<PAGE>

                                                                  EXHIBIT 3.1.3

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES
                                 AND RIGHTS OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       OF
                            TRANSCEND SERVICES, INC.

                     PURSUANT TO SECTION 151 OF THE GENERAL
                    CORPORATION LAW OF THE STATE OF DELAWARE

     Transcend Services, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "COorporation"), does
hereby certify that, pursuant to the authority contained in paragraph IV of its
Certificate of Incorporation and in accordance with Section 151 of the General
Corporation Law of the State of Delaware, the following resolutions creating a
series of Preferred Stock, $.01 par value, designated as Series A Convertible
Preferred Stock, were duly adopted by the Board of Directors of the Corporation
(the "Board") as of November 11, 1997:

     RESOLVED, that the Board hereby creates from among the Corporation=s
21,000,000 authorized and previously undesignated shares of Preferred Stock,
$.01 par value, a series of such Preferred Stock to be known as the "Series A
Convertible Preferred Stock" and to comprise 212,800 shares, and hereby adopts
and prescribes therefore the designation, relative rights, preferences and
limitations, and other terms and conditions of such series as set forth in, and
governed by, Exhibit A attached to these minutes, with such Exhibit A being
hereby incorporated as part of this resolution; and

     FURTHER RESOLVED, that the officers of the Corporation be and hereby are
authorized and directed to take any and all further action that may be necessary
or desirable to accomplish the above authorized action, including but not
limited to the execution and filing of all instruments or documents that may be
necessary to create, designate, issue or evidence shares of the Corporation=s
Series A Convertible Preferred Stock.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by the undersigned duly authorized officers of the
Corporation, this 11/th/ day of November, 1997.

                                By:   /s/Larry G. Gerdes
                                    --------------------
                                    Larry G. Gerdes

                                Title: President and Chief Executive Officer

ATTEST:

By:___________________

Title:
<PAGE>

                                   EXHIBIT A

                      SERIES A CONVERTIBLE PREFERRED STOCK

     1.   Designation; Rank. 212,800 shares of the preferred stock, $.01 par
          -----------------
value, stated value $25.00 per share (the "Stated Value"), of the Corporation
are hereby constituted as a series of the preferred stock designated as "Series
A Convertible Preferred Stock" (the "Series A Preferred Stock") and having
relative rights and preferences to all other classes and series of the capital
stock of the Corporation as set forth herein.  The Series A Preferred Stock
shall rank senior to all other classes or series of capital stock of the
Corporation except as permitted by Section 4(b) hereof.

     2.   Dividends.
          ---------

          (a) The holders of record of issued and outstanding shares of the
Series A Preferred Stock (the "Record Holders") shall be entitled to receive,
when and as declared by the Board of Directors of the Corporation or a duly
authorized committee thereof (the "Board") out of funds legally available
therefor, a cumulative, quarterly cash dividend of nine percent (9%) of the
Stated Value, calculated at the rate of 9% per annum from the Issue Date, of the
shares of the Series A Preferred Stock held by each such Record Holder and no
more, payable on or about the 15th day of February, May, August, and November of
each year, commencing February 15, 1998 (the "Dividend Payment Dates").  Each
dividend declared by the Board shall be paid to the Record Holders as their
names appear on the stock books of the Corporation on the 1st of the month in
which the Dividend Payment Dates fall.  Dividends in arrears for any quarter may
be declared and paid at any time, without reference to any regular Dividend
Payment Dates, to the Record Holders on the date fixed by the Board as their
names appear on the stock books of the Corporation; provided that such date
fixed by the Board shall not exceed 15 days preceding the payment date thereof.
Any dividend payment made on shares of this Series A Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due for this Series
A Preferred Stock.  Whether or not declared for payment by the Board, dividends
at the rate prescribed above shall be deemed to accrue in arrears on each
outstanding share of this Series A Preferred Stock from month to month as of the
15th day of each month, commencing with the month next following the month in
which such share is issued.

          (b) Failure by the Corporation to pay dividends on eight consecutive
Dividend Payment Dates shall constitute a default entitling the holders of the
Series A Preferred Stock to a readjustment of the Conversion Price, as defined
below, so that the holders of the Series A Preferred Stock may convert their
shares into two (2) times as many shares of the common stock, $.01 par value per
share (the "Common Stock"), of the Corporation as the Conversion Price in effect
prior to the default would allow.

          (c) During any fiscal quarter of the Corporation, no dividend shall be
paid upon, or declared and set apart for, any share of this Series A Preferred
Stock or for any share of any other series of the Preferred Stock ranking pari
                                                                          ----
passu with shares of this Series A Preferred Stock as to dividends, unless
-----
during such fiscal quarter a like proportionate dividend, ratably in proportion
to the respective dividends applicable thereto, shall be paid upon, or be
declared and set apart for, all shares of this Series A Preferred Stock as to
which dividends shall have accrued.  Record Holders of shares of this Series A
Preferred Stock shall not be entitled to any dividend, whether payable in cash,
securities or other property, in excess of the full cumulative dividends on
shares of this Series A Preferred Stock.

          (d) So long as any Series A Preferred Stock is outstanding, no
dividend (other than a dividend payable in Common Stock or any other stock of
the Corporation ranking junior to this Series A Preferred Stock as to dividends
and upon liquidation, and other than as provided in paragraph (c) of this
Section 2) shall be declared or paid or set aside for payment, nor shall any
other distribution be declared or made, upon the Common Stock or upon any other
stock of the Corporation ranking junior to or pari passu with this Series A
                                              ---- -----
Preferred Stock as to dividends or upon liquidation, nor shall any of the Common
Stock or any other stock of the Corporation ranking junior to or pari passu with
                                                                 ---- -----
this Series A Preferred Stock as to dividends or upon liquidation be redeemed,
repurchased or otherwise acquired for any consideration (or any monies paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation or any subsidiary thereof (except by  conversion
into or exchange for shares of Common Stock or of any other stock of the
<PAGE>

Corporation ranking junior to this Series A Preferred Stock as to dividends and
upon liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of this Series A Preferred Stock for all dividends in arrears
shall have been paid or declared and set apart for payment.

          (e) Subject to the foregoing provisions, dividends, whether payable in
cash, stock or otherwise as to the Board may determine, may be declared and paid
from time to time on Common Stock and on any other class or series of stock of
the Corporation, out of funds of the Corporation legally available for the
payment of dividends, and this Series A Preferred Stock shall not be entitled to
participate in any such dividends.

     3.   Preference on Liquidation.
          -------------------------

          (a) Liquidation Preference for Series A Preferred Stock.  In the event
              ---------------------------------------------------
that the Corporation shall commence a voluntary case under the federal
bankruptcy laws or any other applicable federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the federal bankruptcy laws or any other applicable
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution of
the assets of the Corporation shall be made to the holders of shares of Common
Stock or other Junior Securities (and no monies shall be set apart for such
purpose) unless (i) prior thereto, the holders of shares of Series A Preferred
Stock shall have received from the assets of the Corporation an amount per share
equal to the sum of $25.00 (the "Series A Liquidation Preference").

          (b) Pro Rata Payments.  If, upon any such liquidation, dissolution or
              -----------------
other winding up of the affairs of the Corporation, the assets of the
Corporation shall be insufficient to permit the payment in full of the Series A
Liquidation Preference for each share of Series A Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities, then the
assets of the Corporation remaining after the distribution to holders of any
Senior Securities of the full amounts to which they may be entitled shall be
ratably distributed among the holders of Series A Preferred Stock and of any
Parity Securities in proportion to the full amounts to which they would
otherwise be respectively entitled if all amounts thereon were paid in full.

          (c) Sale not a Liquidation.  Neither the voluntary sale, conveyance,
              ----------------------
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.

          (d) Notice of Liquidation.  Written notice of any liquidation,
              ---------------------
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, shall be given by first class mail, postage prepaid, not less
than thirty (30) days prior to any payment date specified therein, to the
holders of record of the Series A Preferred Stock at their respective addresses
as shall appear on the records of the Corporation.

     4.   Voting.
          ------

          (a) General Rights.  In addition to any voting rights provided in the
              --------------
Certificate of Incorporation or By-laws, the Series A Preferred Stock shall vote
together with the Common Stock as a single class  on all actions to be voted on
by the stockholders of the Corporation.  Each share of Series A Preferred

                                      -3-
<PAGE>

Stock shall entitle the holder thereof to such number of votes per share on each
such action as shall equal the number of shares of Common Stock (rounded down to
the nearest whole share of Common Stock) into which each share of Series A
Preferred Stock is then convertible. The holders of Series A Preferred Stock
shall be entitled to notice of any stockholders= meeting in accordance with the
By-Laws of the Corporation.

          (b) Special Voting Rights on Certain Corporate Actions.  The
              --------------------------------------------------
Corporation shall not, without the prior consent (in addition to any other vote
or consent required by law, contract or otherwise) of the holders of seventy-
five percent (75%) of the outstanding shares of Series A Preferred Stock, voting
as a class in person or by proxy in writing or at a special meeting called for
the purpose: (i) create or authorize any additional stock or any class or series
unless the same ranks junior to the Preferred Stock as to dividends, as to
redemptions and as to the distribution of assets on dissolution, liquidation or
winding up, whether voluntary or involuntary, or create or authorize any
obligation or security convertible into shares of stock of any class or series
unless the same ranks junior to the Series A Preferred Stock as to dividends, as
to redemptions and as to the distribution of assets on dissolution, liquidation
or winding up, whether voluntary or involuntary, whether any such creation or
authorization shall be by means of amendment of the Certificate of
Incorporation, this Certificate of Designations, merger, consolidation or
otherwise; or (ii) amend, alter or repeal the Certificate of Incorporation, this
Certificate of Designations or Bylaws, or file any directors= resolutions
pursuant to the General Corporation Law of the State of Delaware, containing, in
any such case, any provision which in any manner adversely affects the
respective powers, designations, preferences or rights, or the qualifications,
limitations or restrictions thereof, of the Series A Preferred Stock, (iii)
agree to, or permit any subsidiary to agree to, any provision in any agreement
that would impose any restrictions on the Corporation=s right to make any
redemption of or convert any of the Series A Preferred Shares or otherwise
prohibit the Corporation from honoring the exercise of any rights the holders of
the Series A Preferred Shares now have or may hereafter have, or (iv) engage in
any merger, share exchange, consolidation or reorganization which would result
in the holders of Common Stock of the Corporation immediately prior to such
transaction owning less than fifty percent (50%) of the Common Stock of the
Corporation, or such surviving entity, immediately after such transaction;
provided, however, with respect to this subsection 4(b)(iv), in the event that
such consent is not obtained, the Company may, at its option, redeem all or a
portion of the then issued and outstanding Series A Preferred Stock at the
Redemption Price and upon the terms set forth, and then in effect, in Section
6(a)(iii) hereof.

     5.   Conversion.  The holders of Series A Preferred Stock shall have the
          ----------
right to convert all or a portion of such shares into fully paid and
nonassessable shares of Common Stock or any capital stock or other securities
into which such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof as follows:

          (a) Optional Conversion.  Subject to and upon compliance with the
              -------------------
provisions of this Section 5, a holder of shares of Series A Preferred Stock
shall have the right without payment of any additional consideration, at the
option of such holder, at any time or from time to time, to convert each of such
shares into the number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share of Common
Stock) obtained by dividing $25.00 by the Conversion Price then in effect and by
surrender of such shares, such surrender to be made in the manner provided in
paragraph (b) of this Section 5.  The Common Stock issuable upon conversion of
the shares of Series A Preferred Stock, when such Common Stock shall be issued
in accordance with the terms hereof, are hereby declared to be and shall be duly
authorized, validly issued, fully paid and nonassessable Common Stock held by
the holders thereof.

          (b) Mechanics of Conversion.  Each holder of Series A Preferred Stock
              -----------------------
that desires to convert the same into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the principal office of
the Corporation or of any transfer agent for the Series A Preferred Stock or
Common Stock, accompanied by written notice to the Corporation setting forth the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued if such name or names shall be different
than that of such holder.  In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance and delivery of shares of Common
Stock in such name or names.  Thereupon, the Corporation shall issue and deliver
at such

                                      -4-
<PAGE>

office on the fifth (5th) succeeding Business Day (unless such conversion is in
connection with an underwritten public offering of Common Stock, in which event
concurrently with such conversion) to such holder or on such holder's written
order, (i) a certificate or certificates for the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which such holder is
entitled and (ii) if less than the full number of shares of Series A Preferred
Stock evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the number
of shares converted.

          Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Common Stock, then such conversion shall be deemed to have
been effected upon such surrender) so that the rights of the holder thereof as
to the shares being converted shall cease at such time except for the right to
receive shares of Common Stock, 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 at such time.

          (c) Adjustment of the Conversion Price.  The Conversion Price shall be
              ----------------------------------
adjusted from time to time as follows:

                  (i)   Adjustment for Stock Splits and Combinations.  If the
                        --------------------------------------------
          Corporation at any time or from time to time after the Issue Date
          effects a subdivision of the outstanding Common Stock or combines the
          outstanding shares of Common Stock, then, in each such case, the
          Conversion Price in effect immediately prior to such event shall be
          adjusted so that each holder of shares of Series A Preferred Stock
          shall have the right to convert its shares of Series A Preferred Stock
          into the number of shares of Common Stock which it would have owned
          after the event had such shares of Series A Preferred Stock been
          converted immediately  before the happening of such event.  Any
          adjustment under this Section 5(c)(i) shall become effective as of the
          date and time the subdivision or combination becomes effective.

                  (ii)  Reorganization, Reclassification, Merger or
                        -------------------------------------------
          Consolidation. If the Corporation shall at any time reorganize or
          -------------
          reclassify the outstanding shares of Common Stock (other than a change
          in par value, or from no par value to par value, or from par value to
          no par value, or as a result of a subdivision or combination) or
          consolidate with or merge into another corporation (where the
          Corporation is not the continuing corporation after such merger or
          consolidation), the holders of Series A Preferred Stock shall
          thereafter be entitled to receive upon conversion of the Series A
          Preferred Stock in whole or in part, the same kind and number of
          shares of stock and other securities, cash or other property (and upon
          the same terms and with the same rights) as would have been
          distributed to a holder upon such reorganization, reclassification,
          consolidation or merger had such holder converted its Series A
          Preferred Stock immediately prior to such reorganization,
          reclassification, consolidation or merger (subject to subsequent
          adjustments under Section 5(c) hereof). The Conversion Price upon such
          conversion shall be the Conversion Price that would otherwise be in
          effect pursuant to the terms hereof. Notwithstanding anything herein
          to the contrary, the Corporation will not effect any such
          reorganization, reclassification, merger or consolidation unless prior
          to the consummation thereof, the corporation who may be required to
          deliver any stock, securities or other assets upon the conversion of
          the Series A Preferred Stock shall agree by an instrument in writing
          to deliver such stock, cash, securities or other assets to the holders
          of the Series A Preferred Stock. A sale, transfer or lease of all or
          substantially all of the assets of the Corporation to another person
          shall be deemed a reorganization, reclassification, consolidation or
          merger for the foregoing purposes.

                  (iii) Issuance of Common Stock at a Price Below Conversion
                        ----------------------------------------------------
          Price.  In case the Corporation at any time or from time to time shall
          ------
          issue after the Issue Date shares of its

                                      -5-
<PAGE>

          Common Stock (or securities convertible into its Common Stock) at a
          price per share (or having a conversion price per share) less than the
          Conversion Price (as defined in Section 9 below) per share of Common
          Stock, and in such case, the number of shares of Common Stock into
          which each share of the Series A Preferred Stock is convertible shall
          be adjusted so that the holder of each share thereof shall be entitled
          to receive, upon the conversion thereof, the number of shares of
          Common Stock determined by multiplying (a) the number of shares of
          Common Stock into which such share was convertible immediately prior
          to such event by (b) a fraction, the numerator of which shall be the
          sum of (I) the number of shares of Common Stock outstanding
          immediately prior to such event plus (II) the number of additional
          shares of Common Stock issued, and the denominator of which shall be
          the sum of (III) the number of shares of Common Stock outstanding
          immediately prior to such event plus (IV) the number of shares of
          Common Stock which the aggregate consideration receivable by the
          Corporation for the total number of shares of Common Stock so issued
          would purchase at such Conversion Price on the date of such issuance.
          The adjustment contemplated by this section shall not be made for the
          first 250,000 shares of Common Stock issued upon exercise of stock
          options granted to employees or non-employee directors pursuant to
          plans in existence on the Issue Date provided, however, that the
          consideration received by the Corporation upon issuance is at least
          $2.00 per share.

               (iv) Other Provisions Applicable to Adjustments under this
                    -----------------------------------------------------
          Section.  The following provisions shall be applicable to the making
          -------
          of adjustments of the shares of Common Stock into which the Series A
          Preferred Stock is convertible and the Conversion Price at which the
          Series A Preferred Stock is convertible provided for in this Section
          5(c):

                         (A) When Adjustments to Be Made.  The adjustments
                             ---------------------------
                    required by this Section 5(c) shall be made whenever and as
                    often as any event requiring an adjustment shall occur,
                    except that any adjustment of the Conversion Price that
                    would otherwise be required may be postponed (except in the
                    case of a subdivision or combination of shares of the Common
                    Stock, as provided for in Section 5(c)(i)) up to, but not
                    beyond the date of conversion if such adjustment either by
                    itself or with other adjustments not previously made amount
                    to a change in the Conversion Price is less than $.05.  Any
                    adjustment representing a change of less than such minimum
                    amount (except as aforesaid) which is postponed shall be
                    carried forward and made as soon as such adjustment,
                    together with other adjustments required by this Section
                    5(c) and not previously made, would result in a minimum
                    adjustment or on the date of conversion.  For the purpose of
                    any adjustment, any event shall be deemed to have occurred
                    at the close of business on the date of its occurrence.

                         (B) Fractional Interests.  In computing adjustments
                             --------------------
                    under this Section 5(c), fractional interests in the Common
                    Stock shall be taken into account to the nearest 1/10th of a
                    share.

                         (C) Challenge to Good Faith Determination.  Whenever
                             -------------------------------------
                    the Board shall be required to make a determination in good
                    faith of the fair value of any item under this Section 5(c),
                    such determination may be challenged in good faith by a
                    holder of Series A Preferred Stock and any dispute shall be
                    resolved by an investment banking firm of recognized
                    national standing selected by the Corporation and acceptable
                    to such holder.  The fees of such investment banker shall be
                    borne by such holder if the Corporation=s calculation is
                    determined to be correct and otherwise by the Corporation.

          (d)  No Fractional Share Adjustments.  No fractional shares shall be
               -------------------------------
issued upon conversion of the Series A Preferred Stock.  If more than one share
of the Series A Preferred Stock is to be

                                      -6-
<PAGE>

converted at one time by the same stockholder, the number of full shares
issuable upon such conversion shall be computed on the basis of the aggregate
amount of the shares to be converted. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any shares of Series
A Preferred Stock the Corporation will pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Market Price
per share of Common Stock at the close of business on the day of conversion
which such fractional share of Series A Preferred Stock would be convertible
into on such date.

          (e) Shares to be Reserved.  The Corporation shall at all times reserve
              ---------------------
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of the Series A Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A Preferred Stock from time to time outstanding
including all those required under subsection 2(b).  The Corporation shall from
time to time, in accordance with the laws of the State of Delaware, increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized but unissued Common Stock shall be insufficient to permit the
conversion in full of the Series A Preferred Stock.

          (f) Taxes and Charges.  The Corporation will pay any and all issue or
              -----------------
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock on conversion of the Series A Preferred Stock.  The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of Common Stock in a name
other than that of the Series A Preferred Stock, and no such issuance or
delivery shall be made unless and until the Person requesting such issuance has
paid to the Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.

          (g) Accrued Dividends.  Upon conversion of any shares of the Series A
              -----------------
Preferred Stock, the holder thereof shall be entitled to receive any accrued but
unpaid dividends in respect of the shares of the Series A Preferred Stock so
converted to the date of such conversion in the form of cash.

          (h) Closing of Books.  The Corporation will at no time close its
              ----------------
transfer books against the transfer of any shares of Series A Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series A Preferred Stock in any manner which interferes with the
timely conversion of such shares of Series A Preferred Stock.

     6.   Redemption.
          ----------

          (a) Optional Redemption.  The Series A Preferred Stock will be
              -------------------
redeemable, at the Corporations option, as follows:

              (i)  Provided that the Common Stock has traded at a Market Price
          of greater than $10.50 per share for the 20 consecutive Trading Days
          immediately preceding the Redemption Date, at any time on or after
          November 15, 1998, upon not less than 60 days' notice mailed to each
          holder of Series A Preferred Stock to be redeemed at its address
          appearing in the Security Register, during which time the holder shall
          maintain the ability to convert its Series A Preferred Stock into
          shares of Common Stock at the then current Conversion Price, at the
          following redemption prices (the "Redemption Price") (expressed as
          percentages of the Stated Value), if redeemed during the 12-month
          period beginning November 15 of the years indicated below:

                                                      REDEMPTION
                         YEAR                            PRICE
                         ----                            -----
                         1998                            109%
                         1999                            106%
                         2000                            103%
                         2001 and thereafter             100%

                                      -7-
<PAGE>

          in each case together with any and all accrued but unpaid dividends
          thereon as of the Redemption Date as defined below.

               (ii)   At any time on or after November 15, 1998, the Corporation
          may, at its option, use the net proceeds of one or more Public Equity
          Offerings to redeem all or a portion of the then issued and
          outstanding Series A Preferred Stock at the Redemption Price set forth
          above then in effect for the Series A Preferred Stock; provided that,
          the holders of the Series A Preferred Stock shall maintain the ability
          to convert their shares at the Conversion Price then in effect.  In
          order to effect the foregoing redemption, the Corporation must mail a
          notice of redemption no later than 60 days after the closing of the
          related Public Equity Offering and must consummate such redemption
          within 90 days of the closing of the related Public Equity Offering.

               (iii)  If, at any time on or after November 15, 1998, the
          holders of the outstanding shares of Series A Preferred Stock do not
          consent to a transaction requiring their consent as set forth in
          Section 4(b)(iv) relating to certain mergers, share exchanges,
          consolidations, or reorganizations, the Company may, at its option,
          redeem all or a portion of the then issued and outstanding Series A
          Preferred Stock at the Redemption Price set forth in paragraph (i)
          above then in effect for the Series A Preferred Stock; provided,
          however, the holders of the Series A Preferred Stock shall maintain
          the ability to convert their shares at the Conversion Price then in
          effect.  In order to effect the foregoing redemption, the Corporation
          must mail a notice of redemption to the holders of Series A Preferred
          Stock not less than 30 days prior to the effective date of the
          transaction.

               (iv)   If less than all of the outstanding shares of this Series
          are to be redeemed pursuant to this Section 6, the shares to be
          redeemed shall be selected by the Corporation or from outstanding
          shares of this Series not previously called for redemption, pro rata
          by lot, or by any other method determined by the Corporation in its
          sole discretion to be equitable.

          (b)  Procedures for Redemption.  In the event the Corporation shall
               -------------------------
desire to redeem shares of Series A Preferred Stock pursuant to Section 6(a),
the Corporation shall give written notice of such redemption by first class
mail, postage prepaid, mailed not less than sixty (60) days prior to the
Redemption Date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock records of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number of shares
of Series A Preferred Stock to be redeemed; (iii) the Redemption Price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price; and (v) that payment will be made upon
presentation and surrender of such Series A Preferred  Stock.  Notice having
been mailed as aforesaid, from and after the Redemption Date, unless the
Corporation shall be in default in the payment of the Redemption Price, (A)
shares of Series A Preferred Stock shall be deemed no longer outstanding, and
(B) all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation any moneys payable upon redemption
without interest thereon) shall cease.

          Upon surrender in accordance with such notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Redemption Price.

     7.   Shares to be Retired.  Any share of Series A Preferred Stock
          --------------------
converted, redeemed or otherwise acquired by the Corporation shall be retired
and canceled and shall upon cancellation be restored to the status of
authorized but unissued shares of preferred stock, subject to reissuance by the
Board as shares of preferred stock of one or more other series but not as shares
of Series A Preferred Stock.


                                      -8-
<PAGE>

     8.   Restrictions on Transfer.  Prior to conversion as set forth in Section
          ------------------------
5, the Series A Preferred Stock shall not be transferrable without the prior
written consent of the Company, which consent shall not be unreasonably
withheld.

     9.   Definitions.  As used herein, the following terms shall have the
          -----------
respective meanings set forth below:

          "Business Day" means any day that is not a Saturday, a Sunday or a day
           ------------
     on which banks are required or permitted to be closed in the State of
     Georgia.

          "Common Stock" means the Corporation's Common Stock, no par value per
           ------------
     share, and any stock into which such Common Stock may hereafter be changed
     or for which such Common Stock may be exchanged after giving effect to the
     terms of such change or exchange (by way of reorganization,
     recapitalization, merger, consolidation or otherwise).

          "Conversion Price" means the Conversion Price per share of Common
           ----------------
     Stock into which the Series A Preferred Stock is convertible, as such
     Conversion Price may be adjusted pursuant to Section 5 hereof.  The initial
     Conversion Price shall be $3.375.

          "Issue Date" means, as to any share of Series A Preferred Stock, the
           ----------
     date of original issuance thereof by the Corporation.

          "Junior Securities" means the Common Stock and any other class of
           -----------------
     capital stock or series of preferred stock hereafter created by the
     Corporation which does not expressly provide that it ranks senior to or
     pari passu with the Series A Preferred Stock as to dividends, other
     ---- -----
     distributions, liquidation preference or otherwise.

          "Market Price" means, as to any security on the date of determination
           ------------
     thereof, the average of the closing prices of such security's sales on all
     principal United States securities exchanges on which such security may at
     the time be listed, or, if there shall have been no sales on any such
     exchange on any day, the last trading price of such security on such day,
     or if such there is no such price, the average of the bid and asked prices
     at the end of such day, on The Nasdaq Stock Market, in each such case
     averaged for a period of twenty (20) consecutive Business Days prior to the
     day as of which Market Price is being determined; provided that if such
     security is listed on any United States securities exchange the term
     "Business Days" as used in this sentence means business days on which such
     exchange is open for trading.  Notwithstanding the foregoing, with respect
     to the issuance of any security by the Corporation in an underwritten
     public offering, the Market Price shall be the per share purchase price
     paid by the underwriters.  If at any time such security is not listed on
     any exchange or The Nasdaq Stock Market, the Market Price shall be deemed
     to be the fair value thereof determined in good faith by the Board of
     Directors of the Corporation, as of the most recent practicable date as of
     which the determination is to be made, taking into account the value of the
     Corporation as a going concern, and without taking into account any lack of
     liquidity of such security or any discount for a minority interest.

          "Parity Securities" mean any class of capital stock or series of
           -----------------
     preferred stock hereafter created by the Corporation which expressly
     provides that it ranks pari passu with the Series A Preferred Stock as to
                            ---- -----
     dividends, other distributions, liquidation preference or otherwise.

          "Person" or "person" shall mean an individual, partnership,
           ------      ------
     corporation, trust, unincorporated organization, joint venture, government
     or agency, political subdivision thereof, or any other entity of any kind.

                                      -9-
<PAGE>

          "Public Equity Offering" means an underwritten offering with gross
           ----------------------
     proceeds to the Corporation of at least $15 million pursuant to a
     registration statement that has been declared effective by the Commission
     (other than a registration statement on Form S-8 or otherwise relating to
     equity securities issuable under any employee benefit plan of the
     Corporation).

          "Redemption Date" shall mean the date which shall be selected by the
           ---------------
     Board for redemption of all or a portion of the shares of this Series A
     Preferred Stock.

          "Senior Securities" means any class or series of capital stock, debt
           -----------------
     instrument or security convertible into capital stock or debt securities of
     the Corporation other than Parity Securities or Junior Securities.

          "Series A Liquidation Preference" shall have the meaning set forth in
           -------------------------------
     Section 3(a).

          "Series A Preferred Stock" shall have the meaning set forth in Section
           ------------------------
     1.

          "Trading Day" shall mean any day in which The Nasdaq Stock Market, or
           -----------
any other market or exchange upon which the Common Stock is traded, is open and
no less than 100 shares of Transcend Services, Inc. are traded.

     10.  Notices.  Except as may otherwise be provided for herein, all notices
          -------
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given (i) upon receipt, in the case of a notice of
conversion given to the Corporation as contemplated in Section 5(b) hereof, or
(ii) in all other cases, upon the earlier of (x) receipt of such notice, (y)
three Business Days after the mailing of such notice if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) or (z) the Business Day following sending such notice by
overnight courier, in any case with postage or delivery charges prepaid,
addressed:  if to the Corporation, to its offices at 3353 Peachtree Road, N.E.,
Suite 1000, Atlanta, Georgia 30342, Attention: Doug Shamon, or to an agent of
the Corporation designated as permitted by the Articles of Incorporation, or, if
to any holder of the Series A Preferred Stock, to such holder at the address of
such holder of the Series A Preferred Stock as listed in the stock record books
of the Corporation.

                                      -10-