<PAGE>
 
                                                                     EXHIBIT 4.3

                         CERTIFICATE OF DESIGNATION OF
                           SERIES E PREFERRED STOCK

                                      OF

                              LASERTECHNICS, INC.


It is hereby certified that:

     1.   The name of the Company (hereinafter called the "Company") is
Lasertechnics, Inc. a Delaware corporation.

     2.   The certificate of incorporation of the Company authorizes the
issuance of 7,000,000 shares of preferred stock, $.01 value per share, and
expressly vests in the Board of Directors of the Company the authority provided
therein to issue any or all of said shares in one or more series and by
resolution or resolutions to establish the designation and number and to fix the
relative rights and preferences of each series to be issued.

     3.   The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series E issue of Preferred Stock:

     RESOLVED, that 50 of the 7,000,000 authorized shares of Preferred Stock of
the Company shall be designated Series E Preferred Stock, $.01 par value per
share, and shall possess the rights and preferences set forth below:

     Section 1.     Designation and Amount.  The shares of such series shall
                    ----------------------                                  
have a par value of $.01 per share and shall be designated as Series E Preferred
Stock (the "Series E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be 50.  The Series E Preferred Stock shall be
offered at a purchase price of $10,000 per share (the "Original Series E Issue
Price"), with an 8% per annum accretion rate as set forth herein.

     Section 2.     Rank.     The Series E Preferred Stock shall rank: (i)
                    ----                                                  
junior to any other class or series of capital stock of the Company hereafter
created specifically ranking by its terms senior to the Series E Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.01 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series E
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with the Series A Preferred Stock of
the Company, par value $.01 per share (the "Series A Preferred Stock"), the
Series B Preferred Stock of the Company, par value $.01 per share (the "Series B
Preferred Stock"), the Series C Preferred

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Stock of the Company, par value $.01 per share (the "Series C Preferred Stock"),
the Series D Preferred Stock of the Company, par value $.01 per share (the
"Series D Preferred Stock") and any class or series of capital stock of the
Company hereafter created specifically ranking by its terms on parity with the
Series E Preferred Stock ("Parity Securities") in each case as to distributions
of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary (all such distributions being referred to collectively
as "Distributions").

     Section 3.     Dividends.      The Series E Preferred Stock will bear no
                    ---------                                                
dividends, and the holders of the Series E Preferred Stock ("Holders") shall not
be entitled to receive dividends on the Series E Preferred Stock.

     Section 4.     Liquidation Preference.
                    ---------------------- 

          (a) In the event of any liquidation, dissolution or winding up of the
Company ("Liquidation Event"), either voluntary or involuntary, the Holders of
shares of Series E Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities but in parity with any
distribution to Parity Securities, an amount per share equal to the sum of (i)
the Original Series E Issue Price for each outstanding share of Series E
Preferred Stock and (ii) an amount equal to 8% of the Original Series E Issue
Price per annum for the period that has passed since May 18, 1997 (such amount
being referred to herein as the "Premium").  If upon the occurrence of such
event, and after payment in full of the preferential amounts with respect to the
Senior Securities, the assets and funds available to be distributed among the
Holders of the Series E Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Series E Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders of the
Series E Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.
 
          (b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
 
          (c) At each Holder's option, a sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which any person
or entity acquires more than 50% of the voting power of the Company (a "Change
of Control") shall be deemed to be a Liquidation Event as defined in Section
4(a); provided further that (i) a consolidation, merger, acquisition, or other
business combination of the Company with or into any other publicly traded
company or companies shall not be treated as a Liquidation Event as defined in
Section 4(a), but instead shall be treated pursuant to Section 5(e)(iii) hereof,
and (ii) a consolidation, merger, acquisition, or other business combination 

                                      -2-
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of the Company with or into any other non-publicly traded company or companies
shall be treated as a Liquidation Event as defined in Section 4(a). The Company
shall not effect any transaction described in subsection 4(c)(ii) unless it
first gives 30 business days prior notice of such transaction (during which time
the Holder shall be entitled to convert its shares of Series E Preferred Stock
into Common Stock). For purposes of this Section 4(c), the public offering, sale
or distribution of shares of stock of the Company's Sandia Imaging Systems Corp.
subsidiary or its Lasertechnics Marking Corporation subsidiary (but not both),
or the sale or other disposition of substantially all the assets of one (but not
both) of such subsidiaries, shall not constitute a Liquidation Event.
 
          (d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a Liquidation
Event, the cash distributions required by Section 4(a) or Section 6 have not
been made, the Company shall either: (i) cause such closing to be postponed
until such cash distributions have been made, or (ii) cancel such transaction,
in which event the rights of the Holders of Series E Preferred Stock shall be
the same as existing immediately prior to such proposed transaction.
 
     Section 5.     Conversion.     The record Holders of this Series  D
                    ----------                                          
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):

          (a)  Right to Convert.    Subject to the Company's right of redemption
set forth in Section 6(a), and on the terms and subject to the conditions set
forth in this Certificate of Designation, each record Holder of Series E
Preferred Stock shall be entitled to convert the shares of Series E Preferred
Stock held by such Holder, in whole at any time and in part from time to time,
into that number of fully-paid and non-assessable shares of Common Stock of the
Company calculated in accordance with the following formula (the "Conversion
Rate"):

     Number of shares issued upon conversion of one share of Series E Preferred
     Stock =

                        (.08) (N/365) (10,000) + 10,000
                        -------------------------------
                                Conversion Price

     where,

     .  N = the number of days between (i) May 18, 1997, and (ii) the applicable
     Date of Conversion (as defined in Section 5(c)(iv) below) for the shares of
     Series E Preferred Stock for which conversion is being elected, and

     .  Conversion Price = the lesser of (x) $2.1406 (the "Fixed Conversion
     Price"), and (y) 85% of the average Closing Bid Price, as defined below, of
     the Company's Common Stock for the ten trading days immediately preceding
     the Date of Conversion, as defined below (the "Variable Conversion Price");
     and

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     .  Closing Bid Price = (x) the closing bid price of the Common Stock on The
     Nasdaq Stock Market, including the Nasdaq Small Cap Market or the Nasdaq
     National Market, as applicable, or (y) if the Common Stock is then listed
     for trading on any national securities exchange, the closing bid price of
     the Common Stock on the principal such exchange on which the Common Stock
     is then so listed, or (z) if the Common Stock is not then listed on Nasdaq
     or any national securities exchange, the closing bid price of the Common
     Stock as quoted by the National Quotation Bureau Incorporated; provided,
                                                                    -------- 
     however, that if for any day the Closing Bid Price of a share of Common
     -------                                                                
     Stock is not determinable by any of the foregoing means, then the Closing
     Bid Price for such day shall be determined in good faith by the Board of
     Directors of the Company on the basis of such quotations and other
     considerations as such Board then determines to be appropriate, taking into
     account all relevant circumstances.

          (b)  Mechanics of Conversion.  In order to convert Series E Preferred
Stock into full shares of Common Stock, the Holder shall (i) fax to the Company
at the office of the Company or its designated transfer agent, if any (the
"Transfer Agent"), for the Series E Preferred Stock, on or prior to 3:00 p.m.,
New York City time (the "Conversion Notice Deadline") on the date of conversion,
a copy of a fully executed notice of conversion ("Notice of Conversion"), which
notice shall state that it is a notice of conversion relating to the Series E
Preferred Stock and shall specify the date of conversion, the number of shares
of Series E Preferred Stock to be converted, the applicable conversion price and
a calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the front page of each certificate to be
converted) and (ii) surrender to a common courier for delivery to the office of
the Company or such Transfer Agent (if any) the original certificates
representing the Series E Preferred Stock being converted (the "Preferred Stock
Certificates"), duly endorsed for transfer; provided, however, that the Company
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless either the Preferred Stock
Certificates are delivered to the Company or such Transfer Agent (if any) as
provided above, or the Holder notifies the Company or such Transfer Agent (if
any) that such certificates have been lost, stolen or destroyed (subject to the
requirements of subparagraph (i) below).  Upon receipt by the Company of a
facsimile copy of a Notice of Conversion, the Company shall immediately send,
via facsimile, a confirmation of receipt of the Notice of Conversion to Holder
which shall specify that the Notice of Conversion has been received and the name
and telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion.  In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and shall submit
the disputed calculations to its outside accountant via facsimile within three
days of receipt of Holder's Notice of Conversion.  The Company shall cause such
accountant to perform the calculations and notify Company and Holder of the
results no later than forty-eight hours from the time it receives the disputed
calculations.  Such accountant's calculation shall be deemed conclusive absent
manifest error.
 
          (i)       Lost or Stolen Certificates.  Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing 

                                      -4-
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shares of Series E Preferred Stock, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the Preferred Stock Certificate(s), if
mutilated, the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, Company shall not be obligated
to re-issue such lost or stolen Preferred Stock Certificates if Holder
contemporaneously requests Company to convert such Series E Preferred Stock into
Common Stock.
 
          (ii)      Delivery of Common Stock Upon Conversion.  The Transfer
Agent (if any) or the Company (as applicable) shall use its best efforts to, no
later than the close of business on the second business day and in no event
later than the third business day (the "Deadline") after receipt by the Company
or the Transfer Agent (if any) of a facsimile copy of a Notice of Conversion and
receipt by the Company or the Transfer Agent (if any) of all necessary
documentation duly executed and in proper form required for conversion,
including the original Preferred Stock Certificates to be converted (or after
provision for security or indemnification in the case of lost or destroyed
certificates, if required), issue and surrender to a common courier for either
overnight or (if delivery is outside the United States) two-day delivery to the
Holder at the address of the Holder as shown on the stock records of the Company
a certificate for the number of shares of Common Stock to which the Holder shall
be entitled as aforesaid.
 
          (iii)     No Fractional Shares.  A single whole share of Series E
Preferred Stock may be converted only in whole and not in part.  If any
conversion of the Series E Preferred Stock would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon conversion, in the aggregate, shall be the next lower number of
shares.
 
          (iv)      Date of Conversion.  The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before 3:00 p.m., New York City time, on the
Date of Conversion, and (ii) that the original Preferred Stock Certificates
representing the shares of Series E Preferred Stock to be converted are
surrendered by depositing such certificates with a common courier, for delivery
to the Company or Transfer Agent (if any) as provided above, as soon as
practicable after the Date of Conversion.  The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record Holder or Holders of such shares of
Common Stock on the Date of Conversion.
 
          (c)  Reservation of Stock Issuable Upon Conversion.  The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series E Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all 

                                      -5-
<PAGE>
 
then outstanding Series E Preferred Stock; and if at any time the number of
authorized but unissued of Series E Preferred Stock, the Company will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.

          (d)  Automatic Conversion. Each share of Series E Preferred Stock
outstanding on July 29, 1999, automatically shall be converted into Common Stock
on such date at the Conversion Rate then in effect (calculated in accordance
with the formula in Section 5(a) above), and such date shall be the Date of
Conversion with respect to such conversion.

          (e)  Adjustment to Conversion Rate.
 
          (i)       Adjustment to Fixed Conversion Price Due to Stock Split,
Stock Dividend, Etc.  If, prior to the conversion of all of the Series E
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Fixed Conversion
Price shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Fixed Conversion Price shall be proportionately
increased.
 
          (ii)      Adjustment to Variable Conversion Price.  If, at any time
when any shares of the Series E Preferred Stock are issued and outstanding, the
number of outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any conversion of the Series E Preferred Stock, then the Variable
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all five trading days immediately preceding the Date of Conversion.
 
          (iii)     Adjustment Due to Merger, Consolidation, Etc.  If, prior to
the conversion of all Series E Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets or there is a
Change of Control not deemed to be a liquidation pursuant to section 4(c), then
the Holders of Series E Preferred Stock shall thereafter have the right to
receive upon conversion of Series E Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities and/or
other assets which the Holder would have been entitled to receive in such
transaction had the Series E Preferred Stock been converted immediately prior to
such transaction, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Series E Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for the adjustment of the Conversion Price and of the number of
shares issuable upon conversion of the Series E Preferred 

                                      -6-
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Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities thereafter deliverable upon the exercise hereof. The
Company shall not effect any transaction described in this subsection 5(3)(iii)
unless (a) it first gives 30 business days prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event (during which time the Holder shall be entitled to convert its
shares of Series E Preferred Stock into Common Stock) and (b) the resulting
successor or acquiring entry (if not the Company) assumes by written instrument
the obligations of the Company under this Certificate of Designation including
this subsection 5(e)(iii).
 
          (iv)      No Fractional Shares.  If any adjustment under this Section
5(e) would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be the next
lower number of shares.
 
     Section 6.     Redemption by Company.
                    --------------------- 

          (a) Company's Right to Redeem Upon Receipt of Notice of Conversion.
If the Conversion Price of the Company's Common Stock is less than the Fixed
Conversion Price (as defined in Section 5(a)), at the time of receipt of a
Notice of Conversion pursuant to Section 5, the Company shall have the right, in
its sole discretion, to redeem in whole or in part any Series E Preferred Stock
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion").  If the Company elects to
redeem some, but not all, of the Series E Preferred Stock submitted for
conversion, the Company shall redeem from among the Series E Preferred Stock
submitted by the various shareholders for conversion on the applicable date, a
pro-rata amount from each such Holder so submitting Series E Preferred Stock for
conversion.

          (i)       Redemption Price Upon Receipt of a Notice of Conversion.
The redemption price per share of Series E Preferred Stock under this Section
6(a) shall be calculated in accordance with the following formula ("Redemption
Rate"):
 
  [[(.08)(N/365)(10,000)] + 10,000]  X  Closing Bid Price on Date of Conversion
                                        ---------------------------------------
                                                    Conversion Price

where,

     "N", "Date of Conversion", "Closing Bid Price" and "Conversion Price" shall
have the same meanings as defined in Section 5.

          (ii)      Mechanics of Redemption Upon Receipt of Notice of
Conversion. The Company shall effect each such redemption by giving notice of
its election to redeem, by facsimile, by 5:00 p.m. New York City time the next
business day following receipt of a Notice of Conversion from a Holder, and the
Company shall provide a copy of such redemption notice by overnight or 

                                      -7-
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two-day courier, to (A) the Holder of the Series E Preferred Stock submitted for
conversion at the address and facsimile number of such Holder appearing in the
Company's register for the Series E Preferred Stock and (B) the Company's
Transfer Agent. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series E Preferred Stock submitted for conversion and
the applicable redemption price.
 
          (b) Company's Rights to Redeem at its Election. The Company shall have
the right, in its sole discretion, to redeem ("Redemption at Company's
Election"), in whole at any time, or in part from time to time, any or all of
the Series E Preferred Stock; provided (i) that the Company shall first provide
30 business days advance written notice as provided in subparagraph 6(b)(ii)
below, and (ii) that, in the case of any partial redemption, the Company shall
only be entitled to redeem Series E Preferred Stock having an aggregate Stated
Value (as defined below) of at least $1,000,000.  If the Company elects to
redeem some, but not all, of the Series E Preferred Stock, the Company shall
redeem a pro-rata amount from each Holder of the Series E Preferred Stock.
 
          (i)       Redemption Price At Company's Election.  The "Redemption
Price At Company's Election" shall be calculated as a percentage of Stated
Value, as that term is defined below, of the Series E Preferred Stock redeemed
pursuant to this Section 6(b), which percentage shall vary depending on the date
of Redemption at Company's Election (as defined below), and shall be determined
as follows:
 
   Date of Notice of Redemption at Company's Election      % of Stated Value
   --------------------------------------------------      -----------------

   On or before January 29, 1998                                130%
   January 30, 1998, to July 29, 1998                           125%
   July 30, 1998, to January 30, 1999                           120%
   January 30, 1999, to July 29, 1999                           115%

     For purposes hereof, "Stated Value" shall mean the Original Series E Issue
Price (as defined in Section 4(a)) of the shares of Series E Preferred Stock
being redeemed pursuant to this Section 6(b), together with the accreted but
unpaid Premium (as defined in Section 4(a)).

          (ii)      Mechanics of Redemption at Company's Election.  The Company
shall effect each such redemption by giving at least 30 business days prior
written notice ("Notice of Redemption At Company's Election") to (A) the Holders
of the Series E Preferred Stock selected for redemption, at the address and
facsimile number of such Holder appearing in the Company's Series E Preferred
Stock register and (B) the Transfer Agent, which Notice of Redemption At
Company's Election shall be deemed to have been delivered three business days
after the Company's mailing (by overnight or two-day courier, with a copy by
facsimile) of such Notice of Redemption At Company's Election.  Such Notice of
Redemption At Company's Election shall indicate (i) the number of shares of
Series E Preferred Stock that have been selected for redemption, (ii) the date
which such redemption is to become effective (the "Date of Redemption At
Company's Election") and (iii) the applicable Redemption Price At Company's
Election, as defined in subsection (b)(i) 

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<PAGE>
 
above. Notwithstanding the above, Holder may convert into Common Stock pursuant
to Section 5, prior to the close of business on the Date of Redemption at
Company's Election, any Series E Preferred Stock which it is otherwise entitled
to convert, including Series E Preferred Stock that has been selected for
redemption at Company's election pursuant to this subsection 6(b); provided,
however, that the Company shall still be entitled to exercise its right to
redeem upon receipt of a Notice of Conversion pursuant to section 6(a).
 
          (c) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure under Sections 6(a) and 6(b) unless it has:
 
          (i)   the full amount of the redemption price in cash, available in a
demand or other immediately available account in a bank or similar financial
institution; or
 
          (ii)  immediately available credit facilities, in the full amount of
the redemption price with a bank or similar financial institution; or
 
          (iii) an agreement with a standby underwriter willing to purchase
from the Company a sufficient number of shares of stock to provide proceeds
necessary to redeem any stock that is not converted prior to redemption; or
 
          (iv)  a combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the redemption price.
 
     If the foregoing conditions of this Section 6(c) are satisfied and Company
complies with Section 6(d) hereof, then any shares of Series E Preferred Stock
called for by a Redemption at Company's Election shall cease to be outstanding
for all purposes hereunder (including the right to convert or to accrete
additional Premium or to exercise any other right or privilege hereunder) on the
Date of Redemption at Company's Election and shall instead represent the right
to receive the Redemption Price at Company's Election without interest from and
after the Date of Redemption at Company's Election.

          (d)  Payment of Redemption Price.
 
          (i) Each Holder submitting Preferred Stock being redeemed under this
Section 6 shall send their Series E Preferred Stock Certificates so redeemed to
the Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five business days after the Date of
Redemption at Company's Election.  The Company shall not be obligated to deliver
the redemption price unless the Preferred Stock Certificates so redeemed are
delivered to the Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, unless the Holder
has complied with Section 5(c)(i).

                                      -9-
<PAGE>
 
          (ii)      If Company elects to redeem pursuant to Section 6(a) hereof,
and Company fails to pay Holder the redemption price within the time frame as
required by this Section 6(d), then Company shall issue shares of Common Stock
to any such Holder who has submitted a Notice of Conversion in compliance with
Section 5(c) hereof.  The shares to be issued to Holder pursuant to this
provision shall be the number of shares determined using a Conversion Price (as
defined in Section 6 hereof) that equals the lesser of (i) the Conversion Price
on the date Holder sends its Notice of Conversion to Company or Transfer Agent
via facsimile or (ii) the Conversion Price on the date the Transfer Agent issues
Common Stock pursuant to this Section 6(d)(ii).
 
          (e)  Blackout Period.   Notwithstanding the foregoing, the Company may
not either send out a redemption notice or effect a redemption pursuant to
Section 6(b) above during a Blackout Period (defined as a period during which
the Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten days after the Company shall have given the Holder written notice that the
Blackout Period has been lifted.
 
     Section 7.     Advance Notice of Redemption.
                    ---------------------------- 

          (a)  Holder's Right to Elect to Receive Notice of Cash Redemption by
the Company.  Holder shall have the right to require Company to provide advance
notice stating whether the Company will elect to redeem Holder's shares of
Series E Preferred Stock in cash, pursuant to the Company's redemption rights
discussed in Section 6(a).
 
          (b) Mechanics of Holder's Election Notice.    Holder shall send notice
("Election Notice") to the Company and such other persons as the Company may
designate via facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise its right of conversion (pursuant to
Section 5) whether Company would elect to redeem a specific number of shares of
Holder's Series E Preferred Stock for cash in lieu of issuing Common Stock.
Company is required to disclose to Holder what action Company would take over
the subsequent 20 business day period, including the date of such Election
Notice, as further discussed in subsection 7(c).
 
          (c)  Company's Response.   Upon receipt by the Company of a facsimile
copy of an Election Notice, Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to Holder, which shall specify
that the Election Notice has been received and the name and telephone number of
a contact person at the Company whom the Holder should contact regarding
information related to the requested advance notice.  Thereafter, the Company
must respond by the close of business on the next business day following receipt
of Holder's Election Notice (1) via facsimile and (2) by depositing such
response with an overnight or two-day courier. The Company's response must state
whether it would redeem the shares, in whole or in part, or allow conversion
into shares of Common Stock without redemption.  If Company does not respond to
Holder within one business day via facsimile and overnight or two-day courier,
Company shall be required to issue to Holder Common Stock upon Holder's
conversion within the subsequent 20 

                                      -10-
<PAGE>
 
business day period of Holder's Election Notice. However, if the Company's
Common Stock price decreases so that under the Conversion Rate Company would be
required to issue more than an additional ten percent of shares of Common Stock
than Holder was entitled to receive at the time Holder sent Company its Election
Notice, then Company shall no longer be bound to convert Holder's Preferred
Stock into Common Stock but may elect to redeem for cash.

     Section 8.     Voting Rights.   The Holders of the Series E Preferred Stock
                    -------------                                               
shall have no voting power whatsoever, except as otherwise provided by the
corporation law of the State of Delaware Law ("Delaware Law"), and no Holder of
Series E Preferred Stock shall vote or otherwise participate in any proceeding
in which actions shall be taken by the Company or the shareholders thereof or be
entitled to notification as to any meeting of the shareholders.

     Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company.  In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled 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 liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten days prior to
the record date specified therein, of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.

     To the extent that under Delaware Law the vote of the Holders of the Series
E Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of shares of the Series E Preferred Stock represented at a
duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series E Preferred Stock (except as otherwise may be
required under Delaware Law) shall constitute the approval of such action by the
class.  To the extent that under Delaware Law the Holders of the Series E
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one class, each share of Series E 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 using the record date for the taking of such vote
of stockholders as the date as of which the Conversion Price is calculated.
Holders of the Series E Preferred Stock also shall be entitled to notice of all
shareholder meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's by-
laws and applicable statutes.

                                      -11-
<PAGE>
 
     Section 9.     Protective Provision.     So long as shares of Series D
                    --------------------                                   
Preferred Stock and Series E Preferred Stock are outstanding, the Company shall
not:

          (a) alter or change the rights, preferences or privileges of the
Series D Preferred Stock, the Series E Preferred Stock or any Senior Securities
so as to affect adversely the Series E Preferred Stock, unless such alteration
or change applies equally (on a pro rata basis) to the Series D Preferred Stock;
 
          (b) create any new class or series of stock having a preference over
the Series E Preferred Stock with respect to Distributions (as defined in
Section 2 above), unless such new class or series of stock has an equivalent
preference over the Series D Preferred Stock;
 
          (c) increase the size of the authorized number of shares of Series D
Preferred Stock or increase the size of the authorized number of shares of
Series E Preferred; or
 
          (d) do any act or thing not authorized or contemplated by this
Certificate of Designation with respect to the Series E Preferred Stock which
would result in taxation of the holders of shares of the Series E 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), unless such act or thing is done on the same basis with respect to the
Series D Preferred Stock.
 
     If, pursuant to subsection (a) above,  the Company alters or changes the
rights, preferences or privileges of the shares of the Series D Preferred Stock,
the Series E Preferred Stock or any Senior Securities so as to affect adversely
the Series E Preferred Stock, then the Company will deliver notice of such
approved change to the Holders of the Series E Preferred Stock that did not
agree to such alteration or change (the "Dissenting Holders") and the Dissenting
Holders shall have the right for a period of 30 business days to convert
pursuant to the terms of this Certificate of Designation as they exist prior to
such alteration or change, or continue to hold their shares of Series E
Preferred Stock.

     Section 10.    Status of Converted or Redeemed Stock.  In the event any
                    --------------------------------------                  
shares of Series E Preferred Stock shall be converted or redeemed pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed 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 Series E
Preferred Stock.

     Section 11.    Preference Rights.  Nothing contained herein shall be
                    -----------------                                    
construed to prevent the Board of Directors of the Company from issuing one (1)
or more series of Preferred Stock with dividend and/or liquidation preferences
junior to or on parity with the dividend and liquidation preferences of the
Series E Preferred Stock.

                                      -12-
<PAGE>
 
Signed on July __, 1997

                                   /s/ E.A. Milo Mattorano
                                  ------------------------------------------
                                  E.A. Milo Mattorano, Vice President & CFO

Attest:

/s/ E.A. Milo Mattorano
--------------------------------------
E.A. Milo Mattorano, Secretary

                                      -13-