Exhibit 10.2


                      DESIGNATIONS, PREFERENCES AND RIGHTS
                                       OF
               SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
                                       OF
                                   THCG, INC.


                            I. DESIGNATION AND AMOUNT

         The designation  (this  "Certificate of  Designation")  of this series,
which  consists  of 5000 shares of  Preferred  Stock of THCG,  Inc.,  a Delaware
corporation (the "Company"), is the Series A Convertible Participating Preferred
Stock (the "Preferred Stock") and the stated value shall be One Thousand Dollars
($1,000.00) per share (the "Face Amount").

                                  II. DIVIDENDS

         The Preferred Stock will bear no dividends.

                            III. CERTAIN DEFINITIONS

         For purposes of this  Certificate of  Designation,  the following terms
shall have the following meanings:

         A.  "Aggregate  Purchase Price" shall have the meaning set forth in the
Securities  Purchase  Agreement,  dated as of August 1,  2000,  by and among the
Company and the other signatories thereto (the "Securities Purchase Agreement").

         B. "Bankruptcy Event" shall mean any one or more of the following:  (i)
the commencement of any voluntary  proceeding by the Company seeking entry of an
order for relief under Title 11 of the United States Code or seeking any similar
or equivalent relief under any other applicable  federal or state law concerning
bankruptcy, insolvency, creditors' rights or any similar law; (ii) the making by
the  Company of a general  assignment  for the benefit of its  creditors  or any
portion of them; (iii) the commencement of any involuntary proceeding respecting
the Company  seeking entry of an order for relief  against the Company in a case
under Title 11 of the United  States  Code or seeking any similar or  equivalent
relief under any other  applicable  federal or state law concerning  bankruptcy,
insolvency, creditors' rights or any similar law that is not dismissed within 90
days of commencement;  (iv) entry of a decree or order respecting the Company by
a court having competent jurisdiction,  which decree or order (x) results in the
appointment of a receiver,  liquidator,  assignee, examiner, custodian, trustee,

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sequestrator (or other similar  official) for the Company or for any substantial
part of its  property or (y) orders the winding  up,  liquidation,  dissolution,
reorganization, arrangement, adjustment, or composition of the Company or any of
its debts; (v) the appointment,  whether or not voluntarily by the Company, of a
receiver,  liquidator,  assignee, examiner, custodian, trustee, sequestrator (or
other  similar  official)  for the  Company or for any  substantial  part of its
property; (vi) the failure by the Company to pay, or its admission in writing of
its inability to pay, its debts generally as they become due; (vii) the exercise
by any creditor of any right in connection  with an interest of such creditor in
any substantial part of the Company's property,  including,  without limitation,
foreclosure upon all or any such part of the Company's  property,  replevin,  or
the  exercise of any rights or remedies  provided  under the Uniform  Commercial
Code with regard thereto; (viii) the making of, or the sending of a notice of, a
bulk  transfer  by the  Company;  (ix) the  calling by the  Company of a general
meeting  of its  creditors;  and (x) the  consent  by the  Company to any of the
actions,  appointments,  or proceedings  described herein.  For purposes of this
paragraph, the "Company" shall also refer to any material subsidiary thereof.

         C.  "Closing  Date" shall have the meaning set forth in the  Securities
Purchase Agreement.

         D.  "Closing Bid Price"  means,  for any  security as of any date,  the
closing  bid price of such  security  on the  principal  securities  exchange or
trading  market where such security is listed or traded as reported by Bloomberg
Financial  Markets or a  comparable  reporting  service of  national  reputation
selected by the Company and reasonably acceptable to Holders (as defined herein)
of a  majority  of the  aggregate  principal  amount  represented  by  the  then
outstanding  Preferred Stock (with the consent, not to be unreasonably  withheld
or  delayed,  of the Initial  Holder (as defined  herein) so long as the Initial
Holder  continues  to own  Preferred  Stock)  ("Majority  Holders") if Bloomberg
Financial  Markets is not then  reporting  closing  bid prices of such  security
("Bloomberg"),  or if the foregoing does not apply, the last reported sale price
of such security in the over-the-counter market on the electronic bulletin board
of such security as reported by Bloomberg,  or, if no sale price is reported for
such security by  Bloomberg,  the average of the bid prices of all market makers
for such  security as reported in the "pink  sheets" by the  National  Quotation
Bureau,  Inc. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing  bases, the Closing Bid Price of such security
on such date  shall be the fair  market  value as  reasonably  determined  by an
investment banking firm selected by the Company and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the Company.

         E.  "Conversion  Date" means,  for any Optional  Conversion (as defined
herein),  the date  specified  in the notice of  conversion  attached  hereto as
Exhibit A (the "Notice of Conversion"),  or if no date is specified therein, the
date the Notice of  Conversion  is faxed or otherwise  delivered to the Company;
provided,  however,  that the Conversion  Date shall not be prior to the date of
delivery of the Notice of Conversion  and any Notice of Conversion  delivered to
the Company on a day which is not a business day shall be deemed delivered as of
the next following business day.

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         F.  "Conversion  Price" means,  with respect to any Conversion Date (i)
prior to the  earlier  of (x) the date on which a  Material  Adverse  Change (as
defined below) occurs, and (y) the date which is one hundred and fifty one (151)
days after the Closing Date, the Fixed Conversion Price (as defined herein); and
(ii) from and after the earlier of such dates, the lower of the Fixed Conversion
Price and the Variable  Conversion Price (as defined herein),  each as in effect
as of such date, subject to adjustment as provided herein.

         G. "Fixed Conversion Price" means $5.039. The Fixed Conversion Price is
subject to adjustment as provided herein.

         H.  "Liquidity  Conditions"  means all shares of Common Stock  issuable
upon conversion of all outstanding  shares of Preferred Stock,  upon exercise of
all outstanding  Warrants (as defined in the Securities  Purchase Agreement) (in
each case,  without  giving effect to any  limitation on conversion or exercise)
(i) are then authorized and reserved for issuance, (ii) have been registered for
resale in an  appropriate  and an  effective  registration  statement  under the
Securities  Act of 1933,  as  amended  (the  "Securities  Act"),  available  for
immediate  use by the Holder and  qualified  or exempt  under  applicable  state
securities  laws so that the holder thereof may  immediately  thereafter  resell
such shares of Common  Stock,  (iii) are listed for trading on any of the Nasdaq
National Market or the New York Stock Exchange.

         I. "Market Price," as of any date, means the average of the Closing Bid
Prices for the shares of Common Stock for the ten (10) trading days  immediately
preceding,  but not including,  such date; provided,  however, that in no event,
shall  the  Market  Price be  greater  than  the  Closing  Bid  Price on the day
immediately preceding the determination date.

         J.  "Material  Adverse  Change"  means any change  which has a material
adverse effect on the business, operations,  properties, financial condition, or
operating  results  of the  Company  and  its  subsidiaries  taken  as a  whole;
provided,  however,  a Material  Adverse  Change  shall not  include (i) adverse
general economic  conditions,  (ii) adverse general industry  conditions,  (iii)
adverse  changes  resulting  solely from a decline in the price of the Company's
Common Stock or (iv)  fluctuations in the market value of securities held by the
Company or any of its subsidiaries.

         K. "Premium" means $1000 x (N/365) x R, where

                  N =      the  number of days  from the  Closing  Date to,  and
                           including, the Conversion Date and,

                  R =      0.10

         Premium is payable  quarterly on the last business day of each calendar
quarter and except as provided in Section IV.G(i)  hereof,  the Premium shall be
paid in cash  prior  to the  date on  which  the  Registration  Statement  filed
pursuant to Section 2.1 of the Registration  Rights Agreement (the "Registration
Statement")  is  declared  effective  and  thereafter,  if  and so  long  as

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the Liquidity  Conditions are satisfied and the Company has delivered all shares
free from any  restrictive  legend to the extent  required  under the Securities
Purchase  Agreement  (except to the extent  Purchaser  has not been damaged by a
failure  to  so  deliver  by  the  Company  or,  if  damaged,   has  been  fully
compensated),  by issuance of shares of Common Stock (at a price per share equal
to the  Market  Price on the date on which the  Premium  is paid) or  additional
shares  of  Preferred  Stock  of Face  Amount  equal to the  Premium,  provided,
however,  R shall be 0.08  from and  after  the date on which  the  Registration
Statement is declared  effective,  if such date is within one hundred (100) days
after the Closing Date.

         L.  "Purchaser" and  "Purchasers"  shall have the meanings set forth in
the  Securities  Purchase  Agreement and "Holder" and "Holders" mean the initial
holder of the Preferred  Stock (the  "Initial  Holder") and its  successors  and
assigns as permitted under this Certificate of Designation.

         M.  "Registration  Rights  Agreement"  means  the  Registration  Rights
Agreement referred to in the Securities Purchase Agreement.

         N. "Variable  Conversion  Price" means,  with respect to any applicable
Conversion  Date,  ninety percent (90%) of the average of the Closing Bid Prices
on the five (5) days which  constitute the lowest  five-consecutive  day average
Closing Bid Price of the  Company's  Common  Stock  during the  twenty-two  (22)
consecutive  trading  days  immediately  preceding,   but  not  including,   the
Conversion  Date (subject to equitable  adjustment  for any stock splits,  stock
dividends,  reclassifications  or similar  events  during  such  twenty two (22)
trading-day period), subject to further adjustment, if any, as provided herein.

                                 IV. CONVERSION

         A.  Conversion at the Option of the Holder.  Subject to the limitations
on  conversions  contained  in  Section  IV.G,  each  Holder  may,  at any  time
immediately  following the Closing and from time to time thereafter  convert (an
"Optional Conversion") any or all of its shares of Preferred Stock into a number
of fully paid and  non-assessable  shares of Common Stock  determined,  for each
share of Preferred  Stock so to be converted,  in accordance  with the following
formula:

                     (Premium (accrued but unpaid) + $1000)
              -----------------------------------------------------
                                Conversion Price

         B. Mechanics of Conversion.  In order to effect an Optional Conversion,
a Holder (a "Converting  Holder") shall fax (or otherwise deliver) a copy of the
fully executed Notice of Conversion to the Company.  Upon receipt by the Company
of a facsimile  copy of a Notice of  Conversion  from a Converting  Holder,  the
Company shall immediately send, via facsimile,  a confirmation to the Converting
Holder stating that the Notice of Conversion  has been  received,  the date upon
which the Company expects to deliver the Common Stock upon conversion

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(assuming  proper delivery of  certificate(s)  representing the Preferred Stock)
and the name and telephone  number of a contact person at the Company  regarding
the conversion.  Promptly following the faxing (or other delivery) of the Notice
of  Conversion,  the Holder shall  surrender or cause to be  surrendered  to the
Company the  certificates  representing the Preferred Stock being converted (the
"Preferred Stock  Certificates")  and a copy of the Notice of Conversion (or, in
lieu thereof, materials contemplated by Section XIV.B, if applicable).

         C.  Delivery of Common Stock Upon  Conversion.  Subject to Section IV.F
hereof,  upon the delivery of a Notice of Conversion,  the Company shall as soon
as practicable,  but in any event no later than the later of (a) the day that is
three business days  following the  Conversion  Date and (b) the day that is the
first  business  day  following  the date of surrender  of the  Preferred  Stock
Certificates (or satisfaction of the provisions of Section XIV.B, if applicable)
(the "Delivery  Period"),  issue and deliver to the Converting Holder (or at its
direction) (x) that number of shares of Common Stock issuable upon conversion of
such  shares  of  Preferred   Stock  being   converted  and  (y)  a  certificate
representing  the number of shares of Preferred  Stock not being  converted,  if
any.  Delivery  under this Section IV. C may be made  personally or by reputable
overnight  courier.  The person or persons  entitled to receive shares of Common
Stock  issuable  upon such  conversion  shall be treated for all purposes as the
record holder of such shares at the close of business on the Conversion Date and
such shares shall be issued and outstanding as of such date.

         D. Taxes.  The Company shall pay any and all taxes (other than transfer
or income  taxes) which may be imposed with respect to the issuance and delivery
of the shares of Common Stock upon the conversion of the Preferred Stock.

         E. No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the  conversion  of Preferred  Stock,  but the Company shall instead
round up to the next whole  number  the  number of shares of Common  Stock to be
issued upon such conversion.

         F.  Conversion  Disputes.  In the case of any dispute with respect to a
conversion,  the Company  shall  promptly  issue such number of shares of Common
Stock as are not disputed in accordance  with Sections IV.A and IV.C hereof.  If
such dispute only involves the calculation of the Conversion  Price, the Company
shall submit the disputed  calculations  to an  independent  accounting  firm of
national standing (reasonably acceptable to the Converting Holder) via facsimile
within  two (2)  business  days of  receipt  of the  Notice of  Conversion.  The
accountant shall audit the calculations and notify the Company and the Holder of
the results no later than five (5)  business  days from the date it receives the
disputed calculations.  The accountant's calculation shall be deemed conclusive,
absent manifest error.  As soon as possible  thereafter,  the Company shall then
issue the  appropriate  number of shares  of  Common  Stock in  accordance  with
Sections IV.A and IV.C hereof.

         G.  Limitations on  Conversions.  The conversion of shares of Preferred
Stock shall be subject to the following  limitations  (each of which limitations
shall be applied independently):

<PAGE>

                  (i) Cap Amount.  In no event shall the total  number of shares
of Common Stock issued upon conversion of the Preferred  Stock exceed  2,529,568
shares (the "Cap Amount").  A Holder's allocable portion of the Cap Amount shall
be applied to the  Preferred  Stock held by it on the basis set forth in Section
XIV(C).  Conversions of partial shares of Preferred  Stock shall be permitted to
reach a Holder's  allocable  portion of the Cap Amount. In the event the Company
is prohibited  from issuing  shares of Common Stock as a result of the operation
of this  subparagraph  (i), the Company  shall,  within  thirty (30) days of the
conversion  which results in a Holder reaching its allocable  portion of the Cap
Amount,  redeem all shares of  Preferred  Stock held by such Holder which may no
longer  be  converted  due  to  the  operation  of  this  subparagraph  (i) at a
redemption  price equal to $1.00 for all such shares of  Preferred  Stock in the
aggregate.

                  (ii) No Five Percent Holders.  Notwithstanding anything to the
contrary  contained  herein,  the Preferred  Stock shall not be convertible by a
Holder to the extent  (but only to the  extent)  that,  if  convertible  by such
Holder,  such Holder would  beneficially  own in excess of 4.9% of the shares of
Common Stock. For the purposes of this paragraph,  beneficial  ownership and all
determinations and calculations,  including without limitation,  with respect to
calculations  of percentage  ownership,  shall be determined in accordance  with
Section 13(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"), and Regulation 13D and G thereunder. For clarification, it is expressly a
term of this Certificate of Designation  that the limitations  contained in this
Section shall apply to each successor Holder.

         H. Required Conversions

                    (i) At  Maturity.  Subject to the  limitations  set forth in
Section IV.G and provided the Liquidity  Conditions are satisfied and, except to
the extent  Purchaser has not been damaged by such a failure or if damaged,  has
been fully compensated  therefor,  the Company has issued shares of Common Stock
free of restrictive legends as required under the Securities Purchase Agreement,
each share of Preferred Stock  outstanding on the third (3rd) anniversary of the
Closing  Date (the  "Maturity  Date")  (and any  accrued  and unpaid  Conversion
Default  Payments (as defined  herein)),  automatically  shall be converted into
shares of Common Stock on such date in accordance  with the  conversion  formula
set forth in Section IV.A (the "Required Conversion at Maturity"),  except as to
any  Holder  who  elects  otherwise  in the event  that a  Bankruptcy  Event has
occurred and is continuing.  If a Required  Conversion at Maturity  occurs,  the
Company and the Holders shall follow the  applicable  conversion  procedures set
forth in this Article IV; provided,  however,  that a Notice of Conversion shall
be deemed to be delivered to the Company on the Maturity Date. In the event that
the limitations set forth in this clause (i) or in Section IV.G (ii) prevent the
conversion of all of the Preferred  Stock on the Maturity Date, any  unconverted
Preferred Stock shall continue to be subject to Required  Conversion at Maturity
as set forth in this Section IV.H at such time as the  limitations  set forth in
this clause (i) or in Section  IV.G (ii) do not prevent  such  conversion  for a
period of at least twenty (20) consecutive trading days. Each share of Preferred
Stock  which  as a  result  of  the  limitations  of  Section  IV.G(ii)  remains
unconverted at the Maturity Date,  shall remain fully  convertible in accordance
with this  Certificate  of  Designation  until such time as the  limitations  of
Section  IV.G(ii) no

<PAGE>

longer prevent such  conversion and such share is in fact converted  pursuant to
this Section.  Notwithstanding  anything to the contrary  contained herein, if a
conversion  of any shares of Preferred  Stock at the Maturity Date is prohibited
as a result of the Cap  Amount,  the  Company  shall  redeem all such  shares of
Preferred  Stock held by a Holder  which can no longer be  converted  due to the
operation  of the Cap  Amount  for a  redemption  price  equal  to  $1.00 in the
aggregate.

                    (ii) Forced Conversion.  Provided (a) the Company has timely
honored all Notices of Conversion,  except to the extent  Purchaser has not been
damaged by such a failure or, if damaged,  has been fully compensated  therefor,
(b) all of the Common Stock issuable upon  conversion of the Preferred Stock (at
the time of delivery of the Forced  Conversion Notice (as defined below) and for
each day  thereafter  through the Effective  Time of the Forced  Conversion  (as
defined herein)) is covered by an effective Registration Statement, (c) all such
Common  Stock can be sold  pursuant  thereto at all times during the period from
the date  which is twenty  (20)  trading  days prior to  delivery  of the Forced
Conversion  Notice  until  the  date on which  such  Forced  Conversion  becomes
effective  (the  "Effective  Time of the  Forced  Conversion"),  (d)  all  other
Liquidity  Conditions  (as defined in Article III hereof) are then satisfied and
have been satisfied for the twenty (20) immediately preceding business days, (e)
the  Company has not failed to remove a legend at the  request of  Purchaser  as
required under the Securities Purchase Agreement, except to the extent Purchaser
has not been damaged by such a failure or if damaged, has been fully compensated
therefor,  (f) the  Company  is not  then in  violation  of any of its  material
obligations under the Securities  Purchase  Agreement,  the Registration  Rights
Agreement,  the Warrants or the terms of the Preferred  Stock (which  violations
remain  uncured),  and (g) the Closing Bid Price of the Common Stock for each of
the ten (10)  consecutive  trading  days  preceding  the  delivery of the Forced
Conversion   Notice  is  greater  than  two  hundred   percent   (200%)  of  the
then-effective  Fixed Conversion  Price, the Company may, by notice delivered to
the Holders (the "Forced Conversion Notice"),  cause each share of the Preferred
Stock  outstanding  on the date  which is ten (10) days after  delivery  of such
notice to be automatically converted into shares of Common Stock on such date in
accordance  with the conversion  formula set forth in Section IV. A (the "Forced
Conversion"),  except as to any Holder who elects  otherwise in the event that a
Bankruptcy Event has occurred and is continuing.

         I. Electronic Transmission. In lieu of delivering physical certificates
representing the Common Stock issuable upon  conversion,  provided the Company's
transfer agent is  participating  in the Depository  Trust Company  ("DTC") Fast
Automated  Securities  Transfer program (the "FAST Program"),  upon request of a
Holder,  the Company shall use its reasonable best efforts to cause its transfer
agent to  electronically  transmit the Common Stock issuable upon  conversion to
the Holder by  crediting  the account of Holder's  prime broker with DTC through
its Deposit  Withdrawal  Agent  Commission  system.  The  Company  shall use its
reasonable  best  efforts  to  participate  in  an  electronic  delivery  system
reasonably  acceptable to Holder within twelve (12) months from the date of this
Agreement.

               V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK

<PAGE>

         On the Closing Date and  thereafter,  the Company shall have authorized
and  reserved  and keep  available  for issuance not less than the Cap Amount of
shares of Common Stock  (subject to equitable  adjustment  for any stock splits,
stock dividends, reclassification or similar events and subject to reduction for
the number of shares of Common Stock  issued upon  conversion  of the  Preferred
Stock and upon the exercise of the Warrants) (the "Reserved  Amount") solely for
the purpose of effecting the  conversion of the  Preferred  Stock.  The Reserved
Amount shall be allocated among the Holders as provided in Section XIV (C).


                           VI. INTENTIONALLY OMITTED.

              VII. FAILURE TO SATISFY CONVERSIONS OR REMOVE LEGENDS

         A. Conversion Default Payments. If, at any time, (x) a Holder submits a
Notice of  Conversion  (or is deemed to submit such  notice  pursuant to Section
IV.H) and the Company  fails for any reason  (other than because  such  issuance
would exceed such Holder's  allocated portion of the Cap Amount) to deliver,  on
or prior to the  expiration  of the Delivery  Period for such  conversion,  such
number of shares of Common  Stock to which  such  Holder is  entitled  upon such
conversion  or (y) the  Company  provides  notice  (including  by way of  public
announcement)  to any Holder at any time of its intention not to issue shares of
Common Stock upon exercise by any Holder of its conversion  rights in accordance
with the terms of the Preferred  Stock (other than because such  issuance  would
exceed  such  Holder's  allocated  portion of the Cap Amount) or (z) the Company
fails to deliver certificates  representing Common Stock to the Holder free from
any  restrictive  legend to the extent  required under the  Securities  Purchase
Agreement  (each of (x),  (y) and (z)  being a  "Conversion  Default")  and such
Conversion  Default is not fully cured within three (3) days  following the date
of the Conversion Default,  then the Company shall pay to such Holder damages in
an amount  equal to the product of (A) the Damages  Amount times (B) D times (C)
 .01, where:

         "D" means the number of days  beginning  and  including the date of the
Conversion  Default  through and  including  the Cure Date with  respect to such
Conversion Default;

         "Damages  Amount"  means the Face  Amount of the  Preferred  Stock with
respect to which such Conversion  Default occurred plus all Premium (accrued and
unpaid) thereon as of the first day of the Conversion Default.

         "Cure Date" means (i) with respect to a Conversion Default described in
clause (x) of its definition, the date the Company effects the conversion of the
shares of Preferred  Stock  submitted for  conversion (or such earlier date that
the Purchaser voids the conversion as provided  herein),  (ii) with respect to a
Conversion  Default  described  in clause  (y) of its  definition,  the date the
Company  effects the conversion of the shares of Preferred  Stock  submitted for
conversion  (or such earlier date that the  Purchaser  voids the  conversion  as
provided  herein) and (iii) with  respect to a Conversion  Default  described in
clause  (z) of its  definition,  the  date  the  Company  delivers  certificates
representing  the shares of Common  Stock as a result of such  conversion,  free

<PAGE>

from any  restrictive  legend  pursuant to the terms of the Securities  Purchase
Agreement.

         The  payments  to which a Holder  shall be  entitled  pursuant  to this
Section  VII.A are  referred to herein as  "Conversion  Default  Payments."  All
Conversion  Default Payments shall be paid in cash within ten (10) business days
of a Holder's  demand  therefore  (which demand may be made at any time and from
time to time).

         B. Intentionally omitted.

         C. Certain Prohibited  Announcements.  Notwithstanding  anything to the
contrary  contained in this Article VII, the Company shall not provide notice to
any  Holder,  including  by way of  public  announcement,  at any  time,  of its
intention  not to issue shares of Common Stock to any Holder upon  conversion in
accordance with the terms of this Certificate of Designation (other than because
such issuance would exceed such Holder's allocated portion of the Cap Amount).

         D. Registration Failure and Registration  Suspension.  If the aggregate
duration of all Registration  Failures and/or Registration  Suspensions (each as
defined in the Registration Rights Agreement) is greater than one hundred eighty
(180) days,  then,  beginning with the 180th day, for each subsequent day that a
Registration  Failure or Registration  Suspension is in effect, then the Company
shall,  in lieu of additional  payments  under  Section 2.3 of the  Registration
Rights Agreement, pay to each Holder of Preferred Stock damages in the amount of
1% of the aggregate Face Amount of Preferred  Stock held by such Holder for each
such subsequent day; provided, however, (a) no payment shall be due with respect
to any day  which  is more  than two  years  after  the  Closing  Date;  (b) the
aggregate  payments made under this Section VII D to any Holder shall not exceed
the Face Amount of the  Preferred  Stock held by such Holder;  (c) any amount of
Conversion  Shares (as  defined in the  Securities  Purchase  Agreement)  that a
Holder may sell pursuant to Rule 144 as of the time of calculation  shall not be
included in  calculating  the aggregate  Face Amount of Preferred  Stock held by
such Holder;  (d) any Preferred Stock held by a Holder that has been canceled or
retired  shall not be  included  in  calculating  the  aggregate  Face Amount of
Preferred Stock held by such Holder,  and (e) days that a Permitted Blackout (as
defined in the Registration  Rights  Agreement)  exists shall not be included as
Registration  Failures or Registration  Suspensions for purposes of this Section
VII D. All such cash  payments  shall be made within ten (10) days of a Holder's
demand therefor, which demand may be made at any time and from time to time.

                      VIII. REDEMPTION AT COMPANY'S OPTION

         A. Redemption at Company's Option.

                  (i) Provided (a) the Company has timely honored all Notices of
Conversion,  except  to the  extent  Purchaser  has not been  damaged  by such a
failure  or, if damaged,  has been fully  compensated  therefor,  (b) all of the
Common Stock  issuable upon  conversion  of the Preferred  Stock (at the time of
delivery of the Optional  Redemption Notice and for each day

<PAGE>

thereafter  through the Effective Time of Redemption) is covered by an effective
Registration Statement,  (c) the resale of all such Common Stock can be effected
pursuant  thereto at all times  during the period  from the date which is twenty
(20) trading days prior to delivery of the Optional  Redemption Notice until the
Effective  Time of  Redemption  (as  defined  herein),  (d) all other  Liquidity
Conditions  (as defined in Article III hereof) are then  satisfied and have been
satisfied for the twenty (20) immediately  preceding  business days, and (f) the
Company  has not  failed to remove a legend at the  request  of a  Purchaser  if
required to do so under the Securities Purchase Agreement,  except to the extent
Purchaser has not been damaged by such a failure or, if damaged,  has been fully
compensated therefor  ("Redemption  Conditions") and provided the Company is not
then in  violation  of any of its  material  obligations  under  the  Securities
Purchase  Agreement,  the Registration  Rights  Agreements,  the Warrants or the
terms of the Preferred Stock (which violations remain uncured), then the Company
shall have the right  pursuant to Section  VIII .A(ii)  below to redeem for cash
("Redemption at Company's  Election") all the then  outstanding  Preferred Stock
for the Optional  Redemption  Amount (as herein  defined),  which right shall be
exercisable by delivery of an Optional  Redemption Notice (as defined herein) in
accordance   with  the   procedures   set  forth  in   Section   VIII.C   below.
Notwithstanding the delivery of an Optional Redemption Notice, the Holders shall
have the right to convert up to and including the Effective Time of Redemption.

         The  "Optional  Redemption  Amount  " with  respect  to any  Holder  of
Preferred Stock under this clause means, if the Effective Time of the Redemption
is (a) on or prior to the date which is ninety (90) days after the Closing Date,
the greater of (x) one hundred and ten percent  (110%) of the Face Amount of the
Preferred  Stock held by such Holder which is subject to redemption plus accrued
but unpaid  Premium plus any other amounts due with respect  thereto and (y) the
Benefit of the Bargain (as defined  herein);  (b) after the ninetieth (90th) day
but on or before the one hundred  eightieth  (180th) day  following  the Closing
Date, the greater of (x) one hundred  fifteen  percent (115%) of the Face Amount
of the Preferred  Stock held by such Holder which is subject to redemption  plus
accrued but unpaid  Premium plus any other amounts due with respect  thereto and
(y) the Benefit of Bargain; and (c) after the one hundred and eightieth (180th )
day following the Closing Date,  the greater of (x) one hundred  twenty  percent
(120%) of the Face Amount of the  Preferred  Stock held by such Holder  which is
subject to redemption plus accrued but unpaid Premium plus any other amounts due
with  respect  thereto  and (y) the  Benefit of  Bargain.  The  "Benefit  of the
Bargain"  means  (i) the  number of  Conversion  Shares  issuable  upon the full
conversion  pursuant  to  Section  IV.  A of  the  Preferred  Stock  subject  to
redemption  (without regard to any limitations on conversion herein or elsewhere
contained,  other than the Cap  Amount)  times (ii) the Closing Bid Price on the
trading  day  immediately  before  the  Effective  Time of  Redemption  less the
Conversion Price on such date.

         B. Limitations on Optional  Redemption.  The Company may not deliver an
Optional  Redemption  Notice for a redemption for cash unless such redemption is
with respect to all  then-outstanding  shares of Preferred  Stock and unless the
Company  has  ("Funding  Availability"):  (a) the full  amount  of the  Optional
Redemption Amount in cash, available in a demand or other immediately  available
account in a bank or similar financial institution; or (b) immediately available
credit facilities,  in the full amount of the Optional Redemption Amount in cash
with a

<PAGE>

bank or similar  financial  institution  (or  binding  commitment  letters  with
respect thereto which  commitment  letters shall be subject only to commercially
reasonable  conditions to closing as to which the  Company's  Board of Directors
has made a good faith business judgment will be fulfilled to permit consummation
of the redemption hereunder);  or (c) an agreement with a standby underwriter or
qualified  buyer  ready,  willing  and  able to  purchase  from  the  Company  a
sufficient  face  amount or  number of shares or any debt or equity  securities,
subject to the limitations  contained in the Securities  Purchase  Agreement and
herein,  to provide net proceeds in the full amount of the  Optional  Redemption
Amount;  or (d) a combination  of the items set forth in the  preceding  clauses
(a), (b) and (c),  aggregating the full amount of the Optional Redemption Amount
in cash.  Any  Optional  Redemption  Notice  delivered  in  accordance  with the
foregoing  shall be  accompanied  by a statement  executed by a duly  authorized
officer of the Company certifying that the Company has Funding  Availability and
by other  appropriate  documentation as evidence of the other provisions of this
Section.

         C.  Mechanics  of Optional  Redemption.  The Company  shall  effect the
Redemption at Company's  Election under this Article VIII by delivering  written
notice thereof (the "Optional Redemption Notice") on a business day (the "Notice
Date") that is at least ten (10) days, and not more than thirty (30) days, prior
to the date on which such redemption is to become effective (the "Effective Time
of  Redemption")  to each  Holder  at its  address  appearing  in the  Company's
register  for  the  Preferred  Stock.  An  Optional  Redemption  Notice  may  be
personally  served or delivered by reputable  overnight  courier or by confirmed
telecopy,  and shall be deemed  delivered at the time and date of receipt (which
shall include telephone line facsimile transmission).  Once the Company has made
such an Election, it is irrevocable and binding,  unless revocation is consented
to by all Holders.

         D.  Payment of Optional  Redemption  Amount.  The  Optional  Redemption
Amount shall be paid to each Holder on the third (3rd)  business  day  following
the Effective Time of Redemption, provided that the Preferred Stock certificates
are properly tendered.

         E. Failure to Pay. If the Company fails to pay, when due and owing, any
Optional  Redemption Amount,  then each Holder entitled to receive such Optional
Redemption  Amount shall have the right,  at any time and from time to time,  to
require the Company,  upon written notice, to immediately convert (in accordance
with the terms of and subject to the limitations contained in Article IV) any or
all of the shares of  Preferred  Stock  which are the subject of  Redemption  at
Company's  Election  into  shares  of  Common  Stock at the  lower of the  Fixed
Conversion  Price and the lowest  Conversion  Price in effect  during the 90 day
period  beginning on the date after the  Effective  Time of  Redemption.  In the
event of such a default,  any future right to effect a  Redemption  at Company's
Election  would be  forfeited.  Notwithstanding  the  foregoing,  the  preceding
provisions  of this  paragraph  shall not apply if the  failure to pay is caused
solely by  inadvertent  mistakes on the part of the  Company  and/or its agents;
provided,  however,  in no  event  shall  any  failure  to  pay  caused  by  any
inadvertent mistakes last for more than two (2) business days.

<PAGE>

                                    IX. RANK

         All  outstanding  shares of the Preferred Stock shall rank (i) prior to
the Common Stock;  (ii) prior to any other class of capital stock of the Company
now outstanding and prior to any class or series of capital stock of the Company
hereafter created (unless such class or series of capital stock specifically, by
its terms,  ranks senior to or pari passu with the Preferred Stock to the extent
permitted  by  Article  XIII)  (collectively,  with the  Common  Stock,  "Junior
Securities");  (iii) pari passu with any class or series of capital stock of the
Company  hereafter  created to the extent  permitted by Article  XIII;  and (iv)
junior to any class or series of capital stock of the Company  hereafter created
to the extent  permitted by Article  XIII; in each case as to dividends or as to
distribution  of assets  upon  liquidation,  dissolution  or  winding  up of the
Company, whether voluntary or involuntary.

                            X. LIQUIDATION PREFERENCE

         A.  Liquidation of the Company.  If a Bankruptcy Event shall occur and,
on account of any such event, the Company shall liquidate,  dissolve or wind up,
or if the Company shall otherwise liquidate, dissolve or wind up (a "Liquidation
Event"),  no distribution  shall be made to the Holders of any shares of capital
stock  of  the  Company  (other  than  Senior   Securities)  upon   liquidation,
dissolution  or winding up unless prior  thereto the Holders shall have received
the  Liquidation  Preference  (as herein  defined)  with  respect to each share;
provided,  however, that, upon the occurrence of a Liquidation Event, the assets
and funds available for distribution among the Holders and holders of Pari Passu
Securities  shall be  insufficient  to permit the payment to such Holders of the
preferential  amounts payable  thereon,  then the entire assets and funds of the
Company legally  available for  distribution to the Preferred Stock and the Pari
Passu Securities shall be distributed ratably among such shares in proportion to
the ratio that the  Liquidation  Preference  payable on each such share bears to
the aggregate Liquidation Preference payable on all such shares.

         B. Certain Acts Not a  Liquidation.  The purchase or  redemption by the
Company of stock of any class,  in any manner  permitted by law,  shall not, for
the purposes hereof, be regarded as a liquidation,  dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than  substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company.

         C. Definition of Liquidation Preference.  The "Liquidation  Preference"
with  respect to a share of  Preferred  Stock means an amount  equal to the Face
Amount  thereof  plus the accrued but unpaid  Premium and other  amounts  unpaid
hereunder, including without limitation Redemption Amounts, with respect thereto
plus any other  amounts that may be due from the Company  with  respect  thereto
through the date of final distribution.  The Liquidation Preference with respect
to any Pari  Passu  Securities  shall  be as set  forth  in the  certificate  of
incorporation of the Company.

<PAGE>

          XI. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS

         Subject to Section IV. G(i), the  Conversion  Price shall be subject to
adjustment from time to time as follows:

         A. Stock Splits,  Stock Dividends,  Etc. If at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split,  stock  dividend,  combination,  reclassification  or other similar
event, the Fixed Conversion Price shall be proportionately  adjusted,  or if the
number of  outstanding  shares of Common Stock is  decreased by a reverse  stock
split,  combination or  reclassification  of shares, or other similar event, the
Fixed   Conversion   Price  and  the   Variable   Conversion   Price   shall  be
proportionately  adjusted. In such event, the Company shall notify the Company's
transfer agent of such change on or before the effective date thereof.

         B.       Intentionally omitted.

         C. Major  Transactions.  (i) If the Company  shall with the approval of
its Board of Directors consolidate or merge with any other corporation or entity
(other than a  consolidation  or merger in which the Company is the surviving or
continuing entity and either its capital stock is unchanged and unissued in such
transaction or such capital stock is issued,  which  issuance,  in the aggregate
with all other such  issuances  during the 180-day  period ending on the date on
which such  transaction  is publicly  disclosed,  does not exceed twenty percent
(20%) of the Common Stock),  or there shall occur any share exchange pursuant to
which all of the  outstanding  shares of Common Stock are  converted  into other
securities or property,  or there shall occur any other such reclassification or
change of the outstanding  shares of Common Stock, or the Company shall sell all
or  substantially  all of its  assets  (each  of the  foregoing  being a  "Major
Transaction"),  then each Holder shall  thereafter be entitled to, at its option
exercised  by written  notice to the  Company  given not more than five (5) days
prior to the consummation of such transaction,  either (a) in the event that the
Common Stock remains  outstanding  or holders of Common Stock receive any common
stock or substantially  similar equity interest,  in each of the foregoing cases
which is publicly  traded,  retain its Preferred  Stock and such Preferred Stock
shall  continue  to apply to such  Common  Stock or shall  apply,  as  nearly as
practicable,  to such other common stock or equity interest, as the case may be,
or (b) regardless of whether (a) applies, receive consideration, in exchange for
each share of Preferred Stock held by it, equal to the greater of, as determined
in the sole  discretion  of such  Holder:  (i) the  number of shares of stock or
securities  or  property  (including  cash)  of the  Company,  or of the  entity
resulting from such Major Transaction (the "Major  Transaction  Consideration"),
to which a holder  of the  number  of shares  of  Common  Stock  delivered  upon
conversion of such shares of Preferred  Stock would have been entitled upon such
Major  Transaction  had the Holder  exercised its right of  conversion  (without
regard to any limitations on conversion herein or elsewhere contained other than
the Cap Amount) on the trading date immediately  preceding the effective date of
such Major Transaction and had such Common Stock been issued and outstanding and
had such Holder  been the holder of record of such  Common  Stock at the time of
the consummation of such Major Transaction,  and (ii) one hundred percent (100%)
of the Face Amount plus  accrued and unpaid  Premium of such shares of

<PAGE>

Preferred Stock in cash; and the Company shall make lawful provision therefor as
a part of such Major  Transaction  and shall cause the issuer of any security in
such transaction  which  constitutes  Registrable  Securities (as defined in the
Registration Rights Agreement) under the Registration Rights Agreement to assume
all of the Company's obligations thereunder.

         (ii)  In  the  event  that  the  Company  shall  publicly   propose  to
consolidate or merge with any other corporation in a transaction in which common
stock  of  the  surviving  corporation  or the  parent  thereof  (the  "Exchange
Securities")  is issued to the holders of Common  Stock in such  transaction  in
exchange for all such Common Stock, and (a) the Exchange Securities are publicly
traded on the NASDAQ  National Market or the New York Stock Exchange on the date
such proposed  transaction is publicly  disclosed and remain so traded following
consummation  of such  transaction,  (b) the average daily trading volume of the
Exchange  Securities  during the 45 trading day period  beginning on the date on
which such  transaction  is publicly  disclosed  is equal to or greater than the
average  daily  trading  volume of the Common  Stock  during the 45 trading  day
period ending on the date on which such transaction is publicly  disclosed,  (c)
the historical 45 trading day volatility of the Exchange  Securities  during the
period beginning on the date on which such transaction is publicly  disclosed is
equal to or  greater  than the 45 trading  day  volatility  of the Common  Stock
during the 45 trading day period ending on the date on which such transaction is
publicly  disclosed  and (d) the  market  capitalization  of the  issuer  of the
Exchange Securities,  based on the last sale price of the Exchange Securities on
the date which is 45 trading  days after the date on which such  transaction  is
publicly disclosed, is equal to or greater than the market capitalization of the
Company on the date  immediately  before the date on which such  transaction  is
publicly  disclosed  (in each case,  with respect to the  foregoing  clauses (a)
through  (d), as reported by  Bloomberg  or a  comparable  reporting  service of
national  reputation  selected by the Company and  reasonably  acceptable to the
Majority Holders if Bloomberg is not then reporting  closing sale prices of such
security),  then the  provisions  of clause (b) of paragraph (i) above shall not
apply.

         (iii) In the event  that the  Company  shall,  in a Major  Transaction,
consolidate  or merge with any other  corporation  in a transaction in which the
Company is the  survivor  and less than 40% of the Common  Stock of the  Company
will have been  issued,  in the  aggregate,  in all  transactions  described  in
paragraph  (i) above during the 180-day  period  ending on the date on which the
transaction is publicly disclosed, the provisions of clause (b) of paragraph (i)
above shall not apply to the extent  that each of the  following  conditions  is
satisfied:  (a) the Common Stock remains  publicly traded on the NASDAQ National
Market,  (b) the average daily trading  volume of the Common Stock during the 45
trading day period  beginning on the date on which such  transaction is publicly
disclosed is equal to or greater than the average  daily  trading  volume of the
Common Stock  during the 45 trading day period  ending on the date on which such
transaction is publicly disclosed,  (c) the historical 45 trading day volatility
of the Company's  Common Stock during the period  beginning on the date on which
such  transaction  is  publicly  disclosed  is equal to or  greater  than the 45
trading  day  volatility  of the Common  Stock  during the 45 trading day period
ending on the date on which such transaction is publicly disclosed,  and (d) the
market capitalization of the Company, based on the last sale price of the Common
Stock on the  date  which  is 45  trading  days  after  the  date on which  such
transaction  is  publicly  disclosed

<PAGE>

is equal to or greater than the market capitalization of the Company on the date
immediately  before the date on which such transaction is publicly disclosed (in
each case, with respect to the foregoing clauses (a) through (d), as reported by
Bloomberg).

         (iv) No sooner than ten (10) days nor later than five (5) days prior to
the  consummation  of  a  Major  Transaction,   but  not  prior  to  the  public
announcement of such Major Transaction, the Company shall deliver written notice
("Notice  of  Major  Transaction")  to  each  Holder,   which  Notice  of  Major
Transaction  shall be deemed to have been  delivered  one (1) business day after
the Company's sending such notice by telecopy (provided that the Company sends a
confirming  copy of such  notice on the same day by  overnight  courier) of such
Notice of Major Transaction. Such Notice of Major Transaction shall indicate the
amount and type of the Major Transaction  Consideration  which such Holder would
receive  under this Section.  If the Major  Transaction  Consideration  does not
consist  entirely of United  States  currency,  such Holder may elect to receive
United States currency in an amount equal to the value of the Major  Transaction
Consideration  in lieu of the  Major  Transaction  Consideration  by  delivering
notice of such  election  to the Company  within  five (5) days of the  Holder's
receipt of the Notice of Major Transaction.

         D. Adjustment Due to Distribution. If the Company shall declare or make
any  distribution  of its assets (or rights to acquire its assets) to holders of
any class of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise  (including any dividend or  distribution  to the Company's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary)  (a  "Distribution")  at any time after the date hereof,  then the
Holders  will  be  entitled  to  receive,  upon  the  terms  applicable  to such
Distribution, the amount of such assets (or rights) which each Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon  complete  conversion  of  the  Preferred  Stock  (without  regard  to  any
limitations on conversion or exercise herein or elsewhere contained) immediately
before the date on which a record is taken for determining shareholders entitled
to such  Distribution,  or if no such record is taken,  the date as of which the
record  holders of Common  Stock are to be  determined  to be  entitled  to such
Distribution.

         E. (i) Issuance of Common  Stock at a Price below the Fixed  Conversion
Price. Except as otherwise provided in Section A or C of this Article or in this
Section E, if, at any time after the Closing Date,  the Company issues or sells,
or in  accordance  with Section  E(iii)  hereof is deemed to have issued or sold
(except (a) as consideration in connection with an acquisition by the Company of
any  business or assets,  regarding  which the  Company has  obtained a fairness
opinion from a nationally  recognized investment banking firm or regarding which
an  appropriate  officer of the Company has certified to the Purchaser  that the
board of  directors of the Company has  determined  in its  reasonable  business
judgment  that the Company has received in such  transaction  the fair value for
the shares issued therefor,  (b) as consideration  for services  provided to the
Company,  (I) the issuances of which have been committed by the Company prior to
the Closing Date and such  commitments  have been  disclosed to the Purchaser in
the schedules delivered pursuant to the Securities  Purchase Agreement,  or (II)
the  issuances  of which are  committed by the Company  after the Closing  Date,
provided, however, that services provided

<PAGE>

pursuant  to this clause  (II) shall not exceed  $200,000 in value and  services
provided  under this clause (b) in the  aggregate  shall not exceed  $500,000 in
value,  (c)  pursuant to the  exercise,  conversion  or exchange of  Convertible
Securities (as defined  herein) of the Company issued and  outstanding as of the
Closing Date (as defined in the  Securities  Purchase  Agreement)  in accordance
with the terms of such  Convertible  Securities  as of such  date,  (d) upon the
exercise  of the  Warrant  issued to the Holder  under the  Securities  Purchase
Agreement,  (e) to the Purchasers  pursuant to the Securities Purchase Agreement
or  conversion  of  Preferred  Stock,  (f) pursuant to any stock  option,  stock
purchase or restricted stock plan of the Company covering employees, consultants
and/or   non-employee   directors  (and  any  amendment  thereof  or  any  award
thereunder, provided any such amendment does not reduce any exercise price to an
amount  below $5.00 per share),  so long as the issuance of such stock or option
(other than to non-employee directors) is approved by a committee of independent
directors of the Company,  (g) pursuant to strategic  investments  from industry
participants,  the  primary  purpose  of each of which  is not to  raise  equity
capital,  (h) to  Ladenburg  Thalmann  pursuant  to a  warrant  to be  issued in
connection  with the closing of the  transaction  contemplated by the Securities
Purchase Agreement,  (i) in a fully distributed  underwritten public offering or
(j) under the terms of the April 11,  2000  acquisition  by the  Company of Giza
Group),  any shares of Common Stock for no  consideration or for a consideration
per share less than the then current  Fixed  Conversion  Price,  then  effective
immediately  upon such issuance,  the Fixed Conversion Price will be adjusted to
be equal to the  consideration  per share  received,  or  deemed to be  received
pursuant to this Section XIII E, in such issuance.

                (ii) Issuance of Common Stock at a Price below the Market Price.
Except as otherwise  provided in Section A, C or E (i) of this  Article,  if, at
any time after the Closing Date, the Company  issues or sells,  or in accordance
with  Section  E(iii)  hereof is deemed to have  issued or sold  (except  (a) as
consideration  in connection  with an acquisition by the Company of any business
or assets,  regarding  which the Company has obtained a fairness  opinion from a
nationally  recognized investment banking firm or regarding which an appropriate
officer  of the  Company  has  certified  to the  Purchaser  that  the  board of
directors of the Company has determined in its reasonable business judgment that
the  Company  has  received  in such  transaction  the fair value for the shares
issued therefor,  (b) as consideration for services provided to the Company, (I)
the  issuances of which have been  committed by the Company prior to the Closing
Date and such  commitments have been disclosed to the Purchaser in the schedules
delivered pursuant to the Securities Purchase  Agreement,  or (II) the issuances
of which are committed by the Company after the Closing Date, provided, however,
that services provided pursuant to this clause (II) shall not exceed $200,000 in
value and services  provided  under this clause (b) in the  aggregate  shall not
exceed $500,000 in value,  (c) pursuant to the exercise,  conversion or exchange
of  Convertible  Securities  (as  defined  herein)  of the  Company  issued  and
outstanding  as of the  Closing  Date (as  defined  in the  Securities  Purchase
Agreement) in  accordance  with the terms of such  Convertible  Securities as of
such date,  (d) upon the exercise of the Warrant  issued to the Holder under the
Securities Purchase Agreement,  (e) to the Purchasers pursuant to the Securities
Purchase  Agreement,  (f)  pursuant  to any  stock  option,  stock  purchase  or
restricted  stock plan of the Company  covering  employees,  consultants  and/or
non-employee  directors  (and any  amendment  thereof  or any award  thereunder,
provided  any such  amendment

<PAGE>

does not reduce any exercise price to an amount below $5.00 per share),  so long
as the  issuance  of  such  stock  or  option  is  approved  by a  committee  of
independent directors of the Company, (g) pursuant to strategic investments from
industry  participants,  the  primary  purpose  of each of which is not to raise
equity capital,  (h) to Ladenburg Thalmann pursuant to a warrant to be issued in
connection  with the closing of the  transaction  contemplated by the Securities
Purchase Agreement,  (i) in a fully distributed  underwritten public offering or
(j) under the terms of the April 11,  2000  acquisition  by the  Company of Giza
Group),  any shares of Common Stock for no  consideration or for a consideration
per share less than the then current Market Price (a "Dilutive Issuance"),  then
effective  immediately  upon the Dilutive  Issuance,  the Fixed Conversion Price
will be adjusted in accordance with the following formula:

                  E' = (E) (O + P/M) / (CSDO)


                  where:

                  E'       =        the adjusted Fixed Conversion Price
                  E        =        the then current Fixed Conversion Price;
                  M        =        the then current Market Price;
                  O        =        the   number  of  shares  of  Common   Stock
                                    outstanding   immediately   prior   to   the
                                    Dilutive Issuance;
                  P        =        the aggregate  consideration,  calculated as
                                    set forth in Section E(iii) hereof, received
                                    by the Company upon such Dilutive  Issuance;
                                    and
                  CSDO     =        the total  number of shares of Common  Stock
                                    Deemed   Outstanding   (as  herein  defined)
                                    immediately after the Dilutive Issuance.

Notwithstanding  anything to the contrary in this Section  E(ii),  no adjustment
shall be made under this Section E(ii) to the Fixed  Conversion  Price if shares
of Common Stock are issued or sold or, in accordance with Section E(iii) hereof,
are deemed to be issued or sold by the Company, for a consideration per share in
excess of 125% of the then effective Fixed Conversion Price.

                (iii) Effect on Fixed  Conversion  Price of Certain Events.  For
purposes of determining the adjusted Fixed  Conversion  Price under Section E(i)
or E(ii) hereof, the following will be applicable:

                      (a)  Issuance of Rights or Options.  If the Company in any
manner  issues  or  grants  any  warrants,  rights or  options,  whether  or not
immediately  exercisable,  to subscribe for or to purchase Common Stock or other
securities  exercisable,  convertible  into or  exchangeable  for  Common  Stock
("Convertible  Securities  "), but not to include  the grant or  exercise of any
stock or options which may hereafter be granted or exercised  under any employee
or Director benefit plan of the Company now existing or to be implemented in the
future  (so long as the  issuance  of such stock or  options  is  approved  by a
committee of independent  directors of the Company) (such  warrants,  rights and
options to purchase  Common  Stock or  Convertible  Securities  are  hereinafter
referred to as  "Options"),  and the price per share for which  Common

<PAGE>

Stock is  issuable  upon the  exercise  of such  Options is less than the Market
Price on the date of issuance ("Below Market  Options"),  then the maximum total
number of shares of Common  Stock  issuable  upon the exercise of all such Below
Market Options  (assuming  full exercise,  conversion or exchange of Convertible
Securities, if applicable) will, as of the date of the issuance or grant of such
Below Market  Options,  be deemed to be outstanding  and to have been issued and
sold by the Company  for such price per share.  For  purposes  of the  preceding
sentence,  the  price per share for  which  Common  Stock is  issuable  upon the
exercise of such Below Market  Options is  determined  by dividing (i) the total
amount,  if any,  received or receivable by the Company as consideration for the
issuance or granting of such Below Market  Options,  plus the minimum  aggregate
amount of  additional  consideration,  if any,  payable to the Company  upon the
exercise of all such Below  Market  Options,  plus,  in the case of  Convertible
Securities issuable upon the exercise of such Below Market Options,  the minimum
aggregate  amount  of  additional   consideration  payable  upon  the  exercise,
conversion or exchange  thereof at the time such  Convertible  Securities  first
become  exercisable,  convertible  or  exchangeable,  by (ii) the maximum  total
number of shares of Common  Stock  issuable  upon the exercise of all such Below
Market  Options  (assuming  full  conversion  of  Convertible   Securities,   if
applicable).  No further  adjustment to the Fixed  Conversion Price will be made
upon the actual  issuance of such Common  Stock upon the  exercise of such Below
Market  Options or upon the  exercise,  conversion  or exchange  of  Convertible
Securities issuable upon exercise of such Below Market Options.

                      (b) Issuance of Convertible Securities.

                           1) If the  Company in any manner  issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable  upon the exercise of Options) and the price per share for
which Common Stock is issuable  upon such  exercise,  conversion or exchange (as
determined  pursuant to Section  E(iii)(b)(2)  if  applicable)  is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock  issuable  upon the  exercise,  conversion  or exchange of all such
Convertible  Securities will, as of the date of the issuance of such Convertible
Securities,  be deemed to be outstanding and to have been issued and sold by the
Company for such price per share.  For the purposes of the  preceding  sentence,
the  price per share for which  Common  Stock is  issuable  upon such  exercise,
conversion or exchange is  determined by dividing (i) the total amount,  if any,
received or receivable by the Company as consideration  for the issuance or sale
of all  such  Convertible  Securities,  plus the  minimum  aggregate  amount  of
additional  consideration,  if any,  payable to the Company  upon the  exercise,
conversion or exchange  thereof at the time such  Convertible  Securities  first
become  exercisable,  convertible  or  exchangeable,  by (ii) the maximum  total
number of shares of Common  Stock  issuable  upon the  exercise,  conversion  or
exchange of all such Convertible Securities.  No further adjustment to the Fixed
Conversion  Price will be made upon the actual  issuances  of such Common  Stock
upon exercise, conversion or exchange of such Convertible Securities.

                           2) If the  Company in any manner  issues or sells any
Convertible  Securities  with a  fluctuating  conversion  or  exercise  price or
exchange  ratio (a

<PAGE>

"Variable Rate Convertible Security"), then the price per share for which Common
Stock is issuable upon such exercise, conversion or exchange for purposes of the
calculation  contemplated  by  Section  E(iii)(b)(1)  shall be  deemed to be the
lowest price per share which would be  applicable  assuming that (1) all holding
period  and other  conditions  to any  discount  or  adjustment  to the price of
exercise,  conversion  or  exchange  (including,   without  limitation,  resets)
contained in such Convertible  Security have been satisfied,  and (2) the Market
Price on the date of  issuance  of such  Convertible  Security  was eighty  five
percent  (85%) of the Market Price on such date (the  "Assumed  Variable  Market
Price").

                      (c) Change in Option Price or Conversion Rate.  Except for
the grant or exercise of any stock or options  which may hereafter be granted or
exercised  under any  employee  or  Director  benefit  plan of the  Company  now
existing or to be  implemented  in the future,  so long as the  issuance of such
stock or options is approved  by a committee  of  independent  directors  of the
Company,  if there  is a change  at any  time in (i) the  amount  of  additional
consideration  payable to the Company upon the exercise of any Options; (ii) the
amount of  additional  consideration,  if any,  payable to the Company  upon the
exercise,  conversion or exchange or any  Convertible  Securities;  or (iii) the
rate at which any Convertible  Securities are  convertible  into or exchangeable
for Common  Stock  (other  than  under or by reason of  provisions  designed  to
protect against  dilution),  the Fixed Conversion Price in effect at the time of
such change will be  readjusted to the Fixed  Conversion  Price which would have
been in effect at such time had such  Options or  Convertible  Securities  still
outstanding  provided  for such  changed  additional  consideration  or  changed
conversion  rate, as the case may be, at the time initially  granted,  issued or
sold.

                      (d)   Treatment   of  Expired   Options  and   Unexercised
Convertible  Securities.  If, in any case,  the total number of shares of Common
Stock  issuable  upon  exercise of any Options or upon  exercise,  conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise  such  option or to  exercise,  convert or  exchange  such  Convertible
Securities shall have expired or terminated,  the Fixed Conversion Price then in
effect will be readjusted to the Fixed Conversion Price which would have been in
effect  at the  time of such  expiration  or  termination  had such  Options  or
Convertible  Securities,  to the extent  outstanding  immediately  prior to such
expiration or termination  (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.

                      (e) Calculation of Consideration  Received.  If any Common
Stock, Options or Convertible  Securities are issued,  granted or sold for cash,
the consideration received therefor for purposes of this Designation will be the
amount  received  by  the  Company  therefor,  before  deduction  of  reasonable
commissions,  underwriting  discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock,  Options or Convertible  Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the  consideration  other than cash  received  by the  Company  will be the fair
market value of such consideration  except where such consideration  consists of
freely-tradeable  securities, in which case the amount of

<PAGE>

consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection  with any merger or  consolidation  in which the Company is
the surviving  corporation,  the amount of consideration therefor will be deemed
to be the fair market  value of such  portion of the net assets and  business of
the non-surviving  corporation as is attributable to such Common Stock,  Options
or  Convertible  Securities,  as the case may be. The fair  market  value of any
consideration other than cash or securities will be determined in the good faith
reasonable business judgment of the Board of Directors.

                      (f) Exceptions to Adjustment of Fixed Conversion Price. No
adjustment  to the Fixed  Conversion  Price  will be made (i) upon  issuance  of
Common Stock as  consideration  in connection with an acquisition by the Company
of any business or assets,  regarding  which the Company has obtained a fairness
opinion from a nationally  recognized investment banking firm or regarding which
an  appropriate  officer of the Company has certified to the Purchaser  that the
board of  directors of the Company has  determined  in its  reasonable  business
judgment  that the Company has received in such  transaction  the fair value for
the shares issued therefor;  (ii) upon issuance of Common Stock as consideration
for  services  provided to the  Company,  (I) the  issuances  of which have been
committed  by the Company  prior to the Closing Date and such  commitments  have
been  disclosed to the  Purchaser  in the  schedules  delivered  pursuant to the
Securities Purchase  Agreement,  or (II) the issuances of which are committed by
the Company after the Closing Date,  provided,  however,  that services provided
pursuant  to this clause  (II) shall not exceed  $200,000 in value and  services
provided  under this clause (ii) in the aggregate  shall not exceed  $500,000 in
value;  (iii)  upon  the  exercise  of  any  warrants,  options  or  convertible
securities  issued and  outstanding  on the date hereof in  accordance  with the
terms of such  securities as of such date;  (iv) upon  issuances of Common Stock
pursuant to any stock option,  stock  purchase or  restricted  stock plan of the
Company covering employees,  consultants and/or non-employee  directors (and any
amendment thereof or any award thereunder,  provided any such amendment does not
reduce any exercise  price to an amount  below $5.00 per share),  so long as the
issuance  of such stock or option  (other  than to  non-employee  directors)  is
approved by a committee of  independent  directors of the Company,  (v) upon the
issuance of the Conversion Shares or the Warrant Shares in accordance with terms
of the Securities Purchase Agreement;  (vi) upon the exercise of the Warrant and
conversion of the Preferred Stock;  (vii) upon issuance of Common Stock pursuant
to strategic investments from industry participants, the primary purpose of each
of which is not to raise equity capital, (viii) upon issuance of Common Stock to
Ladenburg  Thalmann  pursuant to a warrant to be issued in  connection  with the
closing of the transaction  contemplated by the Securities  Purchase  Agreement,
(ix) in a fully distributed  underwritten public offering or (x) under the terms
of the April 11, 2000 acquisition by the Company of Giza Group.

         F. Intentionally omitted.

         G. Purchase Rights. If the Company issues any Convertible Securities or
rights to purchase stock, warrants,  securities or other property (the "Purchase
Rights") pro rata to the record  holders of any class of Common Stock,  then the
Holders will be entitled to acquire,  upon

<PAGE>

the terms  applicable to such Purchase  Rights,  the aggregate  Purchase  Rights
which each  Holder  could have  acquired  if such  Holder had held the number of
shares of Common Stock  acquirable  upon  complete  conversion  of its Preferred
Stock (without  regard to any  limitations  on conversion or exercise  herein or
elsewhere contained)  immediately before the date on which a record is taken for
the grant,  issuance or sale of such Purchase  Rights,  or, if no such record is
taken,  the date as of which  the  record  holders  of  Common  Stock  are to be
determined for the grants, issue or sale of such Purchase Rights.

         H.       Intentionally omitted.

         I. Notices of  Adjustment.  Upon the  occurrence of each  adjustment or
readjustment  pursuant to this  Article XI, the Company,  at its expense,  shall
promptly compute such adjustment or readjustment and prepare and furnish to each
Holder a certificate  setting forth such adjustment or readjustment  and showing
in reasonable  detail the facts upon which such  adjustment or  readjustment  is
based.  The Company shall,  upon the written  request at any time of any Holder,
furnish to such Holder a like  certificate  setting forth (i) such adjustment or
readjustment,  (ii) the  Conversion  Price at the time in  effect  and (iii) the
number of shares of Common Stock and the amount,  if any, of other securities or
property which at the time would be received upon conversion of Preferred Stock.

         J.  Delisting.  In the event  that the Common  Stock of the  Company is
suspended  from trading or is no longer listed (and  authorized)  for trading on
Nasdaq National Market (a  "Delisting"),  the Company shall use its best efforts
(subject to good faith business judgment) to cause the Common Stock to be listed
for trading on the Nasdaq  National  Market or the New York Stock  Exchange,  as
applicable.  If the Company does not use its best efforts (subject to good faith
business judgment) to cause the listing of the Common Shares,  each Holder shall
be  entitled  to (i)  receive an amount  equal to any  losses,  damages,  costs,
expenses, and liabilities arising out of, relating to, or incurred in connection
with the  Delisting  and (ii) require the Company to purchase any or all (at any
time and from time to time) Preferred Stock then held by Holder,  at a price per
share equal to one hundred  percent  (100%) of the Face Amount plus  accrued and
unpaid Premium of such share of Preferred Stock.

         K. Key Officer and Director  Transfers.  If any Key Officer (as defined
below) or Insider  Director (as defined  below) (in each case,  or any member of
his/her  family or any trust or other  entity  for the  benefit of any member of
his/her family,  or any of his affiliates under federal  securities law), during
the period  beginning on the Closing Date and ending on the date that is six (6)
months after the Registration  Statement required pursuant to Section 2.1 of the
Registration  Rights Agreement is declared effective  (provided that such period
shall be extended to the extent of any  Registration  Suspension  (as defined in
the  Registration  Rights  Agreement)) (the "Transfer  Period"),  and while such
person is a Key Officer or Insider  Director,  directly or  indirectly,  offers,
sells,  transfers,  assigns,  pledges,  or  otherwise  disposes of any shares of
Common  Stock,  or any  securities  directly or indirectly  convertible  into or
exercisable or exchangeable  for, or warrants,  options or rights to purchase or
acquire shares of Common Stock (all such  securities,  "Options") or enters into
any agreement,  contract,  arrangement or understanding with respect to any such

<PAGE>

offer,  sale,  transfer,  assignment,  pledge or other disposition of any Common
Stock or Options or provides or files any public notice,  including  pursuant to
Rule 144 of the Securities  Act, of a bona fide intent to dispose of a specified
amount of Common Stock or Options (an "Executive Transfer"), then the Conversion
Price for each such Executive  Transfer shall be reduced by twenty percent (20%)
of that amount otherwise  calculated pursuant hereto;  provided,  however that a
Key Officer or Insider  Director  (and all such  entities for the benefit of any
members of his/her family,  and all such affiliates,  collectively)  may sell in
the  aggregate  during the portion of the  Transfer  Period  which is  following
effectiveness of such  Registration  Statement up to ten percent (10%) of his or
her total  holdings of Common Stock on a fully diluted basis as of July 31, 2000
without  triggering the adjustments of this Section.  Any inadvertent  Executive
Transfer in excess of such 10% limit shall not trigger the adjustments described
in this Section XI. K if such Transfer is reversed or offset  promptly after the
discovery  thereof.  For purposes of this Section,  Key Officers  shall mean the
individuals  listed on Schedule 8.2(a) of the Securities  Purchase Agreement and
any  person who  assumes or  performs  the duties of any other Key  Officer  and
Insider  Directors  shall  mean  individuals  listed in  Schedule  8.2(b) of the
Securities  Purchase  Agreement.  For  purposes  of  clarification,  and without
implication  that the  contrary  would  otherwise be true,  each such  Executive
Transfer  during  the  Transfer  Period  shall  result  in a  reduction  of  the
Conversion  Price  by  20%  and  such  reductions,  in  addition  to  any  other
adjustments to the Conversion Price pursuant to this Certificate of Designation,
shall be cumulative.  For example,  if a Key Officer makes an Executive Transfer
when the Conversion  Price is $10.00,  the Conversion  Price would be reduced to
$8.00.  If the Common Stock  subsequently  undergoes a  two-for-one  split,  the
Conversion  Price would be reduced to $4.00.  If,  subsequent to the split,  the
same or another Key Officer makes an Executive  Transfer,  the Conversion  Price
would be  further  reduced  to $3.20.  Notwithstanding  the  foregoing,  any Key
Officer or Insider  Director shall be entitled to make  Permitted  Transfers (as
defined  below)  without  limitation  and any  Permitted  Transfer  shall not be
included in any  computation  of the 10%  limitation  set forth in the preceding
paragraph. The term "Permitted Transfer" shall mean (i) any assignment,  gift or
other  transfer  to any child,  spouse or other  family  member or trust for the
benefit  of any family  member,  provided  that  further  transfers  by any such
transferees shall continue to be subject to this Section XI. K; or (ii) any bona
fide gift to any charitable organization.


                               XII. VOTING RIGHTS

         The holders of Preferred  Stock shall have no voting power  whatsoever,
except as otherwise provided by applicable law.

         Notwithstanding  the above,  the Company shall provide each Holder with
prior  notification  of any  meeting of the  stockholders  (and  copies of proxy
materials and all other information sent to stockholders).  If the Company takes
a  record  of its  stockholders  for the  purpose  of  determining  stockholders
entitled to (a) receive payment of any dividend or other distribution, any right
to subscribe  for,  purchase or otherwise  acquire  (including by way of merger,
consolidation  or  recapitalization)  any  share  of  any  class  or  any  other
securities  or

<PAGE>

property,  or to receive any other right,  or (b) to vote in connection with any
proposed sale, lease or conveyance of all or substantially  all of the assets of
the Company, or any proposed merger, consolidation,  liquidation, dissolution or
winding up of the Company,  the Company  shall fax a notice to each  Holder,  at
least ten (10) days prior to the record date specified therein (or ten (10) days
prior to the consummation of the transaction or event, whichever is earlier, but
in no event earlier than public announcement of such proposed  transaction),  of
the date on which any such  record is to be taken for the  purpose of such vote,
dividend,  distribution,  right or other event, and a brief statement  regarding
the amount and character of such vote,  dividend,  distribution,  right or other
event to the extent known at such time.

         To the extent that under  applicable law the vote of the holders of the
Preferred  Stock,  voting  separately as a class or series,  as  applicable,  is
required to  authorize a given action of the Company,  the  affirmative  vote or
consent of the  Holders of at least a  majority  of the shares of the  Preferred
Stock  represented  at a duly held  meeting  at which a quorum is  present or by
written consent of the Majority  Holders (except as otherwise may be required by
applicable  law) shall  constitute  the  approval of such action by the class or
series.  To the extent that under applicable law Holders are entitled to vote on
a matter with holders of Common Stock,  voting together as one class, each share
of Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible  (without giving effect
to any limitation on conversion with respect thereto, other than the Cap Amount)
using the record date for the taking of such vote of stockholders as the date as
of which the Conversion Price is calculated.

                           XIII. PROTECTION PROVISIONS

         The Company  shall not,  without  first  obtaining  the approval of the
Holders of two-thirds  (2/3) of the Preferred Stock then  outstanding  (but with
respect to (c) and (d) hereof,  such approval is necessary  only so long as five
hundred  thousand  dollars  ($500,000)  Face Amount of Preferred  Stock  remains
outstanding) : (a) alter or change the terms of the Preferred  Stock; (b) create
or issue,  or alter or change the terms of, any capital stock or other equity or
equity-linked  securities of the Company so as to affect adversely the Preferred
Stock;  (c) increase the  authorized  number of shares of Preferred  Stock;  (d)
redeem,  or  declare  or  pay  any  dividend  or  distribution  on,  any  Junior
Securities, except repurchases of stock held by service providers to the Company
upon  termination  of  service,  and except  redemptions  effected  with  Junior
Securities  (subject to the limitations  contained  herein and in the Securities
Purchase  Agreement);  or (e) do any act or thing not authorized or contemplated
by this  Certificate  of  Designations  which would result in any taxation  with
respect to the Preferred Stock under Section 305 of the Internal Revenue Code of
1986, as amended,  or any comparable  provision of the Internal  Revenue Code as
hereafter  from time to time amended (or otherwise  suffer to exist any taxation
as a  result  of such  section  or  provision).  The  Company  shall  not  issue
additional  shares of Preferred  Stock except to effect the purchase and sale to
the Purchasers (as defined in the Securities  Purchase  Agreement) in accordance
with the Securities  Purchase  Agreement and as contemplated by the Registration
Rights Agreement.

<PAGE>

                               XIV. MISCELLANEOUS

         A.  Cancellation  of Preferred  Stock. If any shares of Preferred Stock
are converted or redeemed  pursuant to Article IV, the shares so converted shall
be canceled,  shall return to the status of  authorized  but unissued  preferred
stock of no  designated  series,  and shall not be  issuable  by the  Company as
Preferred Stock.

         B. Lost or Stolen  Certificates.  Upon  receipt  by the  Company of (i)
evidence of the loss,  theft,  destruction or mutilation of any Preferred  Stock
Certificate(s)  and  (ii) (y) in the case of  loss,  theft  or  destruction,  of
indemnity  reasonably  satisfactory  to the  Company,  or (z)  in  the  case  of
mutilation,   upon   surrender  and   cancellation   of  the   Preferred   Stock
Certificate(s),  the Company  shall  execute and  deliver  new  Preferred  Stock
Certificate(s)  of like  tenor  and  date.  However,  the  Company  shall not be
obligated to reissue such lost or stolen Preferred Stock  Certificate(s)  if the
Holder  contemporaneously  requests the Company to convert all of such Preferred
Stock.

         C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and  initial  Reserved  Amount  shall be  allocated  to the  Holders in the same
proportion as the number of shares of Common Stock to which each Holder would be
entitled if all Preferred  Stock held by such Holder were converted bears to the
aggregate  number  of  shares of  Common  Stock to which  all  Holders  would be
entitled if all  Preferred  Stock held by the Holders  were  converted  (without
giving effect to any  limitation  on  conversion  or  exercise).  In the event a
Holder shall sell or otherwise transfer any of such Holder's shares of Preferred
Stock,   each  transferee  shall  be  allocated  a  pro  rata  portion  of  such
transferor's  Cap Amount and Reserved  Amount.  Any portion of the Cap Amount or
Reserved  Amount which remains  allocated to any person or entity which does not
hold any Preferred  Stock shall be allocated to the  remaining  Holders pro rata
based on (x) the  number  of  shares  of  Common  Stock to which  they  would be
entitled if all Preferred  Stock then held by such Holders were  converted as of
the date of determination (in each case of the foregoing,  without giving effect
to any limitation on conversion).

         D. Statements of Available  Shares.  The Company shall promptly deliver
to each Holder a written report  notifying the Holders of any  occurrence  which
prohibits the Company from issuing Common Stock upon any conversion. Such report
shall also specify (i) the total number of shares of Preferred Stock outstanding
as of the date of the  request,  (ii) the total number of shares of Common Stock
issued upon all  conversions of Preferred Stock through the date of the request,
(iii) the total number of shares of Common Stock which are reserved for issuance
upon conversion of the Preferred  Stock as of the date of the request,  and (iv)
the total number of shares of Common Stock which may thereafter be issued by the
Company upon  conversion of the Preferred  Stock before the Company would exceed
the Cap Amount and  Reserved  Amount.  Upon  request of any Holder,  the Company
shall promptly  confirm for such Holder that  sufficient  shares of Common Stock
are reserved for issuance upon conversion of such Holder's Preferred Stock as of
the date of the request.

         E. Payment of Cash; Defaults.  Whenever the Company is required to make
any cash

<PAGE>

payment to a Holder  under this  Certificate  of  Designation  (as a  Conversion
Default  Payment,  Redemption  Amount or otherwise),  such cash payment shall be
made to the  Holder by the  method ( by  certified  or  cashier's  check or wire
transfer of immediately available funds) elected by such Holder. If such payment
is not  delivered  when due (any such  amount not paid when due being a "Default
Amount")  such  Holder  shall  thereafter  be entitled to interest on the unpaid
amount at a per annum  rate equal to the lower of twelve  percent  (12%) and the
highest  interest rate  permitted by applicable law until such amount is paid in
full to the Holder.

         F. Status as Stockholder.  Upon submission of a Notice of Conversion by
a Holder of  Preferred  Stock and the  occurrence  of the  Conversion  Date with
respect  thereto,  the shares  covered  thereby shall be deemed  converted  into
shares of Common  Stock and the  Holder's  rights as a Holder of such  converted
shares of Preferred Stock shall cease and terminate, excepting only the right to
receive  certificates  for such  shares  of  Common  Stock  and to any  remedies
provided  herein or  otherwise  available  at law or in  equity  to such  Holder
because of a failure by the Company to comply with the terms of this Certificate
of  Designation.  Notwithstanding  the  foregoing,  if a Holder has not received
certificates  for all shares of Common Stock prior to the tenth (10th)  business
day after the expiration of the Delivery  Period with respect to a conversion of
Preferred  Stock for any reason,  then  (unless the Holder  otherwise  elects to
retain its  status as a holder of Common  Stock)  the  Holder  shall  regain the
rights of a holder of Preferred Stock with respect to such unconverted shares of
Preferred  Stock and the  Company  shall,  as soon as  practicable,  return such
unconverted  shares to the Holder.  In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the right to receive
Conversion  Default  Payments  pursuant to Section VII.A to the extent  required
thereby for such Conversion  Default and any subsequent  Conversion  Default and
(ii) the right with respect to conversions in accordance  with Section XIV.E, to
the extent applicable) for the Company's failure to convert Preferred Stock.

         G.  Remedies,   Characterizations,   Other  Obligations,  Breaches  and
Injunctive  Relief.  The remedies  provided in this  Certificate  of Designation
shall be cumulative and in addition to all other remedies  available  under this
Certificate of Designation,  at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to actual damages for any failure by
the  Company  to  comply  with the  terms  of this  Certificate  of  Designation
(including,  without limitation, damages incurred to effect "cover" of shares of
Common Stock issuable upon  conversion of the Preferred  Stock hereunder but not
received in accordance  with the terms  hereof).  The Company  covenants to each
Holder that there shall be no characterization  concerning this instrument other
than as fully  consistent  with the express terms  hereof.  Amounts set forth or
provided for herein with respect to payments,  conversion  and the like (and the
computation  thereof)  shall be the amounts to be received by the Holder  hereof
and shall not,  except as  expressly  provided  herein,  be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations  hereunder will cause irreparable harm to
the  holders of  Preferred  Stock and that the remedy at law for any such breach
may be inadequate.  The Company  therefore agrees that, in the event of any such
breach or threatened breach,  the Holders

<PAGE>

shall be entitled, in addition to all other available remedies, to an injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

         H.  Specific  Shall  Not  Limit  General;   Construction.  No  specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision  contained  herein. As used herein,  the word "including"
shall be deemed to mean  "including,  without  limitation."  This Certificate of
Designation  shall be  deemed  to be  jointly  drafted  by the  Company  and all
Purchasers and shall not be construed against any person as the drafter hereof.

         I. Failure or Indulgence Not Waiver. No failure or delay on the part of
a Holder in the  exercise  of any  power,  right or  privilege  hereunder  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

         J. Ratable  Payments.  All payments and prepayments made by the Company
with respect to the  Preferred  Stock shall be made ratably among all Holders of
Preferred Stock in accordance with the Face Amount of such Preferred Stock.

         K.  Assignment.  No Holder may assign any  Preferred  Stock without the
prior written consent of the Company.  Notwithstanding  the foregoing,  a Holder
may  transfer  any or all of its  Preferred  Stock  without  the  consent of the
Company  (x) to any of its  "affiliates",  as that  term is  defined  under  the
Exchange  Act, or (y) after the date which is five (5) months  after the Closing
Date,  to any person who receives at least  one-eighth  of the  Preferred  Stock
purchased by the Initial Holder under the Securities Purchase Agreement, so long
as such transferee is an accredited investor and such permitted transferee shall
be  subject  to the  provisions  of  this  Certificate  of  Designation  and the
Securities Purchase Agreement,  including, without limitation, this Section XIV.
K. In addition, the Preferred Stock may be pledged, and all rights of the Holder
under this  Certificate of Designation may be assigned,  without further consent
of the  Company,  to a bona fide  pledgee,  subject  to the  provisions  of this
Certificate of Designation  and the Securities  Purchase  Agreement,  including,
without  limitation,  this Section XIV. K.

<PAGE>

         IN WITNESS  WHEREOF,  the undersigned  authorized  officer has executed
this Certificate the 2nd day of August, 2000.

                                       THCG, INC.
                                       By:____________________________
                                       Name: _________________________
                                       Title: ________________________


<PAGE>

EXHIBIT A

                              NOTICE OF CONVERSION

The undersigned hereby irrevocably elects to convert (the "Conversion") the Face
Amount of the Series A Preferred Stock (the "Preferred  Stock") set forth below,
plus all accrued and unpaid Premium relating thereto (each defined term used but
not  defined  in this  notice  shall  have  the  meaning  assigned  to it in the
Designation,  Preferences  and  Rights  of  Series A  Convertible  Participating
Preferred Stock of THCG, Inc. (the "Certificate of  Designation")),  into shares
of common stock ("Common Stock") of THCG, Inc. (the "Company")  according to the
conditions of the Certificate of  Designation,  as of the date written below. If
securities are to be issued in the name of a person other than the  undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the Holder for any conversion except as provided herein.

The  undersigned  covenants that all offers and sales by the  undersigned of the
securities  issuable to the undersigned  upon conversion of this Preferred Stock
shall be made pursuant to  registration of the Common Stock under the Securities
Act  of  1933,  as  amended  (the  "Act"),  or  pursuant  to an  exemption  from
registration under the Act.

In the event of partial exercise,  please reissue an appropriate certificate for
the balance of shares of Preferred Stock which shall not have been converted.

                                    Date of Conversion:
                                    Applicable Conversion Price:
                                    Face Amount of Preferred Stock:
                                    Number of Shares of Common Stock
                                    to be issued upon conversion:


                                    Signature:

                                    Name:

                                    Address:

                                    Fax Number (for confirmation):