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                                                                     EXHIBIT 3.1


                           CERTIFICATE OF DESIGNATION

                                       FOR
                            SERIES A PREFERRED STOCK
                                       OF
                               USDATA CORPORATION


          The undersigned, Robert L. Drury, the Chief Financial Officer of
USDATA Corporation, does hereby certify that:

          (a) he is, and at all times mentioned herein was, the duly elected and
          acting Chief Financial Officer of USDATA Corporation, a Delaware
          corporation (the "Corporation"); and

          (b) pursuant to Section 151 of the Delaware General Corporation Law,
          the Board of Directors of the Corporation adopted the following
          preamble and resolution on August 4, 1999:

          WHEREAS, the Corporation's Certificate of Incorporation authorizes a
class of stock designated Preferred Stock (the "Preferred Stock"), comprised of
2,200,000 shares, par value $0.01 per share, provides that such Preferred Stock
may be issued from time to time in one or more series, and vests authority in
the Board of Directors of the Corporation to fix or alter the rights,
preferences, restrictions and other terms and conditions of any wholly unissued
series of Preferred Stock;

     NOW, THEREFORE, BE IT:

          RESOLVED, that, the Board of Directors of the Corporation does hereby
designate 100,000 shares of authorized but unissued Preferred Stock as "Series A
Preferred Stock," and does hereby designate the voting powers, preferences and
relative participation, optional or other special rights and qualifications,
limitations or restrictions of the Series A Preferred Stock as follows:

          1. Dividends.

               a. The holders of the Series A Preferred Stock shall be entitled
to receive cumulative dividends at the rate of $8.00 per share per annum (as
adjusted for any stock dividends, combinations, splits or similar events)
whether or not earned or declared. Any accumulated dividends shall bear interest
at the rate of 8.00% per annum compounded annually. Such dividends and interest
thereon shall be payable, at the election of the Corporation, in additional
shares of Series A Preferred Stock (valued at $100.00 per share, as adjusted for
any stock dividends, combinations, splits or similar events) or in cash, (i)
when, as and if declared by the Board of Directors of the Corporation or (ii)
upon conversion of all of the Series A Preferred Stock to Common Stock pursuant
to Section 5 below.


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               b. No dividends or distributions of any sort (other than a
dividend payable solely in the Common Stock of the Corporation) shall be
declared or paid by the Corporation on any Common Stock of the Corporation so
long as any accrued dividends on the Series A Preferred Stock remain unpaid.

               c. In the event that the Corporation shall declare a dividend or
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, or options or rights to purchase any
such securities or evidences of indebtedness or other assets (including cash),
to the holders of Common Stock of the Corporation, then the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
dividend or distribution as though the holders of the Series A Preferred Stock
were the holders of the number of shares of Common Stock of the Corporation into
which their respective shares of Series A Preferred Stock are convertible as of
the record date fixed for the determination of the holders of the Common Stock
of the Corporation entitled to receive such dividend or distribution.

               d. All numbers relating to calculation of cumulative dividends or
the payment of dividends on the Series A Preferred Stock in kind shall be
subject to equitable adjustment in the event of any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series A Preferred
Stock.

          2. Liquidation Preference.

               a. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock or any other series of Preferred Stock by reason of
their ownership thereof, an amount equal to $100.00 (as adjusted for any stock
dividends, combinations, splits or similar events) plus all accrued but unpaid
dividends and interest thereon (the "Liquidation Amount") for each share of
Series A Preferred Stock then held by them. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holders of
the full Liquidation Amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the aggregate
Liquidation Amount each such holder is otherwise entitled to receive. The
holders of Series A Preferred Stock shall have the right to convert such shares
into Common Stock, in accordance with Section 5 hereof, at any time prior to or
in connection with any liquidation, dissolution or winding up of the
Corporation.

               b. After payment to the holders of the Series A Preferred Stock
of the amounts set forth in Section 2.a. above, the entire remaining assets and
funds of the Corporation legally available for distribution, if any, to the
Corporation's stockholders shall be distributed among the holders of the Common
Stock and the Series A Preferred Stock in proportion to the shares of Common
Stock then held by them and the shares of Common Stock which they then have the
right to acquire upon conversion of the shares of Series A Preferred Stock then
held by them.


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               c. For purposes of this Section 2, at the written direction of
holders of at least a majority of the shares of Series A Preferred Stock then
outstanding, (i) any acquisition of the Corporation by means of merger or other
form of corporate reorganization in which outstanding shares of the Corporation
are exchanged for securities or other consideration issued or paid, or caused to
be issued or paid, by the acquiring entity or its subsidiary (other than a mere
reincorporation transaction) or (ii) a sale, lease or conveyance of all or
substantially all of the assets of the Corporation (upon such written direction,
each event described in (i) and (ii), a "Corporate Transaction"), shall be
treated as a liquidation, dissolution or winding up of the Corporation and shall
entitle the holders of Series A Preferred Stock to receive at the closing of
such Corporate Transaction in cash, securities or other property (valued as
provided in Section 2.d. below) the amounts specified in Section 2.a. above. The
provisions of this Section 2 shall not apply to any reorganization, merger or
consolidation involving (1) only a change in the state of incorporation of the
Corporation, (2) a merger of the Corporation with or into a wholly-owned
subsidiary of the Corporation that is incorporated in the United States of
America, or (3) an acquisition by merger, reorganization or consolidation of
another corporation (a) in which the Corporation is substantively the surviving
corporation, the Corporation continues to operate thereafter as a going concern
and the Corporation is not the target in such acquisition, and (b) that (i) is
approved by the Board of Directors of the Corporation, (ii) does not result in
the holders of the Corporation's Common Stock and Preferred Stock immediately
prior thereto holding less than 50% of the outstanding voting securities of the
surviving corporation immediately thereafter and (iii) does not involve a
recapitalization of the Series A Preferred Stock.

               d. Whenever the distribution provided for in this Section 2 shall
be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors. The Liquidation Amount
shall in all events be paid in cash; provided, however, that if the Liquidation
Amount is otherwise payable in connection with a consolidation or merger of the
Corporation, or sale of substantially all of the capital stock of the
Corporation, then each holder of the Series A Preferred Stock shall receive
payments with respect to the Series A Preferred Stock in the same form of
consideration as is payable with respect to the Common Stock. In the event of
any business combination or acquisition involving the Corporation which is
intended to be treated as a "pooling of interests" for accounting purposes under
Accounting Principles Board Opinion No. 16, the acquisition consideration
(including any shares of capital stock or other securities to be delivered or
exchanged by the acquiring corporation) shall be reallocated among the holders
of Series A Preferred Stock in an appropriate manner to give economic effect to
the essential intent and purposes of Sections 2.a and 2.c.

          3. Redemption.

               a. At any time after December 31, 2002, the holders of a majority
of the outstanding shares of Series A Preferred Stock shall have the option to
require the Corporation to redeem (a "Mandatory Redemption") all, but not less
than all, of the Series A Preferred Stock then outstanding at a price per share
of Series A Preferred Stock equal to the Liquidation Amount. The holders of
shares of Series A Preferred Stock may exercise such option by giving written
notice (the "Redemption Notice") to the Corporation of such election. Such
Mandatory Redemption shall be effected, and the Corporation shall be obligated
to redeem


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all outstanding shares of Series A Preferred Stock, to the extent that it may
lawfully do so, in three equal annual installments each equal to one-third of
the number of shares of Series A Preferred Stock outstanding at the time such
option is exercised. The redemption dates for any such Mandatory Redemption
shall be the 45th day after receipt by the Corporation of such Redemption Notice
and the first and second anniversaries of such 45th day (each, a "Mandatory
Redemption Date").

               b. If the funds of the Corporation legally available for
redemption of Series A Preferred Stock on any Mandatory Redemption Date are
insufficient to redeem the total number of shares of Series A Preferred Stock to
be redeemed on such Mandatory Redemption Date, those funds that are legally
available shall be used to redeem the maximum possible number of shares of
Series A Preferred Stock ratably among the holders of such shares to be redeemed
on the basis of the redemption amounts due with respect to the shares held by
each such holder. At any time and from time to time thereafter when additional
funds of the Corporation are legally available for redemption of shares of
Series A Preferred Stock, such funds shall be used to immediately redeem the
balance of the shares which the Corporation has become obligated to redeem on
any Mandatory Redemption Date but which it has not redeemed. Such shares shall
be redeemed ratably among the holders of such shares to be redeemed on the basis
of the redemption amounts due with respect to the balance of the shares held by
each such holder which the Corporation became obligated to redeem on such
Mandatory Redemption Date but which have not been redeemed. Such funds shall not
be used for any other purpose, including the redemption of any shares of Series
A Preferred Stock which the Corporation is obligated to redeem on any subsequent
date.

          4. Voting Rights. Each holder of shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Series A Preferred Stock could be
converted and shall have voting rights and powers equal to the voting rights and
powers of such Common Stock (except as otherwise expressly provided herein or as
required by law, voting together with the Common Stock as a single class) and
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation and the Delaware General Corporation Law. Fractional
votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into which shares
of Series A Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward). Such
determination of "whole shares" shall be based upon the aggregate number of
shares of Series A Preferred Stock held by each holder, and not upon each share
of Series A Preferred Stock so held by the holder. Each holder of Common Stock
shall be entitled to one vote for each share of Common Stock held. Except as
otherwise expressly provided in the Certificate of Incorporation, the holders of
shares of Series A Preferred Stock and Common Stock shall vote together (or
render written consents in lieu of a vote) as a single class on all matters
submitted to the stockholders of the Corporation.

          5. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):

               a. Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time at the office
of the Corporation or any


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transfer agent for such stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $100.00 plus all accrued but
unpaid dividends and interest thereon by the conversion price applicable to such
share (the "Conversion Price"), determined as hereinafter provided, in effect on
the date the certificate is surrendered for conversion. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of shares of
the Series A Preferred Stock initially shall be $4.65 per share of Common Stock.
Such initial Conversion Price shall be adjusted as hereinafter provided.

               b. Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for
such stock, and shall give written notice to the Corporation at such office that
such holder elects to convert the same and shall state therein the name or names
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.

               c. Adjustments to Conversion Price for Certain Diluting Issues.

                    (i) Special Definitions. For purposes of this Section 5.c.,
the following definitions apply:

                         (1) "Options" shall mean rights, options, or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (defined below) other than any such right, option, or
warrants covered by Section 5.c.4(B) below.

                         (2) "Original Issue Date" shall mean the date on which
a share of Series A Preferred Stock was first issued.

                         (3) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than Common Stock and Series A Preferred Stock)
or other securities convertible into or exchangeable for Common Stock.

                         (4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 5.c.(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued (or deemed issued):

                               (A) upon conversion of shares of Series A
Preferred Stock;


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                               (B) to outside directors, officers, employees and
consultants pursuant to the Corporation's 1994 Equity Compensation Plan or
Employee Stock Purchase Plan or other employee stock plan (the "Employee
Stock"), provided that (i) the issuance of such shares is or has been approved
by a majority of the members of the Board of Directors or any duly constituted
committee thereof and (ii) the number of shares of Employee Stock does not
exceed an aggregate of 2,700,000 shares (as adjusted for any stock dividends,
combinations, splits or similar events) regardless of whether issued by the
Corporation prior to the date hereof;

                               (C) as a dividend or distribution on Series A
Preferred Stock; or

                               (D) for which adjustment of the Conversion Price
is made pursuant to Section 5.d.

                    (ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the Conversion Price shall be
made in respect of the issuance of Additional Shares of Common Stock unless the
consideration per share (determined pursuant to Section 5.c.(v) hereof) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue. In computing each adjusted Conversion Price,
the result shall be rounded to five decimal places, and such adjustment shall be
made separately in each instance, and in the event the adjustment therefrom
results in a change of the Conversion Price of less than $0.01, no adjustment to
the then Conversion Price shall be made, but the amount of said adjustment
calculated thereby shall be carried forward to successive occasions until such
adjustments in the aggregate equal or exceed $0.01.

                    (iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein designed to protect against dilution) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided further
that in any such case in which Additional Shares of Common Stock are deemed to
be issued:

                         (1) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;

                         (2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon


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the exercise, conversion or exchange thereof, the Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities (provided, however, that no such
adjustment of the Conversion Price shall affect Common Stock previously issued
upon conversion of the Series A Preferred Stock);

                         (3) no readjustment pursuant to clause (1) or (2) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (a) the Conversion Price on the original adjustment date,
or (b) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.

                    (iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation, at any time
after the Original Issue Date, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 5.c.(iii)) without consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then and in such event, the Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying the Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at the Conversion
Price in effect immediately prior to such issuance, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issue shall be calculated on a fully
diluted basis, as if all shares of Series A Preferred Stock and all Convertible
Securities had been fully converted into shares of Common Stock and any
outstanding Options or other Convertible Securities had been fully exercised
(and the resulting securities fully converted into shares of Common Stock, if so
convertible) as of such date. The provisions of this Section 5.c may be waived
in any instance (without the necessity of convening any meeting of stockholders
of the Corporation) upon the written approval of the holders of a majority of
the outstanding shares of Series A Preferred Stock.

                    (v) Determination of Consideration. For purposes of this
Section 5.c., the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:

                         (1) Cash and Property: Such consideration shall:

                               (A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation;


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                               (B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and

                               (C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received in exchange for the Additional Shares of Common Stock,
computed as provided in clauses (A) and (B) above, as determined in good faith
by the Board of Directors.

                         (2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 5.c.(iii), relating
to Options and Convertible Securities shall be determined by dividing

                               (A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution) payable
to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by

                               (B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against the dilution) issuable
upon the exercise of such Options or conversion or exchange of such Convertible
Securities.

               d. Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the Original Issue Date shall effect a
(i) subdivision of the outstanding shares of Common Stock into a greater number
of shares of Common Stock (by stock dividend, stock split, reclassification or
otherwise), or (ii) combination or consolidation of the outstanding shares of
Common Stock into a lesser number of shares of Common Stock (by reclassification
or otherwise), then the Conversion Price in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that the
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, then the Corporation shall be deemed to have subdivided the
outstanding shares of Common Stock by an amount of shares equal to the maximum
number of shares issuable through such dividend and/or upon exercise of such
rights to acquire Common Stock.

               e. Adjustments to Conversion Price for Reclassification and
Reorganization. If the Common Stock issuable upon conversion of the Series A
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of


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stock, whether by capital reorganization, reclassification or otherwise (other
than as provided for in Section 5.d. above or in connection with a Corporate
Transaction), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series A Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series A Preferred
Stock immediately before that change.

               f. No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or the Certificate of Incorporation of any
Subsidiary (as hereinafter defined) through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation or any
Subsidiary, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.

               g. Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate executed by the Corporation's
President or Chief Financial Officer setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of the Series A Preferred
Stock.

               h. Notices of Record Date. In the event that the Corporation
shall propose at any time to effect any reclassification or recapitalization, to
merge or consolidate with or into any other entity, or sell, lease or convey all
or substantially all of its assets, or to liquidate, dissolve or wind up, then,
in connection with each such event, the Corporation shall send to the holders of
Series A Preferred Stock: (1) at least 20 days prior written notice of the date
on which a record shall be taken for such event and specifying the date on which
such event shall occur; and (2) at least 20 days prior written notice of the
record date for determining rights to vote, if any, in respect of such event.

               i. Issue Taxes. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.


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               j. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation shall take 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, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to this Certificate of
Incorporation.

               k. Fractional Shares. No fractional share shall be issued upon
the conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).

               l. Notices. Any notice required by the provisions of this Section
5 to be given to the holders of shares of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.

               m. Option to Convert to Securities of Subsidiary. At the option
of any holder of Series A Preferred Stock, such holder shall have the right (but
not the obligation) to convert in the manner provided in this Section 5.m any
share of Series A Preferred Stock then held by it into fully paid and
nonassessable shares of the common stock ("Subsidiary Common Stock") of any
direct or indirect subsidiary of the Corporation more than 50% of the
outstanding voting securities of which are owned directly or indirectly by the
Corporation (each, a "Subsidiary"). Such right may be exercised by delivery to
the Corporation of the certificates representing the shares of Series A
Preferred Stock to be converted together with written notice of such exercise
specifying the applicable Subsidiary. The number of shares of Subsidiary Common
Stock into which any share of Series A Preferred Stock is convertible under
Section 5.m shall be equal to the quotient obtained by dividing the aggregate
Fair Market Value (and hereinafter defined) of the number of shares of Common
Stock into which a share of Series A Preferred Stock is then convertible under
Section 5.a above by the Fair Market Value of a share of Subsidiary Common
Stock. As used herein, the term "Fair Market Value" shall mean (a) as of any
date and with respect to a share of the Corporation's Common Stock, the average
of the closing prices of the Corporation's Common Stock on the NASDAQ National
Market (or such other quotation system or securities exchange upon which the
Corporation's Common Stock is then traded) as reported by the NASDAQ National
Market or such exchange or other quotation system for the consecutive 30-day
trading period immediately preceding such date, and (b) as of any date and with
respect to a share of Subsidiary Common Stock, the most recent price per


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share at which shares of such Subsidiary Common Stock were issued and sold by
such Subsidiary in an arm's length transaction with an unaffiliated third party
(or if lower, the price per share in a transaction with an affiliate),
including, if applicable, the exercise price per share in any options, rights or
warrants to subscribe for or otherwise acquire Subsidiary Common Stock
("Subsidiary Options") or Subsidiary Convertible Securities (as hereinafter
defined) or the conversion price per share in any securities convertible into or
exchangeable for Subsidiary Common Stock ("Subsidiary Convertible Securities").
The Corporation shall take, and shall cause the related Subsidiary to take, all
actions necessary to issue any shares of Subsidiary Common Stock issuable under
this Section 5.m and to cause such shares to be duly authorized, validly issued,
fully paid and nonassessable, including, without limitation, amending such
Subsidiary's Certificate of Incorporation to increase the number of shares of
Subsidiary Common Stock issuable thereunder, if necessary, and pay, on the
holders behalf, any consideration required to accomplish the foregoing. The
Corporation shall notify each holder of shares of Series A Preferred Stock of
any sale of Subsidiary Common Stock, Subsidiary Options or Subsidiary
Convertible Securities by a Subsidiary at least fifteen business days before
such sale is consummated. Any such notice shall be in writing and shall describe
the securities to be issued and sold by such Subsidiary and the consideration to
be received by it in connection therewith.

          6. Restrictions and Limitations. So long as any shares of Series A
Preferred Stock remain outstanding, in addition to any other vote required by
the Delaware General Corporation Law, the vote or written consent or written
agreement of the holders of at least a majority of the then outstanding shares
of the Series A Preferred Stock, voting as a separate class, shall be required
in order to:

                    (i)  alter, amend or modify the rights, preferences or
privileges of the Series A Preferred Stock;

                    (ii) increase the authorized number of shares of the Series
A Preferred Stock or issue any additional shares of Series A Preferred Stock
other than shares issued in payment of dividends on the outstanding share of
Series A Preferred Stock pursuant to Section 1.a above;

                    (iii) authorize or issue, or obligate itself to issue, any
other equity security (including any security convertible into or exercisable
for any equity security) senior to or on a parity with the Series A Preferred
Stock as to dividend rights, liquidation preferences or redemption rights;

                    (iv) redeem, purchase or otherwise acquire any shares of
Common Stock or Preferred Stock (or pay into a sinking fund for such purpose);
provided, however, that this restriction shall not apply to any redemption
pursuant to Section 3 or to the repurchase of shares of Common Stock at the
original purchase price from employees, officers, directors or other persons
performing services for this Corporation;

                    (v)  merge or consolidate with or into any other entity or
sell, lease or convey any substantial portion of the Corporation's assets,
provided, however, that the provisions of this clause (v) shall not apply to any
reorganization, merger or consolidation


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<PAGE>   12


involving (1) only a change in the state of incorporation of the Corporation,
(2) a merger of the Corporation with or into a wholly-owned subsidiary of the
Corporation that is incorporated in the United States of America, or (3) an
acquisition by merger, reorganization or consolidation of another corporation
(a) in which the Corporation is substantively the surviving corporation, the
Corporation continues to operate thereafter as a going concern and the
Corporation is not the target in such acquisition, and (b) that (i) is approved
by the Board of Directors of the Corporation, (ii) does not result in the
holders of the Corporation's Common Stock and Preferred Stock immediately prior
thereto holding less than 50% of the outstanding voting securities of the
surviving corporation immediately thereafter and (iii) does not involve a
recapitalization of the Series A Preferred Stock.;

                    (vi) alter, amend or modify the Corporation's Certificate of
Incorporation or Bylaws; or

                    (vii) amend or modify any existing employee incentive stock
plan of the Corporation to increase the number of shares of Common Stock
issuable thereunder, or create any new employee incentive stock plan for
employees, officers, directors or consultants of the Corporation.

          7. No Reissuance of Series A Preferred Stock. No share or shares of
Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and restored to the status of undesignated Preferred
Stock.

     IN WITNESS WHEREOF, this Certificate of Designation has been signed by the
Chief Financial Officer of the Corporation this 6th day of August, 1999.




                                        ----------------------------------------
                                        Robert L. Drury, Chief Financial Officer


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