<PAGE>
 
                                                                     EXHIBIT 4.1


                           CERTIFICATE OF DESIGNATION

                                     OF THE

                         POWERS, PREFERENCES AND RIGHTS,

                AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS,

                                       OF

                      SERIES A CONVERTIBLE PREFERRED STOCK

                                       OF

                              VIRTUALFUND.COM, INC.

     VirtualFund.com, Inc., a corporation (the "Corporation") organized and
existing under the Minnesota Business Corporation Act (the "Act"), does hereby
certify that pursuant to the authority conferred upon the Board of Directors of
the Corporation by the Articles of Incorporation of the Corporation, as amended,
and pursuant to the provisions of Section 302A.401 of the Act, the Board of
Directors of Corporation, at a meeting duly held on December 14, 1998, adopted a
resolution providing for the authorization of shares of Series A Convertible
Preferred Stock, which resolution is as follows:

     RESOLVED, That, pursuant to Section 3.1 of the Articles of Incorporation of
the Corporation as amended, out of the authorized capital stock of the
Corporation, the Corporation does hereby authorize and create One Million Five
Hundred Thousand (1,500,000) shares of Series A Convertible Preferred Stock, par
value $.01 per share, to be designated "Series A Convertible Preferred Stock,"
and that the powers, preferences and rights of such series, and the
qualifications, limitations and restrictions thereof, be as follows:

     1. Dividends and Distributions. If a dividend or distribution is declared
or otherwise is to be made (whether in liquidation or otherwise) on or in
respect of the Common Stock of the Corporation, the holders of shares of the
Series A Convertible Preferred Stock shall be paid dividends or distributions in
an amount equal to the amount that would have been paid on or in respect of the
Common Stock into which the shares of Series A Convertible Preferred Stock are
then convertible as if all such Common Stock had been issued upon conversion and
had been entitled to such dividends or distributions.

     2. Liquidation Rights.

          (a) In the event of any liquidation, dissolution or winding up of the
     business of the Corporation, whether voluntary or involuntary, each holder
     of any shares of Series A Convertible Preferred Stock shall be entitled to
     receive for each share thereof, out of assets of the Corporation legally
     available therefor, before the payment, distribution or setting apart for
     payment or distribution of any amount for the holders of Common Stock, a
     preferential amount in cash equal to $5.00 per share for each share of
     Series A Convertible Preferred Stock, adjusted for stock 

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     splits, stock dividends and similar recapitalizations, and no more. If the
     assets of Corporation to be distributed to holders of shares of preferred
     stock of the Corporation are insufficient to pay the full preferential
     amount so payable to such holders, all assets to be distributed to such
     holders will be distributed among them, pro rata, in proportion to their
     respective liquidation preferences.

          (b) For purposes of Section 2(a) above, the consolidation or merger of
     the Corporation with or into another entity or entities and the sale or
     transfer by the Corporation of all or substantially all of its assets
     (determined on a consolidated basis) shall be deemed to be a liquidation,
     dissolution or winding up of the Corporation, and the holders of shares of
     the Series A Convertible Preferred Stock shall be entitled to receive
     payment of the amount payable with respect to shares of the Series A
     Convertible Preferred Stock upon a liquidation, dissolution or winding up
     in cancellation of their shares upon the consummation of any such
     transaction; provided that the foregoing provision shall not apply to any
     merger or consolidation in which (i) the Corporation is the surviving
     entity and (ii) the holders of the Corporation's outstanding capital stock
     immediately prior to the merger continue to own the Corporation's
     outstanding capital stock possessing the voting power (under ordinary
     circumstances) to elect a majority of the Corporation's Board of Directors
     immediately after the merger.

     3. Voting Rights. Except as otherwise provided by law or as otherwise
provided herein, the holders of shares of Common Stock and the holders of shares
of Series A Convertible Preferred Stock shall vote together as a single class on
all matters as to which the holders of shares of Common Stock may be entitled to
vote, and the holders of shares of Series A Convertible Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which the shares of Series A Convertible Preferred Stock are convertible at
such time pursuant to Section 4 hereof. The shares of Series A Convertible
Preferred Stock shall not be entitled to vote as a separate class with respect
to any merger, consolidation or exchange offer that may be submitted to a vote
of the shareholders of the Corporation.

     4. Conversion. Shares of the Series A Convertible Preferred Stock shall be
convertible into fully paid and non-assessable shares of the Common Stock of the
Corporation as provided in this Section 4. On the date hereof, the ratio of
number of shares of Common Stock into which each share of Series A Convertible
Preferred Stock shall be convertible (the "Conversion Rate") is one (1) share of
Common Stock for each share of Series A Convertible Preferred Stock.

          (a) In order to prevent dilution of the conversion rights granted
     under this Section 4, the Conversion Rate shall be subject to adjustment
     from time to time as provided in this Section 4(a).

               (i) If the Corporation at any time subdivides (by any stock
          split, stock dividend, recapitalization or otherwise) its outstanding
          shares 

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          of Common Stock into a greater number of shares, the Conversion Rate
          in effect immediately prior to such subdivision shall be
          proportionately increased. If the Corporation at any time combines (by
          reverse stock split or otherwise) its outstanding shares of Common
          Stock into a smaller number of shares, the Conversion Rate in effect
          immediately prior to such combination shall be proportionately
          decreased.

               (ii) Any recapitalization, reorganization, reclassification,
          consolidation, merger, sale of all or substantially all of the
          Corporation's assets to another person or entity or other transaction
          which is effected in such a way that holders of Common Stock are
          entitled to receive (either directly or upon subsequent liquidation)
          stock, securities or assets with respect to or in exchange for Common
          Stock is referred to herein as "Fundamental Change." Upon the
          consummation of any Fundamental Change, the Corporation shall make
          appropriate provision to insure that all holders of shares of Series A
          Convertible Preferred Stock shall thereafter have the right to acquire
          and receive in lieu of the shares of Common Stock immediately
          theretofore acquirable and receivable upon the exercise of the
          conversion right granted hereunder, such shares of stock, securities
          or assets as may be issued or payable with respect to or in exchange
          for the number of shares of Common Stock immediately theretofore
          acquirable and receivable upon exercise of the conversion right
          granted hereunder had such Fundamental Change not taken place. The
          Corporation shall not effect any such consolidation, merger or sale,
          unless prior to the consummation thereof, the successor entity (if
          other than the Corporation) resulting from such consolidation or
          merger or the entity purchasing such assets assumes by written
          instrument, the obligation to deliver to holders of shares of Series A
          Convertible Preferred Stock such shares of stock, securities or assets
          as, in accordance with the foregoing provisions, such holders may be
          entitled to acquire.

          (b) Automatic Conversion to Common Stock.

               (i) Triggering Event: If the Common Stock has traded on the
          Nasdaq system, on any recognized securities exchange or on the over
          the counter market (the "Securities Markets") for:

                    (A) At least five dollars and 00/100 ($5.00) per share,
               adjusted for stock splits, stock dividends and similar
               recapitalizations, for thirty (30) consecutive calendar days at
               any time prior to December 17, 2000 (the "Conversion Date"); or,

                    (B) At least five dollars and 00/100 ($5.00), adjusted for
               stock splits, stock dividends and similar recapitalizations, for
               ten (10) 

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               calendar days during the sixty (60) calendar days immediately
               prior to the Conversion Date,

          the shares of Series A Convertible Preferred Stock shall automatically
          be converted into shares of Common Stock at the then applicable
          Conversion Rate (an "Automatic Conversion"). In addition to the
          foregoing, this Automatic Conversion shall only be triggered if the
          two (2) year restrictions on transfer set forth in Section 5 below
          shall have been waived in writing by the Corporation. In the event of
          an Automatic Conversion, the Corporation shall use its reasonable
          efforts to promptly file a registration statement with the Securities
          Exchange Commission ("SEC") following the Automatic Conversion, if
          required to permit the resale by the holders of the shares of Common
          Stock issuable upon such Automatic Conversion. If the shares of Common
          Stock issuable upon such Automatic Conversion are eligible for resale
          without restriction, other than the volume limitations, pursuant to
          Rule 144 under the Securities Act of 1933, as amended, or any
          successor to such rule ("Rule 144"), then the Corporation shall not be
          required to file a registration statement with the SEC pursuant to
          this Section 4(b).

               (ii) Guarantee of Value Rights: The Common Stock issued as a
          result of an Automatic Conversion will be convertible at the holder's
          written request, effective upon such date as the holder gives notice
          of exercise of the rights set forth in this Section 4(b)(ii) (the
          "Date of Notice"), into the right to receive the per share price of
          five dollars and 00/100 ($5.00), adjusted for stock splits, stock
          dividends and similar recapitalizations, pursuant to the "Guarantee of
          Value Process" described in Section 4(e) hereof until the earlier of:

                    (A) The next date Common Stock has traded on the Securities
               Markets for five dollars and 00/100 ($5.00) per share, or more,
               adjusted for stock splits, stock dividends and similar
               recapitalizations, for at least two-thirds (2/3) of the trading
               days during the prior ninety (90) calendar day period; provided
               that the stock is eligible for resale without restriction, other
               than the volume limitations, pursuant to Rule 144 during said
               ninety (90) day period; or,

                    (B) Six months after the Conversion Date, unless extended by
               the Corporation in its sole discretion.

          If, on the Date of Notice, the average closing price of the shares of
          Common Stock on the Securities Markets (the "Average Stock Price") for
          the immediately preceding ten (10) trading days is less than five
          dollars and 00/100 ($5.00) per share, adjusted for stock splits, stock
          dividends and 

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          similar recapitalizations, the holders shall be entitled to
          "Conversion Shares" as described in the Guarantee of Value Process
          described in Section 4(e) hereof.

          (c) Optional Shareholder Conversion to Common Stock. Upon written
          notice to the transfer agent and surrender of the certificate or
          certificates representing the shares of Series A Convertible Preferred
          Stock to be converted, holders of shares of Series A Convertible
          Preferred Stock may convert shares of Series A Convertible Preferred
          Stock into shares of Common Stock at the then applicable Conversion
          Rate (an "Optional Conversion"). Upon notice of an Optional Conversion
          and surrender of the certificate or certificates as set forth above,
          the Corporation shall use its reasonable efforts to promptly file a
          registration statement with the SEC following the Optional Conversion,
          if required to permit the resale by the holders of the shares of
          Common Stock issuable upon such Optional Conversion. If the shares of
          Common Stock issuable upon such Optional Conversion are eligible for
          resale without restriction, other than the volume limitations,
          pursuant to Rule 144, then the Corporation shall not be required to
          file a registration statement with the SEC pursuant to this Section
          4(c).

          (d) Mandatory Conversion. If there has not been an Automatic
          Conversion or an Optional Conversion prior to the Conversion Date, the
          shares of Series A Convertible Preferred Stock shall, in the sole
          discretion of the holder, be converted on the Conversion Date into the
          right to receive either (i) shares of Common Stock at the then
          applicable Conversion Rate or (ii) five dollars and 00/100 ($5.00) in
          value per share of Series A Convertible Preferred Stock, adjusted for
          stock splits, stock dividends and similar recapitalizations, or some
          combination of the two options not to exceed the total number of
          shares available to the Holder pursuant to the Guarantee of Value
          Process described in Section 4(e) hereof.

          (e) Guarantee of Value Process. The Guarantee of Value Process will
          liquidate the "Conversion Liability" due to the holders of the shares
          of Series A Convertible Preferred Stock under the terms of the Series
          A Convertible Preferred Stock set forth in this Certificate of
          Designation. The "Conversion Liability" is the dollar amount resulting
          from multiplying the number of shares of Series A Convertible
          Preferred Stock or shares of Common Stock issued or issuable upon
          conversion thereof by the price of $5.00 per share, adjusted for stock
          splits, stock dividends and similar recapitalizations, or an aggregate
          amount of up to $7,500,000. Each holder of shares of Series A
          Convertible Preferred Stock shall be required to give written notice
          to the Corporation of such holder's election to have the shares Series
          A Convertible Preferred Stock converted into the right to receive
          either (i) shares of Common Stock at the then applicable Conversion
          Rate or (ii) five dollars and 00/100 ($5.00) in cash per share of
          Series A Convertible Preferred Stock, adjusted for stock splits, stock
          dividends and similar recapitalizations, pursuant to the Guarantee of
          Value Process described in this Section 4(e) within thirty (30) days
          after the Conversion Date. The date of such 

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          notice is referred to herein as the "Date of Notice" for purposes of
          this Section 4(e). If any holder of shares of Series A Convertible
          Preferred Stock fails to give the Corporation written notice of such
          shareholder's election pursuant to this Section 4(e) within the
          specified period of time, such holder will be deemed to have elected
          to receive the shares of Common Stock at the then applicable
          Conversion Rate upon conversion of the shares of Series A Convertible
          Preferred Stock.

                    (i) Average Stock Price is Less than $5.00: If, on the Date
               of Notice, the Average Stock Price for the immediately preceding
               ten (10) trading days is less than five dollars and 00/100
               ($5.00), adjusted for stock splits, stock dividends and similar
               recapitalizations, the holder shall be entitled to receive, upon
               conversion of the shares of Series A Convertible Preferred Stock,
               the shares of Common Stock then issuable at the applicable
               Conversion Rate, plus "Conversion Shares." Each Conversion Share
               shall entitle the holder to receive one share of Common Stock
               adjusted for stock splits, stock dividends and similar
               recapitalizations. The Conversion Shares may be immediately
               convertible to Common Stock by the holder, and must be reasonably
               liquidated in the market within 60 days from the date issued
               unless such time is extended by the Corporation. The number of
               "Conversion Shares" granted to each holder is calculated as
               follows: Five dollars and 00/100 ($5.00), adjusted for stock
               splits, stock dividends and similar recapitalizations, less the
               Average Stock Price, multiplied by the number of shares of Series
               A Convertible Preferred Stock converted; divided by the Average
               Stock Price (rounded to the nearest whole number, no fractional
               shares issued), shown as an equation as follows:

                    (($5.00 - Average Stock Price) x number of shares converted)
                    ------------------------------------------------------------
                                          Average Stock Price

                         (A) Additional Conversion Shares: If the holder
                    liquidates the stock sought to be converted, and the stock
                    received from selling the shares acquired from the
                    Conversion Shares in market value transactions within one
                    hundred eighty (180) days, or such extensions thereof as may
                    be granted by the Corporation in its sole discretion, and
                    does not receive proceeds from the sale which equal or
                    exceed the Conversion Liability on an aggregate basis for
                    the shares liquidated, the holder may request additional
                    Conversion Shares, which will have the same features as the
                    Conversion Shares provided for above. A request for
                    additional Conversion Shares may be made only one time, and
                    must be made by written notice to the Corporation no later
                    than one hundred eighty (180) days after the Conversion
                    Date. The Conversion Shares may be immediately convertible
                    to Common Stock by the holder, and must 

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                    be reasonably liquidated in the market within 60 days from
                    the date issued unless such time is extended by the
                    Corporation. The number of additional Conversion Shares the
                    holder is entitled to receive is determined by taking the
                    remaining Conversion Liability and dividing by the Average
                    Stock Price, shown as an equation as follows:

                 (($5.00 x number of shares converted) - sales proceeds to date)
                 ---------------------------------------------------------------
                                         Average Stock Price

                         (B) Cash or Stock Payment: One (1) year after the
                    Conversion Date, a holder who has elected to receive cash
                    upon conversion of the shares of Series A Convertible
                    Preferred Stock and who has received Conversion Shares under
                    Section 4(e)(i) or 4(e)(i)(A) hereof and who has disposed of
                    all Common Stock received from the Guarantee of Value
                    Process to date, but has not received proceeds from the sale
                    which equal or exceed the Conversion Liability to that
                    holder, may request payment in cash or stock, of the
                    difference between the sales proceeds received by such
                    holder to date and the Conversion Liability to that holder.
                    The cash payment option shall not be available, if in the
                    opinion of the Corporation's tax counsel, such payment would
                    have a reasonable chance to impact the tax-free treatment of
                    the original merger transaction under Internal Revenue Code
                    section 368(a). A request for a cash or stock payment must
                    be made in writing, with evidence of sales of the Common
                    Stock in commercially reasonable transactions. A request for
                    a cash payment may be made no earlier than one (1) year
                    after the Conversion Date, and no later than one (1) year
                    and thirty (30) days after the Conversion Date. The
                    Corporation shall have the discretion to either pay the
                    difference between the Conversion Liability and the sales
                    proceeds received by such holder to date no later than
                    twenty (20) days after receipt of such written request or
                    provide the holder with Conversion Shares, the number of
                    which is determined by dividing the remaining Conversion
                    Liability after deducting all sales proceeds to date by the
                    Average Stock Price for the ten (10) trading days following
                    the receipt of the written request for a cash or stock
                    payment stated as an equation as follows:

                 (($5.00 x number of shares converted) - sales proceeds to date)
                 ---------------------------------------------------------------
                                      Average Stock Price

                    (ii) Average Stock Price is Greater than $5.00: If, on the
               Date of Notice, the Average Stock Price for the immediately
               preceding ten (10) trading days is equal to or greater than five
               dollars and 00/100 ($5.00), 

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          holders will not receive any Conversion Shares at that time. If
          holders who do not receive Conversion Shares liquidate the stock
          sought to be converted in commercially reasonable transactions within
          thirty (30) days of the Conversion Date, unless extended by
          Corporation, and the proceeds of such liquidation are less than the
          Conversion Liability to that holder, the holder may seek Conversion
          Shares in an amount to satisfy the remaining Conversion Liability. A
          request for Conversion Shares must be made in writing with evidence of
          sales of the Common Stock in commercially reasonable transactions
          within the specified time period and may be made no earlier than one
          hundred eighty (180) days after the Conversion Date. The Corporation
          shall provide the holder with Conversion Shares, the number of which
          is determined by dividing the remaining Conversion Liability after
          deducting all sales proceeds on an aggregate basis for all shares
          liquidated to date by the Average Stock Price for the ten (10) trading
          days immediately following the receipt of the written notice stated as
          an equation as follows:

            (($5.00 x number of shares to be converted) - sales proceeds to date
            --------------------------------------------------------------------
                                    Average Stock Price

          If holders liquidate the Conversion Shares within thirty (30) days of
          the date received, unless extended by the corporation in its sole
          discretion, and the aggregate proceeds of such liquidation together
          with the aggregate proceeds of the sale of stock received from the
          conversion are less than the Conversion Liability to that holder, such
          holder may seek a cash or stock payment of the difference between the
          sale proceeds of the stock and the Conversion Liability to that
          holder. A request for a cash or stock payment must be made in writing
          with evidence of the sale of the Common Stock in commercially
          reasonable transactions. A request for cash or stock payment may be
          made no earlier than one (1) year after the Conversion Date and no
          later than one (1) year and thirty (30) days after the Conversion
          Date. The Corporation shall have the discretion to either pay the
          difference between the Conversion Liability and the aggregate sale
          proceeds received by such holder from the liquidation of stock
          received to date no less than twenty (20) days after receipt of such
          written request or provide the holder with additional Conversion
          Shares, the number of which is determined by dividing the remaining
          Conversion Liability after deducting the aggregate sales proceeds from
          the liquidation of the stock by the Average Stock Price for the ten
          (10) trading days following the receipt of the written request for a
          cash or stock payment stated as an equation as follows:

                    ($5.00 x number of shares converted) - sale proceeds to date
                    ------------------------------------------------------------
                                          Average Stock Price

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          (f) Prohibition on Short Sales. During the period that any shares of
          Series A Convertible Preferred Stock remain issued and outstanding and
          convertible into shares of Common Stock or other consideration under
          the terms of this Section 4, the holders of such shares of Series A
          Convertible Preferred Stock are prohibited from engaging in any "short
          sale," as such term is defined in Rule 3b-3 under the Securities
          Exchange Act of 1934, as amended, with respect to any outstanding
          securities of the Corporation. If any holder of shares of Series A
          Convertible Preferred Stock engages in any such short sale in
          violation of this Section 4(f), the holder shall be subject to
          forfeiture of the conversion rights set forth in this Section 4 with
          respect to any shares of Series A Convertible Preferred Stock then
          held by such holder.

          (g) Restrictions on Distributions. The obligations of the Corporation
          under this Section 4 are subject to compliance by the Corporation with
          the applicable requirements of the Minnesota Business Corporation Act
          (the "MBCA"), including without limitation the requirements of
          302A.551 of the MBCA with respect to distributions in respect of
          shares of capital stock. The compliance by the Corporation with the
          requirements of the MBCA may prevent the Corporation from meeting the
          obligations of the Corporation under this Section 4 in the time
          periods set forth therein.

          (h) Reservation of Shares. The Corporation shall at all times reserve
          from its authorized Common Stock a sufficient number of shares to
          provide for conversion for all shares of Series A Convertible
          Preferred Stock from time to time outstanding. As a condition
          precedent to the taking of any action which would cause an adjustment
          increasing the number of shares into which the outstanding Series A
          Convertible Preferred Stock may be converted the Corporation shall
          take such corporate action as may be necessary in order that it may
          validly and legally issue to the holders of shares of Series A
          Convertible Preferred Stock upon conversion fully paid and
          non-assessable shares of Common Stock as may be required by this
          Section 4. If the Common Stock issuable upon conversion of shares of
          Series A Convertible Preferred Stock is listed on any national
          securities exchange, the Corporation shall cause all shares reserved
          for such conversion to be listed on such exchange, subject to official
          notice of issuance upon such conversion.

          5.   Restrictions on Transfer.

          (a) Restrictions. For a period from the date of issuance thereof
          through December 17, 2000, the shares of Series A Convertible
          Preferred Stock and the shares of Common Stock issuable upon
          conversion thereof may not be sold, assigned, transferred, pledged,
          encumbered or otherwise disposed of in any manner without the express
          prior written consent of a duly authorized officer of 

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          the Corporation. Except with such prior written consent, all voluntary
          sales, assignments, transfers, pledges, encumbrances or other
          dispositions by any holder of any such shares ("Voluntary Transfers"),
          and all involuntary transfers of any such shares by operation of law
          to any person (including without limitation to a deceased
          shareholder's estate, a shareholder's trustee in bankruptcy, a
          purchaser at any creditor's or court sale, or the guardian of an
          incompetent shareholder) other than to the Corporation ("Involuntary
          Transfers"), shall be void, and shall vest no right, title or interest
          in the purported transferee. In the event of any purported prohibited
          Voluntary Transfer or Involuntary Transfer, the shares purported to be
          transferred shall remain bound by the terms of this Certificate of
          Designation.

          (b) Legend. All of the shares of Series A Convertible Preferred Stock
          and the shares of Common Stock issuable upon conversion thereof shall
          be subject to and bound by the terms and conditions of this
          Certificate of Designation, and the terms and conditions of this
          Certificate of Designation shall attach to, run with, and bind all of
          such shares. The certificates issued by the Corporation representing
          any of such shares shall bear the following or a substantially similar
          legend:

               THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, ENCUMBRANCE OR OTHER
          DISPOSITION (VOLUNTARY OR INVOLUNTARY) OF THE SHARES REPRESENTED BY
          THIS CERTIFICATE IS RESTRICTED UNDER THE TERMS OF A CERTIFICATE OF
          DESIGNATION OF THE POWERS, PREFERENCES AND RIGHTS, AND QUALIFICATIONS,
          LIMITATIONS AND RESTRICTIONS, OF THE SERIES A CONVERTIBLE PREFERRED
          STOCK OF VIRTUALFUND.COM, INC. (THE "CERTIFICATE OF DESIGNATION"), A
          COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION. THE
          CERTIFICATE OF DESIGNATION PROVIDES, AMONG OTHER THINGS, THAT THE
          SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
          RESTRICTIONS ON TRANSFER. BY ACCEPTING THE SHARES OF STOCK REPRESENTED
          BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE CERTIFICATE
          OF DESIGNATION.

     IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of December,
1998.

                                         By: /s/ Melvin L. Masters
                                             ----------------------------------
                                         Title: CEO 
                                                -------------------------------

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