<Page>

                                                                     Exhibit 3.7

                           CERTIFICATE OF DESIGNATION
                                       FOR
                    SERIES C 6% CONVERTIBLE PREFERRED STOCK,
                   SERIES D 6% CONVERTIBLE PREFERRED STOCK AND
                     SERIES E 6% CONVERTIBLE PREFERRED STOCK
                         OF 5B TECHNOLOGIES CORPORATION

                                ----------------
 Pursuant to Section 151 of the General Corporation Law of the State of Delaware
                                -----------------

The undersigned, Glenn Nortman, hereby certifies that:

         1. I am the duly elected and acting Chief Executive Officer of 5B
Technologies Corporation, a Delaware corporation (the "Corporation").

         2. The Certificate of Incorporation of the Corporation authorizes five
million (5,000,000) shares of preferred stock, $0.01 par value per share.

         3. The following is a true and correct copy of the resolution duly
adopted by the unanimous written consent of the Board of Directors of the
Corporation (the "Board of Directors") on July 30, 2001 pursuant to the
Certificate of Incorporation of the Corporation and in accordance with the
provisions of the General Corporation Law of the State of Delaware, relating to
the designation and issuance of the Series C, D and E preferred stock, each at a
par value $.01 per share, of the Corporation, to be designated "Series C 6%
Convertible Preferred Stock", "Series D 6% Convertible Preferred Stock" and
"Series E 6% Convertible Preferred Stock," which resolution remains in full
force and effect as of the date hereof:

         RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors does hereby provide for the issuance of the following series of
preferred stock, par value $0.01 per share, of the Corporation, to be designated
"Series C 6% Convertible Preferred Stock" ("Series C Preferred"), "Series D 6%
Convertible Preferred Stock" ("Series D Preferred") and "Series E 6% Convertible
Preferred Stock" ("Series E Preferred" and with the Series C Preferred and the
Series D Preferred, hereinafter collectively referred to as the "Preferred
Stock") which shall have the designation, rights, preferences, privileges and
restrictions and limitations as follows:

"I SERIES C 6% CONVERTIBLE PREFERRED STOCK

         (A) Designation and Amount. The shares of such series shall be
designated as "Series C 6% Convertible Preferred Stock," par value $0.01 per
share (the "Series C Preferred"), and the number of shares constituting such
series shall be 4,000.

         (B) Rights, Preferences, Privileges and Restrictions of the Series C
Preferred. The rights, preferences, privileges and restrictions granted to and
imposed on the Series C Preferred are as follows:


                                       1
<Page>

                  (1) Dividend Provisions.

                           (a) The holders of shares of the Series C Preferred
shall be entitled to receive, out of any funds legally available therefor, prior
and in preference to the declaration or payment of any dividend or distribution
to the holders of Common Stock or any other shares or securities of the
Corporation ranking junior to the Series C Preferred with respect to the payment
of dividends and/or the distribution of assets on liquidation (including,
without limitation, the Series A Preferred Stock and the Series B Preferred
Stock, the "Junior Securities"), dividends which shall accrue cumulatively on
each share of the Series C Preferred at the rate and in the manner prescribed in
this section 1 from and including the date of issuance of such shares of the
Series C Preferred, but excluding the date on which any conversion or redemption
of such shares of the Series C Preferred shall have been effected, and payable
quarterly in arrears. The date on which the Corporation initially issues a share
of the Series C Preferred will be deemed to be its "date of issuance" regardless
of the number of times transfer of such shares of the Series C Preferred is
made, or of the number of certificates which may be issued to evidence a share
of the Series C Preferred.

                           (b) Dividends shall accrue on each share of the
Series C Preferred (and on any accrued and unpaid dividends thereon) at a rate
per annum, compounded quarterly, of 6% of the Original Series C Preferred Stock
Issue Price (as defined below) (as adjusted for stock splits, stock dividends,
combinations, recapitalizations and similar events). In the event of any
liquidation, dissolution or winding up of the Corporation or the redemption of a
share of the Series C Preferred or the bankruptcy of the Corporation, all
accrued and unpaid dividends on a share of Series C Preferred shall be added to
the liquidation preference of such share on the payment date under subsection
2(a) below, or on the date of redemption of such share or upon the bankruptcy of
the Corporation, as the case may be, accrued cumulatively to but excluding such
payment date or redemption date or bankruptcy on a daily basis. If there shall
be any accrued but unpaid dividends immediately prior to, and in the event of, a
conversion of shares of the Series C Preferred into shares of Common Stock, all
such accrued and unpaid dividends shall, at the Corporation's option, be
converted into that number of shares of Common Stock determined by dividing the
amount of such dividends by the then effective Conversion Price (as defined in
subsection 3(a) below), but only if the Corporation delivers to the holder of
such Series C Preferred a written notice of the election by the Corporation to
exercise such option within five days after the receipt by the Corporation of
the certificate or certificates representing such shares of Series C Preferred
(as contemplated by Section I(B)(3)(d) below).

                           (c) No dividend or other distribution (other than a
dividend or distribution payable solely in Common Stock) shall be paid on or set
apart for payment on the Common Stock or other Junior Securities nor shall any
payment be made on account of the purchase, redemption or retirement of any
Common Stock or other Junior Securities, unless all accrued and unpaid dividends
on the Series C Preferred have been or contemporaneously are paid or set apart
for payment in accordance herewith; provided, however, that the Corporation may
repurchase Common Stock owned by terminated employees of, or consultants to, the
Corporation or its subsidiaries as and to the extent contemplated by Section
I(B)(8) below. A conversion of a convertible security which by its terms is
convertible into Common Stock by the holder thereof shall not be


                                       2
<Page>

deemed a purchase, redemption or retirement of the security so converted for
purposes of this subsection 1(c). No dividend or other distribution shall be
declared on any series of preferred stock ranking as to dividends or other
distributions on a parity with any other series of preferred stock unless there
shall have been declared on all shares then outstanding of such series of
preferred stock like proportionate dividends or other distributions ratably in
proportion to the respective dividends or other distributions payable in respect
of each such series of preferred stock (the Series D Preferred and the Series E
Preferred shall rank on a parity with the Series C Preferred as to dividends and
other distributions).

                           (d) Any cash dividend (other than pursuant to Section
(B)(1)(b) above) which has been declared with respect to the Series C Preferred
and is otherwise due and payable thereon shall be paid in cash.

                  (2) Liquidation Preference.

                           (a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series C Preferred shall be entitled to receive, in cash, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or any other Junior Securities by
reason of their ownership thereof, the amount of $100.00 per share (the
"Original Series C Preferred Stock Issue Price") in cash or cash equivalents for
each share of Series C Preferred then held by them, and, in addition, an amount
equal to all accrued but unpaid dividends on such shares of Series C Preferred
in cash or cash equivalents. If, upon occurrence of such event the assets and
funds thus distributed ratably among the holders of the Series C Preferred shall
be insufficient to permit the payment to such holders (and the holders of any
series of preferred stock that ranks on a parity with the Series C Preferred on
any liquidation, dissolution or winding up of the Corporation, including,
without limitation, the Series D Preferred Stock and the Series E Preferred
Stock) of the full preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series C Preferred (and such parity stock) in proportion to the
amount that the holders of the Series C Preferred and the holders of such parity
stock would be entitled to receive if they were to be paid the full amounts due
to them at the time of such liquidation, dissolution or winding up. After
payment has been made to the holders of the Series C Preferred of the full
amounts to which they shall be entitled as aforesaid, all remaining assets of
the Corporation shall be distributed among all holders of the preferred stock of
the Corporation that rank junior to the Series C Preferred on any liquidation,
dissolution or winding up of the Corporation (including, without limitation,
holders of Series A 6% Convertible Preferred Stock and Series B 6% Convertible
Preferred Stock and any subsequently issued series of preferred stock) and all
holders of Common Stock and other Junior Securities in proportion to the number
of shares of Common Stock which would be held by each such holder if all shares
of such series' of preferred stock were converted into Common Stock.

                           (b) For purposes of this section 2, a liquidation,
dissolution or winding up of the Corporation shall be deemed to be occasioned
by, and to include, without limitation, the redemption or other purchase by the
Corporation of all of its outstanding Common Stock, the Corporation's sale of
all or substantially all of its assets or the acquisition of this Corporation by
another entity by means of merger or


                                       3
<Page>

consolidation of the Corporation with or into any other entity (whether or not
the Corporation is the surviving or emerging entity) in which cash, stock or
other securities or property of the Corporation, transferee or surviving or
emerging entity or an affiliate thereof are to be received or where the holders
of shares of the Corporation prior to such merger or consolidation represent
less than 50% of the outstanding shares of the surviving entity after such
merger or consolidation. Written notice of any event of liquidation pursuant to
this section 2 shall be given by first class mail, postage prepaid, not less
than 30 days prior to any payment date, which shall be stated therein, to the
holders of record of the Series C Preferred, such notice to be addressed to each
such holder at his last address as shown by the records of the Corporation.
Notwithstanding the receipt of such notice, prior to the payment date with
respect to any such liquidation as set forth therein, the holder of record of
the Series C Preferred may still avail itself of the Conversion Rights set forth
in section 3 below.

                  (3) Conversion. The holders of the Series C Preferred shall
each have conversion rights as follows (the "Conversion Rights"):

                           (a) Right to Convert.Subject to the limitations set
forth in subsection 3(b) below, at any time, each share of Series C Preferred
shall be convertible into a number of fully paid and nonassessable shares of
Common Stock equal to (x) the sum of the Original Series C Preferred Stock Issue
Price (as defined below) and, in the event the Corporation shall not elect to
exercise its option referred to in the last sentence of Section I(B)(1)(b), the
amount of all accrued and unpaid dividends thereon, divided by (y) the Series C
Conversion Price at such time. Each share of Series C Preferred shall be
convertible at the option of the holder thereof at any time. The price at which
shares of Common Stock shall be deliverable upon conversion (the "Series C
Conversion Price") shall initially be $2.00 per share of Common Stock. Such
initial Series C Conversion Price shall be subject to adjustment as hereinafter
provided.

                           (b) Nasdaq Conversion Limitation. Unless the Company
obtains the requisite approval of its stockholders to comply with the applicable
rules of the Nasdaq SmallCap Market or the Nasdaq National Market, no holder of
any shares of Series C Preferred may exercise its conversion rights to the
extent that such conversion would, together with (i) an aggregate of 140,193
shares of Common Stock issued by the Corporation to such holder on the date
hereof, (ii) 50,000 shares of Common Stock subject to outstanding warrants to
purchase Common Stock, (iii) shares of Common Stock issued upon conversion of
the Series D Preferred and the Series E Preferred, and (iv) the shares of Common
Stock issued to any other holder of this Series C Preferred, cause such holder,
or the holders of the Series C Preferred, as a class, to obtain more than 19.9%
of all issued and outstanding shares of Common Stock including shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in such shares of Common Stock. Subject to the provisions of the next
sentence, nothing in this subsection 3(b) shall prohibit a holder of Series C
Preferred from converting such stock if and to the extent that the shares issued
upon such conversion, together with the shares of Common Stock referred to in
subclauses (i), (ii) and (iii) above and any and all shares of Common Stock
issued upon prior conversions by such holder of the Series C Preferred, would
equal 19.9% or less of all issued and outstanding shares of Common Stock,
including shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such shares of Common Stock. Under no
circumstances shall the


                                       4
<Page>

issuance of the shares of Common Stock upon the conversion of this Series C
Preferred, together with the shares of Common Stock referred to in sub-clauses
(i), (ii) and (iii) above and any and all shares of Common Stock issued upon
prior conversions of this Series C Preferred, in the aggregate, be greater than
19.9%, on a pre-transaction basis, prior to the requisite approval of the
Company's stockholders. With respect to any holder of Series C Preferred, all
references in this subsection 3(b) to 19.9% of all issued and outstanding shares
of Common Stock of the Corporation shall mean 19.9% of such issued and
outstanding Common Stock as of the date of issuance by the Corporation of the
Series C Preferred to such holder.

                           (c) Shareholder Vote regarding Conversion Limitation.
If a holder of the Series C Preferred is unable to exercise its conversion
rights due to the limitations set forth in subsection 3(b) above, the Board of
Directors shall use commercially reasonable efforts to present and recommend to
the stockholders of the Company at the next annual meeting of stockholders (to
be held in accordance with the corporate laws of Delaware, the Certificate of
Incorporation and the Bylaws of the Company) a proposal to approve such holder
acquiring in excess of 19.9% of the issued and outstanding shares of Common
Stock upon conversion of the Series C Preferred. The Corporation hereby
undertakes to present such proposal at the annual meeting of stockholders to
take place in 2002 or, if earlier, at the next meeting of stockholders (or in
the next action taken by consent of stockholders without a meeting) other than
the annual meeting of stockholders to take place in 2001. The Corporation shall
use its best efforts to hold such annual meeting of stockholders prior to
September 30, 2002. Notwithstanding the foregoing, at the request of the holders
of the Series C Preferred, the Company shall hold a special meeting of
stockholders as soon as practicable in accordance with all applicable state and
federal laws and regulations; provided that the holders of the Series C
Preferred pay or promptly reimburse the Corporation for all costs and expenses
relating to such special meeting of stockholders. If such approval is not
obtained at the next such meeting of the stockholders of the Corporation (or in
the next action taken by consent of stockholders without a meeting), the
Corporation shall thereafter continue to use commercially reasonable efforts to
effect such approval. In no event may the Corporation issue more than 19.9% of
the issued and outstanding shares of Common Stock as determined in subsection
3(b) above without obtaining such requisite vote of stockholders as set forth
herein.

                           (d) Mechanics of Conversion. No fractional shares of
Common Stock shall be issued upon conversion of the Series C Preferred. In lieu
of any fractional share to which a holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of the Common Stock as determined by the Board of Directors. Before any
holder of the Series C Preferred shall be entitled to convert the same into full
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series C Preferred, as designated by the Corporation, and shall
give written notice to the Corporation at such office that he elects to convert
the same. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series C Preferred, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into a


                                       5
<Page>

fractional share of Common Stock and, if the Corporation shall exercise the
option referred to in the last sentence of Section I(B)(1)(b), any amount owed
to such holder as the result of such exercise. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of such
surrender of the shares of Series C Preferred to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

                           (e) Adjustments to Series C Conversion Price for
Diluting Issues.

                                    (i) Stock Dividends. If the number of shares
of Common Stock outstanding at any time after the effectiveness of these
resolutions is increased by a stock dividend payable in shares of Common Stock
or by a subdivision or split-up of shares of Common Stock or a similar
transaction in respect thereof, then immediately effective at the close of
business upon the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or split-up or
similar transaction, the Series C Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Series C Preferred shall be increased in proportion to such
increase of outstanding shares of Common Stock. Successive adjustments shall be
made upon each such stock dividend, subdivision or split or similar transaction.

                                    (ii) Adjustments for Subdivisions,
Combinations, or Consolidations of Common Stock. In the event the outstanding
shares of Common Stock shall be decreased by a subdivision or combination, by
reclassification or otherwise, into a greater or lesser number of shares of
Common Stock, the Series C Conversion Price in effect immediately prior to such
subdivision or combination shall, concurrently with the effectiveness of such
subdivision, combination or consolidation, be proportionately adjusted so that
the number of shares of Common Stock issuable upon conversion of each share of
Series C Preferred shall be decreased in proportion to such decrease of
outstanding shares of Common Stock. Successive adjustments shall be made upon
each such subdivision, combination or reclassification.

                                    (iii) Adjustments for Other Distributions.
In the event the Corporation at any time or from time to time makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, any distribution payable in securities of the Corporation other than
shares of Common Stock, then and in each such event provision shall be made so
that the holders of the Series C Preferred shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation which they would have
received had their Series C Preferred been converted into Common Stock on the
date of such event to and including the date of conversion, and retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under these resolutions with
respect to the rights of the holders of the Series C Preferred.

                                    (iv) Adjustments for Reorganizations,
Reclassifications, etc. If the Common Stock issuable upon conversion of the
Series C Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock or other securities or property,
whether by reclassification, a merger or consolidation of this Corporation with
or into any other entity or entities (other than


                                       6
<Page>

pursuant to a subdivision, combination, stock dividend, or other distribution
provided for in subsections 3(e)(i), (ii) or (iii) above), the Series C
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted such that
the Series C Preferred shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock or
securities or other property equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion of the
Series C Preferred immediately before such event; and, in any such case,
appropriate adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interest thereafter of the holders of
the Series C Preferred, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series C Conversion Price) shall thereafter be applicable, as nearly as may be
reasonable, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series C Preferred. Successive
adjustments shall be made upon each such reclassification, merger or
consolidation.

                                    (v) Adjustments for Issuances Below the
Current Market Price.

                                            (A) Except as provided in subsection
(B), if the Corporation shall, while there are any shares of the Series C
Preferred outstanding, issue or sell shares of the Common Stock of the
Corporation at a price per share less than the then Current Market Price (as
defined below) in effect immediately prior to such issuance or sale, then in
each such case, the Series C Conversion Price shall be adjusted, effective as of
the date of the issuance of such shares of the Common Stock of the Corporation,
to an amount determined by multiplying the Series C Conversion Price in effect
immediately prior to such issuance or sale by a fraction:

                                                     (i) the numerator of which
shall be (1) the aggregate number of shares of the Common Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock,
plus (2) the aggregate number of shares of Common Stock then issuable upon
conversion of the shares of Series C Preferred outstanding immediately prior to
the issuance of such additional shares of Common Stock, plus (3) the number of
shares of Common Stock that the net aggregate consideration received by the
Corporation for the total number of such additional shares of the Common Stock
so issued would purchase at such Series C Conversion Price in effect immediately
prior to such issuance, and

                                                     (ii) the denominator of
which shall be (1) the aggregate number of shares of the Common Stock
outstanding immediately prior to the issuance of such additional shares of the
Common Stock, plus (2) the aggregate number of shares of Common Stock then
issuable upon conversion of the shares of Series C Preferred outstanding
immediately prior to the issuance of such additional shares of Common Stock,
plus (3) the number of such additional shares of the Common Stock so issued.

                                            (B) The adjustments contemplated by
subsection (A) above shall not apply to (i) any issuance of shares of the Common
Stock to officers, directors, employees, consultants or agents of the
Corporation or any subsidiary of the Corporation pursuant to any stock option
plan or arrangement or other equity incentive,


                                       7
<Page>

bonus, or similar plan or arrangement approved by the Board of Directors, (ii)
the issuance of shares of Common Stock in connection with the merger or
acquisition of the Corporation or any of its subsidiaries with or into an
unaffiliated third party or for purposes of a strategic business alliance with
an unaffiliated third party, (iii) the issuance of any Common Stock issued in
connection with an underwritten public offering of such securities in which the
per share price to the public and any underwriting discounts and commissions are
determined in a manner that is customary for an underwritten offering of similar
size and composition, or (iv) the issuance of any Common Stock in connection
with the conversion of the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock.

                                            (C) For purposes of this section
3(e)(v), the issuance of any warrants, options, subscriptions or purchase rights
with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock, or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities, shall be deemed to be an issuance of shares of Common
Stock at the time of the issuance thereof if the Net Consideration Per Share (as
hereinafter defined) which may be received by the Corporation for the shares of
Common Stock or issuable upon the exercise thereof is less than the then Current
Market Price at the time of the issuance of such warrants, options
subscriptions, purchase rights or securities. Any obligation, agreement or
undertaking to issue warrants, options, subscriptions, purchase rights or such
securities at any time in the future shall be deemed to be an issuance at the
time such obligation, agreement or undertaking is made or arises.
Notwithstanding the foregoing, any adjustment made to the Series C Conversion
Price pursuant to the provisions of this section 3(e)(v) which relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded when, as and if all of such warrants, options,
subscriptions or purchase rights expire or are canceled without being exercised,
so that the Series C Conversion Price effective immediately upon such
cancellation or expiration shall be equal to the Series C Conversion Price in
effect at the time of the issuance of the expired or canceled warrants, options,
subscriptions or purchase rights, after taking into account any other
adjustments that would have been made to the Series C Conversion Price had the
expired or canceled warrants, options, subscriptions or purchase rights not been
issued. No adjustment to the Series C Conversion Price shall be made pursuant to
the provisions of this section 3(e)(v) either (x) upon the issuance of any
shares of the Common Stock that are issued pursuant to the exercise of any
warrants, options, subscriptions or purchase rights or pursuant to the exercise
of any conversion or exchange rights of any convertible securities if any
adjustment shall previously have been made upon the issuance of any such
warrants, options or subscriptions or purchase rights or upon the issuance of
any such convertible securities (or upon the issuance of any warrants, options
or any rights therefor) or (y) upon the issuance of any warrants, options,
subscription or purchase rights or any other securities convertible into or
exchangeable or exercisable for shares of Common Stock (or upon the issuance of
any warrants, options or rights to purchase such securities) in accordance with
subsection (B). Any anti-dilution adjustment to any other class or series of
warrants, options, rights, or convertible securities shall be deemed to be an
issuance of Common Stock at the time of such adjustment; provided, however, that
in no event shall the Series C Preferred Stock be


                                       8
<Page>

subject to more than one adjustment as a result of any single anti-dilution
adjustments to any other security of the Corporation.

                                            (D) For purposes of subsection (C),
the "Net Consideration Per Share" shall mean the amount which is equal to the
total amount of consideration, if any, received by the Corporation for the
issuance of warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Corporation upon exercise or conversion
thereof, divided by the aggregate number of shares of the Common Stock that
would be issued if all such warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities were exercised, converted or
exchanged. For purposes of this subsection (D), if part or all of the
consideration received or to be received by the Corporation in connection with
the issuance of shares of Common Stock or the issuance of any of the securities
described in this subsection (D) consists of property other than cash, the value
of such property shall be determined by or at the direction of the Board of
Directors, in good faith, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Corporation with respect
to receipt of such property.

                                            (E) For the purpose of any
computation under subsection (A) the Current Market Price per share of Common
Stock on any date shall be (i) the last reported sale price, or if none is
reported, the average of the reported closing bid and asked prices, on all
domestic securities exchanges on which the Common Stock is listed, or (ii) if on
any day the Common Stock is not so listed, the sales price for the Common Stock
as of 4:00 P.M., New York time, as reported on the Nasdaq Stock Market, or (iii)
if the Common Stock is not reported on the Nasdaq Stock Market, the average of
the representative bid and asked quotations for the Common Stock as of 4:00
P.M., New York time, as reported on the Nasdaq interdealer quotation system,
bulletin board, over the counter market or any similar or successor
organization, in each such case averaged over a period of 15 trading days prior
to the day as of which the Current Market Price is being determined. If there is
no such closing price or closing bid and asked prices or the Common Stock is not
reported on any such exchange or market, the Current Market Price shall be
determined in any good faith reasonable manner approved by the Board of
Directors of the Corporation.

                           (f) No Impairment.

                                    (i) The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, 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 Corporation but will at all times
in good faith assist in the carrying out of all the provisions of this section 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the Series C Preferred
against impairment.

                                    (ii) The Corporation shall at all times
reserve and keep available for issuance upon the conversion of the Series C
Preferred a number of its authorized but unissued shares of Common Stock that
will from time to time be sufficient to permit the conversion of all outstanding
shares of Series C Preferred, and shall take all action required to increase the
authorized number of shares of Common Stock if at any


                                       9
<Page>

time there shall be insufficient authorized but unissued shares of Common Stock
to permit such reservation or to permit the conversion of all outstanding shares
of Series C Preferred.

                                    (iii) Any registered holder of Series C
Preferred shall be entitled to seek an injunction or injunctions to prevent
breaches of the provisions of this certificate of designation and to enforce
specifically the terms and provisions of this certificate of designation in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such holder may be entitled at law or
in equity.

                           (g) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Series C Conversion Price
pursuant to this section 3, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series C Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series C Preferred, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments,(ii) the Series C Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series C
Preferred.

                           (h) Notices of Record Date. In the event that this
Corporation shall propose at any time:

                                    (i) to declare any dividend or distribution
upon its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;

                                    (ii) to effect any reclassification or
recapitalization or other reorganization of its capital stock; or

                                    (iii) to merge with or into any other
corporation or other entity, or sell, lease or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up; then, in
connection with each such event, this Corporation shall send to the holders of
the Series C Preferred shares:

                                            (A) at least 10 days' prior written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights and setting forth a description thereof (and
specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the matters referred to
in (iii) above; and

                                            (B) in the case of the matters
referred to in subsection 3(h)(ii) or (iii) above, at least 10 days' prior
written notice of the date when the same shall take place (and specifying the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event).

                                    Each such written notice shall be given by
first class mail, postage prepaid, addressed to the holders of Series C
Preferred at the address for each such holder as shown on the books of this
Corporation.


                                       10
<Page>

            (4) Voting. Except as otherwise required by law, the holders of
Series C Preferred shall not be entitled to vote upon any matter submitted to
the stockholders for a vote except as to matters affecting holders of Series C
Preferred as a class, as set forth in section (5) below.

            (5) Protective Provisions. In addition to any other rights provided
by law, so long as any Series C Preferred shall be outstanding, this Corporation
shall not, without first obtaining the affirmative vote or written consent of
the holders of more than 50 percent of such outstanding shares of Series C
Preferred:

                  (a) amend or repeal any provision of, or add any provision to,
this Corporation's Certificate of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series C Preferred; (b) authorize
or issue shares of any class of stock having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of the Series C Preferred, or authorize or issue shares of stock of any
class or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock of
this Corporation having any preference or priority as to dividends or assets
superior to or on a parity with any such preference or priority of the Series C
Preferred; or (c) reclassify any Common Stock into shares having any preference
or priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series C Preferred.

            (6) Status of Converted Stock. In the event any shares of Series C
Preferred shall be converted pursuant to section 3 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation.

            (7) Residual Rights. All rights accruing to the outstanding
shares of this Corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.

            (8) Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series C Preferred shall be deemed to have
consented to distributions made by the Corporation in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Corporation and
such persons.

II SERIES D 6% CONVERTIBLE PREFERRED STOCK

      (A) Designation and Amount. The shares of such series shall be designated
as "Series D 6% Convertible Preferred Stock," par value $0.01 per share (the
"Series D Preferred"), and the number of shares constituting such series shall
be 5,000.

      (B) Rights, Preferences, Privileges and Restrictions of the Series D
Preferred. The rights, preferences, privileges and restrictions granted to and
imposed on the Series D Preferred are as follows:

            (1) Dividend Provisions.

                  (a) The holders of shares of the Series D Preferred shall be
entitled to receive, out of any funds legally available therefor, prior and in
preference to the declaration or payment of any dividend or distribution to the
holders of Common Stock or any other shares or securities of the Corporation
ranking junior to the Series D Preferred with respect to the payment of
dividends and/or the distribution of assets on


                                       11
<Page>

liquidation (including, without limitation, the Series A Preferred Stock and the
Series B Preferred Stock, the "Junior Securities"), dividends which shall accrue
cumulatively on each share of the Series D Preferred at the rate and in the
manner prescribed in this section 1 from and including the date of issuance of
such shares of the Series D Preferred, but excluding the date on which any
conversion or redemption of such shares of the Series D Preferred shall have
been effected, and payable quarterly in arrears. The date on which the
Corporation initially issues a share of the Series D Preferred will be deemed to
be its "date of issuance" regardless of the number of times transfer of such
shares of the Series D Preferred is made, or of the number of certificates which
may be issued to evidence a share of the Series D Preferred.

                  (b) Dividends shall accrue on each share of the Series D
Preferred (and on any accrued and unpaid dividends thereon) at a rate per annum,
compounded quarterly, of 6% of the Original Series D Preferred Stock Issue Price
(as defined below) (as adjusted for stock splits, stock dividends, combinations,
recapitalizations and similar events). In the event of any liquidation,
dissolution or winding up of the Corporation or the redemption of a share of the
Series D Preferred or the bankruptcy of the Corporation, all accrued and unpaid
dividends on a share of Series D Preferred shall be added to the liquidation
preference of such share on the payment date under subsection 2(a) below, or on
the date of redemption of such share or upon the bankruptcy of the Corporation,
as the case may be, accrued cumulatively to but excluding such payment date or
redemption date or bankruptcy on a daily basis. If there shall be any accrued
but unpaid dividends immediately prior to, and in the event of, a conversion of
shares of the Series D Preferred into shares of Common Stock, all such accrued
and unpaid dividends shall, at the Corporation's option, be converted into that
number of shares of Common Stock determined by dividing the amount of such
dividends by the then effective Conversion Price (as defined in subsection 3(a)
below), but only if the Corporation delivers to the holder of such Series D
Preferred a written notice of the election by the Corporation to exercise such
option within five days after the receipt by the Corporation of the certificate
or certificates representing such shares of Series D Preferred (as contemplated
by Section II(B)(3)(d) below).

                  (c) No dividend or other distribution (other than a dividend
or distribution payable solely in Common Stock) shall be paid on or set apart
for payment on the Common Stock or other Junior Securities nor shall any payment
be made on account of the purchase, redemption or retirement of any Common Stock
or other Junior Securities, unless all accrued and unpaid dividends on the
Series D Preferred have been or contemporaneously are paid or set apart for
payment in accordance herewith; provided, however, that the Corporation may
repurchase Common Stock owned by terminated employees of, or consultants to, the
Corporation or its subsidiaries as and to the extent contemplated by Section
II(B)(8) below. A conversion of a convertible security which by its terms is
convertible into Common Stock by the holder thereof shall not be deemed a
purchase, redemption or retirement of the security so converted for purposes of
this subsection 1(c). No dividend or other distribution shall be declared on any
series of preferred stock ranking as to dividends or other distributions on a
parity with any other series of preferred stock unless there shall have been
declared on all shares then outstanding of such series of preferred stock like
proportionate dividends or other distributions ratably in proportion to the
respective dividends or other distributions


                                       12
<Page>

payable in respect of each such series of preferred stock (the Series C
Preferred and the Series E Preferred shall rank on a parity with the Series D
Preferred as to dividends and other distributions).

                  (d) Any cash dividend (other than pursuant to Section
(B)(1)(b) above) which has been declared with respect to the Series D Preferred
and is otherwise due and payable thereon shall be paid in cash.

            (2) Liquidation Preference.

                  (a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series D
Preferred shall be entitled to receive, in cash, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock or any other Junior Securities by reason of their
ownership thereof, the amount of $100.00 per share (the "Original Series D
Preferred Stock Issue Price") in cash or cash equivalents for each share of
Series D Preferred then held by them, and, in addition, an amount equal to all
accrued but unpaid dividends on such shares of Series D Preferred in cash or
cash equivalents. If, upon occurrence of such event the assets and funds thus
distributed ratably among the holders of the Series D Preferred shall be
insufficient to permit the payment to such holders (and the holders of any
series of preferred stock that ranks on a parity with the Series D Preferred on
any liquidation, dissolution or winding up of the Corporation, including,
without limitation, the Series C Preferred Stock and the Series E Preferred
Stock) of the full preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series D Preferred (and such parity stock) in proportion to the
amount that the holders of the Series D Preferred and the holders of such parity
stock would be entitled to receive if they were to be paid the full amounts due
to them at the time of such liquidation, dissolution or winding up. After
payment has been made to the holders of the Series D Preferred of the full
amounts to which they shall be entitled as aforesaid, all remaining assets of
the Corporation shall be distributed among all holders of the preferred stock of
the Corporation that rank junior to the Series D Preferred on any liquidation,
dissolution or winding up of the Corporation (including, without limitation,
holders of Series A 6% Convertible Preferred Stock and Series B 6% Convertible
Preferred Stock and any subsequently issued series of preferred stock) and all
holders of Common Stock and other Junior Securities in proportion to the number
of shares of Common Stock which would be held by each such holder if all shares
of such series' of preferred stock were converted into Common Stock.

                  (b) For purposes of this section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, without limitation, the redemption or other purchase by the Corporation
of all of its outstanding Common Stock, the Corporation's sale of all or
substantially all of its assets or the acquisition of this Corporation by
another entity by means of merger or consolidation of the Corporation with or
into any other entity (whether or not the Corporation is the surviving or
emerging entity) in which cash, stock or other securities or property of the
Corporation, transferee or surviving or emerging entity or an affiliate thereof
are to be received or where the holders of shares of the Corporation prior to
such merger or consolidation represent less than 50% of the outstanding shares
of the surviving entity after such merger or consolidation. Written notice of
any event of


                                       13
<Page>

liquidation pursuant to this section 2 shall be given by first class mail,
postage prepaid, not less than 30 days prior to any payment date, which shall be
stated therein, to the holders of record of the Series D Preferred, such notice
to be addressed to each such holder at his last address as shown by the records
of the Corporation. Notwithstanding the receipt of such notice, prior to the
payment date with respect to any such liquidation as set forth therein, the
holder of record of the Series D Preferred may still avail itself of the
Conversion Rights set forth in section 3 below.

            (3) Conversion. The holders of the Series D Preferred shall each
have conversion rights as follows (the "Conversion Rights"):

                  (a) Right to Convert. Subject to the limitations set forth in
subsection 3(b) below, at any time, each share of Series D Preferred shall be
convertible into a number of fully paid and nonassessable shares of Common Stock
equal to (x) the sum of the Original Series D Preferred Stock Issue Price (as
defined below) and, in the event the Corporation shall not elect to exercise its
option referred to in the last sentence of Section II(B)(1)(b), the amount of
all accrued and unpaid dividends thereon, divided by (y) the Series D Conversion
Price at such time. Each share of Series D Preferred shall be convertible at the
option of the holder thereof at any time. The price at which shares of Common
Stock shall be deliverable upon conversion (the "Series D Conversion Price")
shall initially be $2.75 per share of Common Stock. Such initial Series D
Conversion Price shall be subject to adjustment as hereinafter provided.

                  (b) Nasdaq Conversion Limitation. Unless the Company obtains
the requisite approval of its stockholders to comply with the applicable rules
of the Nasdaq SmallCap Market or the Nasdaq National Market, no holder of any
shares of Series D Preferred may exercise its conversion rights to the extent
that such conversion would, together with (i) an aggregate of 140,193 shares of
Common Stock issued by the Corporation to such holder on the date hereof, (ii)
50,000 shares of Common Stock subject to outstanding warrants to purchase Common
Stock, (iii) shares of Common Stock issued upon conversion of the Series C
Preferred and the Series E Preferred and (iv) the shares of Common Stock issued
to any other holder of this Series D Preferred, cause such holder, or the
holders of the Series D Preferred, as a class, to obtain more than 19.9% of all
issued and outstanding shares of Common Stock, including shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such shares of Common Stock. Subject to the provisions of the next
sentence, nothing in this subsection 3(b) shall prohibit a holder of Series D
Preferred from converting such stock if and to the extent that the shares issued
upon such conversion, together with the shares of Common Stock referred to in
subclauses (i), (ii) and (iii) above and any and all shares of Common Stock
issued upon prior conversions by such holder of the Series D Preferred, would
equal 19.9% or less of all issued and outstanding shares of Common Stock,
including shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such shares of Common Stock. Under no
circumstances shall the issuance of the shares of Common Stock upon the
conversion of this Series D Preferred, together with the shares of Common Stock
referred to in sub-clauses (i), (ii) and (iii) above and any and all shares of
Common Stock issued upon prior conversions of this Series D Preferred, in the
aggregate, be greater than 19.9%, on a pre-transaction basis, prior to the
requisite approval of the Company's stockholders. With respect to any holder of
Series D Preferred, all references in this subsection 3(b) to 19.9% of all
issued and


                                       14
<Page>

outstanding shares of Common Stock of the Corporation shall mean 19.9% of such
issued and outstanding Common Stock as of the date of issuance by the
Corporation of the Series D Preferred to such holder.

                  (c) Shareholder Vote regarding Conversion Limitation. If a
holder of the Series D Preferred is unable to exercise its conversion rights due
to the limitations set forth in subsection 3(b) above, the Board of Directors
shall use commercially reasonable efforts to present and recommend to the
stockholders of the Company at the next annual meeting of stockholders (to be
held in accordance with the corporate laws of Delaware, the Certificate of
Incorporation and the Bylaws of the Company) a proposal to approve such holder
acquiring in excess of 19.9% of the issued and outstanding shares of Common
Stock upon conversion of the Series D Preferred. The Corporation hereby
undertakes to present such proposal at the annual meeting of stockholders to
take place in 2002 or, if earlier, at the next meeting of stockholders (or in
the next action taken by consent of stockholders without a meeting) other than
the annual meeting of stockholders to take place in 2001. The Corporation shall
use its best efforts to hold such annual meeting of stockholders prior to
September 30, 2002. Notwithstanding the foregoing, at the request of the holders
of the Series D Preferred, the Company shall hold a special meeting of
stockholders as soon as practicable in accordance with all applicable state and
federal laws and regulations; provided that the holders of the Series D
Preferred pay or promptly reimburse the Corporation for all costs and expenses
relating to such special meeting of stockholders. If such approval is not
obtained at the next such meeting of the stockholders of the Corporation (or in
the next action taken by consent of stockholders without a meeting), the
Corporation shall thereafter continue to use commercially reasonable efforts to
effect such approval. In no event may the Corporation issue more than 19.9% of
the issued and outstanding shares of Common Stock as determined in subsection
3(b) above without obtaining such requisite vote of stockholders as set forth
herein.

                  (d) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Series D Preferred. In lieu of any
fractional share to which a holder would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the fair market value of the
Common Stock as determined by the Board of Directors. Before any holder of the
Series D Preferred shall be entitled to convert the same into full shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series D Preferred, as designated by the Corporation, and shall give written
notice to the Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series D Preferred, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into a fractional share of Common Stock
and, if the Corporation shall exercise the option referred to in the last
sentence of Section II(B)(1)(b), any amount owed to such holder as the result of
such exercise. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series D Preferred to be converted, and the person or persons entitled to
receive the


                                       15
<Page>

shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.

                  (e) Adjustments to Series D Conversion Price for Diluting
Issues.

                        (i) Stock Dividends. If the number of shares of
Common Stock outstanding at any time after the effectiveness of these
resolutions is increased by a stock dividend payable in shares of Common Stock
or by a subdivision or split-up of shares of Common Stock or a similar
transaction in respect thereof, then immediately effective at the close of
business upon the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or split-up or
similar transaction, the Series D Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Series D Preferred shall be increased in proportion to such
increase of outstanding shares of Common Stock. Successive adjustments shall be
made upon each such stock dividend, subdivision or split or similar transaction.

                        (ii) Adjustments for Subdivisions, Combinations, or
Consolidations of Common Stock. In the event the outstanding shares of Common
Stock shall be decreased by a subdivision or combination, by reclassification or
otherwise, into a greater or lesser number of shares of Common Stock, the Series
D Conversion Price in effect immediately prior to such subdivision or
combination shall, concurrently with the effectiveness of such subdivision,
combination or consolidation, be proportionately adjusted so that the number of
shares of Common Stock issuable upon conversion of each share of Series D
Preferred shall be decreased in proportion to such decrease of outstanding
shares of Common Stock. Successive adjustments shall be made upon each such
subdivision, combination or reclassification.

                        (iii) Adjustments for Other Distributions. In the
event the Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series D Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series D Preferred been converted into Common Stock on the date of such event to
and including the date of conversion, and retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under these resolutions with respect to the rights of the
holders of the Series D Preferred.

                        (iv) Adjustments for Reorganizations,
Reclassifications, etc. If the Common Stock issuable upon conversion of the
Series D Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock or other securities or property,
whether by reclassification, a merger or consolidation of this Corporation with
or into any other entity or entities (other than pursuant to a subdivision,
combination, stock dividend, or other distribution provided for in subsections
3(e)(i), (ii) or (iii) above), the Series D Conversion Price then in effect
shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series D Preferred
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been


                                       16
<Page>

entitled to receive, a number of shares of such other class or classes of stock
or securities or other property equivalent to the number of shares of Common
Stock that would have been subject to receipt by the holders upon conversion of
the Series D Preferred immediately before such event; and, in any such case,
appropriate adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interest thereafter of the holders of
the Series D Preferred, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series D Conversion Price) shall thereafter be applicable, as nearly as may be
reasonable, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series D Preferred. Successive
adjustments shall be made upon each such reclassification, merger or
consolidation.

                        (v) Adjustments for Issuances Below the Current
Market Price.

                              (A) Except as provided in subsection (B), if
the Corporation shall, while there are any shares of the Series D Preferred
outstanding, issue or sell shares of the Common Stock of the Corporation at a
price per share less than the then Current Market Price (as defined below) in
effect immediately prior to such issuance or sale, then in each such case, the
Series D Conversion Price shall be adjusted, effective as of the date of the
issuance of such shares of the Common Stock of the Corporation, to an amount
determined by multiplying the Series D Conversion Price in effect immediately
prior to such issuance or sale by a fraction:

                                    (i) the numerator of which shall be (1)
the aggregate number of shares of the Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock, plus (2) the
aggregate number of shares of Common Stock then issuable upon conversion of the
shares of Series D Preferred outstanding immediately prior to the issuance of
such additional shares of Common Stock, plus (3) the number of shares of Common
Stock that the net aggregate consideration received by the Corporation for the
total number of such additional shares of the Common Stock so issued would
purchase at such Series D Conversion Price in effect immediately prior to such
issuance, and

                                    (ii) the denominator of which shall be
(1) the aggregate number of shares of the Common Stock outstanding immediately
prior to the issuance of such additional shares of the Common Stock, plus (2)
the aggregate number of shares of Common Stock then issuable upon conversion of
the shares of Series D Preferred outstanding immediately prior to the issuance
of such additional shares of Common Stock, plus (3) the number of such
additional shares of the Common Stock so issued.

                              (B) The adjustments contemplated by subsection
(A) above shall not apply to (i) any issuance of shares of the Common Stock to
officers, directors, employees, consultants or agents of the Corporation or any
subsidiary of the Corporation pursuant to any stock option plan or arrangement
or other equity incentive, bonus, or similar plan or arrangement approved by the
Board of Directors, (ii) the issuance of shares of Common Stock in connection
with the merger or acquisition of the Corporation or any of its subsidiaries
with or into an unaffiliated third party or for purposes of a strategic business
alliance with an unaffiliated third party, (iii) the issuance of any Common
Stock issued in connection with an underwritten public offering of such


                                       17
<Page>

securities in which the per share price to the public and any underwriting
discounts and commissions are determined in a manner that is customary for an
underwritten offering of similar size and composition, or (iv) the issuance of
any Common Stock in connection with the conversion of the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, or Series E Preferred
Stock.

                              (C) For purposes of this section 3(e)(v), the
issuance of any warrants, options, subscriptions or purchase rights with respect
to shares of Common Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock, or the issuance of any warrants,
options or any rights with respect to such convertible or exchangeable
securities, shall be deemed to be an issuance of shares of Common Stock at the
time of the issuance thereof if the Net Consideration Per Share (as hereinafter
defined) which may be received by the Corporation for the shares of Common Stock
or issuable upon the exercise thereof is less than the then Current Market Price
at the time of the issuance of such warrants, options subscriptions, purchase
rights or securities. Any obligation, agreement or undertaking to issue
warrants, options, subscriptions, purchase rights or such securities at any time
in the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. Notwithstanding the foregoing, any
adjustment made to the Series D Conversion Price pursuant to the provisions of
this section 3(e)(v) which relates to warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock shall be disregarded
when, as and if all of such warrants, options, subscriptions or purchase rights
expire or are canceled without being exercised, so that the Series D Conversion
Price effective immediately upon such cancellation or expiration shall be equal
to the Series D Conversion Price in effect at the time of the issuance of the
expired or canceled warrants, options, subscriptions or purchase rights, after
taking into account any other adjustments that would have been made to the
Series D Conversion Price had the expired or canceled warrants, options,
subscriptions or purchase rights not been issued. No adjustment to the Series D
Conversion Price shall be made pursuant to the provisions of this section
3(e)(v) either (x) upon the issuance of any shares of the Common Stock that are
issued pursuant to the exercise of any warrants, options, subscriptions or
purchase rights or pursuant to the exercise of any conversion or exchange rights
of any convertible securities if any adjustment shall previously have been made
upon the issuance of any such warrants, options or subscriptions or purchase
rights or upon the issuance of any such convertible securities (or upon the
issuance of any warrants, options or any rights therefor) or (y) upon the
issuance of any warrants, options, subscription or purchase rights or any other
securities convertible into or exchangeable or exercisable for shares of Common
Stock (or upon the issuance of any warrants, options or rights to purchase such
securities) in accordance with subsection (B). Any anti-dilution adjustment to
any other class or series of warrants, options, rights, or convertible
securities shall be deemed to be an issuance of Common Stock at the time of such
adjustment; provided, however, that in no event shall the Series D Preferred
Stock be subject to more than one adjustment as a result of any single
anti-dilution adjustments to any other security of the Corporation.

                              (D) For purposes of subsection (C), the "Net
Consideration Per Share" shall mean the amount which is equal to the total
amount of consideration, if any, received by the Corporation for the issuance of
warrants, options,


                                       18
<Page>

subscriptions or other purchase rights or convertible or exchangeable
securities, plus the minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof, divided by the aggregate number
of shares of the Common Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or convertible or exchangeable
securities were exercised, converted or exchanged. For purposes of this
subsection (D), if part or all of the consideration received or to be received
by the Corporation in connection with the issuance of shares of Common Stock or
the issuance of any of the securities described in this subsection (D) consists
of property other than cash, the value of such property shall be determined by
or at the direction of the Board of Directors, in good faith, whereupon such
value shall be given to such consideration and shall be recorded on the books of
the Corporation with respect to receipt of such property.

                              (E) For the purpose of any computation under
subsection (A) the Current Market Price per share of Common Stock on any date
shall be (i) the last reported sale price, or if none is reported, the average
of the reported closing bid and asked prices, on all domestic securities
exchanges on which the Common Stock is listed, or (ii) if on any day the Common
Stock is not so listed, the sales price for the Common Stock as of 4:00 P.M.,
New York time, as reported on the Nasdaq Stock Market, or (iii) if the Common
Stock is not reported on the Nasdaq Stock Market, the average of the
representative bid and asked quotations for the Common Stock as of 4:00 P.M.,
New York time, as reported on the Nasdaq interdealer quotation system, bulletin
board, over-the-counter market or any similar or successor organization, in each
such case averaged over a period of 15 trading days prior to the day as of which
the Current Market Price is being determined. If there is no such closing price
or closing bid and asked prices or the Common Stock is not reported on any such
exchange or market, the Current Market Price shall be determined in any good
faith reasonable manner approved by the Board of Directors of the Corporation.

                  (f) No Impairment.

                        (i) The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this section 3 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series D Preferred against
impairment.

                        (ii) The Corporation shall at all times reserve and
keep available for issuance upon the conversion of the Series D Preferred a
number of its authorized but unissued shares of Common Stock that will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series D Preferred, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series D
Preferred.

                        (iii) Any registered holder of Series D Preferred
shall be entitled to seek an injunction or injunctions to prevent breaches of
the provisions of this


                                       19
<Page>

certificate of designation and to enforce specifically the terms and provisions
of this certificate of designation in any court of the United States or any
state thereof having jurisdiction, this being in addition to any other remedy to
which such holder may be entitled at law or in equity.

                  (g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series D Conversion Price pursuant to this
section 3, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series D Preferred a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series D Preferred, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments,(ii) the Series D Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series D
Preferred.

                  (h) Notices of Record Date. In the event that this
Corporation shall propose at any time:

                        (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;

                        (ii) to effect any reclassification or
recapitalization or other reorganization of its capital stock; or

                        (iii) to merge with or into any other corporation or
other entity, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this Corporation shall send to the holders of the Series D Preferred
shares:

                              (A) at least 10 days' prior written notice of
the date on which a record shall be taken for such dividend, distribution or
subscription rights and setting forth a description thereof (and specifying the
date on which the holders of Common Stock shall be entitled thereto) or for
determining rights to vote in respect of the matters referred to in (iii) above;
and

                              (B) in the case of the matters referred to in
subsection 3(h)(ii) or (iii) above, at least 10 days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).

                  Each such written notice shall be given by first class mail,
postage prepaid, addressed to the holders of Series D Preferred at the address
for each such holder as shown on the books of this Corporation.

            (4) Voting. Except as otherwise required by law, the holders of
Series D Preferred shall not be entitled to vote upon any matter submitted to
the stockholders for a vote except as to matters affecting holders of Series D
Preferred as a class, as set forth in section (5) below.

            (5) Protective Provisions. In addition to any other rights provided
by law, so long as any Series D Preferred shall be outstanding, this Corporation
shall not, without


                                       20
<Page>

first obtaining the affirmative vote or written consent of the holders of more
than 50 percent of such outstanding shares of Series D Preferred:

                  (a) amend or repeal any provision of, or add any provision to,
this Corporation's Certificate of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series D Preferred;

                  (b) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series D Preferred, or authorize or issue
shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this Corporation having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series D Preferred; or

                  (c) reclassify any Common Stock into shares having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series D Preferred.

            (6) Status of Converted Stock. In the event any shares of Series D
Preferred shall be converted pursuant to section 3 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation.

            (7) Residual Rights. All rights accruing to the outstanding
shares of this Corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.

            (8) Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series D Preferred shall be deemed to have
consented to distributions made by the Corporation in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Corporation and
such persons.

III SERIES E 6% CONVERTIBLE PREFERRED STOCK

      (A) Designation and Amount. The shares of such series shall be designated
as "Series E 6% Convertible Preferred Stock," par value $0.01 per share (the
"Series E Preferred"), and the number of shares constituting such series shall
be 10,000.

      (B) Rights, Preferences, Privileges and Restrictions of the Series E
Preferred. The rights, preferences, privileges and restrictions granted to and
imposed on the Series E Preferred are as follows:

            (1) Dividend Provisions.

                  (a) The holders of shares of the Series E Preferred shall be
entitled to receive, out of any funds legally available therefor, prior and in
preference to the declaration or payment of any dividend or distribution to the
holders of Common Stock or any other shares or securities of the Corporation
ranking junior to the Series E Preferred with respect to the payment of
dividends and/or the distribution of assets on liquidation (including, without
limitation, the Series A Preferred Stock and the Series B Preferred Stock, the
"Junior Securities"), dividends which shall accrue cumulatively on each share of
the Series E Preferred at the rate and in the manner prescribed in this section
1 from and including the date of issuance of such shares of the Series E
Preferred,


                                       21
<Page>

but excluding the date on which any conversion or redemption of such shares of
the Series E Preferred shall have been effected, and payable quarterly in
arrears. The date on which the Corporation initially issues a share of the
Series E Preferred will be deemed to be its "date of issuance" regardless of the
number of times transfer of such shares of the Series E Preferred is made, or of
the number of certificates which may be issued to evidence a share of the Series
E Preferred.

                  (b) Dividends shall accrue on each share of the Series E
Preferred (and on any accrued and unpaid dividends thereon) at a rate per annum,
compounded quarterly, of 6% of the Original Series E Preferred Stock Issue Price
(as defined below) (as adjusted for stock splits, stock dividends, combinations,
recapitalizations and similar events). In the event of any liquidation,
dissolution or winding up of the Corporation or the redemption of a share of the
Series E Preferred or the bankruptcy of the Corporation, all accrued and unpaid
dividends on a share of Series E Preferred shall be added to the liquidation
preference of such share on the payment date under subsection 2(a) below, or on
the date of redemption of such share or upon the bankruptcy of the Corporation,
as the case may be, accrued cumulatively to but excluding such payment date or
redemption date or bankruptcy on a daily basis. If there shall be any accrued
but unpaid dividends immediately prior to, and in the event of, a conversion of
shares of the Series E Preferred into shares of Common Stock, all such accrued
and unpaid dividends shall, at the Corporation's option, be converted into that
number of shares of Common Stock determined by dividing the amount of such
dividends by the then effective Conversion Price (as defined in subsection 3(a)
below), but only if the Corporation delivers to the holder of such Series E
Preferred a written notice of the election by the Corporation to exercise such
option within five days after the receipt by the Corporation of the certificate
or certificates representing such shares of Series E Preferred (as contemplated
by Section III(B)(3)(d) below).

                  (c) No dividend or other distribution (other than a dividend
or distribution payable solely in Common Stock) shall be paid on or set apart
for payment on the Common Stock or other Junior Securities nor shall any payment
be made on account of the purchase, redemption or retirement of any Common Stock
or other Junior Securities, unless all accrued and unpaid dividends on the
Series E Preferred have been or contemporaneously are paid or set apart for
payment in accordance herewith; provided, however, that the Corporation may
repurchase Common Stock owned by terminated employees of, or consultants to, the
Corporation or its subsidiaries as and to the extent contemplated by Section
III(B)(8) below. A conversion of a convertible security which by its terms is
convertible into Common Stock by the holder thereof shall not be deemed a
purchase, redemption or retirement of the security so converted for purposes of
this subsection 1(c). No dividend or other distribution shall be declared on any
series of preferred stock ranking as to dividends or other distributions on a
parity with any other series of preferred stock unless there shall have been
declared on all shares then outstanding of such series of preferred stock like
proportionate dividends or other distributions ratably in proportion to the
respective dividends or other distributions payable in respect of each such
series of preferred stock (the Series C Preferred and the Series D Preferred
shall rank on a parity with the Series E Preferred as to dividends and other
distributions).


                                       22
<Page>

                  (d) Any cash dividend (other than pursuant to Section
(B)(1)(b) above) which has been declared with respect to the Series E Preferred
and is otherwise due and payable thereon shall be paid in cash.

            (2) Liquidation Preference.

                  (a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series E
Preferred shall be entitled to receive, in cash, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock or any other Junior Securities by reason of their
ownership thereof, the amount of $100.00 per share (the "Original Series E
Preferred Stock Issue Price") in cash or cash equivalents for each share of
Series E Preferred then held by them, and, in addition, an amount equal to all
accrued but unpaid dividends on such shares of Series E Preferred in cash or
cash equivalents. If, upon occurrence of such event the assets and funds thus
distributed ratably among the holders of the Series E Preferred shall be
insufficient to permit the payment to such holders (and the holders of any
series of preferred stock that ranks on a parity with the Series E Preferred on
any liquidation, dissolution or winding up of the Corporation, including,
without limitation, the Series C Preferred Stock and the Series D Preferred
Stock) of the full preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series E Preferred (and such parity stock) in proportion to the
amount that the holders of the Series E Preferred and the holders of such parity
stock would be entitled to receive if they were to be paid the full amounts due
to them at the time of such liquidation, dissolution or winding up. After
payment has been made to the holders of the Series E Preferred of the full
amounts to which they shall be entitled as aforesaid, all remaining assets of
the Corporation shall be distributed among all holders of the preferred stock of
the Corporation that rank junior to the Series E Preferred on any liquidation,
dissolution or winding up of the Corporation (including, without limitation,
holders of Series A 6% Convertible Preferred Stock and Series B 6% Convertible
Preferred Stock and any subsequently issued series of preferred stock) and all
holders of Common Stock and other Junior Securities in proportion to the number
of shares of Common Stock which would be held by each such holder if all shares
of such series' of preferred stock were converted into Common Stock.

                  (b) For purposes of this section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, without limitation, the redemption or other purchase by the Corporation
of all of its outstanding Common Stock, the Corporation's sale of all or
substantially all of its assets or the acquisition of this Corporation by
another entity by means of merger or consolidation of the Corporation with or
into any other entity (whether or not the Corporation is the surviving or
emerging entity) in which cash, stock or other securities or property of the
Corporation, transferee or surviving or emerging entity or an affiliate thereof
are to be received or where the holders of shares of the Corporation prior to
such merger or consolidation represent less than 50% of the outstanding shares
of the surviving entity after such merger or consolidation. Written notice of
any event of liquidation pursuant to this section 2 shall be given by first
class mail, postage prepaid, not less than 30 days prior to any payment date,
which shall be stated therein, to the holders of record of the Series E
Preferred, such notice to be addressed to each such


                                       23
<Page>

holder at his last address as shown by the records of the Corporation.
Notwithstanding the receipt of such notice, prior to the payment date with
respect to any such liquidation as set forth therein, the holder of record of
the Series E Preferred may still avail itself of the Conversion Rights set forth
in section 3 below.

            (3) Conversion. The holders of the Series E Preferred shall each
have conversion rights as follows (the "Conversion Rights"):

                  (a) Right to Convert. Subject to the limitations set forth in
subsection 3(b) below, at any time, each share of Series E Preferred shall be
convertible into a number of fully paid and nonassessable shares of Common Stock
equal to (x) the sum of the Original Series E Preferred Stock Issue Price (as
defined below) and, in the event the Corporation shall not elect to exercise its
option referred to in the last sentence of Section III(B)(1)(b), the amount of
all accrued and unpaid dividends thereon, divided by (y) the Series E Conversion
Price at such time. Each share of Series E Preferred shall be convertible at the
option of the holder thereof at any time. The price at which shares of Common
Stock shall be deliverable upon conversion (the "Series E Conversion Price")
shall initially be $3.75 per share of Common Stock. Such initial Series E
Conversion Price shall be subject to adjustment as hereinafter provided.

                  (b) Nasdaq Conversion Limitation. Unless the Company obtains
the requisite approval of its stockholders to comply with the applicable rules
of the Nasdaq SmallCap Market or the Nasdaq National Market, no holder of any
shares of Series E Preferred may exercise its conversion rights to the extent
that such conversion would, together with an (i) aggregate of 140,193 shares of
Common Stock issued by the Corporation to such holder on the date hereof, (ii)
50,000 shares of Common Stock subject to outstanding warrants to purchase Common
Stock, (iii) shares of Common Stock issued upon conversion of the Series C
Preferred and the Series D Preferred and (iv) the shares of Common Stock issued
to any other holder of this Series E Preferred, cause such holder, or the
holders of the Series E Preferred, as a class, to obtain more than 19.9% of all
issued and outstanding shares of Common Stock including shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such shares of Common Stock. Subject to the provisions of the next
sentence, nothing in this subsection 3(b) shall prohibit a holder of Series E
Preferred from converting such stock if and to the extent that the shares issued
upon such conversion, together with the shares of Common Stock referred to in
subclauses (i), (ii) and (iii) above and any and all shares of Common Stock
issued upon prior conversions by such holder of the Series E Preferred, would
equal 19.9% or less of all issued and outstanding shares of Common Stock,
including shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such shares of Common Stock. Under no
circumstances shall the issuance of the shares of Common Stock upon the
conversion of this Series E Preferred, together with the shares of Common Stock
referred to in sub-clauses (i), (ii) and (iii) above and any and all shares of
Common Stock issued upon prior conversions of the Series E Preferred, in the
aggregate, be greater than 19.9%, on a pre-transaction basis, prior to the
requisite approval of the Company's stockholders. With respect to any holder of
Series E Preferred, all references in this subsection 3(b) to 19.9% of all
issued and outstanding shares of Common Stock of the Corporation shall mean
19.9% of such issued and outstanding Common Stock as of the date of issuance by
the Corporation of the Series E Preferred to such holder.


                                       24
<Page>

                  (c) Shareholder Vote regarding Conversion Limitation. If a
holder of the Series E Preferred is unable to exercise its conversion rights due
to the limitations set forth in subsection 3(b) above, the Board of Directors
shall use commercially reasonable efforts to present and recommend to the
stockholders of the Company at the next annual meeting of stockholders (to be
held in accordance with the corporate laws of Delaware, the Certificate of
Incorporation and the Bylaws of the Company) a proposal to approve such holder
acquiring in excess of 19.9% of the issued and outstanding shares of Common
Stock upon conversion of the Series E Preferred. The Corporation hereby
undertakes to present such proposal at the annual meeting of stockholders to
take place in 2002 or, if earlier, at the next meeting of stockholders (or in
the next action taken by consent of stockholders without a meeting) other than
the annual meeting of stockholders to take place in 2001. The Corporation shall
use its best efforts to hold such annual meeting of stockholders prior to
September 30, 2002. Notwithstanding the foregoing, at the request of the holders
of the Series E Preferred, the Company shall hold a special meeting of
stockholders as soon as practicable in accordance with all applicable state and
federal laws and regulations; provided that the holders of the Series E
Preferred pay or promptly reimburse the Corporation for all costs and expenses
relating to such special meeting of stockholders. If such approval is not
obtained at the next such meeting of the stockholders of the Corporation (or in
the next action taken by consent of stockholders without a meeting), the
Corporation shall thereafter continue to use commercially reasonable efforts to
effect such approval. In no event may the Corporation issue more than 19.9% of
the issued and outstanding shares of Common Stock as determined in subsection
3(b) above without obtaining such requisite vote of stockholders as set forth
herein.

                  (d) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Series E Preferred. In lieu of any
fractional share to which a holder would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the fair market value of the
Common Stock as determined by the Board of Directors. Before any holder of the
Series E Preferred shall be entitled to convert the same into full shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series E Preferred, as designated by the Corporation, and shall give written
notice to the Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series E Preferred, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into a fractional share of Common Stock
and, if the Corporation shall exercise the option referred to in the last
sentence of Section III(B)(1)(b), any amount owed to such holder as the result
of such exercise. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series E Preferred to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.

                  (e) Adjustments to Series E Conversion Price for Diluting
Issues.


                                       25
<Page>

                        (i) Stock Dividends. If the number of shares of
Common Stock outstanding at any time after the effectiveness of these
resolutions is increased by a stock dividend payable in shares of Common Stock
or by a subdivision or split-up of shares of Common Stock or a simlar
transaction in respect thereof, then immediately effective at the close of
business upon the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or split-up or
similar transaction, the Series E Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Series E Preferred shall be increased in proportion to such
increase of outstanding shares of Common Stock. Successive adjustments shall be
made upon each such stock dividend, subdivision or split or similar transaction.

                        (ii) Adjustments for Subdivisions, Combinations, or
Consolidations of Common Stock. In the event the outstanding shares of Common
Stock shall be decreased by a subdivision or combination, by reclassification or
otherwise, into a greater or lesser number of shares of Common Stock, the Series
E Conversion Price in effect immediately prior to such subdivision or
combination shall, concurrently with the effectiveness of such subdivision,
combination or consolidation, be proportionately adjusted so that the number of
shares of Common Stock issuable upon conversion of each share of Series E
Preferred shall be decreased in proportion to such decrease of outstanding
shares of Common Stock. Successive adjustments shall be made upon each such
subdivision, combination or reclassification.

                        (iii) Adjustments for Other Distributions. In the
event the Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series E Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series E Preferred been converted into Common Stock on the date of such event to
and including the date of conversion, and retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under these resolutions with respect to the rights of the
holders of the Series E Preferred.

                        (iv) Adjustments for Reorganizations,
Reclassifications, etc. If the Common Stock issuable upon conversion of the
Series E Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock or other securities or property,
whether by reclassification, a merger or consolidation of this Corporation with
or into any other entity or entities (other than pursuant to a subdivision,
combination, stock dividend, or other distribution provided for in subsections
3(e)(i), (ii) or (iii) above), the Series E Conversion Price then in effect
shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series E Preferred
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock or securities or other property equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series E Preferred


                                       26
<Page>

immediately before such event; and, in any such case, appropriate adjustment
shall be made in the application of the provisions herein set forth with respect
to the rights and interest thereafter of the holders of the Series E Preferred,
to the end that the provisions set forth herein (including provisions with
respect to changes in and other adjustments of the Series E Conversion Price)
shall thereafter be applicable, as nearly as may be reasonable, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Series E Preferred. Successive adjustments shall be made upon each such
reclassification, merger or consolidation.

                        (v) Adjustments for Issuances Below the Current
Market Price.

                              (A) Except as provided in subsection (B), if
the Corporation shall, while there are any shares of the Series E Preferred
outstanding, issue or sell shares of the Common Stock of the Corporation at a
price per share less than the then Current Market Price (as defined below) in
effect immediately prior to such issuance or sale, then in each such case, the
Series E Conversion Price shall be adjusted, effective as of the date of the
issuance of such shares of the Common Stock of the Corporation, to an amount
determined by multiplying the Series E Conversion Price in effect immediately
prior to such issuance or sale by a fraction:

                                    (i) the numerator of which shall be (1)
the aggregate number of shares of the Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock, plus (2) the
aggregate number of shares of Common Stock then issuable upon conversion of the
shares of Series E Preferred outstanding immediately prior to the issuance of
such additional shares of Common Stock, plus (3) the number of shares of Common
Stock that the net aggregate consideration received by the Corporation for the
total number of such additional shares of the Common Stock so issued would
purchase at such Series E Conversion Price in effect immediately prior to such
issuance, and

                                    (ii) the denominator of which shall be
(1) the aggregate number of shares of the Common Stock outstanding immediately
prior to the issuance of such additional shares of the Common Stock, plus (2)
the aggregate number of shares of Common Stock then issuable upon conversion of
the shares of Series E Preferred outstanding immediately prior to the issuance
of such additional shares of Common Stock, plus (3) the number of such
additional shares of the Common Stock so issued.

                              (B) The adjustments contemplated by subsection
(A) above shall not apply to (i) any issuance of shares of the Common Stock to
officers, directors, employees, consultants or agents of the Corporation or any
subsidiary of the Corporation pursuant to any stock option plan or arrangement
or other equity incentive, bonus, or similar plan or arrangement approved by the
Board of Directors, (ii) the issuance of shares of Common Stock in connection
with the merger or acquisition of the Corporation or any of its subsidiaries
with or into an unaffiliated third party or for purposes of a strategic business
alliance with an unaffiliated third party, (iii) the issuance of any Common
Stock issued in connection with an underwritten public offering of such
securities in which the per share price to the public and any underwriting
discounts and commissions are determined in a manner that is customary for an
underwritten offering of similar size and composition, or (iv) the issuance of
any Common Stock in connection


                                       27
<Page>

with the conversion of the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock.

                              (C) For purposes of this section 3(e)(v), the
issuance of any warrants, options, subscriptions or purchase rights with respect
to shares of Common Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock, or the issuance of any warrants,
options or any rights with respect to such convertible or exchangeable
securities, shall be deemed to be an issuance of shares of Common Stock at the
time of the issuance thereof if the Net Consideration Per Share (as hereinafter
defined) which may be received by the Corporation for the shares of Common Stock
or issuable upon the exercise thereof is less than the then Current Market Price
at the time of the issuance of such warrants, options subscriptions, purchase
rights or securities. Any obligation, agreement or undertaking to issue
warrants, options, subscriptions, purchase rights or such securities at any time
in the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. Notwithstanding the foregoing, any
adjustment made to the Series E Conversion Price pursuant to the provisions of
this section 3(e)(v) which relates to warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock shall be disregarded
when, as and if all of such warrants, options, subscriptions or purchase rights
expire or are canceled without being exercised, so that the Series E Conversion
Price effective immediately upon such cancellation or expiration shall be equal
to the Series E Conversion Price in effect at the time of the issuance of the
expired or canceled warrants, options, subscriptions or purchase rights, after
taking into account any other adjustments that would have been made to the
Series E Conversion Price had the expired or canceled warrants, options,
subscriptions or purchase rights not been issued. No adjustment to the Series E
Conversion Price shall be made pursuant to the provisions of this section
3(e)(v) either (x) upon the issuance of any shares of the Common Stock that are
issued pursuant to the exercise of any warrants, options, subscriptions or
purchase rights or pursuant to the exercise of any conversion or exchange rights
of any convertible securities if any adjustment shall previously have been made
upon the issuance of any such warrants, options or subscriptions or purchase
rights or upon the issuance of any such convertible securities (or upon the
issuance of any warrants, options or any rights therefor) or (y) upon the
issuance of any warrants, options, subscription or purchase rights or any other
securities convertible into or exchangeable or exercisable for shares of Common
Stock (or upon the issuance of any warrants, options or rights to purchase such
securities) in accordance with subsection (B). Any anti-dilution adjustment to
any other class or series of warrants, options, rights, or convertible
securities shall be deemed to be an issuance of Common Stock at the time of such
adjustment; provided, however, that in no event shall the Series E Preferred
Stock be subject to more than one adjustment as a result of any single
anti-dilution adjustments to any other security of the Corporation.

                              (D) For purposes of subsection (C), the "Net
Consideration Per Share" shall mean the amount which is equal to the total
amount of consideration, if any, received by the Corporation for the issuance of
warrants, options, subscriptions or other purchase rights or convertible or
exchangeable securities, plus the minimum amount of consideration, if any,
payable to the Corporation upon exercise or conversion thereof, divided by the
aggregate number of shares of the Common Stock that


                                       28
<Page>

would be issued if all such warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities were exercised, converted or
exchanged. For purposes of this subsection (D), if part or all of the
consideration received or to be received by the Corporation in connection with
the issuance of shares of Common Stock or the issuance of any of the securities
described in this subsection (D) consists of property other than cash, the value
of such property shall be determined by or at the direction of the Board of
Directors, in good faith, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Corporation with respect
to receipt of such property.

                              (E) For the purpose of any computation under
subsection (A) the Current Market Price per share of Common Stock on any date
shall be (i) the last reported sale price, or if none is reported, the average
of the reported closing bid and asked prices, on all domestic securities
exchanges on which the Common Stock is listed, or (ii) if on any day the Common
Stock is not so listed, the sales price for the Common Stock as of 4:00 P.M.,
New York time, as reported on the Nasdaq Stock Market, or (iii) if the Common
Stock is not reported on the Nasdaq Stock Market, the average of the
representative bid and asked quotations for the Common Stock as of 4:00 P.M.,
New York time, as reported on the Nasdaq interdealer quotation system, bulletin
board, over-the-counter market or any similar or successor organization, in each
such case averaged over a period of 15 trading days prior to the day as of which
the Current Market Price is being determined. If there is no such closing price
or closing bid and asked prices or the Common Stock is not reported on any such
exchange or market, the Current Market Price shall be determined in any good
faith reasonable manner approved by the Board of Directors of the Corporation.

                  (f) No Impairment.

                        (i) The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
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 Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this section 3 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series E Preferred against
impairment.

                        (ii) The Corporation shall at all times reserve and
keep available for issuance upon the conversion of the Series E Preferred a
number of its authorized but unissued shares of Common Stock that will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series E Preferred, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series E
Preferred.

                        (iii) Any registered holder of Series E Preferred
shall be entitled to seek an injunction or injunctions to prevent breaches of
the provisions of this certificate of designation and to enforce specifically
the terms and provisions of this certificate of designation in any court of the
United States or any state thereof having


                                       29
<Page>

jurisdiction, this being in addition to any other remedy to which such holder
may be entitled at law or in equity.

                  (g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series E Conversion Price pursuant to this
section 3, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series E Preferred a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series E Preferred, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments,(ii) the Series E Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series E
Preferred.

                  (h) Notices of Record Date. In the event that this
Corporation shall propose at any time:

                        (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;

                        (ii) to effect any reclassification or recapitalization
or other reorganization of its capital stock; or

                        (iii) to merge with or into any other corporation or
other entity, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this Corporation shall send to the holders of the Series E Preferred
shares:

                              (A) at least 10 days' prior written notice of
the date on which a record shall be taken for such dividend, distribution or
subscription rights and setting forth a description thereof (and specifying the
date on which the holders of Common Stock shall be entitled thereto) or for
determining rights to vote in respect of the matters referred to in (iii) above;
and

                              (B) in the case of the matters referred to in
subsection 3(h)(ii) or (iii) above, at least 10 days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).

                  Each such written notice shall be given by first class mail,
postage prepaid, addressed to the holders of Series E Preferred at the address
for each such holder as shown on the books of this Corporation.

            (4) Voting. Except as otherwise required by law, the holders of
Series E Preferred shall not be entitled to vote upon any matter submitted to
the stockholders for a vote except as to matters affecting holders of Series E
Preferred as a class, as set forth in section (5) below.

            (5) Protective Provisions. In addition to any other rights provided
by law, so long as any Series E Preferred shall be outstanding, this Corporation
shall not, without first obtaining the affirmative vote or written consent of
the holders of more than 50 percent of such outstanding shares of Series E
Preferred:


                                       30
<Page>

                  (a) amend or repeal any provision of, or add any provision to,
this Corporation's Certificate of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series E Preferred;

                  (b) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series E Preferred, or authorize or issue
shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this Corporation having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series E Preferred; or

                  (c) reclassify any Common Stock into shares having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series E Preferred.

            (6) Status of Converted Stock. In the event any shares of Series E
Preferred shall be converted pursuant to section 3 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation.

            (7) Residual Rights. All rights accruing to the outstanding
shares of this Corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.

            (8) Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series E Preferred shall be deemed to have
consented to distributions made by the Corporation in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Corporation and
such persons.

      IN WITNESS WHEREOF, 5B Technologies Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Glenn Nortman,
its Chief Executive Officer, this 16th day of August, 2001.

5B TECHNOLOGIES CORPORATION


By: /s/ Glenn Nortman
--------------------------------------
Glenn Nortman, Chief Executive Officer


                                       31

