Document:

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                                                                     EXHIBIT 4.1

                       Preferred STOCK PURCHASE AGREEMENT

     PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 16,
2002, among Wireless Facilities, Inc., a Delaware corporation (the "Company")
and each of the purchasers named on Schedule 1 hereto (each a "Purchaser" and
collectively, the "Purchasers").

                                R E C I T A L S:

     A. WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, an aggregate of ninety
thousand (90,000) shares of a newly designated class of the Company's preferred
stock, par value U.S.$0.001 per share ("Preferred Stock"), entitled Series B
Preferred Stock (the "Series B Preferred Stock"), having an aggregate purchase
price of forty-five million dollars (U.S.$45,000,000); and

     B. WHEREAS, the Company intends to file a certificate of designations with
the Secretary of State of the State of Delaware setting forth the rights,
preferences and privileges of the Series B Preferred Stock in the form attached
hereto as Exhibit A (the "Certificate of Designations").

                               A G R E E M E N T:

     In consideration of the foregoing premises and the mutual covenants
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:

Section 1. PURCHASE AND SALE OF PREFERRED STOCK

     1.1 Purchase and Sale.

          (a) Purchase and Sale. No later than May 30, 2002 (the "Closing
Date"), each Purchaser shall pay the amount specified next to its name on
Schedule 1 hereto the Company in immediately available funds by wire transfer to
an account at a bank named by the Company, subject to satisfaction of the
conditions in Section 4. At the Closing, subject to the terms and conditions
hereof, the Company shall issue and sell, at five hundred dollars (US$500.00)
per share, to the Purchasers the respective number of shares of Series B
Preferred Stock set forth opposite each of the Purchasers' names on Schedule 1
hereto (collectively, the "Offered Securities"), subject to satisfaction of the
conditions in Section 5.

          (b) Time and Place of Closing. The closing of the purchase and sale of
the Offered Securities (the "Closing") shall occur on the Closing Date. The
Closing shall be held at the offices of Cooley Godward LLP, 4401 Eastgate Mall,
San Diego, California 92121 (by means of facsimile or overnight mail).

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     1.2 Closing Delivery. On the Closing Date, subject to the terms and
conditions hereof:

          (a) Each Purchaser, severally and not jointly, shall pay the
applicable amount specified on Schedule 1 by wire transfer of immediately
available U.S. funds to an account designated in writing by the Company; and

          (b) The Company shall execute and deliver to each Purchaser: (i) a
certificate representing the Offered Securities purchased by such Purchaser, and
(ii) a customary certificate from the secretary of the Company satisfactory to
such Purchaser.

Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
     and warrants as of the date hereof to each Purchaser that:

     2.1 The Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware, with requisite
corporate power and authority to own its properties and conduct its business as
presently conducted. The Company is duly qualified to do business as a foreign
corporation in good standing in all other U.S. jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries, taken
as a whole (hereinafter, a "Material Adverse Effect"). The Company has furnished
representatives of the Purchasers with correct and complete copies of the
charter and by-laws of the Company, both as amended and currently in effect.

     2.2 Each subsidiary of the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own its properties and
conduct its business as presently conducted. Each subsidiary of the Company is
duly qualified to do business as a foreign corporation in good standing in all
other U.S. jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not have a Material Adverse Effect; all of the issued and
outstanding capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable and is owned
of record by the Company.

     2.3 As of March 31, 2002, the authorized capital stock of the Company
consists of: (i) one hundred ninety-five million (195,000,000) shares of Common
Stock and (ii) five million (5,000,000) shares of Preferred Stock. As of May 15,
2002, forty-seven million six hundred ninety-eight thousand one hundred
thirty-eight (47,698,138) shares of Common Stock have been issued and are
outstanding and sixty-three thousand six hundred thirty-seven (63,637) shares of
Preferred Stock are issued and outstanding. As of May 15, 2002, thirty-one
thousand (31,000) shares of Common Stock are held in the Company's treasury. As
reflected in the Company's records as of May 15, 2002, other than with respect
to an aggregate of twenty-one million nine hundred forty-eight thousand three
hundred eighty-two (21,948,382) shares of Common Stock reserved for issuance
under the Company's equity incentive plans, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal),

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proxy or stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its equity securities.

     2.4 The Offered Securities, and the shares of Common Stock issuable upon
conversion of the Offered Securities (the "Conversion Shares"), and all
outstanding shares of capital stock of the Company have been duly authorized;
all outstanding shares of capital stock of the Company are, and, when the
Offered Securities have been delivered and paid for in accordance with this
Agreement on the Closing Date, and, when the Conversion Shares have been
delivered in accordance with the terms of the Certificate of Designations, such
Offered Securities and Conversion Shares will have been, validly issued, fully
paid and nonassessable. None of the Offered Securities or Conversion Shares are
subject to any preemptive right or any right of refusal.

     2.5 No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the consummation of the
transactions contemplated by this Agreement in connection with the issuance and
sale of the Offered Securities or the Conversion Shares by the Company, except
for the filing of a Form D with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"), and
such as may be required under state securities laws.

     2.6 This Agreement has been duly authorized, executed and delivered by the
Company. All corporate action on the part of the Company and its stockholders,
directors and officers necessary for the authorization, execution and delivery
of this Agreement, the performance of all the Company's obligations hereunder
and for the authorization, issuance or reservation for issuance, sale and
delivery of the Offered Securities or the Conversion Shares has been taken. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies, and (iii) the limitations imposed by applicable
federal or state securities laws on the indemnification provisions contained in
this Agreement.

     2.7 The execution, delivery and performance of this Agreement, and the
issuance and sale of the Offered Securities and the Conversion Shares will not
result in a breach or violation of (i) any of the terms and provisions of the
charter or bylaws of the Company or any of its subsidiaries, nor (ii) any of the
terms and provisions of, or constitute a default under any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the Company
or any such subsidiary is a party or by which the Company or any such subsidiary
is bound or to which any of the properties of the Company or any such subsidiary
is subject (except where such breaches, violations or defaults individually or
in the aggregate would not have a Material Adverse Effect). The Company has full
power and authority to authorize, issue and sell the Offered Securities or the
Conversion Shares as contemplated by this Agreement.

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     2.8 There have been no investment bankers, brokers or finders used by the
Company or its affiliates in connection with the transactions contemplated by
this Agreement and no persons or entities are entitled to a fee or compensation
in respect thereof.

     2.9 The Company and its subsidiaries have good and marketable title to all
real properties and all other properties and assets owned by them that are
material to the operation of the Company's business, in each case free from
liens, encumbrances and defects that would materially affect the value thereof
or materially interfere with the use made or to be made thereof by them; and the
Company and its subsidiaries hold any leased real or personal property that are
material to the operation of the Company's business under valid and enforceable
leases with no exceptions that would materially interfere with the use made or
to be made thereof by them.

     2.10 The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.

     2.11 There are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties or any director, officer or employee (related to any such person's
services as a director, officer or employee of the Company) that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Offered Securities and, to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated. The Company has not initiated and
has no plan to initiate any action, suit or proceeding that, if decided
adversely to the Company, would, individually or in the aggregate, result in a
Material Adverse Effect.

     2.12 The Company has made available to representatives of the Purchasers
all registration statements, proxy statements and other statements, reports,
schedules, forms and other documents filed by the Company with SEC since January
1, 2002, including copies of all the exhibits referenced therein (the "SEC
Documents"). All statements, reports, schedules, forms and other documents
required to have been filed by the Company with the SEC since January 1, 2002
have been so filed. As of their respective dates (or, if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amendment or superseding filing): (i) each of the SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be; and (ii) none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

     2.13 The financial statements included in the SEC Documents present fairly
the financial position of the Company and its consolidated subsidiaries as of
the dates shown and

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their results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis (except as may be indicated in the notes to such financial statements or,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and
except that the unaudited financial statements may not have contained footnotes
and were subject to normal and recurring year-end adjustments which were not, or
are not reasonably expected to be, individually or in the aggregate, material in
amount), complied as to form in all material respects with the published rules
and regulations of the SEC applicable thereto.

     2.14 The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, sufficient legal rights to all material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable propriety or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing that, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.

     2.15 Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act) (an "Affiliate") of the Company has,
directly, or through any agent, (a) sold, offered for sale, solicited any offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sales of the Offered
Securities in a manner that would require the registration under the Securities
Act of the Offered Securities; or (b) offered, solicited offers to buy or sold
the Offered Securities in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act; and the Company will not engage in any of the actions
described in subsections (a) and (b) of this paragraph.

     2.16 Subject to the accuracy of each of the Purchaser's representations
herein, it is not necessary in connection with the offer, sale and delivery of
the Offered Securities to the several Purchasers in the manner contemplated by
this Agreement to register the Offered Securities under the Securities Act.

     2.17 The issuance of the Offered Securities and the Conversion Shares,
neither individually nor in the aggregate, constitute an anti-dilution event for
any existing securityholders of the Company, other than the holders of the
Company's Series A Preferred Stock who will be entitled to a full-ratchet
anti-dilution adjustment, pursuant to which such securityholders would be
entitled to additional securities or a reduction in the applicable conversion
price or exercise price of any securities due to any issuance proposed to be
conducted hereunder.

     2.18 The information contained in this Agreement and the SEC documents with
respect to the business, operations, assets, results of operations and financial
condition of the Company, and the transactions contemplated by this Agreement,
are true and complete in all material respects and do not omit to state any
material fact or facts necessary in order to make

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the statements therein, in light of the circumstances under which they were
made, not misleading.

Section 3. Representation and Warranties of the Purchasers. Each Purchaser
hereby, severally and not jointly, represents and warrants to the Company, as of
the date hereof, as follows:

     3.1 If such Purchaser is an entity, such Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite limited partnership, or other power and
authority to consummate the transactions contemplated hereby

     3.2 Such Purchaser has full limited partnership, or other power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to (a) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, (b) rules of law governing specific performance,
injunctive relief and other equitable remedies, and (c) the limitations imposed
by applicable federal or state securities laws on the indemnification provisions
contained in this Agreement.

     3.3 The execution, delivery and performance of this Agreement, and the
purchase and acceptance of the Offered Securities by such Purchaser will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over such Purchaser or any subsidiary of such Purchaser or any of
their properties, or any material agreement or instrument to which such
Purchaser or any such subsidiary is a party or by which such Purchaser or any
such subsidiary is bound or to which any of the properties of such Purchaser or
any such subsidiary is subject, or the charter, by-laws, or other governing
documents of such Purchaser or any such subsidiary (except where any such
breaches, violations or defaults individually or in the aggregate would not have
a material adverse effect on Purchaser's ability to perform this Agreement).

     3.4 Investment Representations.

          (a) Such Purchaser is sophisticated in transactions of this type and
capable of evaluating the merits and risks of the transactions described herein
and has the capacity to protect its own interests. Such Purchaser has not been
formed solely for the purpose of entering into the transactions described herein
and is acquiring the Offered Securities for investment for its own account, not
as a nominee or agent, and not with the view to, or for resale, distribution
thereof, in whole or in part.

          (b) Such Purchaser has not and does not intend to enter into any
contract, undertaking, agreement or arrangement with any person or entity to
sell, transfer or pledge the Offered Securities, other than to an affiliate,
partner or former partner of such Purchaser in compliance with the Securities
Act.

          (c) Such Purchaser acknowledges its understanding that the Company
intends to sell the Offered Securities pursuant to a private placement exempt
from registration under the

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Securities Act. In furtherance thereof, such Purchaser represents and warrants
that it is an "accredited investor" as that term is defined in Rule 501 of
Regulation D under the Securities Act, has the financial ability to bear the
economic risk of its investment, has adequate means for providing for its
current needs and personal contingencies and has no need for liquidity with
respect to its investment in the Company.

          (d) Such Purchaser agrees that it shall not sell or otherwise transfer
any of the Offered Securities without registration under the Securities Act,
pursuant to Rule 144 (or any successor rule) under the Securities Act or
pursuant to an opinion of counsel reasonably satisfactory to the Company that no
violation of the Securities Act will be involved in such transfer. Such
Purchaser fully understands that none of the Offered Securities have been
registered under the Securities Act or under the securities laws of any
applicable state or other jurisdiction and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless subsequently registered under
the Securities Act and under the applicable securities laws of such states or
jurisdictions or an exemption from such registration is available. Such
Purchaser understands that the Company is under no obligation to register the
Offered Securities on its behalf with the exception of certain registration
rights set forth herein. Such Purchaser understands the lack of liquidity and
restrictions on transfer of the Offered Securities and that this investment is
suitable only for a person or entity of adequate financial means that has no
need for liquidity of this investment and that can afford a total loss of its
investment.

     3.5 There is no legal, administrative, arbitration or other action or
proceeding or governmental investigation pending, or to the knowledge of such
Purchaser threatened, against such Purchaser that challenges the validity or
performance of this Agreement or which, if successful, could hinder or prevent
such Purchaser from performing its obligations hereunder.

     3.6 There have been no investment bankers, brokers or finders used by such
Purchaser or its affiliates in connection with the transactions contemplated by
this Agreement and no persons or entities are entitled to a fee or compensation
in respect thereof.

Section 4. CONDITIONS OF THE OBLIGATIONS OF THE PURCHASERS. The several
obligations of each Purchaser to purchase and pay for the Offered Securities on
the Closing Date will be subject to the satisfaction, or waiver by each
Purchaser, of each of the conditions below:

     4.1 The representations and warranties of the Company herein must be
correct and complete on the Closing Date and the Company must have performed all
of its obligations hereunder required to be performed prior to the Closing Date.

     4.2 The Company shall have filed the Certificate of Designations.

     4.3 Each Purchaser must have received a customary opinion, dated the
Closing Date, from Cooley Godward LLP, counsel for the Company, which is
reasonably acceptable to its counsel.

     4.4 Each Purchaser must have received a certificate, dated the Closing
Date, of an officer of the Company in which such officer shall state that: the
representations and warranties of the Company in Section 2 of this Agreement are
correct; the Company has complied with all

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agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and there has been no material and
adverse change in the business of the Company since the date of this Agreement.

     4.5 The business, assets, financial condition and operations of the Company
shall be substantially as represented to the Purchasers and no change shall have
occurred that, in the reasonable good faith judgment of the Purchasers, is or
could have a Material Adverse Effect, provided, however, that no change
constituting or related to (i) the economy or financial markets of the United
States of America or any other region, (ii) any change, effect or development
that is primarily caused by conditions generally effecting the industry in which
the Company conducts its business, (iii) any change that is primarily caused by
the announcement or pendency of this Agreement or the transactions contemplated
hereby or (iv) any generally applicable change in law, rule or regulation, shall
be deemed to be or have a Material Adverse Effect for the purposes of this
Section.

     4.6 Satisfactory completion of legal due diligence by the Purchasers.

     4.7 The Company and Meritech Capital Partners II L.P. ("Meritech") shall
have entered into an agreement providing for Board of Directors observing rights
for Meritech, in the form attached hereto as Exhibit B for so long as 50% of the
Offered Securities purchased by Meritech and its affiliates pursuant hereto
remain outstanding.

Section 5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to sell the Offered Securities on the Closing Date to a Purchaser will
be subject to the satisfaction, or waiver by the Company, of each of the
conditions below:

     5.1 The representations and warranties of such Purchaser herein must be
correct and complete on the Closing Date and such Purchaser must have performed
all of its obligations hereunder required to be performed prior to the Closing
Date.

     5.2 Satisfaction of any notice period required by NASDAQ, and receipt of
any required clearances from NASDAQ.

     5.3 The holders of a majority of the outstanding shares of the Company's
Series A Preferred Stock shall have approved the authorization and issuance of
the Series B Preferred Stock.

Section 6. REGISTRATION OF THE REGISTRABLE SECURITIES; COMPLIANCE WITH THE
SECURITIES ACT.

     6.1 Registration Procedures. The Company is obligated to do the following:

          (a) On the date that is 17 months after the Closing Date, subject to
delivery by the Purchasers of information statements reasonably satisfactory to
the Company regarding the Purchasers' addresses and holdings of capital stock of
the Company, the Company shall prepare and file with the SEC one or more
registration statements in order to register with the SEC the resale by the
Purchasers, from time to time, of the Conversion Shares (which, along with only
Common Stock issued as (or issuable upon the conversion of exercise of any
warrant, right or

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other security that is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Offered Securities or the
Conversion Shares, are sometimes referred to herein as the "Registrable
Securities") through NASDAQ or the facilities of any national securities
exchange on which the Company's Common Stock is then traded, or in privately
negotiated transactions. The Company shall use its best efforts to cause such
registration statement to be declared effective as soon thereafter as reasonably
possible. The Company shall promptly notify the Purchasers of the effectiveness
of such registration statement.

          (b) The Company shall prepare and file with the SEC (i) such
amendments and supplements to any registration statement and the prospectus used
in connection therewith, and (ii) such other filings required by the SEC, in
each case as may be necessary to keep the registration statement continuously
effective and not misleading until the earlier of (A) the date that the
Purchasers have completed the distribution related to the Registrable
Securities, or (B) such time that all Registrable Securities then held by the
Purchasers can be sold within a given three (3) month period without compliance
with the registration requirements of the Securities Act pursuant to Rule 144
under the Securities Act; provided, however, that at any time, upon written
notice to the Purchasers and for a period not to exceed fifteen (15) days
thereafter (the "Suspension Period"), the Company may delay the filing or
effectiveness of any registration statement or suspend the use or effectiveness
of any registration statement (and the Purchasers hereby agree not to offer or
sell any Registrable Securities pursuant to such registration statement during
the Suspension Period) if the Company reasonably believes that the Company may,
in the absence of such delay or suspension hereunder, be required under state or
federal securities laws to disclose any corporate development the disclosure of
which could reasonably be expected to have an adverse effect upon the Company,
its stockholders, a potentially significant transaction or event involving the
Company, or any negotiations, discussions, or proposals directly relating
thereto. The Company may extend the Suspension Period for an additional
consecutive fifteen (15) days upon written notice to the Purchasers. The Company
agrees to use its commercially reasonable best efforts to insure that the
Suspension Period is kept to a minimum number of days. If so directed by the
Company, the Purchasers shall use their best efforts to deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
the Purchasers' possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.

          (c) Furnish to the Purchasers such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them, unless
the Company is already subject to service in such jurisdiction and except as
required by the Securities Act.

          (d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Purchasers;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.

          (e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing

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underwriter(s) of such offering. Each Purchaser participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.

          (f) Notify each Purchaser whose Registrable Securities are covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company shall promptly amend or supplement such prospectus in
order to cause such prospectus not to include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing.

          (g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter, dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.

          (h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on NASDAQ and each other securities exchange on which
similar securities issued by the Company are then listed.

     6.2 Transfer of Securities After Registration. Each Purchaser, severally
and not jointly, agrees that it will not effect any disposition of the
Registrable Securities that would constitute a sale within the meaning of the
Securities Act, unless:

          (a) pursuant to a registration statement then in effect covering such
disposition, if such disposition is made in accordance with such; or

          (b) the Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a reasonably detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, or
other evidence, reasonably satisfactory to the Company, that such disposition
will not require registration of such Registrable Securities under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to and in compliance with Rule 144, and
will not require (i) that such holder furnish the Company with a reasonably
detailed statement of the circumstances of the proposed disposition or (ii) an
opinion of counsel except in unusual circumstances.

          (c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by a Purchaser

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(A) that is a partnership to its partners or former partners in accordance with
partnership interests, (B) that is a limited liability company to its members or
former members in accordance with their interest in the limited liability
company, (C) that is a corporation to its majority owned subsidiaries or
affiliates or (D) that is an individual or a trustee of a trust to the
Purchaser's family members, any trust for the benefit of such Purchaser or his
or her family members, or an entity whose equity owners consist solely of the
Purchaser and his or her family members; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if such transferee were an original Purchaser hereunder.

     6.3 Legends. Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
     OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
     UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
     OTHER WRITTEN EVIDENCE IN THE FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
     OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
     IS IN COMPLIANCE THEREWITH.

     6.4 Expenses of Registration. Except as specifically provided herein, all
expenses incurred by the Company in complying with Section 6 hereof, including,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and expenses of one counsel to the
Purchasers, blue sky fees and expenses, reasonable fees and disbursements of one
counsel for the Purchasers, fees and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company) (collectively, the "Registration Expenses") shall be borne by the
Company. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registrations hereunder shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
shares so sold.

     6.5 Delay of Registration; Furnishing Information.

          (a) The Purchasers shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. Furthermore, each Purchaser,
severally and not jointly, agrees to promptly notify the Company of any changes
in the information set forth in a registration statement regarding such
Purchaser or its plan of distribution set forth in such registration statement.

     6.6 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 6.

<PAGE>

          (a) To the extent permitted by law, the Company will indemnify and
hold harmless each Purchaser, the partners, officers and directors of each
Purchaser, any underwriter (as defined in the Securities Act) for such Purchaser
and each person, if any, who controls such Purchaser or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will pay as
incurred to each such Purchaser, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 6.6 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Purchaser, partner, officer, director, underwriter or controlling person of
such Purchaser.

          (b) To the extent permitted by law, each Purchaser will, if
Registrable Securities held by such Purchaser are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Purchaser selling securities under
such registration statement or any of such other Purchaser's partners, directors
or officers or any person who controls such Purchaser, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Purchaser,
or partner, director, officer or controlling person of such other Purchaser may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Purchaser under an
instrument duly executed by such Purchaser and stated to be specifically for use
in connection with such registration; and each such Purchaser will pay as
incurred any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other person
registering shares under such registration, or partner, officer, director or
controlling person of such other person registering shares under such
registration in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity

<PAGE>

agreement contained in this Section 6.6 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Purchaser, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 6.6 exceed the net proceeds from the offering
received by such Purchaser.

          (c) Promptly after receipt by an indemnified party under this Section
6.6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6.6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.6.

          (d) If the indemnification provided for in this Section 6.6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Purchaser hereunder
exceed the net proceeds from the offering received by such Purchaser.

          (e) The obligations of the Company and the Purchasers under this
Section 6.6 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

<PAGE>

     6.7 Agreement to Furnish Information. In connection with a registration in
which such Purchaser is participating, each Purchaser agrees to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter. In addition, if requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, each
Purchaser shall provide, within ten (10) days of such request, such information
related to such Purchaser as may be required by the Company or such
representative in connection with the completion of any public offering of the
Company's securities pursuant to a registration statement filed under the
Securities Act.

     6.8 Rule 144 Reporting. With a view to making available to the Purchasers
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:

          (a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act;

          (b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and

          (c) So long as a Purchaser owns any Registrable Securities, furnish to
such Purchaser forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.

     6.9 S-3 Eligibility. The Company will use its best efforts to meet the
requirements for the use of Form S-3 for registration of the resale by the
Purchasers of the Registrable Securities. The Company will use its best efforts
to file all reports required to be filed by the Company with the SEC in a timely
manner and take all other necessary action so as to maintain such eligibility
for the use of Form S-3.

Section 7. COVENANTS OF THE COMPANY.

     7.1 Due Diligence. The Company hereby undertakes to provide all information
and to make its employees available to the extent reasonably requested by the
Purchasers and their respective counsel in the course of performing their due
diligence investigation of the Company prior to the Closing Date.

Section 8. COVENANTS OF THE PURCHASERS.

     8.1 Confidentiality of Records. Each Purchaser agrees to use, and to use
its best efforts to insure that it and its authorized representatives use, the
same degree of care as such person uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information has not been publicly disclosed by the Company or otherwise
generally known by

<PAGE>

such Purchaser or transferee), except that such person may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such person for the purpose of evaluating its investment in the Company as long
as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 8.1. Notwithstanding the above, a Purchaser shall not
be in violation of this Section 8.1 with regard to a disclosure that was in
response to a valid order by a court or other governmental body or as required
by law or regulation, provided that such Purchaser provides the Company with
prior written notice of such disclosure in order to permit the Company to seek
confidential treatment or other appropriate remedy of such confidential
information; provided that, in the event that such confidential treatment or
other remedy is not requested or obtained, the Purchaser shall furnish only that
part of the confidential information that is legally required and shall exercise
its reasonable best efforts to ensure that the confidential information so
obtained is accorded treatment as confidential property.

     8.2 Prohibition on Use of Insider Information. Each Purchaser understands
that federal and state securities laws prohibit trading in the Company's
securities while such Purchaser is in the possession of "material nonpublic
information" concerning the Company and/or its affiliates. Each Purchaser
represents that it has been advised by its counsel of such laws and the
consequences of breaking such laws. Each Purchaser, and any transferee of
Registrable Securities, covenants not to enter into any transactions that would
violate applicable securities laws.

     8.3 Lock-up Period. Each of the Purchasers, severally and not jointly,
hereby agrees that from the date hereof and until 30 months after the Closing
Date (the "Lock-Up Expiration Date"), such Purchaser will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
shares of the Company's Common Stock or securities convertible into or
exchangeable or exercisable for any shares of Common Stock (collectively, the
"Securities"), enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of the Securities, whether
any such aforementioned transaction is to be settled by delivery of the
Securities or other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of the Company. The foregoing sentence (x) shall not
apply to transactions relating to Securities acquired (i) by the Purchasers
prior to the execution of this Agreement or (ii) by the Purchasers in the open
market after the date of this Agreement, (y) shall expire, for each Purchaser,
with respect to 20% of the total number of Offered Securities purchased by such
Purchaser, on each of the 18 month anniversary of the Closing Date, the 21 month
anniversary of the Closing Date, the 24 month anniversary of the Closing Date
and the 27 month anniversary of the Closing Date, and (z) shall expire, for each
Purchaser, in its entirety upon the occurrence of any event deemed a Liquidation
(as such term in defined in the Certificate of Designations). In furtherance of
the foregoing, each of the Purchasers, severally and not jointly, agrees that
the Company and its transfer agent and registrar are hereby authorized to
decline to make any transfer of shares of Securities if such transfer would
constitute a violation or breach of the terms of this Section.

Section 9. EXEMPTION FROM REGISTRATION; LEGEND. The Offered Securities and the
Conversion Shares will be issued under an exemption or exemptions from
registration under the Securities Act, and are also subject to certain rights
and obligations set forth herein.

<PAGE>

Accordingly, the certificates evidencing the Offered Securities and any
Conversion Shares issuable upon the conversion thereof shall, upon issuance,
contain a legend, substantially in the form as follows:

     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
     SECURITIES LAWS AND NO INTEREST HEREIN MAY BE SOLD, TRANSFERRED OR
     OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO
     SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
     SECURITIES LAWS OR (2) SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144
     PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR RULE) OR (3) THE ISSUER OF
     THESE SECURITIES SHALL HAVE RECEIVED AN OPINION OF COUNSEL FOR THE HOLDER
     OF THESE SECURITIES SATISFACTORY TO THE ISSUER THAT NO VIOLATION OF THE ACT
     OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER.

Section 10. NOTICES. All communications hereunder will be in writing and, (a) if
sent to a Purchaser, will be mailed, delivered or telegraphed and confirmed to
the address for such Purchaser set forth on Schedule 1 hereto or (c) if sent to
the Company, will be mailed, delivered or telegraphed and confirmed to it at
9725 Scranton Road, Suite 140, San Diego, CA 92121, Attention: Chief Executive
Officer.

Section 11. EXPENSES. The Company, on the one hand, and each Purchaser, on the
other hand, are each responsible for its own expenses associated with the
purchases and sales of the Offered Securities pursuant to the terms of this
Agreement; provided, that the Company will pay, on the Closing Date, the legal
fees and expenses of legal counsel to (i) Meritech; provided, further, that such
amounts shall not exceed $20,000 and (ii) the KLS Trust dated July 14, 1999;
provided, further, that such amounts shall not exceed $5,000.

Section 12. AMENDMENT AND WAIVER

     12.1 Except as otherwise expressly provided, this Agreement may be amended
or modified only upon the written consent of the Company and the Purchasers.

     12.2 Except as otherwise expressly provided herein, (i) rights arising
under this Agreement may only be waived in writing by the party entitled to such
right and (ii) obligations under this Agreement may only be waived by the party
to whose benefit the obligations runs.

Section 13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and no other
person will have any right or obligation hereunder.

<PAGE>

Section 14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

Section 15. APPLICABLE LAW AND VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to principles of conflicts of laws. Any dispute under this Agreement that
is not settled by mutual consent shall be finally adjudicated by any federal or
state court sitting in the City and County of San Diego in the State of
California, and each party consents to the exclusive jurisdiction of such courts
(or any appellate court therefrom) over any such dispute. Each party further
consents to personal jurisdiction in the courts mentioned in the prior sentence.

                            [Signature Page Follows]

<PAGE>

     IN WITNESS WHEREOF, this Agreement is entered into by the undersigned
parties as of the date first written above.

                                       Very truly yours,

                                       WIRELESS FACILITIES, INC.

                                       By: /s/ Wm. Bradford Weller
                                          --------------------------------------
                                          Name: Wm. Bradford Weller
                                          Title: Vice President, Legal Affairs,
                                          General Counsel and Secretary

MERITECH CAPITAL PARTNERS II L.P.

By: Meritech Capital Associates II L.L.C.
      its General Partner

By: Meritech Management Associates II L.L.C.
      a managing member

By: /s/ Paul S. Madera
   ------------------------------------
     Paul S. Madera, a managing member

MERITECH CAPITAL AFFILIATES II L.P.

By: Meritech Capital Associates II L.L.C.
      its General Partner

By: Meritech Management Associates II L.L.C.
      a managing member

By: /s/ Paul S. Madera
   ------------------------------------
    Paul S. Madera, a managing member

MCP ENTREPRENEUR PARTNERS II L.P.

By: Meritech Capital Associates II L.L.C.
      its General Partner

By: Meritech Management Associates II L.L.C.
      a managing member

By: /s/ Paul S. Madera
   ------------------------------------
    Paul S. Madera, a managing member

<PAGE>

OAK INVESTMENT PARTNERS X, LIMITED
PARTNERSHIP

/s/ Bandel Carano
---------------------------------------
Bandel Carano
Managing Member of Oak Associates X, LLC
The General Partner of Oak Investments Partners
X, Limited Partnership

OAK X AFFILIATES FUND, LIMITED
PARTNERSHIP

/s/ Bandel Carano
---------------------------------------
Bandel Carano
Managing Member of Oak Associates X, LLC
The General Partner of Oak X Affiliates Fund,
Limited Partnership

/s/ Sean K. Tayebi
---------------------------------------
Sean K. Tayebi, as Trustee
of the KLS Trust dated July 14, 1999

<PAGE>

                                   Schedule 1

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Purchaser                                             Offered Securities
---------                                             ------------------
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
<S>                                                             <C>
Meritech Capital Partners II L.P.                                 38,708
-------------------------------------------------------------------------------------------------------------
c/o Steve Simonian
285 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
-------------------------------------------------------------------------------------------------------------
Meritech Capital Affiliates II L.P.                                  996
-------------------------------------------------------------------------------------------------------------
c/o Steve Simonian
285 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
-------------------------------------------------------------------------------------------------------------
MCP Entrepreneur Partners II L.P.                                    296
-------------------------------------------------------------------------------------------------------------
c/o Steve Simonian
285 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
-------------------------------------------------------------------------------------------------------------
Oak Investment Partners X, L.P.                                   39,368
-------------------------------------------------------------------------------------------------------------
525 University Ave
Suite 1300
Palo Alto, CA  94301
-------------------------------------------------------------------------------------------------------------
Oak X Affiliates Fund, L.P.,                                         632
-------------------------------------------------------------------------------------------------------------
525 University Ave
Suite 1300
Palo Alto, CA  94301
-------------------------------------------------------------------------------------------------------------
KLS Trust dated July 14, 1999                                     10,000
                                                                ========
-------------------------------------------------------------------------------------------------------------
c/o Merrill Lynch
Century Plaza Towers
2049 Century Park East (South Tower)
11th Floor
Los Angeles, CA 90067
-------------------------------------------------------------------------------------------------------------
         Total                                                    90,000
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                    EXHIBIT A

                       FORM OF CERTIFICATE OF DESIGNATIONS

<PAGE>

               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
                                       of
                            SERIES B PREFERRED STOCK
                                       of
                            WIRELESS FACILITIES, INC.

     I, Masood K. Tayebi, Chief Executive Officer of WIRELESS FACILITIES, INC.,
a corporation organized and existing under the laws of the State of Delaware
(the "Corporation" or the "Company")), in accordance with the provisions of
Section 151 of the Delaware General Corporation Law, DO HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors of the
Corporation (the "Board of Directors") by the Certificate of Incorporation of
the Corporation and by Section 151(g) of the Delaware General Corporation Law,
on May 16, 2002, the Board of Directors adopted the following resolution,
creating a series of shares of convertible preferred stock, Series B, designated
as "Series B Preferred Stock":

     "RESOLVED, that pursuant to the authority vested in the Board of Directors
     (the "Board of Directors") of WIRELESS FACILITIES, INC., a corporation
     organized and existing under the laws of the State of Delaware (the
     "Corporation"), by the Certificate of Incorporation of the Corporation (the
     "Certificate of Incorporation"), the Board of Directors does hereby provide
     for the authorization and issuance of a series of convertible preferred
     stock, Series B, par value U.S.$0.001 per share, of the Corporation, to be
     designated "Series B Preferred Stock," initially consisting of 90,000
     shares, and to the extent that the designations, powers, preferences, and
     relative participating, optional, or other special rights, and the
     qualifications, limitations, and restrictions of the Series B Preferred
     Stock are not stated and expressed in the Certificate of Incorporation, the
     Board of Directors does hereby fix and herein state and express such
     designations, powers, preferences, and relative participating, optional, or
     other special rights, and the qualifications, limitations, and restrictions
     thereof, as follows:

1.   Designation and Rank.

     (a) Ninety thousand (90,000) shares of the preferred stock of the
Corporation, par value $0.001 per share, shall be designated and known as the
"Series B Preferred Stock."

     (b) The Series B Preferred Stock shall rank senior and prior to the common
stock, par value U.S.$0.001 per share, of the Corporation (the "Common Stock"),
and all other classes or series of the capital stock (other than preferred
stock) of the Corporation (now or hereafter authorized or issued), with respect
to the payment of any dividends, the conversion rights set forth herein and any
payment upon liquidation or redemption. The Series B Preferred Stock shall rank
on par with the Series A Preferred Stock of the Corporation with respect to the
payment of any dividends, the conversion rights set forth herein and any payment
upon liquidation or redemption. The Corporation may not issue any additional
classes or series of preferred stock with liquidation, redemption or conversion
rights or right of payment of any kind that is senior to the Series B Preferred
Stock, except pursuant to Section 12.

                                       1.

<PAGE>

2.   Dividend Rights.

     From and after the date hereof, when and if the Board of Directors declares
a dividend or distribution payable with respect to the then-outstanding shares
of Common Stock (other than in additional shares of Common Stock or Common Stock
Equivalents (as defined in Section 4(e)(i) below), the holders of the Series B
Preferred Stock shall be entitled to the amount of dividends per share in the
same form as such Common Stock dividends that would be payable on the largest
number of whole shares of Common Stock into which a holder's aggregate shares of
Series B Preferred Stock could then be converted pursuant to Section 4 hereof
(such number to be determined as of the record date for the determination of
holders of Common Stock entitled to receive such dividend).

3.   Liquidation Rights.

     (a) Liquidation Events. The occurrence of any of the following events shall
be deemed a "Liquidation": (i) any liquidation, dissolution, or winding-up of
the affairs of the Corporation; (ii) any transaction or series of related
transactions in which securities of the Corporation representing 50% or more of
the combined voting power of the Corporation's then outstanding voting
securities are acquired by a person, entity or group of related persons or
entities, excluding any consolidation or merger effected exclusively to change
the domicile of the Corporation; (iii) any consolidation, merger or
reorganization of the Corporation with or into any other corporation or other
entity or person pursuant to which the holders of the Corporation's outstanding
securities receive, pursuant to such transaction, securities in the surviving
entity that represent less than 50% of the voting power of such surviving
entity; or (iv) any sale, lease, exclusive license or other disposition of all
or substantially all of the assets of the Corporation.

     (b) Liquidation Preference.

          (i) In the event of any Liquidation, whether voluntary or involuntary,
before any payment of cash or distribution of other property shall be made to
the holders of Common Stock, or any other class or series of stock subordinate
in liquidation preference to the Series B Preferred Stock, the holders of the
Series B Preferred Stock shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, on behalf of
each share of Series B Preferred Stock held by such holder, U.S.$500.00 (the
"Original Issue Price") (as appropriately adjusted for any combinations,
divisions, or similar recapitalizations affecting the Series B Preferred Stock
after issuance) and all accumulated or accrued and unpaid dividends thereon
(collectively, the "Series B Liquidation Preference").

          (ii) If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders are insufficient to pay the holders of the
Series B Preferred Stock the full amounts to which they are entitled pursuant to
clause (b)(i) above, the holders of the Series B Preferred Stock shall share pro
rata in any distribution of assets in proportion to the respective amounts which
would be payable to the holders of the Series B Preferred Stock and any other
class or series of capital stock of the Corporation ranking on par with the
Series B Preferred Stock in respect of the shares held by them if all amounts
payable to them in respect of such were paid in full pursuant to clause (b)(i)
above.

                                       2.

<PAGE>

          (iii) After the distributions described in clause (b)(i) or (b)(ii)
above have been paid, subject to the rights of any other class or series of
capital stock of the Corporation that may from time to time come into existence,
the remaining assets of the Corporation available for distribution to
stockholders shall be distributed among the holders of Common Stock pro rata
based on the number of shares of Common Stock held by each.

     (c) Non-Cash Distributions. If any distribution to be made pursuant to this
Section 3 is to be paid other than in cash or Common Stock or Common Stock
Equivalents, the value of such distribution will be deemed its fair market value
as determined in good faith by the Board of Directors. Any securities shall be
valued as follows:

          (i) Securities not subject to investment letter or other similar
restrictions on free marketability covered by clause (ii) below:

               (1) if traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such quotation system over the thirty (30) trading
day period ending three (3) trading days prior to the occurrence of the
Liquidation;

               (2) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) trading day period ending three (3) trading
days prior to the occurrence of the Liquidation; and

               (3) if there is no active public market, the value shall be the
fair market value thereof, as determined by the Board of Directors.

          (ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to effectuate an appropriate discount from the market value,
as determined by clause (i)(1), (2) or (3) of this Section 3(c), so as to
reflect the approximate fair market value thereof, as determined by the Board of
Directors.

          (iii) The holders of at least a majority of the outstanding Series B
Preferred Stock shall have the right to challenge any determination by the Board
of Directors of fair market value pursuant to this Section 3(c), in which case
the determination of fair market value shall be made by an independent appraiser
selected jointly by the Board of Directors and the challenging parties, the cost
of such appraisal to be borne equally by the Corporation and the challenging
parties.

4.   Conversion Rights.

     The holders of the Series B Preferred Stock shall have conversion rights as
follows (the "Conversion Right"):

     (a) Conversion Price. The "Conversion Price" shall, initially, be U.S.$5.00
per share and shall be subject to adjustment as set forth below in Sections 4(e)
and 4(f).

                                       3.

<PAGE>

     (b) Automatic Conversion. If the closing price for the shares of the
Corporation's Common Stock (trading on a securities exchange or through Nasdaq
National Market or other national exchange or market) exceeds $11.00 per share
(as adjusted for events described in Section 4(e)(ii) and 4(e)(iii) below) for
any thirty consecutive trading day period that begins after February 28, 2005,
then, upon such occurrence, each share of Series B Preferred Stock shall be
automatically converted into such number of fully paid and non-assessable shares
of Common Stock as is determined by dividing (x) the Original Issue Price of
such share of Series B Preferred Stock (including any accumulated or accrued but
unpaid dividends thereon) by (y) the Conversion Price. The date of such
conversion is herein referred to as the "Conversion Date."

     (c) Optional Conversion. The holders of the Series B Preferred Stock shall
have the right, at any time, to convert the shares of Series B Preferred Stock
held by such holder into that number of shares of Common Stock into which such
shares are convertible pursuant to Section 4(b) ("Optional Conversion"). In the
event of any Optional Conversion, the date of such conversion shall be referred
to as the "Optional Conversion Date."

     (d) Mechanics of Conversion. On the Conversion Date or Optional Conversion
Date, as the case may be, (x) each holder shall tender such holder's shares of
Series B Preferred Stock to the Corporation for cancellation, free and clear of
encumbrances of any type or nature, and (y) the Corporation shall cause to be
delivered to such holder a number of shares of Common Stock as calculated
pursuant to Section 4(b) above, free and clear of encumbrances of any type or
nature. Each holder and the Corporation shall take all other necessary or
appropriate actions in connection with or to effect such closing.

     (e) Certain Adjustments. To the extent that the holders of Series B
Preferred Stock do not participate fully with other stockholders of the
Corporation with respect to dividends paid pursuant to Section 2 hereof, the
following adjustments shall be made to the Conversion Price:

          (i) Adjustment for Common Stock Dividends and Distributions. If, at
any time after the original issue date of the Series B Preferred Stock (the
"Original Issue Date"), the Corporation makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock or Common Stock
Equivalents, in each such event the Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Conversion Price then in effect by a fraction (i) the numerator of which is
the total number of shares of Common Stock and Common Stock Equivalents issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock and Common Stock Equivalents issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock or Common
Stock Equivalents issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be recomputed accordingly as of the close of business
on such record date and thereafter the Conversion Price shall be adjusted
pursuant to this Section 4(e)(i) to reflect the actual payment of such dividend
or distribution.

                                       4.

<PAGE>

               A "Common Stock Equivalent" shall mean each share of Common Stock
into which securities or property or rights are convertible, exchangeable or
exercisable for or into shares of Common Stock, or otherwise entitle the holder
thereof to receive directly or indirectly, any of the foregoing.

          (ii) Adjustments for Stock Splits, Stock Subdivisions and
Combinations. If, at any time after the Original Issue Date, the Corporation
subdivides or combines the Common Stock without making a corresponding
subdivision or combination of the Series B Preferred Stock, (A) in the case of a
subdivision (including a stock split), the Conversion Price in effect
immediately prior to such event shall be proportionately decreased and the
number of shares of Common Stock purchasable thereunder shall be proportionately
increased, and (B) in the case of a combination (including a reverse stock
split), the Conversion Price in effect immediately prior to such event shall be
proportionately increased and the number of shares of Common Stock purchasable
thereunder shall be proportionately decreased. Any adjustment under this Section
4(e)(ii) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          (iii) Adjustments for Reclassification, Reorganization and
Consolidation. In case of (A) any reclassification, reorganization, change or
conversion of securities of the class issuable upon conversion of the Series B
Preferred Stock (other than a change in par value, or from par value to no par
value) into other shares or securities of the Corporation, or (B) any merger or
consolidation of the Corporation with or into another entity (other than a
Liquidation or a merger or consolidation with another entity in which the
Corporation is the acquiring and the surviving entity and that does not result
in any reclassification or change of outstanding securities issuable upon
conversion of the Series B Preferred Stock) each holder of shares of Series B
Preferred Stock shall have the right to receive, in lieu of the shares of Common
Stock otherwise issuable upon the conversion of its shares of Series B Preferred
Stock (and accumulated or accrued and unpaid dividends then-outstanding
thereunder) in accordance with Section 4(b), the kind and amount of shares of
stock and other securities, money and property receivable upon such
reclassification, reorganization, change, merger or consolidation upon
conversion by a holder of the maximum number of shares of Common Stock into
which such shares of Series B Preferred Stock could have been converted
immediately prior to such reclassification, reorganization, change, merger or
consolidation, all subject to further adjustment as provided herein or with
respect to such other securities or property by the terms thereof. The
provisions of this clause (iii) shall similarly attach to successive
reclassifications, reorganizations, changes, mergers and consolidations.

     (f) Antidilution Adjustments. To the extent that (i) the Corporation issues
after the Original Issue Date and before November 28, 2003, Additional Shares of
Common Stock (as defined below) (in one or more transactions, whether or not
related), (ii) each such issuance is at an Effective Price (as defined below)
per share less than Conversion Price then in effect and (iii) the aggregate
gross proceeds of such issuances exceed $15 million, then the Conversion Price
shall be adjusted to equal the lowest Effective Price received by the
Corporation pursuant to any such issuance. The previous sentence will apply to
any issuances of Additional Shares of Common Stock after the $15 million
threshold has been met (provided any such issuance is below the Conversion Price
then in effect) but will not apply to any issuance of Additional

                                       5.

<PAGE>

Shares of Common Stock occurring after November 28, 2003. Notwithstanding the
foregoing, the Conversion Price shall in no event be lower than U.S.$[4.17].

          (i) For the purpose of making any adjustment required under Section
4(f), the consideration received by the Company for any issue or sale of
securities shall (A) to the extent it consists of cash, be computed at the net
amount of cash received by the Company after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale but without deduction of any expenses
payable by the Company (except for purposes of determining if the $15 million
threshold referred to above has been met, in which case the consideration
received will be deemed to be the aggregate gross proceeds received by the
Company), (B) to the extent it consists of property other than cash, be computed
at the fair value of that property as determined in good faith by the Board of
Directors, and (C) if Additional Shares of Common Stock, Convertible Securities
(as defined below) or rights or options to purchase either Additional Shares of
Common Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board of Directors to be
allocable to such Additional Shares of Common Stock, Convertible Securities or
rights or options; provided, however, that the holders of at least a majority of
the outstanding Series B Preferred Stock shall have the right to challenge any
determination by the Board of Directors of fair market value pursuant to this
Section 4(f)(i), in which case the determination of fair market value shall be
made by an independent appraiser selected jointly by the Board of Directors and
the challenging parties, the cost of such appraisal to be borne equally by the
Corporation and the challenging parties.

          (ii) For the purpose of the adjustment required under this Section
4(f), if the Company issues or sells (A) stock or other securities convertible
into, Additional Shares of Common Stock (such convertible stock or securities
being herein referred to as "Convertible Securities") or (B) rights or options
for the purchase of Additional Shares of Common Stock or Convertible Securities
and if the Effective Price of such Additional Shares of Common Stock is less
than the Conversion Price, in each case the Company shall be deemed to have
issued at the time of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or
options, the minimum amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case of Convertible
Securities, the minimum amounts of consideration, if any, payable to the Company
(other than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) upon the conversion thereof; provided that if in the
case of Convertible Securities the minimum amounts of such consideration cannot
be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is

                                       6.

<PAGE>

reduced; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of such rights, options or
Convertible Securities is subsequently increased, the Effective Price shall be
again recalculated using the increased minimum amount of consideration payable
to the Company upon the exercise or conversion of such rights, options or
Convertible Securities. No further adjustment of the Conversion Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Conversion Price, as adjusted upon the issuance of
such rights, options or Convertible Securities, shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.

                    "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company or deemed to be issued pursuant to this
Section 4(f), whether or not subsequently reacquired or retired by the Company
other than (A) shares of Common Stock and/or options, warrants or other Common
Stock purchase rights, and the Common Stock issued or issuable pursuant to such
options, warrants or other rights to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board; (B) shares of Common Stock issued or issuable pursuant to any equipment
loan or leasing arrangement, or debt financing from a bank or similar financial
institution; (C) shares of Common Stock issued or issuable in connection with
licensing transactions involving the Company and other entities, including (1)
joint ventures, manufacturing, marketing or distribution arrangements or (2)
technology transfer or development arrangements; provided that such transactions
in (1) and (2) and the issuance of shares therein has been approved by a
majority of the members of the Company's Board of Directors and the aggregate
number of shares so issued does not exceed four million (4,000,000)(as adjusted
for stock splits, stock dividends, stock combinations, recapitalizatons and the
like); and (D) any other issuances approved by the holders of a majority of the
Series B Preferred Stock then outstanding.

                    The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(f), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this Section
4(f), for such Additional Shares of Common Stock.

                                       7.

<PAGE>

5.   Other Distributions.

     In the event the Corporation provides the holders of its Common Stock with
consideration that is not otherwise addressed in Section 4 (including, without
limitation, declaring a distribution payable in securities, assets, cash or
evidences of indebtedness issued by other persons or the Corporation (excluding
cash dividends declared and paid by the Corporation out of retained earnings)),
then, in each such case, the holders of the Series B Preferred Stock shall be
entitled to a pro rata share of any such distribution as though such holders
were holders of the number of shares of Common Stock of the Corporation as
though the Series B Preferred Stock had been converted in whole as of the record
date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.

6.   Recapitalizations.

     If at any time there occurs a recapitalization of the Common Stock (other
than a subdivision, combination, or merger or sale of assets provided for in
Section 4 hereof), the holders of the Series B Preferred Stock shall be entitled
to receive upon conversion of the Series B Preferred Stock the number of shares
of capital stock or other securities or property of the Corporation or otherwise
to which a holder of the Common Stock deliverable upon conversion would have
been entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of Section 4 hereof with
respect to the rights of the holders of the Series B Preferred Stock after the
recapitalization to the end that the provisions of Section 4 hereof (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series B Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.

7.   No Impairment.

     The Corporation will not, by amendment of the Certificate of Incorporation
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issuance 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 Corporation, but will at
all times in good faith assist in the carrying out of all the provisions hereof
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Right of the holders of the Series B Preferred Stock
against impairment.

8.   No Fractional Shares and Certificate as to Adjustments.

     (a) No fractional shares of Common Stock will be issued upon the conversion
of any share or shares of the Series B Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series B Preferred Stock by a holder 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 Corporation
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to such fraction multiplied by the
closing price of the Corporation's Common Stock on the Nasdaq National Market
(or any other national securities exchange on which the Common

                                       8.

<PAGE>

Stock is then traded) on the day immediately preceding the conversion. All
calculations under Section 4 hereof and this Section 8(a) shall be made to the
nearest cent or to the nearest share, as the case may be.

     (b) Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to Section 4 hereof, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of shares of Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series B Preferred Stock, use its reasonable best efforts to furnish or cause to
be furnished to such holder a like certificate setting forth (i) such adjustment
or readjustment, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series B
Preferred Stock.

9.   Reservation of Stock Issuable Upon Conversion.

     The Corporation 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 B Preferred Stock, such
number of its shares of Common Stock that shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series B Preferred
Stock; and if at any time the number of authorized but unissued shares of Common
Stock not otherwise reserved for issuance shall not be sufficient to effect the
conversion of all then outstanding shares of the Series B Preferred Stock, the
Corporation shall take such corporate action that 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 purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Certificate of
Incorporation.

10.  Notices.

     Any notice required by the provisions hereof to be given to the holders of
shares of Series B Preferred Stock shall be given in writing and shall be deemed
to have been given (i) in the case of personal or hand delivery, on the date of
such delivery, (ii) in the case of an internationally-recognized overnight
delivery courier, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted, and (iv) in the case of
facsimile transmission, the date of telephone confirmation of receipt.

11.  Voting Rights.

     Holders of Series B Preferred Stock shall be entitled to vote on all
matters submitted to a vote of the holders of the Corporation's Common Stock,
including with respect to the election of directors of the Corporation, on an as
if converted to Common Stock basis; provided, however, that the number of votes
to which the Series B Preferred Stock is entitled shall be based on a conversion
price of $5.00 per share, giving effect to any future adjustments pursuant to
Section

                                       9.

<PAGE>

4(e) above, but without giving any effect to any future adjustments pursuant to
Section 4(f) above.

12.  Protective Provisions.

Subject to the rights of any series of preferred stock that may from time to
time come into existence, so long as any shares of Series B Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then-outstanding shares of Series B Preferred Stock, voting
separately as a series:

     (a) amend its Certificate of Incorporation (including the filing of a
Certificate of Designations) so as to (i) increase the number of authorized
shares of the Corporation's preferred stock or (ii) affect adversely the shares
of Series B Preferred Stock or any holder thereof, including, without
limitation, by creating any additional series of preferred stock (or issuing
shares under any such series) that is senior or pari passu in liquidation
preference, redemption right, conversion rights or right of payment to the
Series B Preferred Stock;

     (b) after the date of this Certificate of Designation, create any new debt
instrument or create or increase any new or existing bank line (or similar
arrangement pursuant to which the Company is or becomes indebted), so that the
Company's total indebtedness pursuant to such instruments, lines or arrangements
exceeds $105,000,000 in the aggregate; or

     (c) change the rights of the holders of the Series B Preferred Stock in any
other respect;

provided, however, that the authorization and issuance of additional shares of
Common Stock, and creation of any series of preferred stock (or issuing shares
under any such series) that is junior in right of payment upon liquidation,
redemption, conversion and payment rights and otherwise to the Series B
Preferred Stock shall not be deemed to adversely affect the rights, preferences
or privileges of the Series B Preferred Stock or any holder thereof or change
the rights of the holders of the Series B Preferred Stock in any other respect.

     The Series B Preferred Stock shall have no preemptive rights pursuant
hereto.

13.  Legend.

     The Series B Preferred Stock and any underlying shares of Common Stock will
be issued under an exemption or exemptions from registration under the Act.
Accordingly, the certificates evidencing the Series B Preferred Stock and the
underlying Common Stock shall, upon issuance, contain a legend, substantially in
the form as follows:

     "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
     SECURITIES LAWS AND NO INTEREST HEREIN MAY BE SOLD, TRANSFERRED OR
     OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO
     SUCH SECURITIES SHALL BE EFFECTIVE UNDER

                                       10.

<PAGE>

THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) SUCH SECURITIES ARE
TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR
RULE) OR (3) THE ISSUER OF THESE SECURITIES SHALL HAVE RECEIVED AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER
THAT NO VIOLATION OF THE ACT OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED
IN SUCH TRANSFER.

14.  Status of Converted Stock.

     In the event any shares of Series B Preferred Stock shall be converted
pursuant to Section 4 hereof, the shares so converted shall be canceled and
shall not be reissuable by the Corporation.

                            [Signature page follows]

                                       11.

<PAGE>

     IN WITNESS WHEREOF, said Wireless Facilities, Inc. has caused this
Certificate of Designations to be signed by Masood K. Tayebi, its Chief
Executive Officer, as of May 28, 2002.

                                        WIRELESS FACILITIES, INC.

                                        By:
                                           -------------------------------------
                                        Name:  Masood K. Tayebi
                                        Title: Chief Executive Officer

                                       12.<PAGE>

                         UNITED STATES DISTRICT COURT
                         SOUTHERN DISTRICT OF FLORIDA
                                MIAMI DIVISION

                       Case No. 99-2560-CIV-MORENO/DUBE

H. ROBERT HOLMES, As Trustee for the Holmes
Family Trust, On Behalf of Himself and
All Others Similarly Situated,

                    Plaintiff,
     v.

DALE S. BAKER, GARLAN BRAITHWAITE,
HAROLD M. WOODY, JOSEPH E.
CIVILETTO, GEORGE F. BAKER III,
JEFFREY N. GREENBLATT, AVIATION
SALES COMPANY and ARTHUR ANDERSEN
LLP,

                    Defendants.

                           STIPULATION OF SETTLEMENT
<PAGE>

     This Stipulation of Settlement (the "Stipulation"), dated as of May 6,
2002, is made and entered into by and among the following Settling Parties (as
further defined in Section IV hereof) to Holmes v. Dale S. Baker, et al.,
Southern District of Florida, Case No. 99-2560-CIV-MORENO (the "Litigation"):
(i) the Lead Plaintiffs (on behalf of themselves and the Class), by and through
their counsel of record in the Litigation; and (ii) the Defendants, by and
through their counsel of record in the Litigation.  The Stipulation is intended
by the Settling Parties to fully, finally and forever resolve, discharge and
settle the Released Claims (as defined in (P)1.17), upon and subject to the
terms and conditions hereof (the "Settlement").

                              I.  THE LITIGATION

     The following cases were commenced in the United States District Court for
the Southern District of Florida, Miami Division, on or after September 23,
1999: (1) Holmes v. Dale S. Baker, et al., No. 99-2560-CIV-MORENO; (2) Greenberg
v. Dale S. Baker, et al., No. 99-2603-CIV-MORENO; (3) Feil v. Dale S. Baker, et
al., No. 99-2965-CIV-MORENO; (4) Smith v. Dale S. Baker, et al., No. 99-2681-
CIV-MORENO; (5) Fowler v. Dale S. Baker, et al., No. 99-2710-CIV-GOLD; and (6)
Mica v. Dale S. Baker, et al., No. 99-2657-CIV-MORENO.  By Order dated January
19, 2000, these actions were consolidated for all purposes under the caption
Holmes v. Dale S. Baker, et al., No. 99-2560-CIV-MORENO.

     On January 19, 2000, the Court appointed the Holmes Family Plaintiffs as
Lead Plaintiffs, and appointed the law firms of Kaplan Fox & Kilsheimer LLP
("Kaplan Fox"), Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss") and
Myron M. Cherry & Associates as Co-Lead Counsel for the Class.

     On March 13, 2000, plaintiffs filed an Amended Class Action Complaint for
violations of the federal securities laws, which alleged violations of Sections
11 and 15 of the Securities Act of 1933 ("Securities Act") and Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934

                                      -1-
<PAGE>

("Exchange Act"), and Rule 10b-5 promulgated thereunder, against Aviation Sales
Company, now known as TIMCO Aviation Services, Inc. ("AVS"), Dale S. Baker,
Garlan Braithwaite, Harold M. Woody, Joseph E. Civiletto and Arthur Andersen LLP
("Arthur Andersen"). That complaint was brought on behalf of all persons who
purchased or otherwise acquired AVS stock during the period March 26, 1998
through and including January 28, 2000 or purchased AVS stock in a secondary
offering which became effective June 10, 1999.

     On September 14, 2000, plaintiffs filed a Second Amended Complaint which
added George F. Baker, III and Jeffrey N. Greenblatt as defendants and extended
the class period to April 30, 1997 through and including April 14, 2000.
Defendants moved to dismiss the Second Amended Complaint.

     On August 22, 2001, after oral argument, the Honorable Federico Moreno
issued an order granting in part and denying in part defendants' motions.  The
Order denied defendants' motions to dismiss the claims brought under Sections 11
and 15 of the Securities Act, but dismissed the claims brought under Section
10(b) of the Exchange Act with leave to replead, except as to Arthur Andersen,
which it dismissed with prejudice with respect to the 10(b) claim.

     On September 21, 2001, plaintiffs filed the Third Amended Complaint (the
"Complaint"), On October 22, 2001, AVS and the individual defendants
("Individual Defendants"), against whom the 10(b) claims are alleged, filed new
motions to dismiss the Section 10(b) and 20(a) claims.  Briefing was completed
on those motions on January 15, 2002.  The settlement set forth in this
Stipulation was reached prior to any decision on these motions.

             II.  DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY

     Defendants have denied, and continue to deny, each and every claim and
contention alleged by Lead Plaintiffs in the Litigation.  Defendants have
expressly denied, and continue to deny, all charges of wrongdoing or liability
against them arising out of any of the conduct,

                                      -2-
<PAGE>

statements, acts or omissions alleged, or that could have been alleged, in the
Litigation. Defendants have also denied, and continue to deny, inter alia, the
allegations that Lead Plaintiffs or the Class have suffered damage, that the
price of AVS common stock was artificially inflated by reasons of alleged
misrepresentations, non-disclosures or otherwise, or that Lead Plaintiffs or the
Class were harmed by the conduct alleged in the Litigation.

     Nonetheless, Defendants have concluded that further conduct of the
Litigation would be protracted and expensive, and that it is desirable that the
Litigation be fully and finally settled in the manner and upon the terms and
conditions set forth in this Stipulation.  Defendants have also taken into
account the uncertainty and risks inherent in any litigation, especially in
complex cases like the Litigation.  Defendants have therefore determined that it
is desirable and beneficial to them that the Litigation be settled in the manner
and upon the terms and conditions set forth in this Stipulation.

        III.  CLAIMS OF THE LEAD PLAINTIFFS AND BENEFITS OF SETTLEMENT

     Lead Plaintiffs believe that the claims asserted in the Litigation have
merit and that the evidence developed to date supports the claims.  However,
Plaintiffs' Co-Lead Counsel recognize and acknowledge the expense and length of
continued proceedings necessary to prosecute the Litigation against Defendants
through trial and through appeals.  Plaintiffs' Co-Lead Counsel have also taken
into account the uncertain outcome and the risk of any litigation, especially in
complex actions such as the Litigation, as well as the difficulties and delays
inherent in such litigation.  Plaintiffs' Co-Lead Counsel are also mindful of
the inherent problems of proof under and possible defenses to the federal
securities law violations asserted in the Litigation.  Plaintiffs' Co-Lead
Counsel believe that the Settlement set forth in the Stipulation confers
substantial benefits upon the Class Members.  Based on their evaluation,

                                      -3-
<PAGE>

Plaintiffs' Co-Lead Counsel have determined that the Settlement set forth in the
Stipulation is in the best interests of Lead Plaintiffs and the Class Members.

             IV.  TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among Lead
Plaintiffs (for themselves and the Class) and Defendants, by and through their
respective counsel of record, that, subject to the approval of the Court, the
Litigation and the Released Claims shall be finally and fully compromised,
settled and released, and the Litigation shall be dismissed with prejudice, as
to all Settling Parties, upon and subject to the terms and conditions of the
Stipulation.

1.   Definitions

     As used in the Stipulation the following terms have the meanings specified
below:

     1.1  "Authorized Claimant" or "Authorized Claimants" means any member of
the Class whose claim for recovery has been allowed pursuant to the terms of the
Stipulation.

     1.2 "Claimant" means any Class Member who files a Proof of Claim in such
form and manner, and within such time, as the Court shall prescribe.

     1.3  "Claims Administrator" means the firm of Gilardi & Co. LLC.

     1.4  "Class" means all Persons who purchased or otherwise acquired the
stock of AVS during the period April 30, 1997 through and including April 14,
2000, including those Persons who purchased AVS stock in a secondary offering
which became effective June 10, 1999 (the "Secondary Offering"). Excluded from
the Class are Defendants, members of each of the immediate families of the
Individual Defendants, any entity in which any Defendant has or had a
controlling interest, current and former directors and officers of AVS and
members of their immediate families, current and former partners of Arthur
Andersen, and the legal representatives, heirs, successors, or assigns of any
such excluded Person or entity.

                                      -4-
<PAGE>

     1.5  "Class Member" means a Person who falls within the definition of the
Class as set forth in (P)1.4 of the Stipulation and who has not submitted a
valid request for exclusion.

     1.6  "Class Period" means the period April 30, 1997 through and including
April 14, 2000.

     1.7  "Defendants" means AVS, Dale S. Baker, Garlan Braithwaite, Harold M.
Woody, Joseph E. Civiletto, George F. Baker III, Jeffrey N. Greenblatt and
Arthur Andersen.

     1.8  "Effective Date" means the first date by which all of the events and
conditions specified in (P)7.1 of the Stipulation have been met and have
occurred.

     1.9  "Escrow Agents" shall collectively mean the Arthur Andersen Escrow
Agent and the AVS Escrow Agents as defined below:

          (a)  "Arthur Andersen Escrow Agent" means the entity designated as the
"Escrow Agent" pursuant to the "Escrow Agreement With Defendant Arthur Andersen"
entered into by Arthur Andersen and  Plaintiffs' Co-Lead Counsel on or about
April 18, 2002.

          (b) "AVS Escrow Agents" means the entities designated as the "Escrow
Agent" pursuant to the "Escrow Agreement With Aviation Sales Defendants" entered
into by counsel for AVS and Plaintiffs' Co-Lead Counsel as of May 6, 2002.

     1.10 "Final" means the later of: (i) if there is an appeal, the date on
which the Judgment, which has not been altered, amended or modified in any
respect by any Court without express consent by all parties, is no longer
subject to any further judicial review or appeal whatsoever, whether by reason
of affirmance by a court of last resort, lapse of time, voluntary dismissal of
appeal or otherwise; or (ii) if no appeal is filed, the expiration date of the
time for the filing or noticing of any appeal from the Court's Judgment
approving the Stipulation substantially in the form of Exhibit B hereto; i.e.,
thirty (30) days after entry of the Judgment.

                                      -5-
<PAGE>

For purposes of this paragraph, an "appeal" shall include any request for
reargument or reconsideration or petition for a writ of certiorari or other writ
that may be filed in connection with approval or disapproval of this settlement.
Any proceeding or order, or any appeal or petition for a writ of certiorari
pertaining solely to any plan of allocation and/or application for attorneys'
fees, costs or expenses, shall not in any way delay or preclude the Judgment
from becoming Final.

     1.11  "Judgment" means the Final Judgment and Order of Dismissal with
Prejudice ("Order and Final Judgment") to be rendered by the Court in the form
attached hereto as Exhibit B.

     1.12  "Lead Plaintiffs" means H. Robert Holmes, as Trustee for the Holmes
Family Trust, H. Robert Holmes IRA, H. Robert Holmes, as General Partner of
Gilford Partners, Debra Holmes, Debra Holmes, as Trustee for Kelly E. Holmes,
and Debra Holmes, as Trustee for William B. Holmes.

     1.13  "Person" means an individual, corporation, partnership, limited
partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or
agency thereof, and any business or legal entity and their spouses, heirs,
predecessors, successors, representatives, agents or assignees.

     1.14  "Plaintiffs' Co-Lead Counsel" means Kaplan Fox & Kilsheimer LLP,
Robert N. Kaplan, Christine M. Fox, 805 Third Avenue, 22nd Floor, New York, NY
10022, Telephone (212) 687-1980; Milberg Weiss Bershad Hynes & Lerach LLP,
Kenneth J. Vianale, 5355 Town Center Road, Suite 900, Boca Raton, FL 33486,
Telephone (561) 361-5000; Myron M. Cherry & Associates, Myron M. Cherry, Daniel
Becka, 30 N. LaSalle Street, Chicago, IL 60602, Telephone (312) 372-2100.

                                      -6-
<PAGE>

     1.15 "Plan of Allocation" means a plan or formula for allocating the
Settlement Fund to Authorized Claimants after payment of expenses of notice and
administration of the Settlement, Taxes and Tax Expenses, and such attorneys'
fees, costs, expenses and interest as may be awarded by the Court. Any Plan of
Allocation is not part of the Stipulation and the Released Parties shall have no
responsibility or liability with respect thereto.

     1.16 "Released Parties" shall collectively mean the "AVS Released Parties"
and the "Arthur Andersen Released Parties" as defined below:

          (a) "AVS Released Parties" means AVS and the Individual Defendants and
each of AVS' and the Individual Defendants' past or present directors, officers,
employees, partners, members, principals, agents, underwriters, insurers, co-
insurers, reinsurers, controlling shareholders, attorneys, solicitors, banks or
investment banks, associates, personal or legal representatives, predecessors,
successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses,
heirs, related or affiliated entities, any entity in which AVS or any of the
Individual Defendants has a controlling interest, any members of their immediate
families, or any trust of which AVS or any of the Individual Defendants is the
settlor or which is for the benefit of AVS or any of the Individual Defendants
and/or member(s) of his or her family.

          (b) "Arthur Andersen Released Parties" means Arthur Andersen and each
of Arthur Andersen's past or present directors, officers, employees, partners,
members, principals, agents, underwriters, insurers, co-insurers, reinsurers,
controlling shareholders, attorneys, solicitors, banks or investment banks,
associates, personal or legal representatives, predecessors, successors,
parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs,
related or affiliated entities, any entity in which in which Arthur Andersen has
a controlling interest, any

                                      -7-
<PAGE>

members of Arthur Andersen partners' immediate families, or any trust of which
Arthur Andersen is the settlor or which is for the benefit of Arthur Andersen.

     1.17 "Released Claims" shall mean any and all claims, demands, rights,
causes of action or liabilities, of every nature and description whatsoever,
whether based in law or equity, on federal, state, local, statutory or common
law, or any other law, rule or regulation, including both known claims and
Unknown Claims (as defined in (P)1.22 below), that have been or could have been
asserted directly, indirectly, representatively or in any other capacity, in any
forum by the Class Members, or any of them, or the successors or assigns of any
of them, whether directly, indirectly, representatively or in any other
capacity, against any of the Released Parties, which arise out of, or relate in
any way to, the allegations, transactions, facts, events, matters, occurrences,
acts, representations or omissions involved, set forth, referred to, or that
could have been asserted in the Litigation, including, without limitation,
claims for negligence, gross negligence, breach of duty of care, breach of duty
of loyalty, breach of duty of candor, fraud, negligent misrepresentation, and
breach of fiduciary duty, arising out of, based upon or related in any way to
the purchase, acquisition, sale or disposition of AVS securities by any Class
Member in the Secondary Offering or during the Class Period.

     1.18 "Representative Plaintiffs" means each plaintiff named in the
Litigation.

     1.19 "Representative Plaintiffs' Counsel" means every counsel who has
appeared for any Representative Plaintiff in the Litigation.

     1.20 "Settlement Fund" means: (1) the principal amount of Eleven Million,
Nine Hundred Thousand Dollars ($11,900,000) paid, in cash, pursuant to (P)(P)2.1
and 2.2 of the Stipulation and delivered to the Escrow Agents, plus any accrued
interest; and (2) the securities described in Exhibit C.

                                      -8-
<PAGE>

     1.21 "Settling Parties" means, collectively, each of the Defendants and the
Representative Plaintiffs on behalf of themselves and the Class Members.

     1.22 "Unknown Claims" means any and all Released Claims which any Plaintiff
or Class Member does not know or suspect to exist in his, her, or its favor at
the time of the release of the Released Parties, which, if known by him, her, or
it might have affected his, her or its decision(s) with respect to the
Stipulation. With respect to any and all Released Claims, the Settling Parties
stipulate and agree that upon the Effective Date, the Lead Plaintiffs and
Defendants shall expressly, and each Class Member shall be deemed to have, and
by operation of the Judgment shall have, expressly waived any and all
provisions, rights, and benefits conferred by any law of any state or territory
of the United States, or principle of common law, which is similar, comparable,
or equivalent to Cal. Civ. Code (S) 1542, which provides:

     A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.

Lead Plaintiffs and Defendants acknowledge, and Class Members by operation of
law shall be deemed to have acknowledged, that the inclusion of "Unknown Claims"
in the definition of Released Claims was separately bargained for and was a
material element of the Settlement.

2.   The Settlement

     a.  The Settlement Fund

     2.1 Pursuant to the Escrow Agreement between Arthur Andersen and
Plaintiffs' Co-Lead Counsel, defendant Arthur Andersen transmitted, on or about
April 19, 2002, via wire transfer the sum of $400,000 in cash to an account
designated by the Arthur Andersen Escrow Agent.

                                      -9-
<PAGE>

     2.2 On or before May 8, 2002, defendants, other than Arthur Andersen, shall
cause to be transmitted via wire transfer the sum of $11.5 million to an account
designated by the AVS Escrow Agents.

     2.3 After the Effective Date, AVS shall cause, at its expense, the
securities described in Exhibit C to be distributed, in whole or in part, in
accordance with Plaintiffs' Co-Lead Counsel's written instructions.

     2.4 After the Effective Date, the AVS representative to the Escrow
Agreement With Aviation Sales Defendants shall resign, as set forth therein.

     2.5 It is contemplated that there will be at least two dates of
distribution for both cash and securities: (i) the date of the distribution of
attorneys' fees and costs awarded by the Court to plaintiffs' counsel; and (ii)
the date of the distribution to Class Members.

     b.  The Escrow Agents

     2.6 The Escrow Agents shall invest the Settlement Fund deposited pursuant
to (P)(P)2.1 and 2.2 above in instruments backed by the full faith and credit of
the United States Government or fully insured by the United States Government or
an agency thereof and shall reinvest the proceeds of these instruments as they
mature in similar instruments at their then current market rates.

     2.7 The Escrow Agents shall not disburse the Settlement Fund except as
provided in the Stipulation, or by an order of the Court.

     2.8 Subject to further order and/or directions as may be made by the Court,
the Escrow Agents are authorized to execute such transactions on behalf of the
Class as are consistent with the terms of the Stipulation.

                                     -10-
<PAGE>

     2.9  All funds held by the Escrow Agents shall be deemed and considered to
be in custodia legis of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court. All Settling Parties agree to
hold the Escrow Agents harmless for any actions taken by them pursuant to the
Stipulation and the Escrow Agreements.

     2.10 After the Court grants preliminary approval of the Stipulation,
Plaintiffs' Co-Lead Counsel shall establish a "Class Notice and Administration
Fund," and the Escrow Agents shall deposit up to $100,000 from the Settlement
Fund into such fund. The Class Notice and Administration Fund may be used by
Plaintiffs' Co-Lead Counsel to pay costs and expenses reasonably and actually
incurred in connection with providing Notice to the Class, locating members of
the Class, soliciting Class claims, assisting with the filing of claims,
administering and distributing the Settlement Fund to Authorized Claimants, and
processing Proof of Claim and Release forms, provided, however, that no such
costs shall be paid prior to Court approval of the Notice Order in (P)3.1,
below. The Class Notice and Administration Fund shall also be invested and earn
interest as provided for in (P)2.6 of this Stipulation.

     c.   Taxes

     2.11 (a) For the purpose of this (P)2.11, references to the Settlement Fund
shall include both the cash portion of the Settlement Fund and the Class Notice
and Administration Fund and shall also include any earnings thereon.

          (b) The Settling Parties and the Escrow Agents agree that the cash
portion of the Settlement Fund is intended to be at all times a "qualified
settlement fund" within the meaning of Treas. Reg. Sec. 1.468B-1.  In addition,
the Escrow Agents shall timely make such elections as necessary or advisable to
carry out the provisions of this (P)2.11, including the

                                     -11-
<PAGE>

"relation-back election" (as defined in Treas. Reg. Sec. 1.468B-1) back to the
earliest permitted date. Such elections shall be made in compliance with the
procedures and requirements contained in such regulations. It shall be the
responsibility of the Escrow Agents to timely and properly prepare and deliver
the necessary documentation for signature by all necessary parties, and
thereafter to cause the appropriate filing to occur.

          (c) For the purpose of (S)468B of the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder, the "administrator"
shall be the Escrow Agents.  The Escrow Agents shall timely and properly file
all informational and other tax returns necessary or advisable with respect to
the Settlement Fund (including without limitation the returns described in
Treas. Reg. Sec. 1.468B-2(k)).  Such returns (as well as the election described
in (P)2.11(b)) shall be consistent with this (P)2.11 and in all events shall
reflect that all Taxes (including any estimated Taxes, interest or penalties) on
the income earned by the cash portion of the Settlement Fund shall be paid out
of the Settlement Fund as provided in (P)2.11(d) hereof.

          (d) All (i) Taxes (including any estimated Taxes, interest or
penalties) arising with respect to the income earned by the Settlement Fund,
including any Taxes or tax detriments that may be imposed upon Defendants or
Defendants' counsel with respect to any income earned by the Settlement Fund for
any period during which the Settlement Fund does not qualify as a "qualified
settlement fund" for federal or state income tax purposes ("Taxes"), and (ii)
expenses and costs incurred in connection with the operation and implementation
of this (P)2.11 (including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing
(or failing to file) the returns described in this (P)2.11) ("Tax Expenses"),
shall be paid out of the Settlement Fund; in all events Defendants and their
counsel

                                     -12-
<PAGE>

shall have no liability or responsibility for the Taxes or the Tax Expenses. The
Settlement Fund shall indemnify and hold each of the Defendants and Defendants'
counsel harmless for Taxes and Tax Expenses (including, without limitation,
Taxes payable by reason of any such indemnification). Further, Taxes and Tax
Expenses shall be treated as, and considered to be, a cost of administration of
the Settlement Fund and shall be timely paid by the Escrow Agents out of the
Settlement Fund without prior order from the Court and the Escrow Agents shall
be obligated (notwithstanding anything herein to the contrary) to withhold from
distribution to Authorized Claimants any funds necessary to pay such amounts
including the establishment of adequate reserves for any Taxes and Tax Expenses
(as well as any amounts that may be required to be withheld under Treas. Reg.
Sec. 1.468B-2(l)(2)); neither Defendants nor their counsel are responsible nor
shall they have any liability therefor. The parties hereto agree to cooperate
with the Escrow Agents, each other, and their tax attorneys and accountants to
the extent reasonably necessary to carry out the provisions of this (P)2.11.

     d.  Termination of Settlement

     2.12 In the event that the Stipulation is not approved, or is terminated,
canceled, or fails to become effective for any reason, the Settlement Fund
(including accrued interest net of Taxes and Tax Expenses) less expenses
actually incurred or due and owing in connection with notice costs and
administration of the Settlement provided for herein, shall be refunded to
Defendants as described in (P)7.5 below. Notwithstanding anything herein to the
contrary, in the event that the preliminary approval order is not entered, the
entire Settlement Fund and interest (net of Taxes and Tax Expenses), including
the Class Notice and Administration Fund, shall be refunded by the Escrow Agents
pursuant to written instructions from counsel for AVS, as to the principal
amount of Eleven Million, Five Hundred Thousand Dollars ($11,500,000) plus
interest,

                                     -13-
<PAGE>

or Arthur Andersen, as to the principal amount of Four Hundred Thousand Dollars
($400,000) plus interest.

3.   Notice Order and Settlement Hearing

     3.1  Within five (5) business days after execution of the Stipulation,
Plaintiffs' Co-Lead Counsel shall submit the Stipulation together with its
Exhibits to the Court and shall apply for entry of an order (the "Notice
Order"), substantially in the form of Exhibit A hereto, requesting, inter alia,
the certification of the Class for the purpose of settlement, preliminary
approval of the Settlement set forth in the Stipulation, including approval for
the mailing and publication of a settlement notice (the "Notice"), substantially
in the form of Exhibits A-1 and A-3 hereto, which shall include the general
terms of the Settlement set forth in the Stipulation, the proposed Plan of
Allocation, the general terms of the Fee and Expense Application as defined in
(P)6.1 below and the date of the Settlement Hearing as defined below.

     3.2  Plaintiffs' Co-Lead Counsel shall request that, after Notice is given,
the Court hold a hearing (the "Settlement Hearing") and approve the Settlement
of the Litigation as set forth herein. At or after the Settlement Hearing,
Plaintiffs' Co-Lead Counsel also will request that the Court approve the
proposed Plan of Allocation and the Fee and Expense Application.

4.   Releases

     4.1  Upon the Effective Date, as defined in (P)1.8, Lead Plaintiffs and
each of the Class Members on behalf of themselves, their heirs, executors,
administrators, successors, assigns, officers, and directors, and any persons
they represent, all in their capacities as such, shall be deemed to have, and by
operation of the Judgment shall have, fully, finally, and forever released,
relinquished and discharged all Released Claims against the Released Parties,
whether or not such Class Member executes and delivers the Proof of Claim and
Release, or otherwise shares in the Settlement Fund.

                                     -14-
<PAGE>

     4.2  The Proof of Claim and Release to be executed by Class Members shall
be substantially in the form contained in Exhibit A-2 hereto.

     4.3  Upon the Effective Date, as defined in (P)1.8, each of the Released
Parties shall be deemed to have, and by operation of the Judgment shall have,
fully, finally, and forever released, relinquished and discharged each and all
of the Class Members and Plaintiffs' Co-Lead Counsel from all claims (including
"Unknown Claims"), arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation
or the Released Claims.

     4.4  (a)  Each Lead Plaintiff and Class Member shall be deemed to have
covenanted to refrain from instituting, commencing or prosecuting, either
directly, indirectly, representatively or in any other capacity, any and all
claims, demands, rights, causes of action or liabilities, of every nature and
description whatsoever, whether based in law or equity, on federal, state,
local, statutory or common law, or any other law, rule or regulation, including
both known claims and Unknown Claims, that have been or could have been asserted
directly, indirectly, representatively or in any other capacity, in any forum by
the Class Members, or any of them, or the successors or assigns of any of them,
against any of the Released Parties, which arise out of, or relate in any way
to, or could have been asserted based upon, the allegations, transactions,
facts, events, matters, occurrences, acts, representations or omissions
involved, set forth, referred to, or which relate directly or indirectly to the
Litigation, including, without limitation, claims for negligence, gross
negligence, breach of duty of care, breach of duty of loyalty, breach of duty of
candor, fraud, negligent misrepresentation, and breach of fiduciary duty.

                                     -15-
<PAGE>

     4.4  (b)  The Order and Final Judgment, set forth in Exhibit B hereto,
shall include a Final bar order finally discharging the Released Parties (i)
from the Released Claims by the Plaintiffs and the Class; and (ii) from all
claims for contribution or equitable indemnification by any person or entity,
directly, indirectly, representatively or in any other capacity, whether arising
under state, federal or common law, based upon, arising out of, relating to, or
in connection with the Released Claims of Plaintiffs, the Class or any Class
Member.

5.   Administration and Calculation of Claims, Final Awards and Supervision and
     Distribution of Settlement Fund

     5.1  Plaintiffs' Co-Lead Counsel, or their authorized agents, acting on
behalf of the Class, and subject to such supervision and direction of the Court
as may be necessary or as circumstances may require, shall administer and
calculate the claims submitted by Class Members and shall oversee distribution
of the Net Settlement Fund (defined below) to Authorized Claimants.

     5.2  The Settlement Fund shall be applied as follows:

          (a)  To pay all the costs and expenses reasonably and actually
incurred in connection with providing Notice, locating members of the Class,
soliciting Class claims, assisting with the filing of claims, administering and
distributing the Settlement Fund to Authorized Claimants, and processing Proof
of Claim and Release forms;

          (b)  To pay the Taxes and Tax Expenses described in (P)2.11 above;

          (c)  To pay plaintiffs' counsel's attorneys' fees, expenses and costs
with interest thereon (the "Fee and Expense Award"), if and to the extent
allowed by the Court; and

          (d)  To distribute the balance of the Settlement Fund (the "Net
Settlement Fund") to Authorized Claimants as allowed by the Stipulation, the
Plan of Allocation, or the Court.

                                     -16-
<PAGE>

     5.3  Upon the Effective Date and thereafter, and in accordance with the
terms of the Stipulation, the Plan of Allocation, or such further approval and
further order(s) of the Court as may be necessary or as circumstances may
require, the Net Settlement Fund shall be distributed to Authorized Claimants,
subject to and in accordance with the following:

     5.4  Within ninety (90) days after the mailing of the Notice or such other
time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a completed
Proof of Claim and Release, substantially in the form of Exhibit A-2 hereto,
signed under penalty of perjury and supported by such documents as specified in
the Proof of Claim and Release and as are reasonably available to the Authorized
Claimant.

     5.5  Except as otherwise ordered by the Court, all Class Members who fail
to timely submit a Proof of Claim and Release within such period, or such other
period as may be ordered by the Court, or otherwise allowed, shall be forever
barred from receiving any payments pursuant to the Stipulation and the
Settlement set forth herein, but will in all other respects be subject to and
bound by the provisions of the Stipulation, the releases contained herein, and
the Judgment.

     5.6  The Net Settlement Fund shall be distributed to the Authorized
Claimants substantially in accordance with a Plan of Allocation to be described
in the Notice and approved by the Court.

     5.7  The Released Parties shall not have any responsibility for, interest
in, or liability whatsoever with respect to the providing of notice, the
investment or distribution of the Net Settlement Fund, the Plan of Allocation,
the determination, administration, or calculation of claims, the payment or
withholding of Taxes, or any losses incurred in connection therewith.

                                     -17-
<PAGE>

     5.8  No Person shall have any claim against Plaintiffs' Co-Lead Counsel or
any claims administrator, or other agent designated by Plaintiffs' Co-Lead
Counsel, based on the distributions made in accordance with the Stipulation and
the Settlement contained therein, the Plan of Allocation, or further orders of
the Court.

     5.9  It is understood and agreed by the Settling Parties that any proposed
Plan of Allocation of the Net Settlement Fund including, but not limited to, any
adjustments to an Authorized Claimant's claim set forth therein, is not a part
of the Stipulation and is to be considered by the Court separately from the
Court's consideration of the fairness, reasonableness and adequacy of the
Settlement set forth in the Stipulation, and any order or proceedings relating
to the Plan of Allocation shall not operate to terminate or cancel the
Stipulation or affect the finality of the Court's Judgment approving the
Stipulation and the Settlement set forth therein, or any other orders entered
pursuant to the Stipulation.

6.   Representative Plaintiffs' Counsel's Attorneys' Fees and Reimbursement of
     Expenses

     6.1  Plaintiffs' Co-Lead Counsel may submit an application or applications
(the "Fee and Expense Application") for distributions to plaintiffs' counsel
from the Settlement Fund for: (a) an award of attorneys' fees; plus (b)
reimbursement of expenses, including the fees and expenses of any Lead
Plaintiffs, experts or consultants, incurred in connection with prosecuting the
Litigation, plus any interest on such attorneys' fees, costs and expenses at the
same rate and for the same periods as earned by the Settlement Fund (until paid)
as may be awarded by the Court. There shall be no distribution from the
Settlement Fund for the purposes provided in this (P)6.1 until after the
Effective Date. Plaintiffs' Co-Lead Counsel reserve the right to make additional
applications for fees and expenses incurred.

                                     -18-
<PAGE>

     6.2  The attorneys' fees and expenses, including the fees and expenses of
experts and consultants, as awarded by the Court, shall be paid to Plaintiffs'
Co-Lead Counsel from the Settlement Fund, immediately after the Court executes
an order awarding such fees and expenses, provided, however, that no such
payments shall be made prior to the Effective Date.  Plaintiffs' Co-Lead Counsel
shall thereafter allocate the attorneys' fees amongst Representative Plaintiffs'
Counsel in a manner in which Plaintiffs' Co-Lead Counsel in good faith believe
reflects the contributions of such counsel to the prosecution and settlement of
the Litigation.

     6.3  The procedure for and the allowance or disallowance by the Court of
any application by Plaintiffs' Co-Lead Counsel for attorneys' fees and expenses,
including the fees and expenses of experts and consultants, to be paid out of
the Settlement Fund, are not part of the Settlement set forth in the
Stipulation, and are to be considered by the Court separately from the Court's
consideration of the fairness, reasonableness and adequacy of the Settlement set
forth in the Stipulation, and any order or proceedings relating to the Fee and
Expense Application, or any appeal from any order relating thereto or reversal
or modification thereof, shall not operate to terminate or cancel the
Stipulation, or affect or delay the finality of the Judgment approving the
Stipulation and the Settlement of the Litigation set forth therein.

     6.4  The Released Parties shall have no responsibility for, and no
liability whatsoever with respect to, any payment to Plaintiffs' Co-Lead
Counsel, any Representative Plaintiffs' Counsel, or any other counsel or Person
who receives payment from the Settlement Fund.

     6.5  The Released Parties shall have no responsibility for, and no
liability whatsoever with respect to, the allocation among Representative
Plaintiffs' Counsel and/or any other Person who may assert some claim thereto,
of any Fee and Expense Award that the Court may make in the Litigation.

                                     -19-
<PAGE>

7.   Conditions of Settlement, Effect of Disapproval, Cancellation or
     Termination

     7.1  The Effective Date of the Stipulation shall be conditioned on the
occurrence of all of the following events:

          (a)  AVS and Arthur Andersen have timely made their contributions to
the Settlement Fund as required by (P)2.1 and (P)2.2, respectively, above;

          (b)  The Court has entered the Notice Order as required by (P)3.1;

          (c)  The Court has certified the settlement class;

          (d)  There shall not have been notice of intent to withdraw from this
Settlement pursuant to (P)7.4. It is the intent of the Settling Parties that any
notice of intent to withdraw by Arthur Andersen shall be effective only as to
Arthur Andersen, and that any notice of intent to withdraw by AVS and the
Individual Defendants shall be effective only as to AVS and the Individual
Defendants;

          (e)  The Court has entered the Judgment in the form of Exhibit B
hereto; and

          (f)  The Judgment has become Final, as defined in (P)1.10, above.

     7.2  Upon the occurrence of all of the events referenced in (P)7.1 above,
any and all remaining interest or right of Defendants in or to the Settlement
Fund, if any, shall be absolutely and forever extinguished.

     7.3  If all of the conditions specified in (P)7.1 are not met, then the
Stipulation shall be canceled and terminated subject to (P)7.6 unless
Plaintiffs' Co-Lead Counsel and counsel for Defendants mutually agree in writing
to proceed with the Stipulation.

     7.4  If prior to the Settlement Hearing, Persons who otherwise would be
members of the Class have timely requested exclusion ("Requests for Exclusion")
from the Class in accordance with the provisions of the Notice Order and the
notice given pursuant thereto, and such Persons in the aggregate purchased a
number of shares of AVS common stock during the

                                     -20-
<PAGE>

Class Period in an amount greater than the sum specified in a separate
supplemental agreement (the "Supplemental Agreement") between the Settling
Parties, AVS shall have the option to terminate the Stipulation, as to the
performance of AVS and the Individual Defendants alone, and Arthur Andersen
shall have the option to terminate the Stipulation, as to its performance alone,
in accordance with the procedures set forth in the Supplemental Agreement. The
Supplemental Agreement will not be filed with the Court unless and until a
dispute among the Settling Parties concerning its interpretation or application
arises. Copies of all Requests for Exclusion received, together with copies of
all written revocations of Requests for Exclusion, shall be delivered to
Defendants' counsel within three (3) days of receipt by Plaintiffs' Co-Lead
Counsel but in no event later than ten (10) business days before the Settlement
Hearing.

     7.5  Unless otherwise ordered by the Court, in the event the Stipulation
shall terminate, or be canceled, or shall not become effective for any reason,
within five (5) business days after written notification of such event is sent
by counsel for AVS or Arthur Andersen or Plaintiffs' Co-Lead Counsel to the
Escrow Agents, the Settlement Fund (including accrued interest), plus any amount
then remaining in the Class Notice and Administration Fund (including accrued
interest), less expenses and any costs which have either been disbursed, or are
chargeable to the Class Notice and Administration Fund, shall be refunded by the
Escrow Agents pursuant to written instructions from counsel for AVS or Arthur
Andersen, as applicable. At the request of counsel for AVS or Arthur Andersen,
the Escrow Agents or their designee shall apply for any tax refund owed to the
Settlement Fund and pay the proceeds, after deduction of any fees or expenses
incurred in connection with such application(s) for refund.

     7.6  In the event that the Stipulation is not approved by the Court or the
Settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, the

                                     -21-
<PAGE>

Settling Parties shall be restored to their respective positions in the
Litigation as of the date of this Stipulation. In such event, the terms and
provisions of the Stipulation, shall have no further force and effect with
respect to the Settling Parties and shall not be used in the Litigation or in
any other proceeding for any purpose, and any Judgment or order entered by the
Court in accordance with the terms of the Stipulation shall be treated as
vacated, nunc pro tunc. No order of the Court or modification or reversal on
appeal of any order of the Court concerning the Plan of Allocation or the amount
of any attorneys' fees, expenses and interest awarded by the Court to the
Representative Plaintiffs or any of their counsel shall constitute grounds for
cancellation or termination of the Stipulation.

     7.7  If the Effective Date does not occur, or if the Stipulation is
terminated pursuant to its terms, neither the Representative Plaintiffs nor any
of their counsel shall have any obligation to repay any amounts actually and
properly disbursed from the Class Notice and Administration Fund. However, no
funds shall be disbursed for the Class Notice and Administration Fund or any
other purpose prior to the Court's approval of the Notice Order in (P)3.1. In
addition, any expenses already incurred and chargeable to the Class Notice and
Administration Fund pursuant to (P)2.10 hereof at the time of such termination
or cancellation but which have not been paid, shall be paid by the Escrow Agents
in accordance with the terms of the Stipulation prior to the balance being
refunded in accordance with (P)7.5 above.

     7.8  (a) If a case is commenced in respect of any Defendant (other than
Arthur Andersen) under Title 11 of the United States Code (Bankruptcy), or a
trustee, receiver or conservator is appointed, and in the event of the entry of
a final order of a court of competent jurisdiction determining the transfer of
money to the Settlement Fund or any portion thereof by or on behalf of such
Defendant to be a preference, voidable transfer, fraudulent transfer or

                                     -22-
<PAGE>

similar transaction and any portion thereof is required to be returned, and such
amount is not promptly deposited to the Settlement Fund by other Defendants,
then, at the election of Plaintiffs' Co-Lead Counsel, upon compliance with
(P)7.8(b), including the return of the cash and securities provided by AVS to
the Settlement Fund, the parties shall jointly move the Court to vacate and set
aside the releases given and Judgment entered in favor of the AVS Released
Parties (other than Arthur Andersen) pursuant to this Stipulation, which
releases and Judgment shall be null and void, and Plaintiffs, AVS and the
Individual Defendants shall be restored to their respective positions in the
litigation as of the date a day prior to the date of this Stipulation, and
provided further that the Releases provided pursuant to (P)4.3 by the AVS
Released Parties shall also be null and void. The provisions herein shall apply
only to the AVS Released Parties, and the Stipulation would remain in full force
and effect as to Arthur Andersen and the Arthur Andersen Released Parties.

     7.8  (b) In the event that the Judgment as to AVS and the Individual
Defendants is vacated as provided in (P)7.8(a), prior to the distribution of any
portion of the $11.5 million or any of the securities provided by AVS to the
members of the Class, it is the intention of all parties hereto that all of the
$11.5 million (including accrued interest net of Taxes and Tax Expenses, if
any), and any of the securities provided by AVS, shall be returned to AVS,
subject to and pursuant to(P)7.5, and Plaintiffs' Co-Lead Counsel and the AVS
Escrow Agent(s) shall do so unless otherwise ordered by a court of competent
jurisdiction. If any portion of the $11.5 million or any portion of the
securities provided by AVS shall have already been distributed to the members of
the Class, then the provisions of this (P)7.8 shall not apply.

     7.9  (a)  If a case is commenced in respect of Arthur Andersen under Title
11 of the United States Code (Bankruptcy), or a trustee, receiver or conservator
is appointed for Arthur

                                     -23-
<PAGE>

Andersen, and in the event of the entry of a final order of a court of competent
jurisdiction determining the transfer of money to the Settlement Fund or any
portion thereof by Arthur Andersen to be a preference, voidable transfer,
fraudulent transfer or similar transaction and any portion thereof is required
to be returned, and such amount is not promptly deposited to the Settlement Fund
by other Defendants, then, at the election of Plaintiffs' Co-Lead Counsel, upon
compliance with (P)7.9(b), including the return of the cash provided by Arthur
Andersen in the Settlement Fund, the parties shall jointly move the Court to
vacate and set aside the releases given and Judgment entered in favor of the
Arthur Andersen Released Parties pursuant to this Stipulation, which releases
and Judgment shall be null and void, and Plaintiffs and Arthur Andersen shall be
restored to their respective positions in the litigation as of the date a day
prior to the date of this Stipulation, and provided further that the Releases
provided pursuant to (P)4.3 by the Arthur Andersen Released Parties shall also
be null and void. The provisions herein shall apply only to the Arthur Andersen
Released Parties, and the Stipulation would remain in full force and effect as
to all other Defendants and the AVS Released Parties.

     7.9  (b)  In the event that the Judgment as to Arthur Andersen is vacated
as provided in (P)7.9(a) prior to the distribution to the members of the Class
of any portion of the $400,000 (including accrued interest and net of Taxes and
Tax Expenses, if any) provided by Arthur Andersen to the Arthur Andersen Escrow
Agent, all such cash shall be returned to Arthur Andersen subject to and
pursuant to (P)7.5. If any portion of the $400,000 shall have already been
distributed to the members of the Class, then the provisions of this (P)7.9
shall not apply.

     7.10 If Plaintiffs' Counsel shall have received any of the cash or
securities constituting a portion of the Settlement Fund at or prior to such
time as such cash and/or securities are required to be returned under (P)(P) 7.8
and 7.9 above (as the case may be), then each of Plaintiffs'

                                     -24-
<PAGE>

Counsel shall, within five days after receiving notice from Defendant's counsel
or from the Court to this effect, refund to the Escrow Agents the cash fees and
expenses, and refund to AVS the securities, previously paid or distributed to
them from the Settlement Fund, plus interest thereon on the cash returned at the
same rate as would have been earned on the Settlement Fund had it remained in
escrow between the Effective Date and such date. Each such Plaintiffs' Counsel's
law firm, as a condition to receiving such fees and expenses, on behalf of
itself and each partner and/or shareholder of it, agrees that the law firm and
its partners and/or shareholders are subject to the jurisdiction of the Court
for the purpose of enforcing the provisions of this paragraph.

8.   Miscellaneous Provisions

     8.1  The Settling Parties (a) acknowledge that it is their intent to
consummate this agreement; and (b) agree to cooperate to the extent reasonably
necessary to effectuate and implement all terms and conditions of the
Stipulation and to exercise their best efforts to accomplish the foregoing terms
and conditions of the Stipulation.

     8.2  Each Defendant warrants as to himself or itself that, at the time any
of the payments provided for herein are made on behalf of himself or itself, he
or it is not insolvent and such payment will not render him or it insolvent.
This representation is made by each Defendant as to himself or itself and is not
made by counsel for Defendants.

     8.3  The parties intend this Stipulation to be a final and complete
resolution of all disputes between them with respect to the Litigation. The
Settlement compromises claims which are contested and shall not be deemed an
admission by any Settling Party as to the merits of any claim or defense. Other
than the statement that "the Litigation is being settled voluntarily after
consultation with competent legal counsel," the Settling Parties will not make
any statement to any media representative (whether or not for attribution),
regarding the Litigation, information

                                     -25-
<PAGE>

received from other parties during this Litigation, or this Stipulation,
provided, however, that AVS may report the terms of the Settlement in its
filings with the United States Securities and Exchange Commission. The Final
Judgment will contain a statement that during the course of the Litigation, the
parties and their respective counsel at all times complied with the requirements
of Federal Rule of Civil Procedure 11. The Final Judgment shall also contain all
necessary approvals for issuance of the securities described in Exhibit C
pursuant to Section 3(a) (10) of the Securities Act of 1993, and SEC regulations
thereunder. The Settling Parties agree that the amount paid to the Settlement
Fund and the other terms of the Settlement were negotiated in good faith by the
Settling Parties, and reflect a settlement that was reached voluntarily after
consultation with competent legal counsel.

     8.4  Neither the Stipulation nor the Settlement contained therein, nor any
act performed or document executed pursuant to or in furtherance of the
Stipulation or the Settlement: (a) is or may be deemed to be or may be used as
an admission of, or evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of Defendants; or (b) is or may be deemed to be or may
be used as an admission of, or evidence of, any fault or omission of any of
Defendants in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. Defendants may file the Stipulation
and/or the Judgment in any action that may be brought against them in order to
support a defense or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction
or any other theory of claim preclusion or issue preclusion or similar defense
or counterclaim.

     8.5  The Settling Parties and their counsel and agents agree that all
information or documents provided by another party during the litigation or
mediation shall be treated as

                                     -26-
<PAGE>

confidential information and shall not (a) be disclosed to any other person, and
(b) be used for any other purpose. The Settling Parties further agree that the
agreement to preserve the confidentiality of information provided by another
party shall continue following entry of the Order and Final Judgment, and that
this Court will retain jurisdiction to adjudicate disputes over the treatment of
confidential information. Within forty-five (45) days after the Order and Final
Judgment becomes final (within the meaning of (P)1.10), all documents produced
in this matter shall be returned to the producing party or destroyed, and
counsel of record for the receiving party shall certify in writing that all
documents produced have been returned to the producing party or destroyed, and
shall serve such certification on the producing party.

     8.6  All of the Exhibits to the Stipulation are material and integral parts
thereof and are fully incorporated therein by this reference.

     8.7  The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.

     8.8  The Stipulation and the Exhibits attached thereto and the Supplemental
Agreement constitute the entire agreement among the parties hereto and no
representations, warranties or inducements have been made to any party
concerning the Stipulation or its Exhibits other than the representations,
warranties and covenants contained and memorialized in such documents. Except as
otherwise provided therein, each party shall bear its own costs.

     8.9  Plaintiffs' Co-Lead Counsel, on behalf of the Class, are expressly
authorized by the Lead Plaintiffs to take all appropriate action required or
permitted to be taken by the Class pursuant to the Stipulation to effectuate its
terms and also are expressly authorized to enter into any modifications or
amendments to the Stipulation on behalf of the Class which they deem
appropriate.

                                     -27-
<PAGE>

     8.10  Each counsel or other Person executing the Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such Person has the
full authority to do so.

     8.11  The Stipulation may be executed in one or more counterparts,
including by facsimile. All executed counterparts and each of them shall be
deemed to be one and the same instrument. A complete set of original executed
counterparts shall be filed with the Court.

     8.12  The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the parties hereto.

     8.13  The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
Settlement embodied in the Stipulation.

     8.14  The Stipulation and the Exhibits thereto shall be governed by Federal
Law, including Rule 23 of the Federal Rules of Civil Procedure.

     8.15  To the extent not covered by Federal Law, the Stipulation and the
Exhibits thereto shall be considered to have been negotiated, executed and
delivered, and to be wholly performed, in the State of Florida, and the rights
and obligations of the parties to the Stipulation shall be construed and
enforced in accordance with, and governed by, the internal, substantive laws of
the State of Florida without giving effect to that State's choice of law
principles.

                          [Signatures on next pages]

                                     -28-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys, dated as of May 6, 2002.

                                MILBERG WEISS BERSHAD HYNES
                                & LERACH LLP

                                By:/s/ Kenneth J. Vianale
                                   --------------------------------------
                                     Kenneth J. Vianale (Fla. Bar No. 169668)

                                5355 Town Center Road, Suite 900
                                Boca Raton, FL 33486
                                Tel:  (561) 361-5000
                                Fax:  (561) 367-8400

                                KAPLAN FOX & KILSHEIMER LLP

                                By:/s/ Robert N. Kaplan
                                   --------------------------------------
                                     Robert N. Kaplan (admitted pro hac vice)
                                     Christine M. Fox (admitted pro hac vice)

                                805 Third Avenue, 22nd Floor
                                New York, NY 10022
                                Tel: (212) 687-1980
                                Fax: (212) 687-7714

                                MYRON M. CHERRY & ASSOCIATES

                                By:/s/ Myron M. Cherry
                                   --------------------------------------
                                     Myron M. Cherry (admitted pro hac vice)
                                     Daniel Becka (Fla. Bar No. 0137601)

                                30 N. LaSalle Street
                                Chicago, IL 60602
                                Tel: (312) 372-2100
                                Fax: (312) 853-0279

                                Plaintiffs' Co-Lead Counsel

                                     -29-
<PAGE>

                                AKERMAN, SENTERFITT & EIDSON, P.A.

                                By:/s/ Stanley H. Wakshlag
                                   --------------------------------------
                                     Stanley H. Wakshlag (Fla Bar No. 266264)

                                One S.E. 3rd Avenue, 28th Floor
                                Miami, FL 33131
                                Tel: (305) 374-5600
                                Fax: (305) 374-5095

                                Counsel for Defendant Aviation Sales Company,
                                n/k/a TIMCO Aviation Services, Inc.

                                ARNOLD & PORTER

                                By:/s/ John A. Freedman
                                   --------------------------------------
                                     Scott B. Schreiber (admitted pro hac vice)
                                     John A. Freedman (admitted pro hac vice)

                                Thurman Arnold Building
                                555 Twelfth Street, N.W.
                                Washington, D.C. 20004-1202
                                Tel:  (202) 942-5000
                                Fax:  (202) 942-5999

                                HARKE & CLASBY
                                Lance A. Harke, Esq.
                                155 South Miami Avenue, Suite 600
                                Miami, Florida 33130
                                Tel:  (305) 536-8220
                                Fax:  (305) 536-8229

                                Counsel for Defendant Arthur Andersen LLP

                                     -30-
<PAGE>

                                STEEL HECTOR & DAVIS LLP

                                By: /s/ Lewis F. Murphy
                                   -----------------------
                                      Lewis F. Murphy P.A.
                                      Wendy S. Leavitt

                                200 South Biscayne Boulevard
                                Miami, FL 33131-2398
                                Tel:   (305) 577-7000
                                Fax:   (305) 577-7001

                                Counsel for Defendant Garlan Braithwaite

                                HOMER, BONNER & DELGADO, P.A.

                                By:  /s/ R. Lawrence Bonner
                                   -------------------------------
                                      R. Lawrence Bonner

                                3400 Bank of America Tower at International
                                Place 100 Southeast 2nd Street
                                Miami, FL 33131
                                Tel:  (305) 350-5100
                                Fax:  (305) 372-2738

                                Counsel for Defendant Joseph E. Civiletto

                                ARAGON, BURLINGTON, WEIL & CROCKETT, S.A.

                                By: /s/ Jeffrey Crockett
                                   --------------------------
                                      Jeffrey Crockett
                                      Sean Santini

                                2699 South Bayshore Drive, Penthouse
                                Miami, Florida 33133
                                Tel:   (305) 858-2900
                                Fax:   (305) 858-5261

                                Counsel for Defendants Dale S. Baker and Harold
                                M. Woody

                                     -31-
<PAGE>

                                GREENBERG TRAURIG P.A.

                                By: /s/ Hilarie Bass
                                   -------------------------------
                                      Hilarie Bass

                                1221 Brickell Avenue
                                Miami, Florida 33131
                                Tel:  (305) 579-0500
                                Fax:  (305) 579-0717

                                BAKER BOTTS L.L.P.

                                By: /s/ James E. Maloney
                                   -------------------------------
                                      James E. Maloney, Esq.

                                One Shell Plaza
                                910 Louisiana Street
                                Houston, Texas 77002-4995
                                Tel:  713-229-1255
                                Fax:  713-229-7755

                                Counsel for Defendants Jeffrey N. Greenblatt and
                                George F. Baker, III

                                     -32-

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