EXHIBIT 4.2


                          CERTIFICATE OF DESIGNATIONS,
                             PREFERENCES AND RIGHTS


                                       of


                                    SERIES A
                         7% CONVERTIBLE PREFERRED STOCK


                                       of


                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.


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

     National  Medical Health Card Systems,  Inc., a Delaware  corporation  (the
"Corporation"),  certifies  that  pursuant  to the  authority  contained  in its
Certificate  of  Incorporation  (the  "Certificate  of  Incorporation"),  and in
accordance with the provisions of Section 151 of the General  Corporation Law of
the State of  Delaware  (the  "DGCL"),  its Board of  Directors  (the  "Board of
Directors")  has  adopted  the  following  resolution  creating  a series of its
Preferred Stock,  par value $0.10 per share,  designated as Series A Convertible
Preferred Stock:

     RESOLVED,  that a series of authorized Preferred Stock, par value $0.10 per
share, of the Corporation be hereby created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series,  and the  qualifications,
limitations or restrictions thereof are as follows:

SECTION 1.        Designation and Amount.

     The  shares  of  such  series  shall  be  designated  as the  "Series  A 7%
Convertible  Preferred Stock" (the "Series A Preferred Stock") and the number of
shares  constituting such series shall be 6,956,522 shares of Series A Preferred
Stock.

SECTION 2.        Rank.

     The Series A Preferred  Stock shall,  with respect to payment of dividends,
distributions,  redemption  payments  and  rights  upon any  Liquidation  of the
Corporation, rank (i) senior to all Junior Securities, (ii) on a parity with all
Parity Securities and (iii) junior to all Senior Securities.

SECTION 3.        Dividends and Distributions.

(a)      Payment and Accrual of Dividends.

     (i) From (and  including) the Issuance Date until the fifth  anniversary of
such  date,  the  holders  of the  issued  and  outstanding  shares  of Series A
Preferred  Stock shall be entitled  to receive  when,  as and if declared by the
Board of  Directors  or a duly  authorized  committee  thereof,  out of profits,
surplus  or  other  funds  of the  Corporation  legally  available  therefor,  a
cumulative  dividend on each share of Series A Preferred Stock at the rate of 7%
per annum on the Accrued Value thereof. Such dividends shall be fully cumulative
and  accumulate  and accrue on a daily  basis  (computed  on the basis of actual
number of days  elapsed  in a year of 365 or 366  days,  as the case may be) and
compound and be payable in cash  quarterly  in arrears on the  Dividend  Payment
Dates at the rate indicated above and in the manner set forth herein (whether or
not they have been  declared  and whether or not there are  profits,  surplus or
other funds of the Corporation legally available for the payment of dividends).

     (ii) From (and  including) the fifth  anniversary of the Issuance Date, the
holders of the issued and  outstanding  shares of Series A Preferred Stock shall
be entitled to receive  when,  as and if declared by the Board of Directors or a
duly authorized committee thereof, out of profits, surplus or other funds of the
Corporation legally available  therefor,  a cumulative dividend on each share of
Series A  Preferred  Stock at the rate of 3.5% per  annum on the  Accrued  Value
thereof. Such dividends shall be fully cumulative and accumulate and accrue on a
daily basis (computed on the basis of actual number of days elapsed in a year of
365 or 366  days,  as the  case  may be) and  compound  and be  payable  in cash
quarterly in arrears on the Dividend  Payment Dates at the rate indicated  above
and in the manner set forth herein  (whether or not they have been  declared and
whether  or not there are  profits,  surplus or other  funds of the  Corporation
legally  available  for the  payment  of  dividends).  For  avoidance  of doubt,
pursuant  to  clauses  (i) and  (ii)  of  this  Section  3(a),  dividends  shall
accumulate and accrue,  but not compound,  on a daily basis, and dividends shall
compound quarterly and be added to Accrued Value on a Dividend Payment Date only
if such dividends have not been paid on such Dividend Payment Date.

     (iii)  Each such  dividend  shall be  payable  on the  applicable  Dividend
Payment Date to the holders of record of shares of the Series A Preferred Stock,
as they appear on the stock ledger of the  Corporation  at the close of business
on the day immediately preceding such Dividend Payment Date. Notwithstanding the
foregoing,  the Corporation shall not pay any dividend on the Series A Preferred
Stock (A) during the  period  that a Default or Event of Default  (as such terms
are  defined in the Loan  Agreement,  as amended  from time to time)  shall have
occurred and be  continuing  under the Loan  Agreement,  as amended from time to
time,  (B) if the  payment  of any such  dividend  would  result  in an Event of
Termination (as defined in the Receivables  Purchase Agreement,  as amended from
time to  time),  (C) if the  payment  of any such  dividend  would  result  in a
Group-Wide  Event  of  Termination  (as  defined  in  the  Receivables  Purchase
Agreement,  as  amended  from  time to time) or (D) if the  payment  of any such
dividend  would  result  in a  Servicer  Termination  Event (as  defined  in the
Receivables Purchase Agreement, as amended from time to time). Any dividend that
is not otherwise paid in cash on the applicable  Dividend  Payment Date (whether
due to the  Corporation's  inability to pay such dividend in cash or as a result
of the prohibitions of any of clauses (A) through (D) of this Section  3(a)(iii)
or  otherwise)  shall  automatically,  and without any action on the part of the
Corporation,  accrue  and  compound  and be added to the  Accrued  Value on such
Dividend Payment Date. Once such dividends have been added to the Accrued Value,
dividends  shall accrue and accumulate  thereon in accordance with clause (i) or
(ii) of this  Section  3(a),  as  applicable,  until such time,  if any, as such
dividends,   together  with  all  accrued  and  unpaid  dividends  thereon,  are
subsequently  paid in cash by the Corporation (at which time such dividends,  to
the  extent  paid as  aforesaid,  shall be  deducted  from the  Accrued  Value).
Dividends  shall  cease to accrue  and  accumulate  in  respect  of the Series A
Preferred  Stock on the Optional  Redemption  Date, the  Redemption  Date or the
Conversion  Date for such  shares as the case may be,  unless (1) in the case of
the Optional  Redemption Date or the Redemption  Date, the Corporation  fails to
pay any amount  necessary for such redemption  (including any accrued but unpaid
dividends  required to be paid at such time) when due in accordance with Section
4(c) or Section 5(c) hereof, as applicable,  or, (2) in the case of a Conversion
Date, the  Corporation  fails to deliver  certificates  representing  the Common
Stock or other assets or securities  issuable upon such conversion  within three
Business  Days of the  Conversion  Date; in the case of either clause (1) or (2)
above,  dividends  shall  continue to accumulate  and accrue from the Redemption
Date or the Conversion Date, as the case may be, at the rate indicated above, or
from the  Optional  Redemption  Date as set forth in  Section  4(f),  until such
payment (and payment of such additional dividends) and/or delivery (and delivery
of such additional shares or money owed be reason of the continued  accumulation
and accrual of  dividends)  is made.  Any holder may request in writing that the
Corporation pay any dividend or all dividends  authorized with respect to any or
all Dividend Payment Dates by means of wire transfer to an account  specified by
the holder in such  notice.  Such notice  shall not apply to a Dividend  Payment
Date if received less than five days prior thereto.

     (iv) All  dividend  payments  paid (or  accrued)  with respect to shares of
Series A  Preferred  Stock  shall be paid pro rata (or  accrued pro rata for the
benefit  of the  holders  entitled  thereto),  based on the  number of shares of
Series A Preferred Stock owned by each such holder.

(b)      Restricted Payments.

     (i) Junior  Securities.  So long as any  shares of the  Series A  Preferred
Stock are  outstanding,  the  Corporation  shall  not,  directly  or  indirectly
(whether by any Person, directly or indirectly, controlled by the Corporation or
otherwise),  unless (A) all unpaid dividends on the Series A Preferred Stock for
all  prior  Dividend  Periods  shall  have  been  paid in full,  (B)  sufficient
consideration  shall have been paid or set apart for the payment of the dividend
for the current Dividend Period with respect to the Series A Preferred Stock and
the current  dividend  period with respect to any Parity  Securities and (C) all
Redemption Obligations have been fully discharged, (1) declare, pay or set apart
for  payment any  dividend or other  distribution  on any Junior  Securities  or
purchase,  redeem or  otherwise  acquire  any  Junior  Securities,  (2) make any
payment on account  of, or set apart for  payment  money for, a sinking or other
similar fund for the  purchase,  redemption  or other  retirement  of any Junior
Securities,  or (3) make any  distribution in respect of the Junior  Securities,
either  directly  or  indirectly,  and  whether  in  cash,  obligations  of  the
Corporation, Common Stock, Convertible Securities or other property; other than,
subject  to  Sections   7(b)  and  8(f)  hereof,   to  the  extent   applicable,
distributions  or dividends  on Junior  Securities  which are payable  solely in
additional shares of Junior Securities.

(ii)     Parity Securities.

     (1) Except as provided in Section  3(b)(ii)(2) below, no dividends shall be
paid or authorized  and set apart for payment on any Parity  Securities  for any
period  unless  (A) the  Corporation  has paid or  authorized  and set apart for
payment,  or  contemporaneously  pays or declares and sets apart for payment, on
the Series A  Preferred  Stock all unpaid  dividends  for all  Dividend  Periods
terminating on or prior to the date of payment of such dividends, (B) sufficient
consideration  shall have been paid or set apart for the payment of the dividend
for the current Dividend Period with respect to the Series A Preferred Stock and
the current  dividend  period with respect to any Parity  Securities and (C) all
Redemption Obligations have been fully discharged. Except as provided in Section
3(b)(ii)(2) below, no dividends paid in cash shall be paid or authorized and set
apart for  payment on the  Series A  Preferred  Stock for any period  unless the
Corporation   has  paid  or   authorized   and  set   apart  for   payment,   or
contemporaneously  pays or  declares  and sets  apart for such  payment,  on any
Parity  Securities  all accrued and unpaid  dividends  for all dividend  periods
terminating on or prior to the date of payment of such dividends.

     (2) If at any time the Corporation  has failed to pay any unpaid  dividends
on any shares of Series A Preferred Stock on any Dividend Payment Date or on any
Parity  Securities on a stated payment date, as the case may be, the Corporation
shall  not,  directly  or  indirectly  (whether  by  any  Person,   directly  or
indirectly,  controlled by the Corporation or otherwise), purchase any shares of
the Series A Preferred  Stock or Parity  Securities  (except for a consideration
payable  solely in shares of Junior  Securities) or redeem fewer than all of the
shares of the Series A Preferred Stock and Parity  Securities  then  outstanding
except for (x) the  repurchase or redemption of shares of the Series A Preferred
Stock  made pro rata among the  holders of the shares of the Series A  Preferred
Stock then  outstanding,  (y) the  repurchase or  redemption  made pro rata with
respect to all shares of the Series A Preferred Stock and Parity Securities then
outstanding so that the amounts  repurchased or redeemed shall in all cases bear
to each other the same ratio that, at the time of the  repurchase or redemption,
the aggregate of the then applicable Liquidation Preference of all of the Series
A  Preferred  Stock  and  the  aggregate  of  the  then  applicable  liquidation
preference of all of the other Parity Securities then outstanding, respectively,
bear to each other or (z) pursuant to Section 4 below.

     (3)  Unless  and  until all  unpaid  dividends  on  shares of the  Series A
Preferred Stock and any Parity Securities at the time outstanding have been paid
in full,  all  dividends  paid by the  Corporation  upon  shares of the Series A
Preferred Stock or Parity  Securities  shall be authorized pro rata with respect
to all  shares of the  Series A  Preferred  Stock  and  Parity  Securities  then
outstanding,  so that the amounts of any  dividends  authorized on shares of the
Series A Preferred Stock and on the Parity Securities shall in all cases bear to
each other the same ratio that, at the time of the declaration,  all accrued but
unpaid  dividends in respect of prior Dividend Periods on shares of the Series A
Preferred  Stock  and  prior  dividend  periods  on  other  Parity   Securities,
respectively, bear to each other.

SECTION 4.        Redemption at The Option of the holder.

     (a) No holder of shares of Series A Preferred Stock shall have any right to
require the  Corporation to redeem any shares of Series A Preferred  Stock prior
to the date that is the tenth anniversary of the Issuance Date.  Thereafter,  at
any time on or following the date that is the tenth  anniversary of the Issuance
Date, each holder of shares of Series A Preferred Stock shall have the right, at
the sole option and  election of such  holder,  to require  the  Corporation  to
redeem all or any  portion of the shares of Series A  Preferred  Stock  owned by
such  holder  at the  Optional  Redemption  Price  for each  share  of  Series A
Preferred Stock to be redeemed.

     (b) The holder of any shares of Series A Preferred  Stock may  exercise its
right to require the  Corporation to redeem such shares by  surrendering  to the
Corporation,  at  its  principal  office  or at  such  other  office  or  agency
maintained by the  Corporation  for that purpose  (provided that the Corporation
shall at all  times  maintain  an office or agency in the City of New York or in
Nassau County,  New York for such purposes) a certificate or certificates,  duly
endorsed,  representing  the shares of Series A Preferred  Stock to be redeemed,
accompanied  by a written  notice  stating  (i) the number of shares of Series A
Preferred Stock to be redeemed,  (ii) the date (the "Optional  Redemption Date")
upon which such holder elects such  redemption to take place,  which shall be no
earlier  than  ten  (10)  Business  Days  from  the  date of  surrender  of such
certificates  and (iii) the account  for  delivery  of the  Optional  Redemption
Price.

     (c) The  Corporation  shall,  on the Optional  Redemption  Date, pay to the
holder of the shares being redeemed the Optional  Redemption Price for each such
share of Series A Preferred  Stock.  Such payment shall be made by wire transfer
of immediately  available funds to an account  designated by such holder. In the
event that less than all of the shares of Series A Preferred  Stock  represented
by any certificate are redeemed,  a new certificate  representing the unredeemed
shares  shall be  promptly  issued to the holder  thereof  without  cost to such
holder.

     (d) Subject to Section 4(e), such redemption  right shall be deemed to have
been exercised (as contemplated in Section 4(b)) at the close of business on the
Optional  Redemption  Date and the shares so redeemed  shall no longer be deemed
outstanding, the rights to receive dividends thereon shall cease, and the rights
of the holder  thereof  shall  cease,  at the close of business on the  Optional
Redemption Date; provided,  however, that nothing in this sentence shall relieve
the  Corporation of its obligation to deliver the Optional  Redemption  Price to
the person or persons entitled thereto pursuant to Section 4.

     (e) In the event  that the  Optional  Redemption  Price  for each  share of
Series A Preferred  Stock being redeemed is not paid on the Optional  Redemption
Date in  accordance  with Section 4(c)  hereof,  then,  in addition to any other
rights  that may  otherwise  be  available  to  holders  of  shares  of Series A
Preferred Stock pursuant to this  Certificate of Designations or the Certificate
of  Incorporation,  and  notwithstanding  Section 4(d) or any  provision of this
Certificate of Designations or the Certificate of Incorporation to the contrary,
(1) all shares of the Series A Preferred Stock redeemed pursuant to Section 4(d)
shall be reissued or returned (as applicable) to all holders who exercised their
option to redeem such shares, and the right to receive dividends thereon and all
other rights of the holder  thereof shall be deemed to have continued as if such
redemption  had not  occurred  and (2) if the  holders  of  shares  of  Series A
Preferred Stock do not have the right pursuant to Section 7(d) hereof,  to elect
at least a majority of the directors on the Board of  Directors,  then the total
number of  directors  of the  Corporation  shall be  increased by such number of
directors, if any, as will be required to enable the holders of shares of Series
A Preferred Stock to elect a majority of the directors on the Board of Directors
(the "Default  Number"),  and the holders of shares of Series A Preferred  Stock
then outstanding,  voting together as a single class,  shall by affirmative vote
of  holders of a majority  of the total  number of shares of Series A  Preferred
Stock voting thereon, be entitled to elect, at a meeting of such stockholders or
by written consent in lieu thereof, to the Board of Directors the Default Number
of directors (the "Redemption  Default  Directors") (which directors shall be in
addition to, and not in lieu of, any  directors  such  holders may  otherwise be
entitled to elect pursuant to the terms of this  Certificate of Designations and
the Certificate of  Incorporation  and which directors shall each be required to
satisfy any  applicable  qualifications  existing  under  applicable law and any
applicable  rules of any self  regulatory  organization  that are binding on the
Corporation and shall be entitled to all rights of voting and  participation  as
are  directors  of the  Corporation  generally).  At any time  during  which the
holders of shares of Series A Preferred  Stock are entitled to elect  Redemption
Default  Directors,  in the event  the  Corporation  pays in cash the  aggregate
Optional  Redemption  Price owed by it  pursuant to Section 4, then the terms of
any Redemption  Default  Director then in office shall  terminate as of the time
such payment is made, and the total number of directors of the Corporation shall
decrease by the number of Redemption Default Directors then in office whose term
shall have  terminated  and the  holders of shares of Series A  Preferred  Stock
shall cease to have any rights hereunder to elect Redemption  Default Directors,
in each case,  unless and until one or more of the  conditions  specified  above
shall recur.

     (f) Failure to Discharge a Redemption  Obligation.  If the Corporation does
not have sufficient funds or capital and surplus legally  available to discharge
any  Redemption  Obligation  (or is otherwise  prohibited  from  affecting  such
redemption),  the Corporation shall take all actions required or permitted under
the DGCL to permit  such  redemption  of the Series A Preferred  Stock,  and the
Corporation  shall  redeem as many shares of the Series A Preferred  Stock as it
may legally redeem, ratably from the holders thereof in proportion to the number
of shares held by the holders  from which shares are being  redeemed,  and shall
thereafter from time to time, as soon as it shall have funds available therefor,
redeem as many shares of the Series A  Preferred  Stock as it legally may redeem
until it has fully discharged all Redemption Obligations. Shares of the Series A
Preferred Stock not redeemed as required  pursuant to any Redemption  Obligation
shall accrue  dividends  at a rate equal to 10% per annum of the Accrued  Value,
accruing and compounding in the manner set forth in Section 3(a) hereof from the
Optional  Redemption  Date, until such shares are redeemed by the Corporation in
accordance  with this  Section 4 and all  references  herein to  payment  of the
Optional Redemption Price shall be deemed to include a reference to such accrued
dividends.

     (g) Other Purchases.  Nothing contained in this Certificate of Designations
shall limit any legal right of the  Corporation  or any of its  Subsidiaries  or
Affiliates  to  purchase or  otherwise  acquire any shares of Series A Preferred
Stock,  at any price and upon any  terms,  in a  negotiated  transaction  with a
holder thereof.

SECTION 5.        REDEMPTION AT THE OPTION OF THE CORPORATION.

     (a) Except as provided in this Section 5(a) and Section 5(b), shares of the
Series  A  Preferred  Stock  shall  not be  redeemable  at the  election  of the
Corporation.  From and  after  the date that is the  fourth  anniversary  of the
Issuance Date, the Corporation, at its option, may redeem within 45 days after a
225% Date any or all of the outstanding  shares of Series A Preferred  Stock, in
the sole discretion of the Corporation  (which redemption has been authorized by
the  Required  Vote of the  Independent  Directors),  to the extent it has funds
legally available  therefor,  at a redemption price in cash equal to 100% of the
Carrying  Value,  at the  redemption  date,  of each share of Series A Preferred
Stock to be  redeemed,  plus an  amount  equal to the  aggregate  of all  unpaid
dividends  which have accrued and  accumulated  on the Accrued Value pursuant to
Section 3(a)(i) or (3)(a)(ii),  as applicable,  whether or not declared (and not
previously included in Carrying Value), to the redemption date (any such date, a
"Four Year Redemption  Date"). No redemption shall be permitted pursuant to this
Section 5(a) at any time during  which the Common Stock is not either  listed on
the New York Stock  Exchange (the "NYSE") or traded on the National  Association
of Securities  Dealers,  Inc. National Market System  ("NASDAQ").  A "225% Date"
shall  mean any date as of which  the  Closing  Price of the  Common  Stock  has
equaled or exceeded 225% of the Conversion  Price then in effect for at least 30
consecutive  Trading  Days  immediately  preceding  such date and on such  date;
provided that such 30 day period cannot begin prior to the fourth anniversary of
the Issuance Date.

     (b) From and after the date that is the seventh anniversary of the Issuance
Date, the Corporation,  at its option,  may redeem any or all of the outstanding
shares of Series A Preferred  Stock,  in the sole  discretion of the Corporation
(which  redemption has been  authorized by the Required Vote of the  Independent
Directors),  to the  extent  it  has  funds  legally  available  therefor,  at a
redemption  price in cash equal to 100% of the Accrued Value,  at the redemption
date, of each share of Series A Preferred  Stock to be redeemed,  plus an amount
equal  to  the  aggregate  of  all  unpaid  dividends  which  have  accrued  and
accumulated on the Accrued Value pursuant to Section  3(a)(i) or (3)(a)(ii),  as
applicable,  whether or not  declared  (and not  previously  included in Accrued
Value),  to the redemption date (any such date, a "Seven Year Redemption  Date;"
each of the  Four  Year  Redemption  Date and the  Seven  Year  Redemption  Date
sometimes being referred to herein as the "Redemption Date").

     (c) Not less than 15 days nor more than 45 days  (such date as fixed by the
Board of Directors of the  Corporation is referred to herein as the  "Redemption
Record Date") prior to the date fixed for any redemption of shares of the Series
A Preferred Stock pursuant to this Section 5, a notice specifying the Redemption
Date and the time and  place of the  redemption  and the  number of shares to be
redeemed shall be given by overnight courier or by certified mail return receipt
requested,  to the holders of record on the Redemption Record Date of the shares
of the Series A Preferred Stock to be redeemed at their respective  addresses as
the same shall appear on the books of the Corporation,  calling upon each holder
of record to surrender to the  Corporation on the  Redemption  Date at the place
designated in the notice such holder's certificate or certificates  representing
the number of shares  specified in the notice of redemption  (provided  that the
Corporation  shall at all times  maintain an office or agency in the City of New
York or in Nassau County,  New York for such purposes).  Neither failure to mail
such notice, nor any defect therein or in the mailing thereof, to any particular
holder  shall  affect  the  sufficiency  of the  notice or the  validity  of the
proceedings for redemption with respect to the other holders.  Any notice mailed
in the manner herein provided shall be  conclusively  presumed to have been duly
given whether or not the holder receives the notice.  On or after the Redemption
Date,  each  holder of shares of Series A Preferred  Stock to be redeemed  shall
present and surrender such holder's  certificate or certificates for such shares
to the  Corporation  at  the  place  designated  in the  redemption  notice  and
thereupon  either (i) the Carrying Value,  at the Four Year Redemption  Date, of
each share of Series A Preferred  Stock to be redeemed,  plus an amount equal to
the aggregate of all unpaid  dividends which have accrued and accumulated on the
Accrued Value pursuant to Section 3(a)(i) or (3)(a)(ii), as applicable,  whether
or not declared (and not  previously  included in Carrying  Value),  to the Four
Year  Redemption  Date or (ii) the  Accrued  Value at the Seven Year  Redemption
Date, of each share of Series A Preferred  Stock to be redeemed,  plus an amount
equal  to  the  aggregate  of  all  unpaid  dividends  which  have  accrued  and
accumulated on the Accrued Value pursuant to Section  3(a)(i) or (3)(a)(ii),  as
applicable,  whether or not  declared  (and not  previously  included in Accrued
Value), to the Seven Year Redemption Date, as applicable, shall be paid to or on
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
case fewer than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.

     (d) If a notice of  redemption  has been given  pursuant to this  Section 5
and, on or before the Redemption  Date, the funds  necessary for such redemption
(including  all  dividends  on the  shares  of  Series A  Preferred  Stock to be
redeemed,  including accrued and unpaid dividends  thereon,  that will accrue to
the Redemption Date) shall have been set aside by the Corporation,  separate and
apart from its other funds,  in trust for the pro rata benefit of the holders of
the  shares  of  Series  A  Preferred  Stock so  called  for  redemption,  then,
notwithstanding  that any  certificates  for such  shares of Series A  Preferred
Stock  have  not been  surrendered  for  cancellation,  on the  Redemption  Date
dividends shall cease to accrue on the shares of the Series A Preferred Stock to
be redeemed and the holders of such shares shall cease to be  stockholders  with
respect to those  shares,  shall have no interest in the  Corporation  by virtue
thereof and shall have no voting or other  rights with respect  thereto,  except
the conversion rights provided in subsection (e) of this Section 5 and Section 8
below and the right to receive the monies payable upon such redemption,  without
interest  thereon,   upon  surrender  (and  endorsement,   if  required  by  the
Corporation) of their  certificates,  and the shares of Series A Preferred Stock
represented  thereby  shall no  longer be  outstanding.  Subject  to  applicable
escheat laws,  any monies so set aside by the  Corporation  and unclaimed at the
end of one year from the  Redemption  Date shall revert to the general  funds of
the Corporation,  after which reversion the holders of such shares so called for
redemption  shall  look only to the  general  funds of the  Corporation  for the
payment of the redemption price, without interest. Any interest accrued on funds
so deposited  shall belong to the  Corporation  and be paid thereto from time to
time.

     (e) If a notice of redemption has been given pursuant to this Section 5 and
any holder of shares of Series A Preferred  Stock  shall,  prior to the close of
business on the business day  immediately  preceding the Redemption  Date,  give
written notice to the Corporation  pursuant to Section 8 below of the conversion
of any or all of the  shares  to be  redeemed  held  by the  holder,  then  such
redemption shall not become effective as to such shares to be converted and such
conversion shall become effective as provided in Section 8 below,  whereupon any
funds  deposited  by the  Corporation  for the  redemption  of such shares shall
immediately upon such conversion be returned to the Corporation or, if then held
in trust by the Corporation,  shall  automatically and without further corporate
action or notice be discharged from the trust.

     (f) In every case of redemption of fewer than all of the outstanding shares
of the Series A Preferred  Stock  pursuant  to this  Section 5, the shares to be
redeemed  shall be  selected  pro rata among all  holders of Series A  Preferred
Stock on the basis of the number of shares of Series A Preferred  Stock owned by
each such  holder,  provided  that  only  whole  shares  shall be  selected  for
redemption.

SECTION 6.        Liquidation; Change of Control.

     (a) In the event the Corporation  shall (i) commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency  or similar law,  (ii) consent to the entry of an order for relief in
an  involuntary  case  under  such  law or to  the  appointment  of a  receiver,
liquidator,   assignee,  custodian,  trustee,  sequestrator  (or  other  similar
official) of the Corporation,  or of any substantial part of its property, (iii)
make an assignment for the benefit of its  creditors,  (iv) admit in writing its
inability  to pay its debts  generally  as they become due,  (v) have a court of
competent  jurisdiction  enter an order or decree which has not been  withdrawn,
dismissed  or  reversed  that  is  for  relief  against  the  Corporation  in an
involuntary case under such law or to appoint a receiver, liquidator,  assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation,
or of any substantial part of its property, and any such order or decree remains
unstayed and in effect for 60  consecutive  days, or (vi)  otherwise  liquidate,
dissolve or wind up (any such event, a "Liquidation"),  each holder of shares of
the Series A  Preferred  Stock  shall be  entitled  to receive  the  Liquidation
Preference per share.

     (b) In the event of any Liquidation of the  Corporation,  holders of shares
of Series A Preferred Stock (i) shall not be entitled to receive the Liquidation
Preference  of the shares held by them until  payment in full or  provision  has
been made for the payment of all claims of creditors of the  Corporation and the
liquidation  preference  of any  Senior  Securities,  plus  accrued  and  unpaid
dividends  thereon,  if any, whether or not declared,  to the payment date shall
have been paid in full and (ii) shall be  entitled  to receive  the  Liquidation
Preference of the shares held by them, in preference to and in priority over any
distributions  upon  any  Junior  Securities.   Upon  payment  in  full  of  the
Liquidation  Preference to which the holders of shares of the Series A Preferred
Stock are entitled,  the holders of shares of the Series A Preferred Stock shall
not be entitled to any further  participation  in any  distribution of assets by
the  Corporation.  Subject to clause (i) above, if the assets of the Corporation
are not  sufficient  to pay in full the  Liquidation  Preference  payable to the
holders of shares of the Series A Preferred Stock and the liquidation preference
payable to the holders of any Parity Securities,  the holders of all such shares
shall share ratably in proportion to the full  respective  preferential  amounts
payable on such shares in any distribution.

     (c)  For the  purposes  of  this  Section  6,  neither  the  sale of all or
substantially  all of the assets of the  Corporation  nor the  consolidation  or
merger of the Corporation with or into any other entity, shall be deemed to be a
Liquidation of the  Corporation,  unless (i) such sale,  consolidation or merger
shall be in connection  with a plan of Liquidation of the  Corporation (in which
event the holders of shares of the Series A Preferred Stock shall be entitled to
receive the  Liquidation  Preference per share held by them) or (ii) a Change of
Control (as defined  below) of the  Corporation  shall occur (in which case, the
holders of shares of the Series A  Preferred  Stock  shall if they so request in
writing,  subject to the third and fourth  sentence  of this  Section  6(c),  be
entitled  to receive  for each share of Series A  Preferred  Stock the  Carrying
Value,  at the payment date, plus an amount equal to the aggregate of all unpaid
dividends  which have accrued and  accumulated  on the Accrued Value pursuant to
Section 3(a)(i) or (3)(a)(ii),  as applicable,  whether or not declared (and not
previously  included in Carrying Value), to the payment date). In the event of a
Change of Control, the Corporation shall, not less than 30 days nor more than 60
days prior  thereto,  by  overnight  courier or  certified  mail return  receipt
requested, give notice thereof to the holders of the Series A Preferred Stock at
their  addresses as they appear on the books of the  Corporation  (which  notice
shall  specify that the holders who desire to convert  their shares must satisfy
the  requirements  for  conversion  contained  in Section 8 hereof and shall set
forth the Conversion  Price).  Any holder of shares of Series A Preferred  Stock
who so wishes shall within 10 days of receipt of such notice give written notice
to the Corporation that such holder wishes to receive the Carrying Value, at the
payment  date,  plus an amount equal to the  aggregate  of all unpaid  dividends
which have  accrued and  accumulated  on the Accrued  Value  pursuant to Section
3(a)(i)  or  (3)(a)(ii),  as  applicable,  whether  or  not  declared  (and  not
previously  included in  Carrying  Value),  to the  payment  date for any or all
shares of Series A Preferred Stock held by such holder.  The  Corporation  shall
not consummate a Change of Control  without  adequately  assuring the holders of
shares of the Series A Preferred  Stock the right to receive  the  amounts  such
holders  are  entitled  to  pursuant  to this  Section  6(c) as of such  date in
accordance with applicable law.

     (d) A "Change  of  Control",  with  respect to the  Corporation,  means the
occurrence of any of the following:

     (i) the  acquisition  by any  Person  or group  of  Persons  of  beneficial
ownership  (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
(other than by (x) the Corporation or a Subsidiary of the Corporation or (y) the
holders of the Series A Preferred Stock or their  respective  Affiliates) of 50%
or more of  either  (1) the  then  outstanding  shares  of  Common  Stock of the
Corporation (the "Outstanding Common Stock") or (2) the combined voting power of
the then  outstanding  voting  securities  of the  Corporation  entitled to vote
generally  in the election of directors  of the  Corporation  (the  "Outstanding
voting  Securities");  provided,  however,  that any  acquisition  by any Person
pursuant  to a  transaction  that  complies  with  clauses  (1),  (2) and (3) of
paragraph (iii) of this definition shall not be a Change of Control;

     (ii)  individuals  who, as of the Issuance  Date,  constitute  the Board of
Directors or other similar  governing body of the  Corporation  (the  "Incumbent
Board") (it being  understood  that any Designated  Directors are members of the
Incumbent  Board) cease for any reason to  constitute at least a majority of the
Board of Directors or other similar governing body of the Corporation; provided,
however,  that any individual becoming a director,  or having similar management
supervisory functions (for purposes of this definition, a "director") subsequent
to the date hereof or date of such meeting whose  election,  or  nomination  for
election by the Corporation's shareholders, was approved by a vote of at least a
majority  of  the  directors  then  comprising  the  Incumbent  Board  shall  be
considered as though such individual were a member of the Incumbent  Board,  but
excluding,  for this purpose,  any such individual  whose initial  assumption of
office  occurs  as a result of an actual or  threatened  election  contest  with
respect to the election or removal of  directors  or other actual or  threatened
solicitation  of proxies or consents by or on behalf of a Person  other than the
Incumbent Board of the Corporation; or

     (iii)  consummation  of  a  Business  Combination  unless,  following  such
Business Combination,

          (1) all or  substantially  all of the Persons who were the  beneficial
     owners,  respectively,  of the  Outstanding  Common  Stock and  Outstanding
     Voting  Securities of the  Corporation  immediately  prior to such Business
     Combination  Beneficially Own,  directly or indirectly,  a majority or more
     of,  respectively,  the then  outstanding  shares of  common  stock and the
     combined voting power of the then outstanding voting securities entitled to
     vote  generally  in the election of  directors,  as the case may be, of the
     Person resulting from such Business  Combination  (including a Person which
     as  a  result  of  such   transaction   owns  the  Corporation  or  all  or
     substantially  all of the  Corporation's  assets either directly or through
     one  or  more   Subsidiaries)   (such   resulting   Person,   a  "Resulting
     Corporation")  in  substantially  the same  proportions as their ownership,
     immediately prior to such Business  Combination,  of the Outstanding Common
     Stock and Outstanding Voting Securities of the Corporation, as the case may
     be,

          (2) no Person or group of Persons or their  Affiliates  (excluding any
     Resulting  Corporation and any holder of shares of Series A Preferred Stock
     or Affiliate thereof) Beneficially Owns, directly or indirectly, a majority
     or more of,  respectively,  the then outstanding  shares of common stock of
     the  Resulting  Corporation  or the  combined  voting  power  of  the  then
     outstanding voting securities of the Resulting Corporation entitled to vote
     generally in the election of directors of the Resulting Corporation, and

     (3) at least a majority of the members of the board of  directors  or other
similar  governing  body  of  the  Resulting  Corporation  were  members  of the
Incumbent  Board or were  approved by a majority of the  Incumbent  Board at the
time of the execution of the initial agreement, or of the action of the board or
other similar governing body, providing for such Business Combination.

SECTION 7.        Voting Rights.

     (a)  General.  Each share of Series A  Preferred  Stock  shall  entitle the
holder  thereof  to notice  of, to attend and to vote at, in person or by proxy,
any special or annual  meeting of  stockholders,  on all matters  entitled to be
voted on by  holders  of Common  Stock  and any other  series or class of Voting
Securities  voting  together as a single class with all other shares entitled to
vote  thereon  except  in  cases  where a vote of the  holders  of the  Series A
Preferred  Stock,  voting  separately  as a class,  is required by law or by the
Certificate  of  Incorporation  or by this  Certificate  of  Designations.  With
respect to any such vote,  each share of Series A Preferred  Stock shall entitle
the holder  thereof to cast that number of votes per share as is equal to 83.64%
of the aggregate  number of votes that such holder would be entitled to cast had
such  holder  converted  its shares of Series A  Preferred  Stock into shares of
Common Stock,  as of the record or other  applicable  date for  determining  the
stockholders of the Corporation eligible to vote on any such matters.

     (b) Voting With  Respect to Certain  Matters.  For so long as any shares of
Series A Preferred Stock are outstanding,  in addition to any vote or consent of
stockholders  required by applicable law or by the Certificate of Incorporation,
the  Corporation  shall not effect or validate,  without the  affirmative  vote,
given in person or by proxy at any meeting  called for such purpose,  or written
consent,  of the holders of at least a majority of the Series A Preferred  Stock
at any time issued and outstanding, acting as a single class:

          (i) any  reclassification  of the  Series  A  Preferred  Stock  or any
     amendment,  alteration or repeal, or any replacement (including as a result
     of a merger or consolidation involving the Corporation in which a different
     certificate  of  incorporation  governs the  Corporation  or the  surviving
     corporation  in the  merger  or  otherwise  by  operation  of law),  of any
     provision of the  Corporation's  Certificate  of  Incorporation  or Bylaws,
     which  adversely  affects the dividend or liquidation  preferences,  voting
     powers or other rights of the holders of the Series A Preferred Stock; and

          (ii) the  declaration,  payment or making of any dividend  (other than
     dividends on the Series A Preferred Stock) or other  distribution (in cash,
     property or obligations)  in respect of, or any  repurchase,  redemption or
     other  acquisition of, any of the  Corporation's  equity  securities or any
     Convertible  Securities,  or any  derivative  or  similar  securities  with
     respect to any of the foregoing.

     (c) In  connection  with any right to vote as a single  class  pursuant  to
Section 7(b),  each holder of shares of Series A Preferred  Stock shall have one
vote for each share held.

     (d) Voting Rights for Directors.

          (i) In  addition  to any  other  rights to elect  directors  which the
     holders of shares of Series A Preferred  Stock may have, from and after the
     Issuance Date, for as long as (1) the Initial Holders  Beneficially  Own in
     the aggregate  shares of Common Stock that  constitute at least 75% or more
     of their Initial  Beneficial  Ownership,  the holders of shares of Series A
     Preferred  Stock shall be entitled to nominate  and elect,  at a meeting of
     stockholders  or by  written  consent  in  lieu  thereof,  such  number  of
     directors as shall  constitute  at least 60% of the members of the Board of
     Directors of the Corporation,  (2) the Initial Holders  Beneficially Own in
     the aggregate  shares of Common Stock that constitute at least 65% but less
     than 75% of their Initial  Beneficial  Ownership,  the holders of shares of
     Series A Preferred  Stock shall be  entitled  to nominate  and elect,  at a
     meeting of stockholders or by written consent in lieu thereof,  such number
     of directors as shall  constitute  at least 50% of the members of the Board
     of Directors of the Corporation,  (3) the Initial Holders  Beneficially Own
     in the  aggregate  shares of Common Stock that  constitute at least 55% but
     less than 65% of their Initial Beneficial Ownership,  the holders of shares
     of Series A Preferred  Stock shall be entitled to nominate and elect,  at a
     meeting of stockholders or by written consent in lieu thereof,  such number
     of directors as shall  constitute  at least 40% of the members of the Board
     of Directors of the Corporation,  (4) the Initial Holders  Beneficially Own
     in the  aggregate  shares of Common Stock that  constitute at least 40% but
     less than 55% of their Initial Beneficial Ownership,  the holders of shares
     of Series A Preferred  Stock shall be entitled to nominate and elect,  at a
     meeting of stockholders or by written consent in lieu thereof,  such number
     of directors as shall  constitute  at least 30% of the members of the Board
     of Directors of the Corporation,  (5) the Initial Holders  Beneficially Own
     in the  aggregate  shares of Common Stock that  constitute at least 25% but
     less than 40% of their Initial Beneficial Ownership,  the holders of shares
     of Series A Preferred  Stock shall be entitled to nominate and elect,  at a
     meeting of stockholders or by written consent in lieu thereof,  such number
     of directors as shall  constitute  at least 20% of the members of the Board
     of Directors of the  Corporation,  or (6) the Initial Holders  Beneficially
     Own in the  aggregate  shares of Common Stock that  constitute at least 10%
     but less than 25% of their  Initial  Beneficial  Ownership,  the holders of
     shares of Series A Preferred Stock shall be entitled to nominate and elect,
     at a meeting of  stockholders  or by written  consent in lieu  thereof,  at
     least one  member  of the Board of  Directors  of the  Corporation.  Unless
     prohibited  by  applicable  law  or by any  applicable  rules  of any  self
     regulatory  organization  that are binding on the Corporation (and, in such
     case,  only to the extent  permitted),  for so long as the Initial  Holders
     Beneficially Own in the aggregate shares of Common Stock that constitute at
     least 10% of their  Initial  Beneficial  Ownership,  each  committee of the
     Board of  Directors  of the  Corporation,  the  board of  directors  of any
     Subsidiary of the Corporation  and each committee of any such  Subsidiary's
     board of  directors  shall  include a  proportionate  number  of  directors
     nominated and elected by the Designated Directors;  provided, however, that
     the  Designated  Directors  shall in no event  constitute a majority of the
     Nominating Committee.

          (ii)  Notwithstanding the provisions of Section 7(d)(i), the remaining
     members of the Board of Directors who are neither Designated  Directors nor
     officers  or  employees  of  the  Corporation  or  its  subsidiaries   (the
     "Independent  Directors"),  shall be nominated by the Nominating  Committee
     and each holder of Series A Preferred Stock shall vote or cause to be voted
     all of its shares of Series A  Preferred  Stock in favor of or against  any
     such  nominees in the same  proportion as the votes cast by or on behalf of
     the  holders of the Voting  Securities  other than the  holders of Series A
     Preferred Stock in respect of their shares of Series A Preferred Stock.

          (iii) For so long as the  Initial  Holders  Beneficially  Own,  in the
     aggregate, shares of Common Stock that constitute either (x) 33% or more of
     their  Initial  Beneficial  Ownership  or (y) 15% or  more of the  combined
     voting power of the then outstanding Voting Securities, whichever is lower,
     the Corporation shall not, and shall not permit any of its Subsidiaries to,
     without the consent of the majority of the  Designated  Directors,  effect,
     validate or enter into any agreement with respect to, any of the following:

               (1) any authorization,  issuance or  reclassification,  of any of
          the Corporation's equity securities or any Convertible Securities,  or
          any  derivative  or  similar  securities  with  respect  to any of the
          foregoing other than the issuance of (w) Permitted Options, (x) shares
          of Common  Stock upon the  exercise of  Permitted  Options,  (y) up to
          2,175,112  shares  of  Common  Stock  upon the  exercise  of  options,
          warrants and rights outstanding on the Issuance Date and (z) shares of
          Common Stock used as  consideration  in any  transaction  set forth in
          clause  (5)(B) of this  Section  7(d)(iii)  for which  consent  of the
          Designated Directors is not required;

               (2) the  authorization  or  creation  of, or the  increase in the
          authorized  amount of, or the  issuance  of any shares of any class or
          series of (or the reclassification of any securities into), securities
          of the  Corporation  ranking  senior to or on a par with the  Series A
          Preferred   Stock  with   respect  to   distributions   or  rights  on
          liquidation,  or any security  convertible  into or exercisable for or
          otherwise representing the right to acquire any such securities or any
          derivative or similar securities representing any of the foregoing;

               (3) any  issuance  or  incurrence  of (or  agreement  to issue or
          incur,  including  by way of an  acquisition  of  any  entity,  or any
          merger,  business combination or similar transaction or as a result of
          any  amendment to any  indenture,  credit  agreement or other  similar
          instrument)  Debt,  other than any  borrowing  that does not cause the
          Corporation  to have in  excess  of $50  million  of Debt at any  time
          outstanding  and is made pursuant to and in accordance  with the terms
          of (A) the Loan Agreement as in effect on the Issuance Date or (B) any
          other  loan  agreement  approved  by the  Board  of  Directors,  which
          approval  shall  include  a  majority  of  the  Designated  Directors;
          provided that (I) such Debt may only be increased to an amount greater
          than  $40  million  if,  at the  time of  borrowing,  the  Corporation
          certifies  to  the  Board  that  it   reasonably   believes  that  the
          Corporation  will be able to comply  for at least the next six  months
          with its covenants under the agreements referred to in Clauses (A) and
          (B) after giving effect to such  increase in  borrowings  and (II) the
          provisions  of Clause (I) shall be similarly  applicable to successive
          borrowings, repayments and reborrowings under such agreements.

               (4) the liquidation, dissolution, winding up or reorganization of
          the Corporation;

               (5) any transaction or series of related  transactions  involving
          (A) a Change of Control of the Corporation  (without  reference to the
          exceptions  in  clauses  (1),  (2) and (3) of  paragraph  (iii) of the
          definition  of such term) or the sale of all or  substantially  all of
          the  equity  or  assets of the  Corporation,  or (B) any  acquisition,
          disposition or other business  combination  transaction  (or series of
          transactions)  involving  consideration  in an amount  greater than $5
          million,  individually,  or $15  million,  in the  aggregate in any 24
          month period  (including  without  limitation,  in each case,  (x) the
          purchase price paid or to be paid in connection with such  transaction
          (whether  pursuant to lump sum  payments,  future  payments,  earn-out
          payments or combinations  thereof,  with any potential future payments
          discounted to present value) and (y) any and all liabilities which are
          assumed or to be assumed in connection with such transaction);

               (6)  any   amendment   to  the   Corporation's   Certificate   of
          Incorporation or Bylaws; and

               (7)  the  removal  or  replacement  of  the  Corporation's  Chief
          Executive Officer.

(e)      Election Procedures.

               (i) The right of the holders of Series A Preferred Stock to elect
          directors  as  described  in  Section  7(d)(i)  or  Section  4(e),  as
          applicable,  may be  exercised  either  at a  special  meeting  of the
          holders of shares of Series A Preferred  Stock,  called as hereinafter
          provided in Section  7(e)(ii),  at any annual meeting of  stockholders
          held for the purpose of electing directors,  or by the written consent
          of the holders of shares of Series A Preferred  Stock acting without a
          meeting pursuant to Section 228 of the DGCL.

               (ii) The Secretary of the  Corporation  may, and upon the written
          request  of the  holders  of  record  of at  least  10%  of  the  then
          outstanding  shares  of Series A  Preferred  Stock  (addressed  to the
          Secretary  of  the   Corporation  at  the  principal   office  of  the
          Corporation) shall, call a special meeting of the holders of shares of
          Series A  Preferred  Stock for the  election  of the  directors  to be
          elected by them as provided  in Section  7(d)(i) or Section  4(e),  as
          applicable.  Such call shall be made by the  Corporation  by notice to
          the  holders  of  record of  shares  of  Series A  Preferred  Stock by
          first-class  mail,  postage prepaid at their  respective  addresses as
          they appear in the stock register of the Corporation,  and such notice
          shall be mailed at least 10 days but no more than 20 days  before  the
          date  of the  special  meeting.  Such  meeting  shall  be  held at the
          earliest  practicable  date  upon  the  notice  required  for  special
          meetings of stockholders  at the place  designated by the Secretary of
          the  Corporation.  If such  meeting  shall  not be  called by a proper
          officer of the Corporation within 5 days after receipt of such written
          request  by the  Secretary  of the  Corporation,  then the  holders of
          record of shares  of Series A  Preferred  Stock of at least 10% of the
          then  outstanding  shares of Series A Preferred Stock may designate in
          writing a holder of  shares of Series A  Preferred  Stock to call such
          meeting at the expense of the  Corporation,  and such meeting shall be
          called by such  holder  upon  notice to the  holders  of record of the
          Series A  Preferred  Stock at  least  10 days  before  the date of the
          special  meeting  and  shall be held at the place  designated  by such
          stockholder in such notice. Any holder of shares of Series A Preferred
          Stock that would be  entitled to vote at any such  meeting  shall have
          access to the stock  register  of the  Corporation  for the purpose of
          causing a meeting of holders of shares of Series A Preferred  Stock to
          be called pursuant to the provisions of this Section  7(e)(ii).

               (iii) At any meeting  held for the purpose of electing  directors
          at which the holders of shares of Series A Preferred  Stock shall have
          the right to elect  directors  as  described  in  Section  7(d)(i)  or
          Section 4(e), as applicable, the presence in person or by proxy of the
          holders  of at least a  majority  of the then  outstanding  shares  of
          Series A  Preferred  Stock  shall be  required  and be  sufficient  to
          constitute  a quorum of such class for the  election of  directors  by
          such  class.  At any such  meeting  or  adjournment  thereof,  (x) the
          absence  of a quorum of the  holders  of shares of Series A  Preferred
          Stock shall not prevent the election of directors,  if any, other than
          the  directors  to be  elected  by the  holders  of shares of Series A
          Preferred Stock, and the absence of a quorum or quorums of the holders
          of capital  stock  entitled  to elect such other  directors  shall not
          prevent the election of the  directors to be elected by the holders of
          shares of Series A Preferred Stock, and (y) in the absence of a quorum
          of the  holders of shares of Series A Preferred  Stock,  a majority of
          the holders of shares of Series A Preferred Stock present in person or
          by proxy shall have the power to adjourn the meeting for the  election
          of directors  which such  holders are entitled to elect,  from time to
          time,   without   notice  (except  as  required  by  law)  other  than
          announcement at the meeting, until a quorum shall be present.

               (iv) Except as otherwise  provided for herein, the term of office
          of any  director  nominated  and  elected  by the  holders of Series A
          Preferred  Stock  pursuant  to Section  7(d)(i) or  Section  4(e),  as
          applicable (the "Designated  Directors"),  in office at any time shall
          terminate  upon the  election  of his or her  successor  at the annual
          meeting of stockholders held for the purpose of electing directors.

               (v) Any Designated  Directors  shall be entitled to all rights of
          voting  and   participation   as  are  directors  of  the  Corporation
          generally.  The holders of shares of Series A Preferred Stock shall be
          entitled exclusively,  by affirmative vote of holders of a majority of
          the  total  number  of  shares  of  Series  A  Preferred   Stock  then
          outstanding  or by  written  consent in lieu  thereof,  at any time to
          remove  any  Designated   Director.   Any  other   provision  of  this
          Certificate of  Designations or the  Certificate of  Incorporation  or
          Bylaws of the Corporation notwithstanding,  no Designated Director may
          be removed  except in the manner  provided for in Section 4(e) or this
          Section 7(e).  Vacancies among the Designated Directors resulting from
          death, resignation, retirement, disqualification,  removal from office
          or other cause may be filled at any time, but only by the  affirmative
          vote of holders of a majority of the total  number of shares of Series
          A  Preferred  Stock  cast,  voting at a meeting  together  as a single
          class,  or by a  majority  of the  total  number of shares of Series A
          Preferred  Stock then  outstanding  acting by written  consent in lieu
          thereof.  Any director so chosen shall hold office for a term expiring
          on the date the term of  office  of the  director  such  newly-elected
          director shall have replaced would have expired.

               (vi) So long as any Redemption  Obligation  shall be unsatisfied,
          other  than  to  increase  the  size  of the  Board  of  Directors  in
          accordance with Section 4(e), the size of the Board of Directors shall
          not otherwise be increased or decreased  without the affirmative  vote
          of at least a  majority  of the then  outstanding  shares  of Series A
          Preferred  Stock  voting  separately  as a  single  class  and  to the
          exclusion  of the  holders  of  all  other  classes  of  stock  of the
          Corporation.

     SECTION 8. Conversion.

     (a) Any holder of shares of Series A Preferred Stock may, at any time after
the Issuance Date, convert any or all shares of Series A Preferred Stock held by
such holder, into a number of shares of Common Stock calculated by dividing, for
each share of Series A Preferred  Stock to be converted,  (1) the Accrued Value,
at the date upon which the conversion  takes place,  plus an amount equal to the
aggregate of all unpaid  dividends  which have accrued and  accumulated  thereon
pursuant  to  Section  3(a)(i)  or  (3)(a)(ii),  as  applicable,  whether or not
declared (and not previously  included in Accrued Value), to the date upon which
the conversion takes place by (2) $11.50,  subject to adjustment as described in
Section  8(f)  (the  "Conversion  Price").  If more  than one  share of Series A
Preferred  Stock shall be  surrendered  for  conversion  at one time by the same
record  holder,  the  number  of full  shares  of  Common  Stock  issuable  upon
conversion  thereof  shall be computed on the basis of the  aggregate  number of
shares of Series A Preferred Stock so surrendered.

     (b) Conversion Procedures.

               (i) The  holder of any  shares of  Series A  Preferred  Stock may
          exercise  its right to convert  such shares by  surrendering  for such
          purpose to the  Corporation,  at its principal office or at such other
          office  or  agency  maintained  by the  Corporation  for that  purpose
          (provided that the  Corporation  shall at all times maintain an office
          or agency in the City of New York or in  Nassau  County,  New York for
          such   purposes)  a  certificate  or   certificates,   duly  endorsed,
          representing  the shares of Series A Preferred  Stock to be converted,
          accompanied  by a written  notice  stating (i) the number of shares of
          Series A Preferred  Stock to be  converted,  (ii) the name or names in
          which such holder wishes the certificate or certificates  representing
          shares  of  Common  Stock  to  be  issued  and  (iii)  the  date  (the
          "Conversion  Date") upon which such holder  wants such  conversion  to
          take place,  which shall be no earlier than three  Business  Days from
          the date of surrender of such certificates.

               (ii) The Corporation  shall,  prior to the Conversion Date, issue
          and  deliver to or upon the order of such  holder,  a  certificate  or
          certificates  for the  number of shares of Common  Stock to which such
          holder  shall  be  entitled  (in  the  number(s)  and  denomination(s)
          designated  by such  holder).  In the event  that less than all of the
          shares of Series A Preferred Stock  represented by any certificate are
          converted, a new certificate  representing the unredeemed shares shall
          be promptly issued to the holder thereof without cost to such holder.

               (iii) Such conversion  right with respect to any shares of Series
          A  Preferred  Stock  shall be  deemed to have  been  exercised  on the
          Conversion  Date and the person or  persons  entitled  to receive  the
          Common  Stock  issuable  upon  conversion  shall  be  treated  for all
          purposes  as the record  holder or  holders of Common  Stock upon such
          date; provided,  however,  that nothing in this sentence shall relieve
          the  Corporation of its obligation to deliver to the person or persons
          entitled  to  receive  the  Common  Stock  issuable  upon   conversion
          certificates  therefor  and to make the  payment  required  by Section
          8(c), if applicable.

     (c) No fractional shares of Common Stock shall be issued upon conversion of
shares of Series A Preferred  Stock.  Instead of any fractional  share of Common
Stock  otherwise  issuable  upon  conversion of any shares of Series A Preferred
Stock,  the Corporation  shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the Closing Price of the Common Stock
on the Conversion  Date and, if the Closing Price is not available on such date,
the Fair Market Value on such date.

     (d)  If  a  holder  converts  shares  of  Series  A  Preferred  Stock,  the
Corporation  shall pay any  documentary,  stamp or similar issue or transfer tax
due on the issue of Common Stock upon the conversion or due upon the issuance of
a new certificate or certificates for any shares of Series A Preferred Stock not
converted.  The holder,  however, shall pay any such tax that is due because any
such shares of the Common Stock or of the Series A Preferred Stock are issued in
a name other than the name of the holder.

     (e) The Corporation  shall at all times keep reserved out of its authorized
but unissued Common Stock,  free from Liens and not subject to any preemptive or
other similar  rights,  a sufficient  number of shares of Common Stock to permit
the  conversion  of all of the then  outstanding  shares of  Series A  Preferred
Stock.  For the  purposes  of this  Section  8(e),  the full number of shares of
Common Stock then issuable upon the conversion of all then outstanding shares of
Series A Preferred  Stock shall be computed as if at the time of computation all
outstanding shares of Series A Preferred Stock were held by a single holder. The
Corporation shall from time to time, in accordance with the laws of the State of
Delaware and its Certificate of Incorporation, increase the authorized amount of
its  Common  Stock if at any time the  authorized  amount  of its  Common  Stock
remaining  unissued  shall not be  sufficient  to permit the  conversion  of all
shares of Series A Preferred Stock at the time outstanding. All shares of Common
Stock issued upon  conversion of the shares of Series A Preferred Stock shall be
issued without charge and shall be validly issued, fully paid, nonassessable and
free and  clear  of (i) any  mortgage,  deed of  trust,  pledge,  hypothecation,
assignment,  encumbrance,  lien  (statutory or other),  restriction  (other than
restrictions on transfer  imposed by federal or state  securities laws) or other
security  interest  of any kind or nature  whatsoever  (collectively,  "Liens"),
other than any such Liens  imposed by the holder to whom such  shares are issued
or such Person's creditors and (ii) any preemptive or other similar rights. If a
conversion of Series A Preferred Stock is to be made in connection with a Change
of  Control,  Business  Combination  or  a  similar  transaction  affecting  the
Corporation  (other  than a tender or exchange  offer),  the  conversion  of any
shares of Series A Preferred  Stock may, at the election of the holder  thereof,
be conditioned  upon the  consummation of such  transaction,  in which case such
conversion  shall not be deemed to be effective until such  transaction has been
consummated.  In  connection  with any  tender or  exchange  offer for shares of
Common Stock, holders of Series A Preferred Stock shall have the right to tender
(or submit for exchange)  shares of Series A Preferred Stock in such a manner so
as to  preserve  the status of such  shares as Series A  Preferred  Stock  until
immediately prior to such time as shares of Common Stock are to be purchased (or
exchanged)  pursuant to such offer,  at which time that portion of the shares of
Series A Preferred  Stock so tendered  which is  convertible  into the number of
shares of Common Stock to be  purchased  (or  exchanged)  pursuant to such offer
shall be deemed converted into the appropriate number of shares of Common Stock.
Any shares of Series A Preferred Stock not so converted shall be returned to the
holder as Series A Preferred  Stock.  The Corporation  shall not close its books
against the  transfer of Series A Preferred  Stock or of Common  Stock issued or
issuable  upon  conversion  of  Series A  Preferred  Stock in any  manner  which
interferes with the timely conversion of Series A Preferred Stock.

     (f) The Conversion Price shall be subject to adjustment as follows:

               (i) In case the  Corporation  shall (A) subdivide the outstanding
          shares of any class of Common  Stock into a greater  number of shares,
          including by way of a stock  dividend,  or (B) combine the outstanding
          shares of any class of Common  Stock into a smaller  number of shares,
          the  Conversion  Price in effect  immediately  prior  thereto shall be
          adjusted by multiplying  the  Conversion  Price at which the shares of
          Series A Preferred Stock were theretofore convertible by a fraction of
          which the  denominator  shall be the number of shares of Common  Stock
          outstanding  immediately  following  such  action  and  of  which  the
          numerator  shall be the number of shares of Common  Stock  outstanding
          immediately prior thereto.  Such adjustment shall be made whenever any
          event   listed   above   shall  occur  and  shall   become   effective
          retroactively  immediately  after the close of  business on the record
          date in the case of a  dividend  and  immediately  after  the close of
          business  on the  effective  date  in the  case  of a  subdivision  or
          combination.

               (ii) In case the  Corporation  at any  time or from  time to time
          after  the  Issuance  Date  shall  issue  or  sell to any  Person  any
          Convertible  Securities  without  consideration or for a consideration
          per share (or having a  conversion,  exchange  or  exercise  price per
          share) less than the  Conversion  Price on the date of issuance,  then
          the  Conversion  Price in effect  immediately  prior  thereto shall be
          adjusted as provided below so that the Conversion Price therefor shall
          be equal to the price  determined by  multiplying  (A) the  Conversion
          Price at which  shares of Series A  Preferred  Stock were  theretofore
          convertible  by (B) a fraction of which (x) the  denominator  shall be
          the sum of (1) the number of shares of Common Stock outstanding on the
          date of issuance of the  Convertible  Securities and (2) the number of
          additional   shares  of  Common  Stock  that  may  be  acquired   upon
          conversion,  exchange or exercise of such Convertible Securities,  and
          (y) the  numerator  shall be the sum of (1) the  number  of  shares of
          Common Stock  outstanding on the date of issuance of such  Convertible
          Securities  and (2) the number of  additional  shares of Common  Stock
          which the  aggregate  offering  price of the shares of Common Stock so
          offered  would  purchase  at  the  Conversion  Price  on the  date  of
          issuance.  Such  adjustment  shall be made whenever  such  Convertible
          Securities are issued or sold, and shall become effective  immediately
          after the close of  business  on the date of  issuance or sale of such
          Convertible Securities.

               (iii) In case the  Corporation  shall at any time or from time to
          time after the Issuance Date purchase, redeem or otherwise acquire any
          shares of Common  Stock  (excluding  shares of Common  Stock  acquired
          pursuant to the tender offer  contemplated in the Purchase  Agreement)
          at a price per share greater than the Current Market Price on the date
          of such event,  or in case the Corporation  shall purchase,  redeem or
          otherwise acquire Convertible Securities for a consideration per share
          of Common Stock into which such  Convertible  Security is  exercisable
          for or  convertible  or  exchangeable  into  greater  than the Current
          Market Price on the date of such event,  then the Conversion  Price in
          effect  immediately  prior thereto shall be adjusted as provided below
          so that the  Conversion  Price  therefor  shall be equal to the  price
          determined by multiplying (A) the Conversion  Price at which shares of
          Series  A  Preferred  Stock  were  theretofore  convertible  by  (B) a
          fraction  of which (x) the  denominator  shall be the  Current  Market
          Price  immediately prior to such event, and (y) the numerator shall be
          the  result of  dividing:  (1) (x) the  product  of (aa) the number of
          shares of Common Stock  outstanding  and (bb) the Current Market Price
          immediately prior to such event, minus (y) the aggregate consideration
          paid  by  the  Corporation  in  such  event  (plus,  in  the  case  of
          Convertible Securities,  the aggregate additional  consideration to be
          paid to the Corporation upon exercise, conversion or exchange), by (2)
          the number of shares of Common  Stock  outstanding  immediately  after
          such event.  Such adjustment  shall be made whenever such Common Stock
          is, or Convertible  Securities are,  purchased,  redeemed or otherwise
          acquired,  and shall become effective immediately after such purchase,
          redemption or other acquisition of such securities.

               (iv) In case the  Corporation  shall at any time or from  time to
          time after the Issuance  Date issue or sell any shares of Common Stock
          at a price per share  that is less  than the  Conversion  Price on the
          date the Corporation commits or agrees to such sale or issuance,  then
          the  Conversion  Price in effect  immediately  prior  thereto shall be
          adjusted as provided below so that the Conversion Price therefor shall
          be equal to the price  determined by  multiplying  (A) the  Conversion
          Price at which  shares of Series A  Preferred  Stock were  theretofore
          convertible  by (B) a fraction of which (x) the  denominator  shall be
          the sum of (1) the number of shares of Common Stock outstanding on the
          date of issuance  or sale of such  shares of Common  Stock and (2) the
          number  of  additional  shares  of Common  Stock  offered  for sale or
          subject to issuance, and (y) the numerator shall be the sum of (1) the
          number of shares of Common Stock  outstanding  on the date of issuance
          or sale  of such  shares  of  Common  Stock  and  (2)  the  number  of
          additional  shares of Common Stock which the aggregate  offering price
          of the number of shares of Common  Stock so  offered  or issued  would
          purchase at the Conversion Price in effect  immediately  prior to such
          issuance or sale. Such  adjustment  shall be made whenever such Common
          Stock is issued or sold, and shall become effective  immediately after
          the issuance or sale of such securities;  provided,  however, that the
          provisions  of this  subparagraph  shall not apply to shares of Common
          Stock  issued  pursuant  to  a  dividend  on,  or a  subdivision  or a
          combination  of, the  outstanding  shares of Common Stock requiring an
          adjustment in the Conversion Price pursuant to Section 8(f)(i).

               (v) No  adjustment  in the  Conversion  Price  shall be  required
          unless the  adjustment  would  require an  increase  or decrease of at
          least 1% in the Conversion  Price then in effect;  provided,  however,
          that any  adjustments  that by reason of this Section  8(f)(v) are not
          required to be made shall be carried forward and taken into account in
          any subsequent  adjustment.  All calculations  under this Section 8(f)
          shall be made to the nearest  cent.  Anything  in Section  8(f) to the
          contrary   notwithstanding,   in  no  event  shall  the  then  current
          Conversion  Price be increased as a result of any calculation  made at
          any time pursuant to Sections 8(f)(ii) through 8(f)(iv).

               (vi)  Whenever  the  Conversion  Price  is  adjusted,  as  herein
          provided,  the Corporation shall promptly file with the transfer agent
          for the Series A Preferred  Stock, if any, a certificate of an officer
          of the  Corporation  setting  forth  the  Conversion  Price  after the
          adjustment and setting forth a brief  statement of the facts requiring
          such  adjustment  and  a  computation  thereof  (each,  a  "Conversion
          Certificate")  and promptly  thereafter the Corporation  shall cause a
          notice  of the  adjusted  Conversion  Price  along  with a  Conversion
          Certificate to be mailed to each registered holder of shares of Series
          A Preferred Stock; provided that if there is no transfer agent for the
          Series A Preferred Stock,  then the Corporation  shall promptly send a
          copy  of the  Conversion  Certificate  to each  holder  of  record  by
          overnight courier or by certified mail, return receipt requested.

               (vii) In case of any capital  reorganization or  reclassification
          of outstanding  shares of Common Stock (other than a  reclassification
          covered by Sections  8(f)(i)-(v)),  or in case of any consolidation or
          merger of the Corporation  with or into another Person,  or in case of
          any sale, lease, transfer, conveyance or other disposition (other than
          by way of merger or  consolidation) of all or substantially all of the
          Corporation's assets, on a consolidated basis, in one transaction or a
          series of related  transactions,  to any Person  (including  any group
          that is deemed to be a Person)(each of the foregoing being referred to
          as a "Business Combination"), in each case which is effected in such a
          manner  that the  holders  of Common  Stock are  entitled  to  receive
          (either  directly  or upon  subsequent  liquidation)  stock  or  other
          securities or property (including cash) with respect to or in exchange
          for  Common  Stock,  each  share of  Series  A  Preferred  Stock  then
          outstanding  shall  thereafter  be  convertible  into,  in lieu of the
          Common Stock issuable upon such conversion  prior to the  consummation
          of such Business  Combination,  the kind and amount of shares of stock
          and other securities and property (including cash) receivable upon the
          consummation  of such Business  Combination by a holder of that number
          of shares of Common  Stock into which one share of Series A  Preferred
          Stock was convertible  immediately  prior to the  consummation of such
          Business Combination.  In any such case, the Corporation or the Person
          formed by the  consolidation  or  resulting  from the  merger or which
          acquires such assets or which acquires the  Corporation's  shares,  as
          the case may be, shall make  provisions in its certificate or articles
          of  incorporation  or other  constituent  document to  establish  such
          rights and such rights shall be clearly provided for in the definitive
          transaction   documents   relating  to  such   transaction,   and  the
          Corporation  agrees  that it will  not be a party  to or  permit  such
          Business  Combination to occur unless such provisions are so made as a
          part  of  the  terms   thereof.   The   certificate   or  articles  of
          incorporation  or  other   constituent   document  shall  provide  for
          adjustments, which, for events subsequent to the effective date of the
          certificate  or  articles  of  incorporation   or  other   constituent
          document,  shall be as nearly  equivalent as may be practicable to the
          adjustments  provided for in Section  8(f)(i).  In case  securities or
          property other than Common Stock shall be issuable or deliverable upon
          conversion as aforesaid,  then all  references in this Section 8 shall
          be deemed to apply,  so far as appropriate and as nearly as may be, to
          such other  securities  or property.  The  provisions  of this Section
          8(f)(vii) shall similarly apply to successive  Business  Combinations.
          The  Corporation  shall give written notice to the holders of Series A
          Preferred  Stock  at least  30 days  prior  to the  date on which  any
          Business Combination or similar transaction  effecting the Corporation
          shall take place.

               (viii)  Notwithstanding  anything  to the  contrary  herein,  the
          Conversion  Price shall not be adjusted  pursuant to paragraph (ii) or
          (iv) of this Section 8(f) for the issuance of any Excluded Securities.

               (ix) For the purposes of any adjustment of the  Conversion  Price
          pursuant to paragraph (ii) or (iv) of this Section 8(f), the following
          provisions shall be applicable:

                    (1)  In  the  case  of  the  issuance  of  Common  Stock  or
               Convertible  Securities for cash in a public  offering or private
               placement,  the aggregate consideration shall be deemed to be the
               amount of cash paid before  deducting any discounts,  commissions
               or placement fees payable by the  Corporation to any  underwriter
               or  placement  agent in  connection  with the  issuance  and sale
               thereof.

                    (2)  In the  case  of  the  issuance  of  Common  Stock  for
               consideration   in  whole  or  in  part  other  than  cash,  such
               consideration  shall  be  deemed  to be  the  Fair  Market  Value
               thereof.

                    (3) Subparagraph (2) above  notwithstanding,  in the case of
               the issuance of shares of Common Stock or Convertible  Securities
               to the owners of the non-surviving  entity in connection with any
               merger in which the Corporation is the surviving corporation, the
               amount of  consideration  therefor shall be deemed to be the Fair
               Market  Value of such  portion of the net assets and  business of
               the non-surviving  entity as is attributable to such Common Stock
               or Convertible Securities, as the case may be.

                    (4) If Common Stock is sold as a unit with other securities,
               the aggregate  consideration received for such Common Stock shall
               be  deemed  to be net of the  Fair  Market  Value  of such  other
               securities.

                    (5) The aggregate  maximum  number of shares of Common Stock
               (as set forth in the instruments relating thereto, without regard
               to any provision contained therein for a subsequent  reduction of
               such number)  deliverable  upon conversion of or in exchange for,
               or  upon  the  exercise  of,  such  Convertible   Securities  and
               subsequent  conversion,  exchange  or exercise  thereof  shall be
               deemed  to  have  been  issued  at  the  time  such   Convertible
               Securities  were  issued  and for a  consideration  equal  to the
               consideration   received   by  the   Corporation   for  any  such
               Convertible Securities,  plus the minimum amount of consideration
               (as set forth in the instruments relating thereto, without regard
               to any provision  contained therein for a subsequent  increase of
               consideration),  if any, to be received by the  Corporation  upon
               the  conversion,   exercise  or  exchange  of  such   Convertible
               Securities.

                    (6) In the case of the issuance of Convertible Securities:

                         (A) With respect to any Convertible  Securities  issued
                    after  the  Issuance  Date for  which an  adjustment  to the
                    Conversion  Price  previously  has  been  made  pursuant  to
                    Section 8(f)(ii), on any increase in the number of shares of
                    Common  Stock  deliverable  upon  exercise,   conversion  or
                    exchange  of, or a decrease in the  exercise  price of, such
                    Convertible  Securities  other than a change  resulting from
                    the  anti-dilution   provisions   thereof,   the  applicable
                    Conversion Price shall forthwith be readjusted retroactively
                    to give effect to such increase or decrease;

                         (B) With respect to any Convertible  Securities  issued
                    after  the  Issuance  Date for  which an  adjustment  to the
                    Conversion  Price has  previously  not been made pursuant to
                    Section 8(f)(ii),  if there is any increase in the number of
                    shares of Common Stock deliverable upon exercise, conversion
                    or exchange of, or a decrease in the exercise price of, such
                    Convertible  Securities  other than a change  resulting from
                    the  anti-dilution   provisions  thereof,  such  Convertible
                    Securities  shall be treated  as if they had been  cancelled
                    and reissued and an adjustment to the Conversion  Price with
                    respect to such deemed  issuance  shall be made  pursuant to
                    Section 8(f)(ii), if applicable;

                         (C) With respect to any Convertible  Securities  issued
                    prior to the Issuance  Date, if there is any increase in the
                    number of shares of Common Stock  deliverable upon exercise,
                    conversion  or exchange  of, or a decrease  in the  exercise
                    price of, such  Convertible  Securities  other than a change
                    resulting from the anti-dilution  provisions  thereof,  such
                    Convertible  Securities shall be treated as if they had been
                    cancelled and reissued and an  adjustment to the  Conversion
                    Price with  respect to such  deemed  issuance  shall be made
                    pursuant to Section 8(f)(ii), if applicable; and

                         (D)  No  further  adjustment  of the  Conversion  Price
                    adjusted   upon  the   issuance  of  any  such   Convertible
                    Securities  shall be made as a result of the actual issuance
                    of Common Stock upon the exercise, conversion or exchange of
                    any such Convertible Securities.

          (x) If any event occurs as to which the  foregoing  provisions of this
     Section 8(f) are not strictly applicable or, if strictly applicable,  would
     not, in the good faith  judgment of the Board of Directors,  fairly protect
     the conversion  rights of the Series A Preferred  Stock in accordance  with
     the essential intent and principles of such  provisions,  then the Board of
     Directors   shall  make  such   adjustments  in  the  application  of  such
     provisions,  in accordance with such essential  intent and  principles,  as
     shall be  reasonably  necessary,  in the good faith opinion of the Board of
     Directors, to protect such conversion rights as aforesaid,  but in no event
     shall any such  adjustment  have the effect of  increasing  the  Conversion
     Price,  or  otherwise  adversely  affect the  holders of Series A Preferred
     Stock.

     SECTION 9. STATUS OF SHARES.

     All shares of the Series A  Preferred  Stock that are at any time  redeemed
pursuant to Sections 4 or 5 or converted pursuant to Section 8 and all shares of
the Series A Preferred  Stock that are otherwise  reacquired by the  Corporation
shall have the status of  authorized  but unissued  shares of  Preferred  Stock,
without  designation  as to  series,  subject  to  reissuance  by the  Board  of
Directors as shares of any one or more other classes or series.

     SECTION 10. General Provisions.

     (a)  Headings.  The headings of the  sections,  paragraphs,  subparagraphs,
clauses and subclauses of this  Certificate of Designations  are for convenience
of reference  only and shall not define,  limit or affect any of the  provisions
hereof.

     (b)  Enforcement.  Any  registered  holder of shares of Series A  Preferred
Stock may  proceed  to  protect  and  enforce  its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to protect and
enforce such rights,  whether for the specific  enforcement  of any provision in
this  Certificate of Designations or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.

     (c)  Notice of  Certain  Events.  The  holders  of  shares of the  Series A
Preferred  Stock shall be entitled to receive  written notice of any Liquidation
or Change of Control and shall be given an opportunity to convert their Series A
Preferred Stock  immediately  prior to any such Liquidation or Change of Control
in the manner specified above, if so specified,  or if not so specified, in such
a manner as is reasonably likely to give the holders such an opportunity.

     SECTION 11. Definitions.

     For the purposes of this Certificate of Designations:

     "Accrued Value" means, with respect to a share of Series A Preferred Stock,
as at any date, the sum of (as adjusted for any split, subdivision, combination,
consolidation,  recapitalization  or similar  event with respect to the Series A
Preferred Stock) (i) the Stated Value plus (ii) an amount equal to the aggregate
of all unpaid  dividends  which (x) have accrued and  accumulated  on such share
pursuant  to  Section  3(a)(i)  or  (3)(a)(ii),  as  applicable,  whether or not
declared,  through  and  including  such date and (y) have been added to Accrued
Value (and not subsequently deducted) pursuant to Section 3(a)(iii).

     "Affiliate"  shall have the meaning set forth in Rule 12b-2  promulgated by
the Securities and Exchange Commission under the Exchange Act.

     "Beneficially  Own" with respect to any securities means having "beneficial
ownership" of such  securities  as  determined  pursuant to Rule 13d-3 under the
Exchange Act, as in effect on the Issuance Date.

     "Board of Directors" has the meaning set forth in the Preamble above.

     "Business Combination" has the meaning set forth in Section 8(f)(vii).

     "Business  Day" means any day other than a  Saturday,  Sunday,  or a day on
which  commercial  banks in the City of New York are  authorized or obligated by
law or executive order to close.

     "Certificate  of  Incorporation"  has the meaning set forth in the Preamble
above.

     "Carrying  Value"  means,  with  respect  to a share of Series A  Preferred
Stock,  as at any date,  the sum of (as  adjusted  for any  split,  subdivision,
combination,  consolidation,  recapitalization  or similar event with respect to
the Series A Preferred  Stock) (i) the value of such share of Series A Preferred
Stock carried on the Corporation's consolidated balance sheet as of such date as
prepared in  accordance  with GAAP plus (ii) an amount equal to the aggregate of
all unpaid dividends which (x) have accrued and accumulated on the Accrued Value
pursuant to Section  3(a)(i) or  (3)(a)(ii),  as applicable  (and not previously
included in the value of such share of Series A Preferred  Stock  carried on the
Corporation's  consolidated  balance  sheet  referred  to in clause (i)  above),
whether or not declared, through and including such date and (y) have been added
to Accrued Value (and not subsequently deducted) pursuant to Section 3(a)(iii).

     "Change of Control" has the meaning set forth in Section 6(d).

     "Closing  Price"  per share of the  Common  Stock on any day means the last
reported per share sale price, regular way, of the Common Stock on such day, or,
in case no such  sale  takes  place on such day,  the  average  of the  reported
closing per share bid and asked prices, regular way, of the Common Stock on such
day,  in each  case on the  NASDAQ  or,  if the  Common  Stock is not  quoted or
admitted to trading on NASDAQ, on the principal national  securities exchange or
quotation  system on which the Common  Stock is listed or admitted to trading or
quoted,  or, if the Common  Stock is not listed or admitted to trading or quoted
on any  national  securities  exchange or quotation  system,  the average of the
closing  per share bid and asked  prices of the Common  Stock on such day in the
over-the-counter  market as reported by a generally  accepted national quotation
service.

     "Common Stock" means the common stock,  par value $0.001 per share,  of the
Corporation.

     "Conversion Certificate" has the meaning set forth in Section 8(f)(vi).

     "Conversion Date" has the meaning set forth in Section 8(b).

     "Conversion Price" has the meaning set forth in Section 8(a).

     "Convertible Securities" shall mean (i) any options or warrants to purchase
or other rights to acquire  Common  Stock,  (ii) any  securities  by their terms
convertible  into or  exchangeable  for Common  Stock,  and (iii) any options or
warrants  to  purchase  or other  rights  to  acquire  any such  convertible  or
exchangeable securities.

     "Corporation" has the meaning set forth in the Preamble above.

     "Current  Market  Price"  for a given  date,  with  respect to any share of
Common  Stock,  shall mean the average of the  Closing  Prices of such share (if
available,  as reported in The Wall Street Journal or other reputable  financial
news source) for the 20  consecutive  Trading Days  immediately  preceding  such
date;  provided,  however,  that with respect to options issued pursuant to duly
adopted  stock option or other plans of the  Corporation  under which options to
purchase stock of the Corporation may be issued to employees or directors of the
Corporation  or of  affiliates  under the  Corporation's  control  ("Corporation
Option Plans"),  each reference to "Current  Market Price" in Section  8(f)(iii)
shall be deemed to be a  reference  to the current  market  price or fair market
value of the Common Stock or similar concept, if any, as such term or concept is
used in the applicable  Corporation  Option Plan for determining the fair market
value of such stock at the time of grant.

     "Debt" shall mean, with respect to any Person,  whether  recourse is to all
or a portion of the assets of such  Person and  whether or not  contingent,  and
without  duplication,  (i) every  obligation of such Person for money  borrowed;
(ii) every  obligation of such Person evidenced by bonds,  debentures,  notes or
other similar instruments, including obligations incurred in connection with the
acquisition  of  property,  assets  or  businesses;  (iii)  every  reimbursement
obligation  of  such  Person  with  respect  to  letters  of  credit,   bankers'
acceptances or similar  facilities  issued for the account of such Person;  (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services but excluding trade accounts payable;  (v) every capital
lease obligation of such Person;  (vi) all indebtedness of such Person,  whether
incurred on or prior to the Issuance Date or thereafter incurred,  for claims in
respect of derivative  products,  including interest rate, foreign exchange rate
and commodity  forward  contracts,  options and swaps and similar  arrangements;
(vii) every other  liability or obligation  of such Person but  excluding  trade
accounts payable; and (viii) every obligation of the type referred to in clauses
(i) through  (vii) of another  Person and all  dividends  of another  Person the
payment of which,  in either case,  such Person has guaranteed or is responsible
or liable for, directly or indirectly, as obligor or otherwise.

     "Default Number" has the meaning set forth in Section 4(e).

     "Designated Director" has the meaning set forth in Section 7(e)(iv).

     "DGCL" has the meaning set forth in the Preamble.

     "Dividend  Payment Date" means each of March 31, June 30,  September 30 and
December  31,  except that if such date is not a Business  Day then the Dividend
Payment Date shall be the next day that is a Business Day.

     "Dividend Period" means each quarterly period from and including a Dividend
Payment Date to the next following  Dividend Payment Date (but without including
such later Dividend Payment Date).

     "Exchange  Act" means the  Securities  Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.

     "Excluded  Securities"  means (1) stock options and restricted Common Stock
awards issued to employees,  consultants,  officers or non-employee directors of
the  Corporation  following  the  Issuance  Date  pursuant to any stock  option,
restricted stock,  stock purchase or stock bonus plan,  agreement or arrangement
approved by the Board of Directors and the  Compensation  Committee of the Board
of Directors not to exceed 200,000 in the aggregate for all such issuances,  and
any shares of Common Stock issuable upon the exercise of such stock options; (2)
securities  issued  upon  conversion  of  the  Series  A  Preferred  Stock;  (3)
securities  issuable as  dividends  or  distributions  on shares of the Series A
Preferred  Stock;  (4) securities  issued pursuant to the acquisition of another
business  entity or business  segment of any such entity by the  Corporation  by
merger,  purchase  of  substantially  all the  assets  or  other  reorganization
agreement if such issuance is approved by the Board of Directors, which approval
shall include a majority of the Designated Directors; (5) up to 2,175,112 shares
of  Common  Stock  issuable  upon  exercise  of  rights,  options  and  warrants
outstanding  on the Issuance  Date;  and (6) shares of Common Stock  issuable in
accordance with an earn-out  provision in connection with an acquisition made by
the Corporation prior to the Issuance Date.

     "Fair  Market  Value" with  respect to any  securities,  assets or property
shall mean the fair value  thereof as determined  by an  independent  investment
banking or appraisal  firm  experienced  in the valuation of such  securities or
property  selected in good faith by the Independent  Directors and acceptable to
the holders of a majority of the outstanding  shares of Series A Preferred Stock
or, at the  option of the  holders of a majority  of the  outstanding  shares of
Series A Preferred  Stock,  as  determined by the  Independent  Directors of the
Corporation in good faith;  provided,  that,  the value of any  securities  that
trade on a national securities  exchange or inter-dealer  quotation system shall
be the Closing Price thereof as of the date such value is determined.

     "Four Year Redemption Date" has the meaning set forth in Section 5(a).

     "GAAP" means United States generally accepted accounting principles.

     "Incumbent Board" has the meaning set forth in Section 6(d)(ii).

     "Independent Directors" has the meaning set forth in Section 7(d)(ii).

     "Initial Beneficial Ownership" shall mean the aggregate number of shares of
Common Stock which the holders of shares of Series A Preferred  Stock would have
been  entitled  to receive  pursuant  to Section 8 had all  holders of shares of
Series A Preferred  Stock  converted  such shares into shares of Common Stock on
the  Issuance  Date  (as  adjusted  for  any  split,  subdivision,  combination,
recapitalization  or  similar  event  from the  Issuance  Date until the date of
determination).

     "Initial  Holders"  shall mean New Mountain  Partners,  L.P.,  New Mountain
Affiliated  Investors,  L.P. and any Person to whom Series A Preferred  Stock or
shares of Common Stock issued upon  conversion  of the Series A Preferred  Stock
are  transferred,  other  than a  transfer  in a  public  offering  or in a sale
pursuant to Rule 144 promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended.

     "Issuance  Date"  means the  Closing  Date as such term is  defined  in the
Purchase Agreement.

     "Junior  Securities"  shall  mean the  Corporation's  Common  Stock and all
classes  and  series  of  capital  stock  of the  Corporation  now or  hereafter
authorized,  issued or outstanding  which by their terms expressly  provide that
they are junior to the Series A Preferred  Stock,  or which do not specify their
rank, with respect to payment of dividends or distributions, or the distribution
of assets upon Liquidation.  This definition of Junior Securities shall include,
without limitation,  any Convertible  Securities exercisable or exchangeable for
or convertible into any Junior Securities.

     "Liens" has the meaning set forth in Section 8(e).

     "Liquidation" has the meaning set forth in Section 6(a).

     "Liquidation  Preference"  means the greater of (x) an amount in cash equal
to the Accrued Value, at the date such  Liquidation  Preference is paid, of each
share of Series A Preferred Stock,  plus an amount equal to the aggregate of all
unpaid  dividends  which have  accrued  and  accumulated  on the  Accrued  Value
pursuant  to  Section  3(a)(i)  or  (3)(a)(ii),  as  applicable,  whether or not
declared (and not previously  included in Accrued  Value),  to and including the
date  such  Liquidation  Preference  is paid and (y) the  amount  that  would be
payable  to such  holder in the  Liquidation  in  respect  of the  Common  Stock
issuable  upon  conversion  of such  share of  Series A  Preferred  Stock if all
outstanding  shares of Series A Preferred Stock were converted into Common Stock
immediately prior to the Liquidation in accordance with Section 8.

     "Loan Agreement" means the Loan and Security Agreement, dated as of January
29, 2002, as amended on October 30, 2003, between NMHC Funding,  LLC, a Delaware
limited liability company,  and HFG Healthco-4 LLC, a Delaware limited liability
company.

     "NASDAQ" has the meaning set forth in Section 5(a).

     "Nominating  Committee"  means a  committee  of the  Board of  Directors  a
majority  of the  members  of  which  is  comprised  of  directors  who  are not
Designated  Directors  or  officers  or  employees  of  the  Corporation  or its
Subsidiaries  and which  committee  is  empowered  to act for the full  Board of
Directors to nominate individuals for election as Independent Directors.

     "NYSE" has the meaning set forth in Section 5(a).

     "Optional Redemption Date" has the meaning set forth in Section 4(b).

     "Optional  Redemption  Price"  means the  Accrued  Value,  at the  Optional
Redemption Date, of such share of Series A Preferred Stock, plus an amount equal
to the  aggregate of all unpaid  dividends  which have  accrued and  accumulated
thereon pursuant to Section 3(a)(i) or (3)(a)(ii), as applicable, whether or not
declared (and not previously  included in Accrued  Value),  to and including the
Optional Redemption Date.

     "Outstanding Common Stock" has the meaning set forth in Section 6(d)(i).

     "Outstanding  Voting  Securities"  has the  meaning  set  forth in  Section
6(d)(i).

     "Parity  Securities"  means each class or series of capital stock issued by
the Corporation  after the date hereof the terms of which  specifically  provide
that such  class or series  will rank on a parity  with the  Series A  Preferred
Stock  with  respect  to  payment  of  dividends  and  distributions,   and  the
distribution of assets upon  Liquidation.  This definition of Parity  Securities
shall include,  without limitation,  any Convertible  Securities  exercisable or
exchangeable for or convertible into any Parity Securities.

     "Permitted  Options"  means  options to acquire  shares of Common  Stock or
restricted  Common  Stock,  not to exceed in the  aggregate in any fiscal year 2
1/2% of the shares of Common  Stock  outstanding  at the end of the  immediately
preceding fiscal year (treating the Series A Preferred Stock for this purpose as
having been  converted  into Common  Stock),  issued after the Issuance  Date to
employees,  consultants,  officers or non-employee  directors of the Corporation
pursuant to any stock option,  restricted  stock,  stock purchase or stock bonus
plan,  agreement  or  arrangement  approved  by the  Board of  Directors,  which
approval shall include a majority of the Designated Directors.

     "Person" means an individual,  partnership,  corporation, limited liability
company or partnership,  unincorporated organization, trust or joint venture, or
a governmental agency or political  subdivision  thereof, or other entity of any
kind.

     "Purchase Agreement" means that certain Preferred Stock Purchase Agreement,
dated October 30, 2003, by and among the  Corporation and the other Persons that
are a party  thereto,  as  amended  from  time to time;  a copy of the  Purchase
Agreement  will be made  available  without  charge  to any  stockholder  of the
Corporation upon request.

     "Receivables   Purchase  Agreement"  means  the  Receivables  Purchase  and
Transfer  Agreement,  dated as of January  29,  2002,  as amended on October 30,
2003, among the Corporation, the other providers named therein and NMHC Funding,
LLC, as purchaser.

     "Redemption Date" has the meaning set forth in Section 5(b).

     "Redemption Default Directors" has the meaning set forth in Section 4(e).

     "Redemption  Obligation"  means any obligation of the Corporation to redeem
shares of Series A Preferred Stock pursuant to Section 4.

     "Redemption Record Date" has the meaning set forth in Section 5(c).

     "Required Vote of the Independent  Directors" means the affirmative vote of
at least a majority of the Independent Directors then in office.

     "Senior  Securities"  means each class or series of capital stock issued by
the Corporation  after the date hereof the terms of which  specifically  provide
that such class or series will rank senior to the Series A Preferred  Stock with
respect to payment of  dividends  and  distributions,  and the  distribution  of
assets upon  Liquidation.  This definition of Senior  Securities  shall include,
without limitation,  any Convertible  Securities exercisable or exchangeable for
or convertible into any Senior Securities.

     "Series A Preferred Stock" has the meaning set forth in Section 1.

     "Seven Year Redemption Date" has the meaning set forth in Section 5(b).

     "Stated Value" means,  with respect to a share of Series A Preferred Stock,
$11.50 (as  adjusted  for any split,  subdivision,  combination,  consolidation,
recapitalization or similar event with respect to the Series A Preferred Stock).

     "Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity  securities or equity interest
is owned, directly or indirectly, by such Person.

     "13D  Group"  shall mean any group of Persons  who,  with  respect to those
acquiring,  holding,  voting or disposing of voting securities  would,  assuming
ownership of the requisite  percentage  thereof, be required under Section 13(d)
of the Exchange Act and the rules and regulations thereunder to file a statement
on Schedule 13D or 13G with the SEC as a "person"  within the meaning of Section
13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes
of Section 13(g)(3) of the Exchange Act.

     "Trading  Day" means a day on which  securities  are traded on the national
securities exchange or quotation system or in the  over-the-counter  market used
to determine Closing Prices for the Common Stock.

     "225% Date" has the meaning set forth in Section 5(a).

     "Voting  Securities"  mean any class or  classes  of stock,  or  securities
convertible  into or  exchangeable  for any class of stock,  of the  Corporation
pursuant to which the holders  thereof  have the  general  power under  ordinary
circumstances  to vote with respect to the  election of the Board of  Directors,
irrespective of whether or not, at the time, stock of any other class or classes
shall  have,  or might  have,  voting  power by reason of the  happening  of any
contingency.

     The effective date of this  Certificate of  Designations,  Preferences  and
Rights of Series A 7%  Convertible  Preferred  Stock of National  Medical Health
Card Systems, Inc. will be March 19, 2004 at 9:16 a.m.

     IN  WITNESS  WHEREOF,  the  Corporation  has  caused  this  Certificate  of
Designations  of Series A Preferred  Stock to be duly  executed this 19th day of
March, 2003.


                                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.



                                 By:/s/ James J. Bigl
                                    -------------------------------------------
                                    Name:James J. Bigl
                                    Title:President and Chief Executive Officer