Document:

CERTIFICATE OF DESIGNATION
                          OF RIGHTS AND PREFERENCES OF
                           SERIES A PREFERRED STOCK OF
                           AXIOM PHARMACEUTICALS, INC.

Pursuant to N.R.S. 78.1955, Axiom  Pharmaceuticals,  Inc. (the "Company") hereby
amends its Articles of Incorporation as follows:

         I.  Article IV of the  Company's  Articles  of  Incorporation  shall be
amended by adding the following after the existing provisions of such article:

         1.  DESIGNATION,  AMOUNT,  PAR  VALUE,  AND RANK.  The  Company  hereby
designates the issuance of a series of Preferred  Stock to be called the "Series
A  Convertible  Preferred  Stock" (the  "Series A Preferred  Stock").  The total
number of shares of Series A Preferred Stock that the corporation shall have the
authority to issue is  4,095,000.  Each share of Series A Preferred  Stock shall
have a par value of $.001 per share.

         2.  VOTING  RIGHTS.  The holder of each share of the Series A Preferred
Stock  shall be entitled to the number of votes equal to the number of shares of
Common  Stock  into  which  such  share of  Series A  Preferred  Stock  could be
converted  for  purposes  of  determining  the  shares  entitled  to vote at any
regular,  annual or special meeting of  shareholders  of the Company,  and shall
have  voting  rights  and powers  equal to the  voting  rights and powers of the
Common Stock (except as otherwise  expressly  provided  herein or as required by
law,  voting  together  with the  Common  Stock as a single  class) and shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the  Company.  Fractional  votes  shall  not,  however,  be  permitted  and  any
fractional voting rights resulting from the above formula (after aggregating all
shares into which  shares of Series A Preferred  Stock held by each holder could
be converted)  shall be rounded to the nearest whole number (with one-half being
rounded upward).

         3.  DIVIDEND  PROVISIONS.  The holders of the Series A Preferred  Stock
shall be entitled to  receive,  when and as declared by the Board of  Directors,
dividends in such amounts as may be  determined  by the Board of Directors  from
time to time out of funds legally available  therefor.  No dividends (other than
those  payable  solely in Common Stock) shall be paid on the Common Stock during
any fiscal year of the Company  until there shall have been paid or declared and
set apart  during  that  fiscal  year for the  holders of the Series A Preferred
Stock a  dividend  in an amount  per share  equal to (i) the number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock times (ii)
the amount per share of the dividend to be paid on the Common Stock.

         4. PREFERENCE AS TO LIQUIDATION.  (a) In the event of any  liquidation,
dissolution or winding up of the Company, either voluntary and involuntary,  the
holders of each share of the  Series A  Preferred  Stock  shall be  entitled  to
receive,  prior and in  preference to any  distribution  of any of the assets or
surplus funds of the Company to the Common Stock holders, an amount equal to (i)

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all  declared and unpaid  dividends on each such share;  plus (ii) an amount per
share equal to greater of (A) the original issue price ($2.00),  as adjusted for
any stock splits, stock dividends,  recapitalizations or similar occurrences, as
set forth in Section 5(d) herein, plus interest of 8% per annum on such original
issue price (as  adjusted)  accumulated,  but not  compounded,  from the date of
issuance  to the date on which  the  liquidation  preference  is paid or (B) the
amount  that  would be  receivable  if the  Series A  Preferred  Stock  had been
converted into Common Stock immediately prior to such liquidation  distribution.
In the event the assets and funds of the  Company  are  insufficient  to pay the
entire  liquidation  preference  of the Series A  Preferred  Stock,  the holders
thereof will share  ratably in the assets and funds of the Company in proportion
to the preferential amount each such holder is otherwise entitled to receive.

         (b) A  consolidation  or merger of the  Company  with or into any other
corporation or corporations  wherein the Company is not the surviving company or
the Company's  shareholders do not constitute a majority of the  shareholders of
the surviving  company,  or a sale of all or substantially  all of the assets of
the  Company  to a  company  in which  the  Company's  shareholders  are not the
majority  shareholders,  shall be deemed  to be a  liquidation,  dissolution  or
winding up for purposes of this section.

         5. CONVERSION RIGHTS

         (a) Right to Convert.  Each share of Series A Preferred  Stock shall be
convertible,  at the option of the holder thereof, at any time after the date of
issuance  of such share at the office of the Company or any  transfer  agent for
such stock,  into such number of fully paid and  nonassessable  shares of Common
Stock as is  determined  by  dividing  $2.00 by the  Series A  Conversion  Price
applicable to such share,  determined as hereinafter  provided, in effect on the
date the certificate is surrendered for conversion. The price at which shares of
Common  Stock shall be  deliverable  upon  conversion  of shares of the Series A
Preferred  Stock (the "Series A Conversion  Price") shall initially be $2.00 per
share of Common Stock.  Such initial Series A Conversion Price shall be adjusted
as hereinafter provided.

         (b)  Mechanics of  Conversion.  Before any holder of Series A Preferred
Stock shall be entitled  to convert  the same into  shares of Common  Stock,  he
shall surrender the certificate or certificates  thereof,  duly endorsed, at the
office of the Company or of any  transfer  agent for such stock,  and shall give
written  notice to the Company at such office that he elects to convert the same
and shall state therein the name or names in which he wishes the  certificate or
certificates for shares of Common Stock to be issued. The Company shall, as soon
as  practicable  thereafter,  issue and deliver at such office to such holder of
Series A Preferred Stock, a certificate or certificates for the number of shares
of Common  Stock to which he shall be entitled  as  aforesaid.  Such  conversion
shall be deemed to have been made immediately  prior to the close of business on
the date of surrender of the shares of Series A Preferred Stock to be converted,
and the  person or  persons  entitled  to  receive  the  shares of Common  Stock
issuable  upon such  conversion  shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.

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         (c)  Adjustments  to Series A  Conversion  Price for  Certain  Diluting
Issues.

                  (i) For purposes of this Section,  the  following  definitions
apply:

                           (a) "Options" shall mean rights, options, or warrants
                  to subscribe for,  purchase or otherwise acquire either Common
                  Stock or Convertible Securities.

                           (b)  "Original  Issue  Date"  shall  mean the date on
                  which a share of Series A Preferred Stock was first issued.

                           (c) "Convertible Securities" shall mean any evidences
                  of indebtedness,  shares (other than Common Stock and Series A
                  Preferred  Stock)  or  other  securities  convertible  into or
                  exchangeable for Common Stock.

                           (d)  "Additional  Shares of Common  Stock" shall mean
                  all shares of Common  Stock  issued  (or,  pursuant to Section
                  5(c)(iii),  deemed  to be  issued)  by the  Company  after the
                  Original Issue Date,  other than shares of Common Stock issued
                  or issuable:

                                    (1) upon  conversion  of  shares of Series A
                           Preferred Stock;

                                    (2) to  officers,  directors  or  bona  fide
                           employees of, or consultants to, the Company pursuant
                           to stock option or stock  purchase plans and reserved
                           for issuance upon exercise of warrants outstanding on
                           the   Original   Issue  Date  and  for  issuance  for
                           services,   on  terms   approved   by  the  Board  of
                           Directors,  but not  exceeding  1,300,000  shares  of
                           Common Stock (net of any repurchases of such shares),
                           subject  to  adjustment  for  all   subdivisions  and
                           combinations;

                                    (3)  as a dividend or distribution on Series
                           A Preferred Stock; or

                                    (4) for which  adjustment  of the Series A
                           Conversion Price is made pursuant to Section 5(d).

                  (ii) No adjustment  in the Series A Conversion  Price shall be
         made in respect of the  issuance of  Additional  Shares of Common Stock
         unless the  consideration  per share  (determined  pursuant  to Section
         5(c)(v)  hereof)  for an  Additional  Share of Common  Stock  issued or
         deemed to be issued by the Company is less than the Series A Conversion
         Price in effect on the date of and immediately prior to such issue.

                  (iii) In the  event  the  Company  at any time or from time to
         time  after  the  Original  Issue  Date  shall  issue  any  Options  or
         Convertible Securities or shall fix a record date for the determination
         of holders of any class of securities then entitled to receive any such
         Options or  Convertible  Securities,  then the maximum number of shares

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         (as set forth in the instrument  relating thereto without regard to any
         provisions  contained  therein designed to protect against dilution) of
         Common Stock issuable upon the exercise of such Options or, in the case
         of  Convertible  Securities  and Options  therefor,  the  conversion or
         exchange  of  such  Convertible  Securities,  shall  be  deemed  to  be
         Additional  Shares of Common  Stock issued as of the time of such issue
         or, in case such a record date shall have been  fixed,  as of the close
         of business on such record date,  provided  that  Additional  Shares of
         Common  Stock  shall  not be  deemed to have  been  issued  unless  the
         consideration per share (determined pursuant to Section 5(c)(v) hereof)
         of such Additional Shares of Common Stock would be less than the Series
         A Conversion  Price in effect on the date of and  immediately  prior to
         such  issue,  or such  record  date,  as the case may be, and  provided
         further  that in any such  case in which  Additional  Shares  of Common
         Stock are deemed to be issued:

                           (a) No further adjustments in the Series A Conversion
                  Price shall be made upon the  subsequent  issue of Convertible
                  Securities or shares of Common Stock upon the exercise of such
                  Options  or  conversion   or  exchange  of  such   Convertible
                  Securities;

                           (b) If such  options  or  Convertible  Securities  by
                  their terms  provide,  with the passage of time or  otherwise,
                  for any increase in the consideration  payable to the Company,
                  or decrease in the number of shares of Common Stock  issuable,
                  upon the exercise,  conversion or exchange thereof, the Series
                  A Conversion  Price  computed upon the original  issue thereof
                  (or  upon  the  occurrence  of  a  record  date  with  respect
                  thereto), and any subsequent adjustments based thereon, shall,
                  upon any such  increase or  decrease  becoming  effective,  be
                  recomputed to reflect such increase or decrease  insofar as it
                  affects such Options or the rights of  conversion  or exchange
                  under such Convertible Securities (provided,  however, that no
                  such adjustment of the Series A Conversion  Price shall effect
                  Common Stock previously issued upon conversion of the Series A
                  Preferred Stock); and

                           (c) Upon the  expiration  of any such  Options or any
                  rights  of  conversion  or  exchange  under  such  Convertible
                  Securities  which shall not have been exercised,  the Series A
                  Conversion  Price computed upon the original issue thereof (or
                  upon the  occurrence  of a record date with respect  thereto),
                  and any subsequent adjustments based thereon, shall, upon such
                  expiration, be recomputed as if:

                                    (1) In the case of Convertible Securities or
                           Options for Common Stock the only  Additional  Shares
                           of  Common  Stock  issued  were the  share of  Common
                           Stock,  if any,  actually issued upon the exercise of
                           such  Options or the  conversion  or exchange of such
                           Convertible Securities and the consideration received
                           therefor was the  consideration  actually received by
                           the  Company  for  the  issue  of all  such  Options,

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                           whether  or not  exercised,  plus  the  consideration
                           actually  received by the Company upon such exercise,
                           or for the issue of all such  Convertible  Securities
                           which were actually converted or exchanged,  plus the
                           additional  consideration,  if any, actually received
                           by the Company upon such conversion or exchange and

                                    (2) In the case of Options  for  Convertible
                           Securities only the Convertible  Securities,  if any,
                           actually issued upon the exercise thereof were issued
                           at the  time  of  issue  of  such  Options,  and  the
                           consideration  received  by the Company for the issue
                           of all such Options,  whether or not exercised,  plus
                           the consideration deemed to have been received by the
                           Company  (determined  pursuant to Section  5(c)(viii)
                           upon the  issue of the  Convertible  Securities  with
                           respect  to  which   such   Options   were   actually
                           exercised.

                  (iv) In the event the Company,  at any time after the Original
         Issue Date shall issue  Additional  Shares of Common  Stock  (including
         Additional  Shares of Common  Stock  deemed  to be issued  pursuant  to
         Section  5(c)(iii))  without  consideration or for a consideration  per
         share less than the Series A Conversion  Price in effect on the date of
         and immediately prior to such issue, then and in such event, the Series
         A Conversion Price shall be reduced, concurrently with such issue, to a
         price  (calculated to the nearest cent)  determined by multiplying such
         Series A Conversion  Price by a fraction,  the numerator of which shall
         be the number of shares of Common Stock  outstanding  immediately prior
         to such  issue  plus the  number of shares  of Common  Stock  which the
         aggregate consideration received by the Company for the total number of
         Additional  Shares of Common  Stock so issued  would  purchase  at such
         Series A Conversion  Price,  and the  denominator of which shall be the
         number of shares of Common Stock outstanding  immediately prior to such
         issue  plus the  number of such  Additional  Shares of Common  Stock so
         issued. For the purpose of the above calculation,  the number of shares
         of Common Stock  outstanding  immediately  prior to such issue shall be
         calculated  on a fully  diluted  basis,  as if all  shares  of Series A
         Preferred Stock and all convertible securities had been fully converted
         into shares of Common Stock and any  outstanding  warrants,  options or
         other  rights  for the  purchase  of  shares  of stock  or  convertible
         securities had been fully exercised (and the resulting securities fully
         converted into shares of Common Stock,  if so  convertible)  as of such
         date, but not including any such  calculation  of additional  shares of
         Common  Stock  issuable  with  respect to shares of Series A  Preferred
         Stock,  Convertible  Securities,  or outstanding  options,  warrants or
         other  rights  for the  purchase  of  shares  of stock  or  convertible
         securities,  solely as a result  of the  adjustment  of the  respective
         conversion  prices  (or other  conversion  ratios)  resulting  from the
         issuances of Additional Shares of Common Stock causing such adjustment.

                  (v) For  purposes  of this  Section  5(c),  the  consideration
         received  by the  Company  for the  issue of any  Additional  Shares of
         Common Stock shall be computed as follows:

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                           (a) Cash and property shall:

                                    (1)  insofar  as it  consists  of  cash,  be
                           computed at the aggregate  amount of cash received by
                           the  Company  excluding  amounts  paid or payable for
                           accrued interest or accrued dividends;

                                    (2) insofar as it consists of property other
                           than cash,  be computed at the fair value  thereof at
                           the time of such issue,  as  determined in good faith
                           by,  and  reflected  in a formal  resolution  of, the
                           Board of Directors; and

                                    (3) in the event Additional Shares of Common
                           Stock  are  issued  together  with  other  shares  or
                           securities   or  other  assets  of  the  Company  for
                           consideration which covers both, be the proportion of
                           such consideration so received,  computed as provided
                           in clauses (A) and (B) above,  as  determined in good
                           faith by, and  reflected in a formal  resolution  of,
                           the Board of Directors.

                           (b)  The  consideration  per  share  received  by the
                  Company for  Additional  Shares of Common Stock deemed to have
                  been issued pursuant to Section  5(c)(iii)(c)(1),  relating to
                  Options and  Convertible  Securities,  shall be  determined by
                  dividing

                                    (1) the total  amount,  if any,  received or
                           receivable  by the Company as  consideration  for the
                           issue of such Options or Convertible Securities, plus
                           the   minimum    aggregate   amount   of   additional
                           consideration   (as  set  forth  in  the  instruments
                           relating  thereto,  without  regard to any  provision
                           contained   therein   designed  to  protect   against
                           dilution) payable to the Company upon the exercise of
                           such  Options or the  conversion  or exchange of such
                           Convertible Securities, or in the case of Options for
                           Convertible Securities,  the exercise of such Options
                           for  Convertible  Securities  and the  conversion  or
                           exchange of such Convertible Securities by

                                    (2) the  maximum  number of shares of Common
                           Stock  (as  set  forth  in the  instruments  relating
                           thereto,  without  regard to any provision  contained
                           therein  designed to protect  against  the  dilution)
                           issuable   upon  the  exercise  of  such  Options  or
                           conversion   or   exchange   of   such    Convertible
                           Securities.

                  (vi) The  rights  of the  Series  A  Preferred  Stock  Holders
         provided in this Section 5(c) shall expire on the date that is one year
         from the Original Issue Date.

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         (d)  Adjustments  to  Series A  Conversion  Price for  Combinations  or
Subdivisions  of Common Stock. In the event that the Company at any time or from
time to time after the Original  Issue Date shall declare or pay any dividend on
the  Common  Stock  payable in Common  Stock or in any right to  acquire  Common
Stock, or shall effect a subdivision of the  outstanding  shares of Common Stock
into  a  greater   number  of   shares   of  Common   Stock  (by  stock   split,
reclassification  or otherwise  than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common  Stock  shall  be  combined  or  consolidated,   by  reclassification  or
otherwise,  into a lesser  number of shares of Common  Stock,  then the Series A
Conversion Price in effect  immediately prior to such event shall,  concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as  appropriate.  In the event that the Company  shall  declare or pay,  without
consideration,  any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration  then the Company shall be deemed to have made
a dividend  payable in Common  Stock in an amount of shares equal to the maximum
number of shares issuable upon exercises of such rights to acquire Common Stock.

         (e)  Adjustments  for  Reclassifications  and  Reorganizations.  If the
Common Stock issuable upon  conversion of the Series A Preferred  Stock shall be
changed  into the same or a  different  number of  shares of any other  class or
classes  of  stock,  whether  by  capital  reorganization,  reclassification  or
otherwise  (other than a subdivision or  combination  of shares  provided for in
Section  5(d) above or a merger or other  reorganization  referred to in Section
4(b) above),  the Series A Conversion  Price then in effect shall,  concurrently
with  the  effectiveness  of  such   reorganization  or   reclassification,   be
proportionately  adjusted  so  that  the  Series  A  Preferred  Stock  shall  be
convertible  into,  in lieu of the  number of shares of Common  Stock  which the
holders would  otherwise  have been  entitled to receive,  a number of shares of
such  other  class or  classes  of stock  equivalent  to the number of shares of
Common  Stock  that would have been  subject  to  receipt  by the  holders  upon
conversion of the Series A Preferred Stock immediately before that change.

         (f) Beneficial  Ownership.  The Company shall not effect any conversion
of the  Series A  Preferred  Stock,  and no  person  who is a holder of Series A
Preferred  Stock shall have the right to convert  its Series A  Preferred  Stock
into Common Stock,  to the extent that after giving  effect to such  conversion,
such person (together with such person's  affiliates) would  beneficially own in
excess of 9.99% of the shares of the Common Stock outstanding  immediately after
giving effect to such conversion.  For purposes of the foregoing  sentence,  the
aggregate number of shares of Common Stock beneficially owned by such Person and
its affiliates shall include, without limitation, the number of shares of Common
Stock issuable upon  conversion of the Series A Preferred  Stock with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i)  conversion  of the  remaining,
unconverted shares of Series A Preferred Stock beneficially owned by such person
and its  affiliates,  and (ii)  exercise or  conversion  of the  unexercised  or

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unconverted portion of any other securities of the Company beneficially owned by
such Person and its affiliates (including,  without limitation,  any debentures,
convertible  notes or  convertible  preferred  stock or  warrants)  subject to a
limitation  on  conversion  or exercise  analogous to the  limitation  contained
herein.  Except as set forth in the  preceding  sentence,  for  purposes of this
paragraph,  beneficial  ownership shall be calculated in accordance with Section
13(d) of the Securities  Exchange Act of 1934, as amended.  For purposes of this
Section 5(f), in determining the number of outstanding shares of Common Stock, a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the  Company's  most recent Form 10-Q,  Form 10-K or other public  filing
with the  Securities  and  Exchange  Commission,  as the case may be, (2) a more
recent  public  announcement  by the  Company,  or (3) any  other  notice by the
Company or its transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of any
holder of Series A Preferred  Stock,  the Company shall within two business days
confirm  orally  and in  writing  to such  holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined  after giving effect to the  conversion or exercise of
securities of the Company by such holder and its affiliates since the date as of
which  such  number  of  outstanding  shares of Common  Stock was  reported.  In
effecting the conversion of the Series A Preferred  Stock,  the Company shall be
entitled  to rely on a  representation  by the holder of such shares of Series A
Preferred  Stock  as to the  number  of  shares  that it  beneficially  owns for
purposes of the above 9.99% limitation calculation.

         6. AMENDMENT.  Any term relating to the Series A Preferred Stock may be
amended and the observance of any term relating to the Series A Preferred  Stock
may  be  waived  (either  generally  or  in a  particular  instance  and  either
retroactively or prospectively) only with the vote or written consent of holders
of at least  fifty-one  percent  (51%)  of all  Series A  Preferred  Stock  then
outstanding;  provided,  however, that in determining whether the holders of the
requisite  shares of Series A  Preferred  Stock have given any vote,  consent or
other authorization,  shares of Series A Preferred Stock owned by the Company or
any subsidiary thereof shall be disregarded and not be deemed to be outstanding.
Any  amendment  or waiver so effected  shall be binding upon the Company and all
holders of Series A Preferred Stock.

         7. NO  REISSUANCE  OF SERIES A PREFERRED  STOCK.  No share or shares of
Series A Preferred  Stock  acquired by the  Company by reason of  conversion  or
otherwise shall be reissued, and all such shares shall be canceled,  retired and
eliminated from the shares which the Company shall be authorized to issue.

         8.  RESTRICTIONS  AND  LIMITATIONS.  So long as any  shares of Series A
Preferred Stock remain  outstanding,  the Company shall not, without the vote or
written consent by the holders of at least  fifty-one  percent (51%) of the then
outstanding shares of Series A Preferred Stock:

         (a) Effect any reclassification,  recapitalization or other change with
respect to any  outstanding  shares of stock  which  results in the  issuance of
shares of stock having any  preference  or priority as to dividend or redemption
rights, liquidation preferences, conversion rights or otherwise, superior to any

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such preference or priority of the Series A Preferred Stock, or

         (b) Authorize or issue, or obligate  itself to issue,  any other equity
security  senior  to or on a parity  with the  Series  A  Preferred  Stock as to
dividend or redemption  rights,  liquidation  preferences,  conversion rights or
otherwise, or create any obligation or security convertible into or exchangeable
for, or having any option rights to purchase,  any such equity security which is
senior to the Series A Preferred Stock, or

         (c) Amend,  alter or repeal the  preferences,  special  rights or other
powers of the  Series A  Preferred  Stock,  or  otherwise  amend  the  Company's
Articles  of  Incorporation,  so as to effect  adversely  the Series A Preferred
Stock.

         For purposes of this Section 8, in  determining  whether the holders of
the requisite shares of Series A Preferred Stock have given any vote, consent or
other authorization,  shares of Series A Preferred Stock owned by the Company or
any subsidiary thereof shall be disregarded and not be deemed to be outstanding

         9.  MISCELLANEOUS  PROVISIONS.  (a) The  Company  shall not engage in a
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action, in order to avoid or seek to avoid the
observance  or  performance  of any of the  terms to be  observed  or  performed
hereunder  by the  Company  and will at all  times in good  faith  assist in the
carrying  out of all the  provisions  of and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.

         (b) The Company  shall at all times  reserve and keep  available out of
its  authorized but unissued  shares of Common Stock,  solely for the purpose of
effecting  the  conversion of the shares of the Series A Preferred  Stock,  such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred Stock;
and if at any time the number of authorized but unissued  shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding  shares
of the Series A Preferred  Stock, the Company will take such corporate action as
may, in the opinion of its 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  shareholder  approval of any  necessary  amendment to its
Articles of Incorporation.

         (c) No  fractional  share  shall be issued upon the  conversion  of any
share or  shares of  Series A  Preferred  Stock.  All  shares  of  Common  Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred Stock by a holder thereof shall be aggregated for purposes of
determining  whether  the  conversion  would  result  in  the  issuance  of  any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the  issuance  of a fraction of a share of Common  Stock,  the Company
shall,  round the number of shares to be issued upon  conversion  up to the next
whole number.

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         (d) Any  notice  required  by the  provisions  of this  Certificate  of
Designation  to be given to the  holders of Series A  Preferred  Stock  shall be
deemed given if  deposited  in the United  States  mail,  postage  prepaid,  and
addressed to each holder of record at his address  appearing on the books of the
Company.

         IN WITNESS WHEREOF, the undersigned,  being the Chief Executive Officer
and President of the Company,  has executed this Certificate of Designation this
21st day of August, 2003.

------------------------------
Name:  That Ngo
Title: Chief Executive Officer

                                       10Exhibit 4.1

                                     FORM OF
               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
                                       OF
                     SERIES A-1 CONVERTIBLE PREFERRED STOCK
                                       AND
                     SERIES A-2 CONVERTIBLE PREFERRED STOCK
                                       OF
                             AUTO DATA NETWORK, INC.
                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

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

Auto Data Network,  Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"),  hereby  certifies that,  pursuant to the
authority  vested in the Board of Directors of the Company (the  "Board") by the
Certificate   of   Incorporation   of   the   Company   (the   "Certificate   of
Incorporation"), as amended, the following resolution was adopted as of July 18,
2003 by the Board  pursuant to Section 141 of the Delaware  General  Corporation
Law:

RESOLVED,  that pursuant to the authority  granted to and vested in the Board in
accordance with the provisions of the Certificate of Incorporation,  as amended,
there  shall be created a series of  Preferred  Stock,  $0.001 par value,  which
series  shall  have the  following  designations  and  number  thereof,  powers,
preferences, rights, qualifications, limitations and restrictions:

1.  Designation  and  Number  of  Shares.  There  shall  hereby be  created  and
established a
series of Preferred Stock designated as "Series A-1 Convertible Preferred Stock"
(the "Series A-1 Preferred Stock") and a series of Preferred Stock designated as
"Series A-2 Convertible  Preferred Stock (the "Series A-2 Preferred Stock"). The
authorized number of shares of Series A-1 Preferred Stock shall be 500,000.  The
authorized number of shares of Series A-2 Preferred Stock shall be 2,300,000.

2. Conversion.

(a) Right to Convert.  Each share of Series A-1  Preferred  Stock and Series A-2
Preferred  Stock shall be  convertible  into a number of shares of Common  Stock
equal to the  applicable  Liquidation  Amount  (as  defined in Section 5 herein)
divided by the then  applicable  Conversion  Price (as defined  herein) upon the
earlier to occur of (i) the  election  of the holder to  convert  (an  "Optional
Conversion"), in whole or in part, at any time, or from time to time, commencing
with date of the  issuance  of Series  A-1  Preferred  Stock or the  Series  A-2
Preferred  Stock  (the  "A-1  Issuance  Date" or the  "A-2  Issuance  Date",  as
applicable;  each one, an "Issuance  Date") or (ii) the earliest to occur of the
following dates (an "Automatic Conversion"): (A) the date, at any time after the
one year  anniversary of the applicable  Issuance Date,  upon which both (x) the
average of the Market Price (as defined  herein) for a share of Common Stock for
thirty  consecutive  Trading Days (as defined  herein) exceeds $8.00 (subject to
adjustment in the event of stock splits,  reverse stock splits, stock dividends,
recapitalizations  or similar  events) and (y) the average of the trading volume
for the Common Stock during such period exceeds  200,000 shares per day (subject
to  adjustment  in the  event of  stock  splits,  reverse  stock  splits,  stock
dividends, recapitalizations or similar events) shares per Trading Day; (B) with
respect to the Series A-1  Preferred  Stock,  upon the  affirmative  vote of the
holders of a majority  of the then  outstanding  shares of Series A-1  Preferred
Stock; (C) with respect to the Series A-2 Preferred Stock,  upon the affirmative
vote of a majority of the then outstanding shares of Series A-2 Preferred Stock;
or (D) immediately  prior to the closing of an  underwritten  public offering of
the Company's Common Stock for aggregate gross proceeds of not less than Fifteen
Million Dollars ($15,000,000).

(b) As used herein,  "Market Price" means,  with respect to the shares of Common
Stock,

<PAGE>

         (i)      if the  shares  are  listed or  admitted  for  trading  on any
                  national   securities  exchange  or  included  in  The  Nasdaq
                  National Market or Nasdaq SmallCap  Market,  the last reported
                  sales price as reported  on such  exchange or market;  (ii) if
                  the  shares  are not  listed or  admitted  for  trading on any
                  national   securities  exchange  or  included  in  The  Nasdaq
                  National Market or Nasdaq SmallCap Market,  the average of the
                  last reported  closing bid and asked  quotation for the shares
                  as reported on the National  Association of Securities Dealers
                  Automated  Quotation System ("NASDAQ") or a similar service if
                  NASDAQ  is not  reporting  such  information;  or (iii) if the
                  shares are not listed or admitted  for trading on any national
                  securities  exchange or included in The Nasdaq National Market
                  or  Nasdaq  SmallCap  Market  or quoted by NASDAQ or a similar
                  service,  the  average  of the  last  reported  bid and  asked
                  quotation  for the  shares as quoted by a market  maker in the
                  shares (or if there is more than one market maker, the bid and
                  asked  quotation  shall be obtained from two market makers and
                  the  average of the lowest bid and  highest  asked  quotation)
                  (such applicable trading market to be referred to the "Trading
                  Market").  In the absence of any available  public  quotations
                  for the Common Stock,  the Board shall determine in good faith
                  the fair value of the Common Stock, which  determination shall
                  be set forth in a certificate by the Secretary of the Company.
                  As  used  herein,  "Trading  Day"  means  a day on  which  the
                  principal  Trading  Market with respect to the Common Stock is
                  open for the transaction of business.

(c)  Effecting a  Conversion.  Immediately  upon the  occurrence of an Automatic
Conversion,  each holder's  shares of Series A-1  Preferred  Stock or Series A-2
Preferred Stock, as applicable,  shall be deemed to have been converted into the
applicable number of shares of the Company's Common Stock in accordance with the
then applicable  Conversion  Price, and  certificates  evidencing such shares of
Common  Stock  shall be issued to such  holder  promptly  after  receipt  of the
applicable  certificates evidencing such holder's shares of Series A-1 Preferred
Stock or  Series  A-2  Preferred  Stock,  as  applicable,  together  with  other
customary  documentation  (including  delivery  instructions).  The holder shall
effect any Optional  Conversion by surrendering  the certificate or certificates
representing  the shares of Series A-1  Preferred  Stock or Series A-2 Preferred
Stock,  as  applicable,  to be converted to the Company,  together  with written
notice  of its  election  to  convert  and  specifying  the name or names  (with
address) in which a certificate or  certificates  for shares of Common Stock are
to be issued (a "Stockholder  Conversion Notice").  Each Stockholder  Conversion
Notice  shall  specify  the  number of shares of Series A-1  Preferred  Stock or
Series A-2 Preferred Stock to be converted and the date on which such conversion
is to be  effected,  which date may be  neither  prior to, nor more than 10 days
after, the date the holder delivers such Stockholder  Conversion  Notice.  If no
conversion date is specified in a Stockholder  Conversion Notice, the conversion
date shall be the date that the Stockholder Conversion Notice is delivered. Each
Stockholder  Conversion Notice,  once given,  shall be irrevocable.  A holder of
Series A-1 Preferred Stock or Series A-2 Preferred Stock may only convert shares
of Series A-1 Preferred  Stock or Series A-2 Preferred  Stock in blocks equal to
not less than the  lesser of (i) the  number of shares of Series  A-1  Preferred
Stock or Series A-2  Preferred  Stock,  as  applicable,  convertible  into 5,000
shares of Common  Stock and (ii) all  shares of Series  A-1

<PAGE>

Preferred Stock or Series A-2 Preferred Stock then held by the  stockholder.  If
the holder is converting  less than all shares of Series A-1 Preferred  Stock or
Series A-2 Preferred  Stock,  as applicable,  represented by the  certificate or
certificates tendered by the holder with the Stockholder  Conversion Notice, the
Company  shall  convert  the number of shares of Series A-1  Preferred  Stock or
Series A-2 Preferred Stock so specified and shall promptly deliver (but not more
than ten business  days later) to such holder a  certificate  for such number of
shares as have not been  converted.  Upon an Automatic  Conversion,  the Company
shall notify each holder thereof and each holder shall surrender the certificate
or certificates representing all of the shares of Series A-1 Preferred Stock and
Series A-2  Preferred  Stock  owned by such  holder and each holder of shares of
Series A-1 Preferred  Stock or Series A-2 Preferred  Stock shall be deemed to be
the holder of record of the Common Stock issued upon such Automatic  Conversion.
All fractional  shares resulting from the conversion of the Series A-1 Preferred
Stock or Series A-2  Preferred  Stock  shall be  rounded up to the next  highest
whole share. All certificates  representing shares of Series A-1 Preferred Stock
and Series A-2 Preferred Stock  surrendered for conversion shall be delivered to
the Company for cancellation and canceled by it. As promptly as practicable (but
no more than ten business  days) after the surrender of any shares of Series A-1
Preferred  Stock or Series A-2 Preferred  Stock,  the Company shall  (subject to
compliance with the applicable  provisions of federal and state securities laws)
deliver to the holder of such shares so surrendered certificate(s)  representing
the number of fully  paid and  nonassessable  shares of Common  Stock into which
such shares are entitled to be  converted.  Upon a  conversion,  any accrued and
unpaid  dividends  shall be paid either in cash, to the extent funds are legally
available  therefore,  or shares of Common Stock valued at the Market Price,  in
the sole discretion of the Company.

(d) Conversion  Price. The initial  conversion price per share of the Series A-1
Preferred Stock or Series A-2 Preferred  Stock,  as applicable (the  "Conversion
Price"),  shall be equal to $1.25 per  share of Common  Stock  into  which  such
number of share of Series A-1 Preferred  Stock or Series A-2 Preferred  Stock is
convertible, subject to adjustment as provided in Section 3.

(e)  Reservation  of Shares.  The  Company  covenants  that it will at all times
reserve and keep  available  out of its  authorized  and  unissued  Common Stock
solely for the purpose of issuance upon conversion of Series A-1 Preferred Stock
and Series A-2 Preferred Stock, as herein provided,  free from preemptive rights
or any other actual contingent purchase rights of persons other than the holders
of Series A-1  Preferred  Stock or Series A-2 Preferred  Stock  pursuant to this
clause, not less than such number of shares of Common Stock as shall be issuable
upon the conversion of all outstanding  shares of Series A-1 Preferred Stock and
Series A-2  Preferred  Stock.  The Company  covenants  that all shares of Common
Stock  that  shall  be so  issuable  shall,  upon  issue,  be duly  and  validly
authorized, issued and fully paid, nonassessable and freely tradeable. If at any
time the number of authorized  but unissued  shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A-1
Preferred  Stock and Series  A-2  Preferred  Stock,  in  addition  to such other
remedies as shall be available to the holders of such Series A-1 Preferred Stock
and Series A-2  Preferred  Stock,  the Company will take such  corporate  action
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.

<PAGE>

(f) Issue  Taxes.  The Company  shall pay all issue taxes,  if any,  incurred in
respect  of the issue of shares of Common  Stock on  conversion.  If a holder of
shares of Series A-1  Preferred  Stock or Series A-2 Preferred  Stock  specifies
that the shares of Common Stock to be issued on Automatic  Conversion  are to be
issued in a name or names  other than the name or names in which such Series A-1
Preferred  Stock or Series A-2 Preferred  Stock stand or the names of affiliates
of the initial holder of such shares,  then the Company shall not be required to
pay any additional transfer or other taxes incurred by reason of the issuance of
such  shares  of Common  Stock to the name of  another,  and if the  appropriate
transfer taxes shall not have been paid to the Company or the transfer agent for
the Series A-1 Preferred Stock or Series A-2 Preferred Stock, as applicable,  at
the time of Automatic Conversion of the Series A-1 Preferred Stock or Series A-2
Preferred  Stock,  as  applicable,  the  shares  of  Common  Stock  issued  upon
conversion  thereof may be  registered  in the name or names in which the Series
A-1  Preferred  Stock  or  Series  A-2  Preferred  Stock,  as  applicable,  were
registered, despite the instructions to the contrary.

3. Adjustment of Conversion Price.

(a) Definition of Additional  Stock. For purposes of this Section 3, "Additional
Shares of Common  Stock"  includes  all  shares  of Common  Stock  issued by the
Company after the Series A-1 Issuance Date, other than:

(i) Up to 2,300,000  shares of Series A-2 Preferred  Stock,  all of which shares
are to be issued by the  Company  at no less than  $2.50 per share  (subject  to
appropriate adjustment for any stock dividend, stock split, combination or other
similar recapitalization  affecting such shares), and the Shares of Common Stock
issued upon  conversion  of shares of Series A-1  Preferred  Stock or Series A-2
Preferred Stock;

(ii) Shares of Common Stock  (subject to  appropriate  adjustment  for any stock
dividend, stock split,  combination or other similar recapitalization  affecting
such  shares)  issuable  or  issued to the  Company's  employees,  directors  or
consultants pursuant to a stock option plan or restricted stock plan approved by
the Board;

(iii)  Shares of Common  Stock issued or issuable  pursuant to  subsection  3(d)
below;

(iv) Shares of Common Stock or Preferred Stock issuable upon exercise of
options,  warrants or upon conversion of convertible  securities or other rights
outstanding as of the applicable Issuance Date; and

(v) Shares of capital  stock or options or warrants to  purchase  capital  stock
issued (a) to financial  institutions or lessors in connections  with commercial
credit agreements,  equipment financings or similar transactions or (b) to other
corporations,  persons or entities in connection with  acquisitions,  mergers or
similar business combinations,  partnership  arrangements,  strategic alliances,
licensing  arrangements or similar non-capital raising transactions  approved by
the Board. The number and kind of securities issuable upon the conversion of the
Series A-1 Preferred Stock and the Series A-2 Preferred Stock and the Conversion
Price shall be subject to adjustment  from time to time in  accordance  with the
following provisions:

<PAGE>

(b) Subdivision or Combination of Shares. In the event that the Company shall at
any time or from time to time,  prior to  conversion  of  shares  of Series  A-1
Preferred  Stock or Series A-2 Preferred  Stock (x)  subdivide  the  outstanding
shares of Common  Stock  into a larger  number  of  shares  or (y)  combine  the
outstanding shares of Common Stock into a smaller number of shares, then, and in
each such case, the Conversion Price in effect  immediately  prior to such event
shall be  adjusted  (and any  other  appropriate  actions  shall be taken by the
Company) so that the holder of any share of Series A-1 Preferred Stock or Series
A-2 Preferred Stock  thereafter  surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other  securities of the Company
that such holder would have owned or would have been entitled to receive upon or
by reason of any of the  events  described  above,  had such share of Series A-1
Preferred Stock or Series A-2 Preferred Stock been converted  immediately  prior
to the  occurrence of such event.  An  adjustment  made pursuant to this Section
3(b) shall become effective retroactively in the case of any such subdivision or
combination,  to the close of  business  on the day upon  which  such  corporate
action becomes effective.

(c) Stock Dividends. In case Additional Shares of Common Stock are issued as a
dividend  or  other  distribution  on the  Common  Stock  (or such  dividend  is
declared),  the  Conversion  Price shall be reduced,  as of the date a record is
taken of the holders of Common Stock for the purpose of receiving  such dividend
or other  distribution (or if no such record is taken, as at the earliest of the
date of such  declaration,  payment or other  distribution),  to the  Conversion
Price determined by multiplying the Conversion Price in effect immediately prior
to such  declaration,  payment  or  other  distribution  by a  fraction  (i) the
numerator  of which  shall be the number of shares of Common  Stock  outstanding
immediately  prior to the  declaration  or  payment  of such  dividend  or other
distribution,  and (ii) the  denominator  of which shall be the total  number of
shares of Common Stock outstanding  immediately after the declaration or payment
of such  dividend or other  distribution.  In the event that the  Company  shall
declare or pay any dividend on the Common Stock  payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend  payable in Common  Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.

(d)  Recapitalization  or  Reclassification  of Common Stock. In case of any (i)
capital  reorganization  or any  reclassification  (other  than a change  in par
value) of the capital  stock of the Company,  or (ii)  exchange or conversion of
the Common Stock for or into securities of another  corporation or other entity,
or (iii)  consolidation  or merger of the Company  with or into any other person
(other than a merger which does not result in any reclassification,  conversion,
exchange or  cancellation  of outstanding  shares of Common Stock) or (iv) sale,
lease or other  conveyance  of all or  substantially  all of the  assets  of the
Company,  then in each instance referred to in the preceding clauses (i) through
(iv),

<PAGE>

except, in the event of a "Change in Control  Redemption Event" (as such term is
hereinafter defined in Section 11), if the holders of Series A-1 Preferred Stock
or Series  A-2  Preferred  Stock,  as the case may be,  shall  not  waive  their
respective  redemption  right,  then the  Board  and the  person  formed by such
consolidation or resulting from such capital reorganization, reclassification or
merger or which acquires (by sale, lease or other  conveyance)  such assets,  as
the case may be, shall make provision  such that the Series A-1 Preferred  Stock
and the Series A-2 Preferred Stock shall  thereafter be convertible for the kind
and  amount  of  shares  of stock,  other  securities,  cash and other  property
receivable upon such capital  reorganization,  reclassification,  consolidation,
merger,  sale,  lease or other  conveyance,  as the case may be,  by a holder of
shares of Common Stock equal to the number of shares of Common Stock  underlying
the Series A-1 Preferred  Stock or Series A-2 Preferred  Stock,  as  applicable,
issuable upon the  conversion  of the Series A-1  Preferred  Stock or Series A-2
Preferred  Stock  immediately  prior  to the  effective  date  of  such  capital
reorganization,  reclassification,  merger, consolidation,  sale, lease or other
conveyance  and,  in each  instance  referred  to in the  preceding  clauses (i)
through (iv) (each,  a  "Transaction"),  appropriate  adjustment  (as reasonably
determined in good faith by the Board) shall be made in the  application  of the
provisions  herein set forth with respect to rights and interests  thereafter of
the holders of the Series A-1 Preferred Stock and Series A-2 Preferred Stock, to
the end that the provisions set forth herein (including the specified changes in
and other  adjustments  of the  number  of  shares  underlying  the  Series  A-1
Preferred Stock and Series A-2 Preferred  Stock) shall thereafter be applicable,
as near as  reasonably  may be, in relation to any such shares of stock or other
securities  or other  property  thereafter  deliverable  upon  conversion of the
Series A-1 Preferred Stock and Series A-2 Preferred Stock. The Company shall not
enter into any  Transaction  unless  effective  provision shall be made so as to
give effect to the  provisions  set forth in this  subsection  (d).  The Company
shall not effect any transaction described in this subsection 3(d) unless (i) it
first  gives   twenty  (20)  days'  prior   written   notice  of  such   merger,
consolidation,  exchange of shares,  recapitalization,  reorganization  or other
similar  event or sale of assets  (during  which time the  holders of Series A-1
Preferred  Stock and Series A-2 Preferred Stock shall be entitled to convert the
Series A-1 Preferred Stock or Series A-2 Preferred Stock) and (ii) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
the obligations of this subsection  3(d). The provisions of this subsection 3(d)
shall   similarly   apply   to   successive   consolidations,   reorganizations,
reclassifications,  exchanges,  conversions,  mergers,  sales,  leases and other
conveyances. (e) Issuance of Stock at Less than Conversion Price. If the Company
shall issue any Additional Shares of Common Stock after the applicable  Issuance
Date (other than as provided in the foregoing  subsections  3(b) through  3(d)),
for no consideration  or for a consideration  per share less than the Conversion
Price in effect on the date of and immediately prior to such issue, then in such
event, the Conversion Price shall be reduced,  concurrently  with such issue, as
follows:

(i) if such event shall occur  during the period  from the  applicable  Issuance
Date until the later of (x)  December  31, 2003 and (y) five (5)  business  days
following  the  retirement,  cancellation,  repayment or conversion to equity in
full of the Company's  outstanding debts, as of the applicable Issuance Date, to
HSBS Holdings and MAM

<PAGE>

Software,  then the Conversion  Price for the Series A-1 Preferred Stock and the
Series A-2 Preferred Stock shall be reduced,  as of the close of business on the
date of such issue or sale, to the  Effective  Price (as such term is defined in
subsection  3(g)(v))  at which  such  Additional  Shares of Common  Stock are so
issued  or  sold;  and  (ii) if such  event  shall  occur  thereafter,  then the
Conversion  Price shall be reduced to a price equal to the quotient  obtained by
dividing:

(A) an amount equal to (x) the total number of shares of Common Stock
outstanding  immediately  prior  to  such  issuance  or sale  multiplied  by the
Conversion Price in effect  immediately prior to such issuance or sale, plus (y)
the  Aggregate  Consideration  Received  (as such term is defined in  subsection
3(g)(v)) or deemed to be received by the Company upon such  issuance or sale, by
(B) the total number of shares of Common  Stock  outstanding  immediately  after
such issuance or sale.

(f) Issuance of Options and Convertible Securities Deemed Issuance of Additional
Shares of Common Stock.  If the Company,  at any time or from time to time after
the  applicable  Issuance Date,  shall issue any options,  warrants or rights to
purchase  Common Stock  (collectively,  "Options") or securities  that, by their
terms,  directly or indirectly,  are convertible into or exchangeable for shares
of Common Stock  ("Convertible  Securities")  or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible  Securities,  then the maximum number of shares of Common
Stock (as set forth in the  instrument  relating  thereto  without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or, in the case of Convertible  Securities and
Options  therefore,  the conversion or exchange of such Convertible  Securities,
shall be  deemed to be  Additional  Shares of Common  Stock  issued  under  this
Certificate  as of the time of such  issue or, in case such a record  date shall
have been fixed, as of the close of business on such record date,  provided that
in any such case in which  Additional  Shares of Common  Stock are  deemed to be
issued:

(i) no  further  adjustment  in the  Conversion  Price  shall  be made  upon the
subsequent  issue of  Convertible  Securities or shares of Common Stock upon the
exercise  of  such  Options  or  conversion  or  exchange  of  such  Convertible
Securities and, upon the expiration of any such Option or the termination of any
such right to convert or exchange such  Convertible  Securities,  the Conversion
Price then in effect  hereunder  shall  forthwith be increased to the Conversion
Price  which  would  have  been in  effect  at the  time of such  expiration  or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination,  never been issued, and the
Common Stock issuable  thereunder  shall no longer be deemed to be  outstanding;
(ii) if such Options or Convertible  Securities by their terms provide, with the
passage of time or otherwise,  for any increase in the consideration  payable to
the Company, or decrease in the number of shares of Common Stock issuable,  upon
the exercise, conversion or exchange thereof, the Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto),  and any subsequent  adjustments  based thereon,  shall, upon any such
increase or decrease becoming effective,  be recomputed to reflect such increase
or decrease  insofar as it

<PAGE>

affects  such  Options  or the  rights of  conversion  or  exchange  under  such
Convertible  Securities,  provided that no readjustment  pursuant to this clause
(B) shall have the effect of increasing the Conversion  Price to an amount which
exceeds the lower of (i) the Conversion  Price on the original  adjustment date,
or (ii) the  Conversion  Price that would have  resulted  from any  issuance  of
Additional Shares of Common Stock between the original  adjustment date and such
readjustment date; and (iii) if such Options or Convertible  Securities by their
terms  provide,  with the passage of time or otherwise,  for any decrease in the
consideration  payable to the  Company,  or  increase in the number of shares of
Common Stock issuable,  upon the exercise,  conversion or exchange thereof,  the
Conversion  Price  computed  upon  the  original  issue  thereof  (or  upon  the
occurrence  of  a  record  date  with  respect  thereto),   and  any  subsequent
adjustments  based thereon,  shall,  upon any such decrease or increase becoming
effective,  be  recomputed  to reflect such  decrease or increase  insofar as it
affects  such  Options  or the  rights of  conversion  or  exchange  under  such
Convertible  Securities,  provided that no readjustment  pursuant to this clause
(C) shall have the effect of decreasing the Conversion  Price to an amount which
exceeds the lower of (i) the Conversion  Price on the original  adjustment date,
or (ii) the  Conversion  Price that would have  resulted  from any  issuance  of
Additional Shares of Common Stock between the original  adjustment date and such
readjustment date.

(g)  Other  Provisions  Applicable  to  Adjustment  Under  this  Section  3. The
following  provisions  shall be applicable to the  adjustments in the Conversion
Price as provided in this Section 3.

(i)  Treasury  Shares.  The  number  of  shares  of  Common  Stock  at any  time
outstanding  shall not include any shares  thereof then  directly or  indirectly
owned or held by or for the account of the Company.

(ii) Other Action Affecting Common Stock. If the Company shall take any action
affecting the outstanding  number of shares of Common Stock other than an action
described  in  any  of the  foregoing  subsections  3(b)  through  3(f)  hereof,
inclusive,  which would have an inequitable  effect on the holders of the Series
A-1 Preferred Stock or the Series A-2 Preferred Stock, then the Conversion Price
shall be adjusted in such manner and at such times as the Board on the advice of
the Company's  independent  public accountants may in good faith determine to be
equitable in the circumstances.

(iii) Minimum Adjustment. No adjustment of the Conversion Price shall be made
if the amount of any such  adjustment  would be an amount  less than one percent
(1%) of the  Conversion  Price  then in  effect,  but any such  amount  shall be
carried  forward and an adjustment in respect  thereof shall be made at the time
of and together with any subsequent  adjustment which, together with such amount
and any other amount or amounts so carried forward,  shall aggregate an increase
or decrease of one percent (1%) or more.

(iv) Certain  Adjustments.  The  Conversion  Price shall not be adjusted  upward
except in the event of a combination of the  outstanding  shares of Common Stock
into a smaller number of shares of Common Stock.

(v) Determination of Consideration.

(A) For purposes of subsection 3(e), the "Effective  Price" of Additional Shares
of Common Stock shall mean the quotient determined by dividing (x) the Aggregate
Consideration  Received,  or deemed to have been received,  by the

<PAGE>

Company under this subsection 3(e), for the issue of such Additional Shares of.-
9 - Common Stock,  by (y) the total number of Additional  Shares of Common Stock
issued or sold,  or deemed to have been  issued or sold,  by the  Company  under
subsection  3(e).  (B) For  purposes  of this  Subsection  3(f),  the  Aggregate
Consideration  Received by the Company for the issue of any Additional Shares of
Common  Stock  shall  be  computed  as  follows:  (A) Cash  and  Property:  Such
consideration shall:

(1) insofar as it consists of cash, be computed at the aggregate gross amount of
cash received by the Company  before  deduction of any  underwriting  or similar
commissions,  compensation  or  concessions  paid or allowed  by the  Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company and  excluding  amounts  paid or payable for accrued  interest or
accrued dividends;

(2) insofar as it consists of property  other than cash, be computed at the fair
market value  thereof at the time of such issue,  as determined in good faith by
the  Board;  and in the  event  Additional  Shares of  Common  Stock are  issued
together  with other  shares or  securities  or other  assets of the Company for
consideration  which covers both,  be the  proportion of such  consideration  so
received,  computed as provided in clauses (1) and (2) above,  as  determined in
good faith by the Board.

(B) Options and Convertible Securities.  The consideration per share received by
the Company for Additional Shares of Common Stock deemed to have been
issued  pursuant to  subsection  3(f)(ii),  relating to Options and  Convertible
Securities, shall be determined by dividing

(1)  the  total  amount,  if any,  received  or  receivable  by the  Company  as
consideration for the issue of such Options or Convertible Securities,  plus the
minimum  aggregate  amount  of  additional  consideration  (as set  forth in the
instruments relating thereto,  without regard to any provision contained therein
for a subsequent  adjustment of such consideration)  payable to the Company upon
the exercise of such Options or the  conversion or exchange of such  Convertible
Securities,  or in the case of Options for Convertible Securities,  the exercise
of such Options for  Convertible  Securities  and the  conversion or exchange of
such Convertible Securities, by (2) the maximum number of shares of Common Stock
(as set  forth  in the  instruments  relating  thereto,  without  regard  to any
provision contained therein for a subsequent adjustment of such number) issuable
upon  the  exercise  of such  Options  or the  conversion  or  exchange  of such
Convertible Securities.

(i) No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization,  transfer of assets, consolidation,
merger, dissolution,  issue or sale of securities or any other voluntary action,
avoid or seek to avoid the  observance or  performance of any of the terms to be
observed  or  performed  hereunder  by the Company but will at all times in good
faith assist in the carrying out of all the  provisions  of Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion  rights of the holders of the Series A-1 Preferred  Stock and the
Series A-2 Preferred Stock against impairment.

<PAGE>

(j) Notices of Adjustments.  Whenever the Conversion Price is adjusted as herein
provided,  the Chief Financial Officer (or other senior executive officer in the
absence  of such  person) of the  Company  shall,  in good  faith,  compute  the
adjusted Conversion Price in accordance with the foregoing  provisions and shall
prepare a written  certificate  setting forth such adjusted Conversion Price and
showing  in detail  the facts upon  which  such  adjustment  is based,  and such
written  instrument  shall  promptly be delivered  to each record  holder of the
Series A-1 Preferred Stock and Series A-2 Preferred Stock.

4. Ranking.
The Series A-1 Preferred Stock and the Series A-2 Preferred Stock shall rank, as
to
dividends,  rights upon  liquidation,  dissolution  or winding up, pari passu to
each  other,  and shall rank  senior and prior to (i) the Common  Stock and (ii)
each other  class or series of capital  stock of the Company  hereafter  created
which  does not  expressly  rank pari  passu  with or senior to the  Series  A-1
Preferred Stock or the Series A-2 Preferred  Stock,  as applicable.  (All equity
securities of the Company to which the Series A-1 Preferred Stock and the Series
A-2 Preferred  Stock ranks senior to, whether with respect to dividends,  rights
upon  liquidation,  dissolution,  winding up or otherwise,  including the Common
Stock,  are collectively  referred to herein as "Junior  Securities," all equity
securities of the Company to which the Series A-1 Preferred  Stock or the Series
A-2 Preferred Stock ranks on a parity with, whether with respect to dividends or
upon  liquidation,  dissolution,  winding  up  or  otherwise,  are  collectively
referred  to herein as  "Parity  Securities"  and all equity  securities  of the
Company  to which the Series A-1  Preferred  Stock and the Series A-2  Preferred
Stock ranks  junior,  whether with  respect to  dividends  or upon  liquidation,
dissolution,  winding up or  otherwise  are  collectively  referred to herein as
"Senior Securities").

5. Liquidation Rights.
(a) Liquidation Preference. Upon a voluntary or involuntary liquidation, under
applicable bankruptcy or reorganization  legislation,  or dissolution or winding
up of the Company  (each a  "Liquidation"),  before any  distribution  of assets
shall be made to the holders of Junior  Securities,  the holder of each share of
Series A-1 Preferred Stock and Series A-2 Preferred Stock then outstanding shall
be paid out of the assets of the Company legally  available for  distribution to
its  stockholders  (the  "Available  Assets")  an amount per share  equal to the
"Liquidation  Amount." For purposes of a  Liquidation,  the  Liquidation  Amount
shall mean the original issue price per share of the Series A-1 Preferred  Stock
and Series A-2 Preferred Stock ($2.50, as adjusted for stock splits,  dividends,
combinations  or other  recapitalization  of the Series A-1 Preferred  Stock and
Series  A-2.11Preferred  Stock)  plus all  dividends  accrued but unpaid on such
share  (whether  or  not  declared)  up to the  date  of  the  Liquidation  (the
"Liquidation  Preference").  Upon the completion of the distribution required by
this subsection 4(a), and any other distribution to any other class or series of
Senior Securities,  if assets remain in the Company, the remaining assets of the
Company  available for distribution to stockholders  shall be distributed  among
the holders of shares of any other series of preferred  stock in accordance with
their  respective  terms,  then to the holders of Common Stock pro rata based on
the  number of shares  of the  Common  Stock  actually  outstanding  and held by
holders of shares of Common Stock..

<PAGE>

(b) Priority.  If the Available  Assets are  insufficient  to pay the holders of
Series A-1 Preferred Stock and Series A-2 Preferred Stock the full amount of the
Liquidation  Amount,  the holders of Series A-1  Preferred  Stock and Series A-2
Preferred Stock, in the aggregate, will share ratably in the distribution of the
Available Assets in proportion to the respective amounts that would otherwise be
payable  in respect of the  shares  held by them upon such  distribution  if all
amounts payable on or with respect to such shares were paid in full.

(c)  Notice.  The Company  will send a written  notice of a  Liquidation  to the
holders  of record of the Series A-1  Preferred  Stock and Series A-2  Preferred
Stock,  stating a payment date, the  Liquidation  Amount and the place where the
Liquidation  Amount will be paid, using any of the following  delivery  methods:
(i) in person;  (ii) mailed by  certified or  registered  mail,  return  receipt
requested; or (iii) sent by national courier, not less than 25 days prior to the
payment date stated therein.  The notice will be addressed to each holder at its
address as shown by the records of the Company.

6.  Appraisal.  If a  majority  in  interest  of the  holders  of the Series A-1
Preferred  Stock,  or a majority  in  interest  of the holders of the Series A-2
Preferred Stock, or both, as the case may be, reasonably disagree(s) with any of
the  Board's  determinations  referred  to in Section 2,  Section 3 or Section 5
above (each, a  "Determination"),  then the Company and the majority in interest
of such  Series  A-1  Preferred  Stock  holders or Series  A-2  Preferred  Stock
Holders,   or  both,   as   applicable   (each   majority   in   interest,   the
"Representative";  together, the "Representatives") shall use good faith efforts
to mutually  agree upon the  designation  of a single  Qualified  Appraiser  (as
defined  below)  within  seven  (7)  business  days of such  event  requiring  a
Determination.  The  date of such  event  requiring  a  Determination  shall  be
referred to as the "Determination Date." If such a single Qualified Appraiser is
designated,  that  person  shall make a  Determination.  If the  Company and the
Representative(s)  do not so agree upon the  designation  of a single  Qualified
Appraiser  within such period,  then within five (5) business days following the
end  of  such  period,   each  of  the  Company,   by  written   notice  to  the
Representative(s),  and the Representative(s), by written notice to the Company,
shall  designate  a  Qualified  Appraiser  (or if any  party  fails to  select a
Qualified Appraiser within the time period specified, the person selected by the
other  party  shall  be  the  Qualified  Appraiser),  with  two  such  Qualified
Appraisers  being so  designated in total,  and the two Qualified  Appraisers so
designated  shall within ten (10)  business  days of their  designation  jointly
designate a third Qualified  Appraiser and solely such third Qualified Appraiser
so designated shall independently make a Determination. The designated Qualified
Appraiser  shall make the  Determination  not later than ten (10)  business days
following  the  Determination  Date.  The  Determination  made by the  Qualified
Appraiser shall be final,  conclusive and binding on the parties hereto. None of
the  Qualified  Appraisers  shall be  affiliated  with any of the Company or the
Representative(s) or another Qualified Appraiser. If the amount of Determination
by the Qualified  Appraiser  deviates by more than 10% from the determination by
the  Company  and is more  favorable  to the Series A-1  Preferred  Stock or the
Series A-2 Preferred  Stock, as applicable,  then the Company shall pay the fees
and expenses of the Qualified  Appraiser(s).  Otherwise,  the

<PAGE>

Representative(s) shall pay the fees and expenses of the Qualified Appraiser(s).
(By way of example,  if the Company determined that the Aggregate  Consideration
Received in non-cash  property for Additional Shares of Common Stock was $10 per
share, the Company will pay the fees and expenses of the Qualified  Appraiser(s)
only if the Determination is that the Aggregate  Consideration Received for such
property  was $11.01 or more.  For the  purposes of this  Agreement,  "Qualified
Appraiser"  shall mean an individual who is engaged on a regular basis (although
not necessarily full time) in valuing securities or arrangements similar to this
Agreement,  as the case may be, and may  include  (but shall not be limited  to)
professional business appraisers, investment bankers or accountants.

7. Dividends.
Dividends shall accrue on each  outstanding  share of Series A-1 Preferred Stock
and on each outstanding share of Series A-2 Preferred Stock at the rate equal to
5% per annum (pro rated in the first  annual  period if the  initial  applicable
Issuance Date is after the commencement of the initial quarterly payment period)
of the initial Liquidation Preference per share of Series A-1 Preferred Stock or
Series A-2 Preferred Stock, as applicable, whether or not declared by the Board.
Such  dividends  shall  accrue and, if declared,  shall be payable  quarterly in
arrears on the 30 th day of January,  April, July and October of each year (each
such date, a "Dividend  Payment  Date").  Dividends shall begin to accrue on the
Series  A-1  Preferred  Stock and on the Series  A-2  Preferred  Stock as of the
applicable  Issuance  Date,  provided  that the  dividends due in respect of the
initial  quarterly  period shall be pro rated if such Issuance Date is after the
commencement of such quarterly period. Dividends payable on shares of Series A-1
Preferred Stock and Series A-2 Preferred  Stock shall be cumulative;  therefore,
if a full or partial  dividend on the shares of Series A-1  Preferred  Stock and
Series A-2  Preferred  Stock with  respect to any quarter is not declared by the
Board, the Company shall remain obligated to pay a full dividend with respect to
that  quarter,  provided,  however,  that any  unpaid  dividends  shall not bear
interest.  At the election of the Company,  any accrued but unpaid dividends may
be paid in cash at any time.

At the election of the Company,  each dividend on the Series A-1 Preferred Stock
or the  Series  A-2  Preferred  Stock may be paid in  shares  of  Common  Stock.
Dividends paid in shares of Common Stock shall be paid in full shares only, with
a cash payment equal to the value of any fractional shares. The issuance of such
shares of Common  Stock shall be valued at the  average of the per share  Market
Price for the ten Trading Day period immediately preceding the date on which the
dividend becomes due. Each dividend paid in capital stock shall be mailed to the
holders of record of the Series A-1 Preferred Stock and the Series A-2 Preferred
Stock as their names and addresses  appear on the share  register of the Company
or at the office of the transfer  agent on the  corresponding  dividend  payment
date.  Holders of Series A-1 Preferred Stock and Series A-2 Preferred Stock will
receive  written  notification  from  the  Company  or the  transfer  agent if a
dividend is paid in kind, which  notification  will specify the number of shares
of Common Stock paid as a dividend. All holders of shares of Common Stock issued
as  dividends  shall be entitled to all of the rights and  benefits  relating to
shares  of  Common  Stock  as  set  forth  in  the  Company's   Certificate   of
Incorporation.  After  payment of  setting  aside of the

<PAGE>

payment of  dividends  described  in this  Section 7, any  additional  dividends
(other  dividends on Common Stock payable  solely in Common  Stock)  declared or
paid in any fiscal  year shall be  declared  or paid among the holders of Series
A-1  Preferred  Stock,   Series  A-2  Preferred  Stock  and  Common  Stock  then
outstanding  in proportion to the nearest whole number of shares of Common Stock
which would be held by each such  holder if all holders of Series A-1  Preferred
Stock and  Series  A-2  Preferred  Stock were  converted  at the  then-effective
Conversion Rate.

8. Voting Rights.
Each holder of outstanding  shares of Series A-1 Preferred  Stock and Series A-2
Preferred  Stock is entitled to the number of votes equal to the number of whole
shares of Common  Stock into which the shares of Series A-1  Preferred  Stock or
Series A-2 Preferred Stock held of record by such holder are convertible at each
meeting of  stockholders  of the Company (and written actions of stockholders in
lieu  of  meetings)  with  respect  to any  and  all  matters  presented  to the
stockholders  of the  Company  for  their  action  or  consideration.  Except as
provided by law and by the provisions of Section 9 below,  the holders of shares
of Series A-1 Preferred Stock and Series A-2 Preferred Stock shall vote together
with the holders of Common Stock as a single class.  Notwithstanding  the above,
the Company shall  provide each holder of Series A-1 Preferred  Stock and Series
A-2  Preferred  Stock  with prior  written  notification  of any  meeting of the
stockholders  (and  copies  of proxy  materials  and other  information  sent to
stockholders). In the event of any undertaking by the Company of a record of its
stockholders  for the purpose of  determining  stockholders  who are entitled to
receive  payment of any dividend or other  distribution,  any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining  stockholders  who
are entitled to vote in connection  with any proposed sale,  lease or conveyance
of all or  substantially  all of the  assets  of the  Company,  or any  proposed
liquidation,  dissolution or winding up of the Company, the Company shall mail a
notice to each holder, at least ten (10) days prior to the record date specified
therein (or twenty (20) days prior to the  consummation  of any  transaction  or
event,  whichever  is  earlier),  of the date on which any such  record is to be
taken for the purpose of such dividend,  distribution, right or other event, and
a  brief  statement  regarding  the  amount  and  character  of  such  dividend,
distribution,  right or other  event to the extent  known at such  time.  To the
extent that under the Delaware  General  Corporation Law ("DGCL") holders of the
Series A-1 Preferred  Stock and Series A-2 Preferred  Stock are entitled to vote
on a matter with holders of Common  Stock,  voting  together as one class,  each
share of Series A-1 Preferred Stock and Series A-2 Preferred Stock shall entitle
the  holder  thereof to cast that a number of votes per share as is equal to the
number of shares of Common  Stock  into which it is then  convertible  using the
record date for determining the  stockholders of the Company eligible to vote on
such  matters  as the  date as of which  the  Conversion  Price  is  calculated.
Whenever  the holders

<PAGE>

of the Series A-1  Preferred  Stock and the holders of the Series A-2  Preferred
Stock are required  under the DGCL or this  Certificate of  Designations  or the
Company's  Certificate  of  Incorporation  to vote  separately  from the holders
Common Stock,  rather than voting  together with the holders of the Common Stock
as one class,  then, except as set forth in the next succeeding  paragraph,  the
holders  of the  Series A-1  Preferred  Stock and the  holders of the Series A-2
Preferred Stock shall vote together as a single class,  and the affirmative vote
of a majority of the shares of the holders of the Series A-1 Preferred Stock and
the Series A-2 Preferred  Stock,  in the  aggregate,  represented at a duly held
meeting at which a quorum is present or by written  consent of a majority of the
shares of Series  A-1  Preferred  Stock and Series A-2  Preferred  Stock,  taken
together in the aggregate,  shall  constitute the approval of such action by the
holders  of the  Series A-1  Preferred  Stock and the  holders of the Series A-2
Preferred Stock.

However,  whenever the holders of the Series A-1 Preferred Stock and the holders
of the  Series  A-2  Preferred  Stock  are  required  under  the  DGCL  or  this
Certificate of Designations  or the Company's  Certificate of  Incorporation  to
vote  separately  from the  holders  of the Common  Stock,  rather  than  voting
together with the holders of the Common Stock as one class,  and, under the DGCL
or  this   Certificate  of   Designations   or  the  Company's   Certificate  of
Incorporation,  the holders of the Series A-1 Preferred Stock and the holders of
the  Series A-2  Preferred  Stock are  required  to vote as  separate  series or
classes, and not jointly,  then the affirmative vote of a majority of the shares
of the Series A-1 Preferred  Stock, or the affirmative vote of a majority of the
shares of the Series A-2 Preferred Stock, as applicable,  voting separately as a
class,  represented  at a duly held  meeting  at which a quorum is present or by
written  consent of a majority of the shares of Series A-1 Preferred  Stock or a
majority  of the shares of Series A-2  Preferred  Stock,  as  applicable,  shall
constitute  the  approval  of such  action  by the  holders  of the  Series  A-1
Preferred Stock or the holders of the Series A-2 Preferred Stock, as applicable.
Holders of the Series A-1 Preferred  Stock and Series A-2 Preferred  Stock shall
be entitled to written notice of all  stockholder  meetings or written  consents
(and copies of proxy materials and other information sent to stockholders)  with
respect to which they would be entitled by vote,  which notice would be provided
pursuant to the Company's bylaws and the DGCL).

9. Protective Provisions.
(a) So long as the shares of Series A-1 Preferred  Stock or Series A-2 Preferred
Stock are outstanding,  the Company shall not, take, approve or otherwise ratify
any of the following  actions  without the consent of at least a majority of the
aggregate of the then  outstanding  shares of Series A-1 Preferred Stock and the
Series A-2 Preferred  Stock,  voting  together and not as separate  series:

(i)  authorize,  issue or agree to authorize or issue any new class or series of
Parity  Securities  or  securities  or  rights of any kind  convertible  into or
exercisable or exchangeable for any such Parity  Securities,  or offer,  sell or
issue any Parity Securities or securities or rights of any kind convertible into
or exercisable or exchangeable for any such Parity Securities;

(ii) purchase,  repurchase or redeem shares of (i) Common Stock, (ii) securities
or rights of any kind convertible into or exercisable or exchangeable for Common
Stock or

(iii) other  securities of the Company,  (except in the case of a termination of
an employee, at which the Company may repurchase or redeem such shares of Common
Stock at cost and  pursuant to any  agreement  under which such shares of Common
Stock were issued); (iii) effect any merger, combination,  reorganization of the
Company,  or any sale or license of all or  substantially  all of the  Company's
assets,  in

<PAGE>

either  case  other  than a  merger,  combination  or  reorganization  or  other
transaction (or series of such  transactions) in which 50% or more of the voting
power of the Company is disposed of or in which the  stockholders of the Company
immediately prior to such merger,  reorganization or consolidation own less than
50% of the  Company's  voting power  immediately  after;  or (iv) declare or pay
dividends  or any other  distribution  on  shares  of Common  Stock or any other
capital stock of the Company except as  contemplated  herein;  or (b) So long as
the  shares of Series A-1  Preferred  Stock or Series  A-2  Preferred  Stock are
outstanding, the Company shall not, take, approve or otherwise ratify any of the
following  actions  without  the  consent  of at  least a  majority  of the then
outstanding  shares of Series A-1 Preferred Stock,  voting as a separate series,
and a majority of the then  outstanding  shares of Series A-2  Preferred  Stock,
voting as a separate series:

(i)  authorize,  issue or agree to authorize or issue any new class or series of
Senior  Securities  or  securities  or  rights of any kind  convertible  into or
exercisable or exchangeable for any such Senior  Securities,  or offer,  sell or
issue any Senior Securities or securities or rights of any kind convertible into
or exercisable or exchangeable for any such Senior Securities; (ii) increase the
authorized  number  of  shares  of Series  A-1  Preferred  Stock or  Series  A-2
Preferred  Stock;  or  (iii)  amend  the  Certificate  of  Incorporation  or the
Certificate  of  Designations  or Bylaws of the Company,  or alter or change the
rights,  preferences  or privileges of the Series A-1 Preferred  Stock or Series
A-2  Preferred  Stock or any Parity  Securities  or Senior  Securities or Junior
Securities, by merger,  consolidation or otherwise, in each case so as to affect
adversely  the rights,  preferences  or  privileges  of the Series A-1 Preferred
Stock or Series A-2 Preferred Stock.

10. Preemptive Right.
(a) The Company shall not issue or sell any shares of Common Stock or securities
convertible  into or exercisable or exchangeable for shares of Common Stock (the
securities  issued in such  transactions  being referred to as the "Newly Issued
Securities"), other than any such issuance or sale (i) which is made pursuant to
a public offering pursuant to a registration statement declared effective by the
Securities  and  Exchange  Commission,  (ii)  pursuant to a stock option plan or
similar plan or  agreement  approved by the Board,  (iii) in  exchange,  at fair
market value,  for assets or equipment to be used by the Company in the ordinary
course of business,  or (iv)  pursuant to any of the purchase  agreements or the
documents executed, filed or delivered in connection therewith,  unless prior to
the issuance or sale of such Newly Issued  Securities  each holder of Series A-1
Preferred  Stock and  Series  A-2  Preferred  Stock  shall  have been  given the
opportunity  (such  opportunity  being  herein  referred  to as the  "Preemptive
Right")  to  purchase  (on the same terms as such Newly  Issued  Securities  are
proposed to be sold) the same proportion of such Newly Issued  Securities  being
issued or offered  for sale by the Company as (x) the number of shares of Common
Stock  (calculated  solely on account of outstanding  Series A-1 Preferred Stock
and Series A-2.

Preferred  Stock  on an as  converted  basis)  held  by such  holder  on the day
preceding the date of the Preemptive  Notice (as defined below) bears to (y) the
total number of shares of Common Stock (calculated on a fully diluted basis with
respect to the Series A-1 Preferred

<PAGE>

Stock and Series A-2  Preferred  Stock and any other  Common  Stock  equivalents
which  are "in the  money")  outstanding  on the day  preceding  the date of the
Preemptive Notice (as defined below). (b) At least thirty (30) days prior to the
issuance by the Company of any Newly Issued  Securities,  the Company shall give
written  notice thereof (the  "Preemptive  Notice") to each holder of Series A-1
Preferred  Stock and Series A-2 Preferred  Stock.  The  Preemptive  Notice shall
specify (i) the name and  address of the bona fide  investor to whom the Company
proposes  to issue or sell Newly  Issued  Securities,  (ii) the total  amount of
capital to be raised by the Company  pursuant  to the  issuance or sale of Newly
Issued Securities,  (iii) the number of such Newly Issued Securities proposed to
be issued or sold, (iv) the price and other terms of their proposed  issuance or
sale,  (v) the  number of such Newly  Issued  Securities  which  such  holder is
entitled to purchase  (determined as provided in subsection (a) above), and (vi)
the period  during  which such  holder may elect to purchase  such Newly  Issued
Securities,  which period  shall extend for at least thirty (30) days  following
the receipt by such holder of the Preemptive Notice (the "Preemptive  Acceptance
Period").  Each  holder of Series A-1  Preferred  Stock or Series A-2  Preferred
Stock who desires to purchase Newly Issued  Securities  shall notify the Company
within the Preemptive Acceptance Period of the number of Newly Issued Securities
he wishes to purchase, as well as the number, if any, of additional Newly Issued
Securities such holder would be willing to purchase in the event that all of the
Newly Issued  Securities  subject to the Preemptive Right are not subscribed for
by the other  holders of Series  A-1  Preferred  Stock and Series A-2  Preferred
Stock.

(c) After the conclusion of the Preemptive Acceptance Period, any Newly Issued
Securities  which none of the holders elect to purchase in  accordance  with the
provisions  of this Section 10, may be sold by the  Company,  within a period of
four (4) months after the expiration of the Preemptive Acceptance Period, to any
other  person or  persons  at not less than the price and upon  other  terms and
conditions  not less  favorable  to the  Company  than  those  set  forth in the
Preemptive Notice.

(d) The term "Newly Issued  Securities" shall not include:

(i)  Shares of Common  Stock  issued  upon  conversion  of shares of Series  A-1
Preferred  Stock or Series A-2  Preferred  Stock;  (ii)  Shares of Common  Stock
(subject  to  appropriate  adjustment  for  any  stock  dividend,  stock  split,
combination or other similar recapitalization affecting such shares) issuable or
issued to the Company's employees,  directors or consultants pursuant to a stock
option plan or  restricted  stock plan  approved by the Board;  (iii)  Shares of
Common  Stock issued or issuable  pursuant to  subsection  3(d);  (iv) Shares of
Common Stock or Preferred  Stock issuable upon exercise of options,  warrants or
upon conversion of convertible  securities or other rights outstanding as of the
A-1  Issuance  Date;  (v) Shares of capital  stock or  options  or  warrants  to
purchase  capital  stock,  issued  to  financial   institutions  or  lessors  in
connections with commercial credit agreements,  equipment  financings or similar
transactions  or to other  corporations,  persons or entities in connection with
acquisitions,   mergers   or   similar   business   combinations,    partnership
arrangements, strategic alliances, licensing arrangements or similar non-capital
raising  transactions  approved by the Board; (vi) Shares of Common Stock issued
in connection with any stock split,  stock dividend or  recapitalization  of the
Company;  and (vii)  Securities  that are issued by the  Company  pursuant  to a
registration statement filed under the Securities Act.

<PAGE>

11. Mandatory Redemption
(a) On the date which is five (5) years after the A-1  Issuance  Date or the A-2
Issuance Date, as applicable (such fifth anniversary,  the "Mandatory Redemption
Date"),  the Company shall redeem each then outstanding  share of the Series A-1
Preferred  Stock and Series A-2 Preferred Stock for an amount per share equal to
the  applicable  Liquidation  Amount.  (b) Upon a Change of  Control  Redemption
Event,  the Company shall redeem each then  outstanding  share of the Series A-1
Preferred  Stock and Series A-2 Preferred Stock for an amount per share equal to
101% of the  Liquidation  Amount.  For purposes of this Section 11, a "Change of
Control  Redemption  Event"  shall be  deemed  to have  occurred  upon a merger,
combination  or  reorganization  of the  Company  in which  more than 50% of the
voting power of the Company is disposed of, or in which the  stockholders of the
Company  immediately  prior to such merger,  reorganization or consolidation own
less than 50% of the  Company's  voting  power  immediately  after,  unless  (i)
waived,  with respect to shares of Series A-1 Preferred  Stock, by a majority in
interest of the holders of the Series A-1 Preferred Stock, or (ii) waived,  with
respect to shares of Series A-2  Preferred  Stock,  by a majority in interest of
the holders of the Series A-2 Preferred  Stock. (b) From and after the latest to
occur of (i) the  Mandatory  Redemption  Date or a Change of Control  Redemption
Event,  and (ii) the date  upon  which  the  Company  irrevocably  deposits  the
aggregate  Liquidation  Amount or 101% of the aggregate  Liquidation  Amount, as
applicable, in respect of the shares of Series A-1 Preferred Stock or Series A-2
Preferred  Stock being  redeemed in an account  for  disbursement  to holders of
shares  of  Series  A-1  Preferred  Stock or  Series  A-2  Preferred  Stock,  as
applicable,  upon receipt of certificates evidencing their respective shares and
other customary documentation for such redemption,  no holder of such Series A-1
Preferred  Stock or Series A-2 Preferred  Stock shall have any rights in respect
of such shares other than to receive the applicable Liquidation Amount per share
in respect of such holder's shares.

12. No Reissuance of Series A-1 Preferred Stock or Series A-2 Preferred Stock.
No share or shares of Series A-1 Preferred  Stock or Series A-2 Preferred  Stock
acquired  by the  Company  by  reason of  redemption,  purchase,  conversion  or
otherwise  shall be reissued,  and all such shares of Series A-1 Preferred Stock
and Series A-2 Preferred  Stock shall be cancelled,  retired and eliminated from
the  shares of Series A-1  Preferred  Stock or Series A-2  Preferred  Stock,  as
applicable,  which the Company shall be authorized to issue.  Any such shares of
Series A-1 Preferred Stock or Series A-2 Preferred Stock acquired by the Company
shall have the status of  authorized  and  unissued  shares of  Preferred  Stock
issuable in  undesignated  Series and may be  redesignated  and  reissued in any
series other than as Series A-1 Preferred Stock or Series A-2 Preferred Stock.

<PAGE>

13. Registered Holders.
A holder of Series A-1 Preferred Stock or Series A-2 Preferred Stock  registered
on the  Company's  stock  transfer  books as the owner of  shares of Series  A-1
Preferred Stock or Series A-2 Preferred  Stock, as applicable,  shall be treated
as the owner of such  shares  of all  purposes.  All  notices  and all  payments
required  to be mailed to a holder of shares of Series  A-1  Preferred  Stock or
Series A-2 Preferred Stock shall be mailed to such holder's  registered  address
on the Company's stock transfer books, and all dividends and redemption payments
to a holder of Series A-1  Preferred  Stock or Series A-2  Preferred  Stock made
hereunder  shall be  deemed  to be paid in  compliance  hereof  on the date such
payments are deposited  into the mail  addressed to such holder at such holder's
registered address on the Company's stock transfer books.

14. Certain Remedies.
Any  registered  holder of shares of Series  A-1  Preferred  Stock or Series A-2
Preferred  Stock shall be entitled to an  injunction or  injunctions  to prevent
breaches of the provisions of this  Certificate of  Designations  and to enforce
specifically the terms and provisions of this Certificate of Designations in any
court of the United States or any state thereof having jurisdiction,  this being
in addition  to any other  remedy to which such holder may be entitled at law or
in equity.

15. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of reference
only and shall not affect the interpretation of any of the provisions hereof.

16. Severability of Provisions.
If any right,  preference or  limitation  of the Series A-1  Preferred  Stock or
Series A-2
Preferred  Stock  set  forth  herein  (as may be  amended)  from time to time is
invalid, unlawful or incapable of being enforced by reason of any rule of law or
public  policy,  such  right,  preference  or  limitation  (including,   without
limitation, the dividend rate) shall be enforced to the maximum extent permitted
by law and all other rights, preferences and limitations set forth herein (as so
amended)   which  can  be  given  effect   without  the  invalid,   unlawful  or
unenforceable  right,  preference or limitation herein set forth shall be deemed
dependent  upon any  other  such  right,  preference  or  limitation  unless  so
expressed herein.

[Remainder of Page Intentionally Left Blank.].

IN WITNESS  WHEREOF,  the undersigned,  being the President of the Company,  has
executed this Certificate of Designations as of July 18, 2003.

AUTO DATA NETWORK, INC.

By:

Name: Christopher R Glover

                                     Title:

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