STATE OF DELAWARE
                                                              SECRETARY OF
STATE
                                                        DIVISION OF
CORPORATIONS
                                                       FILED 01:00 PM
9/30/1998
                                                             981379294 -
2198205

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES
                                   AND RIGHTS
                                       OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                           FINET HOLDINGS CORPORATION


     Finet Holdings  Corporation  (the "Company"),  a corporation
organized and
existing under the General Corporation Law of the State of Delaware, does
hereby
certify that, pursuant to authority conferred upon the Board of Directors
of the
Company by the  Certificate  of  Incorporation  of the Company,  and
pursuant to
Section 151 of the General  Corporation Law of the State of Delaware,  the
Board
of  Directors  of the Company at a meeting duly held,  adopted  resolutions
(i)
authorizing a series of the Company's authorized preferred stock, $.01 par
value
per share,  and (ii) providing for the  designations,  preferences and
relative,
participating, optional or other rights, and the qualifications,
limitations or
restrictions  thereof, of 300 shares of Series A Convertible  Preferred
Stock of
the Company, as follows:

     RESOLVED,  that the Company is  authorized  to issue 300 shares of
Series A
Convertible  Preferred Stock (the "Series A Preferred  Shares"),  $.01 par
value
per share, which shall have the following powers, designations,
preferences and
other special rights:

          (1)  Dividends.  The  Series A  Preferred  Shares  shall  not
bear any
     dividends.

          (2)  Holder's  Conversion  of Series A Preferred  Shares.  A
holder of
     Series A Preferred Shares shall have the right, at such holder's
option, to
     convert the Series A Preferred  Shares into shares of the Company's
common
     stock,  $. 01 par value per share (the "Common  Stock"),  on the
following
     terms and conditions:

               (a) Conversion Right.  Subject to the provisions of Sections
2(g)
          and 3(a) below,  at any time or times on or after the earlier to
occur
          of: (i) February  15, 1999,  or (ii) the Closing Bid Price (as
defined
          herein) of the Common Stock shall be above $1.50 per share, any
holder
          of Series A Preferred Shares shall be entitled to convert any
Series A
          Preferred Shares into fully paid and nonassessable  shares
(rounded to
          the nearest  whole share in  accordance  with  Section  2(h)
below) of
          Common Stock,  at the Conversion  Rate (as defined  below);
provided,
          however,  that in no event  other  than  upon a  Mandatory
Conversion
          pursuant  to Section  2(g)  hereof,  shall any holder be
entitled  to
          convert Series A Preferred Shares in excess of that number of
Series A
          Preferred Shares which,  upon giving effect to such conversion,
would
          cause the  aggregate  number of  shares of Common  Stock
beneficially
          owned  by  the  holder  and  its  affiliates  to  exceed  4.9%
of the
          outstanding shares of the Common Stock following such conversion.
For
          purposes of the foregoing  proviso,  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   Shares  with   respect  to  which
the
          determination  of such  proviso is being made,  but shall
exclude the
          number of shares of Common  Stock  which  would be  issuable
upon (i)
          conversion of the remaining,  nonconverted  Series A Preferred
Shares
          beneficially owned by the holder and its affiliates beneficially
owned
          by the holder and its affiliates. Except as set forth in the
preceding
          sentence,  for purposes of this paragraph,  beneficial ownership
shall
          be  calculated  in  accordance  with Section  13(d) of the
Securities
          Exchange Act of 1934, as amended.

               (b)  Conversion  Rate.  The  number of  shares  of  Common
Stock
          issuable  upon  conversion  of each of the Series A  Preferred
Shares
          pursuant  to  Section  (2)(a)  shall be  determined  according
to the
          following formula (the "Conversion Rate");

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

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

               (i)  "Conversion  Price"  means  as, of any  Conversion
Date (as
          defined below),  the Floating  Conversion  Price, in effect as of
such
          date, if applicable, and subject to adjustment as provided
herein;

               (ii)  "Floating  Conversion  Price"  means,  as of  any
date  of
          determination,  the amount  obtained  by  multiplying  the
Conversion
          Percentage  in effect as of such date by the Average  Market
Price for
          the Common Stock for the five (5) consecutive trading days
immediately
          preceding such date;

               (iii)  "Conversion  Percentage" means 78% and shall be
reduced by
          an  additional  2% for every 30 days  (pro-rated  for partial
months)
          beyond  forty-five  (45) days from the Issuance  Date (the
"Scheduled
          Filing Date") that the registration  statement  covering the
resale of
          Common Stock issued upon  conversion of the Series A Preferred
Shares
          (the "Registration Statement") is not filed by the Company;
provided,
          however,  that no such  reduction to the Conversion  Percentage
shall
          occur with respect to any Series A Preferred Shares which are
redeemed
          by the Company pursuant to Section 3(a) herein;

               (iv) "Average  Market Price" means,  with respect to any
security
          for any period,  that price which shall be computed as the
arithmetic
          average of the Closing Bid Prices (as defined below) for such
security
          for each trading day in such period;

               (v) "Closing Bid Price"  means,  for any security as of any
date,
          the  last  closing  bid  price  on the  Nasdaq  National  Market
(the
          "Nasdaq-NM") as reported by Bloomberg Financial Markets
("Bloomberg"),
          or, if the  Nasdaq-NM  is not the  principal  trading  market for
such
          security, the last closing bid price of such security on the
principal
          securities exchange or trading market where such security is
listed or
          traded as reported by Bloomberg, or if the foregoing do not
apply, the
          last closing bid price of such security in the over-the-counter
market
          on the pink sheets or bulletin  board for such security as
reported by
          Bloomberg,  or, if no closing bid price is reported for such
security
          by  Bloomberg,  the  last  closing  trade  price of such
security  as
          reported by  Bloomberg.  If the Closing Bid Price cannot be
calculated
          for such  security  on such date on any of the  foregoing  bases,
the
          Closing  Bid Price of such  security  on such  date  shall be the
fair
          market value as  reasonably  determined  in good faith by the
Board of
          Directors of the Company (all as appropriately  adjusted for any
stock
          dividend,  stock  split  or  other  similar  transaction  during
such
          period); and

               (vi) "N"  means the  number  of days  from,  but  excluding,
the
          Issuance Date through and including the Conversion Date for the
Series
          A Preferred Shares for which conversion is being elected.

               (vii)  "Issuance Date" means the date of issuance of the
Series A
          Preferred Shares.

          (c) Adjustment to Conversion  Price - Registration  Statement.
If the
     Registration  Statement is not  declared  effective by the SEC on or
before
     the  ninetieth  (90th) day  following  the  Issuance  Date (the
"Scheduled
     Effective Date"), or if after the Registration  Statement has been
declared
     effective  by the SEC,  sales cannot be made  pursuant to the
Registration
     Statement (whether because of a failure to keep the Registration
Statement
     effective,  to disclose  such  information  as is necessary for sales
to be
     made pursuant to the Registration  Statement, to register sufficient
shares
     of Common Stock or  otherwise),  then, as partial relief for the
damages to
     any holder by reason of any such delay in or  reduction  of its
ability to
     sell the  underlying  shares of Common  Stock  (which  remedy  shall
not be
     exclusive  of any  other  remedies  at law or in  equity),  the
Conversion
     Percentage shall be adjusted as follows:

               (i) Conversion  Percentage.  The Conversion Percentage in
effect,
          at such time for each time period set forth in Section  2(b)(iv)
with
          respect to the Series A Preferred  Shares  which may be
converted  as
          permitted by Section  2(a) hereof  during the period that sales
cannot
          be made pursuant to the Registration Statement,  shall be reduced
by a
          number of percentage  points equal to the product of (A) three
(3) and
          (B) the sum of (I) the number of months  (prorated for partial
months)
          after  the  Scheduled  Effective  Date and  prior to the date
that the
          relevant  Registration  Statement is declared effective by the
SEC and
          (II) the number of months  (prorated  for partial  months)  that
sales
          cannot  be made  pursuant  to the  Registration  Statement  after
the
          Registration  Statement has been declared effective.  (For
example, if
          the Registration  Statement becomes effective one and one-half (1
1/2)
          months after the Scheduled  Effective Date, the Conversion
Percentage
          with respect to the Series A Preferred  Shares would  decrease by
four
          and one-half percent (4.5% to 73.5%) until any subsequent
adjustment;
          if  thereafter  sales could not be made  pursuant to the
Registration
          Statement for a period of two (2)  additional  months,  the
Conversion
          Percentage  with  respect  to the  Series  A  Preferred  Shares
would
          decrease by an additional six percent (6%), for an aggregate
decrease
          of ten and one-half percent (10.5% to 67.5%); provided,  however,
that
          no such  reduction  to the  Conversion  Percentage  shall  occur
with
          respect to any Series A  Preferred  Shares  which are  redeemed
by the
          Company pursuant to Section 3(a) herein.

          (d)  Adjustment  to Conversion  Price - Dilution and Other
Events.  In
     order to prevent  dilution of the rights granted under this
Certificate of
     Designations,  the Conversion Price will be subject to adjustment from
time
     to time as provided in this Section 2(d).

               (i)  Adjustment of Fixed  Conversion  Price upon
Subdivision  or
          Combination of Common Stock. If the Company at any time
subdivides (by
          any stock split, stock dividend, recapitalization or otherwise)
one or
          more classes of its outstanding  shares of Common Stock into a
greater
          number of shares,  the Fixed  Conversion  Price in effect
immediately
          prior to such  subdivision  will be  proportionately  reduced.
If the
          Company at any time combines (by  combination,  reverse stock
split or
          otherwise)  one or more  classes of its  outstanding  shares of
Common
          Stock into a smaller number of shares,  the Fixed  Conversion
Price in
          effect  immediately prior to such combination will be
proportionately
          increased.

               (ii) Reorganization, Reclassification,  Consolidation,
Merger, or
          Sale.   Any   recapitalization,    reorganization
reclassification,
          consolidation. merger, sale of a or substantially all of the
Company's
          assets  to  another   Person  (as  defined  below)  or  other
similar
          transaction  which is  effected  in such a way that  holders of
Common
          Stock are  entitled to receive  (either  directly  or upon
subsequent
          liquidation)  stock,  securities  or  assess  with  respect  to
or in
          exchange  for  Common  Stock is  referred  to  herein  as in
"Organic
          Change." Prior to the consummation of any Organic Change,  the
Company
          will make appropriate provision (in form and substance
satisfactory to
          the  holders  of a  majority  of the Series A  Preferred  Shares
then
          outstanding)  to  insure  that  each of the  holders  of the
Series A
          Preferred Shares 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  immediately  theretofore  acquirable  and  receivable
upon the
          conversion of such holder's Series A Preferred Shares,  such
shares of
          stock,  securities  or assets as may be issued or payable with
respect
          to or in exchange for the number of shares of Common Stock
immediately
          theretofore  acquirable  and  receivable  upon the  conversion of
such
          holder's  Series A Preferred  Shares had such Organic Change not
taken
          place. In any such case, the Company will make  appropriate
provision
          (in form and  substance  satisfactory  to the holders of a
majority of
          the Series A Preferred Shares then  outstanding)  with respect to
such
          holders'  rights and  interests to insure that the  provisions of
this
          Section 2(d) and Section 2(e) below will  thereafter  be
applicable to
          the Series A Preferred  Shares.  The Company  will not effect any
such
          consolidation,  merger  or  sale,  unless  prior  to the
consummation
          thereof the  successor  entity (if other than the  Company)
resulting
          from  consolidation  or merger or the entity  purchasing  such
assets
          assumes, by written instrument (in form and substance
satisfactory to
          the  holders  of a  majority  of the Series A  Preferred  Shares
then
          outstanding),  the  obligation  to deliver to each  holder of
Series A
          Preferred  Shares  such shares of stock,  securities  or assets
as, in
          accordance with the foregoing provisions,  such holder may be
entitled
          to acquire.  For purposes of this  Agreement,  "Person"  shall
mean an
          individual,  a  limited  liability  company,  a  partnership,  a
joint
          venture, a corporation, a trust, an unincorporated  organization
and a
          government or any department or agency thereof.

               (iii) Notices.

               a) Immediately  upon any adjustment of the Conversion
Price, the
          Company  will give written  notice  thereof to each holder of
Series A
          Preferred  Shares,  setting forth in reasonable  detail and
certifying
          the calculation of such adjustment.

               b) The Company will give written  notice to each holder of
Series
          A  Preferred  Shares at least  twenty  (20) days  prior to the
date on
          which the Company  closes its books or takes a record (I) with
respect
          to any  dividend  or  distribution  upon the Common  Stock,  (II)
with
          respect to any pro rata subscription  offer to holders of Common
Stock
          or (III) for  determining  rights to vote with  respect to any
Organic
          Change, dissolution or liquidation.

               c) The Company  will also give  written  notice to each
holder of
          Series A Preferred  Shares at least twenty (20) days prior to the
date
          on which any Organic  Change,  Major  Transaction  (as defined
below),
          dissolution or liquidation will take place.

          (e)  Purchase  Rights.  If at any time the Company  grants,
issues or
     sells any  Options,  Convertible  Securities  or rights to purchase
stock,
     warrants,  securities or other  property pro rata to the record
holders of
     any class of Common  Stock (the  "Purchase  Rights"),  then the
holders of
     Series A Preferred  Shares  will be  entitled  to  acquire,  upon the
terms
     applicable to such Purchase  Rights,  the aggregate  Purchase  Rights
which
     such  holder  could  have  acquired  if such  holder had held the
number of
     shares of Common Stock acquirable upon complete  conversion of the
Series A
     Preferred Shares immediately before the date an which a record is
taken for
     the grant issuance or sale of such Purchase  Rights,  or, if no such
record
     is taken, the date as of which the record holders of Common Stock are
to be
     determined for the grant, issue or sale of such Purchase Rights.

          (f) Mechanics of  Conversion.  Subject to the  Company's
inability to
     fully satisfy its obligations  under a Conversion Notice (as defined
below)
     as provided for in Section 5 below:

               (i) Holder's Delivery Requirements. To convert Series A
Preferred
          Shares into full shares of Common  Stock on any date (the
"Conversion
          Date"), the holder thereof shall (A) deliver or transmit by
facsimile,
          for receipt on or prior to 11:59 p.m.,  Eastern Standard Time, on
such
          date,  a copy of a fully  executed  notice of  conversion  in the
form
          attached hereto as Exhibit I (the "Conversion  Notice") to the
Company
          or its  designated  transfer  agent (the  "Transfer  Agent"),
and (B)
          surrender  to a common  carrier  for  delivery  to the  Company
or the
          Transfer  Agent  as soon  as  practicable  following  such  date,
the
          original certificates representing the Series A Preferred Shares
being
          converted  (or an  indemnification  undertaking  with  respect to
such
          shares  in  the  case  of  their  loss,  theft  or  destruction)
(the
          "Preferred Stock Certificates") and the originally executed
Conversion
          Notice.

               (ii)  Company's  Response.  Upon  receipt  by  the  Company
of a
          facsimile copy of a Conversion  Notice,  the Company shall
immediately
          send, via  Facsimile,  a  confirmation  of receipt of such
Conversion
          Notice to such  holder.  Upon  receipt by the Company or the
Transfer
          Agent of the Preferred Stock  Certificates to be converted
pursuant to
          a Conversion Notice,  together with the originally executed
Conversion
          Notice,  the  Company or the  Transfer  Agent (as  applicable)
shall,
          within five (5) business days following the date of receipt, (A)
issue
          and  surrender  to a common  carrier  for  overnight  delivery
to the
          address  as  specified  in  the  Conversion   Notice,  a
certificate,
          registered in the name of the holder or its  designee,  for the
number
          of shares of Common Stock to which the holder shall be entitled
or (B)
          credit  the  aggregate  number of shares of Common  Stock to
which the
          holder  shall be entitled to the  holder's or its  designee's
balance
          account at The Depository Trust Company. (iii) Dispute
Resolution.  In
          the case of a dispute as to the  determination  of the Average
Market
          Price  or the  arithmetic  calculation  of the  Conversion  Rate,
the
          Company  shall  promptly  issue to the  holder the number of
shares of
          Common  Stock  that is not  disputed  and shall  submit  the
disputed
          determinations or arithmetic  calculations to the holder via
facsimile
          within three (3) business days of receipt of such holder's
Conversion
          Notice.  If such  holder and the  Company are unable to agree
upon the
          determination of the Average Market Price or arithmetic
calculation of
          the  Conversion  Rate within two (2)  business  days of such
disputed
          determination or arithmetic calculation being submitted to the
holder,
          then  the  Company  shall  within  one (1)  business  day  submit
via
          facsimile (A) the disputed  determination  of the Average Market
Price
          to an  independent,  reputable  investment  bank or (B)  the
disputed
          arithmetic  calculation  of the  Conversion  Rate to its
independent,
          outside accountant. The Company shall cause the investment bank
or the
          accountant,  as the case may be,  to  perform  the
determinations  or
          calculations  and notify the  Company and the holder of the
results no
          later  than  forty-eight  (48)  hours  from the time it  receives
the
          disputed  determinations  or calculations.  Such investment
bank's or
          accountant's  determination or calculation,  as the case may be,
shall
          be binding upon all parties absent manifest error.

               (iv) Record Holder. The person or persons entitled to
receive the
          shares  of  Common  Stock  issuable  upon a  conversion  of
Series  A
          Preferred  Shares  shall be  treated  for all  purposes  as the
record
          holder or holders  of such  shares of Common  Stock on the
Conversion
          Date.

               (v)  Company's  Failure to Timely  Convert.  If the Company
shall
          fail to issue to a holder within five (5) business days
following the
          date of receipt by the Company or the Transfer  Agent of the
Preferred
          Stock  Certificates to be converted pursuant to a Conversion
Notice, a
          certificate  for the  number of shares of Common  Stock to which
such
          holder is entitled upon such holder's conversion of Series A
Preferred
          Shares, in addition to all other available  remedies which such
holder
          may  pursue  hereunder  and under the  Securities  Purchase
Agreement
          between the Company and the initial  holders of the Series A
Preferred
          Shares    (the    "Securities    Purchase    Agreement")
(including
          indemnification  pursuant to Section 8 thereof), the Company
shall pay
          additional  damages to such  holder on each day after the fifth
(5th)
          business  day  following  the date of  receipt  by the  Company
or the
          Transfer  Agent of the Preferred  Stock  Certificates  to be
converted
          pursuant to the Conversion  Notice,  for which such  conversion
is not
          timely effected, an amount calculated in accordance with the
following
          schedule:

                                            Late Payment for Each
                                            Series A Preferred Share
           No. Business Days Late           Converted

                     1                      $100
                     2                      $200
                     3                      $300
                     4                      $400
                     5                      $500
                     6                      $600
                     7                      $700
                     8                      $800
                     9                      $900
                    10                      $1,000
                    11                      $1,000 +  $200 for each
                                            Business Days Late Beyond
                                            10 days

          (g)  Mandatory  Conversion.  If any Series A Preferred  Shares
remain
     outstanding on September 29, 2000, then all such Series A Preferred
Shares
     shall be converted as of such date in accordance  with this Section 2
as if
     the  holders of such  Series A  Preferred  Shares had given the
Conversion
     Notice on September 29, 2000, and the Conversion  Date had been fixed
as of
     September 29, 2000,  for all purposes of this Section 2, and all
holders of
     Series A Preferred  Shares shall  thereupon  and with two (2) business
days
     thereafter  surrender all Preferred Stock  Certificates,  duly
endorsed for
     cancellation,  to the  Company  or the  Transfer  Agent.  No  person
shall
     thereafter have any rights in respect of Series A Preferred Shares,
except
     the right to  receive  shares  of Common  Stock on  conversion
thereof  as
     provided in this Section 2.

          (h) Fractional  Shares.  The Company 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 the  Series  A  Preferred  Shares  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 the
     aforementioned aggregation,  the issuance would result in the issuance
of a
     fraction of it share of Common Stock, the Company shall round such
fraction
     of a share of Common Stock up or down to the nearest whole share.

               (i) Taxes.  The Company  shall pay any and all taxes which
may be
          imposed  upon it with  respect to the  issuance and delivery of
Common
          Stock upon the conversion of the Series A Preferred Shares.

     (3) Company's Right to Redeem at its Election.

          (a) At any time, from the Issuance Date, through February 15,
1999, as
     long as the Company has not breached any of the representations,
warrants,
     and covenants  contained herein or in any related  agreements,  the
Company
     shall have the right,  in it sole  discretion,  to redeem
("Redemption  at
     Company's  Election"),  from  time  to  time,  any or all of the
Series  A
     Preferred Stock: provided (i) Company shall first provide fifteen (15)
days
     advance written notice as provided in subparagraph 3(a)(ii) below, and
(ii)
     that the Company shall only be entitled to redeem Series A Preferred
Stock
     having an  aggregate  Stated  Value  (as  defined  below) of at least
Five
     Hundred Thousand Dollars ($500,000).  If the Company elects to redeem
some,
     but not all, of the Series A Preferred  Stock,  the Company  shall
redeem a
     pro-rata amount from each Holder of the Series A Preferred Stock.

               (i) Redemption Price At Company's Election. The "Redemption
Price
          at Company's Election" shall be calculated as 105% of Stated
Value, as
          that term is defined  below,  of the  Series A  Preferred  Stock.
For
          purposes  hereof,  "Stated  Value" shall mean the  original
principal
          amount of Preferred Stock being redeemed, plus the unpaid 6% per
annum
          premium being redeemed pursuant to this Section 3(a).

               (ii) Mechanics of Redemption at Company's  Election.  The
Company
          shall effect each such redemption by giving at least fifteen (15)
days
          prior written notice ("Notice of Redemption at Company's
Election") to
          (A)  the  Holders  of  the  Series  A  Preferred  Stock  selected
for
          redemption  at  the  address  and  facsimile  number  of  such
Holder
          appearing in the Company's  Series A Preferred  Stock register
and (B)
          the Transfer Agent,  which Notice of Redemption At Company's
Election
          shall be deemed to have been  delivered  three (3) business days
after
          the  Company's  mailing (by  overnight or two (2) 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 A 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 (a)(i) above. Notwithstanding the above, Holder may
convert
          into  Common  Stock,  prior to the  close of  business  on the
Date of
          Redemption at Company's  Election,  any Series A Preferred Stock
which
          it is  otherwise  entitled  to convert,  including  Series A
Preferred
          Stock that has been  selected for  redemption  at  Company's
election
          pursuant to this subsection 3(b).

          (b)  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 3(a) unless it has:

               (i) the full amount of the redemption price to 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
          redemptions; or

               (iv) a combination of the items set forth in (i), (ii), and
(iii)
          above, aggregating the full amount of the redemption price.

               (v) the  failure  of the  Company's  shareholders  to
approve an
          amendment  to  its  Certificate  of   Incorporation  to
authorize  an
          additional  forty  million  (40,000,000)  shares of Common  Stock
(the
          "Share  Increase") at its annual  shareholders'  meeting to be
held in
          November 1998 (the Shareholders' Meeting).

          (c) Payment of  Redemption  Price.  Each Holder  submitting
Preferred
     Stock  being  redeemed  under  this  Section 3 shall  send  their
Series A
     Preferred  Stock  Certificates  to redeemed to the Company or its
Transfer
     Agent,  and the Company shall pay the applicable  redemption  price to
that
     Holder within five (5) business days of the Date of Redemption at
Company's
     Election.

     (4) Redemption at Option of Holders.

          (a) Redemption Option Upon Major Transaction. In addition to all
other
     rights of the holders of Series A Preferred Shares contained herein,
after
     a Major  Transaction (as defined below),  the holders of Series A
Preferred
     Shares shall have the right in accordance  with Section 4(f), at the
option
     of the  holders  of at least  two-thirds  (2/3) of the  Series A
Preferred
     Shares then outstanding, to require the Company to redeem all of the
Series
     A Preferred Shares then outstanding at a price per Series A Preferred
Share
     equal to the  greater  of (i) 115% of the  Liquidation  Value  (as
defined
     below) of such share and (ii) the price  calculated in accordance
with the
     Redemption Rate (as defined below)  calculated as of the date of the
public
     announcement  of such  Major  Transaction  or the next  date on  which
the
     exchange  or  market on which  the  Common  Stock is traded in open if
such
     public  announcement is made (A) after 1:00 p.m.  Eastern  Standard
Time on
     such  date or (B) on a date on which  the  exchange  or market on
which the
     Common Stock is traded is closed.

          (b) Redemption  Option Upon Triggering Event. In addition to all
other
     rights of the holders of Series A Preferred Shares contained herein,
after
     a Triggering  Event (as defined  below),  the holders of Series A
Preferred
     Shares shall have the right in accordance  with Section 4(g), at the
option
     of the  holders  of at least  two-thirds  (2/3) of the  Series A
Preferred
     Shares then outstanding, to require the Company to redeem all of the
Series
     A  Preferred  Shares  then  outstanding  at a price per Series A
Preferred
     Shares  equal to the greater of (i) 115% of the  Liquidation  Value of
such
     share and (ii) the price  calculated in accordance with the Redemption
Rate
     as of the date  immediately  preceding such  Triggering  Event on
which the
     exchange or market on which the Common Stock is traded is open.

          (c) "Redemption  Rate." The "Redemption Rate" shall, as of any
date of
     determination,  be equal to (i) the  Conversion  Rate in  effect as of
such
     date as calculated  pursuant to Section 2(b) multiplied by (ii) the
Closing
     Bid Price of the Common Stock on such date.

          (d) "Major Transaction." A "Major Transaction" shall be deemed to
have
     occurred at such time as any of the following events:

               (i)   the    consummation   of   any   merger,
reorganization,
          restructuring,  consolidation,  or similar transaction by or
involving
          the Company except (A) a merger or consolidation  where the
Company is
          the survivor or (B) pursuant to a migratory merger effected
solely for
          the purpose of  changing  the  jurisdiction  of  incorporation
of the
          Company;

               (ii)  sale  of all or  substantially  all  of the  assets
of the
          Company or all of its material subsidiaries or any similar
transaction
          or related  transactions which effectively results in a sale of
all or
          substantially   all  of  the   assets  of  the   Company   and/or
its
          subsidiaries;

               (iii) the occurrence,  after the date hereof, of the
acquisition,
          by any person  (including any entity or association) or persons
(other
          than any existing  stockholder  of the Company or two or more
existing
          stockholders of the Company,  acting in concert,  of securities
of the
          Company  (or the power to vote such  securities)  representing
50% or
          more of the total  voting  power of all  outstanding  Common
Stock or
          other voting securities of the Company; or

               (iv) the failure of the  Company to continue to own,
directly or
          indirectly,   all  of  the  capital  stock  of  all  of  its
material
          subsidiaries  (other  than due to a  merger  or  consolidation
of any
          subsidiary  into  the  Company  or a  wholly-owned  subsidiary
of the
          Company).

          (e) "Triggering  Event." A "Triggering  Event" shall be deemed to
have
     occurred at such time as any of the following events:

               (i) either (A) the failure of the  Registration  Statement
to be
          effective  or to cover the resale of all of the shares of Common
Stock
          issued or issuable upon conversion of the Series A Preferred
Shares at
          any time  after  sixty (60) days after the  Scheduled  Effective
Date
          (provided that for purposes of determining the Closing Bid Price
under
          Section  4(c)  above,  the  Triggering  Event  shall be deemed to
have
          occurred on the first day of such 60-day  period)or (B) for any
period
          of sixty (60)  consecutive days after the date that is sixty (60)
days
          after  the  Scheduled  Effective  Date  that  Common  Stock
issued or
          issuable upon  conversion  of the Series A Preferred  Shares
cannot be
          sold under the  Registration  Statement for any reason  (provided
that
          for purposes of  determining  the Closing Bid Price under Section
4(c)
          above,  the  Triggering  Event shall be deemed to have occurred
on the
          first day of such 60-day period);

               (ii) if for any  reason the  Company  fails to perform or
observe
          any covenant,  agreement, or other provision contained in Section
9 or
          10 hereof or in Section 4(g) of the Securities Purchase
Agreement;

               (iii) the  Company's  notice to any holder of Series A
Preferred
          Shares,  including by way of public announcement,  at any time,
of its
          intention for any reason not to comply with requests for
conversion of
          any Series A Preferred Shares for shares of Common Stock;

               (iv) if for any  reason the  Company  fails to perform or
observe
          any covenant, agreement, or other provision contained herein or
in the
          Securities  Purchase  Agreement or the  registration  rights
agreement
          required to be filed by the Company  pursuant to  Registration
Rights
          Agreement,  dated of even date  herewith,  between the Company
and its
          initial holders of Series A Preferred Shares (the "Registration
Rights
          Agreement"),  and such  failure is not cured  within 30 days
after the
          Company  knows,  or should have known with the exercise of
reasonable
          diligence,  of the  occurrence  thereof,  and such failure has
had, or
          could reasonably be expected to have, a material adverse effect
on (A)
          the financial condition,  operating results, business,
properties, or
          operations of the Company and its subsidiaries taken as a whole
taking
          into  account any proceeds  reasonably  expected to be received
by the
          Company or its  subsidiaries in the foreseeable  future from
insurance
          policies  or rights of  indemnification  or (B) the Series A
Preferred
          Shares; or

               (v) any  representation  or warranty  contained in the
Securities
          Purchase  Agreement or the  Registration  Rights Agreement is
false or
          misleading on or as of the date made and which either  reflects
or has
          had  a  material  adverse  effect  on  (A)  the  financial
condition,
          operating results, business,  properties, or operations of the
Company
          and its subsidiaries taken as a whole taking into account any
proceeds
          reasonably  expected to be received by the Company or its
subsidiaries
          in the  foreseeable  future  from  insurance  policies  or
rights  of
          indemnification or (B) the Series A Preferred Shares.

               (vi) the  failure of the  Company's  shareholders  to
approve the
          Share Increase at the Shareholders' Meeting.

          (f) Mechanics of Redemption at Option of Buyer Upon Major
Transaction.
     No sooner than  fifteen (15) days nor later than ten (10) days prior
to the
     consummation  of  a  Major  Transaction,   but  not  prior  to  the
public
     announcement of such Major  Transaction,  the Company shall deliver
written
     notice  thereof  via  facsimile  and  overnight  courier  ("Notice of
Major
     Transaction")  to each  holder of Series A  Preferred  Shares.  At any
time
     after  receipt of a Notice of Major  Transaction,  the  holders of at
least
     two-thirds  (2/3) of the Series A  Preferred  Shares then  outstanding
may
     require the Company to redeem all of the holders' Series A Preferred
Shares
     then  outstanding  in accordance  with Section 4(a) by  delivering
written
     notice thereof via facsimile and overnight  courier  ("Notice of
Redemption
     at Option of Buyer Upon Major Transaction") to the Company, which
Notice of
     Redemption at Option of Buyer Upon Major Transaction shall indicate
(i) the
     number of Series A Preferred  Shares that such  holders are voting in
favor
     of  redemption  and (ii) the  applicable  redemption  price,  as
calculated
     pursuant to Section 4(a) above.

          (g) Mechanics of Redemption at Option of Buyer Upon Triggering
Event.
     Within one (1) day after the occurrence of a Triggering  Event, the
Company
     shall deliver  written notice  thereof via facsimile and overnight
courier
     ("Notice of Triggering Event") to each holder of Series A Preferred
Shares.
     At any time after receipt of a Notice of Triggering  Event,  the
holders of
     at least two-thirds (2/3) of the Series A Preferred Shares then
outstanding
     may require the Company to redeem all of the Series A Preferred Shares
then
     outstanding  in accordance  with Section 4(b) by delivering  written
notice
     thereof via  facsimile  and  overnight  courier  ("Notice of
Redemption at
     Option of Buyer Upon  Triggering  Event") to the  Company,  which
Notice of
     Redemption at Option of Buyer Upon Triggering  Event shall indicate
(i) the
     number of Series A Preferred  Shares that such  holders are voting in
favor
     of  redemption  and (ii) the  applicable  redemption  price,  as
calculated
     pursuant to Section 4(b) above.

          (h)  Payment of  Redemption  Price.  Upon the  Company's  receipt
of a
     Notice(s)  of  Redemption  at Option of Buyer Upon Major  Transaction
or a
     Notice(s) of Redemption at Option of Buyer Upon  Triggering  Event,
as the
     case may be, from the holders of at least  two-thirds (2/3) of the
Series A
     Preferred Shares then  outstanding,  the Company shall  immediately
notify
     each holder by facsimile of the Company's receipt of such requisite
notices
     necessary  to affect a  redemption  and each  holder of Series A
Preferred
     Shares  shall  thereafter  promptly  send  such  holder's  Preferred
Stock
     Certificates  to be  redeemed  to the Company or its  Transfer  Agent.
The
     Company shall pay the applicable  redemption price, as calculated
pursuant
     to Section 4(a) or 4(b) above,  in cash to such holder  within  thirty
(30)
     days after the Company' receipt of the requisite notices required to
affect
     a redemption;  provided that a holder's  Preferred Stock Certificates
shall
     have been so  delivered  to the  Company or its  Transfer  Agent;
provided
     further  that if the  Company  is  unable  to  redeem  all of the
Series A
     Preferred  Shares,  the Company  shall redeem an amount from each
holder of
     Series A Preferred Shares equal to such holder's  pro-rata amount
(based on
     the number of Series A Preferred Shares held by such holder relative
to the
     number of Series A Preferred Shares  outstanding) of all Series A
Preferred
     Shares  being  redeemed.  If the  Company  shall  fail to redeem all
of the
     Series A Preferred Shares submitted for redemption  (other than
pursuant to
     a  dispute  as to  the  determination  of  the  Closing  Bid  Price
or the
     arithmetic  calculation of the Redemption Rate), the applicable
redemption
     price payable in respect of such unredeemed Series A Preferred Shares
shall
     bear interest at the rate of 2.5% per month  (prorated for partial
months)
     until  paid  in  full.  Until  the  Company  pays  such  unpaid
applicable
     redemption  price in full to each  holder,  holders of at least  two-
thirds
     (2/3) of the Series A Preferred Shares then  outstanding,  including
shares
     of Series A Preferred  Shares  submitted  for  redemption  pursuant to
this
     Section 4 and for which the applicable  redemption price has not been
paid,
     shall have the option (the "Void Optional  Redemption  Option") to, in
lieu
     of redemption, require the Company to promptly return to each holder
all of
     the Series A Preferred  Shares that were  submitted for  redemption by
such
     holder under this Section 4 and for which the applicable  redemption
price
     has not been paid,  by sending  written  notice  thereof to the
Company via
     facsimile  (the "Void  Optional  Redemption  Notice").  Upon the
Company's
     receipt of such Void Optional Redemption  Notice(s) and prior to
payment of
     the full applicable  redemption price to each holder,  (i) the
Notice(s) of
     Redemption  at Option of Buyer Upon  Triggering  Event or the
Notice(s) of
     Redemption at Option of Buyer Upon Major  Transaction,  as the case
may be,
     shall be null and void with  respect  to those  Series A  Preferred
Shares
     submitted for redemption and for which the applicable  redemption
price has
     not been  paid,  (ii) the  Company  shall  immediately  return any
Series A
     Preferred  Shares  submitted  to the Company by each holder for
redemption
     under this Section 4(i) and for which the applicable  redemption
price had
     not been paid,  (iii) the Fixed  Conversion Price of such returned
Series A
     Preferred  Shares  shall  be  adjusted  to  the  lesser  of (A)  the
Fixed
     Conversion  Price  as in  effect  on the  date on  which  the  Void
Option
     Redemption Notice(s) is delivered to the Company and (B) the lowest
Closing
     Bid Price during the period beginning on the date on which the
Notice(s) of
     Redemption  of Option of Buyer Upon Major  Transaction  or the
Notice(s) of
     Redemption at Option of Buyer Upon Triggering Event, as the case may
be, is
     delivered to the Company and ending on the date on which the Void
Optional
     Redemption  Notice(s)  is  delivered  to  the  Company;  provided
that  no
     adjustment  shall be made if such adjustment would result in an
increase of
     the  Fixed  Conversion  Price  then in  effect,  and  (iv)  the
Conversion
     Percentage  in effect at such time and  thereafter  shall be  reduced
by a
     number of  percentage  points  equal to the product of (A) two and one-
half
     (2.5) and (B) the number of months  (prorated  for  partial  months)
in the
     period beginning on the date on which the Notice(s) of Redemption at
Option
     of Buyer Upon Major Transaction or the Notice(s) of Redemption at
Option of
     Buyer  Upon  Triggering  Event,  as the case may be,  is  delivered
to the
     Company  and  ending  on the date on which  the  Void  Optional
Redemption
     Notice(s) is delivered to the Company.  Notwithstanding  the
foregoing,  in
     the event of a dispute as to the  determination of the Closing Bid
Price or
     the arithmetic  calculation of the Redemption  Rate,  such dispute
shall be
     resolved  pursuant to Section  2(f)(iii)  above with the term
"Closing Bid
     Price" being  substituted  for the term "Average Market Price" and the
term
     "Redemption Rate" being substituted for the term "Conversion Rate."

     (5) Inability to Fully Convert.

          (a) Holder's  Option if Company Cannot Fully  Convert.  If at any
time
     after  the  earlier  to  occur  of (i)  effectiveness  of the
Registration
     Statement or (ii) sixty (60) days after the Scheduled  Effective Date,
upon
     the Company's  receipt of a Conversion  Notice,  the Company does not
issue
     shares  of  Common  Stock  which  are   registered  for  resale  under
the
     Registration  Statement  within five (5) business days of the time
required
     in  accordance  with Section 2(f) hereof,  for any reason or for no
reason,
     including,  without  limitation,  because  the  Company (x) does not
have a
     sufficient  number of shares of Common Stock authorized and available,
(y)
     is otherwise prohibited by applicable law or by the rules or
regulations of
     any stock exchange,  interdealer  quotation system or other self-
regulatory
     organization   with  jurisdiction  over  the  Company  or  its
Securities,
     including without  limitation the Nasdaq-Small Cap, from issuing all
of the
     Common Stock which is to be issued to a holder of Series A Preferred
Shares
     pursuant to a Conversion Notice or (z) fails to have a sufficient
number of
     shares of  Common  Stock  registered  and  eligible  for  resale
under the
     Registration  Statement,  then the  Company  shall  issue as many
shares of
     Common  Stock as it is able to  issue  in  accordance  with  such
holder's
     Conversion  Notice and pursuant to Section 2(f) above and,  with
respect to
     the  unconverted  Series A Preferred  Shares,  the  holder,  solely at
such
     holder's  option,  can, in addition to any other  remedies  such
holder may
     have  hereunder,   under  the  Securities  Purchase  Agreement
(including
     indemnification  under Section 8 thereof),  under the  Registration
Rights
     Agreement, at law or in equity, elect to:

               (i) require the Company to redeem from such holder those
Series A
          Preferred Shares for which the Company is unable to issue Common
Stock
          in  accordance  with  such  holder's   Conversion  Notice
("Mandatory
          Redemption")  at a price per Series A Preferred  Share (the
"Mandatory
          Redemption Price") equal to the greater of (x) 115% of the
Liquidation
          Value of such share and (y) the Redemption  Rate as of such
Conversion
          Date;

               (ii)  if the  Company's  inability  to  fully  convert
Series  A
          Preferred  Shares is pursuant to Section  5(a)(z)  above,
require the
          Company to issue restricted  shares of Common Stock in accordance
with
          such holder's Conversion Notice and pursuant to Section 2(f)
above; or

               (iii) void its Conversion Notice and retain or have
returned,  as
          the case may be, the nonconverted  Series A Preferred Shares that
were
          to be converted pursuant to such holder's Conversion Notice.

          (b)  Mechanics of  Fulfilling  Holder's  Election.  The Company
shall
     immediately  send via  facsimile to a holder of Series A Preferred
Shares,
     upon receipt of a facsimile  copy of a  Conversion  Notice from such
holder
     which cannot be fully  satisfied  as  described  in Section  5(a)
above,  a
     notice of the Company's inability to fully satisfy such holder's
Conversion
     Notice (the "Inability to Fully Convert  Notice").  Such Inability to
Fully
     Convert  Notice shall  indicate (i) the reason why the Company is
unable to
     fully satisfy such holder's  Conversion Notice, (ii) the number of
Series A
     Preferred  Shares  which  cannot be  converted  and  (iii)  the
applicable
     Mandatory  Redemption Price. Such holder must within five (5) business
days
     of receipt of such Inability to Fully Convert Notice deliver written
notice
     via facsimile to the Company ("Notice in Response to Inability to
Convert")
     of its election pursuant to Section 5(a) above.

          (c) Payment of  Redemption  Price.  If such holder shall elect to
have
     its shares redeemed  pursuant to Section 5(a) above,  the Company
shall pay
     the  Mandatory  Redemption  Price in cash to such holder within thirty
(30)
     days of the  Company's  receipt  of the  holder's  Notice  in
Response  to
     Inability  to  Convert.  If the  Company  shall fail to pay the
applicable
     Mandatory Redemption Price to such holder on a timely basis as
described in
     this Section 5(c) (other than pursuant to a dispute as to the
determination
     of the Closing Bid Price or the  arithmetic  calculation  of the
Redemption
     Rate), such unpaid amount shall bear interest at the rate of 2.5% per
month
     (prorated for partial months) until paid in full.  Until the full
Mandatory
     Redemption  Price is paid in full to such holder,  such holder may
void the
     Mandatory  Redemption  with respect to those Series A Preferred
Shares for
     which the full  Mandatory  Redemption  Price has not been paid and
receive
     back such Series A Preferred Shares.  Notwithstanding the foregoing,
if the
     Company fails to pay the applicable  Mandatory Redemption Price within
such
     thirty  (30) days time period due to a dispute as to the
determination  of
     the Closing Bid Price or the arithmetic calculation of the Redemption
Rate,
     such dispute shall be resolved pursuant to Section 2(f)(iii) above
with the
     term "Closing Bid Price" being  substituted  for the term  "Average
Market
     Price"  and the term,  "Redemption  Rate"  being  substituted  for the
term
     "Conversion Rate."

          (d)  Pro-rata  Conversion  and  Redemption.  In the event the
Company
     receives  a  Conversion  Notice  from  more  than one  holder  of
Series A
     Preferred  Shares on the same day and the  Company  can  convert and
redeem
     some,  but not all,  of the  Series A  Preferred  Shares  pursuant  to
this
     Section 5, the Company  shall convert and redeem from each holder of
Series
     A Preferred Shares electing to have Series A Preferred Shares
converted and
     redeemed  at such time an amount  equal to such  holder's  pro-rata
amount
     (based on the  number  of Series A  Preferred  Shares  held by such
holder
     relative to the number of Series A  Preferred  Shares  outstanding)
of all
     Series A Preferred Shares being converted and redeemed at such time.

     (6) Reissuance of Certificates.  In the event of a conversion or
redemption
pursuant to this  Certificate of  Designations  of less than all of the
Series A
Preferred Shares represented by a particular  Preferred Stock  Certificate,
the
Company  shall  promptly  cause to be issued and delivered to the holder of
such
Series A  Preferred  Shares  a  Preferred  stock  certificate  representing
the
remaining  Series  A  Preferred  Shares  which  have not  been so
converted  or
redeemed.

     (7) Reservation of Shares.  The Company shall, so long as any of the
Series
A  Preferred  Shares  are  outstanding  reserve  and keep  available  out
of its
authorized  and unissued  Common Stock,  solely for the purpose of
effecting the
conversion  of the Series A  Preferred  Shares,  such number of shares of
Common
Stock as shall from time to time be sufficient  to affect the  conversion
of all
of the Series A Preferred Shares then  outstanding;  provided that the
number of
shares of  Common  Stock so  reserved  shall at no time be less than 200%
of the
number of shares of Common Stock for which the Series A Preferred  Shares
are at
any time  convertible  and  provide  further  that until  approval  of the
Share
Increase by the Company's shareholders at the Shareholder's Meeting, the
Company
will not be  required to comply with such  reservation  ratio (the
"Reservation
Ratio").

     (8) Voting  Rights.  Holders  of Series A  Preferred  Shares  shall
have no
voting  rights,  except as  required  by law,  including  but not limited
to the
General  Corporation  Law of the State of Delaware and as expressly
provided in
this Certificate of Designations.

     (9) Liquidation,  Dissolution, Winding-Up. In the event of any
voluntary or
involuntary liquidation,  dissolution, or winding up of the Company, the
holders
of the Series A Preferred Shares shall be entitled to receive in cash out
of the
assets of the  Company,  whether  from capital or from  earnings  available
for
distribution  to its  stockholders  (the "Preferred  Funds"),  before any
amount
shall be paid to the holders of any of the  capital  stock of the Company
of any
class  junior  in rank to the  Series  A  Preferred  Shares  in  respect
of the
preferences as to the distributions and payments on the liquidation,
dissolution
and winding up of the Company,  an amount per Series A Preferred  Share
equal to
the sum of (i) $10,000 and (ii) an amount equal to the product of (.06)
(N/365)
($10,000)  (such sum being  referred to as the  "Liquidation  Value");
provided
that, if the Preferred Funds are  insufficient to pay the full amount due
to the
holders of Series A Preferred  Shares and holders of shares of other
classes or
series of preferred  stock of the Company that are of equal rank with the
Series
A Preferred  Shares as to payments of Preferred Funds (the "Pari Passu
Shares"),
then each  holder of Series A  Preferred  Shares  and Pari  Passu  Shares
shall
receive  a  percentage  of the  Preferred  Funds  equal  to the full
amount  of
Preferred  Funds  payable  to  such  holder  as  a  liquidation
preference,  in
accordance with their respective  Certificate of  Designations,
Preferences and
Rights as a  percentage  or the full amount of  Preferred  Funds  payable
to all
holders of Series A  Preferred  Shares and Pari Passu  Shares.  The
purchase or
redemption by the Company of stock of any class in any manner  permitted by
law,
shall not for the purposes hereof, be regarded as a liquidation,
dissolution or
winding up of the Company.  Neither the  consolidation  or merger of the
Company
with or into any other  Person,  nor the sale or transfer by the Company of
less
than substantially all of its assets,  shall, for the purposes hereof, be
deemed
to be a  liquidation,  dissolution  or winding up of the  Company.  No
holder of
Series A Preferred  Shares shall be entitled to receive any amounts with
respect
thereto upon any  liquidation,  dissolution  or winding up of the Company
other
than the amounts provided for herein.

     (10) Preferred  Rate. All shares of Common Stock shall be of junior
rank to
all Series A Preferred  Shares in respect to the preferences as to
distributions
and payments upon the liquidation,  dissolution,  and winding up of the
Company.
The rights of the shares of Common Stock shall be subject to the
Preferences and
relative rights of the Series A Preferred Shares.  The Series A Preferred
Shares
shall be of  greater  priority  than any  Series of Common  or  Preferred
Stock
hereinafter issued by the Company.  Without the prior express written
consent of
the  holders  of not  less  than a  majority  of the then  outstanding
Series A
Preferred Shares, the Company shall not hereafter  authorize or issue
additional
or other capital stock that is of senior or equal rank to the Series A
Preferred
Shares in respect of the preferences as to  distributions  and payments
upon the
liquidation,  dissolution  and  winding  up of the  Company.  Without  the
prior
express written consent of the holders of not less than two-thirds  (2/3)
of the
then  outstanding  Series A Preferred  Shares,  the Company  shall not
hereafter
authorize or make any amendment to the Company's Certificate of
Incorporation or
bylaws,  or make any  resolution  of the board of  directors  with the
Delaware
Secretary of State  containing any provisions,  which would adversely
affect or
otherwise impair the rights or relative  priority of the holders of the
Series A
Preferred  Shares  relative to the holders of the Common Stock or the
holders of
any other class of capital stock. In the event of the merger or
consolidation of
the Company  with or into  another  corporation,  the Series A Preferred
Shares
shall maintain their relative powers, designations, and preferences
provided for
herein and no merger shall result inconsistent therewith.

     (11) Restriction on Redemption and Dividends.

          (a)  Restriction  on  Dividend.  If any Series A Preferred
Shares are
     outstanding,  without the prior express  written  consent of the
holders of
     not less than a majority of the then outstanding Series A Preferred
Shares,
     the Company  shall not  directly  or  indirectly  declare,  pay or
make any
     dividends  or other  distributions  upon any of the Common Stock so
long as
     written  notice thereof has been given to holders of the Series A
Preferred
     Shares at least 30 days prior to the  earlier of (a) the record  date
taken
     for or (b)  the  payment  of  any  such  dividend  or  other
distribution.
     Notwithstanding  the  foregoing,  this Section 10(a) shall not
prohibit the
     Company  from  declaring  and paying a dividend in cash with respect
to the
     Common Stock so long as the Company: (i) pays simultaneously to each
holder
     of Series A  Preferred  Shares an amount in cash equal to the  amount
such
     holder  would have  received  had all of such  holder's  Series A
Preferred
     Shares  been  converted  to Common  Stock  pursuant to Section 2
hereof one
     business day prior to the record date for any such dividend, and (ii)
after
     giving  effect  to the  payment  of any  dividend  and any  other
payments
     required in connection  therewith  including to the holders of the
Series A
     Preferred Shares under clause 10(a)(i)  hereof,  the Company has in
cash or
     cash  equivalents  an  amount  equal to the  aggregate  of:  (A) all
of its
     liabilities reflected on its most recently available balance sheet,
(B) the
     amount  of  any  indebtedness  incurred  by  the  Company  or  any  of
its
     subsidiaries since its most recent balance sheet and (C) 125% of the
amount
     payable to all holders of any shares of any class of preferred stock
of the
     Company  assuming  a  liquidation  of the  Company  as the date of its
most
     recently available balance sheet.

          (b)  Restriction on Redemption.  If any Series A Preferred
Shares are
     outstanding,  without the prior express  written  consent of the
holders of
     not less than a majority of the then outstanding Series A Preferred
Shares,
     the Company shall not directly or indirectly redeem,  purchase or
otherwise
     acquire  from any  person or entity  other  than from a direct or
indirect
     wholly-owned  subsidiary  of the Company,  or permit any  subsidiary
of the
     Company to redeem,  purchase or otherwise acquire from any person or
entity
     other  than from the  Company or another  direct or  indirect  wholly-
owned
     subsidiary of the Company, any of the Company's or any subsidiary's
capital
     stock or other equity securities (including, without limitation,
warrants,
     options and other  rights to acquire  such  capital  stock or other
equity
     securities).

     (12) Vote to Change the Terms of Series A Preferred Shares. The
affirmative
vote at a meeting duly called for such purpose or the written  consent
without a
meeting,  of the  holders  of not less than a majority  of the then
outstanding
Series A Preferred Shares,  shall be required for any change to this
Certificate
of Designations or the Company's Certificate of Incorporation which would
amend,
alter, change or repeal any of the powers, designations,  preferences and
rights
of the Series A Preferred Shares.

     (13) Lost or Stolen  Certificates.  Upon receipt by the Company of
evidence
satisfactory to the Company of the loss, theft, destruction or mutilation
of any
Preferred Stock Certificates representing the Series A Preferred Shares,
and, in
the case of loss, theft or destruction,  of any  indemnification
undertaking by
the holder to the Company and, in the case of  mutilation,  upon  surrender
and
cancellation  of the Preferred Stock  Certificate(s),  the Company shall
execute
and deliver new preferred stock certificate(s) of like tenor and date;
provided,
however,  the  Company  shall  not be  obligated  to  re-issue  preferred
stock
certificates  if the holder  contemporaneously  requests  the Company to
convert
such Series A Preferred Shares into Common Stock.

     (14)  Withholding Tax Obligations.  Notwithstanding  anything herein
to the
contrary,  to the extent that the Company  receives  advice in writing
from its
counsel that there is a reasonable basis to believe that the Company is
required
by applicable  federal laws or  regulations  and delivers a copy of such
written
advice to the holders of the Series A Preferred Shares so effected,  the
Company
may reasonably condition the making of any distribution (as such term is
defined
under  applicable  federal tax law and  regulations)  in respect of any
Series A
Preferred Share on the holder of such Series A Preferred Shares  depositing
with
the  Company an amount of cash  sufficient  to enable the Company to
satisfy its
withholding  tax  obligations  (the  "Withholding  Tax")  with  respect  to
such
distribution.  Notwithstanding the foregoing or anything to the contrary,
if any
holder of the Series A Preferred  Shares so effected  receives advice in
writing
from its counsel that there is a reasonable basis to believe that the
Company is
not so required by applicable federal laws or regulations and delivers a
copy of
such  written  advice to the  Company,  the Company  shall not be
permitted  to
condition  the  making  of any such  distribution  in  respect  of any
Series A
Preferred Share on the holder of such Series A Preferred Shares  depositing
with
the Company any  Withholding  Tax with respect to such  distribution,
provided,
however,   the  Company  may  reasonably   condition  the  making  of  any
such
distribution  in respect of any Series A  Preferred  Share on the holder of
such
Series A Preferred  Shares  executing  and  delivering  to the  Company,
at the
election of the holder, either: (i) if applicable, a properly completed
Internal
Revenue  Service Form 4224,  or (a) an  indemnification  agreement in
reasonably
acceptable  form,  with  respect to any federal  tax  liability,  penalties
and
interest that may be imposed upon the Company by the Internal Revenue
Service as
a  result  of  the  Company's  failure  to  withhold  in  connection  with
such
distribution  to such holder.  If the  conditions in the preceding two
sentences
are fully  satisfied,  the Company  shall not be required to pay any
additional
damages set forth in Section 2(f)(v) of this  Certificate of Designations
if its
failure to timely deliver any Conversion Shares results solely from the
holder's
failure to deposit any  withholding  tax  hereunder or provide to the
Company an
executed  indemnification  agreement in the form reasonably  satisfactory
to the
Company.

     IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations
to be signed by L. Daniel Rawitch,  its Chief Executive Officer,  as of the
29th
day of September, 1998.

                                FINET HOLDINGS CORPORATION



                                By:   /s/ Jan C. Hoeffel
                                   ----------------------------------------
--
                                     Jan C. Hoeffel
                                     President



<PAGE>


EXHIBIT I

                           FINET HOLDINGS CORPORATION
                                CONVERSION NOTICE


     Reference is made to the  Certificate  of  Designations,  Preferences,
and
Rights of Finet Holdings  Corporation (the  "Certificate of
Designations").  In
accordance with and pursuant to the Certificate of Designations, the
undersigned
hereby  irrevocably  elects to convert  the above  shares of Series A
Preferred
Stock No(s).___________ into shares of Common Stock, $.01 par value (the
"Common
Stock"),  of  Finet  Holdings  Corporation  (the  "Company")  according  to
the
conditions  hereof,  as of the date written below. If shares are to be
issued in
the  name of a person  other  than  undersigned,  the  undersigned  will
pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith
such
certificates,  opinions,  and signature guarantee as reasonably requested
by the
Company  or its  Transfer  Agent.  No fee will be  charged to the Holder
for any
conversion, except for transfer taxes, if any.

     The  undersigned  represents  and warrants that all offers and sales
by the
undersigned  of the shares of Common  Stock  issuable  to the  undersigned
upon
conversion of the shares of Series A Preferred Stock shall be made only
pursuant
to (i)  registration of the Common Stock under the Act or (ii) advice of
counsel
that such sale is exempt from registration required by Section 5 under the
Act.

                              Date of Conversion:

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


                              Number of Series A Preferred  Shares
                              to be converted:


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


                              Stock certificate no(s). of Series A
                              Preferred Shares to be converted:



Please confirm the following information

                              Conversion Price:


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


                              Number of Shares of Common  Stock to
                              be issued:


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



Please issue the Common Stock into which the Series A Preferred Shares are
being
converted in the following name and to the following address:

<PAGE>
                              Issue to:(1)

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

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


                              Facsimile Number:

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


                              Authorization:

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

                              By:
                                 ------------------------------------------
---

                              Title:
                                 ------------------------------------------
---

                              Dated:
                                 ------------------------------------------
---


ACKNOWLEDGED AND AGREED:

FINET HOLDINGS CORPORATION


By:
   ----------------------------------------

Name:
   ----------------------------------------

Title:
   ----------------------------------------

Date:
   ----------------------------------------

--------
(1)  If other than to the record holder of the Series A Preferred Shares,
any applicable transfer tax must be paid by the undersigned.