RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                         GALAXY NUTRITIONAL FOODS, INC.

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It is hereby certified that:

     1. The present name of the corporation is GALAXY  NUTRITIONAL  FOODS,  INC.
(the  "Corporation").  The name  under  which  the  Corporation  was  originally
incorporated  is Galaxy Cheese  Company;  and the date of filing of the original
Certificate of  Incorporation  of the Corporation with the Secretary of State of
the State of Delaware is May 14, 1987.

     2. The provisions of the Certificate of Incorporation of the Corporation as
heretofore amended and/or  supplemented,  and without further amendments herein,
are  hereby  restated  and  integrated  into  the  single  instrument  which  is
hereinafter  set  forth,   and  which  is  entitled   Restated   Certificate  of
Incorporation of GALAXY  NUTRITIONAL  FOODS, INC. without any further amendments
and without  any  discrepancy  between  the  provisions  of the  Certificate  of
Incorporation  as heretofore  amended and supplemented and the provisions of the
said single instrument hereinafter set forth.

     3. The restatement  herein  certified has been duly adopted by the Board of
Directors in accordance with the Certificate of Incorporation and the provisions
of Section 245 of the General Corporation Law of the State of Delaware.

     4. The Certificate of Incorporation of the Corporation, as restated herein,
shall at the effective time of this Restated Certificate of Incorporation,  read
as follows:

<PAGE>

                                    "RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                         GALAXY NUTRITIONAL FOODS, INC.

--------------------------------------------------------------------------------

     FIRST.  The name of the  Corporation  shall be "Galaxy  Nutritional  Foods,
Inc."

     SECOND.The  address of its  registered  office in the State of  Delaware is
1209 Orange Street,  in the City of Wilmington,  County of New Castle,  Delaware
19801. The name of its registered agent at such address is The Corporation Trust
Company.

     THIRD.  The nature of the  business or purposes to be conducted or promoted
is to  engage in any  lawful  act or  activity  for  which  corporations  may be
organized under the General Corporation Law of Delaware.

     FOURTH.The  maximum  number of shares of all  classes  of stock  which this
Corporation  is  authorized  to  issue  is  86,000,000  shares,   consisting  of
85,000,000  shares of Common Stock with a par value of One Cent ($.01) per share
and 1,000,000 shares of Preferred Stock with a par value of ($.01) per share.

     A  description  of the  respective  classes of stock and a statement of the
designations,  preferences,  voting  powers  (or no  voting  powers),  relative,
participating,   optional  or  other  special  rights  and  privileges  and  the
qualifications,  limitations and  restrictions of the Preferred Stock and Common
Stock are as follows:

     A.   PREFERRED STOCK
          ---------------

     The  Preferred  Stock may be  issued in one or more  series at such time or
times and for such consideration or considerations as the board of directors may
determine.  Each series  shall be so  designated  as to  distinguish  the shares
thereof  from the shares of all other  series and  classes.  Except as otherwise
provided in this  Certificate of  Incorporation,  different  series of Preferred
Stock shall not be construed to constitute  different  classes of shares for the
purpose of voting by classes.

     The board of directors is expressly  authorized to provide for the issuance
of all or any shares of the  Preferred  Stock in one or more  series,  each with
such designations,  preferences,  voting powers (or no voting powers), relative,
participating,  optional  or  other  special  rights  and  privileges  and  such
qualifications,  limitations or  restrictions  thereof as shall be stated in the
resolution  or  resolutions  adopted by the board of  directors  to create  such
series,  and a certificate of said  resolution or resolutions  shall be filed in
accordance  with the  General  Corporation  Law of the  State of  Delaware.  The
authority  of the board of  directors  with  respect to each such  series  shall
include,  without  limitation  of the  foregoing,  the right to provide that the
shares of each such

                                       2
<PAGE>

series may be: (i) subject to redemption at such time or times and at such price
or prices;  (ii)  entitled  to receive  dividends  (which may be  cumulative  or
non-cumulative)  at such  rates,  on such  conditions,  and at such  times,  and
payable in preference  to, or in such relation to, the dividends  payable on any
other class or classes or any other series;  (iii)  entitled to such rights upon
the dissolution of, or upon any  distribution of the assets of, the corporation;
(iv) convertible into, or exchangeable for, shares of any other class or classes
of stock,  or of any other  series of the same or any other  class or classes of
stock of the  corporation  at such price or prices or at such rates of  exchange
and  with  such  adjustments,  if  any;  (v)  entitled  to the  benefit  of such
limitations,  if any,  on the  issuance of  additional  shares of such series or
shares of any other series of Preferred  Stock;  or (vi)  entitled to such other
preferences, powers, qualifications,  rights and privileges, all as the board of
directors  may  deem  advisable  and as are not  inconsistent  with  law and the
provisions of this Certificate of Incorporation.

     1. NUMBER OF SHARES. Of the 1,000,000 shares of authorized but undesignated
Preferred Stock of the Corporation, 200,000 shares shall be designated and known
as shares of Series A Preferred  Stock.  Any shares of Series A Preferred  Stock
repurchased by the Corporation shall be cancelled and shall revert to authorized
but unissued shares of Preferred  Stock,  undesignated as to series,  subject to
reissuance by the  Corporation  as shares of Preferred  Stock of any one or more
series.

     2. RANK.  The Series A  Preferred  Stock  shall,  with  respect to dividend
rights and with respect to rights upon  liquidation,  winding up or dissolution,
rank  senior  and  prior in right  to the  Common  Stock  and any  other  equity
interests  (including,  without  limitation,  other classes of preferred  stock,
warrants,  stock appreciation rights, phantom stock rights, profit participation
rights in debt  instruments  or other  rights  with  equity  features,  calls or
options  exercisable  for or  convertible  into  such  capital  stock or  equity
interests)  in the  Corporation  that by its terms  rank  junior to the Series A
Preferred Stock (all of such classes or series of capital stock and other equity
interests are collectively referred to as "Junior Securities").

     3. DIVIDENDS.

     (a) 10% DIVIDENDS. For the first twelve (12) months after the date on which
the shares of Series A Preferred  Stock are issued (the "Original  Issue Date"),
the holders of the Series A Preferred Stock shall be entitled to receive a stock
dividend  at an  annual  rate per  share  equal to ten  percent  (10%)(the  "10%
Dividends")  of the shares of Series A  Preferred  Stock  held by such  holders,
payable in shares of Series A Preferred Stock on each three-month anniversary of
the Original Issue Date.

     (b) 8%  DIVIDENDS.  Beginning one year after the Original  Issue Date,  the
holders of Series A Preferred  Stock  shall be  entitled  to receive  cumulative
annual dividends at an annual rate per share equal to eight percent (8%)(the "8%
Dividends")  of the Series A Preference  Amount per share (as defined in Section
4(a) hereof),  payable on the 15th month  anniversary of the Original Issue Date
and each three month anniversary thereafter (each, a "Quarterly Dividend Date").
The Corporation,  at its option, must pay each 8% dividend either (A) in cash on
each Quarterly Dividend Date (or other payment date), or (B) in shares of Series
A Preferred Stock (for which the shares of Common Stock issuable upon conversion
thereof have been registered

                                       3
<PAGE>

for  resale  under  the  Securities  Act of  1933,  as  amended)  valued  at the
Conversion Price on the applicable dividend date.

     The 10% Dividends and the 8% Dividends are referred to herein  collectively
as the "Series A Dividends." The Series A Dividends shall be deemed to accrue on
the  Series A  Preferred  Stock  and be  cumulative,  whether  or not  earned or
declared and payable to the extent of funds or  securities,  as the case may be,
of the Corporation legally available for the payment of dividends. The amount of
the Series A Dividends shall be subject to adjustment whenever there shall occur
a stock split,  combination,  reclassification  or other similar event involving
the Series A Preferred  Stock.  Any  accrued  Series A  Dividends  shall  become
payable upon any  conversion  or  redemption of the shares of Series A Preferred
Stock.

     4. LIQUIDATION.

     (a) Upon the occurrence of any Liquidating  Event (as defined below),  each
holder of Series A Preferred  Stock then  outstanding  shall be paid, out of the
assets of the Corporation available for distribution to its stockholders, before
any payment  shall be made in respect of the Common Stock or Junior  Securities,
an amount per share equal to $48.18,  plus all accrued  dividends  that are then
unpaid for each share of Series A Preferred Stock then held by them (the "Series
A Preference  Amount"),  subject to  appropriate  adjustment in the event of any
stock  dividend,  stock split,  combination  or other  similar  recapitalization
affecting such shares.

     (b) Written  notice of any such  Liquidating  Event stating a payment date,
the place  where  such  payment  shall be made,  the  amount of each  payment in
liquidation and the amount of dividends to be paid shall be given by first class
mail, postage prepaid,  not less than thirty (30) days prior to the payment date
stated therein, to each holder of record of the Series A Preferred Stock at such
holder's address as shown in the records of the  Corporation,  provided that any
holder of Preferred  Stock may convert its shares of  Preferred  Stock to Common
Stock  during such  period at any time prior to the payment  date stated in such
notice.  If upon the  occurrence  of a  Liquidating  Event,  the  assets  of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of the Series A Preferred  Stock the full Series A Preference
Amount to which they shall be  entitled,  the  holders of the Series A Preferred
Stock shall  share  ratably in any  distribution  of assets (so that each holder
receives the same percentage of the Series A Preference Amount per share). After
payment has been made to the holders of the Series A Preferred Stock of the full
Series A  Preference  Amount to which they shall be entitled as  aforesaid,  any
remaining  assets  shall  be  distributed  ratably  among  the  holders  of  the
Corporation's Common Stock, Series A Preferred Stock and other Junior Securities
as if such shares of Series A  Preferred  Stock had been  converted  voluntarily
into Common Stock immediately prior to such Liquidating Event.

     (c) A "Liquidating  Event" shall mean (i) any  liquidation,  dissolution or
winding up of the Corporation,  either voluntary or involuntary, or (ii) a sale,
transfer  or other  disposition  of all or  substantially  all the assets of the
Corporation  to,  or a merger  or  consolidation  into,  an  entity  that is not
controlled,  directly or indirectly, by the stockholders of the Corporation; for
purposes of this definition,  "control" shall mean ownership of more than 50% of
the voting power of an entity;  PROVIDED,  HOWEVER, if the holders of a majority
of the shares of Series A Preferred  Stock so elect by giving  written notice to
the Corporation before the effective date of a

                                       4
<PAGE>

merger or consolidation  that would otherwise be a Liquidating  Event as defined
herein, such merger or consolidation shall not be deemed a Liquidating Event and
the  provisions  of  Section  6(h)  shall  apply.  Upon  the  occurrence  of any
Liquidating  Event that would involve the distribution of assets other than cash
with respect to the outstanding  shares of Series A Preferred  Stock, the amount
of such distribution  shall be deemed to be the fair market value thereof at the
time of such distribution determined as follows:

          (i)  Securities  not subject to an investment  letter or other similar
restriction on free marketability:

               (A) If traded on a securities  exchange or on the Nasdaq SmallCap
Market  or  the  Nasdaq   National   Market   System  or  if   actively   traded
over-the-counter,  the value shall be deemed to be the Market  Price (as defined
in Section 6(b) hereof) of the securities as of the date of valuation.

               (B) If there is no such active public market for the  securities,
the value shall be the Fair Market Value (as defined  below) of the  securities.
Fair Market  Value of any asset  (including  a  security)  means the fair market
value  thereof  as  determined  in good faith by the Board of  Directors  of the
Corporation.

          (ii) For  securities  for which there is an active  public  market but
which  are  subject  to an  investment  letter  or  other  restrictions  on free
marketability,  the value shall be the Fair Market Value thereof,  determined by
discounting appropriately the Market Price thereof.

          (iii) For all other  securities,  the value  shall be the Fair  Market
Value thereof.

     5. PROTECTIVE  PROVISIONS.  In addition to any other rights provided by law
or as set forth in this FOURTH Article, so long as at least 25% of the shares of
Series A Preferred Stock ever issued is outstanding,  the Corporation shall not,
without first obtaining the  affirmative  vote or written consent of the holders
of not less  than  sixty  percent  (60%) of the  then-outstanding  shares of the
Series A Preferred Stock affected by such action:

     (a) take any action that  materially  and  adversely  alters or changes the
powers, rights, preferences or privileges of the Series A Preferred Stock;

     (b)  redeem,  purchase or  otherwise  acquire for value (or pay into or set
aside for a sinking  fund for such  purpose),  or  declare  and pay or set aside
funds for the payment of any dividend (except  dividends payable in Common Stock
or  preferred  stock)  with  respect  to, any share or shares of capital  stock,
except as required or  permitted  hereunder  with  respect to Series A Preferred
Stock and except for  repurchasing  shares of Common  Stock  from  employees  or
consultants of the Corporation at the original  purchase price thereof  pursuant
to vesting agreements approved by the Board of Directors;

     (c)  authorize  or  issue,  or  obligate  itself  to  authorize  or  issue,
additional  shares of Series A Preferred  Stock (except as required or permitted
under the terms of the Purchase Agreement);

                                       5
<PAGE>

     (d)  authorize or issue,  or obligate  itself to  authorize  or issue,  any
equity or debt  security on a parity with or having  preference or priority over
the Series A Preferred Stock as to liquidation  preferences,  redemption rights,
dividend rights, or otherwise;  provided, however, that this provision shall not
apply to, and stockholder consent pursuant to this Section shall not be required
for: (A) debt securities  representing up to $3,000,000 in indebtedness incurred
by the  Corporation  after  April 5, 2001;  (B) trade  payables  incurred in the
ordinary  course;  and (C) refinancing of existing  indebtedness  owed to Finova
Capital and South Trust Bank (but only to the extent such  refinancing is in the
form of non-convertible debt);

     (e)  consent  to  any  liquidation,   dissolution  or  winding  up  of  the
Corporation; or

     (f) amend,  restate,  modify or alter the Bylaws of the  Corporation in any
way which adversely  affects the rights of the holders of the Series A Preferred
Stock.

     For this purpose,  without  limiting the generality of the  foregoing,  the
authorization  of any shares of capital stock with  preference or priority over,
or on a parity with,  Series A Preferred Stock as to the right to receive either
dividends or amounts  distributable upon liquidation,  dissolution or winding up
of the Corporation shall be deemed to affect adversely such series.

     6.  CONVERSION  RIGHTS.  The holders of Series A Preferred Stock shall have
the following conversion rights:

     (a) RIGHT TO CONVERT.

          (i) Subject to the terms,  conditions,  and restrictions of Sections 6
and 7 hereof, at any time after the Original Issue Date the holder of any shares
of Series A Preferred  Stock shall have the right to convert each whole share of
Series A Preferred Stock into that number of fully paid and nonassessable shares
of Common Stock at the Conversion Rate (as defined below).

          (ii) Anything in Subsection  6(a)(i) to the contrary  notwithstanding,
in no event shall any holder be entitled to convert Series A Preferred  Stock in
excess of that  number of shares of Series A Preferred  Stock that,  upon giving
effect to such conversion,  would cause the aggregate number of shares of Common
Stock  beneficially owned by the holder and its "AFFILIATES" (as defined in Rule
405 under the  Securities  Act of 1933,  as amended (the  "SECURITIES  ACT")) to
exceed  9.99% of the  outstanding  shares of the  Common  Stock  following  such
conversion.  For purposes of this Subsection,  the aggregate number of shares of
Common Stock  beneficially  owned by the holder and its affiliates shall include
the number of shares of Common Stock  issuable  upon  conversion of the Series A
Preferred Stock with respect to which the determination is being made, but shall
exclude  the number of shares of Common  Stock that would be  issuable  upon (i)
conversion of the remaining,  nonconverted Series A Preferred Stock beneficially
owned by the holder and its  affiliates  and (ii)  exercise or conversion of the
unexercised or unconverted  portion of any other  securities of the  Corporation
(including,  without  limitation,  any warrants or convertible  preferred stock)
subject to a limitation on conversion or

                                       6
<PAGE>

exercise analogous to the limitation  contained herein beneficially owned by the
holder and its affiliates.  Except as set forth in the preceding  sentence,  for
purposes of this Subsection  6(a)(ii),  beneficial ownership shall be calculated
in  accordance  with Section  13(d) of the  Securities  Exchange Act of 1934, as
amended (the "EXCHANGE ACT").  For purposes of this  Subsection,  in determining
the number of outstanding shares of Common Stock a holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Corporation's most
recent  Form 10-Q or Form  10-K,  as the case may be, (2) a more  recent  public
announcement  by the  Corporation or (3) any other notice by the  Corporation or
its  transfer  agent  setting  forth  the  number  of  shares  of  Common  Stock
outstanding. For any reason at any time, upon the written or oral request of any
holder,  the Corporation shall immediately  confirm orally and in writing to any
such holder the number of shares of Common Stock then outstanding.  In any case,
the number of  outstanding  shares of Common  Stock  shall be  determined  after
giving effect to  conversions  of Series A Preferred  Stock by such holder since
the date as of which  such  number of  outstanding  shares  of Common  Stock was
reported.  To the  extent  that  the  limitation  contained  in this  Subsection
6(a)(ii)  applies,  the  determination  of whether  shares of Series A Preferred
Stock are convertible (in relation to other securities owned by a holder) and of
which shares of Series A Preferred  Stock are  convertible  shall be in the sole
discretion  of such holder,  and the  submission of shares of Series A Preferred
Stock for conversion shall be deemed to be such holder's determination that such
shares of Series A Preferred Stock are convertible, in each case subject to such
aggregate percentage limitation, and the Corporation shall have no obligation or
right to verify or confirm the accuracy of such determination. Nothing contained
herein  shall be deemed to restrict the right of a holder to convert such shares
of Series A Preferred Stock at such time as such conversion will not violate the
provisions of this  Subsection.  A holder of Series A Preferred  Stock may waive
the  provisions  of this  Subsection  6(a)(ii)  as to itself  (and  solely as to
itself)  upon not less than 61 days' prior  notice to the  Corporation,  and the
provisions of this  Subsection  6(b)(ii) shall continue to apply until such 61st
day (or such  later  date as may be  specified  in such  notice of  waiver).  No
conversion in violation of this Subsection 6(b)(ii), but otherwise in accordance
with this FOURTH  Article,  shall  affect the status of the Common  Stock issued
upon such conversion as validly issued, fully paid and nonassessable.

     (b) CONVERSION RATE AND OTHER DEFINITIONS. Each share of Series A Preferred
Stock  shall be  convertible  at the option of the holder  thereof,  at any time
after the issuance of such share,  into fully paid and  nonassessable  shares of
Common Stock of the Corporation. The number of shares of Common Stock into which
each share of the  Series A  Preferred  Stock may be  converted  (the  "Series A
Conversion  Rate" or the "Conversion  Rate") shall be determined by dividing the
Series A Preference  Amount by the Conversion  Price  (determined as hereinafter
provided) in effect at the time of the conversion.

     For purposes of this FOURTH  Article,  the  following  terms shall have the
following meanings:

     "MARKET  PRICE" means the average  Closing Bid Price of the Common Stock on
the  Principal  Market for the five (5) Trading Days prior to the date for which
the Market Price is to be determined.

     "CLOSING  BID PRICE" or "CLOSING ASK PRICE"  means,  for any security as of
any  date,  the last  closing  bid or ask  price,  as the case may be,  for such
security on the Principal

                                       7
<PAGE>

Market as reported by  Bloomberg  Financial  Markets  ("BLOOMBERG"),  or, if the
Principal Market is not the principal  securities exchange or trading market for
such  security,  the  last  closing  bid or ask  price of such  security  on the
principal securities exchange or trading market where such security is listed or
traded as reported by  Bloomberg,  or if the  foregoing  do not apply,  the last
closing bid or ask price of such security in the over-the-counter  market on the
electronic bulletin board for such security as reported by Bloomberg,  or, if no
closing bid or ask price is reported for such  security by  Bloomberg,  the last
closing trade price of such  security as reported by  Bloomberg,  or, if no last
closing trade price is reported for such  security by Bloomberg,  the average of
the bid or ask prices of any market  makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or
Closing Ask Price cannot be calculated  for such security on such date on any of
the foregoing bases, the Closing Bid Price or Closing Ask Price of such security
on such date shall be the fair market value as determined in good faith by Board
of Directors of the Corporation.

     "CONVERSION  PRICE"  means,  as of any  Conversion  Date or  other  date of
determination,  the lower of (x)  $5.10,  (y) the Market  Price on the  Original
Issue Date or (z) 95% of the average of the two (2) lowest Closing Bid Prices on
the  Principal  Market of the Common  Stock out of the fifteen (15) Trading Days
immediately  prior to  conversion,  which  Conversion  Price  shall be  adjusted
proportionately for any reorganizations,  reclassifications, stock splits, stock
dividends,  reverse stock splits and similar events; provided, however, that the
Conversion Price will not be lower than the Floor Price, if applicable.

     "FLOOR  PRICE"  means  $3.10  for the  conversion  of a share  of  Series A
Preferred  Stock effected at any time after the Original  Issue Date;  provided,
however, that if:

     (A) the  Conversion  Price,  as calculated  herein  without regard to Floor
Price, for any thirty (30) Trading Days,  whether or not consecutive,  after the
Original  Issue  Date is below  the Floor  Price,  then the  Floor  Price  shall
thereafter  not  apply  with  respect  to any  subsequent  conversions  of up to
one-third  (1/3rd)  of the total  number of shares of Series A  Preferred  Stock
originally purchased under the Purchase Agreement;  provided,  however, that the
Corporation  shall first be given the opportunity to redeem such shares pursuant
to Section 8(b) hereof;

     (B) the  Conversion  Price,  as calculated  herein  without regard to Floor
Price, for any sixty (60) Trading Days,  whether or not  consecutive,  after the
Original  Issue  Date is below  the Floor  Price,  then the  Floor  Price  shall
thereafter  not  apply  with  respect  to any  subsequent  conversions  of up to
two-thirds  (2/3rds) of the total  number of shares of Series A Preferred  Stock
originally  purchased under the Purchase  Agreement (less any shares  previously
converted or redeemed hereunder);  provided, however, that the Corporation shall
first be given the  opportunity  to redeem such shares  pursuant to Section 8(b)
hereof; and

     (C) the  Conversion  Price,  as calculated  herein  without regard to Floor
Price, for any ninety (90) Trading Days,  whether or not consecutive,  after the
Original  Issue  Date is below  the Floor  Price,  then the  Floor  Price  shall
thereafter not apply with respect to any  subsequent  conversions of any and all
remaining shares of

                                       8
<PAGE>

Series A Preferred Stock held;  provided,  however,  that the Corporation  shall
first be given the  opportunity  to redeem such shares  pursuant to Section 8(b)
hereof.

     "PRINCIPAL  MARKET" means the American Stock  Exchange,  the New York Stock
Exchange,  the Nasdaq National Market, or the Nasdaq Smallcap Market,  whichever
is at the  applicable  time the  principal  trading  exchange  or market for the
Common Stock, based upon share volume.

     "TRADING DAY" means any day during which the Principal Market shall be open
for business.


     (c) CONVERSION  NOTICE.  A holder of Series A Preferred  Stock may exercise
its  conversion  right by  giving a  written  conversion  notice  in the form of
Exhibit A hereto (the  "CONVERSION  NOTICE") to the Corporation (x) by facsimile
confirmed by a telephone  call or (y) by registered  mail or overnight  delivery
service,  with a copy by facsimile to the  Corporation's  transfer agent for its
Common  Stock,  as  designated  by the  Corporation  from time to time.  If such
conversion  will  result in the  conversion  of all of such  holder's  shares of
Series A Preferred  Stock,  such holder shall also surrender the  certificate or
certificates  representing  the shares so to be converted (the "PREFERRED  STOCK
CERTIFICATES")  to the Corporation at its principal office (or such other office
or agency of the  Corporation  as the  Corporation  may  designate  by notice in
writing to the holders of the Series A  Preferred  Stock) at any time during its
usual business hours on the date set forth in the Conversion Notice.

     (d) ISSUANCE OF CERTIFICATES.

          (i) Promptly,  but in no event more than four (4) Trading Days,  after
the receipt of the Conversion  Notice  referred to in Section 6(c) and surrender
of the Preferred Stock  Certificates (if required),  the Corporation shall issue
and deliver, or cause to be issued and delivered,  to the holder,  registered in
such name or names as such holder may direct,  a certificate or certificates for
the number of whole  shares of Common  Stock into which such  shares of Series A
Preferred Stock have been converted.  In the alternative,  if the  Corporation's
transfer  agent is a participant in the electronic  book transfer  program,  the
transfer agent shall credit such  aggregate  number of shares of Common Stock to
which the holder  shall be entitled to the  holder's or its  designee's  balance
account with The Depository  Trust Company.  Such conversion  shall be deemed to
have been effected, and the Conversion Date shall be deemed to have occurred, on
the date on which  such  Conversion  Notice  shall  have  been  received  by the
Corporation and at the time specified in such Conversion  Notice,  which must be
during the calendar  day of such notice.  The rights of the holder of such share
or shares of Series A Preferred Stock shall cease,  and the person or persons in
whose name or names any certificate or  certificates  for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented  thereby, on the Conversion Date.
Issuance of shares of Common Stock issuable upon  conversion  that are requested
to be  registered  in a name other than that of the  registered  holder shall be
subject to compliance with all applicable federal and state securities laws.

                                       9
<PAGE>

          (ii) The Corporation  understands  that a delay in the issuance of the
shares of Common Stock beyond four (4) Trading  Days after the  Conversion  Date
could  result in  economic  loss to the  holder of shares of Series A  Preferred
Stock. As  compensation  to the holder for such loss, the Corporation  agrees to
pay liquidated  damages to such holder per day of delay in the amount of 0.2% of
the product of (1) the number of shares of Common  Stock for which  certificates
have not been  properly  delivered  and (2) the highest  Market Price during the
delay period.  The Corporation shall make all payments due under this Subsection
6(d)(ii) in immediately available funds upon demand.  Nothing herein shall limit
a holder's  right to pursue  injunctive  relief  and/or  actual  damages for the
Corporation's  failure  to issue  and  deliver  Common  Stock to such  holder as
required by Subsection 6(d)(i),  including,  without  limitation,  such holder's
actual losses  occasioned by any "buy-in" of Common Stock  necessitated  by such
late  delivery.  Furthermore,  in  addition  to any other  remedies  that may be
available  to such  holder,  if the  Corporation  fails for any reason to effect
delivery of such shares of Common  Stock  within six (6) Trading  Days after the
Conversion Date, such holder will be entitled to revoke the relevant  Conversion
Notice by delivering a notice to such effect to the  Corporation.  Upon delivery
of such  notice of  revocation,  the  Corporation  and the holder  shall each be
restored to their  respective  positions  immediately  prior to delivery of such
Conversion Notice, except that holder shall retain the right to receive both the
late payment amounts set forth above plus the actual cost of any "buy-in."

          (iii)  If, at any time (a) the  Corporation  challenges,  disputes  or
denies the right of a holder to effect the  conversion of the Series A Preferred
Stock into Common Stock or otherwise  dishonors or rejects any Conversion Notice
properly  delivered in accordance with this Section 6 or (b) any third party who
is not and has never been an affiliate  of a holder  obtains a judgment or order
from any court or public or governmental authority that denies, enjoins, limits,
modifies,  or delays the right of such  holder to effect the  conversion  of the
Series A Preferred  Stock into  Common  Stock,  then such holder  shall have the
right,  by written  notice to the  Corporation,  to require the  Corporation  to
promptly  redeem the Series A  Preferred  Stock at a price  equal to the closing
sale  price of the  Common  Stock on the date  immediately  prior to the date on
which such notice is given.  Under any of the circumstances set forth above, the
Corporation shall indemnify the holder against and hold it harmless from, and be
responsible for the payment of, all costs and expenses of the holder,  including
its  reasonable  legal fees and expenses,  as and when incurred in disputing any
such action or pursuing its rights hereunder (in addition to any other rights of
such holder).  The Corporation  shall not refuse to honor any Conversion  Notice
unless its has actually been enjoined by a court of competent  jurisdiction from
doing so,  and if so  enjoined,  the  Corporation  shall  post with such court a
performance  bond equal to 125% of the aggregate  Market Price multiplied by the
number of shares  sought to be  converted  by the holder that are the subject of
such injunction.

          (iv) The  holders of Series A  Preferred  Stock  shall be  entitled to
exercise their conversion privilege notwithstanding the commencement of any case
under 11 U.S.C.ss.101 ET SEQ. (the "BANKRUPTCY  CODE").  The Corporation  hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C.ss.  362 in respect of the holder's conversion privilege,  if it becomes a
debtor under the Bankruptcy  Code. The Corporation  agrees to take or consent to
any and all action necessary to effectuate relief under 11 U.S.C.ss.362  without
cost or expense to the holder.

                                       10
<PAGE>

     (e) FRACTIONAL  SHARES.  The Corporation  shall not issue any fraction of a
share of Common Stock upon any conversion. All shares of Common Stock (including
fractions  thereof)  issuable upon conversion of more than one share of Series A
Preferred  Stock by a  holder  thereof  shall  be  aggregated  for  purposes  of
determining whether the conversion would result in the issuance of a fraction of
a share of Common Stock. If, after such  aggregation,  the issuance would result
in the issuance of a fraction of a share of Common Stock, the Corporation  shall
round such fraction of a share of Common Stock up to the nearest whole share.

     (f) ISSUANCE TAXES.  The Corporation  shall pay any and all issue and other
taxes  that may be payable  in  respect  of any issue or  delivery  of shares of
Common Stock on conversion of Series A Preferred Stock pursuant hereto; provided
that the Corporation shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than of the holder of Series A  Preferred  Stock  which is being
converted.

     (g) REORGANIZATIONS,  RECLASSIFICATIONS,  ETC. If the Common Stock issuable
upon the  conversion of Series A Preferred  Stock shall be changed into the same
or a  different  number of shares of any class or classes  of stock,  whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares or stock dividend  provided for in Section 7(a)),  then
and in each such  event the  holder of each  share of Series A  Preferred  Stock
shall have the right  thereafter  to convert such share into the kind and amount
of shares  of stock  and other  securities  and  property  receivable  upon such
reorganization,  reclassification,  or other change, by holders of the number of
shares of Common Stock into which such shares of Series A Preferred  Stock might
have been converted immediately prior to such reorganization,  reclassification,
or change.

     (h) MERGERS,  CONSOLIDATIONS,  SALE OF ASSETS. In case of any consolidation
or merger of the Corporation with or into another corporation or the sale of all
or  substantially  all of the assets of the  Corporation to another  corporation
(other  than a  consolidation,  merger or sale  treated as a  Liquidating  Event
pursuant  to Section 4 above),  each  share of Series A  Preferred  Stock  shall
thereafter be  convertible  into the kind and amount of shares of stock or other
securities  or property that a holder of the number of shares of Common Stock of
the  Corporation  deliverable  upon conversion of Series A Preferred Stock would
have been entitled upon such  consolidation,  merger or sale;  and in such case,
appropriate  adjustment  (as determined in good faith by the Board of Directors)
shall be made in the  application  of the  provisions  of  Sections 6 and 7 with
respect  to the  rights  and  interest  thereafter  of the  holders  of Series A
Preferred  Stock,  to the end that the  provisions set forth in Sections 6 and 7
shall  thereafter be applicable,  as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of Series A  Preferred  Stock.  In lieu of  electing  to receive  the  foregoing
rights,  the holders of a majority  of the Series A Preferred  Stock may instead
exercise their redemption rights under Section 8 hereof.

     (i) NO IMPAIRMENT.  The  Corporation  will not, by amendment of the Amended
Certificate of Incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder

                                       11
<PAGE>

by the  Corporation,  but will at all times in good faith assist in the carrying
out of all of the  provisions  of Sections 6 and 7 and in the taking of all such
action as may be necessary  or  appropriate  in order to protect the  conversion
rights of the holders of the Series A Preferred Stock against impairment.

     (j) LIMITATION ON NUMBER OF CONVERSION  SHARES.  Notwithstanding  any other
provision herein,  the Corporation shall not be obligated to issue any shares of
Common  Stock  upon  conversion  of the Series A  Preferred  Stock if and to the
extent the  issuance of such shares of Common  Stock would  exceed the number of
shares (the "EXCHANGE CAP") then permitted to be issued without violation of the
rules or regulations of the Principal Market,  except that such limitation shall
not apply in the event that the  Corporation  (i)  obtains  the  approval of its
stockholders  as required by applicable  rules and  regulations of the Principal
Market for issuances of Common Stock in excess of the Exchange Cap, (ii) obtains
a  written  opinion  issued  to the  Corporation  and the  holders  of  Series A
Preferred Stock from outside  counsel to the  Corporation  that such approval is
not required,  which opinion shall be reasonably  satisfactory to the holders of
sixty-six and two-thirds  percent  (66-2/3%) of the shares of Series A Preferred
Stock then outstanding,  or (iii) is no longer listed on the Principal Market at
such time. If and to the extent the Exchange Cap applies,  no original purchaser
of Series A Preferred Stock  (collectively,  the  "INVESTORS")  shall be issued,
upon conversion of Series A Preferred Stock, shares of Common Stock in an amount
greater  than the product of (x) the  Exchange  Cap amount  multiplied  by (y) a
fraction,  the  numerator of which is the number of shares of Series A Preferred
Stock  originally  issued to such Investor and the  denominator  of which is the
aggregate  amount of all the Series A Preferred  Stock  issued to the  Investors
(the "CAP  ALLOCATION  AMOUNT").  In the event that any  Investor  shall sell or
otherwise  transfer  any of  such  Investor's  Series  A  Preferred  Stock,  the
transferee  shall  be  allocated  a pro  rata  portion  of such  Investor's  Cap
Allocation  Amount.  In the event  that any holder of Series A  Preferred  Stock
shall  convert all of such  holder's  Series A Preferred  Stock into a number of
shares of Common Stock that,  in the  aggregate,  is less than such holder's Cap
Allocation  Amount,  then the  difference  between such holder's Cap  Allocation
Amount and the number of shares of Common Stock  actually  issued to such holder
shall be allocated to the Cap  Allocation  Amounts of the  remaining  holders of
Series A  Preferred  Stock on a pro rata  basis in  proportion  to the number of
Series A Preferred Stock then held by each such holder.

     7. ADJUSTMENT OF CONVERSION RATE. The Series A Conversion Rate from time to
time in effect shall be subject to adjustment from time to time as follows.

     (a) STOCK SPLITS, DIVIDENDS AND COMBINATIONS. In case the Corporation shall
at any time  subdivide the  outstanding  shares of Common Stock or shall issue a
dividend in Common Stock on its outstanding Common Stock, the Conversion Rate in
effect  immediately  prior to such  subdivision or the issuance of such dividend
shall be  proportionately  decreased,  and in case the Corporation  shall at any
time  combine the  outstanding  shares of Common  Stock into a lesser  number of
shares of Common Stock, the Conversion Rate in effect  immediately prior to such
combination   shall  be   proportionately   increased,   concurrently  with  the
effectiveness of such subdivision, dividend or combination, as the case may be.

                                       12
<PAGE>

     (b) NONCASH DIVIDENDS,  STOCK PURCHASE RIGHTS, CAPITAL  REORGANIZATIONS AND
DISSOLUTIONS. In case:

          (i) the  Corporation  shall take a record of the holders of its Common
     Stock for the purpose of entitling  them to receive a dividend or any other
     distribution, payable otherwise than in cash; or

          (ii) the Corporation  shall take a record of the holders of its Common
     Stock for the purpose of entitling  them to  subscribe  for or purchase any
     shares of stock of any class or to receive any other rights; or

          (iii)   of   any   capital    reorganization   of   the   Corporation,
     reclassification  of the  capital  stock of the  Corporation  (other than a
     subdivision  or  combination  of its  outstanding  shares of Common Stock),
     consolidation or merger of the Corporation with or into another Corporation
     that is not a Liquidating  Event or conveyance of all or substantially  all
     of the  assets of the  Corporation  to  another  Corporation  that is not a
     Liquidating Event (an "Organic Change");

then,  and in any such case,  the  Corporation  shall  cause to be mailed to the
transfer agent for the Series A Preferred  Stock,  if any, and to the holders of
record of the outstanding Series A Preferred Stock, at least ten (10) days prior
to the date  hereinafter  specified,  a notice  stating  the date on which (A) a
record is to be taken for the purpose of such dividend,  distribution  or rights
or (B) such reclassification, reorganization, consolidation, merger, conveyance,
dissolution,  liquidation or winding up is to take place and the date, if any is
to be fixed,  as of which holders of Common Stock of record shall be entitled to
exchange  their  shares  of  Common  Stock  for  securities  or  other  property
deliverable upon such reclassification,  reorganization,  consolidation, merger,
conveyance,  dissolution,  liquidation or winding up. In addition,  prior to the
Organic Change,  the Corporation will make appropriate  provision to insure that
each of the holders of the Series A  Preferred  Stock will  thereafter  have the
right to acquire  and  receive in lieu of or in addition to (as the case may be)
the  shares  of  Common  Stock  otherwise  acquirable  and  receivable  upon the
conversion  of such  holder's  Series A Preferred  Stock,  such shares of stock,
securities or assets as would have been issued or payable in such Organic Change
with  respect to or in  exchange  for the number of shares of Common  Stock that
would have been  acquirable  and  receivable  had all of such holder's  Series A
Preferred Stock been converted into shares of Common Stock  immediately prior to
such Organic Change (without taking into account any limitations or restrictions
on the timing or amount of conversions).  In any such case, the Corporation will
make appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 7(b) will thereafter be applicable to
the  Series  A  Preferred  Stock.  The  Corporation  will  not  effect  any such
consolidation,  merger or sale,  unless prior to the consummation  thereof,  the
successor entity (if other than the Corporation) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument,  the
obligation to deliver to each holder of Series A Preferred  Stock such shares of
stock,  securities  or assets as, in accordance  with the foregoing  provisions,
such holder may be entitled to acquire.

                                       13
<PAGE>

     (c) ISSUANCES AT LESS THAN THE CONVERSION  PRICE.  So long as any shares of
Series A  Preferred  Stock  remain  outstanding  (the  "MFN  Period"),  upon the
issuance or sale by the Corporation of:

          (i)  Common  Stock  for  a Per  Share  Selling  Price  less  than  any
Conversion Price in effect  immediately prior to the time of such issue or sale;
or

          (ii) any Stock  Purchase  Rights where the Per Share Selling Price for
which  shares  of Common  Stock  may at any time  thereafter  be  issuable  upon
exercise  thereof (or, in the case of Stock Purchase Rights  exercisable for the
purchase of Convertible  Securities,  upon the subsequent conversion or exchange
of such  Convertible  Securities)  shall be less  than any  Conversion  Price in
effect immediately prior to the time of the issue or sale of such Stock Purchase
Rights; or

          (iii) any Convertible Securities where the consideration per share for
which shares of Common Stock may at any time thereafter be issuable  pursuant to
the terms of such Convertible Securities shall be less than any Conversion Price
in effect immediately prior to the time of the issue or sale of such Convertible
Securities;

other than an issuance of Common Stock  pursuant to Sections 7(a) or 7(f) hereof
(any such issuance shall be referred to  hereinafter as a "Dilutive  Issuance"),
then forthwith upon such issue or sale, such applicable  Conversion  Price shall
be reduced to such lower Per Share Selling Price.

     Notwithstanding  the foregoing,  no Conversion  Price shall at such time be
reduced if such reduction would be an amount less than $.01, but any such amount
shall be carried  forward and deduction with respect thereto made at the time of
and together with any subsequent  reduction that,  together with such amount and
any other amount or amounts so carried forward, shall aggregate $.01 or more.

     (d) For  purposes  of this  Section  7, the  following  provisions  will be
applicable:

          (i)  "Convertible  Securities"  shall mean evidences of  indebtedness,
shares of stock (including, without limitation, the Series A Preferred Stock) or
other securities that are convertible into or exchangeable  for, with or without
payment of additional consideration, shares of Common Stock.

          (ii) "Stock Purchase Rights" shall mean any warrants, options or other
rights to  subscribe  for,  purchase or  otherwise  acquire any shares of Common
Stock or any Convertible Securities.

          (iii) Convertible Securities and Stock Purchase Rights shall be deemed
outstanding and issued or sold at the time of such issue or sale.

          (iv) The term "Per  Share  Selling  Price"  shall  include  the amount
actually paid by third parties for each share of Common Stock.  In the event the
Corporation in connection with such  transaction pays a fee in excess of 6%, any
such  excess  amount  shall be deducted  from the selling  price pro rata to all
shares sold in the  transaction to arrive at the Per Share Selling Price. A sale
in a capital raising transaction of shares of Common Stock shall

                                       14
<PAGE>

include  the sale or  issuance  of  rights,  options,  warrants  or  convertible
securities  under  which the  Corporation  is or may become  obligated  to issue
shares of Common Stock, and in such circumstances the Per Share Selling Price of
the Common Stock  covered  thereby shall also include the exercise or conversion
price thereof (in addition to the consideration received by the Corporation upon
such sale or issuance less the excess fee amount, if any, as provided above). In
case of any such  security  issued  within  the MFN Period in a  "Variable  Rate
Transaction" or "MFN Transaction" (each as defined below), the Per Share Selling
Price shall be deemed to be the lowest  conversion  or  exercise  price at which
such  securities  are  converted or  exercised  or might have been  converted or
exercised in the case of a Variable Rate  Transaction,  or the lowest adjustment
price in the case of an MFN Transaction, each over the life of such securities.

          (v)  "Variable  Rate  Transaction"  means a  transaction  in which the
Corporation  issues  or  sells  (a)  any  debt or  equity  securities  that  are
convertible  into,  exchangeable  or  exercisable  for,  or include the right to
receive  additional shares of Common Stock either (x) at a conversion,  exercise
or  exchange  rate or other  price that is based  upon  and/or  varies  with the
trading  prices of or  quotations  for the  Common  Stock at any time  after the
initial  issuance  of  such  debt  or  equity  securities,  or (y)  with a fixed
conversion,  exercise or  exchange  price that is subject to being reset at some
future date after the initial  issuance of such security or upon the  occurrence
of specified or contingent events directly or indirectly related to the business
of the  Corporation or the market for the Common Stock, or (b) any securities of
the Corporation  issued or issuable pursuant to an "equity line" structure which
provides for the sale, from time to time, of securities of the Corporation which
are registered for resale pursuant to the Securities Act.

          (vi) "MFN  Transaction"  means a transaction in which the  Corporation
issues or sells any equity securities in a capital raising transaction or series
of related  transactions  (the "New Offering")  which grants to an investor (the
"New Investor") the right to receive  additional shares based upon future equity
raising  transactions  of the  Corporation  on terms more  favorable  than those
granted to the New Investor in the New Offering.

          (vii)  DETERMINATION OF  CONSIDERATION.  The  "consideration  actually
received" by the  Corporation  for the  issuance,  sale,  grant or assumption of
shares  of Common  Stock,  Stock  Purchase  Rights  or  Convertible  Securities,
irrespective of the accounting treatment of such consideration,  shall be valued
as follows:

               (A) CASH PAYMENT. In the case of cash, the net amount received by
the Corporation  after deduction of any accrued interest or dividends and before
deducting  any expenses  paid or incurred and any  underwriting  commissions  or
concessions  paid or allowed by the Corporation in connection with such issue or
sale;

               (B)  NONCASH  PAYMENT.  If shares are issued for a  consideration
other than cash,  the Per Share  Selling Price shall be the fair market value of
such  consideration as determined in good faith by independent  certified public
accountants mutually acceptable to the Corporation and the holders of a majority
of shares of Series A Preferred Stock.; and

               (C) STOCK PURCHASE RIGHTS AND CONVERTIBLE  SECURITIES.  The total
consideration,  if any,  received by the  Corporation as  consideration  for the
issuance of the Stock

                                       15
<PAGE>

Purchase  Rights or the  Convertible  Securities,  as the case may be,  plus the
minimum  aggregate  amount of additional  consideration,  if any, payable to the
Corporation  upon  the  exercise  of such  Stock  Purchase  Rights  or upon  the
conversion or exchange of such  Convertible  Securities,  as the case may be, in
each case after deducting any accrued interest or dividends.

     (e)  READJUSTMENT OF CONVERSION RATE. In the event of any change in (i) the
consideration,  if any,  payable upon exercise of any Stock  Purchase  Rights or
upon the conversion or exchange of any  Convertible  Securities or (ii) the rate
at which any  Convertible  Securities are convertible  into or exchangeable  for
shares of Common  Stock,  the  applicable  Conversion  Rate as computed upon the
original issue thereof shall forthwith be readjusted to the Conversion Rate that
would  have  been in  effect  at such  time had such  Stock  Purchase  Rights or
Convertible  Securities provided for such changed purchase price,  consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold.  On the  expiration of any Stock  Purchase  Rights not exercised or of any
right to convert or exchange under any Convertible Securities not exercised, the
applicable  Conversion  Rate then in effect shall  forthwith be increased to the
Conversion  Rate that would  have been in effect at the time of such  expiration
had such Stock Purchase Rights or Convertible  Securities never been issued.  No
readjustment  of the Conversion  Rate pursuant to this Subsection 7(e) shall (i)
increase the applicable Conversion Rate by an amount in excess of the adjustment
originally made to the Conversion Rate in respect of the issue, sale or grant of
the applicable  Stock Purchase Rights or Convertible  Securities or (ii) require
any  adjustment to the amount paid or number of shares of Common Stock  received
by any holder of Preferred  Stock upon any  conversion of any share of Preferred
Stock  prior to the date upon which such  readjustment  to the  Conversion  Rate
shall occur.

     (f)  EXCLUSIONS.  Anything  herein  to the  contrary  notwithstanding,  the
Corporation  shall not be required to make any adjustment of any Conversion Rate
in the case of (i) the  issuance  or sale of  options,  or the  shares  of stock
issuable upon exercise of such  options,  to purchase  shares of Common Stock to
directors,  officers,  employees or consultants of the  Corporation  pursuant to
stock  options or stock  purchase  plans or  agreements  in existence on Aprl 5,
2001,  whether  "qualified"  for tax  purposes  or not,  pursuant  to  plans  or
arrangements  approved  by the  Board of  Directors  or  stockholders,  (ii) the
issuance of Common Stock  pursuant to warrants  outstanding as of April 5, 2001;
(iii) the  issuance of Common  Stock upon  conversion  of the Series A Preferred
Stock;  and  (iv) the  issuance  of  equity  or debt  securities  to  finance  a
redemption  of Series A  Preferred  Stock  (but  only if all  shares of Series A
Preferred Stock are in fact promptly redeemed with the proceeds thereof pursuant
to the terms of this FOURTH  Article).  The issuances or sales  described in the
preceding  clauses  (i),  (ii) (iii) and (iv) shall be ignored  for  purposes of
calculating any adjustment to the Conversion Rate.

     (g)  NOTICE OF  ADJUSTMENTS.  Upon the  occurrence  of each  adjustment  or
readjustment  of the Conversion Rate pursuant to this Section 7, the Corporation
at its expense  shall  promptly  compute  such  adjustment  or  readjustment  in
accordance  with the terms  thereof,  and  prepare and furnish to each holder of
Series A Preferred  Stock  affected  thereby a  certificate  setting  forth such
adjustment  or  readjustment  and  showing  in detail  the facts upon which such
adjustment or readjustment is based.  The  Corporation  shall,  upon the written
notice at any time of any holder of Series A Preferred Stock furnish or cause to
be furnished to such holder a like certificate setting forth (i) such adjustment
or readjustment, (ii) the applicable Conversion Rate at

                                       16
<PAGE>

the time in  effect  and (iii)  the  number  of  shares of Common  Stock and the
amount,  if any, of other  property  that at the time would be received upon the
conversion of such holder's shares.

     8. REDEMPTION.

     (a) REDEMPTION AT THE OPTION OF THE HOLDERS OF SERIES A PREFERRED STOCK.

          (i)  Upon  the  occurrence  of any of the  following  events  (each  a
"Redemption  Event"),  the  holders of Series A  Preferred  Stock shall have the
right to have the  Corporation  redeem their shares of Series A Preferred  Stock
pursuant to this Section 8(a) (provided,  the Corporation  shall have 20 days to
cure any default  under  subsections  (F),  (G), (H), (I) and (J) below from the
date it receives notice thereof):

               (A) the fourth (4th) anniversary of the Original Issue Date;

               (B) a  consolidation  or merger of the  Corporation  with or into
          another entity or the sale of all or  substantially  all of the assets
          of the  Corporation  to another  entity  (other than a  consolidation,
          merger or sale treated as a  Liquidating  Event  pursuant to Section 4
          above)(a "Sale Transaction");

               (C) After the Effective Date of any Registration  Statement,  the
          inability  for 30 or more days  (whether  or not  consecutive)  of any
          holder  of  Securities  to  sell  any   Securities   pursuant  to  the
          Registration Statement as a direct or indirect result of any action or
          omission  of the  Corporation  in  breach of the  Registration  Rights
          Agreement dated April 6TH, 2001 by and between the Corporation and the
          original  holders of the Series A Preferred  Stock (the  "Registration
          Rights Agreement");

               (D)  The  Corporation   shall  fail  or  default  in  the  timely
          performance  of any  obligation  (i) to  issue  Conversion  Shares  or
          Warrant Shares as and when required by the Purchase Agreement (and the
          related exhibits thereto), (ii) to remove restrictive legends pursuant
          to Article  IX of the  Purchase  Agreement,  or (iii)  constituting  a
          registration default under Section 3(v)(ii) of the Registration Rights
          Agreement;

               (E) The Corporation  amends its Certificate of  Incorporation  or
          Bylaws,  without the  consent of holders of Series A Preferred  Stock,
          which  amendment  materially  and adversely  affects the rights of any
          holder of Series A Preferred Stock;

               (F) The  termination  of  employment  of  Angelo  Morini as Chief
          Executive  Officer of the  Corporation,  whether  by the  Corporation,
          resignation,   or  otherwise   (including  a  substantial   change  or
          diminution of his duties as such, but excluding death or disability);

                                       17
<PAGE>

               (G)  Failure  by  the  Corporation  to  comply  with  any  of its
          obligations under Section 6.13 of the Purchase Agreement or failure to
          secure  the  approvals  contemplated  thereby by the  deadline  stated
          therein;

               (H) The  Corporation's  common  stock  ceased to be listed on the
          American Stock  Exchange,  unless such common stock is  simultaneously
          being  listed on the Nasdaq  National  Market or the  Nasdaq  SmallCap
          Market;

               (I) Any lender or any holder of  indebtedness  of the Corporation
          for  borrowed  money in excess of $250,000  shall  declare an event of
          default  pursuant  to  documents  evidencing  such  indebtedness  that
          enables or  permits  the holder of such  indebtedness  to require  the
          payment of such indebtedness prior to its scheduled maturity; and

               (J)  Failure  by the  Corporation  to have  sufficient  shares of
          Common Stock  authorized  for  issuance  upon  conversion  of Series A
          Preferred Stock and exercise of the Warrants;

          then,  in any such  Redemption  Event,  upon  written  request  to the
     Corporation  by holders of a majority of the Series A Preferred  Stock (the
     "Holders' Redemption Notice"), the Corporation shall redeem all outstanding
     shares of Series A Preferred Stock for cash at a redemption price per share
     equal to the  greater  of: (x) 100% of the Series A  Preference  Amount per
     share as of the Holders'  Redemption Date (defined below); or (y) an amount
     equal to the  product  of (1) the  number of shares  of Common  Stock  then
     issuable to the holders  upon  conversion  of the Series A Preferred  Stock
     being  redeemed  and (2) the Market  Price on the date of  redemption  (the
     greater of which shall be referred to as the "Redemption Price"); provided,
     however,  in the event of a  Redemption  Event  arising by virtue of a Sale
     Transaction  under  Section  8(a)(i)(C)  above,  each  holder  of  Series A
     Preferred  Stock  shall be  entitled  to elect,  solely at its  option,  to
     receive  either  the  Redemption  Price  or the  consideration  it would be
     entitled to receive as part of the Sale Transaction had it converted all of
     its shares of Series A Preferred Stock into Common Stock  immediately prior
     to   consummation   of  the  Sale   Transaction   (the  "Sale   Transaction
     Consideration");  provided further,  however, that if the amount or type of
     Sale Transaction Consideration is not fully determinable at the time of the
     holder's election,  such holder shall be entitled to receive the Redemption
     Price per share pursuant to this Section 8(a), plus the difference,  if any
     and only if it is a positive amount, between the aggregate Redemption Price
     and the Sale Transaction Consideration,  payable by the surviving entity in
     the  Sale  Transaction  at the  time  such  consideration,  or any  portion
     thereof, is finally determined or paid.

          (ii) Within five (5) days after its receipt of the Holders' Redemption
Notice (the  "Holders'  Redemption  Date"),  the  Corporation  shall pay to each
holder of shares of Series A Preferred  Stock the Redemption  Price for all such
holder's shares of Series A Preferred Stock (the "Redemption Amount") in cash by
wire transfer of immediately  available  funds in accordance  with such holder's
written  wire  transfer  instructions.  If the  Corporation  fails to do so,  in
addition  to any remedy  such  holder may have under this  FOURTH  Article,  the
Purchase

                                       18
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Agreement and the Registration  Rights Agreement,  such unpaid amount shall bear
interest at the rate of 3.0% per month  (prorated for partial months) until paid
in  full.  Until  the  Redemption  Amount  is paid in full to such  holder,  the
redemption  provided for in this Section 8(a) will not be effective with respect
to those shares of Series A Preferred  Stock for which the Redemption  Price has
not been paid in full.

          (iii) As a condition to payment of the Redemption Amount to any holder
of shares of Series A Preferred Stock, on or before the Holders' Redemption Date
that holder must surrender to the Corporation (through the escrow agent approved
by the  Corporation and the holders) at its principal  offices any  certificates
representing  such  shares  (or an  affidavit  of lost  certificate  in form and
content reasonably  satisfactory to the Corporation.  Upon payment to the holder
of the Redemption Amount,  each such surrendered  certificate shall be cancelled
and retired.

     (b) REDEMPTION AT THE OPTION OF THE CORPORATION.

          (i) If a holder of Series A Preferred  Stock  provides  written notice
(each time a "Floor  Price  Elimination  Notice")  to the  Corporation  that the
Conversion Price, as calculated herein without regard to Floor Price, for any:

               (A) thirty (30) Trading Days (whether or not  consecutive)  after
          the Original Issue Date is below the Floor Price, then the Corporation
          shall have the option to redeem,  on the terms described  below, up to
          one-third (1/3rd) of the shares of Series A Preferred Stock originally
          purchased under the Purchase Agreement;

               (B) any sixty (60)  Trading  Days  (whether  consecutive  or not)
          after the  Original  Issue  Date is below the  Floor  Price,  then the
          Corporation  shall have the option to redeem,  on the terms  described
          below,  up to  two-thirds  (2/3rds)  of the total  number of shares of
          Series A  Preferred  Stock  originally  purchased  under the  Purchase
          Agreement   (less  any  shares   previously   converted   or  redeemed
          hereunder); or

               (C) for any ninety (90) Trading Days (whether consecutive or not)
          after the  Original  Issue  Date is below the  Floor  Price,  then the
          Corporation  shall have the option to redeem,  on the terms  described
          below, all remaining shares of Series A Preferred Stock held.

          (ii) If the  Corporation  opts to redeem  shares of Series A Preferred
Stock  pursuant to this Section 8(b), it must provide  written notice of such to
the holders of Series A Preferred Stock (the "Corporation's  Redemption Notice")
within four (4) Trading Days of its receipt of a Floor Price Elimination Notice.
The  Corporation's  Redemption  Notice must specify (A) the date for  redemption
(the  "Corporation's  Redemption  Date"),  which must be no sooner than four (4)
Trading  Days  and not  more  than  six (6)  Trading  Days of the  Corporation's
Redemption  Notice,  and (B) the number of shares of Series A Preferred Stock to
be  redeemed  from the  holder to whom the  Corporation's  Redemption  Notice is
delivered.  Each holder of shares of Series A Preferred  Stock shall be entitled
to convert its shares of Series A Preferred

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<PAGE>

Stock into Common Stock prior to the Corporation's  Redemption Date.  Failure to
timely deliver the  Corporation's  Redemption Notice shall result in termination
of the Corporation's redemption option with respect to those shares.

          (iii) Within three (3) Trading Days after the Corporation's Redemption
Date, the  Corporation  shall pay to each holder of shares of Series A Preferred
Stock its  entire  Redemption  Amount in cash by wire  transfer  of  immediately
available  funds  in  accordance  with  such  holder's   written  wire  transfer
instructions.  If it fails to do so, (A) the option  redemption  provided for in
this Section  8(b) will  terminate  and shall not be  effective  with respect to
those shares of Series A Preferred Stock for which the Redemption  Price has not
been paid in full,  and (B) that holder may  continue to convert its  unredeemed
shares of Series A Preferred Stock as provided in Section 6.

          (iv) As a condition to payment of the Redemption  Amount to any holder
of shares of Series A Preferred Stock, on or before the Corporation's Redemption
Date,  that holder must surrender to the  Corporation  (through the escrow agent
approved  by the  Corporation  and the  holders)  at its  principal  offices any
certificates  representing  such shares (or an affidavit of lost  certificate in
form and content reasonably satisfactory to the Corporation. Upon payment to the
holder of the  Redemption  Price,  each such  surrendered  certificate  shall be
cancelled and retired.

     B. COMMON STOCK

     1. RELATIVE  RIGHTS OF PREFERRED STOCK AND COMMON STOCK.  All  preferences,
voting  powers,  relative,  participating,  optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are  expressly  made  subject  and  subordinate  to those that may be fixed with
respect to any shares of the Preferred Stock.

     2. VOTING RIGHTS.  Except as otherwise  required by law or this Certificate
of Incorporation,  each holder of Common Stock shall have one vote in respect of
each  share of stock held by him of record on the books of the  corporation  for
the election of directors and on all matters submitted to a vote of stockholders
of the corporation.

     3. DIVIDENDS.  Subject to the  preferential  rights of the Preferred Stock,
the holders of shares of Common Stock shall be entitled to receive,  when and if
declared by the board of directors,  out of the assets of the corporation  which
are by law available therefor,  dividends payable either in cash, in property or
in shares of capital stock.

     4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any dissolution,
liquidation or winding up of the affairs of the corporation,  after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of the Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise  provided by law or this Certificate of Incorporation,  to receive all
of the  remaining  assets of the  corporation  of whatever  kind  available  for
distribution  to  stockholders  ratably in proportion to the number of shares of
Common Stock held by them respectively.

     FIFTH. The corporation is to have perpetual existence.

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<PAGE>

     SIXTH. In furtherance and not in limitation of the powers  conferred by the
laws of the State of Delaware:

          A. The board of directors of the  corporation is expressly  authorized
     to adopt, amend or repeal the by-laws of the corporation.

          B.  Elections of directors  need not be by written  ballot  unless the
     by-laws of the corporation shall so provide.

          C. The books of the  corporation  may be kept at such place  within or
     without the State of Delaware as the by-laws of the corporation may provide
     or as may be designated  from time to time by the board of directors of the
     corporation.

     SEVENTH.  Whenever a compromise  or  arrangement  is proposed  between this
corporation  and  its  creditors  or any  class  of  them  and/or  between  this
corporation  and its  stockholders  or any class of them, any court of equitable
jurisdiction  within the State of Delaware may, on the  application in a summary
way of this  corporation  or of any  creditor or  stockholder  thereof or on the
application of any receiver or receivers  appointed for this  corporation  under
the  provisions  of  Section  291 of  Title  8 of the  Delaware  Code  or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this  corporation  under the  provisions  of  Section  279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this  corporation,  as the case may
be, to be summoned in such  manner as the said court  directs.  If a majority in
number  representing  three-fourths  in  value  of the  creditors  or  class  of
creditors,  and/or  of  the  stockholders  or  class  of  stockholders  of  this
corporation,  as the case may be, agree to any compromise or arrangement  and to
any  reorganization  of this  corporation as  consequence of such  compromise or
arrangement,  the said  compromise or  arrangement  and the said  reorganization
shall,  if sanctioned by the court to which the said  application has been made,
be  binding  on all the  creditors  or class  of  creditors,  and/or  on all the
stockholders or class of stockholders,  of this corporation, as the case may be,
and also on this corporation.

     EIGHTH.The  corporation eliminates the personal liability of each member of
its board of  directors  to the  corporation  or its  stockholders  for monetary
damages for breach of fiduciary duty as a director,  provided that the foregoing
shall not  eliminate  the  liability  of a  director  (i) for any breach of such
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions  not in good faith or which  involve  intentional  misconduct  or a
knowing  violation  of law,  (iii) under  Section 174 of Title 8 of the Delaware
Code or (iv) for any  transaction  from which such director  derived an improper
personal benefit.

     NINTH. The corporation  reserves the right to amend or repeal any provision
contained in this certificate of  incorporation,  in the manner now or hereafter
prescribed by statute,  and all rights  conferred upon a stockholder  herein are
granted subject to this reservation."

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<PAGE>

     IN WITNESS WHEREOF,  the undersigned has executed this Restated Certificate
of Incorporation this 14 day of December, 2002.

                                        GALAXY NUTRITIONAL FOODS, INC.

                                        By: /s/ Angelo S. Morini
                                            --------------------------
                                            Angelo S. Morini
                                            President

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<PAGE>

                                    Exhibit A
                                    ---------

                NOTICE OF CONVERSION OF SERIES A PREFERRED STOCK


     The undersigned hereby elects to convert  _____________  shares of Series A
Preferred Stock of Galaxy  Nutritional  Foods,  Inc. (the "Company") held by the
undersigned pursuant to the following terms and instructions:

Date of Conversion:____________________________________________________

Applicable Conversion Price:___________________________________________

Applicable Conversion Rate:____________________________________________

Calculation of the Conversion Rate:____________________________________

                                    ___________________________________



Number of Shares of Common Stock to be Issued:_________________________

Name in which Shares are to be Issued:_________________________________

Holder:________________________________________________________________

Signature:_____________________________________________________________

Title, if applicable:__________________________________________________

Address for delivery of shares or DTC account number for deposit of shares:

_______________________________________________________________________

_______________________________________________________________________


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