<PAGE>

                                                                     EXHIBIT 3.2


                          CERTIFICATE OF DESIGNATION OF
                            SERIES A PREFERRED STOCK

                                       OF

                            BREAKAWAY SOLUTIONS, INC.


         Breakaway Solutions, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "GCL"),

                  DOES HEREBY CERTIFY THAT:

         Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said corporation, and pursuant to the provisions
of Section 151 of the GCL, said Board of Directors by the written consent taken
pursuant to Section 141 of the GCL, adopted a resolution creating Six Hundred
Thousand (600,000) shares of Series A Preferred Stock, which resolution is
attached hereto as Exhibit "A".

         IN WITNESS WHEREOF, said Breakaway Solutions, Inc. has caused this
certificate to be signed by its Chief Executive Officer, this 6th day of April,
2001.



                                           By: /S/ WILLIAM LOFTUS
                                               --------------------------------
                                           Name: William Loftus
                                           Title: President and Chief Executive
                                                  Officer


<PAGE>

                                    EXHIBIT A

                      RESOLUTION OF THE BOARD OF DIRECTORS
                                    APPROVING
                            THE DESIGNATION STATEMENT
                      RELATING TO SERIES A PREFERRED STOCK


         WHEREAS, the Third Amended and Restated Certificate of Incorporation of
the Corporation authorizes the Corporation to issue a total of 5,000,000 shares
of Preferred Stock, par value $.0001 per share ("Preferred Stock"), which may be
divided into one or more series as the Board of Directors may determine;

         WHEREAS, the Certificate of Incorporation of the Corporation expressly
vests in the Board of Directors the authority to fix and determine the
designations, powers, preferences, and rights, and the qualifications,
limitations and restrictions thereof, of the Preferred Stock; and

         WHEREAS, the Board of Directors deems it advisable to designate a
series of the Preferred Stock consisting of Six Hundred Thousand (600,000)
shares designated as Series A Preferred Stock;

         NOW, THEREFORE, IT IS HEREBY RESOLVED, that pursuant to Paragraph
FOURTH of the Certificate of Incorporation of the Corporation, there be and
hereby is authorized and created a series of Preferred Stock hereby designated
as Series A Preferred Stock, to consist of 600,000 shares, having a par value of
$0.0001 per share, which series shall have the voting rights, designations,
powers, preferences, relative and other special rights, and the qualifications,
limitations and restrictions set forth below:

         SERIES A PREFERRED STOCK. Six Hundred Thousand (600,000) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" (the "Series A Preferred Stock"). The rights, preferences, privileges,
restrictions and other matters relating to the Series A Preferred Stock are as
follows:

         (a) DIVIDEND RIGHTS.

                  (i) Subject to the right of any other series of Preferred
         Stock that may from time to time come into existence and which is
         expressly senior to the rights of the Series A Preferred Stock, the
         holders of Series A Preferred Stock, in preference to the holders of
         Common Stock and any other stock of the Company hereafter created which
         shall be junior to the Series A Preferred Stock (together, "Series A
         Junior Stock"), shall be entitled to receive dividends, but only out of
         funds that are legally available therefor, at the rate of 8% of the
         Series A Original Issue Price (as defined below) per annum (the "Series
         A Dividend Rate") on each outstanding share of Series A Preferred Stock
         (as adjusted for any stock dividends, combinations, splits,
         recapitalizations and the like with respect to such shares). Such
         dividends shall accrue, whether or not declared by the Board of
         Directors, but shall be payable only when, as and if declared by the
         Board of Directors. Such dividends shall be payable, when and if
         declared, at the option of the Company


<PAGE>

         either (A) in cash or (B) in additional shares of Series A Preferred
         Stock (valued at the Series A Original Issue Price (as defined below),
         as adjusted for any stock dividends, combinations, splits,
         recapitalizations and the like with respect to such shares). Such
         additional shares of Series A Preferred Stock issued in lieu of the
         cash dividend are sometimes referred to as "PIK Shares." The original
         issue price of the Series A Preferred Stock (the "Series A Original
         Issue Price") shall be $70.00. Such dividends shall be cumulative and
         shall accrue quarterly. Notwithstanding the foregoing, (A) in the event
         of a Qualified Public Offering or a Qualified Sale on or before the
         third anniversary of the Series A Original Issue Date, all issued and
         outstanding PIK Shares shall be canceled, and (B) in the event that any
         shares of Series A Preferred Stock shall be converted pursuant to
         Section (d) of this Certificate of Designation on or prior to the
         expiration of three years from the Series A Original Issue Date, any
         accrued and unpaid dividends with respect to such shares shall be
         cancelled.

                  (ii) So long as any shares of Series A Preferred Stock shall
         be outstanding, without the prior written consent of the holders of a
         majority of the then issued and outstanding shares of Series A
         Preferred Stock, no dividend (other than a stock dividend paid pro rata
         to the Company's stockholders), whether in cash or property, shall be
         paid or declared, nor shall any other distribution (other than a stock
         dividend paid pro rata to the Company's stockholders) be made, on any
         Series A Junior Stock, nor shall any shares of any Series A Junior
         Stock of the Company be purchased, redeemed, or otherwise acquired for
         value by the Company (except for acquisitions of Common Stock by the
         Company pursuant to agreements that permit the Company to repurchase
         such shares upon termination of services to the Company or in exercise
         of the Company's right of first refusal upon a proposed transfer) until
         all dividends (set forth in Section (a)(i) above) on the Series A
         Preferred Stock shall have been paid or declared and set apart. In the
         event that the Company shall declare a dividend or distribution payable
         in securities of other persons, evidences of indebtedness issued by the
         Company or other persons, or options or rights to purchase any such
         securities or evidences of indebtedness or other assets (including
         cash) to the holders of the Common Stock, then the holders of the
         Series A Preferred Stock shall be entitled to a proportionate share of
         any such dividend or distribution as though the holders of the Series A
         Preferred Stock were the holders of the number of shares of Common
         Stock into which their respective shares of Series A Preferred Stock
         are convertible as of the record date fixed for the determination of
         the holders of the Common Stock entitled to receive such dividend or
         distribution.

         (b) VOTING RIGHTS.

                  (i) General Rights. Except as otherwise provided herein or as
         required by law, the Series A Preferred Stock shall be voted equally
         with the shares of the Common Stock of the Company and not as a
         separate class, at any annual or special meeting of stockholders of the
         Company, upon the following basis: each holder of shares of Series A
         Preferred Stock shall be entitled to such number of votes as shall be
         equal to the whole number of shares of Common Stock into which such
         holder's aggregate number of shares of Series A Preferred Stock, are
         convertible pursuant to Section (d) hereof

                                       2

<PAGE>

         immediately after the close of business on the record date fixed for
         such meeting or the effective date of such written consent.

                  (ii) Separate Vote of Series A Preferred Stock. Subject to the
         rights of any series of Preferred Stock which may hereafter from time
         to time come into existence, for so long as at least 10% of the Series
         A Preferred Stock theretofore issued remain outstanding (subject to
         adjustment for any stock split, reverse stock split or other similar
         event affecting the Series A Preferred Stock), in addition to any other
         vote or consent required herein or by law, the vote of the holders of
         at least a majority of the outstanding Series A Preferred Stock shall
         be necessary for effecting or validating the following actions:

                           (A) any amendment, alteration, or repeal of any
                  provision of the Certificate of Incorporation (including this
                  Certificate of Designation) or the Bylaws of the Company
                  (including any filing of a Certificate of Designation), that
                  alters or changes or adversely affects the voting or other
                  powers, preferences, or other special rights or privileges, or
                  restrictions of the Series A Preferred Stock;

                           (B) reclassification or recapitalization of any
                  outstanding shares of securities of the Company into shares
                  having rights, preferences or privileges senior to or on a
                  parity with the Series A Preferred Stock;

                           (C) authorization or issuance of any other stock
                  having rights, preferences or privileges senior to or on a
                  parity with the Series A Preferred Stock;

                           (D) reorganization, merger or consolidation with or
                  into any corporation if such reorganization, merger or
                  consolidation would result in the stockholders of the Company
                  immediately prior to such reorganization, merger or
                  consolidation holding less than a majority of the voting power
                  of the stock of the surviving corporation immediately after
                  such reorganization, merger or consolidation;

                           (E) sale, lease, conveyance or other disposition of,
                  or encumbrance of, all or substantially all the Company's
                  assets in a single transaction or series of related
                  transactions;

                           (F) liquidation, dissolution or winding-up of the
                  Company;

                           (G) amendment of the Certificate of Incorporation, as
                  amended, to increase the number of shares of authorized Common
                  Stock or Preferred Stock;

                           (H) redemption, purchase or other acquisition by the
                  Company, either direct or indirect, of any of the Company's
                  capital stock or other equity securities (including any
                  securities directly or indirectly convertible into or
                  exchangeable or exercisable for such securities) excluding
                  redemptions, repurchases or other reacquisitions at cost with
                  respect to shares issued in accordance with plans



                                       3
<PAGE>

                  or agreements approved by the Board of Directors from current
                  or former employees, consultants, advisors or directors upon
                  or in connection with their death, disability or termination
                  of employment with the Company and excluding the Series A
                  Preferred Stock pursuant to Section (e) below;

                           (I) authorization, declaration or payment of any
                  dividend (other than a stock dividend paid pro rata to the
                  Company's stockholders) on any shares of Common Stock or
                  Preferred Stock, other than the Series A Preferred Stock; or

                           (J) increase or decrease the number of authorized
                  shares of Series A Preferred Stock; or

                           (K) issuance, reservation or authorization of shares
                  of Common Stock or any right or option to purchase Common
                  Stock or other security convertible into Common Stock to
                  employees, consultants or directors in an amount which would
                  result in total options outstanding at any time exceeding 15%
                  of the total number of shares, warrants and options issued and
                  outstanding immediately after the Series A Original Issue Date
                  (as adjusted for any stock dividends, combinations or splits
                  with respect to such shares).

         (c) LIQUIDATION RIGHTS.

                  (i) Upon any liquidation, dissolution, or winding up of the
         Company, whether voluntary or involuntary, before any distribution or
         payment shall be made to the holders of any Series A Junior Stock,
         subject to the rights of any series of Preferred Stock that may from
         time to time come into existence and which is expressly senior to the
         rights of the Series A Preferred Stock, the holders of Series A
         Preferred Stock shall be entitled to be paid out of the assets of the
         Company an amount per share of Series A Preferred Stock equal to 100%
         of the Series A Original Issue Price (as adjusted for any stock
         dividends, combinations, splits, recapitalizations and the like with
         respect to such shares) for each share of Series A Preferred Stock held
         by each such holder. If, upon any such liquidation, dissolution, or
         winding up, the assets of the Company shall be insufficient to make
         payment in full to all holders of Series A Preferred Stock, then such
         assets shall be distributed among the holders of Series A Preferred
         Stock at the time outstanding, ratably in proportion to the full
         amounts to which they would otherwise be respectively entitled. After
         the payment of the foregoing full liquidation preference of the Series
         A Preferred Stock and any other distribution that may be required with
         respect to any series of Preferred Stock that may from time to time
         come into existence and which is expressly senior to the rights of the
         Series A Preferred Stock, the assets of the Company legally available
         for distribution, if any, shall be distributed ratably to the holders
         of Series A Preferred Stock, on an as converted basis, and the holders
         of Series A Junior Stock.

                  (ii) The following events shall be considered a liquidation
         under this Section, unless by vote or written consent of the holders of
         at least a majority of the Series A Preferred Stock then outstanding,
         such holders waive the right to treat any of the following events as a
         deemed liquidation:


                                       4
<PAGE>

                           (A) any consolidation or merger of the Company with
                  or into any other corporation or other entity or person, or
                  any other corporate reorganization, in which the stockholders
                  of the Company immediately prior to such consolidation, merger
                  or reorganization, own less than 50% of the Company's voting
                  power immediately after such consolidation, merger or
                  reorganization, or any transaction or series of related
                  transactions to which the Company is a party in which in
                  excess of 50% of the Company's voting power is transferred,
                  excluding any consolidation or merger effected exclusively to
                  change the domicile of the Company (an "Acquisition");

                           (B) a transaction or a series of related
                  transactions, other than transactions involving a holder of
                  Series A Preferred Stock, in which a majority of the voting
                  power is transferred to a third party (or group of affiliated
                  third parties) who were not previously stockholders of the
                  Company; or

                           (C) a sale, lease or other disposition of all or
                  substantially all of the assets of the Company (an "Asset
                  Transfer").

                  (iii) In any of the events set forth in subparagraph (ii), if
         the consideration received by the Company is other than cash, its value
         will be deemed its fair market value as determined in good faith by the
         Board of Directors. Any securities shall be valued as follows:

                           (A) Securities not subject to restrictions on free
                  marketability covered by subparagraph (B) below:

                                    (1) If traded on a securities exchange or
                           through the Nasdaq National Market (or a similar
                           national quotation system), the value shall be deemed
                           to be the average of the closing prices of the
                           securities on such quotation system over the 30 day
                           period ending three days prior to the closing;

                                    (2) If actively traded over-the-counter, the
                           value shall be deemed to be the average of the
                           closing bid or sale prices (whichever is applicable)
                           over the 30 day period ending three days prior to the
                           closing; and

                                    (3) If there is no active public market, the
                           value shall be the fair market value thereof, as
                           determined in good faith by the Board of Directors.

                           (B) The method of valuation of securities subject to
                  restrictions on free marketability (other than restrictions
                  arising solely by virtue of a stockholder's status as an
                  affiliate or former affiliate) shall be to make an appropriate
                  discount from the market value determined as above in
                  subparagraphs (iii)(A)(1),


                                       5
<PAGE>

                  (2) or (3) to reflect the approximate fair market value
                  thereof, as determined in good faith by the Board of
                  Directors.

                  (iv) Written notice of any such liquidation, dissolution or
         winding up (or deemed liquidation, dissolution or winding up) of the
         Company within the meaning of this Section, which states the payment
         date, the place where said payments shall be made and the date on which
         conversion rights as set forth herein terminate as to such shares
         (which shall be not less than 10 days after the date of such notice),
         shall be given by first class mail, postage prepaid, or by telecopy or
         facsimile, not less than 20 days prior to the payment date stated
         therein, to the then holders of record of Series A Preferred Stock,
         such notice to be addressed to each such holder at its address as shown
         on the records of the Company.

         (d) CONVERSION RIGHTS. The holders of the Series A Preferred Stock
shall have the following rights with respect to the conversion of the Series A
Preferred Stock into shares of Common Stock:

                  (i) Optional Conversion. Subject to and in compliance with the
         provisions of this Section (d), any shares of Series A Preferred Stock
         may, at the option of the holder, be converted at any time into
         fully-paid and nonassessable shares of Common Stock The number of
         shares of Common Stock to which a holder of Series A Preferred Stock
         shall be entitled upon conversion shall be the product obtained by
         multiplying the "Series A Preferred Conversion Rate" then in effect
         (determined as provided in subsection (ii)) by the number of shares of
         Series A Preferred Stock being converted.

                  (ii) Series A Preferred Conversion Rate. The conversion rate
         in effect at any time for conversion of the Series A Preferred Stock
         (the "Series A Preferred Conversion Rate") shall be the quotient
         obtained by dividing the Series A Original Issue Price by the "Series A
         Preferred Conversion Price," calculated as provided in subsection (iii)
         below.

                  (iii) Series A Preferred Conversion Price. The conversion
         price for the Series A Preferred Stock shall initially be $0.70 (the
         "Series A Preferred Conversion Price"). Such initial Series A Preferred
         Conversion Price shall be adjusted from time to time in accordance with
         this Section (d). All references to the Series A Preferred Conversion
         Price herein shall mean the Series A Preferred Conversion Price as so
         adjusted.

                  (iv) Mechanics of Conversion. Each holder of Series A
         Preferred Stock who desires to convert the same into shares of Common
         Stock pursuant to this Section (d) shall surrender the certificate or
         certificates therefor, duly endorsed, at the office of the Company or
         any transfer agent for the Series A Preferred, and shall give written
         notice to the Company at such office that such holder elects to convert
         the same. Such notice shall state the number of shares of Series A
         Preferred being converted. Thereupon, the Company shall promptly issue
         and deliver at such office to such holder a certificate or certificates
         for the number of shares of Common Stock to which such holder is
         entitled and shall promptly pay in cash (at the Common Stock's fair
         market value


                                       6
<PAGE>

         determined by the Board of Directors as of the date of conversion) the
         value of any fractional share of Common Stock otherwise issuable to any
         holder of Series A Preferred. Such conversion shall be deemed to have
         been made at the close of business on the date of such surrender of the
         certificates representing the shares of Series A Preferred to be
         converted, and the person entitled to receive the shares of Common
         Stock issuable upon such conversion shall be treated for all purposes
         as the record holder of such shares of Common Stock on such date.

                  (v) Adjustment Upon Common Stock Event. Upon the happening of
         a Common Stock Event (as hereinafter defined) at any time or from time
         to time after the date that the first share of Series A Preferred is
         issued (the "Series A Original Issue Date"), the Series A Preferred
         Conversion Price shall, simultaneously with the happening of such
         Common Stock Event, be adjusted by multiplying the Series A Preferred
         Conversion Price in effect immediately prior to such Common Stock Event
         by a fraction, (i) the numerator of which shall be the number of shares
         of Common Stock issued and outstanding immediately prior to such Common
         Stock Event, and (ii) the denominator of which shall be the number of
         shares of Common Stock issued and outstanding immediately after such
         Common Stock Event, and the product so obtained shall thereafter be the
         Series A Preferred Conversion Price. The Series A Preferred Conversion
         Price shall be readjusted in the same manner upon the happening of each
         subsequent Common Stock Event. As used in this Section (d), the term
         "Common Stock Event" shall mean (i) the issue by the Company of
         additional shares of Common Stock as a dividend or other distribution
         on outstanding Common Stock, (ii) a subdivision of the outstanding
         shares of Common Stock into a greater number of shares of Common Stock
         (by stock split, reclassification or otherwise), or (iii) a combination
         or consolidation, by reclassification or otherwise, of the outstanding
         shares of Common Stock into a smaller number of shares of Common Stock.

                  (vi) Adjustment for Other Dividends and Distributions. If at
         any time or from time to time after the Series A Original Issue Date
         the Company pays a dividend or makes another distribution to the
         holders of the Common Stock (or fixes a record date for the
         determination of holders of Common Stock entitled to receive such
         dividend or other distribution) payable in securities of the Company or
         any of its subsidiaries other than shares of Common Stock, then in each
         such event provision shall be made so that the holders of Series A
         Preferred Stock shall receive upon conversion thereof, in addition to
         the number of shares of Common Stock receivable upon conversion
         thereof, the amount of securities of the Company which they would have
         received had their Series A Preferred Stock been converted into Common
         Stock on the date of such event (or such record date, as applicable)
         and had they thereafter, during the period from the date of such event
         (or such record date, as applicable) to and including the conversion
         date, retained such securities receivable by them as aforesaid during
         such period, subject to all other adjustments called for during such
         period under this Section (d) with respect to the rights of the holders
         of the Series A Preferred Stock or with respect to such other
         securities by their terms.


                                       7
<PAGE>

                  (vii) Adjustment for Reclassification, Exchange and
         Substitution. If at any time or from time to time after the Series A
         Original Issue Date, the Common Stock issuable upon the conversion of
         the Series A Preferred Stock is changed into the same or a different
         number of shares of any class or classes of stock, whether by
         recapitalization, reclassification or otherwise (other than an
         Acquisition or Asset Transfer as defined in Section (c) or a
         subdivision or combination of shares or stock dividend or a
         reorganization, merger, consolidation or sale of assets provided for
         elsewhere in this Section (d)), in any such event each holder of Series
         A Preferred Stock shall have the right thereafter to convert such stock
         into the kind and amount of stock and other securities and property
         receivable upon such recapitalization, reclassification or other change
         by holders of the maximum number of shares of Common Stock into which
         such shares of Series A Preferred Stock could have been converted
         immediately prior to such recapitalization, reclassification or change,
         all subject to further adjustment as provided herein or with respect to
         such other securities or property by the terms thereof.

                  (viii) Adjustment for Reorganizations, Mergers or
         Consolidations. If at any time or from time to time after the Series A
         Original Issue Date, there is a capital reorganization of the Common
         Stock or the merger or consolidation of the Company with or into
         another corporation or another entity or person (other than an
         Acquisition or Asset Transfer as defined in Section (c) or a
         recapitalization, subdivision, combination, reclassification, exchange
         or substitution of shares provided for elsewhere in this Section (d)),
         as a part of such capital reorganization, provision shall be made so
         that the holders of the Series A Preferred Stock shall thereafter be
         entitled to receive upon conversion of the Series A Preferred Stock the
         number of shares of stock or other securities or property of the
         Company to which a holder of the number of shares of Common Stock
         deliverable upon conversion would have been entitled on such capital
         reorganization, subject to adjustment in respect of such stock or
         securities by the terms thereof. In any such case, appropriate
         adjustment shall be made in the application of the provisions of this
         Section (d) with respect to the rights of the holders of Series A
         Preferred Stock after the capital reorganization to the end that the
         provisions of this Section (d) (including adjustment of the Series A
         Preferred Conversion Price then in effect and the number of shares
         issuable upon conversion of the Series A Preferred Stock) shall be
         applicable after that event and be as nearly equivalent as practicable.

                  (ix) Sale of Shares Below Series A Preferred Conversion Price.

                           (A) If at any time or from time to time after the
                  Series A Original Issue Date, the Company issues or sells, or
                  is deemed by the express provisions of this subsection (ix) to
                  have issued or sold Additional Shares of Common Stock (as
                  defined in subsection (ix)(B)(1) below), other than (w) as a
                  dividend or distribution on the Series A Preferred Stock, (x)
                  in connection with a Common Stock Event as provided in
                  subsection (v) above, (y) as a dividend or other distribution
                  on any class of stock as provided in subsection (vi) above,
                  and (z) a subdivision or combination of shares of Common Stock
                  as provided in subsection (vii) above, for an Effective Price
                  (as defined in subsection (ix)(B)(4) below) less than the then
                  effective Series A Preferred Conversion Price, then and in
                  each such case the


                                       8
<PAGE>

                  then existing Series A Preferred Conversion Price shall be
                  reduced, as of the opening of business on the date of such
                  issue or sale, to a price equal to the price per share paid
                  for such Additional Shares of Common Stock (but not less than
                  the par value of the Common Stock).

                           (B) Certain Definitions. For the purpose of making
                  any adjustment required under this subsection (ix):

                                    (1) "Additional Shares of Common Stock"
                           shall mean all shares of Common Stock issued (or,
                           pursuant to this Section, deemed to be issued) by the
                           Company, whether or not subsequently reacquired or
                           retired by the Company, other than: (A) shares of
                           Common Stock issued or issuable upon exercise of
                           options, warrants (other than outstanding warrants
                           granted in favor of Invest Inc.), convertible
                           securities or other rights outstanding as of the
                           Series A Original Issue Date; and (B) shares of
                           Common Stock issued or issuable by the Company or any
                           subsidiary to employees, officers, directors or
                           consultants pursuant to stock option plans that are
                           permitted by Section 7.4 of the Series A Preferred
                           Stock Purchase Agreement, dated as of February 16,
                           2001, among the Company, SCP Private Equity Partners
                           II, L.P., and ICG Holdings, Inc., unless otherwise
                           approved by the holders of not less than a majority
                           of the outstanding shares of Series A Preferred
                           Stock;

                                    (2) The "Aggregate Consideration Received"
                           by the Company for any issue or sale (or deemed issue
                           or sale) of securities shall (i) (A) to the extent it
                           consists of cash, be computed at the gross amount of
                           cash received by the Company before deduction of any
                           underwriting or similar commissions, compensation or
                           concessions paid or allowed by the Company in
                           connection with such issue or sale and without
                           deduction of any expenses payable by the Company; (B)
                           to the extent it consists of property other than
                           cash, be computed at the fair value of that property
                           at the time of such issue as determined in good faith
                           by the Board; and (C) if Additional Shares of Common
                           Stock, Convertible Securities or Rights or Options
                           are issued or sold together with other stock or
                           securities or other assets of the Company for a
                           consideration which covers both, be computed as the
                           portion of the consideration so received that may be
                           reasonably determined in good faith by the Board to
                           be allocable to such Additional Shares of Common
                           Stock, Convertible Securities or Rights or Options or
                           (ii) if no consideration is received by the Company,
                           be considered zero;

                                    (3) "Convertible Securities" shall mean any
                           evidence of indebtedness, stock or other securities
                           directly or indirectly convertible into or
                           exchangeable for shares of Common Stock;

                                    (4) The "Effective Price" of Additional
                           Shares of Common Stock shall mean the quotient
                           determined by dividing the total number of


                                       9
<PAGE>

                           Additional Shares of Common Stock issued or sold, or
                           deemed to have been issued or sold by the Company by
                           the provisions of clause (1), into the Aggregate
                           Consideration Received, or deemed to have been
                           received by the Company by the provisions of this
                           clause (4), for such issue or sale of such Additional
                           Shares of Common Stock; and

                                    (5) "Rights or Options" shall mean warrants,
                           options or other rights to purchase or otherwise
                           acquire shares of Common Stock or Convertible
                           Securities.

                           (C) Deemed Issuances. For the purpose of making any
                  adjustment to the Series A Preferred Conversion Price required
                  under this subsection (ix), if the Company issues or sells any
                  Rights or Options or Convertible Securities (or shall fix a
                  record date for the determination of holders of any class of
                  securities then entitled to receive any such Rights or Options
                  or Convertible Securities), then the Company shall be deemed
                  (x) to have issued, at the time of the issuance of such Rights
                  or Options or Convertible Securities, that number of
                  Additional Shares of Common Stock that is equal to the maximum
                  number of shares of Common Stock issuable upon exercise of
                  such Rights or Options or conversion or exchange of such
                  Convertible Securities upon their issuance (or, in the case
                  such a record date shall have been fixed, as of the close of
                  business on such record date) and (y) to have received, as the
                  Aggregate Consideration Received for the deemed issuance of
                  such additional shares of Common Stock, an amount equal to the
                  total amount of the consideration, if any, received by the
                  Company for the issuance of such Rights or Options or
                  Convertible Securities, plus, in the case of such Rights or
                  Options, the minimum total amount of consideration, if any,
                  payable to the Company upon the exercise in full of such
                  Rights or Options (including, with respect to Rights or
                  Options for Convertible Securities, the minimum aggregate
                  amount of consideration payable to the Company (other than by
                  cancellation of liabilities or obligations evidenced by such
                  Rights or Options) upon the conversion or exchange of such
                  underlying Convertible Securities), plus, in the case of
                  Convertible Securities, the minimum total amount of
                  consideration, if any, payable to the Company (other than by
                  cancellation of liabilities or obligations evidenced by such
                  Convertible Securities) upon the conversion or exchange
                  thereof; PROVIDED THAT:

                                    (1) if the minimum amounts of such
                           consideration cannot be ascertained, but are a
                           function of antidilution or similar protective
                           clauses, then the Company shall be deemed to have
                           received the minimum amounts of consideration without
                           reference to such clauses;

                                    (2) if the minimum amount of consideration
                           payable to the Company upon the exercise of such
                           Rights or Options or the conversion or exchange of
                           such Convertible Securities is reduced or the maximum
                           number of shares of Common Stock issuable upon the
                           exercise of such Rights or Options or the conversion
                           or exchange of such Convertible Securities is

                                       10
<PAGE>

                           increased over time or upon the occurrence or
                           non-occurrence of specified events, other than by
                           reason of antidilution or similar protective
                           adjustments, then the Series A Preferred Conversion
                           Price computed upon the original issue or deemed
                           issue thereof (or upon the occurrence of a record
                           date with respect thereto), and any subsequent
                           adjustments based thereon, shall, upon any such
                           decrease or increase becoming effective, be
                           recomputed to reflect such decrease or increase, as
                           the case may be (provided, however, that no such
                           adjustment of the Series A Preferred Conversion Price
                           shall affect Common Stock previously issued upon
                           conversion of the Series A Preferred Stock); and

                                    (3) if the minimum amount of consideration
                           payable to the Company upon the exercise of such
                           Rights or Options or the conversion or exchange of
                           such Convertible Securities is subsequently increased
                           or the maximum number of shares of Common Stock
                           issuable upon the exercise of such Rights or Options
                           or the conversion or exchange of such Convertible
                           Securities is subsequently decreased, then the Series
                           A Preferred Conversion Price computed upon the
                           original issue or deemed issue thereof (or upon the
                           occurrence of a record date with respect thereto),
                           and any subsequent adjustments based thereon, shall,
                           upon any such increase or decrease becoming
                           effective, be recomputed to reflect such increase or
                           decrease, as the case may be, (provided, however,
                           that no such adjustment of the Series A Preferred
                           Conversion Price shall affect Common Stock previously
                           issued upon conversion of the Series A Preferred
                           Stock, and further provided that no readjustment
                           pursuant to this clause (3) shall have the effect of
                           increasing the Series A Preferred Conversion Price to
                           an amount which exceeds the lower of (A) the Series A
                           Preferred Conversion Price on the original adjustment
                           date, or (B) the Series A Preferred Conversion Price
                           that would have resulted from any issuance of
                           Additional Shares of Common Stock between the
                           original adjustment date and such readjustment date).

                  No further adjustment of the Series A Preferred Conversion
                  Price, adjusted upon the issuance of such Rights or Options or
                  Convertible Securities, shall be made as a result of the
                  actual issuance of shares of Common Stock on the exercise of
                  any such Rights or Options or the conversion or exchange of
                  any such Convertible Securities. If any such Rights or Options
                  or the conversion rights represented by any such Convertible
                  Securities shall expire without having been fully exercised,
                  then the Series A Preferred Conversion Price as adjusted upon
                  the issuance of such Rights or Options or Convertible
                  Securities (or upon the occurrence of the record date with
                  respect thereto), and any subsequent adjustments based
                  thereon, shall be readjusted to the Series A Preferred
                  Conversion Price which would have been in effect had an
                  adjustment been made on the basis that (x) the only Additional
                  Shares of Common Stock so issued were the shares of Common
                  Stock, if any, that were actually issued or sold on the
                  exercise of such Rights or Options or rights of conversion or
                  exchange of such Convertible Securities and (y) the

                                       11
<PAGE>

                  consideration received with respect to Additional Shares of
                  Common Stock was the consideration actually received by the
                  Company upon such exercise of such Rights or Options, plus the
                  consideration, if any, actually received by the Company for
                  the granting of all such Rights or Options, whether or not
                  exercised, plus the consideration received for issuing or
                  selling all such Convertible Securities actually converted or
                  exchanged, plus the consideration, if any, actually received
                  by the Company (other than by cancellation of liabilities or
                  obligations evidenced by such Convertible Securities) on the
                  conversion or exchange of such Convertible Securities
                  provided, however, that no such adjustment of the Series A
                  Preferred Conversion Price shall affect Common Stock
                  previously issued upon conversion of the Series A Preferred
                  Stock. In the case of any Rights or Options which expire by
                  their terms not more than 30 days after the date of issue
                  thereof, no adjustment of the Series A Preferred Conversion
                  Price shall be made (except as to shares of Series A Preferred
                  Stock converted in such period) until the expiration or
                  exercise of all such Rights or Options, whereupon such
                  adjustment shall be made in the same manner provided above. If
                  any such record date shall have been fixed and such Rights or
                  Options or Convertible Securities are not issued on the date
                  fixed thereof, the adjustment previously made in the Series A
                  Preferred Conversion Price which became effective on such
                  record date shall be canceled as of the close of business on
                  such record date, and shall instead be made on the actual date
                  of issuance, if any.

                  (x) Waiver. The Series A Preferred Conversion Price adjustment
         provisions of this Section 4 may be waived by the written consent of
         the holders of at least a majority of the outstanding Series A
         Preferred Stock, voting together as a single class.

                  (xi) Certificate of Adjustment. In each case of an adjustment
         or readjustment of the Series A Preferred Conversion Price for the
         number of shares of Common Stock or other securities issuable upon
         conversion of the Series A Preferred Stock, if the Series A Preferred
         Stock is then convertible pursuant to this Section (d), the Company, at
         its expense, shall compute such adjustment or readjustment in
         accordance with the provisions hereof and prepare a certificate showing
         such adjustment or readjustment, and shall mail such certificate, by
         first class mail, postage prepaid, to each registered holder of Series
         A Preferred Stock at the holder's address as shown in the Company's
         books. The certificate shall set forth such adjustment or readjustment,
         showing in detail the facts upon which such adjustment or readjustment
         is based, including a statement of (i) the consideration received or
         deemed to be received by the Company for any Additional Shares of
         Common Stock issued or sold or deemed to have been issued or sold, (ii)
         the Series A Preferred Conversion Price at the time in effect, (iii)
         the number of Additional Shares of Common Stock and (iv) the type and
         amount, if any, of other property which at the time would be received
         upon conversion of the Series A Preferred Stock.

                  (xii) Notices of Record Date. Upon (i) any taking by the
         Company of a record of the holders of any class of securities for the
         purpose of determining the holders thereof who are entitled to receive
         any dividend or other distribution, or (ii) any Acquisition (as defined
         in Section (c)) or other capital reorganization of the Company, any
         reclassification or recapitalization of the capital stock of the
         Company, any merger or


                                       12
<PAGE>

         consolidation of the Company with or into any other corporation, or any
         Asset Transfer (as defined in Section (c)), or any voluntary or
         involuntary dissolution, liquidation or winding up of the Company, the
         Company shall mail to each holder of Series A Preferred Stock at least
         10 days prior to the record date specified therein (or such shorter
         period approved by a majority of the outstanding Series A Preferred
         Stock) a notice specifying (A) the date on which any such record is to
         be taken for the purpose of such dividend or distribution and a
         description of such dividend or distribution, (B) the date on which any
         such Acquisition, reorganization, reclassification, transfer,
         consolidation, merger, Asset Transfer, dissolution, liquidation or
         winding up is expected to become effective, and (C) the date, if any,
         that is to be fixed as to when the holders of record of Common Stock
         (or other securities) shall be entitled to exchange their shares of
         Common Stock (or other securities) for securities or other property
         deliverable upon such Acquisition, reorganization, reclassification,
         transfer, consolidation, merger, Asset Transfer, dissolution,
         liquidation or winding up.

                  (xiii) Automatic Conversion.

                           (A) Each share of Series A Preferred Stock shall
                  automatically be converted into shares of Common Stock, based
                  on the then-effective Series A Preferred Conversion Price, (A)
                  at any time upon the written consent of the holders of at
                  least a majority of the outstanding shares of the Series A
                  Preferred Stock, (B) upon the closing of a Qualified Public
                  Offering, or (C) upon a Qualified Sale. The term "Qualified
                  Public Offering" shall mean a firmly underwritten public
                  offering pursuant to an effective registration statement under
                  the Securities Act of 1933, as amended, covering the offer and
                  sale of Common Stock for the account of the Company in which
                  (i) the per share price is at least four times the then
                  effective Series A Preferred Conversion Price, and (ii) the
                  gross cash proceeds to the Company (before underwriting
                  discounts, commissions and fees) are at least $60,000,000. The
                  term "Qualified Sale" shall mean an Acquisition or Asset
                  Transfer (as defined in Section (c)) which provides for
                  minimum consideration payable with respect to each share of
                  Common Stock (on a fully diluted basis) of at least three
                  times the then effective Series A Preferred Conversion Price
                  in cash or Liquid Stock. The term "Liquid Stock" shall mean
                  capital stock which is registered under Section 12(b) or
                  Section 12(g) of the Securities Exchange Act of 1934, as
                  amended, the disposition of which would not be significantly
                  restricted by low trading volume or otherwise; provided, that
                  capital stock which is either (i) listed for trading on the
                  NASDAQ National Market System with average daily trading
                  volume over the past six months of at least 100,000 shares, or
                  (ii) listed for trading on the New York Stock Exchange, Inc.
                  shall be deemed to be Liquid Stock. Upon such automatic
                  conversion, any accrued and unpaid dividends shall be paid in
                  accordance with the provisions of Section (a).

                           (B) Upon the occurrence of any of the events
                  specified in subparagraph (A), the outstanding shares of
                  Series A Preferred Stock shall be converted automatically
                  without any further action by the holders of such shares and
                  whether or not the certificates representing such shares are
                  surrendered to the


                                       13
<PAGE>

                  Company or its transfer agent; PROVIDED, HOWEVER, that the
                  Company shall not be obligated to issue certificates
                  evidencing the shares of Common Stock issuable upon such
                  conversion unless the certificates evidencing such shares of
                  Series A Preferred Stock are either delivered to the Company
                  or its transfer agent as provided below, or the holder
                  notifies the Company or its transfer agent that such
                  certificates have been lost, stolen or destroyed and executes
                  an agreement satisfactory to the Company to indemnify the
                  Company from any loss incurred by it in connection with such
                  certificates. Upon the occurrence of such automatic conversion
                  of the Series A Preferred Stock, the holders of Series A
                  Preferred Stock shall surrender the certificates representing
                  such shares at the office of the Company or any transfer agent
                  for the Series A Preferred Stock. Thereupon, there shall be
                  issued and delivered to such holder promptly at such office
                  and in its name as shown on such surrendered certificate or
                  certificates, a certificate or certificates for the number of
                  shares of Common Stock into which the shares of Series A
                  Preferred Stock surrendered were convertible on the date on
                  which such automatic conversion occurred. If the conversion is
                  in connection with an underwritten offering of securities
                  pursuant to the Securities Act, the conversion may, at the
                  option of any holder tendering shares of Series A Preferred
                  Stock for conversion, be conditioned upon the closing with the
                  underwriters of the sale of securities pursuant to such
                  offering, in which event the holder entitled to receive the
                  Common Stock upon conversion of the Series A Preferred Stock
                  shall not be deemed to have converted such Series A Preferred
                  Stock until immediately prior to the closing of such sale of
                  securities.

                  (xiv) Fractional Shares. No fractional shares of Common Stock
         shall be issued upon conversion of Series A Preferred Stock. All shares
         of Common Stock (including fractions thereof) issuable upon conversion
         of more than one share of Series A Preferred Stock by a holder thereof
         shall be aggregated for purposes of determining whether the conversion
         would result in the issuance of any fractional share. If, after the
         aforementioned aggregation, the conversion would result in the issuance
         of any fractional share, the Company shall, in lieu of issuing any
         fractional share, pay cash equal to the product of such fraction
         multiplied by the Common Stock's fair market value (as determined by
         the Board of Directors) on the date of conversion.

                  (xv) 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 shares of the Series A Preferred
         Stock, such number of its shares of Common Stock as shall from time to
         time be sufficient to effect the conversion of all outstanding shares
         of the Series A Preferred Stock. If at any time the number of
         authorized but unissued shares of Common Stock shall not be sufficient
         to effect the conversion of all then outstanding shares of the Series A
         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.


                                       14
<PAGE>

                  (xvi) Notices. Any notice required by the provisions of this
         Section (d) shall be in writing and shall be deemed effectively given:
         (i) upon personal delivery to the party to be notified, (ii) when sent
         by confirmed electronic mail or facsimile if sent during normal
         business hours of the recipient; if not, then on the next business day,
         (iii) 5 days after having been sent by registered or certified mail,
         return receipt requested, postage prepaid, or (iv) 1 day after deposit
         with a nationally recognized overnight courier, specifying next day
         delivery, with verification of receipt. All notices shall be addressed
         to each holder of record at the address of such holder appearing on the
         books of the Company.

                  (xvii) Payment of Taxes. The Company will pay all taxes (other
         than taxes based upon income) and other governmental charges that may
         be imposed with respect to the issue or delivery of shares of Common
         Stock upon conversion of shares of Series A Preferred Stock, excluding
         any tax or other charge imposed in connection with any transfer
         involved in the issue and delivery of shares of Common Stock in a name
         other than that in which the shares of Series A Preferred Stock so
         converted were registered.

                  (xviii) No Impairment. The Company shall not avoid or seek to
         avoid the observance or performance of any of the terms to be observed
         or performed hereunder by the Company, but shall at all times in good
         faith assist in carrying out all such actions as may be reasonably
         necessary or appropriate in order to protect the conversion rights of
         the holders of the Series A Preferred Stock against impairment.

                  (xix) Satisfaction of Accrued Dividends. Except as otherwise
         expressly provided, upon the conversion of any shares of Series A
         Preferred Stock into Common Stock as provided herein, the holders
         thereof shall be entitled to receive a payment in satisfaction of all
         accrued but unpaid dividends, subject to limitations regarding the
         cancellation of PIK Shares contained in this Section.

         (e) OPTIONAL REDEMPTION.

                  (i) Redemption at Option of Holders of Series A Preferred
         Stock. At any time on and after January 20, 2006, at the request of any
         holder of Series A Preferred Stock, such holder may require the Company
         to redeem all, but not less than all, of the shares of Series A
         Preferred Stock held by such holder in accordance with the provisions
         contained in this Section (e). In no event shall the Company be
         required to redeem shares in excess of the amount permitted by law;
         PROVIDED, HOWEVER, that such inability to redeem shall not have any
         impact or effect upon the per-share Series A Redemption Price (as
         hereinafter defined). All redemptions shall be made in the order in
         which notices of redemption are received (with any notice of redemption
         received within 25 days of delivery of notice by an Initial Redeeming
         Holder (as hereinafter defined) under subsection (iii) being treated as
         having been received simultaneously with that of the Initial Redeeming
         Holder), and, if less than all of the shares submitted for redemption
         in a particular 25-day period are capable of being redeemed, then such
         shares shall be redeemed


                                       15
<PAGE>

         on a pro rata basis, based on the number of shares that each
         stockholder submitted for redemption.

                  (ii) Redemption Price of Series A Preferred Stock. The price
         at which the Series A Preferred Stock shall be redeemed (the "Series A
         Redemption Price") shall be equal to the Series A Original Issue Price
         (as adjusted for any stock dividends, combinations, splits,
         recapitalizations and the like with respect to such shares) for each
         share of Series A Preferred Stock plus accrued but unpaid dividends.

                  (iii) Exercise of Option to Redeem Series A Preferred Stock.
         If a holder of Series A Preferred Stock desires to exercise such
         holder's option to redeem all, but not less than all, of such holder's
         shares of Series A Preferred Stock pursuant to this Section (e), such
         holder (the "Initial Redeeming Holder") must give written notice to the
         Company specifying the number of shares to be redeemed, and the Company
         shall promptly provide a copy of such notice to each other holder of
         Series A Preferred Stock. No later than 25 days after receipt by the
         Company of notice of the Initial Redeeming Holder, if any other holder
         of Series A Preferred Stock also wishes to redeem all of such holder's
         shares of Series A Preferred Stock at the same time as the redemption
         of the shares of the Initial Redeeming Holder, such additional holder
         shall provide a notice comparable to that of the Initial Redeeming
         Holder to the Company and the Company shall promptly provide a copy of
         such notice to each other holder of Series A Preferred Stock.
         Redemptions shall be made on a date 30 calendar days after the date on
         which the Company receives the notice of the Initial Redeeming Holder
         (or the first business day thereafter). Each such date of redemption
         shall be a "Series A Redemption Date." To receive the Series A
         Redemption Price, the holder of shares of Series A Preferred Stock must
         present and surrender the certificate or certificates representing such
         shares (duly endorsed for transfer) to the Company at the principal
         executive offices of the Company no later than three business days
         prior to the Series A Redemption Date. The Company shall pay the Series
         A Redemption Price to, or to the order of, the person whose name
         appears on such certificate or certificates as the owner thereof. The
         Company shall pay the entire Series A Redemption Price on the Series A
         Redemption Date.

                  (iv) Effect of Redemption. From and after the Series A
         Redemption Date, unless the Company shall default in providing for the
         payment of the Series A Redemption Price, all dividends on such shares
         requested to be redeemed pursuant to this Section (e) shall cease to
         accrue, and all rights of the holders of any such shares subject to
         redemption as stockholders of the Company with respect to such shares,
         except the right to receive the Series A Redemption Price, shall cease
         and terminate. Any shares of Series A Preferred Stock that are redeemed
         by the Company shall be retired and shall not be reissued.

                  (v) Failure to Redeem. If the Company shall for any reason
         fail to redeem any shares of Series A Preferred Stock as required by
         this Section (e), and such failure shall continue for a period of 30
         days, then notwithstanding anything to the contrary contained in this
         Certificate of Designation, with respect to all shares of Series A
         Preferred Stock then outstanding: (i) the conversion rights set forth
         in Section (d) hereof


                                       16
<PAGE>

         shall continue beyond any date for redemption specified in said
         Section, and said rights may be exercised at any time; and (ii) the
         Company may not, other than in the ordinary course of business, incur
         any indebtedness for money borrowed or borrow or reborrow any amounts
         under any lines of credit or any other borrowing facility which it may
         then have outstanding without the prior written consent of the holders
         of at least a majority of the then outstanding shares of Series A
         Preferred Stock, unless the proceeds of such incurrence of such
         indebtedness or borrowing or reborrowing are to be used to make all
         redemptions then required to be made; and (iii) dividends shall
         continue to accrue and be paid in accordance with and as defined in
         Section (a), and, to the extent not paid, shall be added to the Series
         A Redemption Price. Nothing herein shall limit the Company's
         obligations to redeem as set forth above, or limit the remedies
         available to the holders of Series A Preferred Stock in the event of a
         failure of the Company to honor such obligations.

         (f) WAIVER. Any rights of the holders of Series A Preferred Stock set
forth herein may be waived by the affirmative vote or consent of the holders of
a majority of the shares of Series A Preferred Stock then outstanding.

         (g) LIMITATION ON REISSUANCE OF SHARES. No share of shares of Series A
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares that the Company is authorized
to issue.


                                       17