
<PAGE>
 
                                                                     EXHIBIT 3.1

                           ARTICLES OF AMENDMENT TO
                         ARTICLES OF INCORPORATION OF
                             GOODNOISE CORPORATION
     (Pursuant to Sections 607.1006 and 607.0602 of the Florida Business 
                               Corporation Act)


     GoodNoise Corporation (the "Company"), a corporation organized and existing
under the Florida Business Corporation Act bearing Document Number L13154, does
hereby certify that, pursuant to authority conferred upon the Company's Board of
Directors by the Articles of Incorporation, as amended, of the Company, the
Board of Directors of the Company at a meeting duly held, adopted resolutions
(i) authorizing a series of the Company's previously authorized preferred stock,
par value $0.01 per share (the "Preferred Stock"), and (ii) providing for the
amendment of Article III of the Company's Articles of Incorporation, as follows:

          RESOLVED, that the Company is authorized to issue 2,000
     shares of Preferred Stock par value $0.01 per share to be
     designated as the Series A Convertible Preferred Stock, and amend
     Article III of the Company's Articles of Incorporation to include
     the following which states the designation and number of shares,
     and fixes the relative rights:

     The following shall be added to Article III of the Company's Articles of
Incorporation, and shall be inserted at the end of such article:

                             ARTICLE III

Series A Convertible Stock:

     (1)  Designation, Amount and Dividends.  The designation of this series,
          ---------------------------------                                  
which consists of 2,000 shares of Preferred Stock, is the Series A Convertible
Preferred Stock (the "Preferred Shares") and the stated value shall be One
Thousand dollars ($1,000) per share (the "Stated Value").  The Preferred Shares
shall not bear any dividends.
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     (2)  Holder's Conversion of Preferred Shares.  A holder of Preferred Shares
          ---------------------------------------                               
shall have the right, at such holder's option, to convert the Preferred Shares
into shares of the Company's common stock, $0.01 par value per share (the
"Common Stock"), on the following terms and conditions:

          (a)  Conversion Right.  Subject to the provisions of Section 2(j), at
               ----------------                                                
any time or times on or after the Issuance Date (as defined below), any holder
of Preferred Shares shall be entitled to convert any whole number of Preferred
Shares into fully paid and nonassessable shares (rounded to the nearest whole
share in accordance with Section 2(h)) of Common Stock, at the Conversion Rate
(as defined below); provided, however, that in no event shall any holder be
entitled to convert Preferred Shares in excess of that number of Preferred
Shares which, upon giving effect to such conversion, would cause the aggregate
number of shares of Common Stock beneficially owned by the holder and its
affiliates to exceed 4.99% of the outstanding shares of the Common Stock
following such conversion.  For purposes of the foregoing proviso, the aggregate
number of shares of Common Stock beneficially owned by the holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of the Preferred Shares with respect to which the determination of
such proviso is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining, nonconverted
Preferred Shares beneficially owned by the holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants or
convertible preferred stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the holder
and its affiliates.  Except as set forth in the preceding sentence, for purposes
of this Section 2(a), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended.

          (b)  Conversion Rate and Other Definitions.  The number of shares of
               -------------------------------------                          
Common Stock issuable upon conversion of each of the Preferred Shares pursuant
to Sections (2)(a) and 2(g) shall be determined according to the following
formula (the "Conversion Rate"):

                          (.06)(N/365)(1,000) + 1,000
                          ---------------------------
                               Conversion Price

     For purposes of these Articles of Amendment, the following terms shall have
the following meanings:

               (i)   "Conversion Price" means, as of any Conversion Date (as
     defined below) or other date of determination, the lower of the Fixed
     Conversion Price (as defined below) and the Floating Conversion Price (as
     defined below), each in effect as of such date and subject to adjustment as
     provided herein;

               (ii)  "Fixed Conversion Price" means with regard to any Preferred
     Shares issued hereunder,  (A) on any date prior to the date which is 180
     days after the Issuance Date of the Initial Preferred Shares (as defined in
     the Securities Purchase Agreement, 110% of the Closing Bid Price (as
     defined below) of the Common Stock on the trading day immediately preceding
     such Issuance Date (the "Initial Fixed Conversion Price") and (B) on any
     date on or after the date which is 180 days after the Issuance Date of the
     Initial Preferred Shares the lesser of (I) the Initial Fixed Conversion
     Price then in effect and (II) 110% of the Closing Bid Price of the Common
     Stock on the date which is 180 days after the Issuance Date of the Initial
     Preferred Shares, subject to adjustment as provided herein;

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               (iii)  "Floating Conversion Price" means, as of any date of
     determination, the amount obtained by multiplying the Conversion Percentage
     in effect as of such date by the lower of (i) the Market Price as of such
     date or (ii) the Closing Bid Price on the Conversion Date (as defined
     below), subject to adjustment as provided herein;

               (iv)   "Conversion Percentage" means (i) from the date beginning
     on the Issuance Date of the applicable Preferred Shares and ending on the
     date which is 180 days after such Issuance Date, 85% and (ii) after the
     date which is 180 days after such Issuance Date, 80%, in each case subject
     to adjustment as provided herein;

               (v)    "Market Price" means, with respect to shares of Common
     Stock for any date of determination, the price which shall be computed as
     the arithmetic average of the four lowest Closing Bid Prices of the shares
     of Common Stock during the 20 consecutive trading days immediately
     preceding such date;

               (vi)   "Closing Bid Price" means, for any security as of any
     date, the last closing bid price for such security on the Nasdaq SmallCap
     Market as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
     Nasdaq SmallCap Market is not the principal trading market for such
     security, the last closing bid price of such security on the principal
     securities exchange or trading market where such security is listed or
     traded as reported by Bloomberg, or if the foregoing do not apply, the last
     closing bid price of such security in the over-the-counter market on the
     electronic bulletin board for such security as reported by Bloomberg, or,
     if no closing bid price is reported for such security by Bloomberg, the
     last closing trade price of such security as reported by Bloomberg, or, if
     no last closing trade price is reported for such security by Bloomberg, the
     average of the bid prices of any market makers for such security as
     reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
     Closing Bid Price cannot be calculated for such security on such date on
     any of the foregoing bases, the Closing Bid Price of such security on such
     date shall be the fair market value as mutually determined by the Company
     and the holders of a majority of the outstanding Preferred Shares including
     for purposes of this determination any Preferred Shares with respect to
     which the Closing Bid Price is being determined. If the Company and the
     holders of Preferred Shares are unable to agree upon the fair market value
     of the Common Stock, then such dispute shall be resolved pursuant to
     Section 2(f)(iii) with the term "Closing Bid Price" being substituted for
     the term "Market Price." (All such determinations to be appropriately
     adjusted for any stock dividend, stock, split or other similar transaction
     during such period);

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

               (viii) "Issuance Date" means, with respect to each Preferred
     Share, the date of issuance of the applicable Preferred Share;

               (ix)   "SEC" means the Securities and Exchange Commission;

               (x)    "Registration Rights Agreement" means that certain
     Registration Rights Agreement among the Company and the initial purchasers
     of the Preferred Shares; and

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               (xi)   "Registration Statement" means a Registration Statement
     (as defined in the Registration Rights Agreement).

          (c)  INTENTIONALLY OMITTED.

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

               (i)    Adjustment of Fixed Conversion Price upon Issuance of 
                      -----------------------------------------------------
     Common Stock.  If and whenever on or after the Issuance Date, the Company 
     ------------        
     issues or sells, or is deemed to have issued or sold, any shares of Common
     Stock (other than (1) the Conversion Shares (as defined in the Securities
     Purchase Agreement between the Company and the initial holders of the
     Preferred Shares (the "Securities Purchase Agreement"), (2) any New Equity
     Securities (as defined below), (3) any Approved Acquisition (as defined
     below) and (4) shares of Common Stock deemed to have been issued by the
     Company in connection with an Approved Stock Plan (as defined below)), for
     a consideration per share less than a price (the "Applicable Price") equal
     to the greater of (A) the average of the Closing Bid Price of the Common
     Stock on the five consecutive trading days immediately preceding the date
     of such issuance or sale and (B) Fixed Conversion Price in effect
     immediately prior to such issuance or sale, then immediately after such
     issue or sale, the Fixed Conversion Price then in effect shall be reduced
     to an amount equal to the product of (x) the Fixed Conversion Price in
     effect immediately prior to such issue or sale and (y) the quotient
     determined by dividing (1) the sum of (I) the product of the Applicable
     Price and the number of shares of Common Stock Deemed Outstanding (as
     defined below) immediately prior to such issue or sale, and (II) the
     consideration, if any, received by the Company upon such issue or sale, by
     (2) the product of (I) the Applicable Price and (II) the number of shares
     of Common Stock Deemed Outstanding (as defined below) immediately after
     such issue or sale. For purposes of determining the adjusted Fixed
     Conversion Price under this Section 2(d)(i), the following shall be
     applicable:

                    (A)  Issuance of Options.  If the Company in any manner 
                         -------------------  
     grants any rights or options to subscribe for or to purchase Common Stock
     (other than pursuant to an Approved Stock Plan or upon conversion of the
     Preferred Shares or exercise of the Warrants) or any stock or other
     securities convertible into or exchangeable for Common Stock (such rights
     or options being herein called "Options" and such convertible or
     exchangeable stock or securities being herein called "Convertible
     Securities") and the price per share for which Common Stock is issuable
     upon the exercise of such Options or upon conversion or exchange of such
     Convertible Securities is less than the Applicable Price, then the total
     maximum number of shares of Common Stock issuable upon the exercise of such
     Options or upon conversion or exchange of the total maximum amount of such
     Convertible Securities issuable upon the exercise of such Options shall be
     deemed to be outstanding and to have been issued and sold by the Company
     for such price per share. For purposes of this Section 2(d)(i)(A), the
     "price per share for which Common Stock is issuable upon exercise of such
     Options or upon conversion or exchange of such Convertible Securities" is
     determined by dividing (I) the total amount, if any, received or receivable
     by the Company as consideration for the granting of such Options, plus the
     minimum aggregate amount of additional consideration payable to the Company
     upon the exercise of all such Options, plus in the case of such Options
     which relate to Convertible Securities, the minimum aggregate amount of
     additional consideration, if any, payable to the Company upon the issuance
     or sale of such Convertible Securities and the conversion or exchange

                                      -4-
<PAGE>
 
     thereof, by (II) the total maximum number of shares of Common Stock
     issuable upon exercise of such Options or upon the conversion or exchange
     of all such Convertible Securities issuable upon the exercise of such
     Options. No adjustment of the Fixed Conversion Price shall be made upon the
     actual issuance of such Common Stock or of such Convertible Securities upon
     the exercise of such Options or upon the actual issuance of such Common
     Stock upon conversion or exchange of such Convertible Securities.

                    (B)  Issuance of Convertible Securities.  If the Company 
                         ----------------------------------  
     in any manner issues or sells any Convertible Securities and the price per
     share for which Common Stock is issuable upon such conversion or exchange
     is less than the Applicable Price, then the maximum number of shares of
     Common Stock issuable upon conversion or exchange of such Convertible
     Securities shall be deemed to be outstanding and to have been issued and
     sold by the Company for such price per share. For the purposes of this
     Section 2(d)(i)(B), the "price per share for which Common Stock is issuable
     upon such conversion or exchange" is determined by dividing (I) the total
     amount received or receivable by the Company as consideration for the issue
     or sale of such Convertible Securities, plus the minimum aggregate amount
     of additional consideration, if any, payable to the Company upon the
     conversion or exchange thereof, by (II) the total maximum number of shares
     of Common Stock issuable upon the conversion or exchange of all such
     Convertible Securities. No adjustment of the Fixed Conversion Price shall
     be made upon the actual issue of such Common Stock upon conversion or
     exchange of such Convertible Securities, and if any such issue or sale of
     such Convertible Securities is made upon exercise of any Options for which
     adjustment of the Fixed Conversion Price had been or are to be made
     pursuant to other provisions of this Section 2(d)(i), no further adjustment
     of the Fixed Conversion Price shall be made by reason of such issue or
     sale.

                    (C)  Change in Option Price or Rate of Conversion.  If the
                         ---------------------------------------------        
     purchase price provided for in any Options, the additional consideration,
     if any, payable upon the issue, conversion or exchange of any Convertible
     Securities, or the rate at which any Convertible Securities are convertible
     into or exchangeable for Common Stock change at any time, the Fixed
     Conversion Price in effect at the time of such change shall be readjusted
     to the Fixed Conversion Price which would have been in effect at such time
     had such Options or Convertible Securities still outstanding provided for
     such changed purchase price, additional consideration or changed conversion
     rate, as the case may be, at the time initially granted, issued or sold;
     provided that no adjustment shall be made if such adjustment would result
     in an increase of the Fixed Conversion Price then in effect.

                    (D)  Certain Definitions.  For purposes of determining the
                         -------------------                                  
     adjusted Fixed Conversion Price under this Section 2(d)(i), the following
     terms have meanings set forth below:

                         (I)   "Approved Stock Plan" shall mean any contract,
     plan or agreement which has been approved by the Board of Directors of the
     Company, pursuant to which the Company's securities may be issued to any
     employee, officer, director, consultant or other service provider.

                         (II)  "Common Stock Deemed Outstanding" means, at any
     given time, the number of shares of Common Stock actually outstanding at
     such time, plus the number of shares of Common Stock deemed to be
     outstanding pursuant to Sections 2(d)(i)(A) and 2(d)(i)(B) hereof
     regardless of whether the Options or Convertible 

                                      -5-
<PAGE>
 
     Securities are actually exercisable at such time, but excluding any shares
     of Common Stock issuable upon conversion of the Preferred Shares.

                         (III) "New Equity Securities" means, the issuance by
     the Company on or prior to the 90th day after the Issuance Date of the
     Initial Preferred Shares of any equity securities or any instrument
     convertible into or exercisable or exchangeable for equity securities of
     the Company.

                         (IV)  "Approved Acquisition means the issuance of
     securities pursuant to that certain Agreement and Plan of Reorganization by
     and among the Company, Creative Fulfillment, Inc. and certain other parties
     dated as of October 8, 1998 without amendment or waiver and that certain
     Agreement and Plan of Reorganization by and among the Company and Nordic
     Entertainment Worldwide, Inc. and certain other parties dated as of October
     8, 1998 without amendment or waiver.

                    (E)  Effect on Fixed Conversion Price of Certain Events. For
                         --------------------------------------------------  
     purposes of determining the adjusted Fixed Conversion Price under this
     Section 2(d)(i), the following shall be applicable:

                         (I)   Calculation of Consideration Received.  If any 
                               -------------------------------------
     Common Stock, Options or Convertible Securities are issued or sold or
     deemed to have been issued or sold for cash, the consideration received
     therefor will be deemed to be the net amount received by the Company
     therefor. In case any Common Stock, Options or Convertible Securities are
     issued or sold for a consideration other than cash, the amount of the
     consideration other than cash received by the Company will be the fair
     value of such consideration, except where such consideration consists of
     securities, in which case the amount of consideration received by the
     Company will be the arithmetic average of the Closing Bid Prices of such
     security for the five (5) consecutive trading days immediately preceding
     the date of receipt. In case any Common Stock, Options or Convertible
     Securities are issued to the owners of the non-surviving entity in
     connection with any merger in which the Company is the surviving entity the
     amount of consideration therefor will be deemed to be the fair value of
     such portion of the net assets and business of the non-surviving entity as
     is attributable to such Common Stock, Options or Convertible Securities, as
     the case may be. The fair value of any consideration other than cash or
     securities will be determined jointly by the Company and the holders of a
     majority of the Preferred Shares then outstanding. If such parties are
     unable to reach agreement within ten (10) days after the occurrence of an
     event requiring valuation (the "VALUATION EVENT"), the fair value of such
     consideration will be determined within forty-eight (48) hours of the tenth
     (10th) day following the Valuation Event by an independent, reputable
     appraiser selected by the Company. The determination of such appraiser
     shall be binding upon all parties absent manifest error.

                         (II)  Integrated Transactions.  In case any Option is 
                               -----------------------
     issued in connection with the issue or sale of other securities of the
     Company, together comprising one integrated transaction in which no
     specific consideration is allocated to such Options by the parties thereto,
     the Options will be deemed to have been issued for a consideration of $.01.

                         (III) Treasury Shares.  The number of shares of Common 
                               ---------------   
     Stock outstanding at any given time does not include shares owned or held
     by or for the 

                                      -6-
<PAGE>
 
     account of the Company, and the disposition of any shares so owned or held
     will be considered an issue or sale of Common Stock.

                         (IV)  Record Date.  If the Company takes a record of 
                               -----------           
     the holders of Common Stock for the purpose of entitling them (1) to
     receive a dividend or other distribution payable in Common Stock, Options
     or in Convertible Securities or (2) to subscribe for or purchase Common
     Stock, Options or Convertible Securities, then such record date will be
     deemed to be the date of the issue or sale of the shares of Common Stock
     deemed to have been issued or sold upon the declaration of such dividend or
     the making of such other distribution or the date of the granting of such
     right of subscription or purchase, as the case may be.

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

               (iii)  Adjustment of Floating Conversion Price upon Issuance of
                      --------------------------------------------------------
     Convertible Securities.  If the Company in any manner issues or sells
     ----------------------                                               
     Convertible Securities that are convertible into or exchangeable for Common
     Stock at a price which varies with the market price of the Common Stock
     (the formulation for such variable price being herein referred to as, the
     "VARIABLE PRICE") and such Variable Price is not calculated using the same
     formula used to calculate the Floating Conversion Price in effect
     immediately prior to the time of such issue or sale, the Company shall
     provide written notice thereof via facsimile and overnight courier to each
     holder of the Preferred Shares ("VARIABLE NOTICE") on the date of issuance
     of such Convertible Securities.  If the holders of Preferred Shares
     representing at least two-thirds (2/3) of the Preferred Shares then
     outstanding provide written notice via facsimile and overnight courier (the
     "VARIABLE PRICE ELECTION NOTICE") to the Company within five (5) business
     days of receiving a Variable Notice that such holders desire to replace the
     Floating Conversion Price then in effect with the Variable Price described
     in such Variable Notice, then from and after the date of the Company's
     receipt of the Variable Price Election Notice the Floating Conversion Price
     will automatically be replaced with the Variable Price (together with such
     modifications to these Articles of Amendment as may be required to give
     full effect to the substitution of the Variable Price for the Floating
     Conversion Price).  A holder's delivery of a Variable Price Election Notice
     shall serve as the consent required to amend these Articles of Amendment
     pursuant to Section 13.  In the event that a holder delivers a Conversion
     Notice at any time after the Company's issuance of Convertible Securities
     with a Variable Price but before such holder's receipt of the Company's
     Variable Notice, then such holder shall have the option by written notice
     to the Company to rescind such Conversion Notice or to have the Conversion
     Price be equal to such Variable Price for the conversion effected by such
     Conversion Notice.

               (iv)   Reorganization, Reclassification, Consolidation, Merger or
                      ----------------------------------------------------------
     Sale.  Any recapitalization, reorganization, reclassification,
     ----                                                          
     consolidation, merger, sale of all or substantially all of the Company's
     assets to another Person (as defined below) or other transaction which is
     effected in such a way that holders of Common Stock are entitled to 

                                      -7-
<PAGE>
 
     receive (either directly or upon subsequent liquidation) stock, securities
     or assets with respect to or in exchange for Common Stock (other than a
     merger effected solely to change the Company's state of incorporation) is
     referred to herein as "Organic Change." Prior to the consummation of any
     Organic Change, the Company will make appropriate provision (in form and
     substance satisfactory to the holders of a majority of the Preferred Shares
     then outstanding) to insure that each of the holders of the Preferred
     Shares will thereafter have the right to acquire and receive in lieu of or
     in addition to (as the case may be) the shares of Common Stock otherwise
     acquirable and receivable upon the conversion of such holder's Preferred
     Shares, such shares of stock, securities or assets that would have been
     issued or payable in such Organic Change with respect to or in exchange for
     the number of shares of Common Stock which would have been acquirable and
     receivable upon the conversion of such holder's Preferred Shares had such
     Organic Change not taken place (without taking into account any limitations
     or restrictions on the timing or amount of conversions). In any such case,
     the Company will make appropriate provision (in form and substance
     reasonably satisfactory to the holders of a majority of the Preferred
     Shares then outstanding) with respect to such holders' rights and interests
     to insure that the provisions of this Section 2(d) and Section 2(e) will
     thereafter be applicable to the Preferred Shares (including, in the case of
     any such consolidation, merger or sale in which the successor entity or
     purchasing entity is other than the Company, an immediate adjustment of the
     Fixed Conversion Price to the value for the Common Stock reflected by the
     terms of such consolidation, merger or sale, if the value so reflected is
     less than the Fixed Conversion Price in effect immediately prior to such
     consolidation, merger or sale). The Company will not effect any such
     consolidation, merger or sale, unless prior to the consummation thereof,
     the successor entity (if other than the Company) resulting from
     consolidation or merger or the entity purchasing such assets assumes, by
     written instrument (in form and substance reasonably satisfactory to the
     holders of a majority of the Preferred Shares then outstanding), the
     obligation to deliver to each holder of Preferred Shares such shares of
     stock, securities or assets as, in accordance with the foregoing
     provisions, such holder may be entitled to acquire. "Person" shall mean an
     individual, a limited liability company, a partnership, a joint venture, a
     corporation, a trust, an unincorporated organization and a government or
     any department or agency thereof.

               (v)    Certain Events.  If any event occurs of the type 
                      --------------     
     contemplated by the provisions of this Section 2(d) but not expressly
     provided for by such provisions (including, without limitation, the
     granting of stock appreciation rights, phantom stock rights or other rights
     with equity features), then the Company's Board of Directors will make an
     appropriate adjustment in the Conversion Price so as to protect the rights
     of the holders of the Preferred Shares; provided, however, that no such
     adjustment will increase the Conversion Price as otherwise determined
     pursuant to this Section 2(d).

               (vi)   Notices.
                      --------

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

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

                                      -8-
<PAGE>
 
     liquidation and in no event shall such notice be provided to such holder
     prior to such information being made known to the public.

                    (C)  The Company will also give written notice to each
     holder of Preferred Shares at least twenty (20) days prior to the date on
     which any Organic Change, dissolution or liquidation will take place and in
     no event shall such notice be provided to such holder prior to such
     information being made known to the public.

          (e)  Purchase Rights. In addition to any adjustments of the Conversion
               ---------------   
Price pursuant to Section 2(d), if at any time after the Issuance Date the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the holders
of the Preferred Shares will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Preferred Shares (without taking into
account any limitations or restrictions on the timing or amount of conversions)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of the Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

          (f)  Mechanics of Conversion.  Subject to the Company's inability to
               -----------------------                                        
fully satisfy its obligations under a Conversion Notice (as defined below) as
provided for in Section 4:

               (i)   Holder's Delivery Requirements. To convert Preferred Shares
                     ------------------------------       
     into full shares of Common Stock on any date (the "Conversion Date"), the
     holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
     receipt on or prior to 11:59 p.m., Eastern Time on such date, a copy of a
     fully executed notice of conversion as described in Section 19 (the
     "Conversion Notice"), to the Company and (B) surrender to a common carrier
     for delivery to the Company or its designated transfer agent (the "Transfer
     Agent"), as soon as practicable following such date, the original
     certificate(s) representing the Preferred Shares being converted (or an
     indemnification undertaking in customary form with respect to such shares
     in the case of their loss, theft or destruction) (the "Preferred Stock
     Certificate(s)").

               (ii)  Company's Response.  Upon receipt by the Company of a
                     ------------------                                   
     facsimile copy of a Conversion Notice, the Company shall as soon as
     practicable, but in any event no later than the next business day, send,
     via facsimile, a confirmation of receipt of such Conversion Notice to such
     holder.  Upon receipt by the Company or the Transfer Agent of the Preferred
     Stock Certificate(s) to be converted pursuant to a Conversion Notice, the
     Company or the Transfer Agent (as applicable) shall, on the next business
     day following the date of receipt, (I) issue and surrender to a common
     carrier for overnight delivery to the address specified in the Conversion
     Notice, a certificate, registered in the name of the holder or its
     designee, for the number of shares of Common Stock to which the holder
     shall be entitled, or (II) credit such aggregate number of shares of Common
     Stock to which the holder shall be entitled to the holder's or its
     designee's balance account with The Depository Trust Company.  If the
     number of Preferred Shares represented by the Preferred Stock
     Certificate(s) submitted for conversion is greater than the number of
     Preferred Shares being converted, then the Company or Transfer Agent, as
     the case may be, shall, as soon as practicable and in no event later than
     two business days after receipt of the Preferred Stock 

                                      -9-
<PAGE>
 
     Certificate(s) and at its own expense, issue and deliver to the holder a
     new Preferred Stock Certificate representing the number of Preferred Shares
     not converted.

               (iii)  Dispute Resolution.  In the case of a dispute as to the
                      ------------------                                     
     determination of the Market Price or the arithmetic calculation of the
     Conversion Rate, the Company shall promptly issue to the holder the number
     of shares of Common Stock that is not disputed and shall submit the
     disputed determinations or arithmetic calculations to the holder via
     facsimile within one business day of receipt of such holder's Conversion
     Notice. If such holder and the Company are unable to agree upon the
     determination of the Market Price or arithmetic calculation of the
     Conversion Rate within one (1) business day of such disputed determination
     or arithmetic calculation being submitted to the holder, then the Company
     shall within one (1) business day submit via facsimile (A) the disputed
     determination of the Market Price to an independent, reputable investment
     bank or (B) the disputed arithmetic calculation of the Conversion Rate to
     its independent, outside accountant. The Company shall cause the investment
     bank or the accountant, as the case may be, to perform the determinations
     or calculations and notify the Company and the holder of the results no
     later than forty-eight (48) hours from the time it receives the disputed
     determinations or calculations. Such investment bank's or accountant's
     determination or calculation, as the case may be, shall be binding upon all
     parties absent manifest error.

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

               (v)    Company's Failure to Timely Convert.  If within five (5)
                      -----------------------------------                     
     business days after the Company's or the Transfer Agent's receipt of the
     Preferred Stock Certificates to be converted the Company shall fail (I) to
     issue a certificate for the number of shares of Common Stock to which a
     holder is entitled or to credit the holder's balance account with The
     Depository Trust Company for such number of shares of Common Stock to which
     the holder is entitled upon such holder's conversion of Preferred Shares or
     (II) to issue a new Preferred Stock Certificate representing the number of
     Preferred Shares to which such holder is entitled pursuant to Section
     2(f)(ii), in addition to all other available remedies which such holder may
     pursue hereunder and under the Securities Purchase Agreement (including
     indemnification pursuant to Section 7 thereof), the Company shall pay
     additional damages to such holder on each date after the fifth business day
     that such conversion or delivery of such Preferred Stock Certificates, as
     the case may be, is not timely effected in an amount equal to 0.5% of the
     product of (A) the sum of the number of shares of Common Stock not issued
     to the holder on a timely basis pursuant to Section 2(f)(ii) and to which
     such holder is entitled and, in the event the Company has failed to deliver
     a Preferred Stock Certificate to the holder on a timely basis pursuant to
     Section 2(f)(ii), the number of shares of Common Stock issuable upon
     conversion of the Preferred Shares represented by such Preferred Stock
     Certificate, as of the last possible date which the Company could have
     issued such Preferred Stock Certificate to such holder without violating
     Section 2(f)(ii) and (B) the Closing Bid Price of the Common Stock on the
     last possible date which the Company could have issued such Common Stock
     and the Preferred Stock Certificate, as the case may be, to such holder
     without violating Section 2(f)(ii).

          (g)  Mandatory Conversion at Maturity.  If any Preferred Shares remain
               --------------------------------                                 
outstanding on the Maturity Date (as defined below), then all such Preferred
Shares shall be converted as of such date in accordance with this Section 2 as
if the holders of such Preferred Shares 

                                      -10-
<PAGE>
 
had given the Conversion Notice on the Maturity Date; provided, however, that if
a Triggering Event (other than a Triggering Event resulting from the Section
3(d)(vi) due to the Company's breach of a representation) has occurred and is
continuing on the Maturity Date, then the Company shall, within five business
days following the Maturity Date (unless otherwise notified in writing by the
holder of its request to have the Preferred Shares converted into Common Stock),
pay to each holder of Preferred Shares then outstanding, in immediately
available funds, an amount equal to the Triggering Event Redemption Price as of
the Maturity Date. All holders of Preferred Shares shall thereupon surrender all
Preferred Stock Certificates, duly endorsed for cancellation, to the Company or
the Transfer Agent, provided that the Company has complied with its obligations
under this Section 2(g). "Maturity Date" means the date which is three years
after the applicable Issuance Date for the Preferred Shares.

          (h)  Fractional Shares.  The Company shall not issue any fraction of a
               -----------------                                                
share of Common Stock upon any conversion. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one Preferred Share by
a holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of a fraction of a share of Common
Stock. If, after the aforementioned aggregation, the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up or down to the nearest whole share.

          (i)  Taxes.  The Company shall pay any and all taxes that may be
               -----                                                      
payable with respect to the issuance and delivery of Common Stock upon the
conversion of Preferred Shares.

     (3)  Redemption at Option of Holders.
          ------------------------------- 

          (a)  Redemption Option Upon Major Transaction.  In addition to all
               ----------------------------------------                     
other rights of the holders of Preferred Shares contained herein, simultaneous
with or after the occurrence of a Major Transaction (as defined below), each
holder of Preferred Shares shall have the right, at such holder's option, to
require the Company to redeem all or a portion of such holder's Preferred Shares
at a price per Preferred Share equal to the greater of (i) 130% of the
Liquidation Value (as defined in Section 9) and (ii) the product of (A) the
Conversion Rate on the date the Notice of Redemption at Option of Buyer Upon
Major Transaction is given and (B) the Closing Bid Price on the date of the
public announcement of such Major Transaction or the next date on which the
exchange or market on which the Common Stock is traded is open if such public
announcement is made (X) after 12:00 p.m., Central Time, time on such date or
(Y) on a date on which the exchange or market on which the Common Stock is
traded is closed ("Major Transaction Redemption Price").

          (b)  Redemption Option Upon Triggering Event. In addition to all other
               ---------------------------------------  
rights of the holders of Preferred Shares contained herein, simultaneous with or
after the occurrence of a Triggering Event (as defined below), each holder of
Preferred Shares shall have the right, at such holder's option, to require the
Company to redeem all or a portion of such holder's Preferred Shares at a price
per Preferred Share equal to the greater of (i) 130% of the Liquidation Value
and (ii) the product of (A) the Conversion Rate on the date of such holder's
delivery of a Notice of Redemption at Option of Holder Upon Triggering Event (as
defined below) and (B) the greater of (I) the Closing Bid Price on the trading
day immediately preceding such Triggering Event or (II) the Closing Bid Price on
the date of the holder's delivery to the Company of a Notice of Redemption at
Option of Holder Upon Triggering Event (as defined below) or, if such date of
delivery is not a trading day, the next date on which the exchange or market on
which the Common Stock is traded is open ("Triggering Event Redemption Price"
and, collectively with "Major Transaction Redemption Price," the "Redemption
Price").

                                      -11-
<PAGE>
 
          (c)  "Major Transaction".  A "Major Transaction" shall be deemed to
               -------------------                                           
have occurred at such time as any of the following events:

               (i)    the consolidation, merger or other business combination of
     the Company with or into another Person (other than pursuant to a migratory
     merger effected solely for the purpose of changing the jurisdiction of
     incorporation of the Company);

               (ii)   the sale or transfer of all or substantially all of the
     Company's assets; or

               (iii)  a purchase, tender or exchange offer made to and accepted
     by the holders of more than 30% of the outstanding shares of Common Stock.

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

               (i)    the failure of the Registration Statement to be declared
     effective by the SEC on or prior to the date that is 135 days after the
     Issuance Date to which such Registration Statement is related;

               (ii)   while the Registration Statement is required to be
     maintained effective pursuant to the terms of the Registration Rights
     Agreement, the effectiveness of the Registration Statement lapses for any
     reason (including, without limitation, the issuance of a stop order) or is
     unavailable to the holder of the Preferred Shares for sale of the
     Registrable Securities (as defined in the Registration Rights Agreement) in
     accordance with the terms of the Registration Rights Agreement, and such
     lapse or unavailability continues for a period of at least five consecutive
     days or for an aggregate of at least ten days in any 365 day period;

               (iii)  the suspension from trading or quotation or failure of the
     Common Stock to be listed or quoted on the over-the-counter market on the
     electronic bulletin board (the "OTC"), the Nasdaq SmallCap Market, the
     Nasdaq National Market, The New York Stock Exchange, Inc. or The American
     Stock Exchange, Inc. for a period of five consecutive days or for an
     aggregate of at least ten days in any 365 day period;

               (iv)   the Company's notice to any holder of Preferred Shares,
     including by way of public announcement, at any time, of its intention not
     to comply with proper requests for conversion of any Preferred Shares into
     shares of Common Stock, including due to any of the reasons set forth in
     Section 4(a), or the Company's failure to deliver Conversion Shares within
     ten days of the Conversion Date;

               (v)    upon the Company's receipt of a Conversion Notice, the
     Company shall not be obligated to issue the Conversion Shares due to the
     provisions of Section 12; or

               (vi)   any representation or warranty by the Company was not true
     and correct at the time made (including the Issuance Date) or the Company
     breaches any covenant or other term or condition of the Securities Purchase
     Agreement, the Registration Rights Agreement, these Articles of Amendment,
     the Irrevocable Transfer Agent Instructions (as defined in the Securities
     Purchase Agreement), or any other agreement, document, certificate or other
     instrument delivered in connection with the transactions contemplated
     thereby or hereby, except (i) to the extent that such breach would not have
     a 

                                      -12-
<PAGE>
 
     Material Adverse Effect (as defined in Section 3(a) of the Securities
     Purchase Agreement), and (ii) in the case of a breach of a covenant which
     is curable, such breach continues for a period of less than ten days.

          (e)  Mechanics of Redemption at Option of Holder Upon Major
               ------------------------------------------------------
Transaction.  No sooner than fifteen days nor later than ten days prior to the
consummation of a Major Transaction, but not prior to the public announcement of
such Major Transaction, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "Notice Of Major Transaction") to each holder
of Preferred Shares.  At any time after receipt of a Notice of Major Transaction
(or, in the event a Notice of Major Transaction is not delivered at least ten
days prior to a Major Transaction, at any time on or after the date which is ten
days prior to a Major Transaction), any holder of the Preferred Shares then
outstanding may require the Company to redeem all or a portion of the holder's
Preferred Shares, which redemption shall be effective concurrent with the
consummation of the Major Transaction, then outstanding by delivering written
notice thereof via facsimile and overnight courier (a "Notice of Redemption at
Option of Holder Upon Major Transaction") to the Company, which Notice of
Redemption at Option of Holder Upon Major Transaction shall indicate (i) the
number of Preferred Shares that such holder is submitting for redemption and
(ii) the applicable Major Transaction Redemption Price, as calculated pursuant
to Section 3(a).

          (f)  Mechanics of Redemption at Option of Holder Upon Triggering 
               -----------------------------------------------------------
Event.  Within one business day after the occurrence of a Triggering Event, the
-----
Company shall deliver written notice thereof via facsimile and overnight courier
(a "Notice of Triggering Event") to each holder of Preferred Shares. At any time
after the earlier of a holder's receipt of a Notice of Triggering Event and such
holder becoming aware of a Triggering Event, any holder of the Preferred Shares
then outstanding may require the Company to redeem all or a portion of the
holder's Preferred Shares then outstanding by delivering written notice thereof
via facsimile and overnight courier (a "Notice Of Redemption at Option of Holder
Upon Triggering Event") to the Company, which Notice of Redemption at Option of
Holder Upon Triggering Event shall indicate (i) the number of Preferred Shares
that such holder is submitting for redemption and (ii) the applicable Triggering
Event Redemption Price, as calculated pursuant to Section 3(b).

          (g)  Payment of Redemption Price.  Upon the Company's receipt of a
               ---------------------------                                  
Notice(s) of Redemption at Option of Holder Upon Triggering Event or a Notice(s)
of Redemption at Option of Holder Upon Major Transaction from any holder of
Preferred Shares, the Company shall immediately notify each holder of Preferred
Shares by facsimile of the Company's receipt of such Notice(s) of Redemption at
Option of Holder Upon Triggering Event or Notice(s) of Redemption at Option of
Holder Upon Major Transaction and each holder which has sent such a notice shall
promptly submit to the Company or its Transfer Agent such holder's Preferred
Stock Certificates which such holder has elected to have redeemed.  The Company
shall deliver the applicable Triggering Event Redemption Price, in the case of a
redemption pursuant to Section 3(f), to such holder within five business days
after the Company's receipt of a Notice of Redemption at Option of Holder Upon
Triggering Event and, in the case of a redemption pursuant to Section 3(e), the
Company shall deliver the applicable Major Transaction Redemption Price
concurrent with the consummation of the Major Transaction; provided that a
holder's Preferred Stock Certificates shall have been so delivered to the
Company; and provided further that if the Company is unable to redeem all of the
Preferred Shares to be redeemed, the Company shall redeem an amount from each
holder of Preferred Shares being redeemed equal to such holder's pro rata amount
(based on the number of Preferred Shares held by such holder relative to the
number of Preferred Shares outstanding) of all Preferred Shares being redeemed.
If the Company shall fail to redeem all of the Preferred Shares submitted for
redemption in addition to any remedy such holder of Preferred 

                                      -13-
<PAGE>
 
Shares may have under these Articles of Amendment, the Securities Purchase
Agreement and the Registration Rights Agreement, the applicable Redemption Price
payable in respect of such unredeemed Preferred Shares shall bear interest at
the rate of 2.5% per month (prorated for partial months) until paid in full.
Until the Company pays such unpaid applicable Redemption Price in full to a
holder of Preferred Shares submitted for redemption, such holder shall have the
option (the "Void Optional Redemption Option") to, in lieu of redemption,
require the Company to promptly return to such holder(s) all of the Preferred
Shares that were submitted for redemption by such holder(s) under this Section 3
and for which the applicable Redemption Price has not been paid, by sending
written notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice"). Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full applicable Redemption Price to such
holder, (i) the Notice(s) of Redemption at Option of Holder Upon Triggering
Event or the Notice(s) of Redemption at Option of Holder Upon Major Transaction,
as the case may be, shall be null and void with respect to those Preferred
Shares submitted for redemption and for which the applicable Redemption Price
has not been paid, (ii) the Company shall immediately return any Preferred
Shares submitted to the Company by each holder for redemption under this Section
3(g) and for which the applicable Redemption Price has not been paid and (iii)
if the redemption was caused by a Triggering Event involving the Company's
inability to issue Conversion Shares because of the Exchange Cap (as defined in
Section 12), the holders of at least two-thirds of the Preferred Shares then
outstanding, including Preferred Shares submitted for redemption pursuant to
this Section 3 with respect to which the applicable Redemption Price has not
been paid, may direct the Company to immediately delist the Common Stock from
the exchange or automated quotation system on which the Common Stock is traded
and have the Common Stock, at such holders' option, traded in the electronic
bulletin board or the "pink sheets." Notwithstanding the foregoing, in the event
of a dispute as to the determination of the Closing Bid Price or the arithmetic
calculation of the Redemption Price, such dispute shall be resolved pursuant to
Section 2(f)(iii) above with the term "Closing Bid Price" being substituted for
the term "Market Price" and the term "Redemption Price" being substituted for
the term "Conversion Rate". A holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not effect the
Company's obligations to make any payments which have accrued prior to the date
of such notice. Payments provided for in this Section 3 shall have priority to
payments to other stockholders in connection with a Major Transaction.

     (4)  Inability to Fully Convert.
          -------------------------- 

          (a)  Holder's Option if Company Cannot Fully Convert.  If, upon the
               -----------------------------------------------               
Company's receipt of a Conversion Notice or on the Maturity Date, the Company
cannot issue shares of Common Stock registered for resale under the Registration
Statement (or which are exempt from the registration requirements under the 1933
Act pursuant to Rule 144(k) under the 1933 Act) for any reason, including,
without limitation, because the Company (x) does not have a sufficient number of
shares of Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Company or its Securities, including without limitation the Exchange Cap (as
defined below), from issuing all of the Common Stock which is to be issued to a
holder of Preferred Shares pursuant to a Conversion Notice or (z) fails to have
a sufficient number of shares of Common Stock registered for resale under the
Registration Statement, then the Company shall issue as many shares of Common
Stock as it is able to issue in accordance with such holder's Conversion Notice
and pursuant to Section 2(f) and, with respect to the unconverted Preferred
Shares, the holder, solely at such holder's option, can elect to:

               (i)    require the Company to redeem from such holder those
     Preferred Shares for which the Company is unable to issue Common Stock in
     accordance with such 

                                      -14-
<PAGE>
 
     holder's Conversion Notice ("Mandatory Redemption") at a price per
     Preferred Share (the "Mandatory Redemption Price") equal to the Triggering
     Event Redemption Price as of such Conversion Date;

               (ii)   if the Company's inability to fully convert Preferred
     Shares is pursuant to Section 4(a)(z), require the Company to issue
     restricted shares of Common Stock in accordance with such holder's
     Conversion Notice and pursuant to Section 2(f);

               (iii)  void its Conversion Notice and retain or have returned, as
     the case may be, the nonconverted Preferred Shares that were to be
     converted pursuant to such holder's Conversion Notice (provided that a
     holder's voiding its Conversion Notice shall not effect the Company's
     obligations to make any payments which have accrued prior to the date of
     such notice); or

               (iv)   if the Company's inability to fully convert Preferred
     Shares is pursuant to Section 4(a)(y), require the Company to issue shares
     of Common Stock in accordance with such holder's Conversion Notice and
     pursuant to Section 2(f) at a Conversion Price equal to the average of the
     Closing Bid Prices of the Common Stock on the five consecutive trading days
     immediately preceding such holder's Notice in Response to Inability to
     Convert (as defined below).

          (b)  Mechanics of Fulfilling Holder's Election.  The Company shall
               -----------------------------------------                    
immediately send via facsimile to a holder of Preferred Shares, upon receipt of
a facsimile copy of a Conversion Notice from such holder which cannot be fully
satisfied as described in Section 4(a), a notice of the Company's inability to
fully satisfy such holder's Conversion Notice (the "Inability to Fully Convert
Notice").  Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such holder's Conversion Notice, (ii)
the number of Preferred Shares which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder shall notify the Company of
its election pursuant to Section 4(a) above by delivering written notice via
facsimile to the Company ("Notice in Response to Inability to Convert").

          (c)  Payment of Mandatory Redemption Price. If such holder shall elect
               -------------------------------------  
to have its shares redeemed pursuant to Section 4(a)(i), the Company shall pay
the Mandatory Redemption Price in cash to such holder within five (5) days of
the Company's receipt of the holder's Notice in Response to Inability to
Convert.  If the Company shall fail to pay the applicable Mandatory Redemption
Price to such holder on a timely basis as described in this Section 4(c) (other
than pursuant to a dispute as to the determination of the arithmetic calculation
of the Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under these Articles of Amendment, the Securities Purchase
Agreement and the Registration Rights Agreement, such unpaid amount shall bear
interest at the rate of 2.5% per month (prorated for partial months) until paid
in full.  Until the full Mandatory Redemption Price is paid in full to such
holder, such holder may void the Mandatory Redemption with respect to those
Preferred Shares for which the full Mandatory Redemption Price has not been paid
and receive back such Preferred Shares.  Notwithstanding the foregoing, if the
Company fails to pay the applicable Mandatory Redemption Price within such five
(5) days time period due to a dispute as to the determination of the Mandatory
Redemption Price, such dispute shall be resolved pursuant to Section 2(f)(iii)
with the term "Mandatory Redemption Price" being substituted for the term
"Conversion Rate".

          (d)  Pro-rata Conversion and Redemption.  In the event the Company
               ----------------------------------                           
receives a Conversion Notice, Notice of Redemption at Option of Holder Upon
Major Transaction or Notice of Redemption at Option of Holder Upon Triggering
Event from more than one holder of 

                                      -15-
<PAGE>
 
Preferred Shares on the same day and the Company can convert and/or redeem some,
but not all, of the Preferred Shares pursuant to this Section 4, the Company
shall convert and/or redeem from each holder of Preferred Shares electing to
have Preferred Shares converted and redeemed at such time an amount equal to
such holder's pro-rata amount (based on the number of Preferred Shares held by
such holder relative to the number of Preferred Shares outstanding) of all
Preferred Shares being converted and redeemed at such time.

     (5)  Company's Right to Redeem.
          ------------------------- 

          (a)  Right to Redeem. Subject to Sections 5(a)(iv) and 5(a)(v) below,
               ---------------                                                 
if the Company shall have issued any New Equity Securities during the 90 day
period following the Issuance Date of the Initial Preferred Shares, the Company
shall have the right, in its sole discretion, to redeem ("Redemption at the
Company's Election"), from time to time, any or all of the Preferred Shares at
the Redemption Price at the Company's Election (as defined below). If the
Company elects to redeem some, but not all, of the Preferred Shares, the Company
shall redeem a pro rata amount from each holder of Preferred Shares based on the
number of Preferred Shares held by such holder relative to the number of
Preferred Shares outstanding.

               (i)    Redemption Price at the Company's Election.  The 
                      ------------------------------------------ 
     "Redemption Price at the Company's Election" shall be an amount per
     Preferred Share equal to the product of (A) 1.15 multiplied by (B) the sum
     of (I) (.06)(P/365)(Stated Value) plus (II) Stated Value; where "P" means
     the number of days from, but excluding, the Issuance Date through and
     including the Date of Redemption at the Company's Election (as defined in
     Section 5(a)(ii)).

               (ii)   Mechanics of Redemption at the Company's Election.  The
                      -------------------------------------------------      
     Company shall have a period of two trading days beginning on the day
     following the expiration of any Exchange Offer Notice Period (as defined in
     the Securities Purchase Agreement) during which it may at its election
     deliver written notice of its Redemption at the Company's Election via
     facsimile and overnight courier ("Notice of Redemption at the Company's
     Election") to (A) each holder of the Preferred Shares and (B) the Transfer
     Agent.  The Company shall effect any Redemption at the Company's Election
     on the 10th trading days after delivering the Notice of Redemption of the
     Company's Election.  Such Notice of Redemption at the Company's Election
     shall indicate (I) the number of Preferred Shares that have been selected
     for redemption, (II) the date that such redemption is to become effective
     (the "Date of Redemption at the Company's Election") and (III) the
     applicable Redemption Price at the Company's Election.  Notwithstanding the
     above, any holder may convert into Common Stock pursuant to Section 2, on
     or prior to the date immediately preceding the Date of Redemption at the
     Company's Election, any Preferred Shares held by such holder, including
     Preferred Shares that have been selected for Redemption at the Company's
     Election pursuant to this Section 5(a).

               (iii)  Payment of Redemption Price.  Each holder submitting
                      ---------------------------                         
     Preferred Shares being redeemed under this Section 5(a) shall send such
     holder's Preferred Stock Certificates so redeemed to the Transfer Agent
     within five (5) business days after the Date of Redemption at the Company's
     Election, and the Company shall pay the applicable Redemption Price at the
     Company's Election to that holder in cash within two business days after
     such holder's Preferred Stock Certificates are delivered to the Company or
     its Transfer Agent.  If the Company shall fail to pay the applicable
     Redemption Price at the Company's Election to such holder on a timely basis
     as described in this Section 5(a)(iii), in addition to any remedy such
     holder of Preferred Shares may have under these Articles of Amendment 

                                      -16-
<PAGE>
 
     and the Securities Purchase Agreement including but not limited to
     declaring such Redemption at the Company's Election null and void, such
     holder shall be entitled to interest at the rate of 2.5% per month until
     the Redemption Price at the Company's Election is paid in full or until
     such Redemption at the Company's Election shall be declared null and void
     with respect to any such holder. Notwithstanding the foregoing, if the
     Company fails to pay the applicable Redemption Price at the Company's
     Election to a holder within the time period described in this Section 5(a)
     due to a dispute as to the arithmetic calculation of the Redemption Price
     at the Company's Election, such dispute shall be resolved pursuant to
     Section 2(f)(iii) above with the term "Redemption Price at the Company's
     Election" being substituted for the term "Conversion Rate."

               (iv)   Company Must Have Immediately Available Funds or Credit
                      -------------------------------------------------------
     Facilities.  The Company shall not be entitled to send any Notice of
     ----------                                                          
     Redemption at the Company's Election pursuant to Section 5(a)(ii) above and
     begin the redemption procedure under this Section 5(a), unless it has:

                      (A)  the full amount of the Redemption Price at the
     Company's Election in cash, available in a demand or other immediately
     available account in a bank or similar financial institution;

                      (B)  credit facilities, with a bank or similar financial
     institutions that are immediately available and unrestricted for use in
     redeeming the Preferred Shares, in the full amount of the Redemption Price
     at the Company's Election; or

                      (C)  a combination of the items set forth in the preceding
     clauses (A) and (B), aggregating the full amount of the Redemption Price at
     the Company's Election.

               (v)    Certain Conditions During Notice Period. The Company shall
                      ---------------------------------------  
     not be entitled to redeem the Preferred Shares on a Date of Redemption at
     the Election of the Company, unless each of the following conditions are
     satisfied as of the date of the Notice of Redemption at the Company's
     Election and on each day from such date until and including the later of
     the Date of Redemption at the Company's Election and the date on which the
     Company pays the applicable Redemption Price:

                      (A)  The Company has delivered Conversion Shares upon
     conversion of the Preferred Shares and Warrant Shares upon exercise of the
     Warrants to the Buyers on a timely basis as set forth in Section 2(f)(ii)
     of this Articles of Amendment and Sections 2(a) and 2(b) of the Warrants,
     respectively; and

                      (B)  The Company otherwise has satisfied its obligations
     and is not in default under these Articles of Amendment, the Securities
     Purchase Agreement, the Warrants and the Registration Rights Agreement.

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

     (7)  Reservation of Shares.  The Company shall, so long as any of the
          ---------------------                                           
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely 

                                      -17-
<PAGE>
 
for the purpose of effecting the conversion of the Preferred Shares, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding (without regard to
any limitations on conversions); provided that the number of shares of Common
Stock so reserved shall at no time be less than 200% of the number of shares of
Common Stock for which the Preferred Shares are at any time convertible. The
initial number of shares of Common Stock reserved for conversions of the
Preferred Shares and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Preferred Shares based on the number
of Preferred Shares held by each holder at the time of issuance of the Preferred
Shares or increase in the number of reserved shares, as the case may be. In the
event a holder shall sell or otherwise transfer any of such holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any Preferred Shares shall be allocated to the remaining holders
of Preferred Shares, pro rata based on the number of Preferred Shares then held
by such holder.

     (8)  Voting Rights.  Holders of Preferred Shares shall have no voting
          -------------                                                   
rights, except as required by law, including but not limited to the Florida
Business Corporation Act, and as expressly provided in these Articles of
Amendment.

     (9)  Liquidation, Dissolution, Winding-Up. In the event of any voluntary or
          ------------------------------------  
involuntary liquidation, dissolution or winding up of the Company, the holders
of the Preferred Shares shall be entitled to receive in cash out of the assets
of the Company, whether from capital or from earnings available for distribution
to its stockholders (the "Preferred Funds"), before any amount shall be paid to
the holders of any of the capital stock of the Company of any class junior in
rank to the Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the sum of (i) $1,000 and (ii)
an amount equal to the product of (.06) (N/365) ($1,000) (such sum being
referred to as the "Liquidation Value"); provided that, if the Preferred Funds
are insufficient to pay the full amount due to the holders of Preferred Shares
and holders of shares of other classes or series of preferred stock of the
Company that are of equal rank with the Preferred Shares as to payments of
Preferred Funds (the "Pari Passu Shares"), then each holder of Preferred Shares
and Pari Passu Shares shall receive a percentage of the Preferred Funds equal to
the full amount of Preferred Funds payable to such holder as a liquidation
preference, in accordance with their respective Articles of Amendment, as a
percentage of the full amount of Preferred Funds payable to all holders of
Preferred Shares and Pari Passu Shares.  The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company.  Neither the consolidation or merger of the Company with or into
any other Person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be deemed to be
a liquidation, dissolution or winding up of the Company.  No holder of Preferred
Shares shall be entitled to receive any amounts with respect thereto upon any
liquidation, dissolution or winding up of the Company other than the amounts
provided for herein; provided that a holder of Preferred Shares shall be
entitled to all amounts previously accrued with respect to amounts owed
hereunder.

     (10) Preferred Rank; Participation.
          ----------------------------- 

                                      -18-
<PAGE>
 
          (a)  All shares of Common Stock shall be of junior rank to all
Preferred Shares in respect to the preferences as to distributions and payments
upon the liquidation, dissolution and winding up of the Company.  The rights of
the shares of Common Stock shall be subject to the preferences and relative
rights of the Preferred Shares.  Without the prior express written consent of
the holders of not less than two-thirds (2/3) of the then outstanding Preferred
Shares, the Company shall not hereafter authorize or issue additional or other
capital stock that is of senior or equal rank to the Preferred Shares in respect
of the preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company other than New Equity Securities for
which a New Financing Notice (as defined in the Securities Purchase Agreement )
has been given which may rank equal to (but not senior to) the Preferred Shares.
Without the prior express written consent of the holders of not less than two-
thirds (2/3) of the then outstanding Preferred Shares, the Company shall not
hereafter authorize or make any amendment to the Company's Articles of
Incorporation or bylaws, or file any resolution of the board of directors of the
Company with the Florida Secretary of State containing any provisions, which
would adversely affect or otherwise impair the rights or relative priority of
the holders of the Preferred Shares relative to the holders of the Common Stock
or the holders of any other class of capital stock.  In the event of the merger
or consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative powers, designations and preferences
provided for herein and no merger shall result inconsistent therewith.

          (b)  Subject to the rights of the holders, if any, of the Pari Passu
Shares, the holders of the Preferred Shares shall, as holders of Preferred
Stock, be entitled to such dividends paid and distributions made to the holders
of Common Stock to the same extent as if such holders of Preferred Shares had
converted the Preferred Shares into Common Stock (without regard to any
limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions.  Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.

     (11) Restriction on Redemption and Cash Dividends with respect to Other
          ------------------------------------------------------------------
Capital Stock.  Until all of the Preferred Shares have been converted or
-------------                                                           
redeemed as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its Common Stock
without the prior express written consent of the holders of not less than two-
thirds (2/3) of the then outstanding Preferred Shares.

     (12) Limitation on Number of Conversion Shares.  Notwithstanding any other
          -----------------------------------------                            
provision herein, the Company shall not be obligated to issue any shares of
Common Stock upon conversion of the Preferred Shares if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon Conversion of the Preferred Shares (the "Exchange
Cap") without breaching the Company's obligations under the rules or
regulations, if any, of OTC or any national securities or automated quotation
system on which the Common Stock is quoted or listed requiring the approval of
the Company's stockholders for the issuance of a certain number of shares of
Common Stock, except that such limitation shall not apply in the event that the
Company (i) obtains the approval of its stockholders as required by applicable
rules and regulations, if any, of OTC or any national securities or automated
quotation system on which the Common Stock is quoted or listed for issuances of
Common Stock in excess of the Exchange Cap or (ii) obtains a written opinion
from outside counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the holders of a majority of the
Preferred Shares then outstanding.  To the extent that the above limitation is
applicable to the Company, until such approval or written opinion is obtained,
no purchaser of Preferred Shares pursuant to the Securities Purchase Agreement
(the "Purchasers") shall be issued, upon conversion of Preferred Shares, shares
of Common Stock in an amount greater than the product of (x) the 

                                      -19-
<PAGE>
 
Exchange Cap amount multiplied by (y) a fraction, the numerator of which is the
number of Preferred Shares issued to such Purchaser pursuant to the Securities
Purchase Agreement and the denominator of which is the aggregate amount of all
the Preferred Shares issued to the Purchasers pursuant to the Securities
Purchase Agreement (the "Cap Allocation Amount"). In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser's Preferred
Shares, the transferee shall be allocated a pro rata portion of such Purchaser's
Cap Allocation Amount. In the event that any holder of Preferred Shares shall
convert all of such holder's Preferred Shares into a number of shares of Common
Stock which, in the aggregate, is less than such holder's Cap Allocation Amount,
then the difference between such holder's Cap Allocation Amount and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Cap Allocation Amounts of the remaining holders of Preferred
Shares on a pro rata basis in proportion to the number of Preferred Shares then
held by each such holder.

     (13) Vote to Change the Terms of or Issue Preferred Shares.  The
          -----------------------------------------------------      
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares, shall be required for (a) any change to
these Articles of Amendment or the Company's Articles of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares, or (b) any issuance of Preferred
Shares other than pursuant to the Securities Purchase Agreement.

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

     (15) Remedies, Characterizations, Other Obligations, Breaches and
          ------------------------------------------------------------
Injunctive Relief.  The remedies provided in these Articles of Amendment shall
-----------------                                                             
be cumulative and in addition to all other remedies available under these
Articles of Amendment, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of these Articles of Amendment.
The Company covenants to each holder of Preferred Shares that there shall be no
characterization concerning this instrument other than as expressly provided
herein.  Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof).  The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of the Preferred Shares and
that the remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Preferred Shares shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

     (16) Specific Shall Not Limit General; Construction.  No specific provision
          ----------------------------------------------                        
contained in these Articles of Amendment shall limit or modify any more general
provision contained herein.  

                                      -20-
<PAGE>
 
These Articles of Amendment shall be deemed to be jointly drafted by the Company
and the initial holders of the Preferred Shares and shall not be construed
against any person as the drafter hereof.

     (17) Failure or Indulgence Not Waiver.  No failure or delay on the part of
          --------------------------------                                     
a holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof (except to the extent that such
power, right or privilege must, in accordance with the terms of these Articles
of Amendment, be exercised within a specified period of time and such period of
time has lapsed without such power, right or privilege being exercised), nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.

     (18) Notices.  Any notice required to be delivered pursuant to the terms of
          -------                                                               
these Articles of Amendment shall be delivered, unless otherwise provided in
these Articles of Amendment, in accordance with the terms, and subject to the
notice provisions of, the Securities Purchase Agreement.

     (19)  Conversion Notice.
           ----------------- 

     Reference is made to these Articles of Amendment, of the Series A
Convertible Preferred Stock (the "Articles Of Amendment").  In accordance with
and pursuant to the Articles of Amendment, the undersigned hereby elects to
convert the number of shares of Series A Convertible Preferred Stock, par value
$0.01 per share (the "Preferred Shares"), of GoodNoise Corporation, a Florida
corporation (the "Company"), indicated below into shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the Preferred Shares specified below as of the
date specified below.

     Date of Conversion: _______________________________________________________

     Number of Preferred Shares to be converted: _______________________________

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

Please confirm the following information:

     Conversion Price: _________________________________________________________

     Number of shares of Common Stock
     to be issued: _____________________________________________________________

Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

     Issue to:           _______________________________________________________
                         _______________________________________________________
                         _______________________________________________________
                         _______________________________________________________
           
     Facsimile Number:   _______________________________________________________

     Authorization:      _______________________________________________________

                                      -21-
<PAGE>
 
                         By: ___________________________________________________
                         Title: ________________________________________________


     Dated:       _______

     Account Number:
      (if electronic book entry transfer): _____________________________________

     Transaction Code Number 
      (if electronic book entry transfer): _____________________________________

                                      -22-
<PAGE>
 
     IN WITNESS WHEREOF, the Company has caused these Articles of Amendment to
be signed by Gene Hoffman, its President , as of the 20th day of October, 1998.

                              GOODNOISE CORPORATION


                              By:               /s/
                                 -----------------------------------------------
                              Name:  Gene Hoffman
                              Its:   President
