Document:

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                                                                     EXHIBIT 4.2

                              CONVERSION AGREEMENT

        THIS CONVERSION AGREEMENT, dated as of March 29, 2000 (this
"AGREEMENT"), by and among General Magic, Inc., a Delaware corporation (the
"COMPANY"), and the undersigned holders of the Company's Series D Preferred
Stock and Series F Preferred Stock (each individually an "INVESTOR" and
collectively the "INVESTORS").

                                   WITNESSETH:

        WHEREAS, the Company and each Investor are parties to a Securities
Purchase Agreement, dated as of March 30, 1999 (the "SERIES D PURCHASE
AGREEMENT"), pursuant to which the Company issued to the respective Investor the
Company's Series D Preferred Stock (the "SERIES D PREFERRED SHARES"), and an
Exchange Agreement, dated as of September 9, 1999 (the "EXCHANGE AGREEMENT")
pursuant to which the Company issued to the respective Investor the Company's
Series F Preferred Stock (the "SERIES F PREFERRED SHARES");

        WHEREAS, in connection with the Securities Purchase Agreement by and
among the Company and the Investors of even date herewith (the "SERIES H
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Series H Purchase Agreement, to issue and sell to the
Investors 2,200 shares of the Company's Series H Convertible Preferred Stock,
which will be convertible into shares of the Company's common stock (the "COMMON
STOCK") and warrants to purchase Common Stock;

        WHEREAS, to induce the Company to execute and deliver the Series H
Purchase Agreement, Each Investor has agreed to convert the Preferred Shares as
provided herein;

        NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
Investor hereby agree as follows:

        1.      Provided that the Closing (as defined in the Series H Purchase
Agreement) shall have occurred, each of the Investors agrees that on or prior to
the date which is 186 days after the Closing Date (as defined in the Series H
Purchase Agreement) (the "REQUIRED CONVERSION DATE"), such Investor shall have
delivered one or more conversion notices for the conversion of all of the Series
D Preferred Shares and Series F Preferred Shares held by such Investor as of the
date hereof, provided that: (a) each time that the Company delivers a Put Notice
during such 186 day period pursuant to the Common Stock Investment Agreement
dated as of July 30, 1999, as amended, between the Company and Cripple Creek
Securities, LLC, such date shall be extended for Halifax Fund, L.P., Palladin
Partners I., L.P., Palladin Overseas Fund, Limited, The Gleneagles Fund Company
and Lancer Securities, Ltd., as may be reasonably requested by Halifax Fund,
L.P. so that compliance with this conversion obligation will not force the
undersigned to become the beneficial owner of more than 4.99% of Company common
stock in the aggregate; and (b) such Investor shall not be required to deliver
any further conversion notices if at any time during such period the closing bid
price for Company Common Stock is less than $4.00.

        2.      Except as provided in the Series H Purchase Agreement, the
Series D Purchase Agreement and the Exchange Agreement shall remain in full
force and effect in accordance with their respective terms.

        3.      Miscellaneous.

               (a) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws.

               (b) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

               (c) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once

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executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

               (d) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

               (e) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

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        IN WITNESS WHEREOF, the parties have caused this Conversion Agreement to
be duly executed as of day and year first above written.

COMPANY:                        BUYERS:

GENERAL MAGIC, INC.                HFTP INVESTMENT L.L.C.
                                      By:      Promethean Asset Management
                                               L.L.C.
                                      Its:     Investment Manager
By: _______________________
Name:
Its:                                  By:
                                         -------------------------------
                                      Name:    James F. O'Brien, Jr.
                                      Its:     Managing Member

                                   RGC INTERNATIONAL INVESTORS,
                                     LDC
                                      By:      Rose Glen Capital
                                               Management, L.P.
                                      Its:     Investment Manager

                                      By:      RGC General Partner Corp.
                                      Its:     General Partner

                                      By:
                                         -------------------------------
                                      Name:    Wayne Bloch
                                      Its:     Managing Director

                                   HALIFAX FUND, L.P.
                                      By:      The Palladin Group, L.P.
                                      Its:     Attorney-in-Fact

                                      By:
                                         -------------------------------
                                      Name:    Robert Chender
                                      Title:   Managing Director

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            [PAGE 2 OF 3 OF THE CONVERSION AGREEMENT SIGNATURE PAGES]

                                   PALLADIN PARTNERS I, L.P.
                                      By:      Palladin Asset Management, L.L.C.
                                      Its:     General Partner

                                      By:
                                         -------------------------------
                                      Name:    Robert Chender
                                      Title:   Managing Director

                                   PALLADIN OVERSEAS FUND
                                   LIMITED
                                      By:      The Palladin Group L.P.
                                      Its:     Attorney-in-Fact

                                      By:
                                         -------------------------------
                                      Name:    Robert Chender
                                      Title:   Managing Director

                                   THE GLENEAGLES FUND COMPANY
                                      By:      The Palladin Group L.P
                                      Its:     Attorney-in-Fact

                                      By:
                                         -------------------------------
                                      Name:    Robert Chender
                                      Title:   Managing Director

                                   LANCER SECURITIES LTD.
                                      By:      The Palladin Group L.P
                                      Its:     Attorney-in-Fact

                                      By:
                                         -------------------------------
                                      Name:    Robert Chender
                                      Title:   Managing Director

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            [PAGE 3 OF 3 OF THE CONVERSION AGREEMENT SIGNATURE PAGES]

                                      FISHER CAPITAL LTD.

                                      By:
                                         -------------------------------
                                      Name:       Daniel Hopkins
                                      Its:        Authorized Signatory

                                      WINGATE CAPITAL LTD.

                                      By:
                                         -------------------------------
                                      Name:       Daniel Hopkins
                                      Its:        Authorized Signatory

                                      CONSECO DIRECT LIFE

                                      By:
                                         -------------------------------
                                         Name:
                                         Its:<PAGE>   1
                                                                     EXHIBIT 4.3

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES
               AND RIGHTS OF SERIES H CONVERTIBLE PREFERRED STOCK
                                       OF
                               GENERAL MAGIC, INC.

        General Magic, Inc. (the "COMPANY"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held adopted resolutions
(i) authorizing a series of the Company's previously authorized preferred stock,
par value $.001 per share, and (ii) providing for the designations, preferences
and relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of Two Thousand Two Hundred (2,200) shares
of Series H Convertible Preferred Stock of the Company, as follows:

               RESOLVED, that the Company is authorized to issue 2,200 shares of
        Series H Convertible Preferred Stock (the "PREFERRED SHARES"), par value
        $.001 per share, which shall have the following powers, designations,
        preferences and other special rights:

(1) Dividends. The Preferred Shares shall not bear any dividends.

(2)

(3) Holder's Conversion of Preferred Shares. A holder of Preferred Shares shall
have the right, at such holder's option, to convert the Preferred Shares into
shares of the Company's common stock, par value $.001 per share, including any
related purchase rights (the "COMMON STOCK"), on the following terms and
conditions:

(4)

        (a) Conversion Right. At any time or times on or after the Issuance
        Date, any holder of Preferred Shares shall be entitled to convert any
        whole number of Preferred Shares into fully paid and nonassessable
        shares (rounded to the nearest number of whole shares in accordance with
        Section 2(g)) of Common Stock, at the Conversion Rate (as defined
        below); provided, however, that in no event shall any holder be entitled
        to convert Preferred Shares in excess of that number of Preferred Shares
        which, upon giving effect to such conversion, would cause the aggregate
        number of shares of Common Stock beneficially owned by the holder and
        its affiliates to exceed 4.99% of the outstanding shares of Common Stock
        following such conversion. For purposes of the foregoing proviso, the
        aggregate number of shares of Common Stock beneficially owned by the
        holder and its affiliates shall include the number of shares of Common
        Stock issuable upon conversion of the Preferred Shares

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        with respect to which the determination of such proviso is being made,
        but shall exclude the number of shares of Common Stock which would be
        issuable upon (i) conversion of the remaining, nonconverted Preferred
        Shares beneficially owned by the holder and its affiliates, and (ii)
        exercise or conversion of the unexercised or unconverted portion of any
        other securities of the Company (including, without limitation, any
        warrants) subject to a limitation on conversion or exercise analogous to
        the limitation contained herein beneficially owned by the holder and its
        affiliates. Except as set forth in the preceding sentence, for purposes
        of this Section 2(a), beneficial ownership shall be calculated in
        accordance with Section 13(d) of the Securities Exchange Act of 1934, as
        amended. For the purposes of this Section 2(a), in determining the
        number of outstanding shares of Common Stock a holder may rely on the
        number of outstanding shares of Common Stock as reflected in (1) the
        Company's most recent Form 10-Q or Form 10-K, as the case may be, (2) a
        more recent public announcement by the Company or (3) any other notice
        by the Company or its transfer agent setting forth the number of shares
        of Common Stock outstanding. For any reason at any time, upon the
        written or oral request of any holder, the Company shall within one (1)
        Business Day confirm orally and in writing to any such holder the number
        of shares of Common Stock outstanding as of the date of such request. In
        any case, the number of outstanding shares of Common Stock shall be
        determined after giving effect to conversions of Preferred Shares by
        such holder since the date as of which such number of outstanding shares
        of Common Stock was reported.

        (a) Conversion Rate and Other Definitions. The number of shares of
        Common Stock issuable upon conversion of each of the Preferred Shares
        pursuant to Sections (2)(a) and 2(f) and Section 5 shall be determined
        according to the following formula (the "CONVERSION RATE"):

                             Conversion Amount
                             -----------------
                              Conversion Price

        For purposes of this Certificate of Designations, the following terms
shall have the following meanings:

                      (i) "ADDITIONAL AMOUNT" means, on a per share basis, the
result of the following formula: (0.02)(N/365)($10,000);

                      (ii) "CONVERSION PRICE" means, as of any Conversion Date
(as defined below) or other date of determination, the Fixed Conversion Price,
subject to adjustment as provided herein;

                      (iii) "FIXED CONVERSION PRICE" means the greater of (I)
92% of the average of the Closing Bid Prices of the Common Stock for the 10
consecutive trading days beginning on and including the first trading day after
the date on which the Company files a Form 8-K with the Securities and Exchange
Commission (the "SEC") describing the terms of the offering of Preferred Shares
pursuant to Section 4(i) of the Securities Purchase Agreement

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(as defined below) or (II) $5.00 (subject to adjustment for stock splits, stock
dividends, stock combinations and other similar transactions), subject in each
case to adjustment as provided herein;

                      (iv) "CONVERSION AMOUNT" means the sum of (i) the
Additional Amount and (ii) $10,000;

                      (v) "CLOSING BID PRICE" means, for any security as of any
date, the last closing bid price for such security on The Nasdaq National Market
as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if The Nasdaq
National Market is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price of such security as reported
by Bloomberg, or, if no last closing trade price is reported for such security
by Bloomberg, the average of the bid prices of any market makers 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 Preferred Shares (including for
purposes of this determination any Preferred Shares with respect to which the
Closing Bid Price is being determined). If the Company and the holders of
Preferred Shares are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved pursuant to Section 2(e)(iii). All
such determinations shall be appropriately adjusted for any stock dividend,
stock split or other similar transaction during any period for which the Closing
Bid Price is being determined.

                      (vi) "ISSUANCE DATE" means, with respect to each Preferred
Share, the date of issuance of the Preferred Shares;

                      (vii) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed;

                      (viii) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Preferred Shares;

                      (ix) "STATED VALUE" means $10,000;

                      (x) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Preferred Shares;

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                      (xi) "CONVERSION SHARES" means shares of Common Stock
issuable upon conversion of Preferred Shares and any shares of Common Stock
issuable as payment of Registration Delay Payments (as defined in the
Registration Rights Agreement); and

                      (xii) "N" means the number of days from, but excluding,
the Issuance Date through and including the Conversion Date, the Maturity Date
(as defined in Section 2(f)) or other date of determination for such Preferred
Share, for which such determination is being made.

(a) Adjustment to Conversion Price -- Dilution and Other Events. In order to
prevent dilution of the rights granted under this Certificate of Designations,
the Conversion Price will be subject to adjustment from time to time as provided
in this Section 2(c).

(b)

                      (i) Adjustment of Fixed Conversion Price upon Subdivision
        or Combination of Common Stock. If the Company at any time subdivides
        (by any stock split, stock dividend, recapitalization or otherwise) one
        or more classes of its outstanding shares of Common Stock into a greater
        number of shares, the Fixed Conversion Price in effect immediately prior
        to such subdivision will be proportionately reduced. If the Company at
        any time combines (by combination, reverse stock split or otherwise) one
        or more classes of its outstanding shares of Common Stock into a smaller
        number of shares, the Fixed Conversion Price in effect immediately prior
        to such combination will be proportionately increased.

                      (ii) Reorganization, Reclassification, Consolidation,
        Merger or Sale. Any recapitalization, reorganization, reclassification,
        consolidation, merger, sale of all or substantially all of the Company's
        assets to another Person (as defined below) or other transaction which
        is effected in such a way that holders of Common Stock are entitled to
        receive (either directly or upon subsequent liquidation) stock,
        securities or assets with respect to or in exchange for Common Stock is
        referred to herein as "ORGANIC CHANGE." Prior to the consummation of any
        Organic Change, the Company will make appropriate provision (in form and
        substance reasonably satisfactory to the holders of a majority of the
        Preferred Shares then outstanding) to insure that each of the holders of
        the Preferred Shares will thereafter have the right to acquire and
        receive in lieu of or in addition to (as the case may be) the shares of
        Common Stock otherwise acquirable and receivable upon the conversion of
        such holder's Preferred Shares, such shares of stock, securities or
        assets that would have been issued or payable in such Organic Change
        with respect to or in exchange for the number of shares of Common Stock
        which would have been acquirable and receivable upon the conversion of
        such holder's Preferred Shares had such Organic Change not taken place
        (without taking into account any limitations or restrictions on the
        timing or amount of conversions). In any such case, the Company will
        make appropriate provision (in form and substance satisfactory to the
        holders of a majority of the Preferred Shares then outstanding) with
        respect to such holders' rights and interests to insure that all of the
        provisions of this Certificate of Designations, including the

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        provisions of this Section 2(c) and Section 2(d), will thereafter be
        applicable to the Preferred Shares. The Company will not effect any such
        consolidation, merger or sale, unless prior to the consummation thereof,
        the successor entity (if other than the Company) resulting from
        consolidation or merger or the entity purchasing such assets and, if an
        entity different from the successor entity, the entity whose capital
        stock or assets the holders of the Common Stock are entitled to receive
        as a result of such Organic Change, assumes, by written instrument (in
        form and substance reasonably satisfactory to the holders of a majority
        of the Preferred Shares then outstanding), all of the obligations of the
        Company under this Certificate of Designations including the obligations
        to deliver to each holder of Preferred Shares such shares of stock,
        securities or assets as, in accordance with the foregoing provisions,
        such holder may be entitled to acquire. "PERSON" shall mean an
        individual, a limited liability company, a partnership, a joint venture,
        a corporation, a trust, an unincorporated organization and a government
        or any department or agency thereof.

                      (iii) Certain Events. If any event occurs of the type
        contemplated by the provisions of this Section 2(c) but not expressly
        provided for by such provisions, then the Company's Board of Directors
        will make an appropriate adjustment in the Conversion Price so as to
        protect the rights of the holders of the Preferred Shares; provided,
        however, that no such adjustment will increase the Conversion Price as
        otherwise determined pursuant to this Section 2(c).

                      (iv) Notices.

                              (A) Immediately upon any adjustment of the
        Conversion Price but in no event later than two (2) Business Days after
        the date of such adjustment, the Company will give written notice
        thereof to each holder of the Preferred Shares, setting forth in
        reasonable detail and certifying the calculation of such adjustment.

                              (B) The Company will give written notice to each
        holder of the Preferred Shares at least ten (10) days prior to the date
        on which the Company closes its books or takes a record (I) with respect
        to any dividend or distribution upon the Common Stock, (II) with respect
        to any pro rata subscription offer to holders of Common Stock, or (III)
        for determining rights to vote with respect to any Organic Change,
        dissolution or liquidation and in no event shall such notice be provided
        to such holder prior to such information being made known to the public.

                              (C) The Company will also give written notice to
        each holder of the Preferred Shares at least ten (10) days prior to the
        date on which any Organic Change, dissolution or liquidation 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.

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        (a) Purchase Rights. In addition to any adjustments of the Conversion
        Price pursuant to Section 2(c), if at any time after the applicable
        Issuance Date the Company grants, issues or sells any Options,
        Convertible Securities or rights to purchase stock, warrants, securities
        or other property pro rata to the record holders of any class of Common
        Stock (the "PURCHASE RIGHTS"), then the holders of the Preferred Shares
        will be entitled to acquire, upon the terms applicable to such Purchase
        Rights, the aggregate Purchase Rights which such holder could have
        acquired if such holder had held the number of shares of Common Stock
        acquirable upon complete conversion of the Preferred Shares (without
        taking into account any limitations or restrictions on the timing or
        amount of conversions) immediately before the date on which a record is
        taken for the grant, issuance or sale of such Purchase Rights, or, if no
        such record is taken, the date as of which the record holders of the
        Common Stock are to be determined for the grant, issue or sale of such
        Purchase Rights.

        (a) Mechanics of Conversion. Subject to the Company's inability to fully
        satisfy its obligations under a Conversion Notice (as defined below) as
        provided for in Section 4:

        (i) Holder's Delivery Requirements. To convert Preferred Shares into
        full shares of Common Stock on any date (the "CONVERSION DATE"), the
        holder thereof shall (A) transmit by facsimile (or otherwise deliver),
        for receipt on or prior to 5:00 p.m. Pacific 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 its designated
        transfer agent (the "TRANSFER AGENT"), and (B) surrender to a common
        carrier, for delivery to the Company or the Transfer Agent as soon as
        practicable following such date, the original certificate(s)
        representing the Preferred Shares being converted (or an indemnification
        undertaking with respect to such shares in the case of their loss, theft
        or destruction) (the "PREFERRED STOCK CERTIFICATE(s)") and the
        originally executed Conversion Notice.

        (i) Company's Response. Upon receipt by the Company of a facsimile copy
        of a Conversion Notice, the Company shall as soon as practicable, but in
        any event not later than the next Business Day, send, via facsimile, a
        confirmation of receipt of such Conversion Notice to such holder. Upon
        receipt by the Company or the Transfer Agent of the Preferred Stock
        Certificate(s) to be converted pursuant to a Conversion Notice, together
        with the originally executed Conversion Notice, the Company or the
        Transfer Agent (as applicable) shall, subject to Section 2(e)(iii)
        below, on the next Business Day following the date of receipt of such
        Preferred Stock Certificate(s), (I) issue and surrender to a common
        carrier for overnight delivery to the address 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, or (II) credit such aggregate number of shares
        of Common Stock to which the holder shall be entitled to the holder's or
        its designee's balance account with The Depository Trust Company. If the
        number of Preferred Shares represented by the Preferred Stock
        Certificate(s) submitted for conversion is greater than the number of

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        Preferred Shares being converted, then the Company or Transfer Agent, as
        the case may be, shall, subject to Section 2(e)(iii) below, as soon as
        practicable and in no event later than two (2) Business Days after
        receipt of the Preferred Stock Certificate(s) and at its own expense,
        issue and deliver to the holder a new Preferred Stock Certificate
        representing the number of Preferred Shares not converted.

        (i) Dispute Resolution. In the case of a dispute as to the determination
        of the fair market value of the Common Stock (pursuant to Section
        2(b)(v)) or the arithmetic calculation of the Conversion Rate, 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
        within one (1) Business Day of receipt of such holder's Conversion
        Notice. If such holder and the Company are unable to agree upon the
        determination of the fair market value of the Common Stock (pursuant to
        Section 2(b)(v)) or arithmetic calculation of the Conversion Rate 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 fair market value of the Common Stock to an independent,
        reputable investment bank, or (B) the disputed arithmetic calculation of
        the Conversion Rate to its independent, outside accountant. The Company
        shall cause the investment bank or the 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 two (2) Business Days 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.

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

        (i) Company's Failure to Timely Convert. If within five (5) Business
        Days after the Company's or the Transfer Agent's receipt of the
        Preferred Stock Certificate(s) to be converted and the Conversion Notice
        the Company shall fail (I) to issue a certificate for the number of
        shares of Common Stock to which a holder is entitled or to credit the
        holder's balance account with The Depository Trust Company for such
        number of shares of Common Stock to which the holder is entitled upon
        such holder's conversion of the Preferred Shares, pursuant to Section
        2(e)(ii), or (II) to issue a new Preferred Stock Certificate
        representing the number of Preferred Shares to which such holder is
        entitled, pursuant to Section 2(e)(ii), in addition to all other
        available remedies which such holder may pursue hereunder and under the
        Securities Purchase Agreement (including indemnification pursuant to
        Section 8 thereof), the Company shall pay additional damages to such
        holder on each date after such fifth (5th) Business Day that such
        conversion or delivery of such Preferred Stock Certificates, as the case
        may be, is not timely effected in an amount equal to 0.5% of the product
        of (A) the

<PAGE>   8
        sum of the number of shares of Common Stock not issued to the holder on
        a timely basis pursuant to Section 2(e)(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
        2(e)(ii), the number of shares of Common Stock issuable upon conversion
        of the Preferred Shares 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
        2(e)(ii); and (B) the average of the Closing Bid Prices of the Common
        Stock for the three (3) consecutive trading days immediately preceding
        the last possible date which the Company could have issued such Common
        Stock and the Preferred Stock Certificate, as the case may be, to such
        holder without violating Section 2(e)(ii).

        (a) Mandatory Conversion or Redemption at Maturity at Company's Option.
        If any Preferred Shares remain outstanding on the Maturity Date for such
        Preferred Shares, then all such Preferred Shares, at the Company's
        option, either (i) shall be converted at the Conversion Price for such
        Preferred Shares as of such date without the holders of such Preferred
        Shares being required to give a Conversion Notice on the Maturity Date
        (a "MATURITY DATE MANDATORY CONVERSION"), or (ii) shall be redeemed as
        of such date for an amount in cash per Preferred Share (the "MATURITY
        DATE REDEMPTION PRICE") equal to the Conversion Amount on the Maturity
        Date (a "MATURITY DATE MANDATORY REDEMPTION"). The Company shall be
        deemed to have elected a Maturity Date Mandatory Conversion unless it
        delivers written notice to each holder of Preferred Shares at least 25
        Business Days prior to the Maturity Date of its election to effect a
        Maturity Date Mandatory Redemption. If the Company elects a Maturity
        Date Mandatory Redemption, then on the Maturity Date the Company shall
        pay to each holder of Preferred Shares outstanding on the Maturity Date
        for such Preferred Shares, by wire transfer of immediately available
        funds, an amount per Preferred Share equal to the Maturity Date
        Redemption Price. If the Company elects a Maturity Date Mandatory
        Redemption and fails to redeem all of the Preferred Shares outstanding
        on the Maturity Date by payment of the Maturity Date Redemption Price,
        then in addition to any remedy such holder of Preferred Shares may have
        under this Certificate of Designations, the Securities Purchase
        Agreement and the Registration Rights Agreement, (X) the applicable
        Maturity Date Redemption Price payable in respect of such unredeemed
        Preferred Shares shall bear interest at the rate of 2.0% per month,
        prorated for partial months, until paid in full, and (Y) any holder of
        Preferred Shares shall have the option to require the Company to convert
        any or all of such holder's Preferred Shares that the Company elected to
        redeem under this Section 2(f) and for which the Maturity Date
        Redemption Price (together with any interest thereon) has not been paid
        into the number of shares of Common Stock such holder would have
        received if such holder had converted such Preferred Shares at a
        conversion price equal to the Fixed Conversion Price on the Maturity
        Date. Promptly following the Maturity Date, all holders of Preferred
        Shares shall surrender all Preferred Stock Certificates, duly endorsed
        for cancellation, to the Company or the Transfer Agent. Notwithstanding
        anything to the contrary in this Section 2(f), the Company shall not be
        entitled to elect a Maturity Date Mandatory Conversion and shall be
        deemed to have

<PAGE>   9
        elected a Maturity Date Mandatory Redemption with respect to those
        Preferred Shares which, if converted, would exceed the number of shares
        of Common Stock which the Company is permitted and authorized to issue
        upon conversion of such Preferred Shares. "MATURITY DATE" means, with
        respect to any Preferred Share, the date which is two (2) years after
        the Issuance Date of such Preferred Share, provided that if the Company
        has elected a Maturity Date Mandatory Conversion, has failed to give
        notice to elect a Maturity Date Mandatory Redemption at least 25
        Business Days prior to the Maturity Date or has failed to pay the
        Maturity Date Redemption Price in a timely manner as described above,
        then, at the option of at least two-thirds (2/3) of the Preferred Shares
        then outstanding, the Maturity Date shall be extended for any Preferred
        Shares for as long as (A) a Triggering Event shall have occurred and be
        continuing, or (B) an event shall have occurred and be continuing which
        with the passage of time and the failure to cure would result in a
        Triggering Event.

        (a) Fractional Shares. The Company shall not issue any fraction of a
        share of Common Stock upon any conversion. All shares of Common Stock
        (including fractions thereof) issuable upon conversion of more than one
        Preferred Share by a holder thereof shall be aggregated for purposes of
        determining whether the conversion would result in the issuance of a
        fraction of a share of Common Stock. If, after the aforementioned
        aggregation, the issuance would result in the issuance of a fraction of
        a share of Common Stock, the Company shall round such fraction of a
        share of Common Stock down to the nearest whole share.

        (a) Taxes. The Company shall pay any and all taxes which may be imposed
        upon it other than income and franchise taxes of the holder of Preferred
        Shares, with respect to the issuance and delivery of shares of Common
        Stock upon the conversion of the Preferred Shares.

        (1) Redemption at Option of Holders.

        (a) Intentionally Omitted.

        (a) Redemption Option Upon Triggering Event. In addition to all other
        rights of the holders of Preferred Shares contained herein, simultaneous
        with or after the occurrence of a Triggering Event (as defined below),
        each holder of Preferred Shares shall have the right, at such holder's
        option, to require the Company to redeem all or a portion of such
        holder's Preferred Shares at a price per Preferred Share equal to the
        greater of (i) 130% of the Conversion Amount; and (ii) the product of
        (A) the Conversion Rate on the date of such holder's delivery of a
        Notice of Redemption at Option of Holder Upon Triggering Event (as
        defined in Section 3(f)), and (B) the greater of (x) the Closing Bid
        Price on the trading day immediately preceding such Triggering Event or
        (y) the Closing Bid Price on the date of the holder's delivery to the
        Company of a Notice of Redemption at Option of Buyer Upon Triggering
        Event (as defined below) or, if such date of delivery is not a trading
        day, the next date on which

<PAGE>   10
        the exchange or market on which the Common Stock is traded is open (the
        "TRIGGERING EVENT REDEMPTION PRICE").

        (a) Intentionally Omitted.

        (a) "Triggering Event". A "TRIGGERING EVENT" shall be deemed to have
        occurred at such time as the Company's notice to any holder of Preferred
        Shares, including by way of public announcement, at any time, of its
        intention not to comply with proper requests for conversion of any
        Preferred Shares into shares of Common Stock, including due to any of
        the reasons set forth in Section 4(a) below (other than clause (y) of
        Section 4(a)), or, subject to Section 2(e)(iii), the Company's failure
        to deliver Conversion Shares within five (5) days of the Conversion
        Date.

        (a) Intentionally Omitted.

        (a) Mechanics of Redemption at Option of Buyer Upon Triggering Event.
        Within one (1) Business Day after the occurrence of a Triggering Event,
        the Company shall deliver written notice thereof via facsimile and
        overnight courier (a "NOTICE OF TRIGGERING EVENT") to each holder of
        Preferred Shares. 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 Preferred Shares then outstanding may
        require the Company to redeem all or a portion of the holder's Preferred
        Shares then outstanding by delivering written notice thereof via
        facsimile and overnight courier (a "NOTICE OF REDEMPTION AT OPTION OF
        HOLDER UPON TRIGGERING EVENT") to the Company; provided that such Notice
        of Redemption at Option of Holder upon Triggering Event may only be sent
        during the period beginning on and including the date of the occurrence
        of the Triggering Event and ending on and including the later of the
        date which is (a) 30 days after the date on which such holder of the
        Preferred Shares receives a Notice of Triggering Event from the Company
        with respect to such Triggering Event and (b) the date on which such
        Triggering Event is cured and such holder receives written notice from
        the Company confirming such Triggering Event has been cured, which
        Notice of Redemption at Option of Holder Upon Triggering Event shall
        indicate (i) the number of Preferred Shares that such holder is
        submitting for redemption, and (ii) the applicable Triggering Event
        Redemption Price, as calculated pursuant to Section 3(b).

        (a) Payment of Redemption Price. Upon the Company's receipt of a
        Notice(s) of Redemption at Option of Holder Upon Triggering Event from
        any holder of Preferred Shares, the Company shall immediately notify
        each holder of Preferred Shares by facsimile of the Company's receipt of
        such Notice(s) of Redemption at Option of Holder Upon Triggering Event
        and each holder which has sent such a notice shall promptly submit to
        the Company or its Transfer Agent 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

<PAGE>   11
        pursuant to Section 3(f), to such holder within five (5) Business Days
        after the Company's receipt of a Notice of Redemption at Option of
        Holder Upon Triggering Event; provided that such holder's Preferred
        Stock Certificates shall have been so delivered to the Company; and
        provided further that if the Company is unable to redeem all of the
        Preferred Shares to be redeemed, the Company shall redeem an amount from
        each holder of Preferred Shares being redeemed equal to such holder's
        pro-rata amount (based on the number of Preferred Shares held by such
        holder relative to the number of Preferred Shares outstanding) of all
        Preferred Shares being redeemed. If the Company shall fail to redeem all
        of the Preferred Shares submitted for redemption, in addition to any
        remedy such holder of Preferred Shares may have under this Certificate
        of Designations, the Securities Purchase Agreement and the Registration
        Rights Agreement, the applicable Triggering Event Redemption Price
        payable in respect of such unredeemed Preferred Shares shall bear
        interest at the rate of 1.5% per month (pro rated for partial months)
        until paid in full. Until the Company pays such unpaid applicable
        Triggering Event Redemption Price in full to a holder of Preferred
        Shares 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 Preferred
        Shares that were submitted for redemption by such holder(s) under this
        Section 3 and for which the applicable Triggering Event 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 Triggering Event Redemption Price to such holder,
        (i) the Notice(s) of Redemption at Option of Holder Upon Triggering
        Event shall be null and void with respect to those Preferred Shares
        submitted for redemption and for which the applicable Triggering Event
        Redemption Price has not been paid and (ii) the Company shall
        immediately return any Preferred Shares submitted to the Company by each
        holder for redemption under this Section 3(g) and for which the
        applicable Triggering Event Redemption Price has not been paid.
        Notwithstanding the foregoing, in the event of a dispute as to the
        determination of the Closing Bid Price or the arithmetic calculation of
        the Triggering Event Redemption Price, such dispute shall be resolved
        pursuant to Section 2(e)(iii) above with the term "Closing Bid Price"
        being substituted for the term "fair market value" and the term
        "Triggering Event Redemption Price" being substituted for the term
        "Conversion Rate". A holder's delivery of a Void Optional Redemption
        Notice and exercise of its rights following such notice shall not affect
        the Company's obligations to make any payments (other than payments of
        the Triggering Event Redemption Price with respect to such redemption)
        which have accrued prior to the date of such notice.

(a)     Intentionally Omitted.

(b)

(c)     Intentionally Omitted.

<PAGE>   12
        (1) 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 Maturity Date, the
        Company can not issue shares of Common Stock registered for resale under
        the Registration Statement (or which are exempt from the registration
        requirements under the 1933 Act pursuant to Rule 144(k) under the 1933
        Act) for any reason, including, without limitation, because the Company
        (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 its Securities from issuing all of the Common Stock
        which is to be issued to a holder of Preferred Shares 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 2(e) and, with respect to the unconverted Preferred
        Shares, the holder, solely at such holder's option, can elect to:

        (i) if the Company's inability to fully convert Preferred Shares is
        pursuant to Section 4(a)(z), require the Company to issue restricted
        shares of Common Stock in accordance with such holder's Conversion
        Notice and pursuant to Section 2(e); or

        (i) void its Conversion Notice and retain or have returned, as the case
        may be, the nonconverted Preferred Shares 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).

        (a) Mechanics of Fulfilling Holder's Election. The Company shall
        immediately send via facsimile to a holder of Preferred Shares, upon
        receipt of a facsimile copy of a Conversion Notice from such holder
        which cannot be fully satisfied as described in Section 4(a), 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, and (ii) the
        number of Preferred Shares which cannot be converted. Such holder shall
        notify the Company of its election pursuant to Section 4(a) above by
        delivering written notice via facsimile to the Company within 10
        Business Days after such holder's receipt of such Inability to Fully
        Convert Notice.

        (a) Pro Rata Conversion and Redemption. In the event the Company
        receives a Conversion Notice or Notice of Redemption at Option of Buyer
        Upon Triggering Event from more than one holder of Preferred Shares on
        the same day and

<PAGE>   13
        the Company can convert and/or redeem some, but not all, of the
        Preferred Shares pursuant to this Section 4, the Company shall convert
        and/or redeem from each holder of Preferred Shares electing to have
        Preferred Shares converted and/or redeemed at such time an amount equal
        to such holder's pro-rata amount (based on the number of Preferred
        Shares held by such holder relative to the number of Preferred Shares
        outstanding) of all Preferred Shares being converted and redeemed at
        such time.

(1) Conversion at the Company's Election. At any time after the date which is
the later of (a) the date which is one (1) year after the applicable Issuance
Date and (b) the date on which the Registration Statement is declared effective,
the Company shall have the right, in its sole discretion, to require that all,
but not less than all, of such outstanding Preferred Shares be converted
("CONVERSION AT COMPANY'S ELECTION") at the Conversion Price then in effect;
provided that the Condition to Conversion at the Company's Election (as set
forth below) is satisfied. The Company shall exercise its right to Conversion at
Company's Election by providing each holder of Preferred Shares written notice
(by facsimile and overnight courier) ("NOTICE OF CONVERSION AT COMPANY'S
ELECTION") at least ten trading days prior to the date selected by the Company
for conversion ("COMPANY'S ELECTION CONVERSION DATE"). The Notice of Conversion
at Company's Election shall indicate the Company's Election Conversion Date,
which date shall be not less than ten or more than 30 trading days after each
holder's receipt of such notice. All Preferred Shares converted in accordance
with the provision of this Section 5 shall be converted as of the Company's
Election Conversion Date in accordance with Section 2 as if the holders of such
Preferred Shares had given the Conversion Notice on the Company's Election
Conversion Date. All holders of Preferred Shares shall thereupon and within two
(2) Business Days after the Company's Election Conversion Date surrender all
Preferred Stock Certificates, duly endorsed for cancellation, to the Company.
"CONDITION TO CONVERSION AT THE COMPANY'S ELECTION" means the following
condition: on each day during the period beginning 20 trading days prior to the
Company's Election Conversion Date and ending on and including the Company's
Election Conversion Date, no Grace Period (as defined in Section 3(f) of the
Registration Rights Agreement) shall be in effect and the Registration Statement
shall have been effective and available for the sale of all of the Registrable
Securities. Notwithstanding the above, any holder of Preferred Shares may
convert such shares into Common Stock pursuant to Section 2(a) on or prior to
the date immediately preceding the Company's Election Conversion Date.

(2)

(3) Redemption at the Company's Election Upon Change of Control. At any time or
times on or after the date the Company publicly discloses a Change of Control
Transaction (as defined below), the Company shall have the right, in its sole
discretion, to require that all, but not less than all, of the outstanding
Preferred Shares be redeemed ("REDEMPTION AT COMPANY'S ELECTION") at a price per
Preferred Share equal to 115% of Conversion Amount (the "CHANGE OF CONTROL
REDEMPTION PRICE"); provided that the Conditions to Redemption at the Company's
Election (as set forth below) are satisfied. The Company shall exercise its
right to Redemption at Company's Election by providing each holder of Preferred
Shares written notice ("NOTICE OF REDEMPTION AT COMPANY'S ELECTION") after the
public disclosure of a proposed, pending or intended Change of Control
Transaction and at least ten (10) trading days prior to the date of consummation
of the Change of Control Transaction ("COMPANY'S

<PAGE>   14
ELECTION REDEMPTION DATE"). The Notice of Redemption at Company's Election shall
indicate the anticipated Company's Election Redemption Date. If the Company has
exercised its right of Redemption at Company's Election and the conditions to
such Redemption at Company's Election have been satisfied, then all Preferred
Shares outstanding at the time of the consummation of the Change of Control
Transaction shall be redeemed as of the Company's Election Redemption Date by
payment by the Company to each holder of Preferred Shares of the Change of
Control Redemption Price concurrent with the closing of the Change of Control
Transaction. All holders of Preferred Shares shall thereupon and within two (2)
Business Days after the Company's Election Redemption Date, or such earlier date
as the Company and each holder of Preferred Shares mutually agree, surrender all
outstanding Preferred Stock Certificates, duly endorsed for cancellation, to the
Company. If the Company fails to pay the full Change of Control Redemption Price
with respect to any Preferred Shares concurrently with the closing of the Change
of Control Transaction, then the Redemption at Company's Election shall be null
and void with respect to such Preferred Shares and the holder of such Preferred
Shares shall be entitled to all the rights of a holder of outstanding Preferred
Shares set forth in this Certificate of Designations. "CONDITIONS TO REDEMPTION
AT THE COMPANY'S ELECTION" means the following conditions: (i) on each day
during the period beginning on the date the Company delivers its Notice of
Redemption at Company's Election to each holder of the Preferred Shares and
ending on and including the Company's Election Redemption Date, no Grace Period
(as defined in Section 3(f) of the Registration Rights Agreement) shall be in
effect and the Registration Statement shall have been effective and available
for the sale of all of the Registrable Securities; and (ii) during the period
beginning on the Issuance Date and ending on and including the Company's
Election Redemption Date, the Company shall have delivered Conversion Shares
upon conversion of the Preferred Shares to the Buyers on a timely basis as set
forth in Section 2(e)(ii) of this Certificate of Designations; and (iii) the
Company otherwise has satisfied in all material respects its obligations and is
not in default in any material respect under this Certificate of Designations,
the Securities Purchase Agreement, the Warrants and the Registration Rights
Agreement. Notwithstanding the above, any holder of Preferred Shares may convert
such shares (including Preferred Shares selected for redemption) into Common
Stock pursuant to Section 2(a) on or prior to the date immediately preceding the
Company's Election Redemption Date. For purposes of this Section 6, "CHANGE OF
CONTROL TRANSACTION" means the consolidation, merger or other business
combination of the Company with or into another person (other than (A) 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, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company).

(4)

(5) Reissuance of Certificates. In the event of a conversion or redemption
pursuant to this Certificate of Designations of less than all of the Preferred
Shares represented by a particular Preferred Stock Certificate, the Company
shall promptly cause to be issued and delivered to the holder of such Preferred
Shares a preferred stock certificate representing the remaining Preferred Shares
which have not been so converted or redeemed.

<PAGE>   15
(6)

(7) Reservation of Shares. The Company shall, so long as any of the Preferred
Shares are outstanding, reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of the
Preferred Shares, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Preferred Shares then
outstanding (without regard to any limitations on conversions) and any
additional Preferred Shares which persons have the right to acquire under the
Securities Purchase Agreement (as if such additional Preferred Shares were
issued and outstanding); provided that the number of shares of Common Stock so
reserved shall at no time be less than the number of shares of Common Stock for
which the Preferred Shares are at any time convertible. The initial number of
shares of Common Stock reserved for conversion of the Preferred Shares and each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Preferred Shares based on the number of Preferred Shares held
by each holder at the time of issuance of the Preferred Shares 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 Preferred Shares, 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 Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holder.

(8)

(9) Voting Rights. Holders of Preferred Shares shall have no voting rights,
except as required by law, including but not limited to the General Corporation
Law of the State of Delaware, and as expressly provided in this Certificate of
Designations.

(10)

(11) Liquidation, Dissolution, Winding-Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of the Preferred Shares shall be entitled to receive in cash out of the assets
of the Company, whether from capital or from earnings available for distribution
to its stockholders (the "PREFERRED FUNDS"), before any amount shall be paid to
the holders of any of the capital stock of the Company of any class junior in
rank to the Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the Conversion Amount; provided
that, if the Preferred Funds are insufficient to pay the full amount due to the
holders of Preferred Shares and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Preferred Shares
as to payments of Preferred Funds (the "PARI PASSU SHARES"), then each holder of
Preferred Shares and Pari Passu Shares shall receive a percentage of the
Preferred Funds equal to the full amount of Preferred Funds payable to such
holder as a liquidation preference, in accordance with their respective
Certificate of Designations, Preferences and Rights, as a percentage of the full
amount of Preferred Funds payable to all holders of Preferred Shares and Pari
Passu Shares. The purchase or redemption by the Company of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person, nor the
sale or transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be

<PAGE>   16
deemed to be a liquidation, dissolution or winding up of the Company. No holder
of Preferred Shares shall be entitled to receive any amounts with respect
thereto upon any liquidation, dissolution or winding up of the Company other
than the amounts provided for herein; provided that a holder of Preferred Shares
shall be entitled to all amounts previously accrued with respect to amounts owed
hereunder.

(12)

(13) Preferred Rank; Participation.

(14)

                (i) All shares of Common Stock shall be of junior rank to all
        Preferred Shares in respect to the preferences as to distributions and
        payments upon the liquidation, dissolution and winding up of the
        Company. The rights of the shares of Common Stock shall be subject to
        the preferences and relative rights of the Preferred Shares. The shares
        of the Series A Convertible Preferred Stock, the Series D Convertible
        Preferred Stock, the Series E Preferred Stock and the Series F Preferred
        Stock shall rank pari passu with the Preferred Shares. Without the prior
        express written consent of the holders of not less than two-thirds (2/3)
        of the then outstanding Preferred Shares, the Company shall not
        hereafter authorize or issue additional or other capital stock that is
        senior to the Preferred Shares in respect of the preferences as to
        distributions and payments upon the liquidation, dissolution and winding
        up of the Company. Without the prior express written consent of the
        holders of not less than two-thirds (2/3) of the then outstanding
        Preferred Shares, the Company shall not hereafter authorize or make any
        amendment to the Company's Certificate of Incorporation or bylaws, or
        file any resolution of the board of directors of the Company with the
        Secretary of State of the State of Delaware containing any provisions
        that would adversely affect or otherwise impair the rights or relative
        priority of the holders of the Preferred Shares relative to the holders
        of the Common Stock or the holders of any other class of capital stock.
        In the event of the merger or consolidation of the Company with or into
        another corporation, the Preferred Shares shall maintain their relative
        powers, designations and preferences provided for herein and no merger
        shall result inconsistent therewith.

                (ii) Subject to the rights of the holders, if any, of the Pari
        Passu Shares, the holders of the Preferred Shares shall, as holders of
        Preferred Stock, be entitled to such dividends paid and distributions
        made to the holders of Common Stock to the same extent as if such
        holders of Preferred Shares had converted the Preferred Shares into
        Common Stock (without regard to any limitations on conversion herein or
        elsewhere) and had held such shares of Common Stock on the record date
        for such dividends and distributions. Payments under the preceding
        sentence shall be made concurrently with the dividend or distribution to
        the holders of Common Stock.

(1) Vote to Change the Terms of or Issue Preferred Shares. 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 two-thirds (2/3) of the then
outstanding Preferred Shares shall be required for (a) any change to this
Certificate of Designations or the Company's Certificate of Incorporation that
would amend, alter, change or repeal any of the powers, designations,

<PAGE>   17
preferences and rights of the Preferred Shares, or (b) any issuance of Preferred
Shares other than pursuant to the Securities Purchase Agreement.

(2)

(3) 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 Preferred Shares, and, in the case
of loss, theft or destruction, of an 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 Preferred Shares
into Common Stock.

(4)

(5) Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designations shall be
cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including 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
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. 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
Preferred Shares and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

(6)

(7) Specific Shall Not Limit General; Construction. No specific provision
contained in this Certificate of Designations shall limit or modify any more
general provision contained herein. This Certificate of Designations shall be
deemed to be jointly drafted by the Company and the initial holders of the
Preferred Shares and shall not be construed against any person as the drafter
hereof.

(8)

(9) Failure or Indulgence Not Waiver. No failure or delay on the part of a
holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof (except to the extent that such
power, right or privilege must, in accordance with the terms of this Certificate
of Designations, be exercised within a specified period of time and such period
of time has lapsed without such power, right or privilege being

<PAGE>   18
exercised), 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.

(10)

(11) Notices. Any notice required to be delivered pursuant to the terms of this
Certificate of Designations shall be delivered, unless otherwise provided in
this Certificate of Designations, in accordance with the terms, and subject to
the notice provisions of, the Securities Purchase Agreement.

(12)

        IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by ___________________, its President, as of March __,
2000.

                                      GENERAL MAGIC, INC.

                                      By:

                                      Name:

                                            Its:  President

<PAGE>   19
                                    EXHIBIT I

                               GENERAL MAGIC, INC.
                                CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of
Series H Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series H Convertible Preferred
Stock, par value $.001 per share (the "PREFERRED SHARES"), of General Magic,
Inc., a Delaware corporation (the "COMPANY"), indicated below into shares of
Common Stock, par value $.001 per share (the "COMMON STOCK"), of the Company, by
tendering the stock certificate(s) representing the 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:

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:

        Account Number:
          (if electronic book entry transfer):

        Transaction Code Number
          (if electronic book entry transfer):

          THIS NOTICE MUST BE DELIVERED TO COMPANY AND TRANSFER AGENT.

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