ARTICLES OF INCORPORATION
                                       OF
                                  QUANTECH LTD.


         The undersigned individual, being of full age, for the purpose of
forming a corporation under and pursuant to Chapter 302A of the Minnesota
Statutes, as amended, hereby adopts the following Articles of Incorporation:


                                ARTICLE 1 - NAME

         1.1) The name of the corporation shall be Quantech Ltd.


                          ARTICLE 2 - REGISTERED OFFICE

         2.1) The registered office of the corporation is located at 1021
Bandana Boulevard East, Suite 212, St. Paul, Minnesota 55108.


                            ARTICLE 3 - CAPITAL STOCK

         3.1) Authorized Shares; Establishment of Classes and Series. The
aggregate number of shares the corporation has authority to issue shall be
30,000,000 shares, which shall have a par value of $.01 per share solely for the
purpose of a statute or regulation imposing a tax or fee based upon the
capitalization of the corporation, and which shall consist of 15,000,000 shares
of Common Stock and 15,000,000 undesignated shares. The Board of Directors of
the corporation is authorized to establish from the undesignated shares, by
resolution adopted and filed in the manner provided by law, one or more classes
or series of shares, to designate each such class or series (which may include
but is not limited to designation as additional shares of Common Stock), and to
fix the relative rights and preferences of each such class or series.

         3.2) Issuance of Shares. The Board of Directors of the corporation is
authorized from time to time to accept subscriptions for, issue, sell and
deliver shares of any class or series of the corporation to such persons, at
such times and upon such terms and conditions as the Board shall determine,
valuing all nonmonetary consideration and establishing a price in money or other
consideration, or a minimum price, or a general formula or method by which the
price will be determined.

         3.3) Issuance of Rights to Purchase Shares. The Board of Directors is
further authorized from time to time to grant and issue rights to subscribe for,
purchase, exchange securities for, or convert securities into, shares of the
corporation of any class or series, and to fix the terms, provisions and
conditions of such rights, including the exchange or conversion basis or the
price at which such shares may be purchased or subscribed for.

<PAGE>

         3.4) Issuance of Shares to Holders of Another Class or Series. The
Board is further authorized to issue shares of one class or series to holders of
that class or series or to holders of another class or series to effectuate
share dividends or splits.


                             ARTICLE 4 - RIGHTS OF SHAREHOLDERS

         4.1) No Preemptive Rights. No shares of any class or series of the
corporation shall entitle the holders to any preemptive rights to subscribe for
or purchase additional shares of that class or series or any other class or
series of the corporation now or hereafter authorized or issued.

         4.2) No Cumulative Voting Rights. There shall be no cumulative voting
by the shareholders of the corporation.


                              ARTICLE 5 - DIRECTORS

         5.1) The names of the person constituting the first Board of Directors
is as follows:

                  R. H. Joseph Shaw


        ARTICLE 6 - MERGER, EXCHANGE, SALE OF ASSETS AND DISSOLUTION

         6.1) Where approval of shareholders is required by law, the affirmative
vote of the holders of at least a majority of the voting power of all shares
entitled to vote shall be required to authorize the corporation (i) to merge
into or with one or more other corporations, (ii) to exchange its shares for
shares of one or more other corporations, (iii) to sell, lease, transfer or
otherwise dispose of all or substantially all of its property and assets,
including its good will, or (iv) to commence voluntary dissolution.


               ARTICLE 7 - AMENDMENT OF ARTICLES OF INCORPORATION.

         7.1) After the issuance of shares by the corporation, any provision
contained in these Articles of Incorporation may be amended, altered, changed or
repealed by the affirmative vote of the holders of at least a majority of the
voting power of the shares present and entitled to vote at a duly held meeting
or such greater percentage as may be otherwise prescribed by the laws of the
State of Minnesota.

                  ARTICLE 8 - LIMITATION OF DIRECTOR LIABILITY

         8.1) To the fullest extent permitted by Chapter 302A, Minnesota
Statutes, as the same exists or may hereafter be amended, a director of this

<PAGE>

corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.


                            ARTICLE 9 - INCORPORATOR

         9.1) The name and mailing address of the incorporator are as follows:

                  Gregory G. Freitag
                  900 Second Avenue South
                  1100 International Centre
                  Minneapolis, Minnesota 55402


         IN WITNESS WHEREOF, the undersigned incorporator has hereunto set his
hand this 13th day of November, 1992.



                                                     /s/ Gregory G. Freitag
                                                    Gregory G. Freitag


<PAGE>




                              ARTICLES OF AMENDMENT
                                     TO THE
                            ARTICLES OF INCORPORATION
                                       OF
                                  QUANTECH LTD.

         The undersigned, being the Secretary of Quantech Ltd., a Minnesota
corporation, (the "Corporation"), on behalf of the Corporation, does hereby
certify that the following recitals and resolutions were adopted at a duly
called special meeting of the shareholders, pursuant to Minnesota Statutes
Sections 302A.135 and 302A.139

                  WHEREAS, the Board of Directors of the Corporation believes it
         is in the best interest of the Corporation to amend the Articles of
         Incorporation to increase the number of authorized common stock shares
         from 30,000,000 to 60,000,000 and has previously adopted similar
         recitals and resolutions as those proposed here;

         IT IS HEREBY RESOLVED THAT:

                  The shareholders, in accordance with the Corporation's Bylaws,
         do hereby approve amending the Corporation's Articles of Incorporation
         to increase the number of authorized common stock shares from
         30,000,000 to 60,000,000;

         RESOLVED FURTHER:

                  Section 3.1 is hereby amended to read:

                                   ARTICLE 3.1
                                  CAPITAL STOCK

                  The aggregate number of shares of all classes of stock which
         this corporation shall have the authority to issue is Sixty Million
         (60,000,000) shares, $.01 par value per share. The Board of Directors
         of the corporation is authorized to establish from the undesignated
         shares, by resolution adopted and filed in the manner provided by law,
         one or more classes or series of shares, to designate each such class
         or series (which may include but is not limited to designation as
         additional shares of Common Stock), and to fix the relative rights and
         preferences of each such class or series.

         RESOLVED FURTHER:

                  The corporation's officers are hereby authorized to complete
         all documents necessary and make all filings necessary to effectuate
         the amendment to the Corporation's Articles of Incorporation and to
         record such Amendment in the Corporation's official record books.

Dated and effective:  September 28, 1995.
                                                     /s/ George Vitalis
                                                     George Vitalis, Secretary


<PAGE>


                            ARTICLES OF AMENDMENT OF
                            ARTICLES OF INCORPORATION
                                OF QUANTECH LTD.

         The undersigned, being the Secretary of Quantech Ltd., a Minnesota
corporation, (the "Corporation"), on behalf of the Corporation, does hereby
certify that the following recitals and resolutions were adopted at a duly
called special meeting of the shareholders, pursuant to Minnesota Statutes,
Sections 302A.135 and 302A.139.

         WHEREAS, the Board of Directors of the Corporation believes it is in
the best interest of the Corporation to amend the Articles of Incorporation to
increase the number of authorized shares from 60,000,000 Common Shares to
120,000,000 shares consisting of 90,000,000 Common Shares and 30,000,000
undesignated shares and has previously adopted similar recitals and resolutions
as those proposed here.

         IT IS HEREBY RESOLVED THAT,

         The shareholders, in accordance with the Corporation's Bylaws, do
hereby approve amending the Corporation's Articles of Incorporation to increase
the number of authorized shares from 60,000,000 Common Shares to 120,000,000
shares consisting of 90,000,000 Common Shares and 30,000,000 undesignated
shares.

         RESOLVED FURTHER, that Section 3.1 is hereby amended to read as
follows:

                                   ARTICLE 3.1
                                  CAPITAL STOCK

         The aggregate number of shares of all classes of stock which this
corporation shall have the authority to issue is One Hundred and Twenty Million
(120,000,000) shares, $.01 par value per share, consisting of 90,000,000 Common
Shares and 30,000,000 undesignated shares. The Board of Directors of the
corporation is authorized to establish from the undesignated shares, by
resolution adopted and filed in the manner provided by law, one or more classes
or series of shares, to designate each such class or series (which may include
but is not limited to designation as additional shares of Common Stock), and to
fix the relative rights and preferences of each such class or series.

         RESOLVED FURTHER,

         The corporation's officers are hereby authorized to complete all
documents necessary and make all filings necessary to effectuate the amendment
to the Corporation's Articles of Incorporation and to record such Amendment in
the Corporation's official record books.

Dated and effective:  November 25, 1996.

/s/ Gregory G. Freitag
Gregory G. Freitag, Secretary

<PAGE>


                            ARTICLES OF AMENDMENT OF
                            ARTICLES OF INCORPORATION
                                OF QUANTECH LTD.

         The undersigned, being the Secretary of Quantech Ltd., a Minnesota
corporation, (the "Corporation"), on behalf of the Corporation, does hereby
certify that the following recitals and resolutions were adopted at a duly
called special meeting of the shareholders, pursuant to Minnesota Statutes,
Sections 302A.135 and 302A.139.

         WHEREAS, the Board of Directors of the Corporation believes it is in
the best interest of the Corporation to amend the Articles of Incorporation to
increase the number of authorized shares from 120,000,000 Common Shares to
250,000,000 shares consisting of 200,000,000 Common Shares and 50,000,000
undesignated shares and has previously adopted similar recitals and resolutions
as those proposed here.

         IT IS HEREBY RESOLVED THAT,

         The shareholders, in accordance with the Corporation's Bylaws, do
hereby approve amending the Corporation's Articles of Incorporation to increase
the number of authorized shares from 120,000,000 Common Shares to 250,000,000
shares consisting of 200,000,000 Common Shares and 50,000,000 undesignated
shares.

         RESOLVED FURTHER, that Section 3.1 is hereby amended to read as
follows:

                                   ARTICLE 3.1
                                  CAPITAL STOCK

         The aggregate number of shares of all classes of stock, which this
corporation shall have the authority to issue is Two Hundred and Fifty Million
(250,000,000) shares, which shall have a par value of $.01 per share solely for
the purpose of a statute or regulation imposing a tax or fee based upon the
capitalization of the corporation, and which shall consist of 200,000,000 Common
Shares and 50,000,000 undesignated shares. The Board of Directors of the
corporation is authorized to establish from the undesignated shares, by
resolution adopted and filed in the manner provided by law, one or more classes
or series of shares, to designate each such class or series (which may include
but is not limited to designation as additional shares of Common Stock), and to
fix the relative rights and preferences of each such class or series.

         RESOLVED FURTHER,

         The corporation's officers are hereby authorized to complete all
documents necessary and make all filings necessary to effectuate the amendment
to the Corporation's Articles of Incorporation and to record such Amendment in
the Corporation's official record books.

Dated and effective:  December 2, 1997

/s/ Gregory G. Freitag
Gregory G. Freitag, Secretary


<PAGE>


                            ARTICLES OF AMENDMENT OF
                            ARTICLES OF INCORPORATION
                                OF QUANTECH LTD.

         The undersigned, being the Secretary of Quantech Ltd., a Minnesota
corporation, (the "Corporation"), on behalf of the Corporation, does hereby
certify that the following recitals and resolutions were adopted at a duly
called special meeting of the directors, pursuant to Minnesota Statutes,
Sections 302A.135 and 302A.139.

         The Board discussed and determined that it was in the interest of
Quantech to effect the reverse split of its Capital Stock to conform its capital
structure to companies in Quantech's industry, so as to attract potential
financing and strategic partners and to position Quantech for filing on NASDAQ
when it meets such organization's listing requirements. It was determined that
the timing of the split should be coordinated with the release of information
concerning Quantech's filing with the FDA of its test for myoglobin.

         A MOTION was made by Mr. Lyons that the directors hereby adopt the
following plan of recapitalization in order to effect a 1-for-20 reverse stock
split effective on the date on which the Amendment of Articles hereinafter
adopted is filed with the Minnesota Secretary of State (the "Effective Date"):

         1.     One (1) share of Common Stock of the Company shall be issued in
                exchange for every twenty (20) shares of Common Stock
                outstanding on the Effective Date.
         2.     Fractional shares resulting on account of such reverse split
                shall be rounded down.
         3.     Promptly following the Effective Date, shareholders shall
                exchange certificates representing shares of Common Stock
                outstanding on the Effective Date for certificates representing
                the appropriate number of shares of Common Stock to reflect the
                reverse stock split.
         4.     On the Effective Date, the number of shares of the Company's
                Common Stock reserved for issuance under, or covered by, any
                outstanding option or warrant shall be decreased by twenty times
                and the per share exercise price shall be increased by such
                amount as may be necessary so that the aggregate purchase price
                of each outstanding option or warrant after adjustment is equal
                to the aggregate purchase price of such option or warrant before
                adjustment.

         FURTHER RESOLVED, that Section 3.1 of Article 3 of the Articles of
Incorporation is amended to read as follows:

                           "ARTICLE 3 - CAPITAL STOCK

                  3.1) Authorized Shares; Establishment of Classes and Series.
                  The aggregate number of shares the corporation has authority
                  to issue shall be 12,500,000 shares, which shall have a par
                  value of $.01 per share solely for the purpose of a statute or
                  regulation imposing a tax or fee based upon the capitalization
                  of the corporation, and which shall consist of 10,000,000

<PAGE>

                  Common Shares (hereinafter referred to as "Common Stock") and
                  2,500,000 undesignated shares. Except as otherwise provided by
                  these Articles of Incorporation or in a contractual obligation
                  of the corporation, the Board of Directors of the corporation
                  is authorized to establish from the undesignated shares, by
                  resolution adopted and filed in the manner provided by law,
                  one or more classes or series of shares, to designate each
                  such class or series (which may include but is not limited to
                  designation as additional shares of Common Stock), and to fix
                  the relative rights and preferences of each such class or
                  series, which rights and preferences may be superior to those
                  of any of the shares of Common Stock."

         FURTHER RESOLVED, that any officer of the Company be and he hereby is
authorized to execute Articles of Amendment of the Articles of Incorporation of
the Company and to cause such Articles of Amendment to be filed with the
Minnesota Secretary of State.

         FURTHER RESOLVED, that the form of stock certificate reviewed this date
be and it hereby is adopted to represent the Company's Common Stock from and
after the Effective Date.

         FURTHER RESOLVED, that the officers of the Company are hereby
authorized and directed to take all such further action and execute and deliver
all such further documents and instruments as may be necessary or advisable to
effectuate such reverse stock split.

         Mr. Perkins seconded the motion and the motion was unanimously approved
by the directors.

Dated and effective:  March 17, 1998

/s/ Gregory G. Freitag
Gregory G. Freitag, Secretary



<PAGE>


                       STATEMENT OF DESIGNATION OF SHARES
                                       OF
                                  QUANTECH LTD.



         I hereby certify that the resolutions set forth on Exhibit A attached
hereto were adopted by written action of the Board of Directors of QUANTECH LTD.
on November 5, 1998.

         I certify that I am authorized to execute this Statement and I further
certify that I understand that by signing this Statement I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
Statement under oath.




                                    /s/ Gregory G. Freitag
                                    Gregory G. Freitag, Chief Operating Officer




<PAGE>


                                    EXHIBIT A


                     Designation of Series A Preferred Stock

         WHEREAS, the corporation's current authorized capitalization consists
of 10,000,000 authorized shares of Common Stock and 2,500,000 authorized but
undesignated shares; and

         WHEREAS, the Board of Directors deems it advisable to establish an
additional class of shares from the 2,500,000 authorized but undesignated
shares;

         NOW, THEREFORE, RESOLVED, that of the 2,500,000 undesignated shares
which the corporation is authorized to issue under its Articles of
Incorporation, 2,500,000 are hereby designated as shares of Series A Preferred
Stock (the "Series A Stock"), with a par value of $0.01 per share solely for
purposes of a statute or regulation imposing a tax or fee based upon the
capitalization of the corporation.

         FURTHER RESOLVED, that the rights and preferences of the Series A Stock
shall be as follows:

         1. Dividends. In the event that the corporation declares and pays any
dividends in cash with respect to Common Stock, the holder of a share of Series
A Stock will be entitled to receive a dividend per share equal to the dividend
that would have been otherwise payable with respect to such share if it had been
converted into shares of Common Stock prior to the record date of such dividend.

         2. Voting. Each outstanding share of Series A Stock shall entitle its
holder to that number of votes on all matters submitted to the stockholders that
is equal to the number of shares of Common Stock into which such holder's shares
of Series A Stock are then convertible, as hereinafter provided (except that
shares of Series A Stock shall have class voting rights as provided in paragraph
3 below and as otherwise now or hereafter required by agreement or law).

         3. Additional Class Votes by Series A Stock. Without the affirmative
vote or written consent of the holders (acting together as a class) of at least
a majority of the shares of Series A Stock at the time outstanding, the
corporation shall not:

                  a. amend the Articles of Incorporation of the corporation in
         any respect, including without limitation any certificate or
         designation relating to the Series A Stock, so as to alter any existing
         provision relating to Series A Stock or the holders thereof or waive
         any of the rights granted to the holders of the Series A Stock by the
         Articles of Incorporation of the corporation; or

                  b. increase the authorized number of shares of Series A
         Stock; or

                  c. authorize or issue any shares of capital stock having
         priority or preference over, or on parity with, Series A Stock as to

<PAGE>

         dividends or distributions in the event of the liquidation, dissolution
         or winding up of the corporation, provided that such prohibition shall
         not prevent the corporation from issuing any shares which may receive
         distributions in such events on a pari passu basis prorated, in the
         event assets are insufficient to pay the original purchase price of all
         such securities, to the original purchase price of each; or

                  d. declare or pay any dividend or make any other distribution
         on any shares of capital stock of the corporation at any time created
         and issued ranking junior to Series A Stock with respect to the rights
         to the distribution of assets upon liquidation, dissolution or winding
         up of the corporation, other than distributions payable solely in
         shares of junior stock.

         4.       Liquidation.

                  a. In the event of the liquidation, dissolution or winding up
         of the corporation, whether voluntary or involuntary, the holders of
         the shares of Series A Stock shall be entitled, subject to the
         participation right of certain lenders/guarantors as provided in
         subparagraph (d) below, to receive in cash, out of the assets of the
         corporation, before any payment shall be made or any assets distributed
         to the holders of Common Stock with respect to the payment of dividends
         or upon dissolution or liquidation of the corporation, an amount equal
         to the sum of (i) $3.00 per share ("Original Purchase Price")
         (appropriately adjusted to reflect stock splits, stock dividends,
         reorganizations, consolidations and similar changes hereafter
         effected), (ii) all dividends unpaid and accumulated or accrued thereon
         to the date of such distribution, if any, and (iii) an amount equal to
         a return on investment at the rate of 10% per annum, compounded
         annually, over the period commencing on the date of original issuance
         of the Series A Stock by the corporation and ending on the date of
         distribution of assets as specified by the corporation's Board of
         Directors. If, upon any liquidation or dissolution of this corporation,
         the assets of the corporation shall be insufficient to pay such amount,
         the holders of such shares shall share pro rata in any such
         distribution in proportion to the full amounts to which they would
         otherwise be respectively entitled.

                  b. After the payment of all preferential amounts required to
         be paid pursuant to subparagraph a above, any remaining assets and
         funds of the corporation available for distribution to its stockholders
         upon the liquidation, dissolution or winding up of the corporation
         shall be distributed ratably among the holders of Common Stock.
         Thereafter, any such remaining assets and funds shall be distributed.

                  c. The merger or consolidation of the corporation into or with
         another corporation which results in the exchange of outstanding shares
         of the corporation for securities or other consideration issued or paid
         or caused to be issued or paid by such other corporation or an
         affiliate thereof (except if such merger or consolidation does not
         result in the transfer of more than 60% of the voting securities of the
         corporation), change in control of more than 60% of the voting
         securities of the corporation or the sale of all or substantially all
         the assets of the corporation, shall be deemed to be a liquidation,
         dissolution or winding up of the corporation for purposes of this
         paragraph, unless the holders of a majority of the Series A Stock then
         outstanding vote otherwise. The amount deemed distributed to the

<PAGE>

         holders of Series A Stock upon any such merger or consolidation shall
         be the cash or the value of the property, rights and/or securities
         distributed to such holders by the acquiring person, firm or other
         entity. The value of such property, rights or other securities shall be
         determined in good faith by the Board of Directors of the corporation.

                  d. The corporation and one of its current directors are
         parties to that certain Agreement dated November 5, 1998, which
         agreement provides that if the director is required to make any payment
         pursuant to that certain Guaranty and Collateral Pledge Agreement, each
         dated August 7, 1998, between such director and Norwest Bank Minnesota,
         National Association, which has provided the corporation a bank credit
         facility in the aggregate principal amount of $750,000, such director
         waives any right of recovery of such payment from the corporation
         except in the event of a liquidation by the corporation in which event
         such director shall be entitled to participate in the distribution of
         the corporation's assets in liquidation on a pro rata basis with
         holders of Series A Stock pursuant to subparagraph a above as if such
         director held an amount of Series A Stock equal to the amount of such
         director's payment under the Guaranty and Collateral Pledge Agreement
         divided by $3.00.

         5. Conversion Right. At the option of the holders thereof, the shares
of Series A Stock shall be convertible, at the office of the corporation (or at
such other office or offices, if any, as the Board of Directors may designate),
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100th of a share) of Common Stock of the corporation, at the
conversion price, determined as hereinafter provided, in effect at the time of
conversion, each share of Series A Stock being deemed to have a value of $3.00
for the purpose of such conversion. The price at which shares of Common Stock
shall be delivered upon conversion of shares of Series A Stock (herein called
the "conversion price") shall be initially $0.75 per share of Common Stock
(i.e., at an initial conversion rate of four shares of Common Stock for each
share of Series A Stock), provided, however, that such initial conversion price
shall be subject to adjustment from time to time in certain instances as
hereinafter provided. The following provisions shall govern such right of
conversion:

                  a. In order to convert shares of Series A Stock into shares of
         Common Stock of the corporation, the holder thereof shall surrender at
         any office hereinabove mentioned the certificate or certificates
         therefor, duly endorsed to the corporation or in blank, and give
         written notice to the corporation at such office that such holder
         elects to convert such shares. Shares of Series A Stock shall be deemed
         to have been converted immediately prior to the close of business on
         the day of the surrender of such shares for conversion as herein
         provided, and the person entitled to receive the shares of Common Stock
         of the corporation issuable upon such conversion shall be treated for
         all purposes as the record holder of such shares of Common Stock at
         such time. As promptly as practicable on or after the conversion date,
         the corporation shall issue and deliver or cause to be issued and
         delivered at such office a certificate or certificates for the number
         of shares of Common Stock of the corporation issuable upon such
         conversion.

                  b. The conversion price shall be subject to adjustment from
         time to time as hereinafter provided. Upon each adjustment of the

<PAGE>

         conversion price each holder of shares of Series A Stock shall
         thereafter be entitled to receive the number of shares of Common Stock
         of the corporation obtained by multiplying the conversion price in
         effect immediately prior to such adjustment by the number of shares
         issuable pursuant to conversion immediately prior to such adjustment
         and dividing the product thereof by the conversion price resulting from
         such adjustment.

                  c. If and whenever the corporation shall issue or sell any
         shares of its Common Stock for a consideration per share less than the
         conversion price in effect immediately prior to the time of such issue
         or sale of the Common Stock, then, forthwith upon such issue or sale,
         the conversion price shall be reduced to such lower price.

         No adjustment of the conversion price of the Series A Stock, however,
shall be made in an amount less than 2% of such conversion price in effect on
the date of such adjustment, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any such adjustment so carried forward, shall be
an amount equal to or greater than 4% of the conversion price of the Series A
Stock then in effect.

         The holders of at least a majority of the Series A Stock then
outstanding may elect to waive the application of the provisions of this
paragraph 5 with respect to any issue or sale by the corporation of shares of
its Common Stock for a consideration per share less than the conversion price of
the Series A Stock in effect immediately prior to the time of such issue or
sale.

         For the purposes of this paragraph 5, the following provisions (i) to
(v), inclusive, shall also be applicable:

                  (i) In the event the corporation shall grant (whether directly
         or by assumption in a merger or otherwise) any rights to subscribe for
         or to purchase, or any options for the purchase of, (a) Common Stock or
         (b) any obligations or any shares of stock of the corporation which are
         convertible into, or exchangeable for, Common Stock (any of such
         obligations or shares of stock being hereinafter called "Convertible
         Securities") whether or not such rights or options or the right to
         convert or exchange any such Convertible Securities are immediately
         exercisable, and the price per share for which Common Stock is issuable
         upon the exercise of such rights or options or upon conversion or
         exchange of such Convertible Securities (determined by dividing (x) the
         total amount, if any, received or receivable by the corporation as
         consideration for the granting of such rights or options, plus the
         minimum aggregate amount of additional consideration payable to the
         corporation upon the exercise of such rights or options, plus, in the
         case of such rights or options which relate to Convertible Securities,
         the minimum aggregate amount of additional consideration, if any,
         payable upon the issue of such Convertible Securities and upon the
         conversion or exchange thereof, by (y) the total maximum number of
         shares of Common Stock issuable upon the exercise of such rights or
         options or upon the conversion or exchange of all such Convertible
         Securities issuable upon the exercise of such rights or options) shall
         be less than the conversion price of the Series A Stock in effect
         immediately prior to the time of the granting of such rights or
         options, then the total maximum number of shares of Common Stock
         issuable upon the exercise of such rights or options or upon conversion
         or exchange of the total maximum amount of such Convertible Securities
         issuable upon the exercise of such rights or options shall (as of the

<PAGE>

         date of granting of such rights or options) be deemed to have been
         issued for such price per share. Except as provided in subparagraph d
         below, no further adjustments of the conversion price of the Series A
         Stock shall be made upon the actual issue of such Common Stock or of
         such Convertible Securities upon exercise of such rights or options or
         upon the actual issue of such Common Stock upon conversion or exchange
         of such Convertible Securities.

                  (ii) In case the corporation shall issue or sell (whether
         directly or by assumption in a merger or otherwise) any Convertible
         Securities, whether or not the rights to exchange or convert thereunder
         are immediately exercisable, and the price per share for which Common
         Stock is issuable upon such conversion or exchange (determined by
         dividing (x) the total amount received or receivable by the corporation
         as consideration for the issue or sale of such Convertible Securities,
         plus the minimum aggregate amount of additional consideration, if any,
         payable to the corporation upon the conversion or exchange thereof, by
         (y) the total maximum number of shares of Common Stock issuable upon
         the conversion or exchange of all such Convertible Securities) shall be
         less than the conversion price of the Series A Stock in effect
         immediately prior to the time of such issue or at the time of such
         issue or sale, then the total maximum number of shares of Common Stock
         issuable upon conversion or exchange of all such Convertible Securities
         shall (as of the date of the issue or sale of such Convertible
         Securities) be deemed to be outstanding and to have been issued for
         such price per share, provided that (a) except as provided in
         subparagraph d below, no further adjustments of the conversion price
         shall be made upon the actual issue of such Common Stock upon
         conversion or exchange of such Convertible Securities, and (b) if any
         such issue or sale of such Convertible Securities is made upon exercise
         of any rights to subscribe for or to purchase or any option to purchase
         any such Convertible Securities for which adjustments of the conversion
         price of the Series A Stock have been or are to be made pursuant to
         other provisions of this paragraph 5, no further adjustment of the
         conversion price shall be made by reason of such issue or sale.

                  (iii) In case any shares of Common Stock or Convertible
         Securities or any rights or options to purchase any such Common Stock
         or Convertible Securities shall be issued or sold for cash, the
         consideration received therefor shall be deemed to be the amount
         received by the corporation therefor, without deducting therefrom any
         expenses incurred or any underwriting commissions, discounts or
         concessions paid or allowed by the corporation in connection therewith.
         In case any shares of Common Stock or Convertible Securities or any
         rights or options to purchase any such Common Stock or Convertible
         Securities shall be issued or sold for a consideration other than cash,
         the amount of the consideration other than cash received by the
         corporation shall be deemed to be the fair value of such consideration
         as determined by the Board of Directors of the corporation, without
         deducting therefrom any expenses incurred or any underwriting
         commissions, discounts or concessions paid or allowed by the
         corporation in connection therewith. In case any shares of Common Stock
         or Convertible Securities or any rights or options to purchase such

<PAGE>
         Common Stock or Convertible Securities shall be issued in connection
         with any merger or consolidation in which the corporation is the
         surviving corporation, the amount of consideration therefor shall be
         deemed to be the fair value as determined by the Board of Directors of
         the corporation of such portion of the assets and business of the
         non-surviving corporation or corporations as such Board shall determine
         to be attributable to such Common Stock, Convertible Securities, rights
         or options, as the case may be. In the event of any consolidation or
         merger of the corporation in which the corporation is not the surviving
         corporation or in the event of any sale of all or substantially all of
         the assets of the corporation for stock or other securities of any
         other corporation, the corporation shall be deemed to have issued a
         number of shares of its Common Stock for stock or securities of the
         other corporation computed on the basis of the actual exchange ratio on
         which the transaction was predicated and for a consideration equal to
         the fair market value on the date of such transaction of such stock or
         securities of the other corporation, and if any such calculation
         results in adjustment of the conversion price of the Series A Stock,
         the determination of the number of shares of Common Stock issuable upon
         conversion immediately prior to such merger, conversion or sale, for
         purposes of subparagraph d below, shall be made after giving effect to
         such adjustment of the conversion price.

                  (iv) In case the corporation shall take a record of the
         holders of its Common Stock for the purpose of entitling them (a) to
         receive a dividend or other distribution payable in Common Stock or in
         Convertible Securities, or in any rights or options to purchase any
         Common Stock or Convertible Securities, or (b) to subscribe for or
         purchase Common Stock or Convertible Securities, then such record date
         shall be deemed to be the date of the issue or sale of the shares of
         Common Stock deemed to have been issued or sold upon the declaration of
         such dividend or the making of such other distribution or the date of
         the granting of such rights of subscription or purchase, as the case
         may be.

                  b. In case the corporation shall (i) declare a dividend upon
         the Common Stock payable in Common Stock (other than a dividend
         declared to effect a subdivision of the outstanding shares of Common
         Stock, as described in subparagraph e below) or Convertible Securities,
         or in any rights or options to purchase Common Stock or Convertible
         Securities, or (ii) declare any other dividend or make any other
         distribution upon the Common Stock payable otherwise than out of
         earnings or earned surplus, then thereafter each holder of shares of
         Series A Stock upon the conversion thereof will be entitled to receive
         the number of shares of Common Stock into which such shares of Series A
         Stock have been converted, and, in addition and without payment
         therefor, each dividend described in clause (i) above and each dividend
         or distribution described in clause (ii) above which such holder would
         have received by way of dividends or distributions if continuously held
         since such holder became the record holder of such shares of Series A
         Stock such holder (i) had been the record holder of the number of
         shares of Common Stock then received, and (ii) had retained all
         dividends or distributions in stock or securities (including Common
         Stock or Convertible Securities, and any rights or options to purchase
         any Common Stock or Convertible Securities) payable in respect of such
         Common Stock or in respect of any stock or securities paid as dividends
         or distributions and originating directly or indirectly from such
         Common Stock. For the purposes of the foregoing, a dividend or
         distribution other than in cash shall be considered payable out of
         earnings or earned surplus only to the extent that such earnings or
         earned surplus are charged an amount equal to the fair value of such
         dividend or distribution as determined by the Board of Directors of the
         corporation.

<PAGE>

                  c. In case the corporation shall at any time split or
         subdivide its outstanding shares of Common Stock into a greater number
         of shares, the conversion price of Series A Stock in effect immediately
         prior to such subdivision shall be proportionately reduced, and
         conversely, in case the outstanding shares of Common Stock of the
         corporation shall be combined into a smaller number of shares, the
         conversion price of Series A Stock in effect immediately prior to such
         combination shall be proportionately increased.

                  d. If (i) the purchase price provided for in any right or
         option referred to in clause (i) of subparagraph a, or (ii) the
         additional consideration, if any, payable upon the conversion or
         exchange of Convertible Securities referred to in clause (i) or clause
         (ii) of subparagraph a, or (iii) the rate at which any Convertible
         Securities referred to in clause (i) or clause (ii) of subparagraph a
         are convertible into or exchangeable for Common Stock, shall change at
         any time (other than under or by reason of provisions designed to
         protect against dilution), the conversion price of the Series A Stock
         then in effect hereunder shall forthwith be increased or decreased to
         such conversion price as would have obtained had the adjustments made
         upon the issuance of such rights, options or Convertible Securities
         been made upon the basis of (a) the issuance of the number of shares of
         Common Stock theretofore actually delivered upon the exercise of such
         options or rights or upon the conversion or exchange of such
         Convertible Securities, and the total consideration received therefor,
         and (b) the issuance at the time of such change of any such options,
         rights, or Convertible Securities then still outstanding for the
         consideration, if any, received by the corporation therefor and to be
         received on the basis of such changed price; and on the expiration of
         any such option or right or the termination of any such right to
         convert or exchange such Convertible Securities, the conversion price
         of the Series A Stock then in effect hereunder shall forthwith be
         increased to such conversion price as would have obtained had the
         adjustments made upon the issuance of such rights or options or
         Convertible Securities been made upon the basis of the issuance of the
         shares of Common Stock theretofore actually delivered (and the total
         consideration received therefor) upon the exercise of such rights or
         options or upon the conversion or exchange of such Convertible
         Securities. If the purchase price provided for in any right or option
         referred to in clause (i) of subparagraph a, or the rate at which any
         Convertible Securities referred to in clause (i) or clause (ii) of
         subparagraph a are convertible into or exchangeable for Common Stock,
         shall decrease at any time under or by reason of provisions with
         respect thereto designed to protect against dilution, then in case of
         the delivery of Common Stock upon the exercise of any such right or
         option or upon conversion or exchange of any such Convertible Security,
         the conversion price of the Series A Stock then in effect hereunder
         shall forthwith be decreased to such conversion price as would have
         obtained had the adjustments made upon the issuance of such right,
         option or Convertible Security been made upon the basis of the issuance
         of (and the total consideration received for) the shares of Common
         Stock delivered as aforesaid.

                  e. The corporation shall at all times insure and keep
         available out of its authorized but unissued shares of Common Stock,
         for the purpose of effecting the conversion of Series A Stock, the full
         number of shares of Common Stock then deliverable upon the conversion
         of all shares of Series A Stock then outstanding.

<PAGE>

                  f. No fractional shares shall be issued upon conversion of the
         Series A Stock, and the number of shares of Common Stock to be issued
         shall be rounded to the nearest whole share (with one-half being
         rounded to the upward). Such conversion shall be determined on the
         basis of the total number of shares of Series A Stock the holder is at
         the time converting into Common Stock and the aggregate number of
         shares of Common Stock issuable upon such conversion.

         6. Mandatory Conversion. The Series A Stock shall automatically be
converted into shares of Common Stock of the corporation, without any act by the
corporation or the holders of the Series A Stock, (i) concurrently with the
closing of an offering of the corporation's equity in which the aggregate
offering price of the securities sold for cash by the corporation in the
offering is at least $5,000,000, or such lower amount as may be approved by the
holders of at least a majority of the shares of Series A Stock then outstanding,
voting separately as a class or (ii) at such time as at least 50% of the number
of shares of Series A Stock that were outstanding as of November 30, 1998 have
been converted or redeemed. As used herein, the term "closing" shall mean the
delivery by the corporation of certificates representing the securities of the
corporation offered against delivery to the corporation of payment therefor. Any
conversion of Series A Stock occurring on the date of the closing of a financing
by the corporation satisfying the conditions set forth above shall be deemed to
be a conversion pursuant to the terms of this paragraph 6.

         Each holder of a share of Series A Stock converted pursuant to the
preceding paragraph shall be entitled to receive the full number of shares of
Common Stock into which such share of Series A Stock held by such holder could
be converted if such holder had exercised its conversion right at the time of
closing of such financing.

         7.       Redemption of Series A Stock.

                  a. If any time after November 5, 2003 the corporation receives
         a written request of the holders of not less than fifty percent (50%)
         of the then outstanding shares of Series A Stock, voting together as a
         single class and on an as-converted basis, (collectively, the
         "Initiating Holders"), the corporation shall within thirty (30) days
         after the receipt of such notice redeem all of the then outstanding
         shares of Series A Stock (or, if less, the maximum amount it may
         lawfully redeem) by paying in cash therefor an amount equal to the sum
         of the Original Purchase Price and an amount equal to a return on
         investment at the rate of 10% per annum, compounded annually, over the
         period commencing on the date of original issuance of the Series A
         Stock by the corporation and ending on the Redemption Date (defined
         below). The aggregate amounts payable with respect to Series A Stock
         are hereinafter collectively referred to as the "Redemption Price."

                  b. At least twenty (20) days prior to the date fixed for any
         redemption of any Series A Stock (the "Redemption Date"), written
         notice shall be mailed, first class postage prepaid, to each holder of
         record (at the close of business on the business day next preceding the
         day on which notice is given) of the Series A Stock to be redeemed, at
         the address last shown on the records of the corporation for such

<PAGE>

         holder or given by the holder to the corporation for the purpose of
         notice or if no such address appears or is given at the principal
         executive office of the corporation, notifying such holder of the
         redemption to be effected, specifying the number of shares to be
         redeemed from such holder, the Redemption Date, the Redemption Price,
         the place at which payment may be obtained, and the date on which such
         holder's conversion rights (as set forth in paragraph 5 above) as to
         such shares terminate, and calling upon such holder to surrender to the
         corporation, in the manner and at the place designated, the certificate
         or certificates representing the shares to be redeemed (the "Redemption
         Notice"). On or after the Redemption Date, each holder of Series A
         Stock to be redeemed shall surrender to the corporation the certificate
         or certificates representing such shares, in the manner and at the
         place designated in the Redemption Notice, and thereupon the Redemption
         Price of such shares shall be payable to the order of the person whose
         name appears on such certificate or certificates as the owner thereof
         and each surrendered certificate shall be canceled. In the event less
         than all the shares represented by any such certificate are redeemed, a
         new certificate shall be issued representing the unredeemed shares.

                  c. From and after the Redemption Date, unless there shall have
         been a default in payment of the Redemption Price, all rights of the
         holders of Series A Stock, as holders of such shares (except the right
         to receive the Redemption Price without interest upon surrender of
         their certificate or certificates) shall cease with respect to such
         shares which such holders elected to have redeemed, and such shares
         shall not thereafter be transferred on the books of the corporation or
         be deemed to be outstanding for any purpose whatsoever. If the funds of
         the corporation legally available for redemption of shares of Series A
         Stock on any Redemption Date are insufficient to redeem the total
         number of shares of Series A Stock to be redeemed on such date, those
         funds that are legally available will be used to redeem shares of
         Series A Stock such that each holder of Series A Stock receives the
         same percentage of the aggregate Series A Stock Redemption Price, as
         applicable, as such holder would otherwise receive if the corporation
         could legally redeem all of the shares put for redemption on such date.
         The shares of Series A Stock not redeemed shall remain outstanding and
         entitled to all the rights and preferences provided herein. At any time
         thereafter when additional funds of the corporation are legally
         available for the redemption of shares of Series A Stock, such funds
         will immediately be used to redeem the balance of the shares that the
         corporation has become obligated to redeem on any Redemption Date but
         that it has not redeemed.

                  d. On or prior to the Redemption Date, the corporation shall
         deposit the Redemption Price of all shares of Series A Stock designated
         for redemption in the Redemption Notice, and not yet redeemed or
         converted, with a bank or trust corporation having aggregate capital
         and surplus in excess of $100,000,000 as a trust fund for the benefit
         of the respective holders of the shares designated by holders of Series
         A Stock for redemption and not yet redeemed, with irrevocable
         instructions and authority to the bank or trust corporation to publish
         the notice of redemption thereof and pay the Redemption Price for such
         shares to their respective holders on or after the Redemption Date,
         upon receipt of notification from the corporation that such holder has
         surrendered its share certificate to the corporation pursuant to

<PAGE>

         subparagraph 7(b) above. As of the date of such deposit, the deposit
         shall constitute full payment of the shares to their holders, and from
         and after the date of the deposit the shares so called for redemption
         shall be redeemed and shall be deemed to be no longer outstanding, and
         the holders thereof shall cease to be shareholders with respect to such
         shares and shall have no rights with respect thereto except the rights
         to receive from the bank or trust corporation payment of the Redemption
         Price of the shares, without interest, upon surrender of their
         certificates therefor, and the right to convert such shares as provided
         in paragraph 5 above. Such instructions shall also provide that any
         moneys deposited by the corporation pursuant to this subparagraph 7(d)
         for the redemption of shares thereafter converted into shares of the
         corporation's Common Stock pursuant to paragraph 6 above prior to the
         Redemption Date shall be returned to the corporation forthwith upon
         such conversion. The balance of any moneys deposited by the corporation
         pursuant to this subparagraph 7(d) remaining unclaimed at the
         expiration of two (2) years following the Redemption Date shall
         thereafter be returned to the corporation upon its request expressed in
         a resolution of its Board of Directors.

         8. Status of Converted or Redeemed Stock. In the event any shares of
Series A Stock shall be converted or redeemed by the corporation, the shares so
converted or redeemed shall not be reissuable by the corporation as Series A
Stock but shall be designated authorized shares of Common Stock and available
for issuance by the corporation as Common Stock. At such time as all outstanding
shares of Series A Stock have been converted or redeemed, (i) any theretofore
authorized but unissued shares of such series shall return to the status of
undesignated shares of the corporation, (ii) this Statement of Designation shall
be deemed amended to eliminate all authorized Series A Stock and the terms and
provisions thereof, and (iii) the Board of Directors and officers of the
corporation are authorized to take such action and execute and file such
instruments as may be necessary or appropriate to effect such amendment.



<PAGE>


                     AMENDMENT OF ARTICLES OF INCORPORATION
                                       OF
                                  QUANTECH LTD.



         Section 3.1 of the Articles of Incorporation of Quantech Ltd. has been
amended to read as follows:

                  "3.1 Authorized Shares; Establishment of Classes and Series.
         The aggregate number of shares the corporation has the authority to
         issue shall be 75,000,000, which shall have a par value of $.01 per
         share solely for the purpose of a statute or regulation imposing a tax
         or fee based upon the capitalization of the corporation, and which
         shall consist of 50,000,000 common shares, 2,500,000 Series A preferred
         shares, and 22,500,000 undesignated shares. The Board of Directors of
         the corporation is authorized to establish from the undesignated
         shares, by resolution adopted and filed in the manner provided by law,
         one or more classes or series of shares, to designate each such class
         or series (which may include but is not limited to designation as
         additional common shares), and to fix the relative rights and
         preferences of each such class or series."

         The foregoing amendment has been approved pursuant to Chapter 302A,
Minnesota Statutes.

         I certify that I am authorized to execute this Amendment and I further
certify that I understand that by signing this Amendment I am subject to the
penalties of perjury as set forth in Minnesota Statutes, Section 609.48 as if I
had signed this Amendment under oath.

         Dated:  December 22, 1998.




                                                 /s/ Gregory G. Freitag
                                                 Gregory G. Freitag
                                                 Chief Operating Officer and
                                                 Chief Financial Officer




<PAGE>


                       STATEMENT OF DESIGNATION OF SHARES
                                       OF
                                  QUANTECH LTD.



         I hereby certify that the resolutions set forth on Exhibit A attached
hereto were adopted by written action of the Board of Directors of QUANTECH LTD.
on May 19, 1999.

         I certify that I am authorized to execute this Statement and I further
certify that I understand that by signing this Statement I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
Statement under oath.




                                     /s/ Gregory G. Freitag
                                    Gregory G. Freitag, Chief Operating Officer




<PAGE>


               Designation of Series B Convertible Preferred Stock

         WHEREAS, the corporation's current authorized capitalization consists
of 50,000,000 authorized shares of Common Stock, 2,500,000 authorized shares of
Series A Preferred Stock and 22,500,000 authorized but undesignated shares; and

         WHEREAS, the Board of Directors deems it advisable to establish an
additional class of shares from the 22,500,000 authorized but undesignated
shares;

         NOW, THEREFORE, RESOLVED, that of the 22,500,000 undesignated shares
which the corporation is authorized to issue under its Articles of
Incorporation, 2,000,000 are hereby designated as shares of Series B Convertible
Preferred Stock (the "Series B Stock"), with a par value of $0.01 per share
solely for purposes of a statute or regulation imposing a tax or fee based upon
the capitalization of the corporation.

         FURTHER RESOLVED, that the rights and preferences of the Series B Stock
shall be as follows:

         1. Dividends. In the event that the corporation declares and pays any
dividends in cash with respect to Common Stock, the holder of a share of Series
B Stock will be entitled to receive a dividend per share equal to the dividend
that would have been otherwise payable with respect to such share if it had been
converted into shares of Common Stock prior to the record date of such dividend.

         2. Voting. Each outstanding share of Series B Stock shall entitle its
holder to that number of votes on all matters submitted to the stockholders that
is equal to the number of shares of Common Stock into which such holder's shares
of Series B Stock are then convertible, as hereinafter provided (except that
shares of Series B Stock shall have class voting rights as provided in paragraph
3 below and as otherwise now or hereafter required by agreement or law).

         3. Additional Class Votes by Series B Stock. Without the affirmative
vote or written consent of the holders (acting together as a class) of at least
a majority of the shares of Series B Stock at the time outstanding, the
corporation shall not:

                  a. amend the Articles of Incorporation of the corporation in
         any respect, including without limitation any certificate or
         designation relating to the Series B Stock, so as to alter any existing
         provision relating to Series B Stock or the holders thereof or waive
         any of the rights granted to the holders of the Series B Stock by the
         Articles of Incorporation of the corporation; or

                  b. increase the authorized number of shares of Series B
         Stock; or

                  c. authorize or issue any shares of capital stock having
         priority or preference over, or on parity with, Series B Stock as to
         dividends or distributions in the event of the liquidation, dissolution

<PAGE>

         or winding up of the corporation, provided that such prohibition shall
         not prevent the corporation from issuing any shares which may receive
         distributions in such events on a pari passu basis prorated, in the
         event assets are insufficient to pay the original purchase price of all
         such securities, to the original purchase price of each; or

                  d. declare or pay any dividend or make any other distribution
         on any shares of capital stock of the corporation at any time created
         and issued ranking junior to Series B Stock with respect to the rights
         to the distribution of assets upon liquidation, dissolution or winding
         up of the corporation, other than distributions payable solely in
         shares of junior stock.

         4.       Liquidation.

                  a. In the event of the liquidation, dissolution or winding up
         of the corporation, whether voluntary or involuntary, the holders of
         the shares of Series B Stock shall be entitled, after the payment of
         the preferential amount required to be paid to the Series A Preferred
         Stock, including the participation right of certain lenders/guarantors
         as provided in subparagraph (d) of the Designation of Series A
         Preferred Stock of this corporation, to receive in cash, out of the
         assets of the corporation, before any payment shall be made or any
         assets distributed to the holders of Common Stock with respect to the
         payment of dividends or upon dissolution or liquidation of the
         corporation, an amount equal to the sum of (i) $1.50 per share
         ("Original Purchase Price") (appropriately adjusted to reflect stock
         splits, stock dividends, reorganizations, consolidations and similar
         changes hereafter effected), and (ii) all dividends unpaid and
         accumulated or accrued thereon to the date of such distribution, if
         any. If, upon any liquidation or dissolution of this corporation, the
         assets of the corporation shall be insufficient to pay such amount, the
         holders of such shares shall share pro rata in any such distribution in
         proportion to the full amounts to which they would otherwise be
         respectively entitled.

                  b. After the payment of all preferential amounts required to
         be paid pursuant to subparagraph a above, any remaining assets and
         funds of the corporation available for distribution to its stockholders
         upon the liquidation, dissolution or winding up of the corporation
         shall be distributed ratably among the holders of Common Stock.

                  c. The merger or consolidation of the corporation into or with
         another corporation which results in the exchange of outstanding shares
         of the corporation for securities or other consideration issued or paid
         or caused to be issued or paid by such other corporation or an
         affiliate thereof (except if such merger or consolidation does not
         result in the transfer of more than 60% of the voting securities of the
         corporation), change in control of more than 60% of the voting
         securities of the corporation or the sale of all or substantially all
         the assets of the corporation, shall be deemed to be a liquidation,
         dissolution or winding up of the corporation for purposes of this
         paragraph, unless the holders of a majority of the Series B Stock then
         outstanding vote otherwise. The amount deemed distributed to the
         holders of Series B Stock upon any such merger or consolidation shall
         be the cash or the value of the property, rights and/or securities
         distributed to such holders by the acquiring person, firm or other
         entity. The value of such property, rights or other securities shall be
         determined in good faith by the Board of Directors of the corporation.

<PAGE>

         5. Conversion Right. At the option of the holders thereof, the shares
of Series B Stock shall be convertible, at the office of the corporation (or at
such other office or offices, if any, as the Board of Directors may designate),
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100th of a share) of Common Stock of the corporation, at the
conversion price, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common Stock shall be delivered upon
conversion of shares of Series B Stock (herein called the "conversion price")
shall be initially $1.50 per share of Common Stock (i.e., at an initial
conversion rate of one share of Common Stock for each share of Series B Stock),
provided, however, that such initial conversion price shall be subject to
adjustment from time to time in certain instances as hereinafter provided. The
following provisions shall govern such right of conversion:

                  a. In order to convert shares of Series B Stock into shares of
         Common Stock of the corporation, the holder thereof shall surrender at
         any office hereinabove mentioned the certificate or certificates
         therefor, duly endorsed to the corporation or in blank, and give
         written notice to the corporation at such office that such holder
         elects to convert such shares. Shares of Series B Stock shall be deemed
         to have been converted immediately prior to the close of business on
         the day of the surrender of such shares for conversion as herein
         provided, and the person entitled to receive the shares of Common Stock
         of the corporation issuable upon such conversion shall be treated for
         all purposes as the record holder of such shares of Common Stock at
         such time. As promptly as practicable on or after the conversion date,
         the corporation shall issue and deliver or cause to be issued and
         delivered at such office a certificate or certificates for the number
         of shares of Common Stock of the corporation issuable upon such
         conversion.

                  b. The conversion price shall be subject to adjustment from
         time to time as hereinafter provided. Upon each adjustment of the
         conversion price each holder of shares of Series B Stock shall
         thereafter be entitled to receive the number of shares of Common Stock
         of the corporation obtained by multiplying the conversion price in
         effect immediately prior to such adjustment by the number of shares
         issuable pursuant to conversion immediately prior to such adjustment
         and dividing the product thereof by the conversion price resulting from
         such adjustment.

                  c. If in the next sale of securities by this corporation after
         the adoption of this Designation, excluding any sale pursuant to
         options, warrants or conversion rights outstanding as the date of
         adoption of this Designation, the price per share of Common Stock sold
         is less than $1.875, or if the security sold is not Common Stock but is
         convertible into or exercisable to purchase Common Stock at a
         conversion or exercise price of less than $1.875 per share, then the
         conversion price shall be reduced an amount equal to 80% of the price
         per share at which such security is sold, convertible or exercisable.

         No adjustment of the conversion price of the Series B Stock, however,
shall be made in an amount less than 2% of such conversion price in effect on
the date of such adjustment, but any such lesser adjustment shall be carried

<PAGE>

forward and shall be made at the time and together with the next subsequent
adjustment which, together with any such adjustment so carried forward, shall be
an amount equal to or greater than 4% of the conversion price of the Series B
Stock then in effect.

         The holders of at least a majority of the Series B Stock then
outstanding may elect to waive the application of the provisions of this
paragraph 5 with respect to any issue or sale by the corporation of shares of
its Common Stock for a consideration per share less than the conversion price of
the Series B Stock in effect immediately prior to the time of such issue or
sale.

         For the purposes of this paragraph 5, the following provisions (i) to
(v), inclusive, shall also be applicable:

                  (i) In the event the corporation shall grant (whether directly
         or by assumption in a merger or otherwise) any rights to subscribe for
         or to purchase, or any options for the purchase of, (a) Common Stock or
         (b) any obligations or any shares of stock of the corporation which are
         convertible into, or exchangeable for, Common Stock (any of such
         obligations or shares of stock being hereinafter called "Convertible
         Securities") whether or not such rights or options or the right to
         convert or exchange any such Convertible Securities are immediately
         exercisable, and the price per share for which Common Stock is issuable
         upon the exercise of such rights or options or upon conversion or
         exchange of such Convertible Securities (determined by dividing (x) the
         total amount, if any, received or receivable by the corporation as
         consideration for the granting of such rights or options, plus the
         minimum aggregate amount of additional consideration payable to the
         corporation upon the exercise of such rights or options, plus, in the
         case of such rights or options which relate to Convertible Securities,
         the minimum aggregate amount of additional consideration, if any,
         payable upon the issue of such Convertible Securities and upon the
         conversion or exchange thereof, by (y) the total maximum number of
         shares of Common Stock issuable upon the exercise of such rights or
         options or upon the conversion or exchange of all such Convertible
         Securities issuable upon the exercise of such rights or options) shall
         be less than the conversion price of the Series B Stock in effect
         immediately prior to the time of the granting of such rights or
         options, then the total maximum number of shares of Common Stock
         issuable upon the exercise of such rights or options or upon conversion
         or exchange of the total maximum amount of such Convertible Securities
         issuable upon the exercise of such rights or options shall (as of the
         date of granting of such rights or options) be deemed to have been
         issued for such price per share. Except as provided in subparagraph d
         below, no further adjustments of the conversion price of the Series B
         Stock shall be made upon the actual issue of such Common Stock or of
         such Convertible Securities upon exercise of such rights or options or
         upon the actual issue of such Common Stock upon conversion or exchange
         of such Convertible Securities.

                  (ii) In case the corporation shall issue or sell (whether
         directly or by assumption in a merger or otherwise) any Convertible
         Securities, whether or not the rights to exchange or convert thereunder
         are immediately exercisable, and the price per share for which Common
         Stock is issuable upon such conversion or exchange (determined by
         dividing (x) the total amount received or receivable by the corporation
         as consideration for the issue or sale of such Convertible Securities,

<PAGE>

         plus the minimum aggregate amount of additional consideration, if any,
         payable to the corporation upon the conversion or exchange thereof, by
         (y) the total maximum number of shares of Common Stock issuable upon
         the conversion or exchange of all such Convertible Securities) shall be
         less than the conversion price of the Series B Stock in effect
         immediately prior to the time of such issue or at the time of such
         issue or sale, then the total maximum number of shares of Common Stock
         issuable upon conversion or exchange of all such Convertible Securities
         shall (as of the date of the issue or sale of such Convertible
         Securities) be deemed to be outstanding and to have been issued for
         such price per share, provided that (a) except as provided in
         subparagraph d below, no further adjustments of the conversion price
         shall be made upon the actual issue of such Common Stock upon
         conversion or exchange of such Convertible Securities, and (b) if any
         such issue or sale of such Convertible Securities is made upon exercise
         of any rights to subscribe for or to purchase or any option to purchase
         any such Convertible Securities for which adjustments of the conversion
         price of the Series B Stock have been or are to be made pursuant to
         other provisions of this paragraph 5, no further adjustment of the
         conversion price shall be made by reason of such issue or sale.

                  (iii) In case any shares of Common Stock or Convertible
         Securities or any rights or options to purchase any such Common Stock
         or Convertible Securities shall be issued or sold for cash, the
         consideration received therefor shall be deemed to be the amount
         received by the corporation therefor, without deducting therefrom any
         expenses incurred or any underwriting commissions, discounts or
         concessions paid or allowed by the corporation in connection therewith.
         In case any shares of Common Stock or Convertible Securities or any
         rights or options to purchase any such Common Stock or Convertible
         Securities shall be issued or sold for a consideration other than cash,
         the amount of the consideration other than cash received by the
         corporation shall be deemed to be the fair value of such consideration
         as determined by the Board of Directors of the corporation, without
         deducting therefrom any expenses incurred or any underwriting
         commissions, discounts or concessions paid or allowed by the
         corporation in connection therewith. In case any shares of Common Stock
         or Convertible Securities or any rights or options to purchase such
         Common Stock or Convertible Securities shall be issued in connection
         with any merger or consolidation in which the corporation is the
         surviving corporation, the amount of consideration therefor shall be
         deemed to be the fair value as determined by the Board of Directors of
         the corporation of such portion of the assets and business of the
         non-surviving corporation or corporations as such Board shall determine
         to be attributable to such Common Stock, Convertible Securities, rights
         or options, as the case may be. In the event of any consolidation or
         merger of the corporation in which the corporation is not the surviving
         corporation or in the event of any sale of all or substantially all of
         the assets of the corporation for stock or other securities of any
         other corporation, the corporation shall be deemed to have issued a
         number of shares of its Common Stock for stock or securities of the
         other corporation computed on the basis of the actual exchange ratio on
         which the transaction was predicated and for a consideration equal to
         the fair market value on the date of such transaction of such stock or
         securities of the other corporation, and if any such calculation
         results in adjustment of the conversion price of the Series B Stock,
         the determination of the number of shares of Common Stock issuable upon
         conversion immediately prior to such merger, conversion or sale, for
         purposes of subparagraph d below, shall be made after giving effect to
         such adjustment of the conversion price.

<PAGE>

                  (iv) In case the corporation shall take a record of the
         holders of its Common Stock for the purpose of entitling them (a) to
         receive a dividend or other distribution payable in Common Stock or in
         Convertible Securities, or in any rights or options to purchase any
         Common Stock or Convertible Securities, or (b) to subscribe for or
         purchase Common Stock or Convertible Securities, then such record date
         shall be deemed to be the date of the issue or sale of the shares of
         Common Stock deemed to have been issued or sold upon the declaration of
         such dividend or the making of such other distribution or the date of
         the granting of such rights of subscription or purchase, as the case
         may be.

                  b. In case the corporation shall (i) declare a dividend upon
         the Common Stock payable in Common Stock (other than a dividend
         declared to effect a subdivision of the outstanding shares of Common
         Stock, as described in subparagraph e below) or Convertible Securities,
         or in any rights or options to purchase Common Stock or Convertible
         Securities, or (ii) declare any other dividend or make any other
         distribution upon the Common Stock payable otherwise than out of
         earnings or earned surplus, then thereafter each holder of shares of
         Series B Stock upon the conversion thereof will be entitled to receive
         the number of shares of Common Stock into which such shares of Series B
         Stock have been converted, and, in addition and without payment
         therefor, each dividend described in clause (i) above and each dividend
         or distribution described in clause (ii) above which such holder would
         have received by way of dividends or distributions if continuously held
         since such holder became the record holder of such shares of Series B
         Stock such holder (i) had been the record holder of the number of
         shares of Common Stock then received, and (ii) had retained all
         dividends or distributions in stock or securities (including Common
         Stock or Convertible Securities, and any rights or options to purchase
         any Common Stock or Convertible Securities) payable in respect of such
         Common Stock or in respect of any stock or securities paid as dividends
         or distributions and originating directly or indirectly from such
         Common Stock. For the purposes of the foregoing, a dividend or
         distribution other than in cash shall be considered payable out of
         earnings or earned surplus only to the extent that such earnings or
         earned surplus are charged an amount equal to the fair value of such
         dividend or distribution as determined by the Board of Directors of the
         corporation.

                  c. In case the corporation shall at any time split or
         subdivide its outstanding shares of Common Stock into a greater number
         of shares, the conversion price of Series B Stock in effect immediately
         prior to such subdivision shall be proportionately reduced, and
         conversely, in case the outstanding shares of Common Stock of the
         corporation shall be combined into a smaller number of shares, the
         conversion price of Series B Stock in effect immediately prior to such
         combination shall be proportionately increased.

                  d. If (i) the purchase price provided for in any right or
         option referred to in clause (i) of subparagraph a, or (ii) the
         additional consideration, if any, payable upon the conversion or
         exchange of Convertible Securities referred to in clause (i) or clause
         (ii) of subparagraph a, or (iii) the rate at which any Convertible
         Securities referred to in clause (i) or clause (ii) of subparagraph a
         are convertible into or exchangeable for Common Stock, shall change at
         any time (other than under or by reason of provisions designed to

<PAGE>

         protect against dilution), the conversion price of the Series B Stock
         then in effect hereunder shall forthwith be increased or decreased to
         such conversion price as would have obtained had the adjustments made
         upon the issuance of such rights, options or Convertible Securities
         been made upon the basis of (a) the issuance of the number of shares of
         Common Stock theretofore actually delivered upon the exercise of such
         options or rights or upon the conversion or exchange of such
         Convertible Securities, and the total consideration received therefor,
         and (b) the issuance at the time of such change of any such options,
         rights, or Convertible Securities then still outstanding for the
         consideration, if any, received by the corporation therefor and to be
         received on the basis of such changed price; and on the expiration of
         any such option or right or the termination of any such right to
         convert or exchange such Convertible Securities, the conversion price
         of the Series B Stock then in effect hereunder shall forthwith be
         increased to such conversion price as would have obtained had the
         adjustments made upon the issuance of such rights or options or
         Convertible Securities been made upon the basis of the issuance of the
         shares of Common Stock theretofore actually delivered (and the total
         consideration received therefor) upon the exercise of such rights or
         options or upon the conversion or exchange of such Convertible
         Securities. If the purchase price provided for in any right or option
         referred to in clause (i) of subparagraph a, or the rate at which any
         Convertible Securities referred to in clause (i) or clause (ii) of
         subparagraph a are convertible into or exchangeable for Common Stock,
         shall decrease at any time under or by reason of provisions with
         respect thereto designed to protect against dilution, then in case of
         the delivery of Common Stock upon the exercise of any such right or
         option or upon conversion or exchange of any such Convertible Security,
         the conversion price of the Series B Stock then in effect hereunder
         shall forthwith be decreased to such conversion price as would have
         obtained had the adjustments made upon the issuance of such right,
         option or Convertible Security been made upon the basis of the issuance
         of (and the total consideration received for) the shares of Common
         Stock delivered as aforesaid.

                  e. The corporation shall at all times insure and keep
         available out of its authorized but unissued shares of Common Stock,
         for the purpose of effecting the conversion of Series B Stock, the full
         number of shares of Common Stock then deliverable upon the conversion
         of all shares of Series B Stock then outstanding.

                  f. No fractional shares shall be issued upon conversion of the
         Series B Stock, and the number of shares of Common Stock to be issued
         shall be rounded to the nearest whole share (with one-half being
         rounded to the upward). Such conversion shall be determined on the
         basis of the total number of shares of Series B Stock the holder is at
         the time converting into Common Stock and the aggregate number of
         shares of Common Stock issuable upon such conversion.

         6. Mandatory Conversion. The Series B Stock shall automatically be
converted into shares of Common Stock of the corporation, without any act by the
corporation or the holders of the Series B Stock, (i) concurrently with the
closing of an offering of the corporation's equity in which the aggregate
offering price of the securities sold for cash by the corporation in the
offering is at least $5,000,000, or (ii) at such time as at least 50% of the
number of shares of Series B Stock have been converted into Common Stock. As
used herein, the term "closing" shall mean the delivery by the corporation of
certificates representing the securities of the corporation offered against
delivery to the corporation of payment therefor. Any conversion of Series B

<PAGE>

Stock occurring on the date of the closing of a financing by the corporation
satisfying the conditions set forth above shall be deemed to be a conversion
pursuant to the terms of this paragraph 6.

         Each holder of a share of Series B Stock converted pursuant to the
preceding paragraph shall be entitled to receive the full number of shares of
Common Stock into which such share of Series B Stock held by such holder could
be converted if such holder had exercised its conversion right at the time of
closing of such financing.

         7. Status of Converted Stock. In the event any shares of Series B Stock
shall be converted by the corporation, the shares so converted shall not be
reissuable by the corporation as Series B Stock but shall be designated
authorized shares of Common Stock and available for issuance by the corporation
as Common Stock. At such time as all outstanding shares of Series B Stock have
been converted, (i) any theretofore authorized but unissued shares of such
series shall return to the status of undesignated shares of the corporation,
(ii) this Statement of Designation shall be deemed amended to eliminate all
authorized Series B Stock and the terms and provisions thereof, and (iii) the
Board of Directors and officers of the corporation are authorized to take such
action and execute and file such instruments as may be necessary or appropriate
to effect such amendment.






<PAGE>



                       STATEMENT OF DESIGNATION OF SHARES
                                       OF
                                  QUANTECH LTD.



         I hereby certify that the resolutions set forth on Exhibit A attached
hereto were adopted by written action of the Board of Directors of QUANTECH LTD.
on October 11, 1999.

         I certify that I am authorized to execute this Statement and I further
certify that I understand that by signing this Statement I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
Statement under oath.




                                    /s/ Gregory G. Freitag
                                    Gregory G. Freitag, Chief Operating Officer




<PAGE>


                            STATEMENT OF DESIGNATION
                                       OF
                      SERIES B CONVERTIBLE PREFERRED STOCK

         WHEREAS, the corporation's current authorized capitalization consists
of 50,000,000 authorized shares of Common Stock, 2,500,000 authorized shares of
Series A Preferred Stock and 22,500,000 authorized but undesignated shares; and

         WHEREAS, the Board of Directors deems it advisable to establish an
additional class of shares from the 22,500,000 authorized but undesignated
shares;

         NOW, THEREFORE, RESOLVED, that of the 22,500,000 undesignated shares
which the corporation is authorized to issue under its Articles of
Incorporation, 3,000,000 are hereby designated as shares of Series B Convertible
Preferred Stock (the "Series B Stock"), with a par value of $0.01 per share
solely for purposes of a statute or regulation imposing a tax or fee based upon
the capitalization of the corporation.

         FURTHER RESOLVED, that the rights and preferences of the Series B Stock
shall be as follows:

         1. Dividends. In the event that the corporation declares and pays any
dividends in cash with respect to Common Stock, the holder of a share of Series
B Stock will be entitled to receive a dividend per share equal to the dividend
that would have been otherwise payable with respect to such share if it had been
converted into shares of Common Stock prior to the record date of such dividend.

         2. Voting. Each outstanding share of Series B Stock shall entitle its
holder to that number of votes on all matters submitted to the stockholders that
is equal to the number of shares of Common Stock into which such holder's shares
of Series B Stock are then convertible, as hereinafter provided (except that
shares of Series B Stock shall have class voting rights as provided in paragraph
3 below and as otherwise now or hereafter required by agreement or law).

         3. Additional Class Votes by Series B Stock. Without the affirmative
vote or written consent of the holders (acting together as a class) of at least
a majority of the shares of Series B Stock at the time outstanding, the
corporation shall not:

                  a. amend the Articles of Incorporation of the corporation in
         any respect, including without limitation any certificate or
         designation relating to the Series B Stock, so as to alter any existing
         provision relating to Series B Stock or the holders thereof or waive
         any of the rights granted to the holders of the Series B Stock by the
         Articles of Incorporation of the corporation; or


<PAGE>

                  b. increase the authorized number of shares of Series B
         Stock; or

                  c. authorize or issue any shares of capital stock having
         priority or preference over, or on parity with, Series B Stock as to
         dividends or distributions in the event of the liquidation, dissolution
         or winding up of the corporation, provided that such prohibition shall
         not prevent the corporation from issuing any shares which may receive
         distributions in such events on a pari passu basis prorated, in the
         event assets are insufficient to pay the original purchase price of all
         such securities, to the original purchase price of each; or

                  d. declare or pay any dividend or make any other distribution
         on any shares of capital stock of the corporation at any time created
         and issued ranking junior to Series B Stock with respect to the rights
         to the distribution of assets upon liquidation, dissolution or winding
         up of the corporation, other than distributions payable solely in
         shares of junior stock.

         4.       Liquidation.

                  a. In the event of the liquidation, dissolution or winding up
         of the corporation, whether voluntary or involuntary, the holders of
         the shares of Series B Stock shall be entitled, after the payment of
         the preferential amount required to be paid to the Series A Preferred
         Stock, including the participation right of certain lenders/guarantors
         as provided in subparagraph (d) of the Designation of Series A
         Preferred Stock of this corporation, to receive in cash, out of the
         assets of the corporation, before any payment shall be made or any
         assets distributed to the holders of Common Stock with respect to the
         payment of dividends or upon dissolution or liquidation of the
         corporation, an amount equal to the sum of (i) $1.00 per share
         ("Original Purchase Price") (appropriately adjusted to reflect stock
         splits, stock dividends, reorganizations, consolidations and similar
         changes hereafter effected), and (ii) all dividends unpaid and
         accumulated or accrued thereon to the date of such distribution, if
         any. If, upon any liquidation or dissolution of this corporation, the
         assets of the corporation shall be insufficient to pay such amount, the
         holders of such shares shall share pro rata in any such distribution in
         proportion to the full amounts to which they would otherwise be
         respectively entitled.

                  b. After the payment of all preferential amounts required to
         be paid pursuant to subparagraph a above, any remaining assets and
         funds of the corporation available for distribution to its stockholders
         upon the liquidation, dissolution or winding up of the corporation
         shall be distributed ratably among the holders of Common Stock.

                  c. The merger or consolidation of the corporation into or with
         another corporation which results in the exchange of outstanding shares
         of the corporation for securities or other consideration issued or paid
         or caused to be issued or paid by such other corporation or an
         affiliate thereof (except if such merger or consolidation does not
         result in the transfer of more than 60% of the voting securities of the
         corporation), change in control of more than 60% of the voting

<PAGE>

         securities of the corporation or the sale of all or substantially all
         the assets of the corporation, shall be deemed to be a liquidation,
         dissolution or winding up of the corporation for purposes of this
         paragraph, unless the holders of a majority of the Series B Stock then
         outstanding vote otherwise. The amount deemed distributed to the
         holders of Series B Stock upon any such merger or consolidation shall
         be the cash or the value of the property, rights and/or securities
         distributed to such holders by the acquiring person, firm or other
         entity. The value of such property, rights or other securities shall be
         determined in good faith by the Board of Directors of the corporation.

         5. Conversion Right. At the option of the holders thereof, the shares
of Series B Stock shall be convertible, at the office of the corporation (or at
such other office or offices, if any, as the Board of Directors may designate),
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100th of a share) of Common Stock of the corporation, at the
conversion price, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common Stock shall be delivered upon
conversion of shares of Series B Stock (herein called the "conversion price")
shall be initially $1.00 per share of Common Stock (i.e., at an initial
conversion rate of one share of Common Stock for each share of Series B Stock),
provided, however, that such initial conversion price shall be subject to
adjustment from time to time in certain instances as hereinafter provided. The
following provisions shall govern such right of conversion:

                  a. In order to convert shares of Series B Stock into shares of
         Common Stock of the corporation, the holder thereof shall surrender at
         any office hereinabove mentioned the certificate or certificates
         therefor, duly endorsed to the corporation or in blank, and give
         written notice to the corporation at such office that such holder
         elects to convert such shares. Shares of Series B Stock shall be deemed
         to have been converted immediately prior to the close of business on
         the day of the surrender of such shares for conversion as herein
         provided, and the person entitled to receive the shares of Common Stock
         of the corporation issuable upon such conversion shall be treated for
         all purposes as the record holder of such shares of Common Stock at
         such time. As promptly as practicable on or after the conversion date,
         the corporation shall issue and deliver or cause to be issued and
         delivered at such office a certificate or certificates for the number
         of shares of Common Stock of the corporation issuable upon such
         conversion.

                  b. The conversion price shall be subject to adjustment from
         time to time as hereinafter provided. Upon each adjustment of the
         conversion price each holder of shares of Series B Stock shall
         thereafter be entitled to receive the number of shares of Common Stock
         of the corporation obtained by multiplying the conversion price in
         effect immediately prior to such adjustment by the number of shares
         issuable pursuant to conversion immediately prior to such adjustment
         and dividing the product thereof by the conversion price resulting from
         such adjustment.

                  c. If in the next sale of securities by this corporation after
         the adoption of this Designation, excluding any sale pursuant to
         options, warrants or conversion rights outstanding as of the date of
         adoption of this Designation, the price per share of Common Stock sold
         is less than $1.00, or if the security sold is not Common Stock but is
         convertible into or exercisable to purchase Common Stock at a
         conversion or exercise price of less than $1.00 per share, then the

<PAGE>

         conversion price shall be reduced to an amount equal to the price per
         share at which such security is sold, convertible or exercisable.

         No adjustment of the conversion price of the Series B Stock, however,
shall be made in an amount less than 2% of such conversion price in effect on
the date of such adjustment, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which, together with any such adjustment so carried forward, shall be
an amount equal to or greater than 4% of the conversion price of the Series B
Stock then in effect.

         The holders of at least a majority of the Series B Stock then
outstanding may elect to waive the application of the provisions of this
paragraph 5 with respect to any issue or sale by the corporation of shares of
its Common Stock for a consideration per share less than the conversion price of
the Series B Stock in effect immediately prior to the time of such issue or
sale.

         For the purposes of this paragraph 5, the following provisions (i) to
(v), inclusive, shall also be applicable:

                  (i) In the event the corporation shall grant (whether directly
         or by assumption in a merger or otherwise) any rights to subscribe for
         or to purchase, or any options for the purchase of, (a) Common Stock or
         (b) any obligations or any shares of stock of the corporation which are
         convertible into, or exchangeable for, Common Stock (any of such
         obligations or shares of stock being hereinafter called "Convertible
         Securities") whether or not such rights or options or the right to
         convert or exchange any such Convertible Securities are immediately
         exercisable, and the price per share for which Common Stock is issuable
         upon the exercise of such rights or options or upon conversion or
         exchange of such Convertible Securities (determined by dividing (x) the
         total amount, if any, received or receivable by the corporation as
         consideration for the granting of such rights or options, plus the
         minimum aggregate amount of additional consideration payable to the
         corporation upon the exercise of such rights or options, plus, in the
         case of such rights or options which relate to Convertible Securities,
         the minimum aggregate amount of additional consideration, if any,
         payable upon the issue of such Convertible Securities and upon the
         conversion or exchange thereof, by (y) the total maximum number of
         shares of Common Stock issuable upon the exercise of such rights or
         options or upon the conversion or exchange of all such Convertible
         Securities issuable upon the exercise of such rights or options) shall
         be less than the conversion price of the Series B Stock in effect
         immediately prior to the time of the granting of such rights or
         options, then the total maximum number of shares of Common Stock
         issuable upon the exercise of such rights or options or upon conversion
         or exchange of the total maximum amount of such Convertible Securities
         issuable upon the exercise of such rights or options shall (as of the
         date of granting of such rights or options) be deemed to have been
         issued for such price per share. Except as provided in subparagraph (d)
         below, no further adjustments of the conversion price of the Series B
         Stock shall be made upon the actual issue of such Common Stock or of
         such Convertible Securities upon exercise of such rights or options or
         upon the actual issue of such Common Stock upon conversion or exchange
         of such Convertible Securities.

<PAGE>

                  (ii) In case the corporation shall issue or sell (whether
         directly or by assumption in a merger or otherwise) any Convertible
         Securities, whether or not the rights to exchange or convert thereunder
         are immediately exercisable, and the price per share for which Common
         Stock is issuable upon such conversion or exchange (determined by
         dividing (x) the total amount received or receivable by the corporation
         as consideration for the issue or sale of such Convertible Securities,
         plus the minimum aggregate amount of additional consideration, if any,
         payable to the corporation upon the conversion or exchange thereof, by
         (y) the total maximum number of shares of Common Stock issuable upon
         the conversion or exchange of all such Convertible Securities) shall be
         less than the conversion price of the Series B Stock in effect
         immediately prior to the time of such issue or at the time of such
         issue or sale, then the total maximum number of shares of Common Stock
         issuable upon conversion or exchange of all such Convertible Securities
         shall (as of the date of the issue or sale of such Convertible
         Securities) be deemed to be outstanding and to have been issued for
         such price per share, provided that (a) except as provided in
         subparagraph d below, no further adjustments of the conversion price
         shall be made upon the actual issue of such Common Stock upon
         conversion or exchange of such Convertible Securities, and (b) if any
         such issue or sale of such Convertible Securities is made upon exercise
         of any rights to subscribe for or to purchase or any option to purchase
         any such Convertible Securities for which adjustments of the conversion
         price of the Series B Stock have been or are to be made pursuant to
         other provisions of this paragraph 5, no further adjustment of the
         conversion price shall be made by reason of such issue or sale.

                  (iii) In case any shares of Common Stock or Convertible
         Securities or any rights or options to purchase any such Common Stock
         or Convertible Securities shall be issued or sold for cash, the
         consideration received therefor shall be deemed to be the amount
         received by the corporation therefor, without deducting therefrom any
         expenses incurred or any underwriting commissions, discounts or
         concessions paid or allowed by the corporation in connection therewith.
         In case any shares of Common Stock or Convertible Securities or any
         rights or options to purchase any such Common Stock or Convertible
         Securities shall be issued or sold for a consideration other than cash,
         the amount of the consideration other than cash received by the
         corporation shall be deemed to be the fair value of such consideration
         as determined by the Board of Directors of the corporation, without
         deducting therefrom any expenses incurred or any underwriting
         commissions, discounts or concessions paid or allowed by the
         corporation in connection therewith. In case any shares of Common Stock
         or Convertible Securities or any rights or options to purchase such
         Common Stock or Convertible Securities shall be issued in connection
         with any merger or consolidation in which the corporation is the
         surviving corporation, the amount of consideration therefor shall be
         deemed to be the fair value as determined by the Board of Directors of
         the corporation of such portion of the assets and business of the
         non-surviving corporation or corporations as such Board shall determine
         to be attributable to such Common Stock, Convertible Securities, rights
         or options, as the case may be. In the event of any consolidation or
         merger of the corporation in which the corporation is not the surviving
         corporation or in the event of any sale of all or substantially all of
         the assets of the corporation for stock or other securities of any
         other corporation, the corporation shall be deemed to have issued a
         number of shares of its Common Stock for stock or securities of the
         other corporation computed on the basis of the actual exchange ratio on
         which the transaction was predicated and for a consideration equal to

<PAGE>
         the fair market value on the date of such transaction of such stock or
         securities of the other corporation, and if any such calculation
         results in adjustment of the conversion price of the Series B Stock,
         the determination of the number of shares of Common Stock issuable upon
         conversion immediately prior to such merger, conversion or sale, for
         purposes of subparagraph d below, shall be made after giving effect to
         such adjustment of the conversion price.

                  (iv) In case the corporation shall take a record of the
         holders of its Common Stock for the purpose of entitling them (a) to
         receive a dividend or other distribution payable in Common Stock or in
         Convertible Securities, or in any rights or options to purchase any
         Common Stock or Convertible Securities, or (b) to subscribe for or
         purchase Common Stock or Convertible Securities, then such record date
         shall be deemed to be the date of the issue or sale of the shares of
         Common Stock deemed to have been issued or sold upon the declaration of
         such dividend or the making of such other distribution or the date of
         the granting of such rights of subscription or purchase, as the case
         may be.

                  b. In case the corporation shall (i) declare a dividend upon
         the Common Stock payable in Common Stock (other than a dividend
         declared to effect a subdivision of the outstanding shares of Common
         Stock, as described in subparagraph e below) or Convertible Securities,
         or in any rights or options to purchase Common Stock or Convertible
         Securities, or (ii) declare any other dividend or make any other
         distribution upon the Common Stock payable otherwise than out of
         earnings or earned surplus, then thereafter each holder of shares of
         Series B Stock upon the conversion thereof will be entitled to receive
         the number of shares of Common Stock into which such shares of Series B
         Stock have been converted, and, in addition and without payment
         therefor, each dividend described in clause (i) above and each dividend
         or distribution described in clause (ii) above which such holder would
         have received by way of dividends or distributions if continuously held
         since such holder became the record holder of such shares of Series B
         Stock such holder (i) had been the record holder of the number of
         shares of Common Stock then received, and (ii) had retained all
         dividends or distributions in stock or securities (including Common
         Stock or Convertible Securities, and any rights or options to purchase
         any Common Stock or Convertible Securities) payable in respect of such
         Common Stock or in respect of any stock or securities paid as dividends
         or distributions and originating directly or indirectly from such
         Common Stock. For the purposes of the foregoing, a dividend or
         distribution other than in cash shall be considered payable out of
         earnings or earned surplus only to the extent that such earnings or
         earned surplus are charged an amount equal to the fair value of such
         dividend or distribution as determined by the Board of Directors of the
         corporation.

                  c. In case the corporation shall at any time split or
         subdivide its outstanding shares of Common Stock into a greater number
         of shares, the conversion price of Series B Stock in effect immediately
         prior to such subdivision shall be proportionately reduced, and
         conversely, in case the outstanding shares of Common Stock of the
         corporation shall be combined into a smaller number of shares, the
         conversion price of Series B Stock in effect immediately prior to such
         combination shall be proportionately increased.

<PAGE>

                  d. If (i) the purchase price provided for in any right or
         option referred to in clause (i) of subparagraph a, or (ii) the
         additional consideration, if any, payable upon the conversion or
         exchange of Convertible Securities referred to in clause (i) or clause
         (ii) of subparagraph a, or (iii) the rate at which any Convertible
         Securities referred to in clause (i) or clause (ii) of subparagraph a
         are convertible into or exchangeable for Common Stock, shall change at
         any time (other than under or by reason of provisions designed to
         protect against dilution), the conversion price of the Series B Stock
         then in effect hereunder shall forthwith be increased or decreased to
         such conversion price as would have obtained had the adjustments made
         upon the issuance of such rights, options or Convertible Securities
         been made upon the basis of (a) the issuance of the number of shares of
         Common Stock theretofore actually delivered upon the exercise of such
         options or rights or upon the conversion or exchange of such
         Convertible Securities, and the total consideration received therefor,
         and (b) the issuance at the time of such change of any such options,
         rights, or Convertible Securities then still outstanding for the
         consideration, if any, received by the corporation therefor and to be
         received on the basis of such changed price; and on the expiration of
         any such option or right or the termination of any such right to
         convert or exchange such Convertible Securities, the conversion price
         of the Series B Stock then in effect hereunder shall forthwith be
         increased to such conversion price as would have obtained had the
         adjustments made upon the issuance of such rights or options or
         Convertible Securities been made upon the basis of the issuance of the
         shares of Common Stock theretofore actually delivered (and the total
         consideration received therefor) upon the exercise of such rights or
         options or upon the conversion or exchange of such Convertible
         Securities. If the purchase price provided for in any right or option
         referred to in clause (i) of subparagraph a, or the rate at which any
         Convertible Securities referred to in clause (i) or clause (ii) of
         subparagraph a are convertible into or exchangeable for Common Stock,
         shall decrease at any time under or by reason of provisions with
         respect thereto designed to protect against dilution, then in case of
         the delivery of Common Stock upon the exercise of any such right or
         option or upon conversion or exchange of any such Convertible Security,
         the conversion price of the Series B Stock then in effect hereunder
         shall forthwith be decreased to such conversion price as would have
         obtained had the adjustments made upon the issuance of such right,
         option or Convertible Security been made upon the basis of the issuance
         of (and the total consideration received for) the shares of Common
         Stock delivered as aforesaid.

                  e. The corporation shall at all times insure and keep
         available out of its authorized but unissued shares of Common Stock,
         for the purpose of effecting the conversion of Series B Stock, the full
         number of shares of Common Stock then deliverable upon the conversion
         of all shares of Series B Stock then outstanding.

                  f. No fractional shares shall be issued upon conversion of the
         Series B Stock, and the number of shares of Common Stock to be issued
         shall be rounded to the nearest whole share (with one-half being
         rounded to the upward). Such conversion shall be determined on the
         basis of the total number of shares of Series B Stock the holder is at
         the time converting into Common Stock and the aggregate number of
         shares of Common Stock issuable upon such conversion.

<PAGE>

         6. Mandatory Conversion. The Series B Stock shall automatically be
converted into shares of Common Stock of the corporation, without any act by the
corporation or the holders of the Series B Stock, (i) concurrently with the
closing of an offering of the corporation's equity in which the aggregate
offering price of the securities sold for cash by the corporation in the
offering is at least $5,000,000, or (ii) at such time as at least 50% of the
number of shares of Series B Stock have been converted into Common Stock. As
used herein, the term "closing" shall mean the delivery by the corporation of
certificates representing the securities of the corporation offered against
delivery to the corporation of payment therefor. Any conversion of Series B
Stock occurring on the date of the closing of a financing by the corporation
satisfying the conditions set forth above shall be deemed to be a conversion
pursuant to the terms of this paragraph 6.

         Each holder of a share of Series B Stock converted pursuant to the
preceding paragraph shall be entitled to receive the full number of shares of
Common Stock into which such share of Series B Stock held by such holder could
be converted if such holder had exercised its conversion right at the time of
closing of such financing.

         7. Status of Converted Stock. In the event any shares of Series B Stock
shall be converted by the corporation, the shares so converted shall not be
reissuable by the corporation as Series B Stock but shall be designated
authorized shares of Common Stock and available for issuance by the corporation
as Common Stock. At such time as all outstanding shares of Series B Stock have
been converted, (i) any theretofore authorized but unissued shares of such
series shall return to the status of undesignated shares of the corporation,
(ii) this Statement of Designation shall be deemed amended to eliminate all
authorized Series B Stock and the terms and provisions thereof, and (iii) the
Board of Directors and officers of the corporation are authorized to take such
action and execute and file such instruments as may be necessary or appropriate
to effect such amendment.