of Common Stock, (B) subdivide
         outstanding Common Shares into a larger number of shares, or (C)
         combine outstanding Common Stock into a smaller number of shares, then
         each Affected Conversion Price (as defined below) shall be multiplied
         by a fraction, the numerator of which shall be the number of shares of
         Common Stock outstanding before such event and the denominator of which
         shall be the number of shares of Common Stock outstanding after such
         event. Any adjustment made pursuant to this Section 5(c)(i) 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 or combination.
<PAGE>
                                                                          Page 6

                           As used herein, the Affected Conversion Prices (each
         an "AFFECTED CONVERSION PRICE") shall refer to: (i) the Fixed Price;
         and (ii) each reported price for the Common Stock on the Principal
         Market occurring on any Trading Day included in the Market Price
         Period, which Trading Day occurred before the record date in the case
         of events referred to in clause (A) of this subparagraph 5(c)(i) and
         the effective date in the case of the events referred to in clauses (B)
         and (C) of this subparagraph 5(c)(i).

                           (ii) In the event that the Corporation issues or
         sells any Common Stock or securities which are convertible into or
         exchangeable for its Common Stock (other than Preferred Shares), or any
         warrants or other rights to subscribe for or to purchase or any options
         for the purchase of its Common Stock (other than shares or options
         issued or which may be issued pursuant to (i) the Corporation's current
         or future employee, director or BONA FIDE consultant option plans or
         shares issued upon exercise of options, warrants or rights outstanding
         on the date of the Purchase Agreement and listed in the Corporation's
         most recent periodic report filed under the Securities Exchange Act of
         1934, as amended, (ii) arrangements with the holders of Preferred
         Shares, (iii) an underwriting agreement, to one or more underwriters in
         connection with a bona fide public offering (as defined herein), or
         (iv) strategic acquisitions of other entities by the Corporation which
         engage in businesses related or complementary to the Corporation's
         business) at an effective purchase price per share which is less than
         the greater of (1) the closing market price per share of the Common
         Stock on the Principal Market on the Trading Day next preceding such
         issue or sale or, in the case of issuances to holders of its Common
         stock, the date fixed for the determination of stockholders entitled to
         receive such warrants, rights, or options ("FAIR MARKET PRICE") or (2)
         the Fixed Price, then in each such case, the Fixed Price in effect
         immediately prior to such issue or sale or record date, as applicable,
         shall be reduced effective concurrently with such issue or sale to an
         amount determined by multiplying the Fixed Price then in effect by a
         fraction, (x) the numerator of which shall be the sum of (1) the number
         of shares of Common Stock and Convertible Securities (as defined below)
         outstanding immediately prior to such issue or sale, plus (2) the
         number of shares of Common Stock which the aggregate consideration
         received by the Corporation for such additional shares would purchase
         at such Fixed Price or Fair Market Price, as the case may be; and (y)
         the denominator of which shall be the number of shares of Common Stock
         and Convertible Securities (as defined below) of the Company
         outstanding immediately after such issue or sale.

                           For purposes of the preceding paragraph, in the event
         that the effective purchase price is less than both the Fair Market
         Price and the Fixed Price, then the calculation method which yields the
         greatest downward adjustment in the Conversion Price shall be used.

                           For the purposes of the foregoing adjustment, in the
         case of the issuance of any convertible securities, warrants, options
         or other rights to subscribe for or to purchase or exchange for, shares
         of Common Stock ("CONVERTIBLE SECURITIES"), the maximum number of
         shares of Common Stock issuable upon exercise, exchange or conversion
         of such Convertible Securities shall be deemed to be outstanding,
         provided that no further adjustment shall be made upon the actual
         issuance of Common Stock upon exercise, exchange or conversion of such
         Convertible Securities.
<PAGE>
                                                                          Page 7

                           (iii) If the Corporation, at any time while the
         Preferred Shares are outstanding, shall distribute to all holders of
         Common Stock evidences of its indebtedness or assets or cash or rights
         or warrants to subscribe for or purchase any security of the
         Corporation or any of its subsidiaries (excluding those referred to in
         Sections 5(c)(i) or 5(c)(ii) above), then concurrently with such
         distributions to holder of Common Stock, the Corporation shall
         distribute to holders of the Preferred Shares, the amount of such
         indebtedness, assets, cash or rights or warrants which the holders of
         Preferred Shares would have received had they converted all their
         Preferred Shares into Common Shares immediately prior to the record
         date for such distribution.

                           (iv) Whenever the Conversion Price is adjusted
         pursuant to Section 5(c)(i) or (ii) above or the Corporation makes a
         distribution as described in Section 5(c)(iii) above, the Corporation
         shall promptly mail to each holder of the Preferred Shares a notice
         setting forth the Conversion Price after such adjustment and setting
         forth a brief statement of the facts requiring such adjustment, or
         setting forth a description of the distribution and the facts
         surrounding same.

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

                           (vi) No adjustment in the Conversion Price shall
         reduce the Conversion price below the then par value of the Common
         Stock.

                           (vii) The Corporation from time to time may reduce
         the Conversion Price by any amount for any period of time if the period
         is at least 20 Trading Days and if the reduction is irrevocable during
         the period. Whenever the Conversion Price is reduced, the Corporation
         shall mail to the holders of Preferred Shares a notice of the
         reduction. The Corporation shall mail, first class, postage prepaid,
         the notice at least 15 days before the date the reduced Conversion
         Price takes effect. The notice shall state the reduced Conversion Price
         and the period it will be in effect. A reduction of the Conversion
         Price does not change or adjust the Conversion Price otherwise in
         effect for purposes of Section 5(c)(i), (ii), or (iii).

                  (d) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall deliver to each holder of Preferred Shares at least 20 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution,
security or right and the amount and character of such dividend, distribution,
security or right.
<PAGE>
                                                                          Page 8

                  (e) ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Preferred Shares pursuant hereto. However, the holder of any Preferred Shares
shall pay any tax that is due because the Common Shares issuable upon conversion
thereof are issued in a name other than such holder's name.

                  (f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued Common Stock, solely for the purposes of effecting the conversion
of the Preferred Shares, an amount of Common Shares equal to 200% of the number
of shares issuable upon conversion of the Preferred Shares at the then
applicable Conversion Price. The Corporation promptly will take such corporate
action as may, in the opinion of its outside counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
best efforts to obtain the requisite stockholder approval.

                  (g) FRACTIONAL SHARES. No fractional shares shall be issued
upon the conversion of any Preferred Shares. All Common Shares (including
fractions thereof) issuable upon conversion of more than one Preferred Share by
a holder thereof and all Preferred Shares issuable upon the purchase thereof
shall be aggregated for purposes of determining whether the conversion and/or
purchase would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion and/or purchase would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, either round up the number of shares to
the next highest whole number or, at the Corporation's option, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date (as determined in good faith by the
Board of Directors of the Corporation).

                  (h) REORGANIZATION, MERGER OR GOING PRIVATE. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale or transfer of all or substantially all of
the assets of the Corporation to any other person or a "GOING PRIVATE"
transaction under Rule 13e-3 promulgated pursuant to the Exchange Act, then, as
part of such reorganization, consolidation, merger, or transfer if the holders
of shares of Common Stock receive any publicly traded securities as part or all
of the consideration for such reorganization, consolidation, merger or sale,
then it shall be a condition precedent of any such event or transaction that
provision shall be made such that each Preferred Share shall thereafter be
convertible into such new securities at a conversion price and pricing formula
which places the holders of Preferred Shares in an economically equivalent
position as they would have been if not for such event. In addition to the
foregoing, if the holders of shares of Common Stock receive any non-publicly
traded securities or other property or cash as part or all of the consideration
for such reorganization, consolidation, merger or sale, then such distribution
shall be treated to the extent thereof as a distribution under Section 5(c)
above and such Section shall also apply to such distribution.
<PAGE>
                                                                          Page 9

                  (i) LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.

                           (i) Notwithstanding anything to the contrary
         contained herein, the number of shares of Common Stock that may be
         acquired by the holder upon conversion pursuant to the terms hereof
         shall not exceed a number that, when added to the total number of
         shares of Common Stock deemed beneficially owned by such holder (other
         than by virtue of the ownership of securities or rights to acquire
         securities that have limitations on the holder's right to convert,
         exercise or purchase similar to the limitation set forth herein),
         together with all shares of Common Stock deemed beneficially owned by
         the holder's "AFFILIATES" (as defined in Rule 144 of the Act)
         ("AGGREGATION PARTIES") that would be aggregated for purposes of
         determining whether a group under Section 13(d) of the Securities
         Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
         total issued and outstanding shares of the Common Stock (the
         "RESTRICTED OWNERSHIP PERCENTAGE"); PROVIDED that (w) each holder shall
         have the right at any time and from time to time to reduce its
         Restricted Ownership Percentage immediately upon notice to the
         Corporation and (x) each holder shall have the right (subject to
         waiver) at any time and from time to time, to increase its Restricted
         Ownership Percentage immediately in the event of the announcement as
         pending or planned, of a transaction or event referred to in Section
         5(m) below.

                          (ii) Each time (a "COVENANT TIME") the holder or an
         Aggregation Party makes a Triggering Acquisition (as defined below) of
         shares of Common Stock (the "TRIGGERING SHARES"), the holder will be
         deemed to covenant that it will not, during the balance of the day on
         which such Triggering Acquisition occurs, and during the 61-day period
         beginning immediately after that day, acquire additional shares of
         Common Stock pursuant to rights-to-acquire existing at that Covenant
         Time, if the aggregate amount of such additional shares so acquired
         (without reducing that amount by any dispositions) would exceed (x)
         9.99% of the number of shares of Common Stock outstanding at that
         Covenant Time (including the Triggering Shares) minus (y) the number of
         shares of Common Stock actually owned by the holder at that Covenant
         Time (regardless of how or when acquired, and including the Triggering
         Shares). A "TRIGGERING ACQUISITION" means the giving of a Conversion
         Notice or any other acquisition of Common Stock by the holder or an
         Aggregation Party; PROVIDED, however, that with respect to the giving
         of such Conversion Notice, if the associated issuance of shares of
         Common Stock does not occur, such event shall cease to be a Triggering
         Acquisition and the related covenant under this paragraph shall
         terminate. At each Covenant Time, the holder shall be deemed to waive
         any right it would otherwise have to acquire shares of Common Stock to
         the extent that such acquisition would violate any covenant given by
         the holder under this paragraph. Notwithstanding anything to the
         contrary in the Transaction Documents, in the event of a conflict
         between any covenant given under this paragraph and any obligation of
         the holder to convert Preferred Shares pursuant to the Transaction
         Documents, the former shall supersede the latter, and the latter shall
         be reduced accordingly. For the avoidance of doubt:

                           (A)      The covenant to be given pursuant to this
                                    paragraph will be given at every Covenant
                                    Time and shall be calculated based on the
                                    circumstances then in effect. The making of
                                    a covenant at one Covenant Time shall not
                                    terminate or modify any prior covenants.
<PAGE>
                                                                         Page 10

                           (B)      The holder may therefore from time to time
                                    be subject to multiple such covenants, each
                                    one having been made at a different Covenant
                                    Time, and some possibly being more
                                    restrictive than others. The holder must
                                    comply with all such covenants then in
                                    effect.

                                    (iii) OVERALL LIMIT ON COMMON STOCK
         ISSUABLE. Notwithstanding anything contained herein to the contrary,
         the number of shares of Common Stock issuable by the Company and
         acquirable by the holders hereunder shall not exceed 2,645,093 shares
         of Common Stock, subject to appropriate adjustment for stock splits,
         stock dividends, or other similar recapitalizations affecting the
         Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance
         of shares hereunder in excess of the Maximum Common Stock Issuance
         shall first be approved by the Company's shareholders in accordance
         with applicable law and the By-laws and Articles of Incorporation of
         the Company. The Company agrees that if at any point in time (the
         "TRIGGER DATE") the number of Common Shares issued pursuant to
         conversion of the Preferred Shares and exercise of the Warrants,
         together with the number of Common Shares issued and issuable pursuant
         to the option under Section 1.4 of the Purchase Agreement and the
         number of Common Shares that would then be issuable by the Company in
         the event of conversion of all the Preferred Shares and exercise of all
         the Warrants then outstanding, would exceed the Maximum Common Stock
         Issuance but for this Section 5(i)(iii), then the Company shall
         promptly call a shareholders meeting to obtain shareholder approval for
         the issuance of Common Shares hereunder in excess of the Maximum Common
         Stock Issuance. If such shareholder approval is not obtained within 60
         days of the Trigger Date, then each holder of Preferred Shares shall
         have the right to sell to the Company such number of Preferred Shares
         and Warrants which cannot be converted or exercised due to such Maximum
         Common Stock Issuance limitation at a redemption price equal to the
         "MANDATORY REPURCHASE PRICE" (as defined in the Registration Rights
         Agreement).

                  (j) CERTIFICATE FOR CONVERSION PRICE ADJUSTMENT. The
Corporation shall promptly furnish or cause to be furnished to each holder a
certificate prepared by the Corporation setting forth any adjustments or
readjustments of the Conversion Price pursuant to this Section 5.

                  (k) SPECIFIC ENFORCEMENT. The Corporation agrees that
irreparable damage would occur in the event that any of the provisions of this
Certificate of Designations were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the holders of
Preferred Shares shall be entitled to specific performance, injunctive relief or
other equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.

                  (l) MANDATORY REPURCHASE. Each holder shall have the
unilateral option and right to compel the Corporation to repurchase any or all
of such holder's Preferred Shares within 3 days of a written notice requiring
such repurchase, at a price per Preferred Share equal to the Mandatory
Repurchase Price if any of the following events involving the Corporation shall
have occurred:
<PAGE>
                                                                         Page 11

                           (i) A Change in Control Transaction (as defined
         below);

                           (ii) A "GOING PRIVATE" transaction under Rule 13e-3
         promulgated pursuant to the Exchange Act; or

                           (iii) A tender offer by the Corporation under Rule
         13e-4 promulgated pursuant to the Exchange Act.

                           A "CHANGE IN CONTROL TRANSACTION" will be deemed to
exist if (i) there occurs any consolidation or merger of the Corporation with or
into any other corporation or other entity or person (whether or not the
Corporation is the surviving corporation), or any other corporate reorganization
or transaction or series of related transactions in which in excess of 50% of
the Corporation's voting power is transferred through a merger, consolidation,
tender offer or similar transaction, (ii) any person (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")),
together with its affiliates and associates (as such terms are defined in Rule
405 under the Securities Act of 1933, as amended (the "ACT")), beneficially owns
or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange
Act without regard to the 60-day exercise period) in excess of 50% of the
Corporation's voting power, (iii) there is a replacement of more than one-half
of the members of the Corporation's Board of Directors which is not approved by
those individuals who are members of the Corporation's Board of Directors on the
date thereof, in one or a series of related transactions or (iv) a sale or
transfer of all or substantially all of the assets of the Corporation,
determined on a consolidated basis.

                  (m) MANDATORY CONVERSION.

                         (x) Subject to subsection (m)(y) below, the Preferred
         Shares shall be automatically converted into Common Shares on the three
         year anniversary of the Closing Date (the "MANDATORY CONVERSION DATE");
         provided, however, that such Mandatory Conversion Date shall be
         deferred, at the sole option of a holder of Preferred Shares, for such
         number of days as is equal to 1.5 times the number of days (A) there is
         a lack of Effective Registration (as defined below), but not including
         the first 120 days after the Closing; (B) there is not a sufficient
         amount of Common Stock available for conversion of all outstanding
         Preferred Shares and exercise of the Warrants, (C) for any other reason
         the Corporation refuses or announces its refusal to honor conversion of
         Preferred Shares or exercise of the Warrants, other than for failure to
         comply with the notice and delivery requirements of Section 5(a) above;
         or (D) for any other reason there is a suspension, restriction or
         limitation in the ability of holders of Preferred Shares or Warrants to
         sell Common Shares received upon conversion of Preferred Shares or
         exercise of the Warrants pursuant to the prospectus included in the
         Registration Statement (as defined in the Registration Rights
         Agreement).
<PAGE>
                                                                         Page 12

                           For purposes of the preceding paragraph, a lack of
         Effective Registration shall be deemed to have occurred at any time the
         Common Shares issuable upon conversion of the Preferred Shares or
         exercise of the Warrants are not capable of being sold on an Approved
         Market (as defined in the Purchase Agreement) pursuant to an effective
         registration statement and deliverable prospectus.

                         (y) Notwithstanding the preceding subsection (m)(x), no
         holder of Preferred Shares shall be obligated to convert any Preferred
         Shares held by such holder on the Mandatory Conversion Date (and there
         shall be no automatic conversion) unless and until each of the
         following conditions has been satisfied or exists, each of which shall
         be a condition precedent to any such forced conversion:

                           (A) no material default or breach exists which has
                           not been cured, and no event shall have occurred
                           which constitutes (or would constitute with notice or
                           the passage of time or both) a material default or
                           breach of the Purchase Agreement, the Registration
                           Rights Agreement, the Warrants or this Certificate of
                           Designations, which has not been cured;

                           (B) none of the events described in clauses (i)
                           through (iv) of Section 2(b) of the Registration
                           Rights Agreement shall have occurred and be
                           continuing;

                           (C) the Registration Statement (as defined in the
                           Registration Rights Agreement) is effective and
                           holders have received unlegended certificates
                           representing Common Shares with respect to all
                           conversions for which Conversion Notices have been
                           given and with respect to all exercises of Warrants
                           for which Notices or Exercise have been given; and

                           (D) the Corporation and its subsidiaries on a
                           consolidated basis has assets with a net realizable
                           fair market value exceeding its liabilities and is
                           able to pay all its debts as they become due in the
                           ordinary course of business, and the Corporation is
                           not subject to any liquidation, dissolution or
                           winding up of its affairs, or any bankruptcy,
                           insolvency or similar proceeding.

                  (z) Notwithstanding Section 5(m)(x) above, no holder's
         Preferred Shares shall be subject to mandatory conversion to the extent
         such mandatory conversion would result in the holder of Preferred
         Shares exceeding any of the limitations contained in Section 5(i)
         above. In such event, the Preferred Shares of such holder shall be
         converted in such amount until such limitation is reached, and the
         remaining Preferred Shares shall be purchased by the Corporation at the
         Mandatory Redemption Price (as defined in the Registration Rights
         Agreement).

                  Such forced conversion shall be subject to and governed by all
the provisions relating to voluntary conversion of the Preferred Shares
contained herein.
<PAGE>
                                                                         Page 13

         6. PUBLIC OFFERINGS. In the event the Corporation completes a "BONA
FIDE PUBLIC OFFERING" (as defined below) on or before June 30, 2000, for 90 days
immediately following the closing of such an offering, no holder of Preferred
Shares shall be entitled to sell any Common Shares issued upon conversion of
Preferred Shares during such 90 day period. Beginning on the 90th day following
the closing of such bona fide public offering until 180 days following such
closing, a holder of Preferred Shares shall be entitled to sell only up to 50%
of any Common Shares issued upon conversion of Preferred Shares. Thereafter, a
holder shall not be restricted in any way from selling Common Shares.

         A "BONA FIDE PUBLIC OFFERING" shall mean a firm commitment, fixed price
underwritten public offering of at least $50 million in aggregate proceeds to
the Corporation.

                  The foregoing restrictions on the sale of Common Shares shall
terminate if any of the following shall have occurred and be continuing:

                         (A) there is a lack of Effective Registration (as
         defined below), but not including the first 120 days after the Closing;
         (B) there is not a sufficient amount of Common Stock available for
         conversion of all outstanding Preferred Shares and exercise of all
         Warrants and exercise of the option contained in Section 1.4 of the
         Purchase Agreement in full, (C) for any other reason the Corporation
         refuses or announces its refusal to honor conversion of Preferred
         Shares or exercise of the Warrants, other than for failure to comply
         with the notice and delivery requirements of Section 5(a) above; or (D)
         for any other reason there is a suspension, restriction or limitation
         in the ability of holders of Preferred Shares to sell Common Shares
         received upon conversion of Preferred Shares pursuant to the prospectus
         included in the Registration Rights Agreement.

         For purposes of the preceding paragraph, a lack of Effective
         Registration shall be deemed to have occurred at any time the Common
         Shares issuable upon conversion of the Preferred Shares or exercise of
         the Warrants are not capable of being sold on an Approved Market (as
         defined in the Purchase Agreement) pursuant to an effective
         registration statement and deliverable prospectus.

                           Notwithstanding the preceding provisions of this
         subsection, no holder of Preferred Shares shall be restricted from
         selling any Common Shares issued upon conversion of Preferred Shares
         unless and until each of the following conditions has been satisfied or
         exists, each of which shall be a condition precedent to any such
         restrictions:

                           1) no material default or breach exists which has not
         been cured, and no event shall have occurred which constitutes (or
         would constitute with notice or the passage of time or both) a material
         default or breach of the Purchase Agreement (including without
         limitation any breach of Sections 2.1(ff) or 3.16 thereof), the
         Registration Rights Agreement, the Warrants (as defined in the Purchase
         Agreement) or this Certificate of Designations, which has not been
         cured;
<PAGE>
                                                                         Page 14

                           2) none of the events described in clauses (i)
         through (iv) of Section 2(b) of the Registration Rights Agreement shall
         have occurred and be continuing;

                           3) the Registration Statement (as defined in the
         Registration Rights Agreement) is effective and holders have received
         unlegended certificates representing Common Shares with respect to all
         conversions for which Conversion Notices have been given and with
         respect to all exercises of the Warrants for which Notices of Exercise
         have been given;

                           4) the Corporation and its subsidiaries on a
         consolidated basis has assets with a net realizable fair market value
         exceeding its liabilities and is able to pay all its debts as they
         become due in the ordinary course of business, and the Corporation is
         not subject to any liquidation, dissolution or winding up of its
         affairs, or any bankruptcy, insolvency or similar proceeding;

                           5) no event described in Section 5(l) above occurred
         or was announced or publicly disclosed that it would or has occurred;
         and

                           6) each member of management of the Corporation is
         subject to the same restriction on selling shares of Common Stock for
         at least the same percentage and time period as the holders of
         Preferred Shares hereunder.

         7. VOTING RIGHTS. In addition to all other requirements imposed by
Delaware law, and all other voting rights granted under the Corporation's
Certificate of Incorporation, the affirmative vote of two-thirds in interest of
the Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment, modification or repeal of this Certificate of Designations (whether
by merger, consolidation or otherwise) or for any merger, reclassification,
consolidation or reorganization, or (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or change or
adversely affect any of the rights, preferences, or privileges of the Preferred
Shares, provided, however, that holders of Preferred Shares (other than the
Investor under the Purchase Agreement and their affiliates) who are affiliates
of the Corporation (and the Corporation itself) shall not participate in such
vote and the Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.

         8. NOTICES. The Corporation shall distribute to the holders of
Preferred Shares copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
<PAGE>
                                                                         Page 15

         9. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Preferred Shares held by any holder of Preferred Shares may be exchanged by such
holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Preferred Shares, as
reasonably requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange. Upon receipt
by the Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any stock certificate representing the Preferred
Shares and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it, or upon surrender and cancellation of such stock certificate
if mutilated, the Corporation will make and deliver a new stock certificate of
like tenor and dated as of such cancellation at no charge to the holder.

         10. ATTORNEYS' FEES. In connection with enforcement by a holder of
Preferred Shares of any obligation of the Corporation hereunder, the prevailing
party shall be entitled to recovery of reasonable attorneys' fees and expenses
incurred.

         11. NO REISSUANCE. No Preferred Shares acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.

         12. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Preferred Shares set forth in this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation herein
set forth be deemed dependent upon any such other right, preference or
limitation unless so expressed herein.

<PAGE>
                                                                         Page 16

         13. LIMITATIONS. Except as may otherwise be required by law and as are
set forth in the Exchange Agreement, the Purchase Agreement and the Registration
Rights Agreement, the Preferred Shares shall not have any powers, preference or
relative participating, optional or other special rights other than those
specifically set forth in this Certificate of Designations (as may be amended
from time to time) or otherwise in the Certificate of Incorporation of the
Corporation.

Signed on March 30, 2000

                                            NETGURU, INC.

                                            By: /s/ Jyoti Chatterjee
                                                ------------------------------
                                                Name:    Jyoti Chatterjee
                                                Title:   President

                                            By: /s/ Wayne Blair
                                                ------------------------------
                                                Name:  Wayne Blair
                                                Title:     Secretary

<PAGE>
                                                                         Page 17

                                    EXHIBIT A

                            (To be Executed by Holder
                      in order to Convert Preferred Shares)

                                CONVERSION NOTICE
                                       FOR
                 SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
                 -----------------------------------------------

The undersigned, as a holder ("HOLDER") of shares of Series B Cumulative
Convertible Preferred Stock ("PREFERRED SHARES") of Netguru, Inc. (the
"CORPORATION"), hereby irrevocably elects to convert _____________ Preferred
Shares for shares ("COMMON SHARES") of common stock, par value $0.01 per share
(the "COMMON STOCK"), of the Corporation according to the terms and conditions
of the Certificate of Designations for the Preferred Shares as of the date
written below. The undersigned hereby requests that share certificates for the
Common Shares to be issued to the undersigned pursuant to this Conversion Notice
be issued in the name of, and delivered to, the undersigned or its designee as
indicated below. No fee will be charged to the Holder of Preferred Shares for
any conversion. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Certificate of Designations.

Conversion Date:  __________________________

Conversion Information:      NAME OF HOLDER:__________________________________

                             By:_____________________________________________
                             Print Name:_____________________________________
                             Print Title:____________________________________

                             Print Address of Holder:
                             ___________________________________________________
                             ___________________________________________________

                             Issue Common Stock to: ____________________________
                             at: _______________________________________________
                             ___________________________________________________

IF COMMON SHARES ARE TO BE ISSUED TO A PERSON OTHER THAN HOLDER, HOLDER'S
SIGNATURE MUST BE GUARANTEED BELOW:

SIGNATURE GUARANTEED BY:

THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.

                           PAGE 1 OF CONVERSION NOTICE

<PAGE>
                                                                         Page 18

PAGE 2 TO CONVERSION NOTICE DATED _________________ FOR: _______________________
                                  (CONVERSION DATE)       (NAME OF HOLDER)

              COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
              -----------------------------------------------------

Number of Preferred Shares converted:     ______________ shares
   Number of Preferred Shares converted x Liquidation Preference    $

TOTAL DOLLAR AMOUNT CONVERTED                                       $
                                                                    ============

CONVERSION PRICE                                                    $

Number of Common Shares =  Total dollar amount converted =          ____________
                           -----------------------------
                               Conversion Price

     NUMBER OF COMMON SHARES =

If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

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