EXHIBIT 3.3
                                                                     -----------

                           CERTIFICATE OF DESIGNATION
                                       OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                              VALUESTAR CORPORATION


         VALUESTAR  CORPORATION,  a corporation organized and existing under the
Colorado Business Corporation Act (the "Corporation"),  in accordance with Colo.
Rev. Stat. Section 7-106-102,

         HEREBY CERTIFIES:

1.       The name of the Corporation is:   Valuestar Corporation.

2.       The text of the amendment  determining the  designations,  preferences,
         limitations, and relative rights of the class or series of shares is as
         set  forth  on  Exhibit  "A",  attached  hereto  and by this  reference
         incorporated herein.

3.       This amendment was adopted on July 20, 1999.

4.       This  amendment  was duly  adopted  by the  Board of  Directors  of the
         Corporation.

         The undersigned does hereby confirm,  under penalties of perjury,  that
the foregoing  Certificate of Designation of Valuestar  Corporation  constitutes
the act and deed of the Corporation, and that the facts stated herein are true.

         Executed at Oakland, California on July 20, 1999



                                              /s/ JIM STEIN
                                              Jim Stein, Chief Executive Officer

<PAGE>


                                   Exhibit "A"


         RESOLVED,  that  pursuant  to the  authority  granted  to the  Board of
Directors by Article THIRD,  Paragraph I of the Articles of Incorporation of the
Corporation,  as amended (the "Articles"),  Certificatethere  is hereby created,
and the  Corporation  be,  and it hereby  is,  authorized  to issue one  million
(1,000,000)  shares  of a series  of  convertible  preferred  stock,  designated
"SERIES A CONVERTIBLE  PREFERRED  STOCK,"  which Series A Convertible  Preferred
Stock  (also  referred  to herein as  "Series  A Stock" or  "Series A  Preferred
Stock") shall have,  in addition to the rights,  restrictions,  preferences  and
privileges  set  forth  in  the  Articles  Certificate,   the  following  terms,
conditions, rights, restrictions, preferences and privileges:

         "A.      DIVIDENDS.

                  1.  Generally.  Each holder of outstanding  shares of Series A
Stock  shall be  entitled  to  receive,  when and if  declared  by the  Board of
Directors and out of any funds legally available therefor,  cumulative dividends
at the annual rate of $0.80 per share (the  "Series A  Preferential  Dividend"),
accruing quarterly at the end of each calendar quarter, and compounded annually,
whether or not earned or  declared,  and payable in shares of Series A Preferred
Stock  at the  rate of one  share  for  each  $10.00  of such  accrued  Series A
Preferential  Dividend  during  each  fiscal  year  of this  Corporation  and in
preference to any declaration or payment (payable other than in Common Stock) on
any other equity  security of the Company.  No cash dividends  shall be declared
and paid on the Common  Stock or any other  equity of the Company  unless a like
cash  dividend  amount  has been paid to the  Series A Stock on an as  converted
basis.  Notwithstanding  anything to the contrary hereunder,  however,  upon the
conversion  of any share of Series A Stock,  all of such  Series A  Preferential
Dividend accrued thereon shall be paid upon such conversion  whether or not such
Series A Preferential Dividend has been declared by the Board of Directors.


                  2. Payment Other Than Cash. If the Corporation shall declare a
distribution  payable  in  securities  of persons  other than this  Corporation,
evidences of  indebtedness  issued by the  Corporation or other persons,  assets
(excluding  cash dividends) or options or rights to purchase any such securities
or evidences of  indebtedness,  then, in each such case, the holders of Series A
Preferred  Stock  shall  be  entitled  to a  proportionate  share  of  any  such
distribution  as though the holders of Series A Preferred Stock were the holders
of the number of shares of Common  Stock of the  Corporation  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  Common  Stock  of the
Corporation who are entitled to receive such distribution.

                  3. Dividend Adjustment. The Series A Preferential Dividend and
number of Series A Stock  shares  issued as a  dividend  shall be  appropriately
adjusted for any stock splits,  dividends,  combinations,  recapitalizations and
the like ("Appropriately Adjusted").

         B.       PREFERENCE ON LIQUIDATION.

                  1.  Preference  Price.  Except upon a  "Qualified  Liquidation
Event,"  in the event of any  liquidation,  dissolution  or  winding  up of this
Corporation,  whether  voluntary or involuntary,  the holders of the outstanding
shares of Series A Stock  shall be entitled to be paid out of the assets of this
Corporation  available  for  distribution  to  its  shareholders,  whether  from
capital, surplus funds or earnings, before any payment is made in respect of the
shares of Common Stock or any other equity security of this  Corporation , in an
amount  equal to $10.00 per share  (Appropriately  Adjusted),  together  with an
amount equal to the greater of (A) eight percent (8%) of such $10.00  compounded
annually at the rate of 8%, for each year (or fraction  thereof)  after the date
of the issuance of each such share of Series A Stock , less the amount,  if any,
of any cash  dividends  actually  paid to the Series A Stock through the date of
liquidation,  or (B) any declared and unpaid dividends  thereon (the "Preference
Price").  After  payment  of the


                                       2
<PAGE>

Preference  Price to the  holders of Series A  Preferred  Stock,  the  remaining
assets of the  Corporation  shall be  distributed  to the  holders  of shares of
Common Stock.

                  2. Partial Payment. If, upon any such liquidation, dissolution
or winding up of this Corporation,  whether voluntary or involuntary, the assets
of this  Corporation  available for  distribution to its  shareholders  shall be
insufficient  to pay in full the  Preference  Price  required  to be paid to the
holders of the outstanding  shares of Series A Stock,  then all of the assets of
this  Corporation  legally  available for  distribution to the holders of equity
securities  shall be  distributed  ratably among the holders of the  outstanding
shares of Series A Preferred  Stock in proportion to the  Preference  Price upon
liquidation  that each Series A Preferred Stock holder is otherwise  entitled to
receive.

                  3. Certain Transactions. The following shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section B with
respect to the  Series A Stock:  (A) a sale of all or  substantially  all of the
Corporation's  assets;  or (B) a consolidation,  merger or reorganization of the
Corporation  with  or  into  any  other   corporation  or  corporations  if  the
Corporation's  shareholders do not control a majority of the outstanding  voting
securities  of such  consolidated,  merged or  reorganized  corporation(s).  The
Corporation  shall provide  written notice of each of the above  transactions to
each  holder of Series A Stock at least ten (10) days prior to such  transaction
in accordance with Section D.14 (below).

                  4.  Liquidation  Adjustment.  The  Preference  Price  shall be
Appropriately Adjusted.

         C.       VOTING.

                  1. Generally. Except as otherwise required by law or expressly
provided  herein,  each share of Series A  Preferred  Stock shall be entitled to
vote on all  matters  submitted  or required  to be  submitted  to a vote of the
shareholders  of the  Corporation  and shall be  entitled to the number of votes
equal to the number of whole  shares of Common  Stock into which such  shares of
Series A Preferred Stock are convertible  pursuant to the provisions  hereof, at
the record date for the  determination of shareholders  entitled to vote on such
matters  or, if no such  record  date is  established,  at the date such vote is
taken or any written consent of  shareholders  is solicited.  In each such case,
except as otherwise required by law or expressly provided herein, the holders of
shares of Series A Preferred  Stock and Common Stock shall vote together and not
as separate classes.

                  2. Special Voting for the Election of Directors.  The Board of
Directors shall be elected as follows:

                           (i)  So  long  as  at  least  One  Hundred   Thousand
(100,000)  shares  of  Series A  Preferred  Stock  are  issued  and  outstanding
(Appropriately  Adjusted),  the  holders of Series A  Preferred  Stock  shall be
entitled,  voting as a separate  class, to elect one (1) and only one (1) member
to the Corporation's Board of Directors; and

                           (ii) The remaining authorized members of the Board of
Directors shall be elected by the holders of Common Stock.

                  3.  Removals  or  Resignations.  Any  vacancy  created  on the
Corporation's  Board of  Directors  shall be filled by a successor  Director who
shall be  elected  in a manner by which his or her  predecessor  was  elected as
provided above. Any Director who has been elected to the Corporation's  Board of
Directors  as  provided  above  may be  removed  during  his term of  office  in
accordance with the General  Corporation  Law of the State of Colorado,  and any
vacancy thereby created shall be filled as provided in this subparagraph.

         D. CONVERSION.  The holders of the outstanding shares of Series A Stock
shall have the following conversion rights (the "Conversion Rights"):

                                       3
<PAGE>

                  1. Right to  Convert.  Each  share of Series A Stock  shall be
convertible,  at the option of the holder thereof, at any time after the date of
issuance of such shares, at the office of this Corporation or any transfer agent
for the Corporation's shares into that number of shares of Common Stock which is
equal to the  quotient  obtained by  dividing  $10.00 for each share of Series A
Stock by the Series A Conversion Price (as such term is hereinafter  defined) in
effect  immediately  prior to the time of such conversion.  The initial price at
which shares of Common Stock shall be deliverable  upon  conversion of shares of
Series A Stock shall be $2.00 (as adjusted from time to time as herein provided,
the "Series A Conversion Price").

                  2. Mechanics of Conversion.  Each holder of outstanding shares
of Series A Stock who desires to convert  the same into  shares of Common  Stock
shall surrender the certificate or certificates therefor,  duly endorsed, at the
office of this Corporation or of any transfer agent for the Corporation's shares
and shall give  written  notice to this  Corporation  at such  office  that such
holder  elects to convert the same and shall state  therein the number of shares
of Series A Stock being converted.  Thereupon,  this Corporation shall 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 all declared  but unpaid  dividends on the shares being  converted.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such  surrender of the  certificate  or  certificates
representing the shares 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.

                  3.  Adjustment  for Stock  Splits  and  Combinations.  If this
Corporation  at any  time  or from  time  to  time  after  the  date  that  this
Certificate of Designation  was filed with the Colorado  Secretary of State (the
"Filing Date") effects a division of the outstanding shares of Common Stock, the
Series A Conversion Price shall be proportionately decreased and, conversely, if
this  Corporation  at any time,  or from time to time,  after  the  Filing  Date
combines the outstanding  shares of Common Stock,  the Series A Conversion Price
shall be proportionately  increased. Any adjustment under this Section D.3 shall
be effective on the close of business on the date such  division or  combination
becomes effective.

                  4. Adjustment for Certain Dividends and Distributions. If this
Corporation at any time or from time to time after the Filing Date pays or fixes
a record  date for the  determination  of  holders  of shares  of  Common  Stock
entitled  to receive a dividend or other  distribution  in the form of shares of
Common  Stock,  or  rights  or  options  for  the  purchase  of,  or  securities
convertible  into, Common Stock, then in each such event the Series A Conversion
Price  shall be  decreased,  as of the time of such  payment  or, in the event a
record  date is fixed,  as of the close of  business  on such  record  date,  by
multiplying  the Series A Conversion  Price by a fraction  (i) the  numerator of
which  shall  be  the  total  number  of  shares  of  Common  Stock  outstanding
immediately  prior to the time of such  payment or the close of business on such
record date and (ii) the  denominator  of which shall be (A) the total number of
shares of Common Stock outstanding immediately prior to the time of such payment
or the close of  business  on such  record date plus (B) the number of shares of
Common  Stock  issuable  in payment of such  dividend  or  distribution  or upon
exercise of such option or right of  conversion;  provided,  however,  that if a
record  date is  fixed  and  such  dividend  is not  fully  paid  or such  other
distribution  is not  fully  made on the  date  fixed  therefor,  the  Series  A
Conversion  Price  shall not be  decreased  as of the close of  business on such
record  date  as  hereinabove  provided  as to the  portion  not  fully  paid or
distributed  and  thereafter  the Series A  Conversion  Price shall be decreased
pursuant  to this  Section 4 as of the date or dates of actual  payment  of such
dividend or distribution.

                  5. Adjustments for Other Dividends and Distributions.  If this
Corporation  at any time or from time to time  after the Filing  Date  pays,  or
fixes a record date for the  determination  of holders of shares of Common Stock
entitled to receive,  a dividend or other distribution in the form of securities
of this  Corporation  other than shares of Common Stock or rights or options for
the purchase of, or securities convertible into, Common Stock, then in each such
event  provision  shall be made so that the  holders  of  outstanding  shares of
Series A Stock shall receive upon conversion  thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of this
Corporation which they would have received had their respective shares of Series
A Stock been converted into shares of Common Stock on the date of such event and
had such holders  thereafter,  from the date of such event to and



                                       4
<PAGE>

including  the  actual  date  of  conversion  of  their  shares,  retained  such
securities, subject to all other adjustments called for during such period under
this  Section D with  respect  to the rights of the  holders of the  outstanding
shares of Series A Stock.

                  6. Adjustment for Reclassification, Exchange and Substitution.
If, at any time or from time to time after the Filing Date, the number of shares
of Common  Stock  issuable  upon  conversion  of the shares of Series A Stock is
changed  into the same or a  different  number of  shares of any other  class or
classes   of  stock   or  other   securities,   whether   by   recapitalization,
reclassification  or  otherwise  (other  than a  recapitalization,  division  or
combination   of  shares  or  stock  dividend  or  a   reorganization,   merger,
consolidation  or sale of assets provided for elsewhere in this Section D), then
in any such event each holder of outstanding shares of Series A Stock shall have
the right thereafter to convert such shares of Series A Stock into the same kind
and amount of stock and other securities receivable upon such  recapitalization,
reclassification  or other  change,  as the  maximum  number of shares of Common
Stock  into  which  such  shares of  Series A Stock  could  have been  converted
immediately  prior to such  recapitalization,  reclassification  or change,  all
subject to further adjustment as provided herein.

                  7.  Reorganizations,   Mergers,  Consolidations  or  Sales  of
Assets.  If, at any time or from time to time after the Filing Date,  there is a
capital  reorganization  of the Common  Stock  (other  than a  recapitalization,
division,  combination,  reclassification  or  exchange of shares  provided  for
elsewhere in this Section D) or a merger or  consolidation  of this  Corporation
into or with another  corporation or a sale of all or substantially  all of this
Corporation's properties and assets to any other person, then, as a part of such
capital reorganization,  merger,  consolidation or sale, provision shall be made
so that the holders of  outstanding  shares of Series A Stock  shall  thereafter
receive  upon  conversion  thereof  the  number  of  shares  of  stock  or other
securities  or property of this  Corporation,  or of the  successor  corporation
resulting  from such merger or  consolidation  or sale, to which a holder of the
number of shares of Common  Stock into which their shares of Series A Stock were
convertible  would have been  entitled on such capital  reorganization,  merger,
consolidation or sale. 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 the  outstanding  shares of Series A Stock  after the capital
reorganization, merger, consolidation, or sale to the end that the provisions of
this Section D) (including  adjustment of the Series A Conversion  Price and the
number of shares into which the shares of Series A Stock may be converted) shall
be applicable  after that event and be as nearly  equivalent to such  Conversion
Prices and number of shares as may be practicable.

                  8. Sale of Shares Below Conversion Price.

                           (i) If,  at any time or from  time to time  after the
Filing  Date,  this  Corporation  issues or sells,  or is deemed by the  express
provisions of this Section 8 to have issued or sold, Additional Shares of Common
Stock (as hereinafter  defined) for an Effective Price (as hereinafter  defined)
less  than the then  current  Series A  Conversion  Price,  other  than (A) as a
dividend or other  distribution on any class of stock as provided in Section D.4
above or (B) upon a  division  or  combination  of  shares  of  Common  Stock as
provided in Section D.3 above,  then, in any such event, the Series A Conversion
Price shall be reduced, as of the close of business on the date of such issuance
or sale, to an amount determined by multiplying the Series A Conversion Price by
a  fraction  (A) the  numerator  of which  shall be (x) the  number of shares of
Common  Stock  outstanding  at the  close  of  business  on the day  immediately
preceding  the date of such  issuance or sale,  plus (y) the number of shares of
Common  Stock  which the  aggregate  consideration  received  (or by the express
provisions  hereof  deemed to have been  received) by this  Corporation  for the
total  number  of  Additional  Shares of  Common  Stock so issued or sold  would
purchase  at such Series A  Conversion  Price and (B) the  denominator  of which
shall be the  number  of  shares of  Common  Stock  outstanding  at the close of
business  on the date of such  issuance  or sale  after  giving  effect  to such
issuance or sale of Additional  Shares of Common  Stock.  For the purpose of the
calculation  described  in this  Section 8, the number of shares of Common Stock
outstanding  shall include,  in addition to the number of shares of Common Stock
actually  outstanding,  (A) the number of shares of Common  Stock into which the
then outstanding  shares of Series A Stock could be converted if fully converted
on the day immediately preceding the issuance or sale or deemed issuance or sale
of  Additional  Shares of Common  Stock;  and (B) the number of shares of Common
Stock which would be obtained  through the exercise or conversion of all rights,

                                       5
<PAGE>

options and Convertible  Securities (as hereinafter  defined) outstanding on the
day  immediately  preceding  the issuance or sale or deemed  issuance or sale of
Additional Shares of Common Stock.

                           (ii)  For  the  purpose  of  making  any   adjustment
required under this Section 8, the  consideration  received by this  Corporation
for any  issuance or sale of  securities  shall (A) to the extent it consists of
property  other than  cash,  be the fair value of that  property  as  reasonably
determined in good faith by a disinterested  majority of the Board of Directors;
and (B) if  Additional  Shares  of  Common  Stock,  Convertible  Securities  (as
hereinafter  defined) or rights or options to purchase either  Additional Shares
of Common Stock or Convertible Securities are issued or sold together with other
stock or  securities  or other assets of this  Corporation  for a  consideration
which covers both, be the portion of the  consideration  so received  reasonably
determined in good faith by a  disinterested  majority of the Board of Directors
to  be  allocable  to  such  Additional  Shares  of  Common  Stock,  Convertible
Securities or rights or options.

                           (iii)  For the  purpose  of the  adjustment  required
under this Section 8, if this Corporation  issues or sells any rights or options
for the purchase of, or stock or other securities  convertible into,  Additional
Shares of Common Stock (such  convertible  stock or securities being hereinafter
referred to as "Convertible  Securities") and if the Effective Price (as defined
in Clause (v) below) of such Additional  Shares of Common Stock is less than the
then current Series A Conversion Price, this Corporation shall be deemed to have
issued,  at the time of the  issuance  of such  rights,  options or  Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof and to have received as consideration therefor an
amount equal to (A) the total amount of the  consideration,  if any, received by
this  Corporation  for the  issuance  of such  rights or options or  Convertible
Securities plus (B) in the case of such rights or options, the minimum amount of
consideration,  if any,  payable to this  Corporation  upon the exercise of such
rights or options or, in the case of Convertible Securities,  the minimum amount
of  consideration,  if any,  payable  to this  Corporation  upon the  conversion
thereof.  Thereafter,  no further  adjustment  of the Series A Conversion  Price
shall be made as a result of the actual issuance of Additional  Shares of Common
Stock on the  exercise  of any such rights or options or the  conversion  of any
such  Convertible  Securities.  If any such rights or options or the  conversion
privilege  represented  by any  such  Convertible  Securities  shall  expire  or
otherwise terminate without having been exercised, the Series A Conversion Price
shall  thereafter  be the Series A  Conversion  Price  which  would have been in
effect had an adjustment been made on the basis that the only Additional  Shares
of Common Stock so issued were the  Additional  Shares of Common Stock,  if any,
actually  issued or sold on the  exercise of such rights or options or rights of
conversion  of such  Convertible  Securities,  and were  issued  or sold for the
consideration  actually received by this Corporation upon such exercise plus (A)
the consideration, if any, actually received for the granting of all such rights
or options,  whether or not exercised,  (B) the consideration,  if any, actually
received by issuing or selling the Convertible Securities actually converted and
(C) the  consideration,  if any,  actually  received on the  conversion  of such
Convertible  Securities.  However,  if any such rights or options or Convertible
Securities by their terms  provide,  with the passage of time or otherwise,  for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange  thereof,  the Series A Conversion Price for the Series A
Stock,  and any  subsequent  adjustments  based  thereon,  shall  upon  any such
increase or decrease  becoming  effective be recomputed to reflect such increase
or  decrease  insofar  as it  affects  such  rights,  options  or the  rights of
conversion or exchange under such Convertible Securities.

                           (iv) For the purpose of any adjustment required under
this Section D.8, if (a) this Corporation  issues or sells any rights or options
for the purchase of Convertible Securities and (b) if the Effective Price of the
Additional Shares of Common Stock underlying such Convertible Securities is less
than the Series A  Conversion  Price,  then in each such event this  Corporation
shall be deemed to have  issued at the time of the  issuance  of such  rights or
options the maximum  number of Additional  Shares of Common Stock  issuable upon
conversion of the total number of Convertible  Securities covered by such rights
or options  (as set forth in the legal  instruments  setting  forth the terms of
such  Convertible  Securities)  and to have  received as  consideration  for the
issuance of such Additional Shares of Common Stock an amount equal to the amount
of  consideration,  if any,  received for the issuance of such rights or options
plus (A) the minimum amount of consideration,  if any, payable upon the exercise
of such rights or options and (B) the minimum amount of  consideration,  if any,
payable  upon  the  conversion  of  such  Convertible  Securities.   No

                                       6
<PAGE>

further adjustment of the Series A Conversion Price shall be made as a result of
the actual  issuance of the  Convertible  Securities  upon the  exercise of such
rights or options or upon the actual  issuance  of  Additional  Shares of Common
Stock upon the  conversion of such  Convertible  Securities.  The  provisions of
Section  D.8.(iii) for the adjustment of the Series A Conversion  Price upon the
expiration  of rights or  options  or the rights of  conversion  of  Convertible
Securities  shall apply  mutatis  mutandis  upon the  expiration  of the rights,
options and Convertible Securities referred to in this Clause D.8.(iv).

                           (v)  "Additional  Shares of Common  Stock" shall mean
all shares of Common  Stock issued or deemed to be issued under this Section D.8
after the  Filing  Date,  other  than (A)  shares of Common  Stock  issued  upon
conversion  of the  shares of  Series A Stock;  (B)  shares of Common  Stock (or
options,  warrants or rights therefor) granted or issued hereafter to employees,
officers, directors, contractors, consultants or advisers to, the Corporation or
any subsidiary pursuant to incentive agreements,  stock purchase or stock option
plans, stock bonuses or awards,  warrants,  contracts or other arrangements that
are unanimously approved by the Board of Directors; (C) securities issued by the
Corporation in connection  with any credit,  financing or leasing  agreements or
similar  instruments with equipment lessors or other persons providing equipment
lease or other equipment financing;  (D) securities issued in connection with or
pursuant  to the  acquisition  of all or any  portion of another  company by the
Company whether by merger or any other  reorganization or by the purchase of all
or any portion of the assets of another company,  pursuant to a plan,  agreement
or  other  arrangement  unanimously  approved  by the  Board of  Directors;  (E)
securities  issued to or in  connection  with an  arrangement  or venture with a
strategic partner of the Company, provided such issuance is unanimously approved
by the Board of Directors;  (F) shares of Common Stock or Preferred Stock issued
or issuable upon the exercise of any warrants,  options or other rights that are
outstanding as of the Filing Date (or issued or issuable after the reissuance of
any such expired or terminated  options,  warrants or rights and net of any such
issued shares repurchased by the Corporation);  (G) the reissuance or assignment
by the  Corporation  of any shares of Common Stock  outstanding as of the Filing
Date to a  different  person from the holder of such  shares;  and (H) shares of
Common  Stock  issued  by way of  dividend  or other  distribution  on shares of
Preferred  Stock and Common Stock  excluded  from the  definition  of Additional
Shares of Common Stock by the  foregoing  clauses (A),  (B), (C), (D), (E), (F),
(G) and this clause (H). The  "Effective  Price" of Additional  Shares of Common
Stock  shall  mean the  quotient  obtained  by  dividing  the  total  number  of
Additional  Shares of Common Stock issued or sold, or deemed to have been issued
or sold,  under this Section 8 into the  aggregate  consideration  received,  or
deemed to have been received for such Additional Shares of Common Stock.

                  9.  Certificate  of  Adjustment.  Upon the  occurrence of each
adjustment or readjustment of the Series A Conversion Price, the Corporation, at
its sole expense,  shall promptly  compute such  adjustment or  readjustment  in
accordance  with the terms  hereof and  prepare  and  furnish to each  holder of
Series A Stock a certificate  setting forth such adjustment or readjustment  and
showing in detail the facts upon which such adjustment or readjustment is based.

                  10.  Notices of Record Date. In the event of (i) any taking by
this  Corporation  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  capital  reorganization  of this
Corporation,  any  reclassification  or recapitalization of the capital stock of
this  Corporation,  any merger or consolidation of this Corporation with or into
any other corporation, or any transfer of all or substantially all of the assets
of the Corporation, or any voluntary or involuntary dissolution,  liquidation or
winding up of this  Corporation,  this Corporation  shall mail to each holder of
shares of Series A Stock at least  twenty  (20) days  prior to the  record  date
specified  therein, a notice specifying (i) 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;   (ii)  the  date  on  which  any  such
reorganization,  reclassification, transfer, consolidation, merger, dissolution,
liquidation  or winding  up, is expected to become  effective  and the  specific
details thereof;  and (iii) the date, if any, that is to be fixed as to when the
holders  of record of shares  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   reorganization,
reclassification,  transfer, consolidation,  merger, dissolution, liquidation or
winding up.

                  11. Automatic Conversion.

                                       7
<PAGE>

                           (i)  "Qualified  Liquidation  Event."  Each  share of
Series A Stock shall  automatically  be  converted  into shares of Common  Stock
based upon the Series A Conversion Price upon (A) the closing of an underwritten
public  offering  pursuant  to an  effective  registration  statement  under the
Securities Act of 1933, as amended,  covering the offering and sale of shares of
Common  Stock for the  account of the  Corporation  (other  than a  registration
statement  effected solely to implement an employee  benefit plan, a transaction
in which Rule 145 of the Securities and Exchange Commission is applicable or any
other form or type of  registration in which the shares of Common Stock issuable
upon  conversion of the shares of Series A Stock cannot be included  pursuant to
the  Securities  and Exchange  Commission  rules or practices)  which results in
aggregate  gross cash proceeds to the  Corporation of at least  $15,000,000 at a
per  share  price  equal  to at  least  $5.00  (Appropriately  Adjusted)  and an
aggregate value of the Corporation immediately prior to the offering of at least
$40,000,000,  which  aggregate  value shall be determined by multiplying (x) the
number  of  outstanding  shares  of  Common  Stock  of  the  Corporation,  on  a
fully-diluted,  as-converted basis, immediately prior to the offering, times (y)
the initial per share price of the Corporation's  Common Stock as offered to the
public in the offering, or (B) (x) a merger or consolidation of this Corporation
with  or  into  another  corporation  or  entity,  or  (y)  the  sale  of all or
substantially all of this Corporation's  properties and assets, or (z) a sale of
the shares of this  Corporation's  Common Stock,  in each  circumstance in which
each  holder of Series A Stock  concurrently  receives  cash  and/or  marketable
securities in an aggregate amount equal to at least $25.00 per share of Series A
Stock (Appropriately Adjusted) if such event occurs on or before March 31, 2002,
or $35.00  per share of Series A Stock  (Appropriately  Adjusted)  if such event
occurs after March 31, 2002, and the aggregate gross  consideration  received by
the  Corporation  and/or  its  shareholders  is at  least  $40,000,000  (each  a
"Qualified Liquidation Event").

                           (ii) "Qualified  Liquidity  Milestone." Each share of
Series A Stock shall  automatically  be  converted  into shares of Common  Stock
based upon the Series A Conversion Price effective as of the first date on which
the  Corporation's  Common Stock is qualified  for listing and is trading on the
NASDAQ  National  Market System ("NMS") or the New York Stock Exchange  ("NSYE")
and the Corporation has had, for any three consecutive months (a "Quarter"), (i)
average trading volume of at least 25,000  (Appropriately  Adjusted)  shares per
trading day, and (ii) an average daily high-bid and low-ask price, if the shares
are listed and traded on the NMS, or closing price, if the shares are listed and
traded  on  the  NYSE,   during  such  Quarter  of  at  least  $5.00  per  share
(Appropriately  Adjusted), if such Quarter commences on or before April 1, 2002,
or $7.00 per share  (Appropriately  Adjusted),  if such Quarter  commences after
April 1, 2002.

                           (iii) Upon Vote of 75% of Series A  Preferred  Stock.
Each share of Series A Preferred  Stock shall  automatically  be converted  into
shares of Common Stock based upon the Series A Conversion  Price then applicable
upon the affirmative vote of the holders of at least seventy-five  percent (75%)
of the outstanding shares of Series A Preferred Stock.

         Upon the  occurrence  of an event  specified  in this  Section  11, the
outstanding  shares of Series A Stock shall be converted into outstanding shares
of Common Stock,  whether or not the certificates  representing  such shares are
surrendered  to the  Corporation  or its  transfer  agent.  Upon  the  automatic
conversion of the outstanding  shares of Series A Stock,  the Corporation  shall
notify the holders of the  outstanding  shares of Series A Stock and  thereafter
such holders shall surrender the  certificates  representing  such shares at the
office of the Corporation or any transfer agent for the shares.  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 surrendered
shares of Series A Stock of such  holder were  convertible  on the date on which
such automatic conversion occurred.

                  12. Fractional Shares. Fractional shares of Common Stock shall
be issued upon conversion of the shares of Series A Stock.

                  13.  Reservation  of  Stock  Issuable  Upon  Conversion.   The
Corporation  shall at all times reserve and keep available out of its authorized
but unissued  shares of Common  Stock,  solely for the purpose of



                                       8
<PAGE>

effecting the conversion of the shares of Series A Stock,  such number of shares
of  Common  Stock  as  shall  from  time to time be  sufficient  to  effect  the
conversion  of all  outstanding  shares  of  Series A 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 Series A Stock, the
Corporation  shall take such action as may, in the  opinion of its  counsel,  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.  Notices.  Any notice  required by the  provisions of this
Section D to be given to a holder  of  shares of Series A Stock  shall be deemed
given upon actual  receipt or if receipt is refused or does not occur,  then the
second  attempted  delivery as evidenced by appropriate  third-party  commercial
documentation (i.e., Postal Service, Federal Express, etc.).

                  15. No Dilution or Impairment. The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization,  transfer
of assets,  consolidation,  merger, dissolution,  issue or sale of securities or
any other  voluntary  action for the purpose of avoiding or seeking to avoid the
observance  or  performance  of any of the  terms to be  observed  or  performed
hereunder  by the  Corporation,  but will at all times in good  faith  assist in
carrying out all such action as may be reasonably  necessary or  appropriate  in
order to  protect  the  rights of the  holders  of the  shares of Series A Stock
against dilution (as contemplated herein) or other impairment of their rights.

         E. NO RE-ISSUANCE. No share or shares of Series A Stock acquired by the
Corporation  by reason of redemption,  purchase or otherwise  shall be reissued,
and all such shares shall be canceled,  retired and  eliminated  from the shares
which the Corporation shall be authorized to issue."


                                       9