Document:

EXHIBIT 4.1

                         CATALYST SOLUTIONS GROUP, INC.

                             1998 STOCK OPTION PLAN

                      (Adopted effective as of May 5, 1998)

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                         CATALYST SOLUTIONS GROUP, INC.

                             1998 STOCK OPTION PLAN

                      (Adopted effective as of May 5, 1998)

                                    ARTICLE 1

                                  INTRODUCTION

     1.1.  Plan/Purpose.  CATALYST  SOLUTIONS  GROUP,  INC. (the  "Company") has
adopted the CATALYST  SOLUTIONS GROUP,  INC. 1998 STOCK OPTION PLAN (the "Plan")
to  encourage  ownership of the  Company's  common  stock by its  employees  and
employees  of  its  subsidiaries,  to  provide  additional  incentive  for  such
employees  to  promote  the  success  of the  business  of the  Company  and its
subsidiaries,  and to attract individuals to enter the employ of the Company and
its  subsidiaries.  It is expected that the added interest of the  participating
employees under this Plan, and the proprietary attitude which results from their
investment  in the  Company's  common  stock,  will  promote the future  growth,
development  and  continued  success of the  Company  and its  subsidiaries.  In
addition,  it is  intended  that  options  will be  issued  under  this  Plan to
officers,  directors and  consultants  of the Company and its  subsidiaries  (or
affiliates of such persons) even though such persons may not be employees.

     1.2.  Type of  Options.  The Plan  provides  for the  grant of  options  to
purchase common stock of the Company  ("Options").  Options may be granted which
qualify for favorable tax treatment as under Section 422 of the Internal Revenue
Code of 1986, as amended ("Incentive Stock Options"), or which do not so qualify
("Nonqualified Stock Options").

     1.3. Stock Subject to the Plan. An aggregate of 500,000 shares of $0.01 par
value common stock of the Company  shall be reserved for issue upon the exercise
of  Options  granted  under  the Plan,  which  number  represents  approximately
fifty-five  percent  (55%) of the fully  diluted  shares of common  stock of the
Company as of May 5, 1998.  Shares  reserved under the Plan may include whole or
fractional  shares,  as determined by the Board of Directors of the Company (the
"Board") in its sole discretion. If any Option is exercised, the Company may use
either  authorized  but  unissued  shares or  shares  held in  treasury  in lieu
thereof.  If any Option expires or terminates for any reason without having been
exercised in full, the unpurchased  shares subject to such Option shall again be
available for the purposes of the Plan.

     1.4. Effective  Date/Shareholder  Approval. The Plan shall become effective
as of May 5, 1998 (the "Effective Date"); provided,  however, that no Option may
be  exercised  in whole or in part until this Plan is  approved by the Board and
the shareholders of the Company.

     1.5.  Governing Law. The Plan shall be governed by the laws of the State of
Missouri, without regard to conflict of law principles.

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                                    ARTICLE 2

                                 ADMINISTRATION

     2.1. Generally. The Plan shall be administered by the Board. Subject to the
express provisions of the Plan, the Board shall have the authority,  in its sole
discretion,  to determine the individuals to whom Options shall be granted,  the
number of shares  subject  to each  Option,  the  purchase  price of the  shares
subject to each Option,  the time or times at which Options shall be granted and
the term and other conditions of each Option, and also to construe and interpret
the Plan, to make  determinations  in administration of the Plan, to make, amend
and rescind rules and regulations regarding the Plan and its administration,  to
determine the terms and  provisions of the  respective  stock option  agreements
(which need not be identical), and to take whatever action is necessary to carry
out the purposes of the Plan. The Board's actions and  determinations on matters
referred to in this Section shall be conclusive on all persons whomsoever.

     2.2.  Liability of Board  Members.  No act or failure to act on the part of
the Board or the Board, or on the. part of any member  thereof,  shall result in
any liability whatsoever if taken in good faith, and the Company shall indemnify
and  hold  harmless  each  member  of the  Board  against  any  cost or  expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board)  arising out of any act or omission to act
in connection  with the Plan,  unless  arising out of such person's own fraud or
bad faith.

                                    ARTICLE 3

                         ELIGIBILITY TO RECEIVE OPTIONS

     3.1. In General.  An Option may be granted  under the Plan to any full-time
employee of the Company or of any of its subsidiaries and to officers, directors
or  consultants  of the Company or any of its  subsidiaries  (but  excluding any
other parties who are not common law employees). In making a determination as to
persons  to whom  Options  shall be  granted  under the Plan,  and the number of
shares to be covered by such  Options,  the Board shall take into  consideration
the nature of the  service  rendered  or to be  rendered  by the  Optionee,  the
Optionee's present and potential contributions to the success of the Company and
its  subsidiaries,  and such other  factors as the Board shall deem  relevant in
accomplishing the purposes of the Plan. Any and all  determinations  made by the
Board pursuant to this section shall be binding upon all persons.

     3.2.  Special Rule for 10%  Shareholders.  No Incentive Stock Option may be
granted  under the Plan to any  person who  immediately  before  such  Option is
granted owns stock  possessing more than ten percent (10%) of the total combined
voting  power  of  all  classes  of  stock  of  the  Company  or of  any  of its
subsidiaries  unless at the time such Option is granted  the Option  price is at
least  one-hundred  and ten percent (110%) of the fair market value of the stock
subject to the Option, and such Option by its terms is not exercisable after the
expiration  of five (5) years  from the date such  Option  is  granted.  For the
purpose of this Section, an employee shall be deemed to own stock which is owned
by the employee's siblings, spouse, ancestors and lineal descendants.

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     3.3.  Multiple/Successive  Options.  An  employee  who has been  granted an
Option under the Plan may be granted an additional  Option or Options  hereunder
at any time, if otherwise eligible under the provisions of the Plan.  Successive
Option grants may be made to any holder of an Option under the Plan.

     3.4. Options Conditioned on Future Employment.  An Option may be granted to
an individual upon the condition that such individual will become an employee of
the Company or any of its  subsidiaries  or contingent  upon the  fulfillment of
other  conditions,  such as the  Company's  attainment  of a specified  level of
profitability;   provided,   however,  that  an  Option  conditioned  on  future
employment shall be deemed to have been granted only on the date such individual
becomes an employee.

     3.5.  Effect of  Option  Grant.  Nothing  contained  in this Plan  shall be
construed  to limit the right of the  Company to grant stock  options  otherwise
than  under  the Plan in  connection  with the  employment  of any  person,  the
acquisition of any corporation,  firm or association,  or the business or assets
thereof  (including  stock  options  granted  to  employees  thereof  who become
employees of the Company or a subsidiary), or other proper corporate purposes.

     3.6 Investment  Representations.  The Company may in its discretion require
that an Optionee,  as a condition to receiving stock pursuant to the exercise of
an Option,  make certain  representations  regarding the status of such Optionee
and his  investment  intentions,  and may place a legend on such Option,  and on
certificates  evidencing stock acquired upon exercise of such Option, to reflect
any  transfer  restriction  that  may be  appropriate  under  federal  or  state
securities laws.

                                    ARTICLE 4

                         TERMS AND CONDITIONS OF OPTIONS

     4.1.  Option Price.  The purchase price of the stock subject to each Option
granted  hereunder  shall be  determined  by the Board,  but,  in the case of an
Incentive Stock Option, shall not be less than one hundred percent (100%) of the
fair market value of the stock at the time of the grant of the Option; provided,
however,  that the purchase  price of the stock  subject to an  Incentive  Stock
Option  granted to an employee who owns stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
shall be not less than that  specified  in Section  3.2.  The Board  shall adopt
criteria for the  determination of the fair market value of stock subject to any
Option granted pursuant to this Plan.

     4.2.  Option  Term.  The term of each  Option  granted  hereunder  shall be
determined by the Board,  but, in the case of an Incentive  Stock Option,  shall
not be more than ten (10) years from the date of granting  thereof.  The term of
an Incentive Stock Option granted to an employee who owns stock  possessing more
than ten  percent  (10%) of the total  combined  voting  power of all classes of
stock of the  Company  shall be not more than that  specified  in  Section  3.2.
Subject to the  restrictions of Articles 6, 7 and 8, and any other  restrictions
and conditions as the Board

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shall in each  instance  specify  (which  need not be uniform for all parties to
whom Options are granted), an Option shall be exercisable at any time within its
term.

     4.3. Option Amount.  The aggregate fair market value  (determined as of the
time the Option is granted) of the stock with respect to which  Incentive  Stock
Options are  exercisable  for the first time by an Optionee  during any calendar
year (under all plans of the Company and its subsidiaries)  shall not exceed one
hundred thousand dollars ($100,000).

     4.4.  Vesting.  An Option  granted  under the Plan shall vest in accordance
with the terms of the agreement  under which the  individual  Option is granted,
which terms shall be determined by the Board.

     4.5.  Transferability.  An Option  granted  under the Plan,  including  the
exercise  of the right to  request  payment  in lieu of  exercise  of the Option
pursuant to Section 6.3, shall be non-transferable by the Optionee other than by
will or the laws of descent and  distribution,  and shall be exercisable  during
the  Optionee's  lifetime only by the  Optionee,  unless the Optionee is under a
legal  disability,  in which case it may be  exercised  by the  Optionee's  duly
appointed legal representative.

                                    ARTICLE 5

                     DATE OF GRANT AND ACCEPTANCE OF OPTION

     5.1 Date of Grant. Subject to Section 3.4, the grant of an Option under the
Plan  shall  take  place on or as of the date the  Board  grants an  employee  a
particular Option;  provided,  however,  that if the resolution or other written
determination  of the Board  specifies that an Option is to be granted as of and
at some future date, the date of grant shall be such future date.

     5.2  Acceptance  of Option.  Within ten business days after the grant of an
Option,  the Company  shall  notify the  Optionee of the grant of the Option and
shall mail or otherwise deliver to the Optionee a Stock Option  Agreement,  duly
executed on behalf of the Company,  with the request  that the Optionee  execute
such Agreement within thirty days after the date of mailing,  or other delivery,
by the Company to the Optionee. If the Optionee shall fail to execute and return
to the Company such Agreement within such thirty-day  period, the Option granted
pursuant to the Agreement shall be automatically terminated.

                                    ARTICLE 6

                               EXERCISE OF OPTIONS

     6.1.  In General.  Except as  provided  in Article 7, and unless  otherwise
provided in the terms of the agreement  under which the Option is granted,  each
Option  shall be  exercisable  in whole or in part  only on the first day of the
fiscal  year of the  Company;  provided,  however,  that an Option  shall not be
exercisable prior to the time the Option vests in accordance with Section 4.4.

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     6.2.  Manner of Exercise.  To the extent that the right to purchase  shares
under an Option is exercisable,  the right may be exercised from time to time by
written  notice to the Company  stating  the number and  identity of shares with
respect to which the Option is being  exercised,  accompanied  by payment either
(i) in cash,  (ii) in the  discretion of the Board,  by tender to the Company of
shares of the common stock of the Company,  owned by the Optionee and registered
in the  Optionee's  name,  having a fair market value equal to the cash exercise
price of the Option being exercised, or (iii) in the discretion of the Board, by
any combination of (i) and (ii) hereof.  The fair market value of stock tendered
as payment shall be determined  according to the criteria for  determining  fair
market value  adopted by the Board or as may be required in order to comply with
or to conform to the requirements of any applicable laws or regulations.

     6.3. Cash Payment Option.  An Optionee may, instead of exercising an Option
in the manner  specified in Section 6.2,  request that the Board  authorize  the
payment to the Optionee of the difference  between the fair market value of part
or all of the stock which is the subject of the Option and the exercise price of
the Option, such differences to be determined as of the close of business on the
date the Board  receives  the request from the  Optionee.  The Board in its sole
discretion may grant such a request from an Optionee with respect to part or all
of the shares of stock as to which the Option is then  exercisable  and,  to the
extent granted,  shall direct the Company to make payment to the Optionee either
in cash  or in  common  stock  of the  Company  or in any  combination  thereof,
provided,  however,  that any common stock of the Company  shall be  distributed
based upon its fair  market  value as of the close of  business  on the date the
Board received the request from the Optionee.  An Option shall be deemed to have
been  exercised  and shall be  cancelled  to the extent that the Board  grants a
request pursuant to this Section.

     6.4.  Effect on Company Books.  The proceeds of sale of stock subject to an
Option shall be added to the capital  stock account of the Company to the extent
of the par value of the shares and the excess to the account  reflecting capital
in excess of par. In the case of payments  made in shares of common stock of the
Company,  such shares  evidencing  payment shall be added to the common stock of
the Company held in its treasury  and used for  corporate  purposes as the Board
shall determine,  with appropriate  credits to the capital stock accounts of the
Company.

     6.5.  Delivery of Certificates.  After the exercise of an Option,  as above
provided,  the Company shall,  within a reasonable  time,  deliver to the person
exercising  the Option a certificate or  certificates  issued in the name of the
person who exercised the Option and such  additional  name, or names, if any, as
may  be  requested  (subject  to  the  general  policy  of  the  Company  as  to
registration of shares), for the appropriate number of shares, without liability
to the person  exercising  the Option for any  transfer  or issue tax,  state or
federal,  then payable.  Each Option  granted under the Plan shall be subject to
the  requirement  that,  if at  any  time  the  Board  shall  determine,  in its
discretion,  that the  listing,  registration  or  qualification  of the  shares
subject  to such  Option  upon any  securities  exchange  or under  any state or
Federal law, or the consent or approval of any governmental  regulatory body, is
necessary or desirable,  as a condition of, or in connection  with, the granting
of such Option or the issue or purchase of shares thereunder, no such Option may
be   exercised  in  whole  or  in  part  unless  such   listing,   registration,
qualification,

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consent or approval  shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors.

     6.6.  Rights  as  Stockholder.  An  Optionee  shall  have  no  rights  as a
stockholder with respect to any shares covered by an Option except to the extent
that one or more  certificates  for shares shall have been delivered to him upon
due exercise of an Option as above provided.

     6.7 Agreements Regarding  Withholding Taxes. If the Board shall so require,
as a condition of  exercise,  each  Optionee  shall agree that no later than the
date of  exercise of any Option,  the  Optionee  will pay to the Company or make
arrangements  satisfactory to the Board regarding payment of any federal, state,
or local taxes of any kind  required by law to be withheld  upon the exercise of
such  Option.  In its  discretion,  the  Board  may  provide  for the  Company's
acceptance  or  retention of stock as payment to the Company for tax required to
be withheld by the Company.

                                    ARTICLE 7

                                DEATH OF OPTIONEE

     If an Optionee dies while an employee of the Company or a  subsidiary,  the
shares which the Optionee was entitled to purchase on the date of the Optionee's
death  under an  Option  or  Options  may be  purchased  at any time  after  the
Optionee's death by the person or persons to whom said right under the Option or
Options shall have passed by the Optionee's  will or by the  applicable  laws of
descent and distribution.  In no event shall any Option be or become exercisable
after the expiration date thereof.

                                    ARTICLE 8

                EFFECT OF MERGER, CHANGE IN CAPITALIZATION, ETC.

     8.1.  Reclassifications,  Etc.  In the  event  of any  reclassification  or
increase or decrease in the number of the issued  shares of common  stock of the
Company  by  reason  of  the  payment  of  a  stock  dividend,   a  split-up  or
consolidation of shares, a recapitalization, a combination or exchange of shares
or any like capital adjustment, then (i) the aggregate number, and the class, of
shares  reserved under the Plan shall be as though the shares  reserved had been
outstanding prior to any adjustment as aforesaid, and (ii) as to any outstanding
unexercised  Options  theretofore  granted  under  the  Plan,  there  shall be a
corresponding  adjustment  as to the class and number of shares  covered by each
Option,  and as to the  purchase  price under each  Option,  to the end that the
Optionee's  proportionate  interest shall be maintained as before the occurrence
of such event  without  change in the total  purchase  price  applicable to said
Option.

     8.2.  Reorganization,  Etc.  In the event the  Company  approves  a plan of
reorganization  or of merger into or consolidation  with any other  corporation,
the  unexercised  portion of each Option then  outstanding  under the Plan shall
thereafter  apply to such  number  and kind of  securities  as would  have  been
issuable by reason of such  reorganization,  merger or consolidation to a holder
of the number of shares  which were subject to the Option  immediately  prior to
such

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reorganization,  merger or  consolidation,  without change in the total purchase
price applicable to said Option, and such Options shall continue under the Plan.

     8.3.  Issuance of  Additional  Stock.  In the event the Company shall issue
additional  capital  stock of any class for cash or other  consideration,  there
shall be no adjustment in the number of shares  covered by  outstanding  Options
under the Plan, and no adjustment in the purchase price under such Options.

                                    ARTICLE 9

                      TERMINATION AND AMENDMENT OF THE PLAN

     9.1. Amendment/Termination.  This Plan shall terminate on the date which is
ten (10) years from the Effective Date, and no Option shall be granted hereunder
after said date, but such  termination  shall not affect any Option  theretofore
granted. The Board may at any time terminate the Plan or make such amendments to
the Plan as it shall deem  advisable  and in the best  interests  of the Company
without further action on the part of the shareholders of the Company; provided,
however,  that the Board May not,  without  approval  by (a) the  holders of all
Options  outstanding,  and (b) the  shareholders  of the Company (if required by
applicable  law),  change the maximum  number of shares for which Options may be
granted under the Plan,  the minimum  Option price,  the maximum  periods during
which Options may be granted or  exercised,  or the  provisions  relating to the
eligibility  of employees to whom Options may be granted and to the  eligibility
of members of the Board.

     9.2. Effect on Outstanding Options.  Subject to the other provisions of the
Plan, no  termination  or amendment of the Plan may,  without the consent of the
Optionee under an Option then  outstanding,  terminate such Option or materially
and adversely affect the rights of the Optionee thereunder.

                                     CATALYST SOLUTIONS GROUP, INC.

                                     By
                                        ----------------------------------------
                                        Name: Richard S. Waidmann
                                        Title:  President

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                                                                     EXHIBIT 4.1

             CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS AND
                                  PREFERENCES
                                     OF THE
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                       GREYSTONE DIGITAL TECHNOLOGY, INC.

               The undersigned, the Chief Executive Officer of GreyStone Digital
Technology, Inc., a Delaware corporation (the "Company"), in accordance with the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company, the following resolution
creating a series of Series A Convertible Preferred Stock, was duly adopted on
May 18, 2000:

               RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company by provisions of the Certificate
of Incorporation of the Company (the "Certificate of Incorporation"), there
hereby is created out of the shares of Preferred Stock, par value $0.001 per
share, of the Company authorized in Article IV of the Certificate of
Incorporation (the "Preferred Stock,"), a series of Preferred Stock of the
Company, to be named "Series A Convertible Preferred Stock," consisting of five
thousand (5,000) shares, which series shall have the following designations,
powers, preferences and relative and other special rights and the following
qualifications, limitations and restrictions:

          1.   Designation and Rank. The designation of such series of the
Preferred Stock shall be the Series A Convertible Preferred Stock, par value
$0.001 per share (the "Series A Preferred Stock"). The maximum number of shares
of Series A Preferred Stock shall be five thousand (5,000) shares. The Series A
Preferred Stock shall rank (i) prior to the common stock, par value $0.001 per
share (the "Common Stock"), and to all other classes and series of equity
securities of the Company which by its terms does not rank senior to the Series
A Preferred Stock ("Junior Stock"), (ii) on parity with any class and series of
equity securities which by its terms shall rank on parity with the Series A
Preferred Stock, and (iii) junior to any class or series of equity securities
which by its terms shall rank senior to the Series A Preferred Stock. The Series
A Preferred Stock shall be subordinate to and rank junior to all indebtedness of
the Company now or hereafter outstanding.

          2.   Dividends.

               (a) Payment of Dividends. The holders of record of shares of
Series A Preferred Stock shall be entitled to receive, out of any assets at the
time legally available therefor and when and as declared by the Board of
Directors, dividends at the rate of eight percent (8%) of the stated Liquidation
Preference Amount (as defined below) per share per annum (the

<PAGE>   2

"Dividend Payment"), and no more, payable on the anniversary of the date of
issuance of the Series A Preferred Stock (the "Issuance Date") in cash or in
shares of Common Stock, at the option of the Company, in an amount equal to the
quotient of (i) the Dividend Payment divided by (ii) the Conversion Price (as
defined in Section 5(d) below). In the case of shares of Series A Preferred
Stock outstanding for less than a full year, dividends shall be pro rated based
on the portion of each year during which such shares are outstanding. Such
dividends on the Series A Preferred Stock shall be cumulative, shall accrue and
be payable only at conversion of the Series A Preferred Stock into shares of
Common Stock and shall accrue until the Mandatory Conversion Date (as defined in
Section 5(c)(ii) without regard to Section 5(c)(ii)(x)(A)). Dividends on the
Series A Preferred Stock are prior and in preference to any declaration or
payment of any distribution (as defined below) on any outstanding shares of
Common Stock or any other equity securities of the Company ranking junior to the
Series A Preferred Stock as to the payment of dividends. Such dividends shall
accrue on each share of Series A Preferred Stock from day to day from the date
of initial issuance thereof whether or not earned or declared so that if such
dividends with respect to any previous dividend period at the rate provided for
herein have not been paid on, or declared and set apart for, all shares of
Series A Preferred Stock at the time outstanding, the deficiency shall be fully
paid on, or declared and set apart for, such shares on a pro rata basis with all
other equity securities of the Company ranking on a parity with the Series A
Preferred Stock as to the payment of dividends before any distribution shall be
paid on, or declared and set apart for Common Stock or any other equity
securities of the Company ranking junior to the Series A Preferred Stock as to
the payment of dividends.

               (b) So long as any shares of Series A Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment any
dividend or make any distribution on any Junior Stock (other than dividends or
distributions payable in additional shares of Junior Stock), unless at the time
of such dividend or distribution the Company shall have paid all accrued and
unpaid dividends on the outstanding shares of Series A Preferred Stock.

               (c) In the event of a dissolution, liquidation or winding up of
the Company pursuant to Section 4, all accrued and unpaid dividends on the
Series A Preferred Stock shall be payable on the day immediately preceding the
date of payment of the preferential amount to the holders of Series A Preferred
Stock. In the event of (i) a mandatory redemption pursuant to Section 9 or (ii)
a redemption upon the occurrence of a Major Transaction (as defined in Section
8(c)) or a Triggering Event (as defined in Section 8(d)) or at the election of
the Company pursuant to Section 8, all accrued and unpaid dividends on the
Series A Preferred Stock shall be payable on the day immediately preceding the
date of such redemption. In the event of a voluntary conversion pursuant to
Section 5(a), all accrued and unpaid dividends on the Series A Preferred Stock
being converted shall be payable on the day immediately preceding the Voluntary
Conversion Date (as defined in Section 5(b)(i)) and in the event of a mandatory
or forced conversion pursuant to Section 5(c), all accrued and unpaid dividends
on the Series A Preferred Stock being converted shall be payable on the day
immediately preceding the Mandatory Conversion Date or Forced Conversion Date
(as defined in Section 5(c)(iv)), as applicable.

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               (d) For purposes hereof, unless the context otherwise requires,
"distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of the Company (other than redemptions set
forth in Section 8 below or repurchases of Common Stock held by employees or
consultants of the Corporation upon termination of their employment or services
pursuant to agreements providing for such repurchase or upon the cashless
exercise of options held by employees or consultants) for cash or property.

         3.    Voting Rights.

               (a) Class Voting Rights. The Series A Preferred Stock shall have
the following class voting rights (in addition to the voting rights set forth in
Section 3(b) hereof). So long as any shares of the Series A Preferred Stock
remain outstanding, the Company shall not, without the affirmative vote or
consent of the holders of at least three-fourths (3/4) of the shares of the
Series A Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting, in which the holders of the Series A
Preferred Stock vote separately as class: (i) authorize, create, issue or
increase the authorized or issued amount of any class or series of stock,
including, but not limited, to the issuance of any more shares of previously
authorized Common Stock or Preferred Stock, ranking prior to or on parity with
the Series A Preferred Stock, with respect to the distribution of assets on
liquidation, dissolution or winding up; (ii) amend, alter or repeal the
provisions of the Series A Preferred Stock, whether by merger, consolidation or
otherwise, so as to adversely affect any right, preference, privilege or voting
power of the Series A Preferred Stock; provided, however, that any creation and
issuance of another series of Junior Stock shall not be deemed to adversely
affect such rights, preferences, privileges or voting powers; (iii) repurchase,
redeem or pay dividends on, shares of the Company's Junior Stock; (iv) amend the
Certificate of Incorporation or By-Laws of the Company so as to affect adversely
any right, preference, privilege or voting power of the Series A Preferred
Stock; (v) effect any distribution with respect to Junior Stock; or (vi)
reclassify the Company's outstanding securities.

               (b) General Voting Rights. Except with respect to transactions
upon which the Series A Preferred Stock shall be entitled to vote separately as
a class pursuant to Section 3(a) above and except as otherwise required by
Delaware law, the Series A Preferred Stock shall have no voting rights. The
Common Stock into which the Series A Preferred Stock is convertible shall, upon
issuance, have all of the same voting rights as other issued and outstanding
Common Stock of the Company.

                                      -3-
<PAGE>   4
          4.   Liquidation Preference.

               (a) In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series A Preferred Stock then outstanding shall be
entitled to receive, out of the assets of the Company whether such assets are
capital or surplus of any nature, an amount equal to $1,000 per share (the
"Liquidation Preference Amount") of the Series A Preferred Stock plus any
accrued and unpaid dividends before any payment shall be made or any assets
distributed to the holders of the Common Stock or any other Junior Stock. If the
assets of the Company are not sufficient to pay in full the Liquidation
Preference Amount plus any accrued and unpaid dividends payable to the holders
of outstanding shares of the Series A Preferred Stock and any series of
preferred stock or any other class of stock on a parity, as to rights on
liquidation, dissolution or winding up, with the Series A Preferred Stock, then
all of said assets will be distributed among the holders of the Series A
Preferred Stock and the other classes of stock on a parity with the Series A
Preferred Stock, if any, ratably in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were paid in
full. The liquidation payment with respect to each outstanding fractional share
of Series A Preferred Stock shall be equal to a ratably proportionate amount of
the liquidation payment with respect to each outstanding share of Series A
Preferred Stock. All payments for which this Section 4(a) provides shall be in
cash, property (valued at its fair market value as determined by an independent,
outside accountant acceptable to the holders of the Series A Preferred Stock) or
a combination thereof; provided, however, that no cash shall be paid to holders
of Junior Stock unless each holder of the outstanding shares of Series A
Preferred Stock has been paid in cash the full Liquidation Preference Amount
plus any accrued and unpaid dividends to which such holder is entitled as
provided herein. After payment of the full Liquidation Preference Amount plus
any accrued and unpaid dividends to which each holder is entitled, such holders
of shares of Series A Preferred Stock will not be entitled to any further
participation as such in any distribution of the assets of the Company.

               (b) A consolidation or merger of the Company with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Company, or the effectuation by the Company of a transaction or
series of transactions in which more than 50% of the voting shares of the
Company is disposed of or conveyed, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this Section 4. In the event of
the merger or consolidation of the Company with or into another corporation, the
Series A Preferred Stock shall maintain its relative powers, designations and
preferences provided for herein and no merger shall result inconsistent
therewith.

               (c) Written notice of any voluntary or involuntary liquidation,
 dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 45

                                      -4-
<PAGE>   5
days prior to the payment date stated therein, to the holders of record of the
Series A Preferred Stock at their respective addresses as the same shall appear
on the books of the Company.

          5.   Conversion. The holder of Series A Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):

               (a) Right to Convert. At any time on or after the Closing Date
(as such term is defined in the Series A Convertible Preferred Stock Purchase
Agreement dated as of May __, 2000 among the Company and the initial holders of
the Series A Preferred Stock (the "Securities Purchase Agreement")), the holder
of any such shares of Series A Preferred Stock may, at such holder's option,
subject to the limitations set forth in Section 7 herein, elect to convert (a
"Voluntary Conversion") all or any portion of the shares of Series A Preferred
Stock held by such person into a number of fully paid and nonassessable shares
of Common Stock (the "Conversion Rate") equal to the quotient of (x) the
Liquidation Preference Amount of the shares of Series A Preferred Stock being
converted divided by (y) the Conversion Price (as defined in Section 5(d) below)
then in effect as of the date of the delivery by such holder of its notice of
election to convert.

          (b)  Mechanics of Voluntary Conversion. The Voluntary Conversion of
Series A Preferred Stock shall be conducted in the following manner:

               (i) Holder's Delivery Requirements. To convert Series A Preferred
Stock into full shares of Common Stock on any date (the "Voluntary Conversion
Date"), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 5:00 p.m., eastern time on such date, a
copy of a fully executed notice of conversion in the form attached hereto as
Exhibit I (the "Conversion Notice"), to the Company, and (B) surrender to a
common carrier for overnight delivery to the Company as soon as practicable
following such date, the original certificates representing the shares of Series
A Preferred Stock being converted (or an indemnification undertaking with
respect to such shares in the case of their loss, theft or destruction) (the
"Preferred Stock Certificates") and the originally executed Conversion Notice.

               (ii) Company's Response. Upon receipt by the Company of a
facsimile copy of a Conversion Notice, the Company shall promptly send, via
facsimile, a confirmation of receipt of such Conversion Notice to such holder.
Upon receipt by the Company of the Preferred Stock Certificates to be converted
pursuant to a Conversion Notice, together with the originally executed
Conversion Notice, the Company or its designated transfer agent (the "Transfer
Agent"), as applicable, shall, within three (3) trading days following the date
of receipt by the Company of both, issue and deliver to the holder via a common
carrier for overnight delivery to the address as specified in the Conversion
Notice, a certificate, registered in the name of the holder or its designee, for
the number of shares of Common Stock to which the holder shall be entitled. If
the number of shares of Series A Preferred Stock represented by the Preferred
Stock Certificate(s) submitted for conversion is greater than the number of
shares of Series A Preferred Stock being converted, then the Company shall, as
soon as practicable and in

                                      -5-
<PAGE>   6
no event later than five (5) business days after receipt of the Preferred Stock
Certificate(s) and at the Company's expense, issue and deliver to the holder a
new Preferred Stock Certificate representing the number of shares of Series A
Preferred Stock not converted; provided, however, that notwithstanding anything
to the contrary contained herein, if the holder issues a Conversion Notice for
the conversion of any or all of the shares represented by such new Preferred
Stock Certificate prior to receipt by such holder of the new Preferred Stock
Certificate, the holder's obligation to deliver original certificates
representing the shares of Series A Preferred Stock being converted, as set
forth in Section 5(b)(i) hereof, shall be deemed to be satisfied and the Company
shall honor such Conversion Notice in accordance with this Section 5(b)(ii).

               (iii) Dispute Resolution. In the case of a dispute as to the
determination of the Conversion Price or the arithmetic calculation of the
number of shares of Common Stock to be issued upon conversion of the Series A
Preferred Stock, the Company shall promptly issue to the holder the number of
shares of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile as soon as
possible, but in no event later than two (2) business days after receipt of such
holder's Conversion Notice. If such holder and the Company are unable to agree
upon the determination of the Conversion Price or the arithmetic calculation of
the number of shares of Common Stock to be issued upon such conversion within
one (1) business day of such disputed determination or arithmetic calculation
being submitted to the holder, then the Company shall within one (1) business
day submit via facsimile (A) the disputed determination of the Conversion Price
to an independent, reputable investment bank acceptable to the applicable holder
or (B) the disputed arithmetic calculation of the number of shares of Common
Stock to be issued upon such conversion to an independent, outside accountant
acceptable to the applicable holder. The Company shall cause such investment
bank or accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
72 hours from the time it receives the disputed determinations or calculations.
Such investment bank's or accountant's determination or calculation, as the case
may be, shall be binding upon all parties absent manifest error. The reasonable
expenses of such investment bank or accountant in making such determination
shall be paid by the Company, in the event the holder's calculation or
determination was correct, or by the holder, in the event the Company's
calculation or determination was correct, or equally by the Company and the
holder in the event that neither the Company's or the holder's calculation or
determination was correct. The period of time in which the Company is required
to effect conversions or redemptions under this Certificate of Designation shall
be tolled with respect to the subject conversion or redemption pending
resolution of any dispute by the Company made in good faith and in accordance
with this Section 5(b)(iii).

               (iv) Record Holder. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of the Series A Preferred
Stock shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.

                                      -6-
<PAGE>   7
               (v) Company's Failure to Timely Convert. If within seven (7)
business days of the Company's receipt of the Conversion Notice and the
Preferred Stock Certificates to be converted and the Conversion Notice (the
"Share Delivery Period") the Company shall fail to issue a certificate to a
holder for the number of shares of Common Stock to which such holder is entitled
upon such holder's conversion of the Series A Preferred Stock or to issue a new
Preferred Stock Certificate representing the number of shares of Series A
Preferred Stock to which such holder is entitled pursuant to Section 5(b)(ii) (a
"Conversion Failure"), in addition to all other available remedies which such
holder may pursue hereunder and under the Securities Purchase Agreement
(including indemnification pursuant to Article VIII thereof), the Company shall
pay additional damages to such holder on each business day after such seventh
(7th) business day that such conversion is not timely effected in an amount
equal to 0.5% of the product of (A) the sum of the number of shares of Common
Stock not issued to the holder on a timely basis pursuant to Section 5(b)(ii)
and to which such holder is entitled and, in the event the Company has failed to
deliver a Preferred Stock Certificate to the holder on a timely basis pursuant
to Section 5(b)(ii), the number of shares of Common Stock issuable upon
conversion of the shares of Series A Preferred Stock represented by such
Preferred Stock Certificate, as of the last possible date which the Company
could have issued such Preferred Stock Certificate to such holder without
violating Section 5(b)(ii) and (B) the Closing Bid Price (as defined in Section
5(d) below) of the Common Stock on the last possible date which the Company
could have issued such Common Stock and such Preferred Stock Certificate, as the
case may be, to such holder without violating Section 5(b)(ii). If the Company
fails to pay the additional damages set forth in this Section 5(b)(v) within
five (5) business days of the date incurred, then such payment shall bear
interest at the rate of 2% per month (pro rated for partial months) until such
payments are made. Notwithstanding anything to the contrary contained herein,
the holder shall be entitled to withdraw a Conversion Notice, and upon such
withdrawal the Company shall only be obligated to pay the liquidated damages
accrued in accordance with this Section 5 (b)(v) through the date the conversion
Notice is withdrawn.

          (c)  Mandatory Conversion; Forced Conversion.

               (i) Subject to the Exchange Cap (as defined in Section 7(b)
below) and the Ownership Cap (as defined in Section 7(c) below), each share of
Series A Preferred Stock outstanding on the Mandatory Conversion Date (as
defined hereinafter) shall, automatically and without any action on the part of
the holder thereof, convert into a number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (i) the Liquidation Preference Amount
of the shares of Series A Preferred Stock outstanding on the Mandatory
Conversion Date divided by (ii) the Conversion Price in effect on the Mandatory
Conversion Date.

               (ii) As used herein, a "Mandatory Conversion Date" shall be the
date which is three (3) years after the effective date of the Registration
Statement (as such term is defined in the Registration Rights Agreement dated as
of May __, 2000 among the Company and the initial holders of the Series A
Preferred Stock (the "Registration Rights Agreement"));

                                      -7-
<PAGE>   8
provided that the Mandatory Conversion Date shall be extended for a period for
any shares of Series A Preferred Stock (x) for as long as (A) the conversion of
such shares of Preferred Stock would violate Section 7, (B) a Triggering Event
(as defined in Section 8(d)) shall have occurred and be continuing or (C) any
event shall have occurred and be continuing which with the passage of time and
the failure to cure would result in a Triggering Event, (y) for those number of
days that the Registration Statement was not in effect during the period between
the Effectiveness Date (as defined in the Registration Rights Agreement) and the
Mandatory Conversion Date, and (z) for those number of days included in any
Blackout Period (as defined in Section 3(n) of the Registration Rights
Agreement). The Mandatory Conversion Date, the Forced Conversion Date and the
Voluntary Conversion Date collectively are referred to in this Certificate of
Designation as the "Conversion Date."

               (iii) On the Mandatory Conversion Date, the outstanding shares of
Series A Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Series A Preferred Stock unless certificates evidencing such shares of Series A
Preferred Stock are either delivered to the Company or the holder notifies the
Company that such certificates have been lost, stolen, or destroyed, and
executes an agreement reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection therewith. Upon the
occurrence of the automatic conversion of the Series A Preferred Stock pursuant
to this Section 5, the holders of the Series A Preferred Stock shall surrender
the Preferred Stock Certificates representing the Series A Preferred Stock for
which the Mandatory Conversion Date has occurred to the Company and the Company
shall deliver the shares of Common Stock issuable upon such conversion (in the
same manner set forth in Section 5(b)(ii)) to the holder within three (3)
business days of the holder's delivery of the applicable Preferred Stock
Certificates.

               (iv) On or after the Effectiveness Date (as such term is defined
in the Registration Rights Agreement), the Company at its option may, upon prior
written notice (the "Forced Conversion Notice"), force a conversion (a "Forced
Conversion") of all or a portion of the Series A Preferred Stock outstanding,
pro rata among the holders of Series A Preferred Stock based on the number of
shares of Series A Preferred Stock held by such holder at the time of
conversion, into a number of fully paid and nonassessable shares of Common Stock
equal to the quotient of (a) the Liquidation Preference Amount of the shares of
Series A Preferred Stock outstanding on the Forced Conversion Date divided by
(b) the Conversion Price in effect on the Forced Conversion Date (as defined
hereinafter) if (x) the Closing Bid Price of the Common Stock as quoted on the
over-the-counter electronic bulletin board (the "OTC Bulletin Board") (or on the
Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange
or the American Stock Exchange (each, an "Alternative Exchange") on which the
shares of the Company trade if, at the time of the conversion, the Common Stock
is not trading on the OTC Bulletin Board), on each of the 20 consecutive trading
days (the "20 Day Period") prior to the

                                      -8-
<PAGE>   9
date of delivery of the Forced Conversion Notice equals or exceeds $10.00 and
(y) the Company's Common Stock has an average trading volume on the OTC Bulletin
Board or the Alternative Exchange, as applicable, of at least 150,000 shares of
Common Stock per day during the 20 Day Period. The Forced Conversion Notice
shall set forth the date of such notice (the "Forced Conversion Date") and the
number of shares of Series A Preferred Stock such holder is being forced to
convert. Upon the occurrence of a Forced Conversion of the Series A Preferred
Stock pursuant to this Section 5, the holders of the Series A Preferred Stock
shall surrender the Preferred Stock Certificate(s) representing the Series A
Preferred Stock subject to a Forced Conversion to the Company and the Company
shall deliver the shares of Common Stock issuable upon such conversion (in the
same manner set forth in Section 5(b)(ii)) to such holder within three (3)
business days of the holder's delivery of the applicable Preferred Stock
Certificate(s).

          (d)  Conversion Price.

               (i) The term "Fixed Conversion Price" shall mean $4.00, subject
to adjustment as provided herein.

               (ii) The term "Conversion Price" shall mean, with respect to any
conversion of Series A Preferred Stock, the lesser of (a) the Fixed Conversion
Price and (ii) the Floating Conversion Price where "Floating Conversion Price"
shall mean 80% of the VWAP of the last 250,000 shares of Common Stock sold
immediately prior to the date of the Conversion Notice. As used herein, the term
"VWAP" shall mean the volume weighted average price (based on a trading day from
9:30 a.m. to 4:00 p.m., eastern time) of a share of Common Stock of the Company
on the OTC Bulletin Board or an Alternative Exchange, as applicable, as reported
by Bloomberg Financial LP using the AQR function. As an example, if a holder
issues a Conversion Notice on May 10, at 3 p.m., the Floating Conversion Price
shall be determined by multiplying 80% by a quotient equal to (i) the aggregate
monetary value of the last 250,000 shares of Common Stock sold on May 9 (and on
the preceding days if fewer than 250,000 shares have traded on May 9) divided by
(ii) 250,000.

               (iii) The term "Closing Bid Price" shall mean, for any security
as of any date, the last closing bid price of such security quoted on the OTC
Bulletin Board or on an Alternative Exchange, or, if no closing bid price is
reported for such security on the OTC Bulletin Board or on an Alternative
Exchange, the last closing trade price of such security as reported on the OTC
Bulletin Board or on an Alternative Exchange, or, if no last closing trade price
is reported for such security by Bloomberg, the closing high bid price of any
market maker for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding shares of Series
A Preferred Stock. If the Company and the holders of Series A Preferred Stock
are unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved

                                      -9-
<PAGE>   10
pursuant to Section 5(b)(iii). (All such determinations to be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period).

          (e)  Adjustments of Conversion Price.

               (i) Adjustments for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the Issuance Date, effect a stock
split of the outstanding Common Stock, the applicable Fixed Conversion Price in
effect immediately prior to the stock split shall be proportionately decreased.
If the Company shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the applicable Fixed Conversion
Price in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 5(e)(i) shall be effective at the
close of business on the date the stock split or combination occurs.

               (ii) Adjustments for Certain Dividends and Distributions. If the
Company shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Fixed Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, as applicable, the
applicable Fixed Conversion Price then in effect by a fraction:

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

                    (2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution.

               (iii) Adjustment for Other Dividends and Distributions. If the
Company shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in other than
shares of Common Stock, then, and in each event, an appropriate revision to the
applicable Fixed Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of Series
A Preferred Stock shall receive upon conversions thereof, in addition to the
number of shares of Common Stock receivable thereon, the number of securities of
the Company which they would have received had their Series A Preferred Stock
been converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the Conversion
Date, retained such securities (together with any distributions payable thereon

                                      -10-
<PAGE>   11
during such period), giving application to all adjustments called for during
such period under this Section 5(e)(iii) with respect to the rights of the
holders of the Series A Preferred Stock.

               (iv) Adjustments for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon conversion of the Series A Preferred Stock at
any time or from time to time after the Issuance Date shall be changed to the
same or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Fixed Conversion Price shall be made and provisions shall be
made (by adjustments of the Conversion Price or otherwise) so that the holder of
each share of Series A Preferred Stock shall have the right thereafter to
convert such share of Series A Preferred Stock into the kind and amount of
shares of stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.

               (v) Adjustments for Reorganization, Merger, Consolidation or
Sales of Assets. If at any time or from time to time after the Issuance Date
there shall be a capital reorganization of the Company (other than by way of a
stock split or combination of shares or stock dividends or distributions
provided for in Section 5(e)(i), (ii) and (iii), or a reclassification, exchange
or substitution of shares provided for in Section 5(e)(iv)), or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's properties or assets to any other
person (an "Organic Change"), then as a part of such Organic Change an
appropriate revision to the Conversion Price shall be made and provision shall
be made (by adjustments of the Conversion Price or otherwise) so that the holder
of each share of Series A Preferred Stock shall have the right thereafter to
convert such share of Series A Preferred Stock into the kind and amount of
shares of stock and other securities or property of the Company or any successor
corporation resulting from Organic Change. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section
5(e)(v) with respect to the rights of the holders of the Series A Preferred
Stock after the Organic Change to the end that the provisions of this Section
5(e)(v) (including any adjustment in the applicable Conversion Price then in
effect and the number of shares of stock or other securities deliverable upon
conversion of the Series A Preferred Stock) shall be applied after that event in
as nearly an equivalent manner as may be practicable.

               (vi) Adjustments for Issuance of Additional Shares of Common
Stock. If the Company, at any time after the Issuance Date, shall issue any
additional shares of Common Stock (otherwise than as provided in the foregoing
subsections (i) through (v) of this Section 5(e)) (the "Additional Shares of
Common Stock"), at a price per share less than the applicable Fixed Conversion
Price then in effect or without consideration, then the applicable Fixed
Conversion Price upon each such issuance shall be adjusted to that price
(rounded to the nearest

                                      -11-
<PAGE>   12
cent) determined by multiplying the applicable Fixed Conversion Price then in
effect by a fraction:

                    (1) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus (B) the number of shares
of Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the applicable Fixed
Conversion Price then in effect, and

                    (2) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock.

The provisions of this subsection (vi) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (i), (ii),
(iii), (iv) or (v) of this Section 5(e). No adjustment of the applicable Fixed
Conversion Price shall be made under this subsection (e) upon the issuance of
any Additional Shares of Common Stock which are issued pursuant to any Common
Stock Equivalent if upon the issuance of such Common Stock Equivalent (x) any
adjustment shall have been made pursuant to subsection (vii) of this Section
5(e) or (y) no adjustment was required pursuant to subsection (vi) of this
Section 5(e). No adjustment of the applicable Fixed Conversion Price shall be
made under this subsection (vi) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more;
provided that upon any adjustment of the applicable Fixed Conversion Price as a
result of any dividend or distribution payable in Common Stock or Convertible
Securities (as defined below) or the reclassification, subdivision or
combination of Common Stock into a greater or smaller number of shares, the
foregoing figure of $.01 per share (or such figure as last adjusted) shall be
adjusted (to the nearest one-half cent) in proportion to the adjustment in the
applicable Fixed Conversion Price.

               (vii) Issuance of Common Stock Equivalents. If the Company, at
any time after the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock ("Convertible
Securities"), other than the Series A Preferred Stock, or any rights or warrants
or options to purchase any such Common Stock or Convertible Securities, shall be
issued or sold (collectively, the "Common Stock Equivalents") and the price per
share for which Additional Shares of Common Stock may be issuable thereafter
pursuant to such Common Stock Equivalent shall be less than the applicable Fixed
Conversion Price then in effect, or if, after any such issuance of Common Stock
Equivalents, the price per share for which Additional Shares of Common Stock may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the applicable Fixed Conversion Price in effect at the time
of such amendment, then the applicable Fixed Conversion Price upon each such
issuance or amendment shall be adjusted as provided in the first sentence of
subsection (vi)

                                      -12-
<PAGE>   13
of this Section 5(e) on the basis that (1) the maximum number of
Additional Shares of Common Stock issuable pursuant to all such Common Stock
Equivalents shall be deemed to have been issued (whether or not such Common
Stock Equivalents are actually then exercisable, convertible or exchangeable in
whole or in part) as of the earlier of (A) the date on which the Company shall
enter into a firm contract for the issuance of such Common Stock Equivalent, or
(B) the date of actual issuance of such Common Stock Equivalent, and (2) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received or receivable by
the Company for the issuance of such Additional Shares of Common Stock pursuant
to such Common Stock Equivalent. No adjustment of the applicable Fixed
Conversion Price shall be made under this subsection (vii) upon the issuance of
any Convertible Security which is issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any adjustment
shall previously have been made to the exercise price of such warrants then in
effect upon the issuance of such warrants or other rights pursuant to this
subsection (vii).

               (viii) Consideration for Stock. In case any shares of Common
Stock or any Common Stock Equivalents shall be issued or sold:

                    (1) in connection with any merger or consolidation in which
the Company is the surviving corporation (other than any consolidation or merger
in which the previously outstanding shares of Common Stock of the Company shall
be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or

                    (2) in the event of any consolidation or merger of the
Company in which the Company is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Company shall be changed
into or exchanged for the stock or other securities of another corporation, or
in the event of any sale of all or substantially all of the assets of the
Company for stock or other securities of any corporation, the Company shall be
deemed to have issued a number of shares of its Common Stock for stock or
securities or other property of the other corporation computed on the basis of
the actual exchange ratio on which the transaction was predicated, and for a
consideration equal to the fair market value on the date of such transaction of
all such stock or securities or other property of the other corporation. If any
such calculation results in adjustment of the applicable Fixed Conversion Price,
or the number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, the determination of the applicable Fixed Conversion Price or
the number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock immediately prior to such merger, consolidation or sale, shall
be made after giving effect to such adjustment of the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock.

                                      -13-
<PAGE>   14
                    (ix) Record Date. In case the Company shall take record of
the holders of its Common Stock or any other Preferred Stock for the purpose of
entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.

                    (x) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock upon the grant after the Issuance Date of, or the exercise after
the Issuance Date of, options or warrants or rights to purchase stock under the
Company's existing stock option plan.

               (f) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment. In the event a holder shall elect
to convert any shares of Series A Preferred Stock as provided herein, the
Company cannot refuse conversion based on any claim that such holder or any one
associated or affiliated with such holder has been engaged in any violation of
law or any agreement or for any other reason unless, an injunction from a court,
on notice, restraining and/or adjoining conversion of all or of said shares of
Series A Preferred Stock shall have been issued and the Company posts a surety
bond for the benefit of such holder in the amount of the difference between the
Conversion Price and the Closing Bid Price on the trading day preceding the date
of the attempted conversion multiplied by the number of shares of Series A
Preferred Stock sought to be converted, which bond shall remain in effect until
the completion of arbitration/litigation of the dispute and the proceeds of
which shall be payable to such holder in the event it obtains judgment.

               (g) Certificates as to Adjustments. Upon occurrence of each
adjustment or readjustment of the Fixed Conversion Price or number of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock pursuant
to this Section 5, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of such Series A Preferred Stock a certificate setting forth such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written request of
the holder of such affected Series A Preferred Stock, at any time, furnish or
cause to be furnished to such holder a like certificate setting forth such
adjustments and readjustments, the applicable Fixed Conversion Price in effect
at the time, and the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon the
conversion of a share of such Series A Preferred Stock. Notwithstanding the
foregoing, the Company shall not be

                                      -14-
<PAGE>   15
obligated to deliver a certificate unless such certificate would reflect an
increase or decrease of at least one percent (1%) of such adjusted amount.

               (h) Issue Taxes. The Company shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
shares of Series A Preferred Stock pursuant thereto; provided, however, that the
Company shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such conversion.

               (i) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by facsimile
or three (3) business days following being mailed by certified or registered
mail, postage prepaid, return-receipt requested, addressed to the holder of
record at its address appearing on the books of the Company. The Company will
give written notice to each holder of Series A Preferred Stock at least 20 days
prior to the date on which the Company closes its books or takes a record (x)
with respect to any dividend or distribution upon the Common Stock, (y) with
respect to any pro rata subscription offer to holders of Common Stock or (z) for
determining rights to vote with respect to any Organic Change, dissolution,
liquidation or winding-up and in no event shall such notice be provided to such
holder prior to such information being made known to the public. The Company
will also give written notice to each holder of Series A Preferred Stock at
least 20 days prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall such notice be
provided to such holder prior to such information being made known to the
public.

               (j) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall pay cash equal to the product of such fraction multiplied by the average
of the Closing Bid Prices of the Common Stock for the five (5) consecutive
trading days immediately preceding the Voluntary Conversion Date, Mandatory
Conversion Date or Forced Conversion Date, as applicable.

               (k) Reservation of Common Stock. The Company shall, so long as
any shares of Series A Preferred Stock are outstanding, reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series A Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A Preferred Stock then outstanding; provided
that the number of shares of Common Stock so reserved shall at no time be less
than 150% of the number of shares of Common Stock for which the shares of Series
A Preferred Stock are at any time convertible. The initial number of shares of
Common Stock reserved for conversions of the Series A Preferred Stock and each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Series A Preferred Stock based on the number of shares of
Series A Preferred Stock held by each holder at the time of issuance of

                                      -15-
<PAGE>   16
the Series A Preferred Stock or increase in the number of reserved shares, as
the case may be. In the event a holder shall sell or otherwise transfer any of
such holder's shares of Series A Preferred Stock, each transferee shall be
allocated a pro rata portion of the number of reserved shares of Common Stock
reserved for such transferor. Any shares of Common Stock reserved and which
remain allocated to any person or entity which does not hold any shares of
Series A Preferred Stock shall be allocated to the remaining holders of Series A
Preferred Stock, pro rata based on the number of shares of Series A Preferred
Stock then held by such holder. The Company shall, from time to time in
accordance with the Delaware General Corporation Law, as amended, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Company's
obligations under this Section 5(k).

               (l) Retirement of Series A Preferred Stock. Conversion of Series
A Preferred Stock shall be deemed to have been effected on the applicable
Voluntary Conversion Date, Mandatory Conversion Date or Forced Conversion Date.
Upon conversion of only a portion of the number of shares of Series A Preferred
Stock represented by a certificate surrendered for conversion, the Company shall
issue and deliver to such holder at the expense of the Company, a new
certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered as
required by Section 5(b)(ii). Upon any conversion or redemption of Series A
Preferred Stock, the converted or redeemed portion, as the case may be, shall be
cancelled and shall not be reissued nor considered outstanding for any purposes.

               (m) Regulatory Compliance. If any shares of Common Stock to be
reserved for the purpose of conversion of Series A Preferred Stock require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Company shall, at its sole cost and expense, in good faith and
as expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.

          6.   No Preemptive Rights. Except as provided in Section 5 hereof and
in the Securities Purchase Agreement, no holder of the Series A Preferred Stock
shall be entitled to rights to subscribe for, purchase or receive any part of
any new or additional shares of any class, whether now or hereinafter
authorized, or of bonds or debentures, or other evidences of indebtedness
convertible into or exchangeable for shares of any class, but all such new or
additional shares of any class, or any bond, debentures or other evidences of
indebtedness convertible into or exchangeable for shares, may be issued and
disposed of by the Board of Directors on such terms and for such consideration
(to the extent permitted by law), and to such person or persons as the Board of
Directors in their absolute discretion may deem advisable.

          7.   Conversion Restrictions.

                                      -16-
<PAGE>   17
               (a) Notwithstanding anything to the contrary contained herein,
the holders of Series A Preferred Stock may not issue a Conversion Notice for
the conversion of shares of Series A Preferred Stock with an aggregate
Liquidation Preference Amount of less than $25,000.

               (b) Notwithstanding any other provision herein, the Company shall
not be obligated to issue any shares of Common Stock upon conversion of the
Series A Preferred Stock if the issuance of such shares of Common Stock would
exceed that number of shares of Common Stock which the Company may issue upon
conversion of the Series A Preferred Stock (the "Exchange Cap") without
breaching the Company's obligations under the rules or regulations of The Nasdaq
Stock Market, Inc. or any Alternative Exchange, except that such limitation
shall not apply in the event that the Company (a) obtains the approval of its
stockholders as required by applicable rules of The Nasdaq Stock Market, Inc. or
any Alternative Exchange, for issuances of Common Stock in excess of such amount
(the "Shareholder Approval") or (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the holders of a majority of the shares of Series
A Convertible Preferred Stock then outstanding; provided, however, that
notwithstanding anything herein to the contrary, the Company, will issue such
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock at the then current Conversion Price up to the Exchange Cap. If
the conversion of any shares of Series A Preferred Stock would result in the
issuance of Common Stock which in the aggregate would exceed the Exchange Cap,
the Company shall within 30 days of the Conversion Date call a meeting of its
stockholders in order to seek approval as required by the applicable rules or
regulations of Nasdaq or the Alternative Exchange, as applicable, which
stockholders meeting shall take place within 60 days of the Voluntary Conversion
Date. Until such approval or written opinion is obtained, no holder of Series A
Convertible Preferred Stock pursuant to the Securities Purchase Agreement shall
be issued, upon conversion of shares of Series A Preferred Stock, shares of
Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
shares of Series A Preferred Stock issued to such holder pursuant to the
Securities Purchase Agreement and the denominator of which is the aggregate
amount of all the shares of Series A Preferred Stock issued to the holders
pursuant to the Securities Purchase Agreement (the "Cap Allocation Amount"). In
the event that any holder of Series A Preferred Stock shall convert all of such
holder's shares of Series A Preferred Stock into a number of shares of Common
Stock which, in the aggregate, is less than such holder's Cap Allocation Amount,
then the difference between such holder's Cap Allocation Amount and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Cap Allocation Amounts of the remaining holders of Series A
Preferred Stock on a pro rata basis in proportion to the number of shares of
Series A Preferred Stock then held by each such holder. Nothing in this Section
7(a) shall limit a holder's right to request conversion of its shares of Series
A Preferred Stock or such holder's rights under Section 9 hereof.

               (c) Notwithstanding anything to the contrary set forth in Section
5 of this Certificate of Designation, at no time may a holder of shares of
Series A Preferred Stock convert shares of the Series A Preferred Stock if the
number of shares of Common Stock to be issued

                                      -17-
<PAGE>   18
pursuant to such conversion would exceed, when aggregated with all other shares
of Common Stock owned by such holder at such time, the number of shares of
Common Stock which would result in such holder owning more than 9.99% (the
"Ownership Cap") of all of the Common Stock outstanding at such time; provided,
however, that upon a holder of Series A Preferred Stock providing the Company
with 75 days notice (pursuant to Section 5(i) hereof) (the "Waiver Notice") that
such holder would like to waive Section 7(b) of this Certificate of Designation
with regard to any or all shares of Common Stock issuable upon conversion of
Series A Preferred Stock, this Section 7(b) will be of no force or effect with
regard to those shares of Series A Preferred Stock referenced in the Waiver
Notice.

          8.   Redemption.

               (a) Redemption Option Upon Major Transaction. In addition to all
other rights of the holders of Series A Preferred Stock contained herein,
simultaneous with the occurrence of a Major Transaction (as defined below), each
holder of Series A Preferred Stock shall have the right, at such holder's
option, to require the Company to redeem all or a portion of such holder's
shares of Series A Preferred Stock at a price per share of Series A Preferred
Stock equal to the greater of (i) 125% of the Liquidation Preference Amount and
(ii) the product of (A) the Conversion Rate and (B) the Closing Bid Price of the
Common Stock on the trading date immediately preceding such Major Transaction
("Major Transaction Redemption Price").

               (b) Redemption Option Upon Triggering Event. In addition to all
other rights of the holders of Series A Preferred Stock contained herein, after
a Triggering Event (as defined below), each holder of Series A Preferred Stock
shall have the right, at such holder's option, to require the Company to redeem
all or a portion of such holder's shares of Series A Preferred Stock at a price
per share of Series A Preferred Stock equal to the greater of (i) 125% of the
Liquidation Preference Amount and (ii) the product of (A) the Conversion Rate at
such time and (B) the Closing Bid Price of the Common Stock calculated as of the
date immediately preceding such Triggering Event on which the exchange or market
on which the Common Stock is traded is open ("Triggering Event Redemption Price"
and, collectively with "Major Transaction Redemption Price," the "Redemption
Price").

          (c)  "Major Transaction". A "Major Transaction" shall be deemed to
have occurred at such time as any of the following events:

               (i) the consolidation, merger or other business combination of
the Company with or into another Person (other than (A) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company or (B) a consolidation, merger or other business
combination in which holders of the Company's voting power immediately prior to
the transaction continue after the transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities).

                                      -18-
<PAGE>   19
               (ii) the sale or transfer of all or substantially all of the
Company's assets; or

               (iii) consummation of a purchase, tender or exchange offer made
to the holders of more than 30% of the outstanding shares of Common Stock.

          (d)  "Triggering Event". A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events:

               (i) the failure of the Registration Statement to be declared
effective by the SEC on or prior to the date which is 270 days after the Closing
Date, provided that the Company has failed to file the Registration Statement on
or before the Filing Date (as defined in the Registration Rights Agreement) or
respond to any and each of the SEC's comments within 15 days of the Company's
receipt of each of the SEC's comments;

               (ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights Agreement,
the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the holder of the Series A Preferred Stock for sale of the Registrable
Securities (as defined in the Registration Rights Agreement) in accordance with
the terms of the Registration Rights Agreement, and such lapse or unavailability
continues for a period of 10 consecutive trading days, provided that the cause
of such lapse or unavailability is due to factors within the control of the
Company and not due to factors solely within the control of such holder of
Series A Preferred Stock;

               (iii) the suspension from listing or the failure of the Common
Stock to be listed on the OTC Bulletin Board for a period of five (5)
consecutive days, provided, that such suspension from listing or failure to be
listed is due to factors within the control of the Company, including, but not
limited to, failure to timely file all reports required to be filed with the SEC
or to meet the net tangible assets requirements for listing, if any;

               (iv) the Company's notice to any holder of Series A Preferred
Stock, including by way of public announcement, at any time, of its inability to
comply (including for any of the reasons described in Section 9) or its
intention not to comply with proper requests for conversion of any Series A
Preferred Stock into shares of Common Stock;

               (v) the Company's failure to comply with a Conversion Notice
tendered in accordance with the provisions of this Certificate of Designation
within 10 business days after the receipt by the Company of the Conversion
Notice and the Preferred Stock Certificates; or

                                      -19-
<PAGE>   20
              (vi) the Company breaches any representation, warranty, covenant
or other term or condition of the Securities Purchase Agreement, the
Registration Rights Agreement, this Certificate of Designation or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby or hereby.

          (e) Mechanics of Redemption at Option of Buyer Upon Major Transaction.
No sooner than 15 days nor later than 10 days prior to the consummation of a
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Major Transaction") to each holder of Series A
Preferred Stock. At any time after receipt of a Notice of Major Transaction (or,
in the event a Notice of Major Transaction is not delivered at least 10 days
prior to a Major Transaction, at any time within 10 days prior to a Major
Transaction), any holder of Series A Preferred Stock then outstanding may
require the Company to redeem, effective immediately prior to the consummation
of such Major Transaction, all of the holder's Series A Preferred Stock then
outstanding by delivering written notice thereof via facsimile and overnight
courier ("Notice of Redemption at Option of Buyer Upon Major Transaction") to
the Company, which Notice of Redemption at Option of Buyer Upon Major
Transaction shall indicate (i) the number of shares of Series A Preferred Stock
that such holder is electing to redeem and (ii) the applicable Major Transaction
Redemption Price, as calculated pursuant to Section 8(a) above.

          (f) Mechanics of Redemption at Option of Buyer Upon Triggering Event.
Within one (1) day after the occurrence of a Triggering Event, the Company shall
deliver written notice thereof via facsimile and overnight courier ("Notice of
Triggering Event") to each holder of Series A Preferred Stock. At any time after
the earlier of a holder's receipt of a Notice of Triggering Event and such
holder becoming aware of a Triggering Event, any holder of Series A Preferred
Stock then outstanding may require the Company to redeem all of the Series A
Preferred Stock by delivering written notice thereof via facsimile and overnight
courier ("Notice of Redemption at Option of Buyer Upon Triggering Event") to the
Company, which Notice of Redemption at Option of Buyer Upon Triggering Event
shall indicate (i) the number of shares of Series A Preferred Stock that such
holder is electing to redeem and (ii) the applicable Triggering Event Redemption
Price, as calculated pursuant to Section 8(b) above.

          (g) Payment of Redemption Price. Upon the Company's receipt of a
Notice(s) of Redemption at Option of Buyer Upon Triggering Event or a Notice(s)
of Redemption at Option of Buyer Upon Major Transaction from any holder of
Series A Preferred Stock, the Company shall immediately notify each holder of
Series A Preferred Stock by facsimile of the Company's receipt of such Notice(s)
of Redemption at Option of Buyer Upon Triggering Event or Notice(s) of
Redemption at Option of Buyer Upon Major Transaction and each holder which has
sent such a notice shall promptly submit to the Company such holder's Preferred
Stock Certificates which such holder has elected to have redeemed. The Company
shall deliver the applicable Triggering Event Redemption Price, in the case of a
redemption pursuant to Section 8(f), to such holder within five (5) business
days after the Company's receipt of a Notice of Redemption at Option of Buyer
Upon Triggering Event and, in the case of a redemption pursuant

                                      -20-
<PAGE>   21
to Section 8(e), the Company shall deliver the applicable Major Transaction
Redemption Price immediately prior to the consummation of the Major Transaction;
provided that a holder's Preferred Stock Certificates shall have been so
delivered to the Company; provided further that if the Company is unable to
redeem all of the Series A Preferred Stock to be redeemed, the Company shall
redeem an amount from each holder of Series A Preferred Stock being redeemed
equal to such holder's pro-rata amount (based on the number of shares of Series
A Preferred Stock held by such holder relative to the number of shares of Series
A Preferred Stock outstanding) of all Series A Preferred Stock being redeemed.
If the Company shall fail to redeem all of the Series A Preferred Stock
submitted for redemption (other than pursuant to a dispute as to the arithmetic
calculation of the Redemption Price), in addition to any remedy such holder of
Series A Preferred Stock may have under this Certificate of Designation and the
Securities Purchase Agreement, the applicable Redemption Price payable in
respect of such unredeemed Series A Preferred Stock shall bear interest at the
rate of 2.0% per month (prorated for partial months) until paid in full. Until
the Company pays such unpaid applicable Redemption Price in full to a holder of
shares of Series A Preferred Stock submitted for redemption, such holder shall
have the option (the "Void Optional Redemption Option") to, in lieu of
redemption, require the Company to promptly return to such holder(s) all of the
shares of Series A Preferred Stock that were submitted for redemption by such
holder(s) under this Section 8 and for which the applicable Redemption Price has
not been paid, by sending written notice thereof to the Company via facsimile
(the "Void Optional Redemption Notice"). Upon the Company's receipt of such Void
Optional Redemption Notice(s) and prior to payment of the full applicable
Redemption Price to such holder, (i) the Notice(s) of Redemption at Option of
Buyer Upon Triggering Event or the Notice(s) of Redemption at Option of Buyer
Upon Major Transaction, as the case may be, shall be null and void with respect
to those shares of Series A Preferred Stock submitted for redemption and for
which the applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Series A Preferred Stock submitted to the Company by each
holder for redemption under this Section 8(g) and for which the applicable
Redemption Price has not been paid and (iii) the Fixed Conversion Price of such
returned shares of Series A Preferred Stock shall be adjusted to the lesser of
(A) the Fixed Conversion Price as in effect on the date on which the Void
Optional Redemption Notice(s) is delivered to the Company and (B) the lowest
Closing Bid Price during the period beginning on the date on which the Notice(s)
of Redemption of Option of Buyer Upon Major Transaction or the Notice(s) of
Redemption at Option of Buyer Upon Triggering event, as the case may be, is
delivered to the Company and ending on the date on which the Void Optional
Redemption Notice(s) is delivered to the Company; provided that no adjustment
shall be made if such adjustment would result in an increase of the Fixed
Conversion Price then in effect. Notwithstanding the foregoing, in the event of
a dispute as to the determination of the Closing Bid Price or the arithmetic
calculation of the Redemption Price, such dispute shall be resolved pursuant to
Section 5(b)(iii) above with the term "Redemption Price" being substituted for
the term "Conversion Price." A holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not effect the
Company's obligations to make any payments which have accrued prior to the date
of such notice. Payments provided for in this Section 8 shall have priority to
payments to other stockholders in connection with a Major Transaction.

                                      -21-
<PAGE>   22
               (h) Company's Redemption Option. If the Floating Conversion Price
is less than the Fixed Conversion Price, the Company may redeem all or a portion
of the Series A Preferred Stock outstanding upon five (5) days prior written
notice (the "Company's Redemption Notice") at a price per share of Series A
Preferred Stock equal to 122.5% of the Liquidation Preference Amount plus any
accrued but unpaid dividends (the "Company's Redemption Price"); provided, that
if a holder has delivered a Conversion Notice to the Company or delivers a
Conversion Notice after receipt of the Company's Redemption Notice, the shares
of Series A Preferred Stock designated to be converted may not be redeemed by
the Company; provided further that if during the period between delivery of the
Company's Redemption Notice and the Company's Redemption Date (as defined
below), a holder shall become entitled to deliver a Notice of Redemption at
Option of Buyer Upon Major Transaction or Notice of Redemption at Option of
Buyer upon Triggering Event, then the such rights of the holders shall take
precedence over the previously delivered Company Redemption Notice. The
Company's Redemption Notice shall state the date of redemption which date shall
be the sixth (6th) day after the Company has delivered the Company's Redemption
Notice (the "Company's Redemption Date"), the Company's Redemption Price and the
number of shares to be redeemed by the Company. The Company shall not send a
Company's Redemption Notice unless it has good and clear funds for a minimum of
the amount it intends to redeem in a bank account controlled by the Company. The
Company shall deliver the Company's Redemption Price to the Escrow Agent (as
defined in the Securities Purchase Agreement) within five (5) business days
after the Company has delivered the Company's Redemption Notice, provided, that
if the holder(s) delivers a Conversion Notice before the Company's Redemption
Date, then the portion of the Company's Redemption Price which would be paid to
redeem the shares of Series A Preferred Stock covered by such Conversion Notice
shall be returned to the Company upon delivery of the Common Stock issuable in
connection with such Conversion Notice to the holder(s). On the Company's
Redemption Date, the Escrow Agent shall pay the Company's Redemption Price,
subject to any adjustment pursuant to the immediately preceding sentence, to the
holder(s) on a pro rata basis, provided, however, that upon receipt by the
Escrow Agent of the Preferred Stock Certificates to be redeemed pursuant to this
Section 8(h), the Escrow Agent shall, on the next business day following the
date of receipt by the Escrow Agent of such Preferred Stock Certificates, pay
the Company's Redemption Price to the holder(s) on a pro rata basis. If the
Company fails to pay the Company's Redemption Price by the sixth (6th) business
day after the Company has delivered the Company's Redemption Notice, the
redemption will be declared null and void and the Company shall lose its right
to serve a Company's Redemption Notice pursuant to this Section 8(h) in the
future.

          9.   Inability to Fully Convert.

               (a) Holder's Option if Company Cannot Fully Convert. If, upon the
Company's receipt of a Conversion Notice or on the Mandatory Conversion Date or
Forced Conversion Date, the Company cannot issue shares of Common Stock
registered for resale under the Registration Statement for any reason,
including, without limitation, because the Company

                                      -22-
<PAGE>   23
(x) does not have a sufficient number of shares of Common Stock authorized and
available, (y) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or any of its
securities from issuing all of the Common Stock which is to be issued to a
holder of Series A Preferred Stock pursuant to a Conversion Notice or (z) fails
to have a sufficient number of shares of Common Stock registered for resale
under the Registration Statement, then the Company shall issue as many shares of
Common Stock as it is able to issue in accordance with such holder's Conversion
Notice and pursuant to Section 5(b)(ii) above and, with respect to the
unconverted Series A Preferred Stock, the holder, solely at such holder's
option, can elect to:

                   (i) require the Company to redeem from such holder those
Series A Preferred Stock for which the Company is unable to issue Common Stock
in accordance with such holder's Conversion Notice ("Mandatory Redemption") at a
price per share equal to the Triggering Event Redemption Price as of such
Conversion Date (the "Mandatory Redemption Price"); (ii) if the Company's
inability to fully convert Series A Preferred Stock is pursuant to Section
9(a)(z) above, require the Company to issue restricted shares of Common Stock in
accordance with such holder's Conversion Notice and pursuant to Section 5(b)(ii)
above;

                   (iii) void its Conversion Notice and retain or have returned,
as the case may be, the shares of Series A Preferred Stock that were to be
converted pursuant to such holder's Conversion Notice (provided that a holder's
voiding its Conversion Notice shall not effect the Company's obligations to make
any payments which have accrued prior to the date of such notice).

               (b) Mechanics of Fulfilling Holder's Election. The Company shall
immediately send via facsimile to a holder of Series A Preferred Stock, upon
receipt of a facsimile copy of a Conversion Notice from such holder which cannot
be fully satisfied as described in Section 9(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the "Inability to
Fully Convert Notice"). Such Inability to Fully Convert Notice shall indicate
(i) the reason why the Company is unable to fully satisfy such holder's
Conversion Notice, (ii) the number of Series A Preferred Stock which cannot be
converted and (iii) the applicable Mandatory Redemption Price. Such holder shall
notify the Company of its election pursuant to Section 9(a) above by delivering
written notice via facsimile to the Company ("Notice in Response to Inability to
Convert").

               (c) Payment of Redemption Price. If such holder shall elect to
have its shares redeemed pursuant to Section 9(a)(i) above, the Company shall
pay the Mandatory Redemption Price in cash to such holder within 30 days of the
Company's receipt of the holder's Notice in Response to Inability to Convert,
provided that prior to the Company's receipt of the holder's Notice in Response
to Inability to Convert the Company has not delivered a notice to such holder

                                      -23-
<PAGE>   24
stating, to the satisfaction of the holder, that the event or condition
resulting in the Mandatory Redemption has been cured and all Conversion Shares
issuable to such holder can and will be delivered to the holder in accordance
with the terms of Section 2(g). If the Company shall fail to pay the applicable
Mandatory Redemption Price to such holder on a timely basis as described in this
Section 9(c) (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Redemption Price), in addition to any remedy such
holder of Series A Preferred Stock may have under this Certificate of
Designation and the Securities Purchase Agreement, such unpaid amount shall bear
interest at the rate of 2.0% per month (prorated for partial months) until paid
in full. Until the full Mandatory Redemption Price is paid in full to such
holder, such holder may (i) void the Mandatory Redemption with respect to those
Series A Preferred Stock for which the full Mandatory Redemption Price has not
been paid, (ii) receive back such Series A Preferred Stock, and (iii) require
that the Fixed Conversion Price of such returned Series A Preferred Stock be
adjusted to the lesser of (A) the Fixed Conversion Price as in effect on the
date on which the holder voided the Mandatory Redemption and (B) the lowest
Closing Bid Price during the period beginning on the Conversion Date and ending
on the date the holder voided the Mandatory Redemption. Notwithstanding the
foregoing, if the Company fails to pay the applicable Mandatory Redemption Price
within such 30 days time period due to a dispute as to the determination of the
arithmetic calculation of the Redemption Rate, such dispute shall be resolved
pursuant to Section 5(b)(iii) above with the term "Redemption Price" being
substituted for the term "Conversion Price".

               (d) Pro Rata Conversion and Redemption. In the event the Company
receives a Conversion Notice from more than one (1) holder of Series A Preferred
Stock on the same day and the Company can convert and redeem some, but not all,
of the Series A Preferred Stock pursuant to this Section 9, the Company shall
convert and redeem from each holder of Series A Preferred Stock electing to have
Series A Preferred Stock converted and redeemed at such time an amount equal to
such holder's pro-rata amount (based on the number shares of Series A Preferred
Stock held by such holder relative to the number shares of Series A Preferred
Stock outstanding) of all shares of Series A Preferred Stock being converted and
redeemed at such time.

          10.  Vote to Change the Terms of or Issue Preferred Stock. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than three-fourths (3/4)
of the then outstanding shares of Series A Preferred Stock, shall be required
(a) for any change to this Certificate of Designation or the Company's
Certificate of Incorporation which would amend, alter, change or repeal any of
the powers, designations, preferences and rights of the Series A Preferred Stock
or (b) for the issuance of shares of Series A Preferred Stock other than
pursuant to the Securities Purchase Agreement.

          11.  Lost or Stolen Certificates. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the shares of Series
A Preferred Stock, and, in the case of

                                      -24-
<PAGE>   25
loss, theft or destruction, of any indemnification undertaking by the holder to
the Company and, in the case of mutilation, upon surrender and cancellation of
the Preferred Stock Certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided, however, the
Company shall not be obligated to re-issue preferred stock certificates if the
holder contemporaneously requests the Company to convert such shares of Series A
Preferred Stock into Common Stock.

          12. Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including, without limitation,
a decree of specific performance and/or other injunctive relief), no remedy
contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a holder's right to
pursue actual damages for any failure by the Company to comply with the terms of
this Certificate of Designation. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the Series A
Preferred Stock and that the remedy at law for any such breach may be
inadequate. Therefore the Company agrees that, in the event of any such breach
or threatened breach, the holders of the Series A Preferred Stock shall be
entitled, in addition to all other available rights and remedies, to an
injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being
required.

          13. Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all initial purchasers of the
Series A Preferred Stock and shall not be construed against any person as the
drafter hereof.

          14. Failure or Indulgence Not Waiver. No failure or delay on the part
of a holder of Series A Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -25-
<PAGE>   26
          IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true this 18th day of May, 2000.

                                   GREYSTONE DIGITAL TECHNOLOGY, INC.

                                   By: /s/ RICHARD A. SMITH
                                      ------------------------------------------
                                       Name: Richard A. Smith
                                       Title: Chief Executive Officer

                                      -26-
<PAGE>   27
                                                                       EXHIBIT I
                       GREYSTONE DIGITAL TECHNOLOGY, INC.
                                CONVERSION NOTICE

Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Preferred Stock of GreyStone Digital Technology,
Inc. (the "Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $0.001 per share (the
"Preferred Shares"), of GreyStone Digital Technology, Inc., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.

               Date of Conversion:
                                                           ---------------------

               Number of Preferred Shares to be converted:
                                                          ----------

               Stock certificate no(s). of Preferred Shares to be converted:
                                                                            ----

               The Common Stock have been sold pursuant to the Registration
Statement (as defined in the Registration Rights Agreement): YES ____ NO____

Please confirm the following information:

               Conversion Price:
                                      ------------------------------------------

               Number of shares of Common Stock
               to be issued:
                                      ------------------------------------------

Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

               Issue to:
                                             -----------------------------------
                                             -----------------------------------

               Facsimile Number:
                                             -----------------------------------

               Authorization:
                                             -----------------------------------
                                             By:
                                                --------------------------------
                                             Title:
                                                   -----------------------------

               Dated:

                                 PRICES ATTACHED

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