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                                                                     EXHIBIT 3.1


             FIRST AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                           COSINE COMMUNICATIONS, INC.



        CoSine Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:

        A.     The name of the corporation is CoSine Communications, Inc. The
corporation was originally incorporated under the same name and the original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on May 16, 2000.

        B.     This First Amended and Restated Certificate of Incorporation
restates and integrates and amends the provisions of the corporation's
Certificate of Incorporation. The amendments and restatement herein set forth
have been duly approved by the corporation's Board of Directors and stockholders
in accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware, with the approval of the corporation's stockholders having
been given by written consent in accordance with Section 228 of the General
Corporation Law of the State of Delaware.

        C.     The Certificate of Incorporation is hereby restated and amended
to read in its entirety as follows:

                                   ARTICLE I
                                      NAME

        The name of this corporation is CoSine Communications, Inc.



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                                   ARTICLE II
                                REGISTERED OFFICE

        The address of this corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of the registered agent at such address is the
Corporation Service Company.

                                   ARTICLE III
                                     PURPOSE

        The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.

                                   ARTICLE IV
                                      STOCK

        This corporation is authorized to issue two classes of shares to be
designated respectively Common Stock, par value $0.0001 per share ("COMMON"),
and Preferred Stock, par value $0.0001 per share ("PREFERRED"). The total number
of shares of all classes of stock that this corporation shall have authority to
issue is 268,398,995, of which 200,000,000 shares are to be Common and
68,398,995 shares are to be Preferred. Of the Preferred Stock, 2,150,000 shares
are hereby designated as Series A Preferred Stock (the "SERIES A PREFERRED"),
13,578,649 shares are hereby designated as Series B Preferred Stock (the "SERIES
B PREFERRED"), 27,503,677 shares are hereby designated as Series C Preferred
Stock (the "SERIES C PREFERRED"), 20,500,000 shares are hereby designated as
Series D Preferred Stock (the "SERIES D PREFERRED") and 4,666,669 shares are
hereby designated as Series E Preferred Stock (the "SERIES E PREFERRED").

        The corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common if at any
time the number of shares of Common remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred.

        The relative rights, preferences, privileges and restrictions granted to
or imposed upon the Common and Preferred and the holders thereof are as set
forth below.

        Section 1. Liquidation Rights.

                (a) Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
corporation (a "LIQUIDATION EVENT") (or the deemed occurrence of such
Liquidation Event pursuant to subsection (d) of this Section 1), the holder of
each share of Series E Preferred, Series D Preferred, Series C Preferred and
Series B Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or property of the corporation to the holders
of the Series A Preferred or the Common by reason of their ownership thereof (i)
in the case of the Series E Preferred, an aggregate amount (the "MAXIMUM
SERIES E LIQUIDATION



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AMOUNT") equal to the sum of (A) Fifteen Dollars ($15.00) per share, plus (B)
whether or not dividends have been declared on the Series E Preferred, twelve
and a half cents ($0.125) per month for each month completed after the Original
Issue Date (as hereafter defined) at the time of such event for each share of
Series E Preferred then held by them, (ii) in the case of the Series D
Preferred, an amount equal to Three Dollars and Fifty and Five Tenths Cents
($3.505) per share plus any accrued or declared and unpaid dividends for each
share of Series D Preferred then held by them, (iii) in the case of the Series C
Preferred, an amount equal to Eighty-Nine and Seven-Tenths Cents ($0.897) per
share plus any accrued or declared and unpaid dividends for each share of Series
C Preferred then held by them, and (iv) in the case of the Series B Preferred,
an amount equal to Seventy-Three and Eight-Tenths Cents ($0.738) per share plus
any accrued or declared and unpaid dividends for each share of Series B
Preferred then held by them.

               All of the preferential amount to be paid to the holders of the
Series E Preferred, Series D Preferred, Series C Preferred and Series B
Preferred under this Section 1(a) shall be paid or set apart for payment before
the payment or setting apart for payment of any amount for, or the distribution
of any assets of the corporation to, the holders of the Series A Preferred and
the Common in connection with any Liquidation Event. After the payment or the
setting apart for payment to the holders of the Series E Preferred, Series D
Preferred, Series C Preferred and Series B Preferred of the preferential amounts
so payable to them, the remaining assets of the corporation available for
distribution shall be distributed in accordance with the provisions of Section
1(b).

               If the assets or property to be distributed is insufficient to
permit the payment to holders of the Series E Preferred, Series D Preferred,
Series C Preferred and Series B Preferred of their full preferential amount, the
entire assets and property legally available for distribution shall be
distributed ratably among the holders of Series E Preferred, Series D Preferred,
Series C Preferred and Series B Preferred in such a manner that the preferential
amount to be distributed to each such holder at that time shall equal the amount
obtained by multiplying the entire assets and funds of the corporation then
legally available for distribution hereunder by a fraction, the numerator of
which shall be the full preferential amount to which such holder would then be
entitled under this Section 1(a) if the assets and property then available to be
distributed sufficed to permit payment thereof, and the denominator of which
shall be the full preferential amount to which all such holders would then be
entitled under this Section 1(a) if the assets and property then available to be
distributed sufficed to permit payment thereof.

               (b) Series A Preferred Liquidation Preference. After payment to
the holders of the Series E Preferred, Series D Preferred, Series C Preferred
and Series B Preferred of the amounts set forth in Section 1(a), above, the
remaining assets and property of the corporation legally available for
distribution, if any, shall be distributed to the holders of the Series A
Preferred such that the holder of each share of Series A Preferred shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or property of the corporation to the holders of the Common by reason of
their ownership thereof, an amount equal to One and 60/100 Dollars ($1.60) per
share plus any accrued or declared and unpaid dividends for each share of
Series A Preferred then held by them.



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               All of the preferential amount to be paid to the holders of the
Series A Preferred under this Section 1(b) shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any assets of the corporation to, the holders of the Common
in connection with any Liquidation Event. After the payment or the setting apart
for payment to the holders of the Series A Preferred of the preferential amounts
so payable to them, the remaining assets of the corporation available for
distribution shall be distributed in accordance with the provisions of
Section 1(c).

               If the remaining assets or property of the corporation, after
payment of the amounts set forth in Section 1(a) above, that are available to be
distributed are insufficient to permit the payment to holders of the Series A
Preferred of their full preferential amount, the entire assets and property
legally available for distribution at that time shall be distributed ratably
among the holders of Series A Preferred in such a manner that the preferential
amount to be distributed to each such holder shall equal the amount obtained by
multiplying the entire remaining assets and funds of the corporation then
legally available for distribution hereunder by a fraction, the numerator of
which shall be the number of shares of Series A Preferred then held by such
holder, and the denominator of which shall be the total number of shares of
Series A Preferred then outstanding.

               (c) Distribution after Payment of the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred and Series E Preferred
Liquidation Preferences. After payment has been made to the holders of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred of the full preferential amounts set forth in
Section 1(a) and 1(b) above, the entire remaining assets and funds of the
corporation legally available for distribution, if any, shall be distributed as
follows:

                      (i) in the event the aggregate value of assets and
property to be distributed for the entire corporation, including assets and
property distributed or available for distribution pursuant to Section 1(a) and
1(b), is less than $15 million:

                             (A) ratably among the holders of Common, Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred in a
manner such that the amount distributed to each holder of Common, Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
equal the amount obtained by multiplying (x) the remaining assets and funds of
the corporation legally available for distribution hereunder after the
distributions pursuant to Section 1(a) and 1(b), above, by a fraction, the
numerator of which shall be (y) the number of shares of Common then held by such
holder (or, in the case of a holder of the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred, the number of shares of
Common for which such holders of Series A Preferred, Series B Preferred, Series
C Preferred or Series D Preferred may then be converted), and the denominator of
which shall be (z) the sum of the total number of shares of Common then
outstanding and the total number of shares of Common issuable upon conversion of
all then outstanding shares of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred; provided, however, that the aggregate per
share liquidation amount of the Series D Preferred under this Section 1 shall
not exceed Fourteen and 2/100 Dollars ($14.02) (the "MAXIMUM SERIES D
LIQUIDATION AMOUNT"); and provided further that the aggregate per share
liquidation



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amount of the Series C Preferred under this Section 1 shall not exceed Three and
588/1000 Dollars ($3.588) (the "MAXIMUM SERIES C LIQUIDATION AMOUNT"); and
provided further that the aggregate per share liquidation amount of the Series B
Preferred under this Section 1 shall not exceed Two and 50/100 Dollars ($2.50)
(the "MAXIMUM SERIES B LIQUIDATION AMOUNT"); and

                             (B) after payment of the Maximum Series E
Liquidation Amount, Maximum Series D Liquidation Amount, Maximum Series C
Liquidation Amount and Maximum Series B Liquidation Amount, ratably among the
holders of Common and Series A Preferred in a manner such that the amount
distributed to each holder of Common and Series A Preferred shall equal the
amount obtained by multiplying (x) the remaining assets and funds of the
corporation legally available for distribution hereunder after the distributions
pursuant to Section 1(a), 1(b) and 1(c)(i)(A) above, by a fraction, the
numerator of which shall be (y) the number of shares of Common then held by such
holder (or, in the case of a holder of Series A Preferred, the number of shares
of Common for which such holder's shares of Series A Preferred may then be
converted), and the denominator of which shall be (z) the sum of the total
number of shares of Common then outstanding and the total number of shares of
Common issuable upon conversion of all then outstanding shares of Series A
Preferred; and

                      (ii) in the event the aggregate value of assets and
property to be distributed, for the entire corporation including assets and
property distributed or available for distribution pursuant to Section 1(a) and
1(b), is equal to or greater than $15 million:

                             (A) ratably among the holders of Common, Series B
Preferred, Series C Preferred and Series D Preferred in a manner such that the
amount distributed to each holder of Common, Series B Preferred, Series C
Preferred and Series D Preferred shall equal the amount obtained by multiplying
(x) the remaining assets and funds of the corporation legally available for
distribution hereunder after the distributions pursuant to Section 1(a) and
1(b), above, by a fraction, the numerator of which shall be (y) the number of
shares of Common then held by such holder (or, in the case of a holder of the
Series B Preferred, Series C Preferred or Series D Preferred, the number of
shares of Common for which such holder's shares of Series B Preferred, Series C
Preferred or Series D Preferred may then be converted), and the denominator of
which shall be (z) the sum of the total number of shares of Common then
outstanding and the total number of shares of Common issuable upon conversion of
all of the then outstanding shares of Series B Preferred, Series C Preferred and
Series D Preferred; provided, however, that the aggregate per share liquidation
amount of the Series D Preferred shall not exceed the Maximum Series D
Liquidation Amount; and provided further that the aggregate per share
liquidation amount of the Series C Preferred under this Section 1 shall not
exceed the Maximum Series C Liquidation Amount; and provided further that the
aggregate per share liquidation amount of the Series B Preferred under this
Section 1 shall not exceed the Maximum Series B Liquidation Amount.

                             (B) after payment of the Maximum Series D
Liquidation Amount, Maximum Series C Liquidation Amount and Maximum Series B
Liquidation Amount, ratably among the holders of Common in a manner such that
the amount distributed to each holder of Common shall equal the amount obtained
by multiplying the remaining assets and funds of the



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corporation legally available for distribution hereunder after the distributions
pursuant to Section 1(a), 1(b) and 1(c)(ii)(A) above, by a fraction, the
numerator of which shall be the number of shares of Common then held by such
holder, and the denominator of which shall be the total number of shares of
Common then outstanding.

               (d) Deemed Liquidation. For purposes of this Section 1, a merger
or consolidation of the corporation with or into any other corporation or
corporations, or a sale or other transfer in a single transaction or a series of
related transactions of all or substantially all of the assets of the
corporation, shall be deemed to be a Liquidation Event (except, in each case,
where the corporation's shareholders of record as constituted immediately prior
to such merger, consolidation, sale or other transfer will immediately after
such merger, consolidation, sale or transfer hold more than fifty percent (50%)
of the voting power of the surviving or acquiring entity).

               (e) Adjustments. The liquidation preferences provided for herein
with respect to the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred shall be equitably adjusted to reflect
any stock dividend, stock distribution, stock split or reverse stock split,
combination of shares, subdivision of shares or reclassification of shares with
respect to the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred as applicable.

               (f) Value of Assets. In any of the events specified in Section
1(d), if the consideration received by the corporation is other than cash, its
value will be deemed its fair market value as determined in good faith by the
Board of Directors; provided, however, any securities shall be valued as
follows;

                      (i) If traded on a securities exchange or through the
Nasdaq National Market or Nasdaq SmallCap Market, the value shall be deemed to
be the average of the closing prices of the securities on such exchange over the
thirty-day period ending three (3) days prior to the closing;

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

                      (iii) If there is no active public market, the value shall
be the fair market value and shall be determined as follows: the board of
directors of the Corporation will promptly engage an independent competent
appraiser to determine the value of the assets to be distributed to the holders
of Preferred Stock or Common Stock. The corporation upon receipt of such
appraiser's valuation shall give prompt written notice to each holder of shares
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, Series E Preferred and Common of the appraiser's valuation.

        Section 2. The holders of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred shall have
conversion rights as follows (the "CONVERSION RIGHTS"):



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               (a) Right to Convert. Each share of Series A Preferred shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series A Preferred, into such number of fully paid and nonassessable
shares of Common as is determined by dividing (x) its original issue price
($1.60) by (y) the Series A Conversion Price, determined as hereinafter
provided, as last adjusted and then in effect at the time of conversion. The
"SERIES A CONVERSION PRICE" shall initially be one and 60/100 dollars ($1.60).
Each share of Series B Preferred shall be convertible, without the payment of
any additional consideration by the holder thereof and at the option of the
holder thereof, at any time after the date of issuance of such share, at the
office of the corporation or any transfer agent for the Series B Preferred, into
such number of fully paid and nonassessable shares of Common as is determined by
dividing (x) its original issue price ($0.738) by (y) the Series B Conversion
Price, determined as hereinafter provided, as last adjusted and then in effect
at the time of conversion. The "SERIES B CONVERSION PRICE" shall initially be
seventy-three and eight-tenths cents ($0.738). Each share of Series C Preferred
shall be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any transfer
agent for the Series C Preferred, into such number of fully paid and
nonassessable shares of Common as is determined by dividing (x) its original
issue price ($0.897) by (y) the Series C Conversion Price, determined as
hereinafter provided, as last adjusted and then in effect at the time of
conversion. The "SERIES C CONVERSION PRICE" shall initially be eighty-nine and
seven-tenths cents ($0.897). Each share of Series D Preferred shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series D Preferred, into such number of fully paid and nonassessable
shares of Common as is determined by dividing (x) its original issue price
($3.505) by (y) the Series D Conversion Price, determined as hereinafter
provided, as last adjusted and then in effect at the time of conversion. The
"SERIES D CONVERSION PRICE" shall initially be three dollars and fifty and
five-tenths cents ($3.505). Each share of Series E Preferred shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series E Preferred, into such number of fully paid and nonassessable
shares of Common as is determined by dividing (x) its original issue price
($15.00) by (y) the Series E Conversion Price, determined as hereinafter
provided, as last adjusted and then in effect at the time of conversion. The
"SERIES E CONVERSION PRICE" shall initially be fifteen dollars ($15.00). The
initial Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price shall
be subject to adjustment, in order to adjust the number of shares of Common into
which the Series A Preferred, the Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred respectively, are convertible, as set forth
in Section 2(d) and 2(e), below. In May 1998, the Series A Conversion Price was
reduced to forty cents ($0.40) pursuant to Section 2(d)(i) hereof as a result of
a stock dividend of three shares of Common on each share of outstanding Common.


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               (b) Automatic Conversion.

                      (i) Initial Public Offering. Each share of Series A
Preferred, Series B Preferred and Series C Preferred shall automatically be
converted into shares of Common at the then effective Series A Conversion Price,
Series B Conversion Price and Series C Conversion Price, respectively, upon the
closing ("CLOSING") of a firm commitment underwritten public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common for the account of the
corporation to the public at an offering price to the public of at least Five
Dollars ($5.00) per share (as adjusted for stock splits, stock dividends,
reclassifications, and like events) and in which the aggregate gross proceeds
received by the corporation (net of underwriting discounts) equal or exceed
$15,000,000, and each share of Series E Preferred and Series D Preferred shall
automatically be converted into shares of Common at the then effective Series E
Conversion Price and Series D Conversion Price, respectively, upon the Closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common for the account of the corporation to the public at
an offering price to the public of at least Seven Dollars ($7.00) per share (as
adjusted for stock splits, stock dividends, reclassifications, and like events)
and in which the aggregate gross proceeds received by the corporation (net of
underwriting discounts) equal or exceed $15,000,000. In the event of the
consummation of any such offering, the person(s) entitled to receive the Common
issuable upon such conversion of the shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred shall
not be deemed to have converted such shares of Preferred until immediately prior
to the Closing.

                      (ii) Shareholder Vote of the Holders of the Series A
Preferred. Each share of Series A Preferred shall automatically be converted
into shares of Common at the then effective Series A Conversion Price upon the
affirmative election of the holders of greater than fifty percent (50%) of the
then outstanding shares of Series A Preferred. In the event of such an election,
the person(s) entitled to receive the Common issuable upon such conversion of
the Series A Preferred shall not be deemed to have converted that Series A
Preferred until written evidence of such election satisfactory to the
corporation is received by the corporation.

                      (iii) Shareholder Vote of the Holders of the Series B
Preferred. Each share of Series B Preferred shall automatically be converted
into shares of Common at the then effective Series B Conversion Price upon the
affirmative election of the holders of greater than fifty percent (50%) of the
then outstanding shares of Series B Preferred. In the event of such an election,
the person(s) entitled to receive the Common issuable upon such conversion of
the Series B Preferred shall not be deemed to have converted that Series B
Preferred until written evidence of such election satisfactory to the
corporation is received by the corporation.

                      (iv) Shareholder Vote of the Holders of the Series C
Preferred. Each share of Series C Preferred shall automatically be converted
into shares of Common at the then effective Series C Conversion Price upon the
affirmative election of the holders of greater than fifty percent (50%) of the
then outstanding shares of Series C Preferred. In the event of such an election,
the person(s) entitled to receive the Common issuable upon such conversion of
the Series C Preferred



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shall not be deemed to have converted that Series C Preferred until written
evidence of such election satisfactory to the corporation is received by the
corporation.

                      (v) Shareholder Vote of the Holders of the Series D
Preferred. Each share of Series D Preferred shall automatically be converted
into shares of Common at the then effective Series D Conversion Price upon the
affirmative election of the holders of greater than fifty percent (50%) of the
then outstanding shares of Series D Preferred. In the event of such an election,
the person(s) entitled to receive the Common issuable upon such conversion of
the Series D Preferred shall not be deemed to have converted that Series D
Preferred until written evidence of such election satisfactory to the
corporation is received by the corporation.

                      (vi) Shareholder Vote of the Holders of the Series E
Preferred. Each share of Series E Preferred shall automatically be converted
into shares of Common at the then effective Series E Conversion Price upon the
affirmative election of the holders of greater than fifty percent (50%) of the
then outstanding shares of Series E Preferred. In the event of such an election,
the person(s) entitled to receive the Common issuable upon such conversion of
the Series E Preferred shall not be deemed to have converted that Series E
Preferred until written evidence of such election satisfactory to the
corporation is received by the corporation.

               (c) Mechanics of Conversion. No fractional shares of Common shall
be issued upon conversion of the Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred. In lieu of any fractional
shares to which a holder of either the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred would otherwise be
entitled, the corporation at its election shall either pay cash equal to such
fraction multiplied by the then effective Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price, respectively, or issue one whole share for each fraction of
a share outstanding, after aggregating all fractional shares held by each
shareholder. Before any holder of either Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred shall be entitled
to convert the same into full shares of Common pursuant to Section 2(a) hereof,
he shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the corporation or of any transfer agent for such shares of
Preferred, and shall give written notice to the corporation at such office that
such holder elects to convert the same and shall state therein the holder's name
or the name or names of such holder's nominees in which the holder wishes the
certificate or certificates for shares of Common to be issued. The corporation
shall, as soon as practicable thereafter, issue and deliver to such holder of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred, or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common to which such holder shall be
entitled as aforesaid, together if so elected by the corporation with cash in
lieu of any fraction of a share. 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 A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred to be converted, and the person or persons
entitled to receive the shares of Common issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common on such date.



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               (d) Adjustments to Conversion Price of Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred and Series E Preferred Upon
Certain Events.

                      (i) Adjustments for Stock Splits or Stock Dividends. In
the event the outstanding shares of Common shall be subdivided (by stock split
or otherwise), into a greater number of shares of Common, or shares of Common
shall have been issued by stock dividend, the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price then in effect shall, concurrently with the
effectiveness of such subdivision or stock dividend, be proportionately
decreased. In the event the outstanding shares of Common shall be combined or
consolidated by reclassification or otherwise, into a lesser number of shares of
Common, the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price then
in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.

                      (ii) 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 entitled to receive, any distribution
payable in securities of the corporation other than shares of Common, then and
in each such event provision shall be made so that the holders of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred shall receive upon conversion thereof, in addition to the number of
shares of Common receivable thereupon, the amount of securities of the
corporation which they would have received had their Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred,
respectively, been converted into Common on the date of such event and had they
thereafter, during the period from the date of such event to and including the
date of conversion, retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called for during such
period under this Section 2 with respect to the rights of the holders of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, respectively.

                      (iii) Adjustments for Reclassification, Exchange and
Substitution. If the Common issuable upon conversion of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price and Series E Conversion
Price then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted such that the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, respectively, shall be convertible into, in lieu of the
number of shares of Common which the holders would otherwise be entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common that would have been subject to receipt by the
holders upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred immediately before that
change.



                                      -10-
   11

                      (iv) Reorganization, Mergers, Consolidations, or Sales
of Assets. If at any time or from time to time there shall be a capital
reorganization of the Common (other than a subdivision, combination,
reclassification, or exchange of shares provided for elsewhere in this
Section 2) or a merger or consolidation of this corporation with or into another
corporation, or the sale of all or substantially all of this corporation's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred shall thereafter be entitled to
receive upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, respectively, the number
of shares of stock or other securities or property of this corporation, or of
the successor corporation resulting from such merger or consolidation or sale,
to which a holder of Common deliverable upon conversion would have been entitled
upon such capital reorganization, merger, consolidation, or sale.

                      (v) In any case, appropriate adjustment shall be made in
the application of the provisions of this Section 2 with respect to the rights
of the holders of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, respectively, after the
event giving rise to the adjustment to the end that the provisions of this
Section 2 (including adjustment of the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price then in effect and the number of shares purchasable
upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, respectively) shall be
applicable after that event as nearly equivalent as may be practicable to those
obtaining immediately before such event.

               (e) Adjustments to Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price for Certain Diluting Issues.

                      (i) Special Definitions. For purposes of this Section
2(e), the following definitions apply:

                             (1) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares (other than Common, Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred) or
other securities convertible into or exchangeable for Common.

                             (2) "OPTIONS" shall mean rights, options, or
warrants to subscribe for purchase or otherwise acquire Common, Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred or Convertible Securities.

                             (3) "ORIGINAL ISSUE DATE" shall mean the date on
which a share of Series E Preferred was first issued.



                                      -11-
   12

                             (4) "ADDITIONAL SHARES OF COMMON" shall mean all
shares of Common issued or deemed to be issued by the corporation after the
Original Issue Date, other than shares of Common issued or issuable:

                                    (A) upon conversion of shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred;

                                    (B) to officers, directors, or employees of,
or consultants to, the corporation on terms approved by the Board of Directors;

                                    (C) to vendors, customers, lenders,
suppliers, or equipment lessors upon terms approved by the Board of Directors;

                                    (D) as a dividend or distribution on Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
Series E Preferred;

                                    (E) subject to Section 2(e)(ii), upon
exercise or conversion of options or warrants, respectively;

                                    (F) for which adjustment of the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price or Series E Conversion Price is made pursuant to Section
2(d)(i); or

                                    (G) in connection with a joint venture
agreement or acquisition agreement upon the terms approved by the Board of
Directors.

                      (ii) Deemed Issuance of Options and Convertible
Securities. If this corporation at any time or from time to time after the
Original Issue Date issues any Options or Convertible Securities or fixes a
record date for the determination of holders of any class of securities entitled
to receive any Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number and not
counting any shares subject to a material contingency) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the time of
such issue or, in case a record date has been fixed, as of the close of business
on such record date.

                      (iii) No Adjustment of Conversion Price. Any provision
herein to the contrary notwithstanding, no adjustment to the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price or Series E Conversion Price shall be made in respect of the issuance of
Additional Shares of Common unless the consideration per share (determined
pursuant to Section 2(e)(iv) hereof) for an Additional Share of Common issued by
the corporation is less than the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price, respectively, in effect on the date of, and immediately prior
to, such issue, and in such event such adjustment shall only be



                                      -12-
   13

made to whichever of the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price exceeds such consideration per share.

                      (iv) Adjustment of Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price Upon Issuance of Additional Shares of Common. In the
event this corporation issues or is deemed to have issued Additional Shares of
Common without consideration or for a consideration per share less than the
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price,
Series D Conversion Price or Series E Conversion Price, as last adjusted and
then in effect on the date of and immediately prior to such issue, then and in
such event, the then applicable Series A Conversion Price, Series B Preferred
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price, respectively, that exceeds such consideration per share
shall be reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price, respectively, by a fraction, the numerator of which shall be
(x) the number of shares of Common outstanding immediately prior to such issue
or deemed issue plus the number of shares of Common which the aggregate
consideration received by the corporation for the total number of Additional
Shares of Common so issued would purchase at such Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price
or Series E Conversion Price, respectively, in effect immediately prior to such
issuance, and the denominator of which shall be (y) the number of shares of
Common outstanding immediately prior to such issue or deemed issue plus the
number of such Additional Shares of Common so issued. For the purpose of the
above calculation, the number of shares of Common outstanding immediately prior
to such issue shall be calculated on a fully diluted basis, as if all shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred and all Convertible Securities had been fully converted
into shares of Common immediately prior to such issuance and any outstanding
warrants, options or other rights for the purchase of shares of stock or
convertible securities had been fully exercised immediately prior to such
issuance (and the resulting securities fully converted into shares of Common, if
so convertible) as of such date, but not including in such calculation any
additional shares of Common issuable with respect to shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred, Convertible Securities, or outstanding options, warrants, or other
rights for the purchase of shares of stock or convertible securities, solely as
a result of the adjustment of the Series A Conversion Price, the Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price, respectively, (or other conversion ratios) resulting
from the issuance of the Additional Shares of Common causing the adjustment in
question.

                      (v) Notwithstanding the foregoing, upon the closing of the
first firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common for the account of the corporation to the public,
if the offering price to the public ("IPO Price") shall be less than fifteen
dollars ($15.00) per share (as adjusted for stock splits, stock dividends,
reclassifications and like events), the Series E Conversion Price shall be
reduced, immediately prior to such Closing such that



                                      -13-
   14

the Series E Preferred shall convert at such closing pursuant to Section 2(b)(i)
hereof at the Series E Conversion Price as so reduced, to a price equal to the
IPO Price, if the IPO Price is equal to seven dollars ($7.00) per share or more.
If the IPO Price is less than $7.00 per share (as adjusted for stock splits,
stock dividends, reclassifications and like events), and holders of Series E
Preferred do not elect to convert at the IPO closing, the Series E Conversion
Price shall be reduced to seven dollars ($7.00) per share, subject to subsequent
adjustment upon subsequent events giving rise to antidilution adjustment.

                      (vi) Determination of Consideration. For purposes of the
operation of Section 2(e), the consideration received (or deemed to have been
received in the case of Options and Convertible Securities) by the corporation
for the issue of any Additional Shares of Common shall:

                             (1) to the extent it consists of cash, be computed
as the aggregate amount of cash paid before deducting any reasonable brokerage
or underwriting commissions or other expense paid or incurred by the corporation
for the issuance and sale of the securities;

                             (2) to the extent it consists of property other
than cash, be computed at the fair value thereof at the time of such issue or
deemed issuance, as determined in good faith by the Board of Directors; and

                             (3) if Additional Shares of Common are issued
together with other shares or securities or other assets of the corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (1) and (2) above, as determined in
good faith by the Board of Directors.

                             (4) for Options and Convertible Securities, be the
sum of the values of (x) the cash and property to be paid to this corporation
for the issue of such Options and Convertible Securities, if any, and (y) the
cash and property payable to this corporation upon the exercise in full of such
Option or the full conversion of such Convertible Securities, if any.

                      (vii) Calculation of Per Share Amount. The number of
Additional Shares of Common deemed to be issued upon the issuance or deemed
issuance of a Convertible Security shall be the number of shares of Common Stock
issuable upon the exercise in full of such Option or the conversion in full of
such Convertible Security as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent increase in
the number of shares issuable or decrease in the amount of consideration payable
upon the exercise, conversion, or exchange thereof.

                      (viii) Recomputation of Adjustment as a Result of Changes
in Options or Convertible Securities. If an Option or Convertible Security by
its terms provides, with the passage of time or otherwise, for any change in the
consideration payable to this corporation or in the number of shares of Common
issuable upon the exercise, conversion, or exchange thereof, the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price and Series E Conversion Price computed upon the original
issuance or deemed issuance of such Option or Convertible Security, and any
subsequent adjustments based thereon, shall each be



                                      -14-
   15

recomputed, upon any such change becoming effective, to reflect such change
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities (provided however that no such adjustment of the
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price,
Series D Conversion Price or Series E Conversion Price shall affect Common Stock
previously issued upon conversion of the Series A Preferred, the Series B
Preferred, the Series C Preferred, the Series D Preferred or the Series E
Preferred).

                      (ix) Recomputation of Adjustment as a Result of Expiration
of Options or Conversion. Upon expiration of any Options or any rights of
conversion or exchange under Convertible Securities that have not been exercised
or converted, the Series A Conversion Price, the Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price and Series E Conversion
Price computed upon the original issuance or deemed issuance thereof, and any
subsequent adjustments based thereon, shall each be recomputed, upon such
expiration, as if (a) in the case of Convertible Securities or Options for
Common, the only Additional Shares of Common issued were shares of Common, if
any, actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by this corporation for the issuance of
all such Options, whether or not exercised, plus the consideration actually
received by this corporation upon such exercise, or for the issuance of all such
Convertible Securities that were actually received by this corporation upon such
exercise, or for the issuance of all such Convertible Securities that were
actually converted or exchanged, plus the additional consideration, if any,
actually received by this corporation upon such conversion or exchange, and (b)
in the case of Options for Convertible Securities, only the Convertible
Securities, if any, actually issued upon the exercise thereof were issued at the
time of issuance or deemed issuance of such Options, and the consideration
received by this corporation for the Additional Shares of Common deemed to have
been then issued was the consideration actually received by this corporation for
the issuance of all such Options, whether or not exercised, plus the
consideration deemed to have been received by this corporation upon the issuance
of the Convertible Securities with respect to which such Options were actually
exercised.

                      (x) Limitation on Readjustments.

                             (1) Readjustment of Conversion Price. No
readjustment pursuant to Section 2 hereof shall have the effect of increasing
the Series A Conversion Price, the Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price or Series E Conversion Price to an
amount that exceeds the lower of (a) the applicable Conversion Price immediately
before the issuance or deemed issuance of such Options or Convertible Securities
or (b) the applicable Conversion Price that would have resulted from any
issuance of Additional Shares of Common between the date immediately before the
issuance or deemed issuance of such Options or Convertible securities and such
readjustment date.

                             (2) No Adjustment Upon Issuance of Shares Deemed
Outstanding. No adjustment in the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price shall be made upon the actual issuance of Additional Shares of
Common Stock if such shares are already deemed issued at the time of issuance



                                      -15-
   16

and any adjustment of the applicable conversion price required to be made as a
result of the deemed issuance has been made.

               (f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price pursuant to this Section 2, 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 A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred,
respectively, a certificate certified by the corporation's chief financial
officer 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 A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred, respectively, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price,
Series D Conversion Price and Series E Conversion Price in effect at that time,
and (iii) the number of shares of Common and the amount, if any, of other
property which at the time would be received upon the conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, respectively.

               (g) No Impairment. This corporation will not through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 2 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred against
impairment.

               (h) Issue Taxes. This corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common on conversion of shares of Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred and Series E Preferred; provided, however, that
this corporation shall not be liable for personal property taxes or personal
income taxes attributable to the holders of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred upon
conversion thereof.

               (i) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common solely for the purpose of effecting the conversion
of the shares of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred such number of its shares of Common as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred. If at any time the number
of authorized but unissued shares of Common shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, this
corporation will take such corporate action



                                      -16-
   17

as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common to such number of shares as shall be sufficient
for such purpose.

                Section 3. Redemption.

               (a) Redemption of Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred. If at any time within the ninety (90) day
period following November 23, 2003, the corporation receives a written request
("REDEMPTION REQUEST") from the holders of not less than sixty-seven percent
(67%) of the then outstanding Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred (computed collectively on an as-if-converted
basis) (collectively, the "REDEEMING SHAREHOLDERS") requesting redemption of all
or a portion of the Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, the corporation shall within ninety (90) days after the
date the Redemption Request is deemed given, redeem pro rata to their respective
requests for redemption one-third of each of the Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred requested to be redeemed
(or, if less, the maximum amount of Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred it may lawfully redeem or, if less
than the maximum amount it may lawfully redeem, the maximum amount the
corporation may redeem without causing the corporation extraordinary financial
distress as reasonably determined in good faith by the Board of Directors), and
shall redeem the Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred remaining outstanding after such redemption, pro rata to the
respective number of shares of each then outstanding, in two equal installments
(or, if less, the maximum amount it may lawfully redeem, or, if less than the
maximum amount it may lawfully redeem, the maximum amount the corporation may
redeem without causing the corporation extraordinary financial distress as
reasonably determined in good faith by the Board of directors) on November 23,
2004, and November 23, 2005. Each date on which the corporation shall redeem
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall be a "REDEMPTION DATE."

               (b) Notice to Other Series B, Series C, Series D and Series E
Holders. If any share of Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred are to be redeemed pursuant to Section 3(a)
hereof, then upon receipt of the Redemption Request, the corporation shall
promptly mail written notice of the Redemption Request ("REDEMPTION NOTICE"),
first class postage prepaid, to each holder of record of Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred. Each such holder
shall have thirty (30) days from the date the Redemption Notice is mailed to
request in writing the redemption of its Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred on the terms contained herein.

               (c) Redemption Price. The corporation shall pay in cash for
Series B Preferred the higher of (i) $0.738 per share, or (ii) the fair market
value of such shares as determined by an qualified independent appraiser
mutually agreed upon by the corporation and holders of a majority of the Series
B Preferred. The aggregate amount payable with respect to Series B Preferred is
hereinafter collectively referred to as the "SERIES B REDEMPTION PRICE." The
corporation shall pay in cash for Series C Preferred the higher of (i) $0.897
per share, or (ii) the fair market value of such shares as determined by an
qualified independent appraiser mutually agreed upon by the corporation



                                      -17-
   18

and holders of a majority of the Series C Preferred. The aggregate amount
payable with respect to Series C Preferred is hereinafter collectively referred
to as the "SERIES C REDEMPTION PRICE." The corporation shall pay in cash for
Series D Preferred the higher of (i) $3.505 per share, or (ii) the fair market
value of such shares as determined by an qualified independent appraiser
mutually agreed upon by the corporation and holders of a majority of the Series
D Preferred. The aggregate amount payable with respect to Series D Preferred is
hereinafter collectively referred to as the "SERIES D REDEMPTION PRICE." The
corporation shall pay in cash for Series E Preferred the higher of (i) $15.00
per share, or (ii) the fair market value of such shares as determined by an
qualified independent appraiser mutually agreed upon by the corporation and
holders of a majority of the Series E Preferred. The aggregate amount payable
with respect to Series E Preferred is hereinafter collectively referred to as
the "SERIES E REDEMPTION PRICE."

               (d) Mechanics of Redemption. At least twenty (20) days prior to
each Redemption Date, the corporation shall mail written notice, first class
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred to be
redeemed, at the address last shown on the records of the corporation for such
holder or given by the holder to the corporation for the purpose of notice or if
no such address appears or is given at the principal executive office of the
corporation, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date, the
Series B Redemption Price, the Series C Redemption Price, the Series D
Redemption Price, the Series E Redemption Price, the place at which payment may
be obtained, and calling upon such holder to surrender to the corporation, in
the manner and at the place designated, the certificate or certificates
representing the shares to be redeemed. If less than all the shares put for
redemption are to be redeemed, the notice shall also provide an explanation of
why the corporation is not redeeming all shares put for redemption and when the
corporation expects that it will be able to redeem such shares. On or after the
Redemption Date, each holder of Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred to be redeemed shall surrender to the
corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
or Series E Redemption Price, as the case may be, of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.

               (e) Shareholders Rights. From and after each Redemption Date,
unless there shall have been a default in payment of the Series B Redemption
Price, Series C Redemption Price, Series D Redemption Price or Series E
Redemption Price, as the case may be, all rights of the holders of Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred, as the
case may be, as holders of such shares (except the right to receive the Series B
Redemption Price, Series C Redemption Price, Series D Redemption Price or Series
E Redemption Price, as the case may be) shall cease with respect to such shares
which have been redeemed, and such shares shall not



                                      -18-
   19

thereafter be transferred on the books of the corporation or be deemed to be
outstanding for any purpose whatsoever.

               (f) Insufficient Funds. If the funds of the corporation available
(whether legally or by determination of the Board of Directors) for redemption
of shares of Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred on any Redemption Date are insufficient to redeem the total
number of shares of Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred to be redeemed on such date, or at any later time when
funds become available for the redemption of shares of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred that were not
timely redeemed, those funds that are then available will be used to redeem
shares of Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred such that each holder of Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred receives the same percentage of the
aggregate amount being paid in such partial redemption as such holder would have
received if the corporation were redeeming all of the shares put for redemption
on such date. The shares of Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein and in the
corporation's Certificate of Incorporation, as amended. At any time thereafter
when additional funds of the corporation are available for the redemption of
shares of Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, such funds will immediately be used to redeem the balance (or
portion thereof) of the shares of Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred that the corporation has become obligated to
redeem on any Redemption Date but that it has not redeemed.

               (g) Escrow of Redemption Price. On or prior to each Redemption
Date, the corporation may deposit the Series B Redemption Price of all shares of
Series B Preferred designated for redemption in the Redemption Notice and not
yet redeemed, the Series C Redemption Price of all shares of Series C Preferred
designated for redemption in the Redemption Notice and not yet redeemed, the
Series D Redemption Price of all shares of Series D Preferred designated for
redemption in the Redemption Notice and not yet redeemed and the Series E
Redemption Price of all shares of Series E Preferred designated for redemption
in the Redemption Notice and not yet redeemed (but not any one or two of the
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
or Series E Redemption Price) with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the benefit of
the respective holders of the shares designated for redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
corporation to pay the Series B Redemption Price, Series C Redemption Price,
Series D Redemption Price and Series E Redemption Price, respectively, for such
shares to their respective holders on or after the Redemption Date upon receipt
of notification from the corporation that such holder has surrendered his share
certificate to the corporation pursuant to Section 3(d) above. As of the
Redemption Date, the deposit shall constitute full payment of the shares to
their holders, and from and after the Redemption Date the shares so called for
redemption shall be redeemed and shall be deemed to be no longer outstanding,
and the holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect thereto except the right to receive
from the bank or trust corporation payment of the Series B Redemption Price, the
Series C Redemption Price, the Series D Redemption Price or the



                                      -19-
   20

Series E Redemption Price, as the case may be, of the shares, without interest,
upon surrender of their certificates therefor. Such instructions shall also
provide that any moneys deposited by the corporation pursuant to this Section
3(g) for the redemption of shares thereafter converted into shares of Common
prior to the Redemption Date shall be returned to the corporation forthwith upon
such conversion. The balance of any moneys deposited by the corporation pursuant
to this Section 3(g) remaining unclaimed at the expiration of two (2) years
following the Redemption Date shall thereafter be returned to the corporation
upon its request, and thereafter holders of any redeemed shares not theretofore
surrendered for redemption shall look to the corporation for payment of the
Series B Redemption Price, Series C Redemption Price, Series D Redemption Price
or Series E Redemption Price, respectively.

        Section 4. Voting Rights.

               (a) Voting for Other than Directors. Except as otherwise required
by law, (i) each share of Common issued and outstanding shall have one vote, and
(ii) each share of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred issued and outstanding shall have the
number of votes equal to the number of shares of Common into which such share of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred, respectively, is convertible as adjusted from time to
time in accordance with the provisions of Section 2 hereof, and the holders of
each of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred shall have voting rights and powers equal to
the voting rights and powers of the Common (except as otherwise expressly
provided herein or as required by law, voting together with the Common as a
single class). Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).

               (b) Voting for Directors. The Board of Directors shall consist of
seven (7) members. For so long as at least Five Hundred Thousand (500,000)
shares of Series B Preferred shall be outstanding (as adjusted for stock
dividends, combinations or splits with respect to such shares), the holders of
shares of Series B Preferred, voting together as a separate class, shall be
entitled to elect two directors. For so long as at least Five Hundred Thousand
(500,000) shares of Series A Preferred shall be outstanding (as adjusted for
stock dividends, combinations or splits with respect to such shares), the
holders of shares of Series A Preferred, voting together as a separate class,
shall be entitled to elect one director. The holders of shares of Common, voting
together as a separate class, shall be entitled to elect one director.
Additional directors shall be elected by the holders of the outstanding shares
of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, Series E Preferred and Common, voting together as a class. Any
vacancy in the Board of Directors occurring because of the death, resignation or
removal of a director shall be filled by the vote or written consent of the
holders of a majority of such class or classes which elected such director. A
director may be removed from the Board of Directors with or without cause only
by the vote or consent of the holders of the outstanding class or classes with
voting power entitled to elect



                                      -20-
   21

him in accordance with the General Corporation Law of Delaware, and the vacancy
created thereby may be filled only by the vote or consent of such holders.

        Section 5. Dividends.

               (a) The holders of outstanding Series E Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
funds legally available therefor, dividends at the annual rate of $1.50 per
share, and no more, payable in preference and priority to any payment of any
dividend on the Common, when and as declared by the Board of Directors. The
right to such dividends on shares of Series E Preferred shall be non-cumulative.

               (b) The holders of outstanding Series D Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
funds legally available therefor, dividends at the annual rate of $0.3505 per
share, and no more, payable in preference and priority to any payment of any
dividend on the Common, when and as declared by the Board of Directors. The
right to such dividends on shares of Series D Preferred shall be non-cumulative.

               (c) The holders of outstanding Series C Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
funds legally available therefor, dividends at the annual rate of $0.0897 per
share, and no more, payable in preference and priority to any payment of any
dividend on the Common, when and as declared by the Board of Directors. The
right to such dividends on shares of Series C Preferred shall be non-cumulative.

               (d) The holders of outstanding Series B Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
funds legally available therefor, dividends at the annual rate of $0.0738 per
share, and no more, payable in preference and priority to any payment of any
dividend on the Common, when and as declared by the Board of Directors. The
right to such dividends on shares of Series B Preferred shall be non-cumulative.

               (e) The holders of outstanding Series A Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
funds legally available therefor, dividends at the annual rate of $0.16 per
share, and no more, payable in preference and priority to any payment of any
dividend on the Common, when and as declared by the Board of Directors. The
right to such dividends on shares of Series A Preferred shall be cumulative.

               (f) In no event shall any dividend payable on either the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred with respect to any year expressed as a percentage of the maximum
annual dividend then payable on such series exceed the dividend payable with
respect to such year similarly expressed as a percentage on any other of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred.

               (g) The dividend rights provided for herein with respect to the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred shall be equitably adjusted to reflect any stock
dividend, stock distribution, stock split or reverse stock split, combination of
shares, subdivision of shares or reclassification of shares with respect to the
Series A



                                      -21-
   22

Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, respectively.

               (h) Dividends may be paid on the Common as and when declared by
the Board of Directors, subject to the prior dividend rights of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred.

        Section 6. Covenants.

               (a) So long as at least 500,000 shares (subject to adjustment for
stock dividends, stock distributions, stock splits or reverse stock splits,
combination of shares, subdivision of shares or reclassification of shares) of
Series A Preferred shall be outstanding, the corporation shall not, without
first obtaining the affirmative vote or written consent of holders of greater
than fifty percent (50%) of all outstanding shares of Series A Preferred voting
together as a class:

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

                      (ii) create or issue any new series of Preferred or
reclassify any Common shares into shares having any preference or priority as to
redemption, voting, dividends or liquidation superior to or on a parity with any
such preference or priority of the Series A Preferred;

                      (iii) except as otherwise provided in Section 3, pay or
declare any dividend or distribution on any shares of capital stock or apply any
of its assets to the redemption, retirement, purchase or other acquisition of
any shares of capital stock except from employees of, or consultants to, the
corporation upon termination of employment or consultancy; provided, in the case
of any such redemptions to be made at the election of this corporation, such
redemptions have been approved by the Board of Directors;

                      (iv) merge or consolidate with or into any other
corporation, or sell or otherwise transfer in a single transaction or a series
of related transactions all or substantially all of the assets of the
corporation (except, in each case, where the corporation's shareholders of
record as constituted immediately prior to such merger, consolidation, sale or
other transfer will, immediately after such merger, consolidation, sale or
transfer hold more than fifty percent (50%) of the voting power of the surviving
or acquiring entity);

                      (v) increase the size of the Board of Directors to a
number greater than seven (7); or

                      (vi) increase the number of authorized shares of Series A
Preferred.

               (b) So long as at least 500,000 shares (subject to adjustment for
stock dividends, stock distributions, stock splits or reverse stock splits,
combination of shares, subdivision of shares



                                      -22-
   23

or reclassification of shares) of Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred, as the case may be, shall be outstanding, the
corporation shall not take any of the following actions, without first obtaining
(in the case of Series B Preferred) the affirmative vote or written consent of
holders of greater than fifty percent (50%) of all outstanding shares of Series
B Preferred voting together as a class, or (in the case of the Series C
Preferred) the affirmative vote or written consent of holders of greater than
fifty percent (50%) of all outstanding shares of Series C Preferred voting
together as a class, or (in the case of the Series D Preferred) the affirmative
vote or written consent of holders of greater than fifty percent (50%) of all
outstanding shares of Series D Preferred voting together as a class, or (in the
case of the Series E Preferred) the affirmative vote or written consent of
holders of greater than fifty percent (50%) of all outstanding shares of Series
E Preferred voting together as a class:

                      (i) amend or repeal any provision of, or add any provision
to, the corporation's Certificate of Incorporation or Bylaws if such action
would adversely alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of the Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred, as the case may
be;

                      (ii) create or issue any new series of Preferred or
reclassify any Common shares into shares having any preference or priority as to
redemption, voting, dividends or liquidation superior to or on a parity with any
such preference or priority of the Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred, as the case may be;

                      (iii) except as otherwise provided in Section 3, pay or
declare any dividend or distribution on any shares of capital stock or apply any
of its assets to the redemption, retirement, purchase or other acquisition of
any shares of capital stock except from employees of, or consultants to, the
corporation upon termination of employment or consultancy; provided, in the case
of any such redemptions to be made at the election of this corporation, such
redemptions have been approved by the Board of Directors;

                      (iv) merge or consolidate with or into any other
corporation, or sell or otherwise transfer in a single transaction or a series
of related transactions all or substantially all of the assets of the
corporation (except, in each case, where the corporation's shareholders of
record as constituted immediately prior to such merger, consolidation, sale or
other transfer will, immediately after such merger, consolidation, sale or
transfer hold more than fifty percent (50%) of the voting power of the surviving
or acquiring entity);

                      (v) increase the size of the Board of Directors to a
number greater than seven (7); or

                      (vi) increase the number of authorized shares of Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred, as the
case may be.

        Section 7. Residual Rights. All rights accruing to the outstanding
shares of the corporation not expressly provided for to the contrary herein
shall be vested in the Common.



                                      -23-
   24

        Section 8. Status of Converted Stock. In the event any shares of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
Series E Preferred shall be converted pursuant to Section 2 hereof, the shares
so converted shall be canceled and shall not be reissuable by the corporation,
and the Certificate of Incorporation shall be appropriately amended to effect
the corresponding reduction in the corporation's authorized stock.

        Section 9. Partial Conversion. In the event that less than all of a
holder's shares of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred shall be converted at any time pursuant
to Section 2 hereof, the corporation shall promptly upon receipt of such
holder's certificate for shares to be converted, issue a new certificate to such
holder representing the unconverted shares.

                                    ARTICLE V
                                    EXISTENCE

        The corporation is to have perpetual existence.

                                   ARTICLE VI
                               BOARD OF DIRECTORS

        Section 1. The management of the business and the conduct of the affairs
of this corporation shall be vested in its Board of Directors. The number of
directors which constitute the whole Board of Directors of the Company shall be
fixed by, or determined in the manner provided in, the Bylaws of this
corporation.

        Section 2. Notwithstanding the foregoing provisions of this Article,
each director shall serve until his or her successor is duly elected and
qualified or until his or her death, resignation or removal. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.

        Section 3. Upon the effectiveness of the registration statement filed
under the Securities Act of 1933 relating to this corporation's initial public
offering of Common, no action shall be taken by the stockholders of this
corporation except at an annual or special meeting of the stockholders called in
accordance with the Bylaws; provided, however, that the foregoing prohibition of
action shall be of no force and effect if such initial public offering does not
close.

                                   ARTICLE VII
                               AMENDMENT OF BYLAWS

        In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of this corporation.



                                      -24-
   25

                                  ARTICLE VIII
                                 INDEMNIFICATION

        Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
this corporation shall be indemnified by the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.

        Section 2. The corporation is authorized to indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate is or was a director or
officer of the corporation or any predecessor of the corporation or serves or
served at any other enterprise as a director or officer at the request of the
corporation or any predecessor to the corporation and the corporation may
indemnify any other employee or agent.

        Section 3. Neither any amendment nor repeal of this Article IX, nor the
adoption of any provision of this corporation's Certificate of Incorporation
inconsistent with this Article IX, shall eliminate or reduce the effect of this
Article IX, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article IX, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.

                                   ARTICLE IX
                             MEETING OF STOCKHOLDERS

        Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Company.







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                                      -25-
   26


        IN WITNESS WHEREOF, the Board of Directors of the Company has caused
this First Amended and Restated Certificate of Incorporation to be signed by
Dean Hamilton, its President and Chief Executive Officer.



Dated:  _____________, 2000.            COSINE COMMUNICATIONS, INC.



                                        By:_____________________________________
                                           Dean Hamilton
                                           President and Chief Executive Officer








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