<PAGE>   1
                                                                     EXHIBIT 4.4


                              IVI PUBLISHING, INC.

                          CERTIFICATE OF DESIGNATION OF
                      SERIES B CONVERTIBLE PREFERRED STOCK

                 (Pursuant to Section 302A.401 of the Minnesota
                            Business Corporation Act)


                IVI Publishing, Inc., a Minnesota corporation (the
"Corporation"), in accordance with the provisions of Section 302A.401 of the
Minnesota Business Corporation Act, DOES HEREBY CERTIFY:

                That pursuant to authority vested in the Board of Directors of
the Corporation by the Articles of Incorporation of the Corporation, the Board
of Directors of the Corporation, by unanimous written consent dated March 30,
1998, adopted a resolution providing for the creation of a series of the
Corporation's Preferred Stock, $.01 par value, which series is designated as
"Series B Convertible Preferred Stock," which resolution is as follows:

                RESOLVED, that pursuant to authority vested in the Board of
Directors by the Articles of Incorporation of the Corporation, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $.01 par value (hereinafter called the "Preferred Stock"), of the
Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights have
not been set forth in the Articles of Incorporation of the Corporation, does
hereby fix the same as follows:

                      SERIES B CONVERTIBLE PREFERRED STOCK

                SECTION 1. DEFINITIONS. As used herein, the following terms
shall have the following meanings:

                "Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person; for purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

                "Aggregated Person" means, with respect to any Person, any
Person whose beneficial 


<PAGE>   2
ownership of shares of Common Stock would be aggregated with the beneficial
ownership of shares of Common Stock by such Person for purposes of Section 13(d)
of the Exchange Act, and Regulation 13D-G thereunder.

                "AMEX" means the American Stock Exchange, Inc.

                "Average Market Price" for any date means the arithmetic average
of the Market Price on each of the four Trading Days, whether or not
consecutive, during the applicable Measurement Period having the lowest Market
Prices.

                "Blackout Period" means any Trading Day, but not in excess of an
aggregate of 30 Trading Days, occurring after the SEC Effective Date as to which
the Corporation has notified the holders of shares of Series B Convertible
Preferred Stock on or prior to such Trading Day in accordance with Section 3(f)
of the Registration Rights Agreements that they are required, pursuant to
Section 3(f) of the Registration Rights Agreements, to suspend offers and sales
of shares of Common Stock pursuant to the Registration Statement as a result of
an event or circumstance which relates to a development concerning a business
combination involving the Corporation which development occurred subsequent to
the later of (x) the SEC Effective Date and (y) the latest date prior to such
notice on which the Corporation has amended or supplemented the Registration
Statement as to which the Board of Directors shall have determined in good faith
that public disclosure of such event or circumstance at such time would not be
in the best interests of the Corporation, which determination shall be set forth
in a resolution duly adopted by the Board of Directors and copies of which shall
be furnished to the holders of shares of Series B Convertible Preferred Stock;
provided, however, that not more than two periods of such Trading Days in any
period of 365 consecutive days shall be Blackout Periods.

                "Board of Directors" or "Board" means the Board of Directors of
the Corporation.

                "Ceiling Price" means $9.73 (subject to equitable adjustments
from time to time by the Corporation on terms reasonably acceptable to the
Majority Holders for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring or with
respect to which "ex-" trading commences on or after the date of filing of this
Certificate of Designation with the Secretary of State of the State of
Minnesota); provided, however, that, notwithstanding any other provision hereof,
the Ceiling Price applicable to a particular conversion shall be subject to
reduction as provided in Section 10(b)(6); provided further, however, that if a
Registration Event occurs, then, in addition to any other right or remedy of any
holder of shares of Series B Convertible Preferred Stock thereafter the Ceiling
Price shall be permanently reduced on each Computation Date by an amount equal
to one percent of the amount that the Ceiling Price otherwise would have been
without any reduction pursuant to this proviso.

                "Closing Bid Price" of any security on any date means the
closing bid price of such security on such date on the securities exchange or
other market on which such security is listed for trading which constitutes the
principal securities market for such security, as reported by Bloomberg, L.P.


                                      -2-
<PAGE>   3
                "Common Stock" means the Common Stock, $.01 par value, of the
Corporation.


                "Computation Date" means, if a Registration Event occurs, any of
(1) the date which is 30 days after such Registration Event occurs, if any
Registration Event is continuing on such date, (2) each date which is 30 days
after a Computation Date, if any Registration Event is continuing on such date,
and (3) the date on which all Registration Events cease to continue.

                "Conversion Agent" means American Stock Transfer & Trust
Company, or its duly appointed successor, as conversion agent for the Series B
Convertible Preferred Stock pursuant to the Transfer Agent Instruction.

                "Conversion Amount" initially shall be equal to $1,000.00,
subject to adjustment as herein provided.

                "Conversion Date" means, with respect to each conversion of
shares of Series B Convertible Preferred Stock pursuant to Section 10, the date
on which the Conversion Notice relating to such conversion is actually received
by the Conversion Agent, whether by mail, courier, personal service, telephone
line facsimile transmission or other means, in case of a conversion pursuant to
Section 10(a).

                "Conversion Notice" means a written notice, duly signed by or on
behalf of a holder of shares of Series B Convertible Preferred Stock, stating
the number of shares of Series B Convertible Preferred Stock to be converted in
the form specified in the Subscription Agreements.

                "Conversion Percentage" means, for any Conversion Date during
any period set forth below, the applicable percentage set forth below:

<TABLE>
<CAPTION>
                                                                                         Conversion
           Conversion Date                                                               Percentage
           ---------------                                                               ----------
<S>                                                                                      <C>

           Issuance Date through 90th day after Issuance Date                                  N/A

           91st through 180th day after Issuance Date                                         100%

           181st through 270th day after Issuance Date                                         95%

           271st day after Issuance Date and thereafter                                        90%
</TABLE>

; provided, however, that, notwithstanding any other provision hereof, if a
Registration Event occurs, then each percentage stated above shall be
permanently reduced by one percentage point on each Computation Date (pro rated
in the case of any Computation Date which is less than 30 days after a
Registration Event occurs or less than 30 days after another Computation Date).

                "Conversion Price" means:


                                      -3-
<PAGE>   4
                (1)     for any Conversion Date on or prior to the date which is
90 days after the Issuance Date, $9.73 (subject to equitable adjustments from
time to time on terms reasonably acceptable to the Majority Holders for stock
splits, stock dividends, combinations, recapitalizations, reclassifications and
similar events occurring or with respect to which "ex-" trading commences on or
after the date of filing of this Certificate of Designation with the Secretary
of State of the State of Minnesota); and

                (2)     for any Conversion Date on or after the date which is 91
days after the Issuance Date, the lesser of:

                (A)     the product of (a) the Average Market Price for such
        date times (b) the applicable Conversion Percentage; and

                (B)     the Ceiling Price;

provided, however, that in the case of this clause (2) the Conversion Price
applicable to a particular conversion shall be subject to reduction as provided
in Section 10(b)(6).

                "Conversion Rate" shall have the meaning provided in Section
10(a).

                "Converted Market Price" means, for any share of Series B
Convertible Preferred Stock as of any date of determination, an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, at the time of such determination, be issuable on conversion in
accordance with Section 10(a) of one share of Series B Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series B Convertible Preferred Stock on the date of
such determination (determined without regard to any limitation on conversion
based on beneficial ownership contained in 10(a)) times (y) the arithmetic
average of the Market Price of the Common Stock for the five consecutive Trading
Days ending on the Trading Day prior to the date of such determination.

                "Corporation Optional Redemption Notice" means a notice given by
the Corporation to the holders of shares of Series B Convertible Preferred Stock
pursuant to Section 9(a) which notice shall state (1) that the Corporation is
exercising its right to redeem all or a portion of the outstanding shares of
Series B Convertible Preferred Stock pursuant to Section 9(a), (2) the number of
shares of Series B Convertible Preferred Stock held by such holder which are to
be redeemed, (3) the Redemption Price per share of Series B Convertible
Preferred Stock to be redeemed or the formula for determining the same,
determined in accordance herewith and (4) the applicable Redemption Date.

                "Current Price" means with respect to any date the arithmetic
average of the Market Price of the Common Stock on the 30 consecutive Trading
Days commencing 45 Trading Days before such date.


                                      -4-
<PAGE>   5
                "Dividend Shares" means shares of Series B Convertible Preferred
Stock issued as dividends on outstanding shares of Series B Convertible
Preferred Stock in accordance with Section 5(b).

                "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                "Holder Optional Redemption Date" shall mean the date of
redemption of shares of Series B Convertible Preferred Stock pursuant to Section
11.

                "Inconvertibility Notice" shall have the meaning provided in
Section 7(a)(2).

                "Issuance Date" means the first date of original issuance of any
shares of Series B Convertible Preferred Stock.

                "Junior Dividend Stock" means, collectively, the Common Stock
and any other class or series of capital stock of the Corporation ranking junior
as to dividends to the Series B Convertible Preferred Stock.

                "Junior Liquidation Stock" means the Common Stock or any other
class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Series B Convertible Preferred Stock.

                "Liquidation Preference" means, for each share of Series B
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.

                "Majority Holders" means at any time the holders of shares of
Series B Preferred Stock which shares constitute a majority of the outstanding
shares of Series B Preferred Stock.

                "Market Price" of the Common Stock on any date means the closing
bid price for one share of Common Stock on such date on the first applicable
among the following: (a) the national securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market for
the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the principal market
for the Common Stock on such date, or (c) the Nasdaq SmallCap, if the Nasdaq
SmallCap constitutes the principal securities market for the Common Stock on
such date, in any such case as reported by Bloomberg, L.P.; provided, however,
that if during any Measurement Period or other period during which the Market
Price is being determined:

                (i)     The Corporation shall declare or pay a dividend or make
        a distribution to all holders of the outstanding Common Stock in shares
        of Common Stock or fix any record date for any such action, then the
        Market Price for each day in such Measurement Period or such other
        period which day is prior to the earlier of (1) the date fixed for the
        determination of shareholders entitled to receive such dividend or other
        distribution and (2) the date on which ex-dividend trading in the Common
        Stock with respect to such 


                                      -5-
<PAGE>   6
        dividend or distribution begins shall be reduced by multiplying the
        Market Price (determined without regard to this proviso) for each such
        day in such Measurement Period or such other period by a fraction, the
        numerator of which shall be the number of shares of Common Stock
        outstanding at the close of business on the earlier of (1) the record
        date fixed for such determination and (2) the date on which ex-dividend
        trading in the Common Stock with respect to such dividend or
        distribution begins and the denominator of which shall be the sum of
        such number of shares and the total number of shares constituting such
        dividend or other distribution;

                (ii)    The Corporation shall issue rights or warrants to all
        holders of its outstanding shares of Common Stock, or fix a record date
        for such issuance, which rights or warrants entitle such holders (for a
        period expiring within forty-five (45) days after the date fixed for the
        determination of shareholders entitled to receive such rights or
        warrants) to subscribe for or purchase shares of Common Stock at a price
        per share less than the Market Price (determined without regard to this
        proviso) for any day in such Measurement Period or such other period
        which day is prior to the end of such 45-day period, then the Market
        Price for each such day shall be reduced so that the same shall equal
        the price determined by multiplying the Market Price (determined without
        regard to this proviso) by a fraction, the numerator of which shall be
        the number of shares of Common Stock outstanding at the close of
        business on the record date fixed for the determination of shareholders
        entitled to receive such rights or warrants plus the number of shares
        which the aggregate offering price of the total number of shares so
        offered would purchase at such Market Price, and the denominator of
        which shall be the number of shares of Common Stock outstanding on the
        close of business on such record date plus the total number of
        additional shares of Common Stock so offered for subscription or
        purchase. In determining whether any rights or warrants entitle the
        holders to subscribe for or purchase shares of Common Stock at less than
        the Market Price (determined without regard to this proviso), and in
        determining the aggregate offering price of such shares of Common Stock,
        there shall be taken into account any consideration received for such
        rights or warrants, the value of such consideration, if other than cash,
        to be determined in good faith by a resolution of the Board of Directors
        of the Corporation;

                (iii)   The outstanding shares of Common Stock shall be
        subdivided into a greater number of shares of Common Stock or a record
        date for any such subdivision shall be fixed, then the Market Price of
        the Common Stock for each day in such Measurement Period or such other
        period which day is prior to the earlier of (1) the day upon which such
        subdivision becomes effective and (2) the date on which ex-dividend
        trading in the Common Stock with respect to such subdivision begins
        shall be proportionately reduced, and conversely, in case the
        outstanding shares of Common Stock shall be combined into a smaller
        number of shares of Common Stock, the Market Price for each day in such
        Measurement Period or such other period which day is prior to the
        earlier of (1) the date on which such combination becomes effective and
        (2) the date on which trading in the Common Stock on a basis which gives
        effect to such combination begins, shall be proportionately increased;


                                      -6-
<PAGE>   7
                (iv)    The Corporation shall, by dividend or otherwise,
        distribute to all holders of its Common Stock shares of any class of
        capital stock of the Corporation (other than any dividends or
        distributions to which clause (i) of this proviso applies) or evidences
        of its indebtedness, cash or other assets (including securities, but
        excluding any rights or warrants referred to in clause (ii) of this
        proviso and dividends and distributions paid exclusively in cash and
        excluding any capital stock, evidences of indebtedness, cash or assets
        distributed upon a merger or consolidation) (the foregoing hereinafter
        in this clause (iv) of this proviso called the "Securities"), or fix a
        record date for any such distribution, then, in each such case, the
        Market Price for each day in such Measurement Period or such other
        period which day is prior to the earlier of (1) the record date for such
        distribution and (2) the date on which ex-dividend trading in the Common
        Stock with respect to such distribution begins shall be reduced so that
        the same shall be equal to the price determined by multiplying the
        Market Price (determined without regard to this proviso) by a fraction,
        the numerator of which shall be the Market Price (determined without
        regard to this proviso) for such trade less the fair market value (as
        determined in good faith by resolution of the Board of Directors of the
        Corporation) on such date of the portion of the Securities so
        distributed or to be distributed applicable to one share of Common Stock
        and the denominator of which shall be the Market Price (determined
        without regard to this proviso); provided, however, that in the event
        the then fair market value (as so determined) of the portion of the
        Securities so distributed applicable to one share of Common Stock is
        equal to or greater than the Market Price (determined without regard to
        this clause (iv) of this proviso) for any such Trading Day, in lieu of
        the foregoing adjustment, adequate provision shall be made so that the
        holders of shares of Series B Preferred Stock shall have the right to
        receive in payment of dividends on the shares of Series B Preferred
        Stock or upon conversion of the shares of Series B Preferred Stock, as
        the case may be, the amount of Securities the holders of shares of
        Series B Preferred Stock would have received had the number of shares of
        Common Stock to be issued in payment of such dividends on the shares of
        Series B Preferred Stock been issued, or had the holders of shares of
        Series B Preferred Stock converted the shares of Series B Preferred
        Stock, in either such case immediately prior to the record date for such
        distribution. If the Board of Directors of the Corporation determines
        the fair market value of any distribution for purposes of this clause
        (iv) by reference to the actual or when issued trading market for any
        securities comprising all or part of such distribution, it must in doing
        so consider the prices in such market on the same day for which an
        adjustment in the Market Price is being determined.

                For purposes of this clause (iv) and clauses (i) and (ii) of
        this proviso, any dividend or distribution to which this clause (iv) is
        applicable that also includes shares of Common Stock, or rights or
        warrants to subscribe for or purchase shares of Common Stock to which
        clause (i) or (ii) of this proviso applies (or both), shall be deemed
        instead to be (1) a dividend or distribution of the evidences of
        indebtedness, assets, shares of capital stock, rights or warrants other
        than such shares of Common Stock or rights or warrants to which clause
        (i) or (ii) of this proviso applies (and any Market Price reduction
        required by this clause (iv) with respect to such dividend or
        distribution shall then be made) immediately followed by (2) a dividend
        or distribution of such shares of Common Stock or such rights 


                                      -7-
<PAGE>   8
        or warrants (and any further Market Price reduction required by clauses
        (i) and (ii) of this proviso with respect to such dividend or
        distribution shall then be made), except that any shares of Common Stock
        included in such dividend or distribution shall not be deemed
        "outstanding at the close of business on the date fixed for such
        determination" within the meaning of clause (i) of this proviso;

                (v)     The Corporation or any subsidiary of the Corporation
        shall (x) by dividend or otherwise, distribute to all holders of its
        Common Stock cash in (or fix any record date for any such distribution),
        or (y) repurchase or reacquire shares of its Common Stock (other than an
        Option Share Surrender) for, in either case, an aggregate amount that,
        combined with (1) the aggregate amount of any other such distributions
        to all holders of its Common Stock made exclusively in cash after the
        Issuance Date and within the twelve (12) months preceding the date of
        payment of such distribution, and in respect of which no adjustment
        pursuant to this clause (v) has been made, (2) the aggregate amount of
        any cash plus the fair market value (as determined in good faith by a
        resolution of the Board of Directors of the Corporation) of
        consideration paid in respect of any repurchase or other reacquisition
        by the Corporation or any subsidiary of the Corporation of any shares of
        Common Stock (other than an Option Share Surrender) made after the
        Issuance Date and within the twelve (12) months preceding the date of
        payment of such distribution or making of such repurchase or
        reacquisition, as the case may be, and in respect of which no adjustment
        pursuant to this clause (v) has been made, and (3) the aggregate of any
        cash plus the fair market value (as determined in good faith by a
        resolution of the Board of Directors of the Corporation) of
        consideration payable in respect of any Tender Offer by the Corporation
        or any of its subsidiaries for all or any portion of the Common Stock
        concluded within the twelve (12) months preceding the date of payment of
        such distribution or completion of such repurchase or reacquisition, as
        the case may be, and in respect of which no adjustment pursuant to
        clause (vi) of this proviso has been made (such aggregate amount
        combined with the amounts in clauses (1), (2) and (3) above being the
        "Combined Amount"), exceeds 10% of the product of the Market Price
        (determined without regard to this proviso) for any day in such
        Measurement Period or such other period which day is prior to the
        earlier of (A) the record date with respect to such distribution and (B)
        the date on which ex-dividend trading in the Common Stock with respect
        to such distribution begins or the date of such repurchase or
        reacquisition, as the case may be, times the number of shares of Common
        Stock outstanding on such date, then, and in each such case, the Market
        Price for each such day shall be reduced so that the same shall equal
        the price determined by multiplying the Market Price (determined without
        regard to this proviso) for such day by a fraction (i) the numerator of
        which shall be equal to the Market Price (determined without regard to
        this proviso) for such day less an amount equal to the quotient of (x)
        the excess of such Combined Amount over such 10% and (y) the number of
        shares of Common Stock outstanding on such day and (ii) the denominator
        of which shall be equal to the Market Price (determined without regard
        to this proviso) for such day; provided, however, that in the event the
        portion of the cash so distributed or paid for the repurchase or
        reacquisition of shares (determined per share based on the number of
        shares of Common Stock outstanding) applicable to one share of Common
        Stock is equal to or greater than the Market Price (determined without
        regard to 


                                      -8-
<PAGE>   9
        this clause (v) of this proviso) of the Common Stock for any such day,
        then in lieu of the foregoing adjustment with respect to such day,
        adequate provision shall be made so that the holders of shares of Series
        B Preferred Stock shall have the right to receive in payment of
        dividends on shares of Series B Preferred Stock or upon conversion of
        shares of Series B Preferred Stock, as the case may be, the amount of
        cash the holders of shares of Series B Preferred Stock would have
        received had the number of shares of Common Stock to be issued in
        payment of such dividends on shares of Series B Preferred Stock been
        issued, or had the holders of shares of Series B Preferred Stock
        converted shares of Series B Preferred Stock, in either such case,
        immediately prior to the record date for such distribution or the
        payment date of such repurchase, as applicable; or

                (vi)    A Tender Offer made by the Corporation or any of its
        subsidiaries for all or any portion of the Common Stock shall expire and
        such Tender Offer (as amended upon the expiration thereof) shall require
        the payment to shareholders (based on the acceptance (up to any maximum
        specified in the terms of the Tender Offer) of Purchased Shares (as
        defined below)) of an aggregate consideration having a fair market value
        (as determined in good faith by resolution of the Board of Directors of
        the Corporation) that combined together with (1) the aggregate of the
        cash plus the fair market value (as determined in good faith by a
        resolution of the Board of Directors of the Corporation), as of the
        expiration of such Tender Offer, of consideration payable in respect of
        any other Tender Offers, by the Corporation or any of its subsidiaries
        for all or any portion of the Common Stock expiring within the 12 months
        preceding the expiration of such Tender Offer and in respect of which no
        adjustment pursuant to this clause (vi) has been made, (2) the aggregate
        amount of any cash plus the fair market value (as determined in good
        faith by a resolution of the Board of Directors of the Corporation) of
        consideration paid in respect of any repurchase or other reacquisition
        by the Corporation or any subsidiary of the Corporation of any shares of
        Common Stock (other than an Option Share Surrender) made after the
        Issuance Date and within the 12 months preceding the expiration of such
        Tender Offer and in respect of which no adjustment pursuant to clause
        (v) of this proviso has been made, and (3) the aggregate amount of any
        distributions to all holders of Common Stock made exclusively in cash
        within 12 months preceding the expiration of such Tender Offer and in
        respect of which no adjustment pursuant to clause (v) of this proviso
        has been made, exceeds 10% of the product of the Market Price
        (determined without regard to this proviso) for any day in such period
        times the number of shares of Common Stock outstanding on such day,
        then, and in each such case, the Market Price for such day shall be
        reduced so that the same shall equal the price determined by multiplying
        the Market Price (determined without regard to this proviso) for such
        day by a fraction, the numerator of which shall be the number of shares
        of Common Stock outstanding on such day multiplied by the Market Price
        (determined without regard to this proviso) for such day and the
        denominator of which shall be the sum of (x) the fair market value
        (determined as aforesaid) of the aggregate consideration payable to
        shareholders based on the acceptance (up to any maximum specified in the
        terms of the Tender Offer) of all shares validly tendered and not
        withdrawn as of the last time tenders could have been made pursuant to
        such Tender Offer (the "Expiration Time") (the shares deemed so
        accepted, up to any such maximum, being referred to as the "Purchased
        Shares") and (y) 


                                      -9-
<PAGE>   10
        the product of the number of shares of Common Stock outstanding (less
        any Purchased Shares) on such day times the Market Price (determined
        without regard to this proviso) of the Common Stock on the Trading Day
        next succeeding the Expiration Time. If the application of this clause
        (vi) to any Tender Offer would result in an increase in the Market Price
        (determined without regard to this proviso) for any trade, no adjustment
        shall be made for such Tender Offer under this clause (vi) for such day.

                "Maximum Share Amount" means 2,025,000 shares, or such greater
number as permitted by the rules of the Nasdaq SmallCap (such amount to be
subject to equitable adjustment from time to time on terms reasonably acceptable
to the Majority Holders for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring or
with respect to which "ex-" trading commences after the date of filing this
Certificate of Designation with the Secretary of State of the State of
Minnesota), of Common Stock.

                "Measurement Period" means, with respect to any date during a
period specified below, the number of consecutive Trading Days specified below
ending on the Trading Day prior to such date:

<TABLE>
<CAPTION>
                                                                                          Number of
           Date                                                                          Trading Days
           ----                                                                          ------------
<S>                                                                                      <C>

           Issuance Date through 90th day after Issuance Date                                N/A

           91st through 180th day after Issuance Date                                         10

           181st through 270th day after Issuance Date                                        15

           271st day after Issuance Date and thereafter                                       20
</TABLE>

                "Nasdaq" means the Nasdaq National Market.

                "Nasdaq SmallCap" means the Nasdaq SmallCap Market.

                "NYSE" means the New York Stock Exchange, Inc.

                "Option Share Surrender" means the surrender of shares of Common
Stock to the Corporation in payment of the exercise price or tax obligations
incurred in connection with the exercise of a stock option granted by the
Corporation to any of its employees, directors or consultants.

                "Optional Redemption Event" means any one of the following
events:

                (1)     For any period of five consecutive Trading Days
        commencing on or after the Issuance Date there shall be no closing bid
        price of the Common Stock on any national securities exchange, the
        Nasdaq or the Nasdaq SmallCap;


                                      -10-
<PAGE>   11
                (2)     The Common Stock ceases to be listed for trading on any
        of the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap;

                (3)     The inability for 30 or more days (whether or not
        consecutive) of any holder of shares of Series B Convertible Preferred
        Stock to sell such shares of Common Stock issued or issuable on
        conversion of shares of Series B Convertible Preferred Stock pursuant to
        the Registration Statement for any reason other than a Blackout Period
        on each of such 30 days;

                (4)     The Corporation shall fail or default in the timely
        performance of any obligation (A) to issue shares of Common Stock upon
        conversion of shares of Series B Convertible Preferred Stock as and when
        required by Section 10 or (B) any other material obligation, in each
        case to a holder of shares of Series B Convertible Preferred Stock under
        the terms of this Certificate of Designation or under the Registration
        Rights Agreement with such holder or any other agreements or documents
        entered into in connection with the issuance of shares of Series B
        Convertible Preferred Stock, as such instruments may be amended from
        time to time, provided, that an event described in clause (B) above
        shall be an Optional Redemption Event only if such failure or default
        shall have continued for a period of 15 days after notice thereof is
        given to the Corporation by any holder of shares of Series B Convertible
        Preferred Stock;

                (5)     Any consolidation or merger of the Corporation with or
        into another entity (other than a merger or consolidation of a
        subsidiary of the Corporation into the Corporation or a wholly-owned
        subsidiary of the Corporation) where the shareholders of the Corporation
        immediately prior to such transaction do not collectively own at least
        51% of the outstanding voting securities of the surviving corporation of
        such consolidation or merger immediately following such transaction or
        the common stock of such surviving corporation is not listed for trading
        on the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap or any sale or
        other transfer of all or substantially all of the assets of the
        Corporation; or

                (6)     The taking of any action to amend any of the
        Corporation's charter documents, including any amendment to the
        Corporation's Articles of Incorporation, without the consent of the
        Majority Holders which materially and adversely affects the rights of
        any holder of shares of Series B Convertible Preferred Stock.

                "Optional Redemption Notice" means a notice from a holder of
shares of Series B Convertible Preferred Stock to the Corporation which states
(1) that the holder delivering such notice is thereby requiring the Corporation
to redeem shares of Series B Convertible Preferred Stock pursuant to Section 11,
(2) in general terms the Optional Redemption Event giving rise to such
redemption, and (3) the number of shares of Series B Convertible Preferred Stock
held by such holder which are to be redeemed.


                                      -11-
<PAGE>   12
                "Optional Redemption Price" means the greater of (i) the Premium
Price on the applicable redemption date, and (ii) Converted Market Price on the
applicable redemption date.

                "Parity Dividend Stock" means any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series B Convertible Preferred Stock.

                "Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series B Convertible Preferred Stock.

                "Par Redemption Date" means the date of redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 9(b), determined in
accordance therewith.

                "Par Redemption Event" means that, during any period of 20
consecutive Trading Days commencing after the date which is 271 days after the
Issuance Date effective by the SEC, the Market Price of the Common Stock shall
be at least equal to 150% of the Ceiling Price on each Trading Day in such
period.

                "Par Redemption Notice" means a notice given by the Corporation
to each holder of Series B Convertible Preferred Stock pursuant to Section 9(b),
which notice shall state (1) that the Corporation is exercising its right to
redeem all outstanding shares of Series B Convertible Preferred Stock pursuant
to Section 9(b), (2) if such right is being exercised by reason of a Par
Redemption Event, that a Par Redemption Event has occurred the date on which
such Par Redemption Event occurred and a brief statement of the facts showing
such occurrence, (3) the number of shares of Series B Convertible Preferred
Stock held by such holder which are to be redeemed, (4) the Par Redemption Price
per share of Series B Convertible Preferred Stock held by such holder which are
to be redeemed, determined in accordance herewith, and (5) the Par Redemption
Date.

                "Par Redemption Price" on any date means an amount equal to the
sum of (a) $1,000 plus (b) an amount equal to the accrued but unpaid dividends
on the share of Series B Convertible Preferred Stock to be redeemed to the Par
Redemption Date, plus (c) an amount equal to the accrued and unpaid interest on
dividends in arrears on such share of Series B Convertible Preferred Stock to
the Par Redemption Date (determined as provided in Section 5).

                "Person" means an individual, partnership, corporation, limited
liability company, trust, incorporated organization, unincorporated association
or joint stock company.

                "Premium Percentage" means 115%.

                "Premium Price" means, for any share of Series B Convertible
Preferred Stock as of any date of determination, the product obtained by
multiplying (a) the sum of (1) the Conversion Amount plus (2) an amount equal to
the accrued but unpaid dividends on such share of Series B Convertible Preferred
Stock to the date of determination, plus (3) an amount equal to the accrued and
unpaid interest on dividends in arrears (as provided in Section 5) to the date
of determination times (b) the Premium Percentage.


                                      -12-
<PAGE>   13
                "Redemption Date" means the date of a redemption of shares of
Series B Convertible Preferred Stock pursuant to Section 9(a), as the case may
be, determined in accordance therewith.

                "Redemption Price" means:

                (1)     in the case of any Redemption Date which is on or prior
        to the date which is 180 days after the Issuance Date, the Premium Price
        on the Redemption Date; and

                (2)     in the case of any Redemption Date which is after the
        date which is 180 days after the Issuance Date, the greater of (A) the
        Premium Price on the Redemption Date and (B) the Converted Market Price
        on the Redemption Date.

                "Registration Event" shall mean (1) the Registration Statement
is not effective within 120 days after the Issuance Date, (2) the Company fails
to file the Registration Statement with the SEC within 45 days after the
Issuance Date, (3) the Company fails to submit a request for acceleration of the
effective date of the Registration Statement in accordance with Section 3(a) of
the Registration Rights Agreement, (4) the Registration Statement shall cease to
be available for use by any holder of shares of Series B Convertible Preferred
Stock who is named therein as a selling shareholder for any reason (including,
without limitation, by reason of an SEC stop order, a material misstatement or
omission in the Registration Statement or the information contained in the
Registration Statement having become outdated) other than as a result of a
Blackout Period; provided, however, that no Registration Event pursuant to this
clause (4) shall be deemed to occur prior to the SEC Effective Date, (5) the
Common Stock ceases to be listed for trading on any of the NYSE, the AMEX, the
Nasdaq or the Nasdaq SmallCap, or (6) a holder of shares of Series B Preferred
Stock having become unable to convert any shares of Series B Preferred Stock in
accordance with Section 10(a) for any reason (other than by reason of the 4.9%
limitation on beneficial ownership set forth therein or a redemption or
repurchase thereof).

                "Registration Rights Agreements" means the several Registration
Rights Agreements entered into between the Corporation and the original holders
of the shares of Series B Convertible Preferred Stock, as amended or modified
from time to time in accordance with their respective terms.

                "Registration Statement" means the Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 2(a) of
the Registration Rights Agreements.

                "SEC" means the United States Securities and Exchange
Commission.

                "SEC Effective Date" means the date the Registration Statement
is first declared effective by the SEC.

                "Securities" shall have the meaning, for purposes of the
definition of the term "Market Price," set forth in clause (iv) of the proviso
to the definition of the term "Market Price."


                                      -13-
<PAGE>   14
                "Senior Dividend Stock" means any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series B
Convertible Preferred Stock.

                "Senior Liquidation Stock" means any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series B
Convertible Preferred Stock.

                "Series B Convertible Preferred Stock" means the Series B
Convertible Preferred Stock, $.01 par value, of the Corporation.

                "Share Limitation Redemption Date" shall mean each date on which
the Corporation is required to redeem shares of Series B Convertible Preferred
Stock as provided in Section 7(a).

                "Share Limitation Redemption Price" means the greater of (i) the
Premium Price on the applicable Share Limitation Redemption Date and (ii) the
Converted Market Price on the applicable Share Limitation Redemption Date.

                "Shareholder Approval" shall mean the approval by a majority of
the votes cast by the holders of shares of Common Stock (in Person or by proxy)
at a meeting of the shareholders of the Corporation (duly convened at which a
quorum was present), or a written consent of holders of shares of Common Stock
entitled to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of such
Common Stock on conversion of the Series B Convertible Preferred Stock, as and
to the extent required under Rule 4310(c)(25)(H) of the Nasdaq SmallCap as in
effect from time to time or any successor provision.

                "Subscription Agreements" means the several Subscription
Agreements by and between the Corporation and the original holders of shares of
Series B Convertible Preferred Stock pursuant to which the shares of Series B
Convertible Preferred Stock were issued.

                "Tender Offer" means a tender offer or exchange offer.

                "Trading Day" means a day on whichever of (x) the national
securities exchange, (y) the Nasdaq or (z) the Nasdaq SmallCap which at the time
constitutes the principal securities market for the Common Stock is open for
general trading.

                "Transfer Agent Instruction" means the Transfer Agent
Instruction, dated April 9, 1998, from the Corporation to the Conversion Agent
for the benefit of the holders of shares of Series B Convertible Preferred
Stock.

                SECTION 2. DESIGNATION AND AMOUNT. The shares of the series of
Preferred Stock created hereby shall be designated as "Series B Convertible
Preferred Stock", and the number of shares constituting the Series B Convertible
Preferred Stock shall be 5,800, and shall 


                                      -14-
<PAGE>   15
not be subject to increase. Of the authorized shares of Series B Convertible
Preferred Stock, 800 shares may be issued only as dividends on the outstanding
shares of Series B Convertible Preferred Stock.

                SECTION 3. SERIES B PREFERRED STOCK CAPITAL. The amount to be
represented in the Series B Convertible Preferred Stock capital of the
Corporation at all times for each outstanding share of Series B Convertible
Preferred Stock shall be the greater of (i) the Premium Price and (ii) the
Converted Market Price. The Corporation shall take such action as may be
required to maintain the amount required by this Section 3 to be represented in
stated capital for the Series B Convertible Preferred Stock not less frequently
than monthly.

                SECTION 4. RANK. Except as approved by the affirmative vote or
written consent of the Majority Holders pursuant to Section 12(b), all Series B
Convertible Preferred Stock shall rank (i) senior to the Common Stock, now or
hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, (ii) senior to any additional series of the class of Preferred
Stock which series the Board of Directors may from time to time authorize, both
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary
and (iii) senior to any additional class of preferred stock (or series of
preferred stock of such class) which the Board of Directors or the shareholders
may from time to time authorize in accordance herewith.

                SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of
shares of Series B Convertible Preferred Stock shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available for such purpose, dividends at the rate of $50.00 per annum per share,
and no more, which shall be fully cumulative, shall accrue without interest
(except as otherwise provided herein as to dividends in arrears) from the date
of original issuance of each share of Series B Convertible Preferred Stock and
shall be payable quarterly on January 15, April 15, July 15, and October 15 of
each year commencing July 15, 1998 (except that if any such date is a Saturday,
Sunday, or legal holiday, then such dividend shall be payable on the next
succeeding day that is not a Saturday, Sunday, or legal holiday) to holders of
record as they appear on the stock books of the Corporation on such record
dates, not more than 20 nor less than 10 days preceding the payment dates for
such dividends, as shall be fixed by the Board. Dividends on the Series B
Convertible Preferred Stock shall be paid in cash or, subject to the limitations
in Section 5(b) hereof, Dividend Shares or any combination of cash and Dividend
Shares, at the option of the Corporation as hereinafter provided. The amount of
the dividends payable per share of Series B Convertible Preferred Stock for each
quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend period
and any period shorter than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months. Dividends not paid on a
payment date, whether or not such dividends have been declared, will bear
interest at the rate of 12% per annum until paid (or such lesser rate as shall
be the maximum rate allowable by applicable law). No dividends or other
distributions, other than the dividends payable solely in shares of any Junior
Dividend Stock, shall be paid or set apart for payment on any shares of Junior
Dividend Stock, and no purchase, redemption, or other acquisition shall be made
by the 


                                      -15-
<PAGE>   16
Corporation of any shares of Junior Dividend Stock (except for Option Share
Surrenders), unless and until all accrued and unpaid dividends on the Series B
Convertible Preferred Stock and interest on dividends in arrears at the rate
specified herein shall have been paid or declared and set apart for payment.

                If at any time any dividend on any Senior Dividend Stock shall
be in arrears, in whole or in part, no dividend shall be paid or declared and
set apart for payment on the Series B Convertible Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then current dividend period, shall
have been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series B Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series B Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series B Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series B
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series B Convertible Preferred Stock
and the Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series B
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.

                Any references to "distribution" contained in this Section 5
shall not be deemed to include any stock dividend or distributions made in
connection with any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary.

                (b)     If the Corporation elects in the exercise of its sole
discretion to issue Dividend Shares in payment of dividends on the Series B
Convertible Preferred Stock in respect of any dividend payment date, the
Corporation shall issue and deliver, or cause to be issued and delivered, by the
third Trading Day after such dividend payment date to each holder of shares of
Series B Convertible Preferred Stock a certificate representing the number of
whole Dividend Shares arrived at by dividing (x) the total amount of cash
dividends such holder would be entitled to receive if the aggregate dividends on
the Series B Convertible Preferred Stock held by such holder which are being
paid in Dividend Shares were being paid in cash by (y) $1,000.00; provided,
however, that if certificates representing Dividend Shares are issued and
delivered to holders of Series B Convertible Preferred Stock subsequent to the
third Trading Day after a dividend payment date, the amount so divided into such
total amount of cash dividends will be reduced by $10.00 for each Trading Day
after the third Trading Day following such dividend payment date to the date of
delivery of Dividend Shares. No fractional Dividend Shares shall be issued in
payment of dividends. In lieu thereof, the Corporation shall pay cash in an
amount equal to the product of (x) the arithmetic average of the Market Price of
the Common Stock for the five 


                                      -16-
<PAGE>   17
consecutive Trading Days ending on the Trading Day prior to such dividend
payment date times (y) the number of shares of Common Stock which the fraction
of a Dividend Share which would otherwise be issuable by the Corporation would
be convertible in accordance with Section 10(a) if so converted on the
applicable dividend payment date. The Corporation shall not exercise its right
to issue Dividend Shares in payment of dividends on Series B Convertible
Preferred Stock if:

                (i)     the number of shares of Series B Convertible Preferred
        Stock at the time authorized, unissued and unreserved for all purposes,
        or held in the Corporation's treasury, is insufficient to permit the
        conversion of such Dividend Shares into shares of Common Stock;

                (ii)    the issuance or delivery of Dividend Shares as a
        dividend payment or the issuance of shares of Common Stock upon
        conversion of such Dividend Shares would require registration with or
        approval of any governmental authority under any law or regulation, and
        such registration or approval has not been effected or obtained;

                (iii)   the shares of Common Stock issuable upon conversion of
        such Dividend Shares have not been authorized for listing, upon official
        notice of issuance, on any securities exchange or market on which the
        Common Stock is then listed; or have not been approved for quotation if
        the Common Stock is traded in the over-the-counter market;

                (iv)    the Conversion Price is less than the par value of one
        share of Common Stock;

                (v)     the shares of Common Stock issuable upon conversion of
        such Dividend Shares (A) cannot be sold or transferred without
        restriction by unaffiliated holders who receive such Dividend Shares or
        (B) are no longer listed on any of the NYSE, the AMEX, the Nasdaq or the
        Nasdaq SmallCap; or

                (vi)    an Optional Redemption Event shall have occurred and any
        holder of shares of Series B Convertible Preferred Stock (A) shall be
        entitled to exercise optional redemption rights under Section 11 of
        shares of Series B Convertible Preferred Stock by reason of such
        Optional Redemption Event or (B) shall have exercised optional
        redemption rights under Section 11 by reason of such Optional Redemption
        Event and the Corporation shall not have paid the Optional Redemption
        Price to each holder.

                Dividend Shares issued in payment of dividends on Series B
Convertible Preferred Stock pursuant to this Section and shares of Common Stock
issuable upon conversion of such Dividend Shares shall be, and for all purposes
shall be deemed to be, validly issued, fully paid and nonassessable shares of
the Corporation; the issuance and delivery thereof is hereby authorized; and the
delivery will be, and for all purposes shall be deemed to be, payment in full of
the cumulative dividends to which holders are entitled on the applicable
dividend payment date.

                (c)     Neither the Corporation nor any subsidiary of the
Corporation shall redeem, repurchase or otherwise acquire in any one transaction
or series of related transactions 


                                      -17-
<PAGE>   18
any shares of Common Stock, Junior Dividend Stock or Junior Liquidation Stock if
the number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any Option Share
Surrender) is more than either (x) 5.0% of the number of shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one Person or group of affiliated
Persons, unless the Corporation or such subsidiary offers to purchase for cash
from each holder of shares of Series B Convertible Preferred Stock at the time
of such redemption, repurchase or acquisition the same percentage of such
holder's shares of Series B Convertible Preferred Stock as the percentage of the
number of outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series B Convertible Preferred Stock
equal to the greater of (i) the Premium Price in effect on the date of purchase
pursuant to this Section 5(c) and (ii) the Converted Market Price on the date of
purchase pursuant to this Section 5(c).

                (d)     Neither the Corporation nor any subsidiary of the
Corporation shall (1) make any Tender Offer for outstanding shares of Common
Stock, unless the Corporation contemporaneously therewith makes an offer, or (2)
enter into an agreement regarding a Tender Offer for outstanding shares of
Common Stock by any Person other than the Corporation or any subsidiary of the
Corporation, unless such Person agrees with the Corporation to make an offer, in
either such case to each holder of outstanding shares of Series B Convertible
Preferred Stock to purchase for cash at the time of purchase in such Tender
Offer the same percentage of shares of Series B Convertible Preferred Stock held
by such holder as the percentage of outstanding shares of Common Stock offered
to be purchased in such Tender Offer at a price per share of Series B
Convertible Preferred Stock equal to the greater of (i) the Premium Price in
effect on the date of purchase pursuant to this Section 5(d) and (ii) the
Converted Market Price on the date of purchase pursuant to this Section 5(d).

                SECTION 6. LIQUIDATION PREFERENCE. In the event of a
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series B Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series B Convertible Preferred Stock equal to the Liquidation Preference, and no
more, before any payment shall be made or any assets distributed to the holders
of Junior Liquidation Stock; provided, however, that such rights shall accrue to
the holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series B Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series B Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in 


                                      -18-
<PAGE>   19
any distribution of assets by the Corporation. Neither a consolidation or merger
of the Corporation with another corporation nor a sale or transfer of all or
part of the Corporation's assets for cash, securities, or other property in and
of itself will be considered a liquidation, dissolution or winding up of the
Corporation.

                SECTION 7. MANDATORY REDEMPTION.

                (a)     MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT. (1)
Notwithstanding any other provision herein, unless the Shareholder Approval
shall have been obtained from the shareholders of the Corporation or waived by
the Nasdaq, so long as the Common Stock is listed on the Nasdaq or the Nasdaq
SmallCap the Corporation shall not be required to issue upon conversion of
shares of Series B Convertible Preferred Stock pursuant to Section 10 more than
the Maximum Share Amount. The Maximum Share Amount shall be allocated among the
shares of Series B Convertible Preferred Stock at the time of initial issuance
thereof pro rata based on the initial issuance of 5,000 shares of Series B
Convertible Preferred Stock. Each certificate for shares of Series B Convertible
Preferred Stock initially issued shall bear a notation as to the number of
shares constituting the portion of the Maximum Share Amount allocated to the
shares of Series B Convertible Preferred Stock represented by such certificate
for purposes of conversion thereof. The Corporation shall maintain records which
show the number of shares of Series B Convertible Preferred Stock issued by the
Corporation pursuant to Section 5 as dividends on the shares of Series B
Convertible Preferred Stock represented by each certificate, which records shall
be controlling in the absence of manifest error. Each such additional share of
Series B Convertible Preferred Stock shall be allocated a portion of the Maximum
Share Amount allocated to the shares of Series B Convertible Preferred Stock in
respect of which such additional shares of Series B Convertible Preferred Stock
are issued as a dividend and the certificate for such additional shares of
Series B Convertible Preferred Stock shall bear a notation as to the certificate
number of the share of Series B Convertible Preferred Stock in respect of which
such additional share of Series B Convertible Preferred Stock is issued as a
dividend. Upon surrender of any certificate for shares of Series B Convertible
Preferred Stock for transfer or re-registration thereof (or, at the option of
the holder, for conversion pursuant to Section 10(a) of less than all of the
shares of Series B Convertible Preferred Stock represented thereby), the
Corporation shall make a notation on the new certificate issued upon such
transfer or re-registration or evidencing such unconverted shares, as the case
may be, as to the remaining number of shares of Common Stock from the Maximum
Share Amount remaining available for conversion of the shares of Series B
Convertible Preferred Stock evidenced by such new certificate. If any
certificate for shares of Series B Convertible Preferred Stock is surrendered
for split-up into two or more certificates representing an aggregate number of
shares of Series B Convertible Preferred Stock equal to the number of shares of
Series B Convertible Preferred Stock represented by the certificate so
surrendered (as reduced by any contemporaneous conversion of shares of Series B
Convertible Preferred Stock represented by the certificate so surrendered), each
certificate issued on such split-up shall bear a notation of the portion of the
Maximum Share Amount allocated thereto determined by pro rata allocation from
among the remaining portion of the Maximum Share Amount allocated to the
certificate so surrendered. If any shares of Series B Convertible Preferred
Stock represented by a single certificate are converted in full pursuant to
Section 10, all of the portion of the Maximum Share 


                                      -19-
<PAGE>   20
Amount allocated to such shares of Series B Convertible Preferred Stock which
remains unissued after such conversion shall be re-allocated pro rata to the
outstanding shares of Series B Convertible Preferred Stock held of record by the
holder of record at the close of business on the date of such conversion of the
shares of Series B Convertible Preferred Stock so converted, and if there shall
be no other shares of Series B Convertible Preferred Stock held of record by
such holder at the close of business on such date, then such portion of the
Maximum Share Amount shall be allocated pro rata among the shares of Series B
Convertible Preferred Stock outstanding on such date.

                (2)     The Corporation shall promptly, but in no event later
than five business days after the occurrence, give notice to each holder of
shares of Series B Convertible Preferred Stock (by telephone line facsimile
transmission at such number as such holder has specified in writing to the
Corporation for such purposes or, if such holder shall not have specified any
such number, by overnight courier or first class mail, postage prepaid, at such
holder's address as the same appears on the stock books of the Corporation) and
any holder of shares of Series B Convertible Preferred Stock may at any time
after the occurrence give notice to the Corporation, in either case, if on any
ten Trading Days within any period of 20 consecutive Trading Days the
Corporation would not have been required to convert shares of Series B
Convertible Preferred Stock of such holder in accordance with Section 10(a) as a
consequence of the limitations set forth in Section 7(a)(1) had the shares of
Series B Convertible Preferred Stock held by such holder been converted in full
into Common Stock on each such day, determined without regard to the limitation,
if any, on such holder contained in the proviso to the second sentence of
Section 10(a) (any such notice, whether given by the Corporation or a holder, an
"Inconvertibility Notice"). If the Corporation shall have given or been required
to give any Inconvertibility Notice, or if a holder shall have given any
Inconvertibility Notice, then within ten Trading Days after such
Inconvertibility Notice is given or was required to be given, the holder
receiving or giving, as the case may be, such Inconvertibility Notice shall have
the right by written notice to the Corporation (which written notice may be
contained in the Inconvertibility Notice given by such holder) to direct the
Corporation to redeem the portion of such holder's outstanding shares of Series
B Convertible Preferred Stock (which, if applicable, shall be all of such
holder's outstanding shares of Series B Convertible Preferred Stock) as shall
not, on the business day prior to the date of such redemption, be convertible
into shares of Common Stock by reason of the limitations set forth in Section
7(a)(1) (determined without regard to the limitation, if any, on beneficial
ownership of Common Stock by such holder contained in the proviso to the second
sentence of Section 10(a)), within five business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder of shares of Series B Convertible Preferred Stock
directs the Corporation to redeem outstanding shares of Series B Convertible
Preferred Stock and, prior to the date the Corporation is required to redeem
such shares of Series B Convertible Preferred Stock, the Corporation would have
been able, within the limitations set forth in Section 7(a)(1), to convert all
of such holder's shares of Series B Convertible Preferred Stock (determined
without regard to the limitation, if any, on beneficial ownership of shares of
Common Stock by such holder contained in the proviso to the second sentence of
Section 10(a)) on any ten Trading Days within any period of 15 consecutive
Trading Days commencing after the period of 20 consecutive Trading Days which
gave rise to the applicable Inconvertibility Notice from the Corporation or such
holder of shares of Series B Convertible Preferred Stock, as the 


                                      -20-
<PAGE>   21
case may be, had all of such holder's shares of Series B Convertible Preferred
Stock been surrendered for conversion into Common Stock on each of such ten
Trading Days within such 15 Trading Day period, then the Corporation shall not
be required to redeem any shares of Series B Convertible Preferred Stock by
reason of such Inconvertibility Notice.

                (3)     Notwithstanding the giving of any Inconvertibility
Notice by the Corporation to the holders of Series B Convertible Preferred Stock
pursuant to Section 7(a)(2) or the giving or the absence of any notice by the
holders of the Series B Convertible Preferred Stock in response thereto or any
redemption of shares of Series B Convertible Preferred Stock pursuant to Section
7(a)(2), thereafter the provisions of Section 7(a)(2) shall continue to be
applicable on any occasion unless the Shareholder Approval shall have been
obtained from the shareholders of the Corporation or waived by the Nasdaq.

                (4)     On each Share Limitation Redemption Date (or such later
date as a holder of shares of Series B Convertible Preferred Stock shall
surrender to the Corporation the certificate(s) for the shares of Series B
Convertible Preferred Stock being redeemed pursuant to this Section 7(a)), the
Corporation shall make payment in immediately available funds of the applicable
Share Limitation Redemption Price to such holder of shares of Series B
Convertible Preferred Stock to be redeemed to or upon the order of such holder
as specified by such holder in writing to the Corporation at least one business
day prior to such Share Limitation Redemption Date. Upon redemption of less than
all of the shares of Series B Convertible Preferred Stock evidenced by a
particular certificate, promptly, but in no event later than three business days
after surrender of such certificate to the Corporation, the Corporation shall
issue a replacement certificate for the shares of Series B Convertible Preferred
Stock evidenced by such certificate which have not been redeemed. Only whole
shares of Series B Convertible Preferred Stock may be redeemed.

                (b)     NO OTHER MANDATORY REDEMPTION. The shares of Series B
Convertible Preferred Stock shall not be subject to mandatory redemption by the
Corporation except as provided in Section 7(a).

                SECTION 8. NO SINKING FUND. The shares of Series B Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement
or sinking fund.

                SECTION 9. OPTIONAL REDEMPTION.

                (a)     CORPORATION OPTIONAL REDEMPTION. If (1) the Corporation
shall be in compliance in all material respects with its obligations to the
holders of shares of Series B Convertible Preferred Stock (including, without
limitation, its obligations under the Subscription Agreement, the Registration
Rights Agreement and the provisions of this Certificate of Designation), (2) on
the date the Corporation Optional Redemption Notice is given and at all times
until the Redemption Date, the Registration Statement is effective and available
for use by each holder of shares of Series B Convertible Preferred Stock for the
resale of shares of Common Stock acquired by such holder upon conversion of all
shares of Series B Convertible Preferred Stock held by such holder and (3) no
Optional Redemption Event shall have occurred with 


                                      -21-
<PAGE>   22
respect to which, on the date a Redemption Notice is to be given or on the
Redemption Date, any holder of shares of Series B Convertible Preferred Stock
(A) shall be entitled to exercise optional redemption rights under Section 11 by
reason of such Optional Redemption Event or (B) shall have exercised optional
redemption rights under Section 11 by reason of such Optional Redemption Event
and the Corporation shall not have paid the Optional Redemption Price to such
holder, then the Corporation shall have the right, exercisable by giving a
Corporation Optional Redemption Notice not less than 20 days or more than 60
days prior to the Redemption Date to all holders of record of the shares of
Series B Convertible Preferred Stock, at any time to redeem all or from time to
time to redeem any part of the outstanding shares of Series B Convertible
Preferred Stock in accordance with this Section 9(a). If the Corporation shall
redeem less than all outstanding shares of Series B Convertible Preferred Stock,
such redemption shall be made as nearly as practical pro rata from all holders
of shares of Series B Convertible Preferred Stock. Any Corporation Optional
Redemption Notice under this Section 9(a) shall be given to the holders of
record of the shares of Series B Convertible Preferred Stock at their addresses
appearing on the records of the Corporation; provided, however, that any failure
or defect in the giving of such notice to any such holder shall not affect the
validity of notice to or the redemption of shares of Series B Convertible
Preferred Stock of any other holder. On the Redemption Date (or such later date
as a holder of shares of Series B Convertible Preferred Stock surrenders to the
Corporation the certificate(s) for shares of Series B Convertible Preferred
Stock to be redeemed pursuant to this Section 9(a)), the Corporation shall make
payment of the applicable Redemption Price to each holder of shares of Series B
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one business day prior to the Redemption Date. A holder of shares of Series B
Convertible Preferred Stock to be redeemed pursuant to this Section 9(a) shall
be entitled to convert such shares of Series B Convertible Preferred Stock in
accordance with Section 10 (1) through the day prior to the Redemption Date and
(2) if the Corporation shall fail to pay the Redemption Price of any share of
Series B Convertible Preferred Stock when due, at any time after the due date
thereof until such date as the Corporation pays the Redemption Price of such
share of Series B Convertible Preferred Stock. No share of Series B Convertible
Preferred Stock as to which the holder exercises the right of conversion
pursuant to Section 10 or the optional redemption right pursuant to Section 11
may be redeemed by the Corporation pursuant to this Section 9(a) on or after the
date of exercise of such conversion right or optional redemption right, as the
case may be, regardless of whether the Corporation Optional Redemption Notice
shall have been given prior to, or on or after, the date of exercise of such
conversion right or optional redemption right, as the case may be.

                (b)     REDEMPTION BASED ON PAR REDEMPTION EVENT. The
Corporation shall have the right to redeem all, but not less than all,
outstanding shares of Series B Convertible Preferred Stock (x) if at any time
prior to the date which is 1,080 days after the Issuance Date a Par Redemption
Event shall have occurred or (y) at any time on or after the date which is 1,080
days after the Issuance Date so long as (1) the Corporation shall be in
compliance in all material respects with its obligations to the holders of the
Series B Convertible Preferred Stock (including, without limitation, its
obligations under the Subscription Agreements, the Registration Rights
Agreements and this Certificate of Designation) and (2) no Optional Redemption
Event shall have occurred with respect to which on the date a Par Redemption
Notice is to be given or on the Par 


                                      -22-
<PAGE>   23
Redemption Date, any holder of shares of Series B Convertible Preferred Stock
(a) shall be entitled to exercise optional redemption rights under Section 11 by
reason of such Optional Redemption Event or (b) shall have exercised optional
redemption rights under Section 11 by reason of such Optional Redemption Event
and the Corporation shall not have paid the Optional Redemption Price to such
holder. In order to exercise its rights under this Section 9(b), the Corporation
shall give a Par Redemption Notice not less than 15 or more than 20 Trading Days
prior to the Par Redemption Date (and, in the case of such redemption by reason
of the occurrence of a Par Redemption Event, within 10 days after the occurrence
of such Par Redemption Event) to all holders of record of the shares of Series B
Convertible Preferred Stock. Any Par Redemption Notice shall be given to the
holders of record of the shares of Series B Convertible Preferred Stock by
telephone line facsimile transmission to such number as shown on the records of
the Corporation for such purpose; provided, however, that any failure or defect
in the giving of such notice to any such holder shall not affect the validity of
notice to or the redemption of shares of Series B Convertible Preferred Stock of
any other holder. On the Par Redemption Date (or such later date as a holder of
shares of Series B Convertible Preferred Stock surrenders to the Corporation the
certificate(s) for shares of Series B Convertible Preferred Stock to be redeemed
pursuant to this Section 9(b)), the Corporation shall make payment of the
applicable Par Redemption Price to each holder of shares of Series B Convertible
Preferred Stock to be redeemed in immediately available funds to such account as
specified by such holder in writing to the Corporation at least one business day
prior to the Par Redemption Date. A holder of shares of Series B Convertible
Preferred Stock to be redeemed pursuant to this Section 9(b) shall be entitled
to convert such shares of Series B Convertible Preferred Stock in accordance
with Section 10 through the day prior to the Par Redemption Date and (2) if the
Corporation shall fail to pay the Par Redemption Price of any share of Series B
Convertible Preferred Stock when due, at any time after the due date thereof
until such date as the Corporation pays the Par Redemption Price of such share
of Series B Convertible Preferred Stock to such holder. If a Par Redemption
Event shall have occurred and the Corporation shall not have exercised its
redemption rights under this Section 9(b) within 15 days after the occurrence of
such Par Redemption Event, then the Corporation shall not be entitled to redeem
shares of Series B Convertible Preferred Stock by reason of another occurrence
of a Par Redemption Event unless such Par Redemption Event occurs more than 30
days after the earlier occurrence of a Par Redemption Event. No share of Series
B Convertible Preferred Stock as to which a holder exercises the right of
conversion pursuant to Section 10 or the optional redemption right pursuant to
Section 11 may be redeemed by the Corporation pursuant to this Section 9(b) on
or after the date of exercise of such conversion right or optional redemption
right, as the case may be, regardless of whether the Par Redemption Notice shall
have been given prior to, or on or after, the date of exercise of such
conversion right or optional redemption right, as the case may be. In the case
of any redemption pursuant to this Section 9(b) for which the Par Redemption
Notice is given on or after the date which is 1,080 days after the Issuance
Date, the Corporation shall have the right, exercisable by a statement to such
effect in the Par Redemption Notice, to pay the Par Redemption Price by the
issuance to the holders of shares of Series B Convertible Preferred Stock to be
redeemed of shares of Common Stock, valued for this purpose at the Conversion
Price on the Par Redemption Date, in lieu of payment of cash, so long as all
shares of Common Stock to be so issued would, if issued as dividends on shares
of Series B Convertible Preferred Stock, meet the criteria in clauses (i)
through (vi) of Section 5(b).


                                      -23-
<PAGE>   24
                (c)     NO OTHER OPTIONAL REDEMPTION. The shares of Series B
Convertible Preferred Stock shall not be subject to redemption at the option of
the Corporation except as provided in Sections 9(a) and 9(b).

                SECTION 10. CONVERSION.

                (a)     CONVERSION AT OPTION OF HOLDER. The holders of the
Series B Convertible Preferred Stock may at any time on or after the earlier of
(x) the SEC Effective Date and (y) the date which is 90 days after the Issuance
Date convert at any time all or from time to time any part of their shares of
Series B Convertible Preferred Stock into fully paid and nonassessable shares of
Common Stock and such other securities and property as herein provided. Each
share of Series B Convertible Preferred Stock may be converted at the office of
the Conversion Agent or at such other additional office or offices, if any, as
the Board of Directors may designate, into such whole number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion by
rounding to the nearest whole share) determined by dividing (x) the sum of (i)
the Conversion Amount, (ii) accrued but unpaid dividends to the applicable
Conversion Date on the share of Series B Convertible Preferred Stock being
converted, and (iii) accrued but unpaid interest on the dividends on the share
of Series B Convertible Preferred Stock being converted in arrears to the
applicable Conversion Date at the rate provided in Section 5 by (y) the
Conversion Price for such Conversion Date (the "Conversion Rate"); provided,
however, that in no event shall any holder of shares of Series B Convertible
Preferred Stock be entitled to convert any shares of Series B Convertible
Preferred Stock in excess of that number of shares of Series B Convertible
Preferred Stock upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by such holder and all Aggregated Persons of
such holder (other than shares of Common Stock deemed beneficially owned through
the ownership of unconverted shares of Series B Convertible Preferred Stock) and
(2) the number of shares of Common Stock issuable upon the conversion of the
number of shares of Series B Convertible Preferred Stock with respect to which
the determination in this proviso is being made, would result in beneficial
ownership by such holder and all Aggregated Persons of such holder of more than
4.9% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of the proviso to the
immediately preceding sentence.

                (b)     OTHER PROVISIONS. (1) Notwithstanding anything in this
Section 10(b) to the contrary, no change in the Conversion Amount pursuant to
this Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Amount shall actually be changed to reflect all adjustments called
for by this Section 10(b) and not previously made. Notwithstanding anything in
this Section 10(b), no change in the Conversion Amount shall be made that would
result in the price at which a share of Series B Convertible Preferred Stock is
converted being less than the par value of the Common Stock into which shares of
Series B Convertible Preferred Stock are at the time convertible.


                                      -24-
<PAGE>   25
                (2)     The holders of shares of Series B Convertible Preferred
Stock at the close of business on the record date for any dividend payment to
holders of Series B Convertible Preferred Stock shall be entitled to receive the
dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series B
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of Series
B Convertible Preferred Stock on a record date for a dividend payment who (or
whose transferee) tenders any of such shares for conversion into shares of
Common Stock on or after such dividend payment date will receive the dividend
payable by the Corporation on such shares of Series B Convertible Preferred
Stock on such date, and the converting holder need not make any payment of the
amount of such dividend in connection with such conversion of shares of Series B
Convertible Preferred Stock. Except as provided above, no adjustment shall be
made in respect of cash dividends on Common Stock or Series B Convertible
Preferred Stock that may be accrued and unpaid at the date of surrender of
shares of Series B Convertible Preferred Stock.

                (3)     (A) The right of the holders of Series B Convertible
Preferred Stock to convert their shares shall be exercised by giving (which may
be done by telephone line facsimile transmission) a Conversion Notice to the
Conversion Agent. Such holder shall also give a copy of any Conversion Notice to
the Corporation; provided, however, that for all purposes a Conversion Notice
shall be deemed given when given to the Conversion Agent as provided herein and
in the Transfer Agent Instruction. If a holder of Series B Convertible Preferred
Stock elects to convert any shares of Series B Convertible Preferred Stock in
accordance with Section 10(a), such holder shall not be required to surrender
the certificate(s) representing such shares of Series B Convertible Preferred
Stock to the Corporation unless all of the shares of Series B Convertible
Preferred Stock represented thereby are so converted. Each holder of shares of
Series B Convertible Preferred Stock and the Corporation shall maintain records
showing the number of shares so converted and the dates of such conversions or
shall use such other method, satisfactory to such holder and the Corporation, so
as to not require physical surrender of such certificates upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Corporation shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any shares of Series B Convertible
Preferred Stock evidenced by a particular certificate therefor are converted as
aforesaid, the holder of Series B Convertible Preferred Stock may not transfer
the certificate(s) representing such shares of Series B Convertible Preferred
Stock unless such holder first physically surrenders such certificate(s) to the
Corporation, whereupon the Corporation will forthwith issue and deliver upon the
order of such holder of shares of Series B Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series B
Convertible Preferred Stock (upon payment by such holder of shares of Series B
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series B


                                      -25-
<PAGE>   26
Convertible Preferred Stock represented by such certificate(s). Each holder of
shares of Series B Convertible Preferred Stock, by acceptance of a certificate
for such shares, acknowledges and agrees that (1) by reason of the provisions of
this paragraph, following conversion of any shares of Series B Convertible
Preferred Stock represented by such certificate, the number of shares of Series
B Convertible Preferred Stock represented by such certificate may be less than
the number of shares stated on such certificate, and (2) the Corporation may
place a legend on the certificates for shares of Series B Convertible Preferred
Stock which refers to or describes the provisions of this paragraph.

                (B)     The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series B Convertible Preferred Stock
except that the Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery
upon conversion of shares of Common Stock or other securities or property in a
name other than that of the holder of the shares of the Series B Convertible
Preferred Stock being converted, and the Corporation shall not be required to
issue or deliver any such shares or other securities or property unless and
until the Person or Persons requesting the issuance thereof shall have paid to
the Corporation the amount of any such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. The number of
shares of Common Stock to be issued upon each conversion of shares of Series B
Convertible Preferred Stock shall be the number set forth in the applicable
Conversion Notice which number shall be conclusive absent manifest error. The
Corporation shall notify a holder who has given a Conversion Notice of any claim
of manifest error within two Trading Days after such holder gives such
Conversion Notice and no such claim of error shall limit or delay performance of
the Corporation's obligation to issue upon such conversion the number of shares
of Common Stock which are not in dispute. A Conversion Notice shall be deemed
for all purposes to be in proper form unless the Corporation notifies a holder
of shares of Series B Convertible Preferred Stock being converted within two
Trading Days after a Conversion Notice has been given (which notice shall
specify all defects in the Conversion Notice) and any Conversion Notice
containing any such defect shall nonetheless be effective on the date given if
the converting holder promptly corrects all such defects.

                (4)     The Corporation (and any successor corporation) shall
take all action necessary so that a number of shares of the authorized but
unissued Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the outstanding
shares of Series B Convertible Preferred Stock, the Corporation promptly shall
seek, 


                                      -26-
<PAGE>   27
and use its best efforts to obtain and complete, such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.

                (5)     In case of any consolidation or merger of the
Corporation with any other corporation (other than a wholly-owned subsidiary of
the Corporation) in which the Corporation is not the surviving corporation, or
in case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that each holder of shares of Series B Convertible
Preferred Stock then outstanding shall have the right thereafter to convert such
shares of Series B Convertible Preferred Stock into the kind of shares of stock
and other securities and property receivable upon such consolidation, merger,
sale, transfer, or share exchange by a holder of shares of Common Stock into
which such shares of Series B Convertible Preferred Stock could have been
converted immediately prior to the effective date of such consolidation, merger,
sale, transfer, or share exchange and on a basis which preserves the economic
benefits of the conversion rights of the holders of shares of Series B
Convertible Preferred Stock on a basis as nearly as practical as such rights
exist hereunder prior thereto. If, in connection with any such consolidation,
merger, sale, transfer, or share exchange, each holder of shares of Common Stock
is entitled to elect to receive securities, cash, or other assets upon
completion of such transaction, the Corporation shall provide or cause to be
provided to each holder of Series B Convertible Preferred Stock the right to
elect the securities, cash, or other assets into which the Series B Convertible
Preferred Stock held by such holder shall be convertible after completion of any
such transaction on the same terms and subject to the same conditions applicable
to holders of the Common Stock (including, without limitation, notice of the
right to elect, limitations on the period in which such election shall be made,
and the effect of failing to exercise the election). The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.

                (6)     If a holder shall have given a Conversion Notice for
shares of Series B Convertible Preferred Stock, the Corporation shall issue and
deliver to such Person certificates for the Common Stock issuable upon such
conversion within three Trading Days after such Conversion Notice is given and
the Person converting shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a holder
shall have given a Conversion Notice as provided herein, the Corporation's
obligation to issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of any action or inaction by the
converting holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Person or any action
to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to such holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
holder or any other Person of any obligation to the Corporation or any violation
or alleged violation of law by such holder or any other Person, and irrespective
of any other 


                                      -27-
<PAGE>   28
circumstance which might otherwise limit such obligation of the Corporation to
the holder in connection with such conversion. If the Corporation fails to issue
and deliver the certificates for the Common Stock to the holder converting
shares of Series B Convertible Preferred Stock pursuant to the first sentence of
this paragraph as and when required to do so, in addition to any other
liabilities the Corporation may have hereunder and under applicable law (1) the
Corporation shall pay or reimburse such holder on demand for all reasonable
out-of-pocket expenses including, without limitation, fees and expenses of legal
counsel incurred by such holder as a result of such failure, (2) the Conversion
Percentage used to determine the Conversion Price applicable to such conversion
shall be reduced by one percentage point from the Conversion Percentage
otherwise used to calculate the Conversion Price applicable to such conversion
for each Trading Day the Corporation fails to so issue and deliver such
certificates and (3) such holder may by written notice (which may be given by
mail, courier, personal service or telephone line facsimile transmission) or
oral notice (promptly confirmed in writing) given at any time prior to delivery
to such holder of the certificates for the shares of Common Stock issuable upon
such conversion of shares of Series B Convertible Preferred Stock, rescind such
conversion, whereupon such holder shall have the right to convert such shares of
Series B Convertible Preferred Stock thereafter in accordance herewith.

                (7)     No fractional shares of Common Stock shall be issued
upon conversion of Series B Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock to purchase fractional shares of Common
Stock which would otherwise be issuable in respect of the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
number of shares of Common Stock to be issued on conversion shall be rounded to
the nearest whole share of Common Stock.

                (8)     The Conversion Amount shall be adjusted from time to
time under certain circumstances, subject to the provisions of Section 10(b)(1),
as follows:

                (i)     In case the Corporation shall issue rights or warrants
on a pro rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at a
price per share less than the Current Price for such record date, then in each
such case the Conversion Amount in effect on such record date shall be adjusted
in accordance with the formula

        C1 = C x  O + N
                  -----
                  O + N x P
                      -----
                        M

where

        C1  = the adjusted Conversion Amount

        C   = the current Conversion Amount

        O   = the number of shares of Common Stock outstanding on the record
              date.


                                      -28-
<PAGE>   29
        N   = the number of additional shares of Common Stock issuable
              pursuant to the exercise of such rights or warrants.

        P   = the offering price per share of the additional shares (which
              amount shall include amounts received by the Corporation in
              respect of the issuance and the exercise of such rights or
              warrants).

        M   = the Current Price per share of Common Stock on the record
              date.

Such adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.

                (ii)    In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined) evidences
of its indebtedness or assets (including securities, but excluding any warrants
or subscription rights referred to in subparagraph (i) above and any dividend or
distribution paid in cash out of the retained earnings of the Corporation), then
in each such case the Conversion Amount then in effect shall be adjusted in
accordance with the formula


      C1 = C x   M
               -----
               M - F

where

      C(1)  = the adjusted Conversion Amount

      C     = the current Conversion Amount

      M     = the Current Price per share of Common Stock on the record date
              mentioned below.

      F     = the aggregate amount of such cash dividend and/or the fair
              market value on the record date of the assets or securities to
              be distributed divided by the number of shares of Common Stock
              outstanding on the record date. The Board of Directors shall
              determine such fair market value, which determination shall be
              conclusive.

Such adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series B Convertible Preferred Stock.


                                      -29-
<PAGE>   30
                (iii)   All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.

                (iv)    If at any time as a result of an adjustment made
pursuant to Section 10(b)(5), the holder of any Series B Convertible Preferred
Stock thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.

                (9)     Except as otherwise provided above in this Section 10,
no adjustment in the Conversion Amount shall be made in respect of any
conversion for share distributions or dividends theretofore declared and paid or
payable on the Common Stock.

                (10)    Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each holder and each transfer agent, if
any, for the Series B Convertible Preferred Stock and the transfer agent for the
Common Stock, a statement signed by the Chairman of the Board, the President, or
any Vice President of the Corporation and by its Treasurer or its Secretary or
an Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all shareholders and upon the Corporation. Whenever
the Conversion Amount is adjusted, the Corporation will give notice by mail to
the holders of record of Series B Convertible Preferred Stock, which notice
shall be made within 15 days after the effective date of such adjustment and
shall state the adjustment and the Conversion Amount. Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.

                (11)    Whenever the Corporation shall propose to take any of
the actions specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of
Section 10(b)(8) which would result in any adjustment in the Conversion Amount
under this Section 10(b), the Corporation shall cause a notice to be mailed at
least 20 days prior to the date on which the books of the Corporation will close
or on which a record will be taken for such action, to the holders of record of
the outstanding Series B Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.

                SECTION 11. REDEMPTION AT OPTION OF HOLDERS.

                (a) REDEMPTION RIGHT. If an Optional Redemption Event occurs,
then, in addition to any other right or remedy of any holder of shares of Series
B Convertible Preferred Stock, each holder of shares of Series B Convertible
Preferred Stock shall have the right, at such holder's option, to require the
Corporation to redeem all of such holder's shares of Series B Convertible
Preferred Stock, or any portion thereof, on the date that is three business days
after 


                                      -30-
<PAGE>   31
the date such holder gives the Corporation an Optional Redemption Notice with
respect to such Optional Redemption Event at any time while any of such holder's
shares of Series B Convertible Preferred Stock are outstanding, at a price equal
to the Optional Redemption Price.

                (b)     NOTICES; METHOD OF EXERCISING OPTIONAL REDEMPTION
RIGHTS, ETC. (1) On or before the fifth business day after the occurrence of an
Optional Redemption Event, the Corporation shall give to each holder of
outstanding shares of Series B Convertible Preferred Stock a notice of the
occurrence of such Optional Redemption Event and of the redemption right set
forth herein arising as a result thereof. Such notice from the Corporation shall
set forth:

                (i)     the date by which the optional redemption right must be
        exercised, and

                (ii)    a description of the procedure (set forth below) which
        each such holder must follow to exercise such holder's optional
        redemption right.

No failure of the Corporation to give such notice or defect therein shall limit
the right of any holder of shares of Series B Convertible Preferred Stock to
exercise the optional redemption right or affect the validity of the proceedings
for the redemption of such holder's shares of Series B Convertible Preferred
Stock.

                (2)     To exercise its optional redemption right, each holder
of outstanding shares of Series B Convertible Preferred Stock shall deliver to
the Corporation on or before the thirtieth day after the notice required by
Section 11(b)(1) is given to such holder (or if no such notice has been given by
the Corporation to such holder, within forty days after such holder first learns
of such Optional Redemption Event) an Optional Redemption Notice to the
Corporation. An Optional Redemption Notice may be revoked by such holder giving
such Optional Redemption Notice by giving notice of such revocation to the
Corporation at any time prior to the time the Corporation pays the Optional
Redemption Price to such holder.

                (3)     If a holder of shares of Series B Convertible Preferred
Stock shall have given an Optional Redemption Notice, on the date which is three
business days after the date such Optional Redemption Notice is given (or such
later date as such holder surrenders such holder's certificates for the shares
of Series B Convertible Preferred Stock redeemed) the Corporation shall make
payment in immediately available funds of the applicable Optional Redemption
Price to such account as specified by such holder in writing to the Corporation
at least one business day prior to the applicable redemption date.

                (c)     OTHER. (1) In connection with a redemption pursuant to
this Section 11 of less than all of the shares of Series B Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three Trading Days after surrender of such certificate to the Corporation,
the Corporation shall issue and deliver to such holder a replacement certificate
for the shares of Series B Convertible Preferred Stock evidenced by such
certificate which have not been redeemed.


                                      -31-
<PAGE>   32
                (2)     An Optional Redemption Notice given by a holder of
shares of Series B Convertible Preferred Stock shall be deemed for all purposes
to be in proper form unless the Corporation notifies such holder in writing
within three business days after such Optional Redemption Notice has been given
(which notice shall specify all defects in such Optional Redemption Notice), and
any Optional Redemption Notice containing any such defect shall nonetheless be
effective on the date given if such holder promptly undertakes to correct all
such defects. No such claim of error shall limit or delay performance of the
Corporation's obligation to redeem all shares of Series B Convertible Preferred
Stock not in dispute whether or not such holder makes such undertaking.

                SECTION 12. VOTING RIGHTS; CERTAIN RESTRICTIONS.

                (a)     VOTING RIGHTS. Except as otherwise required by law or
expressly provided herein, shares of Series B Convertible Preferred Stock shall
not be entitled to vote on any matter.

                (b)     ARTICLES OF INCORPORATION; CERTAIN STOCK. The
affirmative vote or consent of the Majority Holders, voting separately as a
class, will be required for (1) any amendment, alteration, or repeal, whether by
merger or consolidation or otherwise, of the Corporation's Articles of
Incorporation if the amendment, alteration, or repeal materially and adversely
affects the powers, preferences, or special rights of the Series B Convertible
Preferred Stock, or (2) the creation and issuance of any Senior Dividend Stock
or Senior Liquidation Stock; provided, however, that any increase in the
authorized Preferred Stock of the Corporation or the creation and issuance of
any stock which is both Junior Dividend Stock and Junior Liquidation Stock shall
not be deemed to affect materially and adversely such powers, preferences, or
special rights and any such increase or creation and issuance may be made
without any such vote by the holders of Series B Convertible Preferred Stock
except as otherwise required by law.

                (c)     REPURCHASES OF SERIES B CONVERTIBLE PREFERRED STOCK. The
Corporation shall not repurchase or otherwise acquire any shares of Series B
Convertible Preferred Stock (other than pursuant to Sections 7(a), 9(a), 9(b) or
11) unless the Corporation offers to repurchase or otherwise acquire
simultaneously a pro rata portion of each holder's shares of Series B
Convertible Preferred Stock for cash at the same price per share.

                (d)     OTHER. So long as any shares of Series B Convertible
Preferred Stock are outstanding:

                (1)     PAYMENT OF OBLIGATIONS. The Corporation will pay and
discharge, and will cause each subsidiary of the Corporation to pay and
discharge, when due all their respective obligations and liabilities which are
material to the Corporation and its subsidiaries taken as a whole, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings.

                (2)     MAINTENANCE OF PROPERTY; INSURANCE. (A) The Corporation
will keep, and will cause each subsidiary of the Corporation to keep, all
material property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.


                                      -32-
<PAGE>   33
                (B)     The Corporation will maintain, and will cause each
subsidiary of the Corporation to maintain, with financially sound and
responsible insurance companies, insurance against loss or damage by fire or
other casualty and such other insurance, including but not limited to, product
liability insurance, in such amounts and covering such risks as is reasonably
adequate for the conduct of their businesses and the value of their properties.

                (3)     CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Corporation will continue, and will cause each subsidiary of the Corporation to
continue, to engage in business of substantially the same general type as
conducted by the Corporation and its operating subsidiaries at the time this
Certificate of Designation is filed with the Secretary of State of the State of
Minnesota, and will preserve, renew and keep in full force and effect, and will
cause each subsidiary of the Corporation to preserve, renew and keep in full
force and effect, their respective corporate existence and their respective
material rights, privileges and franchises necessary or desirable in the normal
conduct of business.

                (4)     COMPLIANCE WITH LAWS. The Corporation will comply, and
will cause each subsidiary of the Corporation to comply, in all material
respects with all applicable laws, ordinances, rules, regulations, decisions,
orders and requirements of governmental authorities and courts (including,
without limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Corporation and its subsidiaries taken as a
whole.

                (5)     INVESTMENT COMPANY ACT. The Corporation will not be or
become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act of 1940, as amended, or any successor provision.

                (6)     TRANSACTIONS WITH AFFILIATES. The Corporation will not,
and will not permit any subsidiary of the Corporation, directly or indirectly,
to pay any funds to or for the account of, make any investment (whether by
acquisition of stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any indebtedness, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with, any joint enterprise or other
joint arrangement with, any Affiliate of the Corporation, except, on terms to
the Corporation or such subsidiary no less favorable than terms that could be
obtained by the Corporation or such subsidiary from a Person that is not an
Affiliate of the Corporation, as determined in good faith by the Board of
Directors.

                SECTION 13. OUTSTANDING SHARES. For purposes of this Certificate
of Designation, all shares of Series B Convertible Preferred Stock shall be
deemed outstanding except (i) from the applicable Conversion Date, each share of
Series B Convertible Preferred Stock converted into Common Stock, unless the
Corporation shall default in its obligation to 


                                      -33-
<PAGE>   34
issue and deliver shares of Common Stock upon such conversion as and when
required by Section 10; (ii) from the date of registration of transfer, all
shares of Series B Convertible Preferred Stock held of record by the Corporation
or any subsidiary or Affiliate of the Corporation (other than any original
holder of shares of Series B Convertible Preferred Stock) and (iii) from the
applicable Redemption Date, Share Limitation Redemption Date, Par Redemption
Date or date of redemption pursuant to Section 11, all shares of Series B
Convertible Preferred Stock which are redeemed or repurchased, so long as in
each case the Redemption Price, the Share Limitation Redemption Price, the Par
Redemption Price, the Optional Redemption Price or other repurchase price, as
the case may be, of such shares of Series B Convertible Preferred Stock shall
have been paid by the Corporation as and when due hereunder.

                SECTION 14. MISCELLANEOUS.

                (a)     NOTICES. Any notices required or permitted to be given
under the terms of this Certificate of Designation shall be in writing and shall
be delivered personally (which shall include telephone line facsimile
transmission) or by courier and shall be deemed given upon receipt (a) in the
case of the Corporation, addressed to the Corporation at 1601 Fifth Avenue,
Suite 1900, Seattle, Washington, 98101, Attention: Chief Financial Officer
(telephone line facsimile transmission number (206) 292-6836), with a copy to C.
Kent Carlson, Esq., Preston Gates & Ellis LLP, 701 Fifth Avenue, Seattle,
Washington 98104 (telephone line facsimile number (206) 623-7022), or, in the
case of any holder of shares of Series B Convertible Preferred Stock, at such
holder's address or telephone line facsimile transmission number shown on the
stock books maintained by the Corporation with respect to the Series B
Convertible Preferred Stock or such other address as the Corporation shall have
provided by notice to the holders of shares of Series B Convertible Preferred
Stock in accordance with this Section or any holder of shares of Series B
Convertible Preferred Stock shall have provided to the Corporation in accordance
with this Section.


                (b)     REPLACEMENT OF CERTIFICATES. Upon receipt by the
Corporation of evidence reasonably satisfactory to the Corporation of the
ownership of and the loss, theft, destruction or mutilation of any certificate
for shares of Series B Convertible Preferred Stock and (1) in the case of loss,
theft or destruction, of indemnity from the record holder of the certificate for
such shares of Series B Convertible Preferred Stock reasonably satisfactory in
form to the Corporation (and without the requirement to post any bond or other
security) or (2) in the case of mutilation, upon surrender and cancellation of
the certificate for such shares of Series B Convertible Preferred Stock, the
Corporation will execute and deliver to such holder a new certificate for such
shares of Series B Convertible Preferred Stock without charge to such holder.


                (c)     OVERDUE AMOUNTS. Except as otherwise specifically
provided in Section 5 with respect to dividends in arrears on the Series B
Convertible Preferred Stock, whenever any amount which is due to any holder of
shares of Series B Convertible Preferred Stock is not paid to such holder when
due, such amount shall bear interest at the rate of 12% per annum ( or such
other rate as shall be the maximum rate allowable by applicable law) until paid
in full.


                                      -34-
<PAGE>   35
                IN WITNESS WHEREOF, IVI Publishing, Inc. has caused this
certificate to be signed by Robert Goodman, its President and CEO, as of the
10th day of April, 1998.

                                       IVI PUBLISHING, INC.



                                       By /s/ Robert Goodman


                                      -35-