RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                                   AMNEX, INC.

                     (AS AMENDED THROUGH DECEMBER 31, 1996)

         (1)  The name of the corporation is AMNEX, Inc. (the
"Corporation").

         (2) The  Corporation  is formed to  engage in any act or  activity  for
which  corporations  may be organized under the Business  Corporation Law of the
State of New  York,  provided  that it is not  formed  to  engage  in any act or
activity  which  requires  the  consent  or  approval  of  any  state  official,
department,  board, agency, or other body without such consent or approval first
being obtained.

         (3) The  office of the  Corporation  in the State of New York  shall be
located in the County of New York.

         (4) (a) The aggregate  number of shares of stock which the  Corporation
shall have the authority to issue is Forty-five  Million  (45,000,000)  of which
Forty Million  (40,000,000)  are Common Shares,  $.001 par value per share,  and
Five Million (5,000,000) are Preferred Shares, $.001 par value per share.

             (b) The Board of Directors  hereby is vested with the  authority to
provide for the issuance of the Preferred  Shares,  at any time and from time to
time,  in one or more  series,  each of such series to have such voting  powers,
designations, preferences and

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relative  participating,   optional,  conversion  and  other  rights,  and  such
qualifications, limitations or restrictions thereon as expressly provided in the
resolution or resolutions  duly adopted by the Board of Directors  providing for
the issuance of such shares or series  thereof.  The  authority  which hereby is
vested in the Board of  Directors  shall  include,  but not be  limited  to, the
authority to provide for the  following  matters  relating to each series of the
Preferred Shares:

                       (i)   The designation of any series.

                       (ii)  The number of shares initially constituting any 
such series.

                       (iii) The increase, and the decrease, to a number not 
less than the number of the outstanding shares of any such series, of the number
of shares constituting such series theretofore fixed.

                       (iv)  The rate or rates and the times at which dividends
on the Preferred Shares or any series thereof shall be paid, and whether or not
such dividends shall be cumulative,  and, if such dividends shall be cumulative,
the date or dates from and after which they shall accumulate.

                       (v)   Whether or not the Preferred Shares or series 
thereof shall be redeemable, and, if such shares shall be

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redeemable,  the terms and  conditions  of such  redemption,  including  but not
limited to the date or dates upon or after which such shares shall be redeemable
and the amount per share  which  shall be payable  upon such  redemption,  which
amount may vary under different conditions and at different redemption dates.

                       (vi)  The amount payable on the Preferred Shares or 
series  thereof  in  the  event  of  the  voluntary or  involuntary liquidation,
dissolution or winding up of the Corporation;  provided,  however, that the 
holders of shares  ranking  senior to other shares shall be entitled to be paid,
or to have set apart for payment,  not less than the liquidation  value of such
shares  before the  holders of the Common  Shares or the holders of any other
series of Preferred Shares ranking junior to such shares.

                       (vii)  Whether or not the Preferred Shares or series  
thereof  shall have voting  rights,  in addition to the voting rights provided 
by law,  and, if such shares shall have such voting  rights,  the terms and 
conditions thereof, including but not limited to the right of the holders of
such  shares to vote as a separate  class  either  alone or with the  holders of
shares of one or more other class or series of Preferred Shares and the right to
have more than one vote per share.

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                      (viii) Whether or not a sinking fund shall be provided for
the redemption of the Preferred Shares or series thereof, and, if such a sinking
fund shall be provided, the terms and conditions thereof.

                       (ix)  Whether or not a purchase fund shall be provided 
for the Preferred Shares or series thereof,  and, if such a purchase fund shall
be provided, the terms and conditions thereof.

                       (x)  Whether or not the Preferred Shares or series 
thereof shall have  conversion  privileges,  and, if such shares shall have 
conversion  privileges,  the terms and conditions of conversion,  including
but not limited to any provision for the  adjustment of the  conversion  rate or
the conversion price.

                         (xi) Any other relative rights, preferences, 
qualifications, limitations and restrictions.

                  (c) Series A Preferred Shares. A series of Preferred Shares is
hereby  created,  to be limited in amount to 30,000 of the 5,000,000  authorized
but  unissued  Preferred  Shares.  The  designation,  relative  rights,  powers,
preferences, qualifications and limitations are as follows:

         (i)      Designation of Series.  The designation of the series of
                  Preferred Shares created hereby shall be Series A

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                  Preferred Shares (hereinafter the "Series A Preferred 
                  Shares").

         (ii)     Dividends.

                  (A) The holders of Series A Preferred Shares, in preference to
                  the  holders of Common  Shares,  shall be entitled to receive,
                  when and as declared by the Board of  Directors,  dividends at
                  the rate of eight dollars ($8.00) per share per annum,  and no
                  more. Subject to the requirements of applicable law, dividends
                  on the Series A Preferred  Shares  shall be payable  annually,
                  when and as declared by the Board of Directors,  commencing in
                  1993. Such dividends on the Series A Preferred Shares shall be
                  cumulative so that if all or any part of such dividends  shall
                  not have been paid or distributed in any year, or declared and
                  set apart,  the amount of the  deficiency  (without  interest)
                  shall  be paid or  distributed,  or  declared  and set  apart,
                  before any dividend or other  distribution shall be paid upon,
                  or declared  and set apart for,  Common  Shares.  Declared but
                  unpaid dividends shall not bear interest.

                  (B)  Except  as  hereinafter   provided  and  subject  to  the
                  requirements of applicable law, including, without limitation,
                  the obtaining of any necessary  approvals or consents from the
                  holders of the Common Shares of the Corporation,  any dividend
                  declared  on the Series A  Preferred  Shares  shall be paid in
                  cash or, at the option of the Corporation, in Common Shares of
                  the Corporation  having a market price, on the day immediately
                  preceding  the date on which such  dividend is  declared  (the
                  "Valuation  Date"),  equal to the amount of the  dividend.  As
                  used herein,  the term  "market  price" shall mean the closing
                  selling  price or, if not  available,  the mean of the closing
                  bid and asked prices,  or, if not  available,  the mean of the
                  highest bid and lowest asked  prices,  of the Common Shares as
                  quoted  on  a  national   securities   exchange,   or  in  the
                  over-the-counter  market  as  reported  by  NASDAQ  or, if not
                  available, by the National Quotation Bureau, Incorporated,  as
                  the case may be,  or, if there is no  selling  or bid or asked
                  price on a particular  day, then the closing selling price or,
                  if not available, the

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                  mean  of  the  closing  bid  and  asked  prices,  or,  if  not
                  available, the mean of the highest bid and lowest asked prices
                  on the nearest trading date before that day and for which such
                  prices are available,  and if the Common Shares are not listed
                  on  such  an  exchange  or  traded  in  such a  market  on the
                  Valuation  Date,  then the market price shall be determined by
                  the  Board of  Directors  by  taking  into  consideration  all
                  relevant   factors,   including,   but  not  limited  to,  the
                  Corporation's  net  worth,   prospective   earning  power  and
                  dividend paying capacity.

         (iii)    Voting  Rights.  The holders of the Series A Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series A Preferred  Share
                  entitled to vote at such  meetings as is set forth below,
                  voting  together with the holders of Common  Shares, and other
                  Preferred Shares who are entitled to vote, if any such shares
                  are then outstanding, and not as a separate class, except as
                  required by law. The number of votes to which the holders of
                  the Series A Preferred Shares  shall be entitled  to vote for
                  each Series A Preferred Share shall equal the number of Common
                  Shares of the Corporation into which such Series A Preferred
                  Share shall be convertible on or after October 1, 1992
                  (without giving effect to any reductions in the Conversion
                  Price, as hereinafter defined, as provided for in subsection
                  (v) (A) hereof).

         (iv)     Redemption.

                  (A) In the event any holder or  holders of Series A  Preferred
                  Shares  shall give  written  notice to the  Corporation  of an
                  election to convert  such  shares  into  Common  Shares of the
                  Corporation  as provided for in subsection  (v)(B)(ii)  hereof
                  (whether or not such holder shall have theretofore surrendered
                  the certificate(s)  representing the Series A Preferred Shares
                  for conversion),  the Corporation may elect, at its option, by
                  notice  given  prior  to any  Effective  Conversion  Date  (as
                  hereinafter  defined) as provided in (B) below,  to redeem all
                  or any part of the outstanding Series A Preferred

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<PAGE>



                  Shares  with  respect to which an election to convert has been
                  given to the Corporation at a price per share in cash equal to
                  one hundred thirty dollars ($130.00) (the "Redemption  Price")
                  plus all accrued  and unpaid  dividends  with  respect to such
                  Series A Preferred Shares.

                  (B) Notice of every  redemption  shall be given by mailing the
                  same to  every  holder  of  record  of any  shares  then to be
                  redeemed,  prior to any Effective Conversion Date and not less
                  than ten (10) nor more than thirty (30) days prior to the date
                  fixed as the date for the redemption  thereof (the "Redemption
                  Date"),  at the  respective  addresses  of such holders as the
                  same  shall  appear  on  the  stock   transfer  books  of  the
                  Corporation.  The notice  described above shall state that the
                  shares  specified  in  such  notice  will be  redeemed  by the
                  Corporation  at the  Redemption  Price  plus all  accrued  and
                  unpaid  dividends on the Redemption  Date,  upon the surrender
                  for  cancellation,  at the place designated in such notice, of
                  the certificate(s)  representing the shares so to be redeemed,
                  properly  endorsed for transfer,  or  accompanied  by a proper
                  instrument  of  assignment  and  transfer,   and  bearing  all
                  necessary  transfer tax stamps  thereto  affixed and cancelled
                  (provided,  however, that such surrender shall not be required
                  if  the  holder  of  record   shall  have   theretofore   duly
                  surrendered  the  certificate(s)  representing  the  Series  A
                  Preferred Shares in accordance with the conversion  provisions
                  set  forth  in  subsection  (v)  hereof).  On  and  after  the
                  Redemption  Date,  each holder of shares called for redemption
                  shall  be  entitled  to  receive   therefore,   in  cash,  the
                  Redemption  Price, plus accrued and unpaid dividends as of the
                  Redemption Date, upon  presentation and surrender at the place
                  designated  in such  notice of the  certificate(s)  for shares
                  held  by such  holder  and  called  for  redemption,  properly
                  endorsed for transfer or accompanied by proper  instruments of
                  assignment or transfer, and bearing all necessary transfer tax
                  stamps thereto affixed and cancelled (provided,  however, that
                  such  surrender  shall not be required if the holder of record
                  shall  have   theretofore   surrendered   the   certificate(s)
                  representing  the Series A Preferred Shares in accordance with
                  the conversion provisions set forth in subsection (v) hereof).
                  If the

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                  Corporation  shall give notice of redemption as aforesaid (and
                  unless the Corporation  shall fail to pay the Redemption Price
                  of the shares duly presented for redemption,  plus all accrued
                  and unpaid  dividends as of the Redemption Date, in accordance
                  with such notice),  all shares called for redemption  shall be
                  deemed to have been redeemed on the Redemption  Date,  whether
                  or not the  certificates  for said shares shall be surrendered
                  for redemption and cancellation, and said shares so called for
                  redemption  shall from and after said date cease to  represent
                  any interest whatever in the Corporation or its property,  and
                  the holders  thereof shall have no rights other than the right
                  to receive the Redemption  Price,  plus all accrued and unpaid
                  dividends as of the Redemption  Date, but without any right to
                  receive dividends or interest thereon from or after said date.
                  All Series A Preferred Shares redeemed under the provisions of
                  this subsection shall be forthwith retired and cancelled.

         (v)      Conversion.

                  (A) Conversion Right and Price.  Subject to the  Corporation's
                  redemption  right as provided for in  subsection  (iv) hereof,
                  each Series A Preferred  Share  shall be  convertible,  at the
                  option of the holder thereof,  at any time on or after October
                  1, 1992, at the office of the Corporation, into such number of
                  Common Shares of the  Corporation as is determined by dividing
                  one hundred  dollars  ($100.00)  by the  Conversion  Price (as
                  hereinafter   defined).   For   purposes   hereof,   the  term
                  "Conversion  Price" shall mean twenty six and two-thirds cents
                  ($.26 - 2/3),  subject to adjustment as hereinafter set forth;
                  provided,  however,  that,  in  the  event  the  Corporation's
                  Pre-tax  Net Income (as  hereinafter  defined)  for the twelve
                  (12) month period ending June 30, 1993 (the "12 Month Period")
                  shall not  exceed  one  million  dollars  ($1,000,000),  then,
                  effective with the determination of the Corporation's  Pre-tax
                  Net Income for the 12 Month Period (there being no retroactive
                  adjustment), the Conversion Price shall instead be as follows:
                  (i) if the Corporation attains a Pre-tax Net Income for the 12
                  Month Period, but such Pre-tax Net

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                  Income  is  equal  to  or  less  than  one   million   dollars
                  ($1,000,000),  the  Conversion  Price  shall be  twenty  cents
                  ($.20);  and (ii) if the Corporation does not attain a Pre-tax
                  Net Income for the 12 Month Period, the Conversion Price shall
                  be thirteen  and  one-third  cents ($.13 - 1/3).  For purposes
                  hereof,  the terms  "Pre-tax  Net Income" and "Net Loss" shall
                  mean the Corporation's  consolidated net income or loss before
                  all taxes  determined in accordance  with  generally  accepted
                  accounting  principles,  as calculated by the Company's  Chief
                  Financial  Officer,  except that any pre-tax effect of certain
                  reductions in conversion  prices  provided for in that certain
                  Agreement dated as of March 11, 1992 by and among the Company,
                  David A. Lyons, Steven G. Chrust and Friedli Corporate Finance
                  AG, shall be excluded.  For purposes hereof, the Corporation's
                  Pre-tax Net Income or Net Loss for the fiscal  quarter  ending
                  December  31,  1992  shall be deemed  equal to the  difference
                  between the  Corporation's  Pre-tax Net Income or Net Loss for
                  the fiscal  year  ending  December  31,  1992,  as audited and
                  reported upon by the independent  auditors of the Corporation,
                  and the  Corporation's  Pre-tax Net Income or Net Loss for the
                  nine (9) month period ending September 30, 1992.

                  (B) Procedure.  Before any holder of Series A Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series A Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance  with (i) above and the written notice  pursuant to
                  and in accordance with (ii) above (such  thirtieth  (30th) day
                  being  hereinafter  referred to as the  "Effective  Conversion
                  Date"),  the holder shall thereupon be deemed to be the holder
                  of record  of the  Common  Shares  issuable  upon  conversion,
                  notwithstanding   that  the  stock   transfer   books  of  the
                  Corporation shall

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                  then be closed or that the  certificate(s)  representing  such
                  Common  Shares  shall not then be  actually  delivered  to the
                  holder.   Subject  to  the  provisions   hereof,   immediately
                  following the Effective Conversion Date, the Corporation shall
                  cause its  transfer  agent to issue and deliver to such holder
                  of Series A Preferred Shares a  certificate(s)  for the number
                  of  Common  Shares  to which  the  holder  shall be  entitled.
                  Notwithstanding  anything hereinabove to the contrary,  in the
                  event the  Corporation  shall exercise its  redemption  rights
                  pursuant to subsection (iv) hereof,  the Corporation  shall be
                  under no  obligation  to issue Common Shares to the holder and
                  the  holder's  sole  rights  shall be as set forth  under such
                  subsection (iv).

                  (C)      Adjustment of Conversion Price.

                  (i) In the  event  that  the  Corporation  shall  (i)  pay any
                  dividend on its capital stock payable in Common Shares (except
                  with  respect to the  dividend  payable to the  holders of the
                  Series A Preferred  Shares);  (ii) effect a subdivision of its
                  outstanding  shares into a greater number of Common Shares (by
                  reclassification,  stock split or otherwise than by payment of
                  a dividend in Common  Shares);  (iii) effect a combination  or
                  consolidation  of its outstanding  Common Shares into a lesser
                  number of Common Shares (by reclassification, reverse split or
                  otherwise);  (iv)  issue  by  reclassification,   exchange  or
                  substitution  of its Common Shares any shares of capital stock
                  of the  Corporation  or effect  any other  transaction  having
                  similar  effect,  the Conversion  Price in effect  immediately
                  prior  to such  action  shall  be  adjusted  so that  upon the
                  exercise of the conversion  right hereof at any time after the
                  occurrence of any event described  above,  the holder shall be
                  entitled  to receive  the Common  Shares to which such  holder
                  would have been finally  entitled,  after giving effect to the
                  occurrence of such event,  as if such holder had converted the
                  Series A Preferred Shares  immediately prior to the occurrence
                  of such event.  An adjustment  made pursuant to this paragraph
                  (C) shall become effective  immediately  after the record date
                  in  the  case  of  a  dividend  and  shall  become   effective
                  immediately after the effective date in

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                  the case of a subdivision, combination, reclassification,
                  exchange or substitution.

                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make appropriate  provision so that,
                  subject  to  the  Corporation's  redemption  rights  described
                  hereinabove,  the holder of each Series A Preferred Share then
                  outstanding  shall have the right to  convert  such share into
                  the kind and amount of shares or other securities and property
                  receivable  upon such  consolidation  or merger by a holder of
                  the number of Common Shares into which such Series A Preferred
                  Shares  might have been  converted  immediately  prior to such
                  consolidation or merger.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series A Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the product of (1) such fraction of a share times (2)
                  the market price (as hereinabove  defined) of one Common Share
                  on the Effective Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation shall at all times use its best efforts to reserve
                  and keep available out of its  authorized but unissued  Common
                  Shares,  solely for the purpose of effecting the conversion of
                  the  Series A  Preferred  Shares,  such  number of its  Common
                  Shares as shall from time to time be  sufficient to effect the
                  conversion of all outstanding  Series A Preferred Shares,  and
                  if at any time the number of  authorized  but unissued  Common
                  Shares shall not be sufficient to effect the conversion of all
                  then outstanding Series A Preferred Shares, the

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<PAGE>



                  Corporation  will,  as its  sole  obligation,  subject  to the
                  requirements  of  applicable  state law,  take such  corporate
                  action as may, in the opinion of its counsel,  be necessary to
                  increase its  authorized  but unissued  Common  Shares to such
                  number  of shares as shall be  sufficient  for such  purposes;
                  provided, however that nothing contained herein shall preclude
                  the Corporation  from satisfying its obligations in respect of
                  the conversion of the Series A Preferred Shares by delivery of
                  purchased  Common Shares which are held in the treasury of the
                  Corporation.

                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series A  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of  the  surrender  of  the   certificate(s)  as  required  by
                  subsections (iv) and (v) hereof.

                  (G)      Statutory Restrictions.  The foregoing provisions
                  for conversion of the Series A Preferred Shares shall be
                  subject to all applicable statutory limitations and
                  restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary  liquidation,  dissolution  or  winding  up of the
                  Corporation,  the holders of Series A Preferred Shares will be
                  entitled  to  receive,   prior  and  in   preference   to  any
                  distribution of the assets or surplus funds of the Corporation
                  to the holders of any Common Shares by reason of the ownership
                  thereof,  an amount  equal to (1) the fixed sum of one hundred
                  dollars  ($100.00)  per share and no more and (2) all  accrued
                  and unpaid  dividends due with respect to the Preferred Shares
                  (the "Preferential  Amount").  If, upon the occurrence of such
                  an event, the

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<PAGE>



                  assets and funds thus distributed  among the holders of Series
                  A Preferred Shares shall be insufficient to permit the payment
                  to such holders of the full  Preferential  Amount,  then,  the
                  entire assets and funds of the Corporation  legally  available
                  for  distribution  shall  be  distributed  ratably  among  the
                  holders of Series A Preferred  Shares in  accordance  with the
                  respective  amounts  which  would be payable on such shares if
                  all  amounts  payable  thereon  were  paid in full.  After the
                  payment  or  setting  apart of the full  Preferential  Amounts
                  required  to be paid to the  holders  of  Series  A  Preferred
                  Shares, the holders of Common Shares or any other stock of the
                  Corporation  ranking  in  liquidation  junior to the  Series A
                  Preferred  Shares  shall be  entitled  to receive  ratably all
                  remaining assets or surplus funds of the Corporation.  Neither
                  the merger or consolidation of the Corporation,  nor the sale,
                  lease or  conveyance  of all or part of its  assets,  shall be
                  deemed to be a  liquidation,  dissolution or winding up of the
                  affairs   of   the   Corporation,    either   voluntarily   or
                  involuntarily, within the meaning of this section.

         (vii)    Sinking Fund.  The Series A Preferred Shares shall not be
                  entitled to the benefit of any sinking fund to be applied to
                  their purchase or redemption.

                  (d) Series B Preferred Shares. A series of Preferred Shares is
hereby created,  to be limited in amount to 356,000 of the 5,000,000  authorized
Preferred  Shares.  The  designation,   relative  rights,  powers,  preferences,
qualifications and limitations are as follows:

         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series B Preferred
                  Shares (hereinafter the "Series B Preferred Shares").

         (ii)     Dividends.


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<PAGE>



                  (A) The holders of Series B Preferred Shares, in preference to
                  the  holders of Common  Shares and on a pari passu  basis with
                  the holders of Series A  Preferred  Shares,  if any,  shall be
                  entitled  to  receive,  when and as  declared  by the Board of
                  Directors,  dividends  at the rate of forty  cents  ($.40) per
                  share per annum,  and no more.  Subject to the requirements of
                  applicable  law,  dividends  on the Series B Preferred  Shares
                  shall be payable  annually,  when and as declared by the Board
                  of Directors, commencing in 1993. Such dividends on the Series
                  B Preferred  Shares shall be  cumulative so that if all or any
                  part of such dividends shall not have been paid or distributed
                  in any year,  or  declared  and set  apart,  the amount of the
                  deficiency (without interest) shall be paid or distributed, or
                  declared   and  set  apart,   before  any  dividend  or  other
                  distribution  shall be paid upon,  or  declared  and set apart
                  for,  Common Shares.  Declared but unpaid  dividends shall not
                  bear  interest.  For  dividend  purposes,  Series B  Preferred
                  Shares  shall be deemed to have been  issued as of the date of
                  issuance of the Series A Preferred  Shares for which they were
                  exchanged.

                  (B)  Except  as  hereinafter   provided  and  subject  to  the
                  requirements of applicable law, including, without limitation,
                  the obtaining of any necessary  approvals or consents from the
                  holders of the Common Shares and/or Series A Preferred  Shares
                  of the  Corporation,  any  dividend  declared  on the Series B
                  Preferred  Shares  shall be paid in cash or, at the  option of
                  the Corporation,  in Common Shares of the Corporation having a
                  market  price,  on the day  immediately  preceding the date on
                  which such dividend is declared (the "Valuation Date"),  equal
                  to the  amount  of the  dividend.  As used  herein,  the  term
                  "market price" shall mean the closing selling price or, if not
                  available,  the mean of the closing bid and asked prices,  or,
                  if not available, the mean of the highest bid and lowest asked
                  prices,   of  the  Common  Shares  as  quoted  on  a  national
                  securities  exchange,  or in the  over-the-counter  market  as
                  reported  by NASDAQ  or,  if not  available,  by the  National
                  Quotation  Bureau,  Incorporated,  as the case may be,  or, if
                  there is no selling or bid or asked price on a particular day,
                  then the closing selling price or, if not available,  the mean
                  of the closing bid and asked

                                       14

<PAGE>



                  prices, or, if not available,  the mean of the highest bid and
                  lowest  asked  prices on the nearest  trading date before that
                  day and for which such prices are available, and if the Common
                  Shares are not listed on such an  exchange or traded in such a
                  market on the Valuation  Date,  then the market price shall be
                  determined   by  the  Board  of   Directors   by  taking  into
                  consideration all relevant factors, including, but not limited
                  to, the Corporation's net worth, prospective earning power and
                  dividend paying capacity.

         (iii)    Voting  Rights.  The holders of the Series B Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series B Preferred Share
                  entitled to vote at such  meetings as is set forth below,
                  voting together with the holders of Common Shares, and other
                  Preferred Shares who are entitled to vote, if any such shares
                  are then outstanding,  and not as a separate class,  except as
                  required by law. The number of votes to which the holders of
                  the Series B Preferred Shares  shall be entitled  to vote for
                  each Series B Preferred Share shall equal the number of Common
                  Shares of the  Corporation  into which such Series B Preferred
                  Share is convertible.

         (iv)     Redemption.

                  (A) In the event any holder or  holders of Series B  Preferred
                  Shares  shall give  written  notice to the  Corporation  of an
                  election to convert  such  shares  into  Common  Shares of the
                  Corporation  as provided for in subsection  (v)(B)(ii)  hereof
                  (whether or not such holder shall have theretofore surrendered
                  the certificate(s)  representing the Series B Preferred Shares
                  for conversion),  the Corporation may elect, at its option, by
                  notice  given  prior  to any  Effective  Conversion  Date  (as
                  hereinafter  defined) as provided in (B) below,  to redeem all
                  or any part of the outstanding  Series B Preferred Shares with
                  respect to which an  election to convert has been given to the
                  Corporation  at a price per share in cash equal to six dollars
                  fifty cents ($6.50) (the

                   1                    15

<PAGE>



                  "Redemption Price") plus all accrued and unpaid dividends with
                  respect to such Series B Preferred Shares.

                  (B) Notice of every  redemption  shall be given by mailing the
                  same to  every  holder  of  record  of any  shares  then to be
                  redeemed,  prior to any Effective Conversion Date and not less
                  than ten (10) nor more than thirty (30) days prior to the date
                  fixed as the date for the redemption  thereof (the "Redemption
                  Date"),  at the  respective  addresses  of such holders as the
                  same  shall  appear  on  the  stock   transfer  books  of  the
                  Corporation.  The notice  described above shall state that the
                  shares  specified  in  such  notice  will be  redeemed  by the
                  Corporation  at the  Redemption  Price  plus all  accrued  and
                  unpaid  dividends on the Redemption  Date,  upon the surrender
                  for  cancellation,  at the place designated in such notice, of
                  the certificate(s)  representing the shares so to be redeemed,
                  properly  endorsed for transfer,  or  accompanied  by a proper
                  instrument  of  assignment  and  transfer,   and  bearing  all
                  necessary  transfer tax stamps  thereto  affixed and cancelled
                  (provided,  however, that such surrender shall not be required
                  if  the  holder  of  record   shall  have   theretofore   duly
                  surrendered  the  certificate(s)  representing  the  Series  B
                  Preferred Shares in accordance with the conversion  provisions
                  set  forth  in  subsection  (v)  hereof).  On  and  after  the
                  Redemption  Date,  each holder of shares called for redemption
                  shall be entitled to receive therefor, in cash, the Redemption
                  Price,  plus accrued and unpaid dividends as of the Redemption
                  Date, upon  presentation and surrender at the place designated
                  in such notice of the  certificate(s)  for shares held by such
                  holder  and  called  for  redemption,  properly  endorsed  for
                  transfer or accompanied by proper instruments of assignment or
                  transfer,  and  bearing  all  necessary  transfer  tax  stamps
                  thereto affixed and cancelled  (provided,  however,  that such
                  surrender  shall not be required if the holder of record shall
                  have theretofore  surrendered the certificate(s)  representing
                  the  Series  B  Preferred   Shares  in  accordance   with  the
                  conversion  provisions set forth in subsection (v) hereof). If
                  the  Corporation  shall give notice of redemption as aforesaid
                  (and unless the  Corporation  shall fail to pay the Redemption
                  Price of the shares duly presented for

                                       16

<PAGE>



                  redemption,  plus all accrued and unpaid  dividends  as of the
                  Redemption  Date, in accordance with such notice),  all shares
                  called for redemption shall be deemed to have been redeemed on
                  the Redemption Date,  whether or not the certificates for said
                  shares shall be surrendered  for redemption and  cancellation,
                  and said shares so called for redemption  shall from and after
                  said date cease to  represent  any  interest  whatever  in the
                  Corporation  or its  property,  and the holders  thereof shall
                  have no rights other than the right to receive the  Redemption
                  Price,  plus  all  accrued  and  unpaid  dividends  as of  the
                  Redemption Date, but without any right to receive dividends or
                  interest  thereon  from or  after  said  date.  All  Series  B
                  Preferred   Shares  redeemed  under  the  provisions  of  this
                  subsection shall be forthwith retired and cancelled.

         (v)      Conversion.

                  (A) Conversion Right and Price.  Subject to the  Corporation's
                  redemption  right as provided for in  subsection  (iv) hereof,
                  each Series B Preferred  Share  shall be  convertible,  at the
                  option  of  the   holder   thereof,   at  the  office  of  the
                  Corporation,   into  such  number  of  Common  Shares  of  the
                  Corporation as is determined by dividing five dollars  ($5.00)
                  by the Conversion Price (as hereinafter defined). For purposes
                  hereof,  the term  "Conversion  Price"  shall mean fifty cents
                  ($.50), subject to adjustment as hereinafter set forth.

                  (B) Procedure.  Before any holder of Series B Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series B Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance with (i) above and the written

                                       17

<PAGE>



                  notice  pursuant to and in accordance with (ii) above, or such
                  shorter  period  of  time  as the  Board  of  Directors  shall
                  determine  with  respect to any  particular  conversion  (such
                  thirtieth  (30th) day or end of  shorter  period of time being
                  hereinafter  referred to as the "Effective  Conversion Date"),
                  the  holder  shall  thereupon  be deemed  to be the  holder of
                  record  of  the  Common  Shares   issuable  upon   conversion,
                  notwithstanding   that  the  stock   transfer   books  of  the
                  Corporation  shall  then be closed or that the  certificate(s)
                  representing  such  Common  Shares  shall not then be actually
                  delivered  to the holder.  Subject to the  provisions  hereof,
                  immediately  following  the  Effective  Conversion  Date,  the
                  Corporation  shall  cause  its  transfer  agent to  issue  and
                  deliver  to  such  holder  of  Series  B  Preferred  Shares  a
                  certificate(s)  for the  number of Common  Shares to which the
                  holder shall be entitled. Notwithstanding anything hereinabove
                  to the contrary,  in the event the Corporation  shall exercise
                  its redemption rights pursuant to subsection (iv) hereof,  the
                  Corporation  shall  be  under no  obligation  to issue  Common
                  Shares to the holder and the holder's  sole rights shall be as
                  set forth under such subsection (iv).

                  (C)      Adjustment of Conversion Price.

                  (i) In the  event  that  the  Corporation  shall  (i)  pay any
                  dividend on its capital stock payable in Common Shares (except
                  with  respect to the  dividend  payable to the  holders of the
                  Series B Preferred  Shares);  (ii) effect a subdivision of its
                  outstanding  shares into a greater number of Common Shares (by
                  reclassification,  stock split or otherwise than by payment of
                  a dividend in Common  Shares);  (iii) effect a combination  or
                  consolidation  of its outstanding  Common Shares into a lesser
                  number of Common Shares (by reclassification, reverse split or
                  otherwise);  (iv)  issue  by  reclassification,   exchange  or
                  substitution  of its Common Shares any shares of capital stock
                  of the  Corporation  or effect  any other  transaction  having
                  similar  effect,  the Conversion  Price in effect  immediately
                  prior  to such  action  shall  be  adjusted  so that  upon the
                  exercise of the conversion  right hereof at any time after the
                  occurrence of any event described  above,  the holder shall be
                  entitled to receive the Common

                                       18

<PAGE>



                  Shares to which such holder would have been finally  entitled,
                  after giving  effect to the  occurrence  of such event,  as if
                  such  holder  had  converted  the  Series B  Preferred  Shares
                  immediately   prior  to  the  occurrence  of  such  event.  An
                  adjustment  made  pursuant to this  paragraph (C) shall become
                  effective  immediately  after the record date in the case of a
                  dividend  and shall  become  effective  immediately  after the
                  effective  date  in the  case of a  subdivision,  combination,
                  reclassification, exchange or substitution.

                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make appropriate  provision so that,
                  subject  to  the  Corporation's  redemption  rights  described
                  hereinabove,  the holder of each Series B Preferred Share then
                  outstanding  shall have the right to  convert  such share into
                  the kind and amount of shares or other securities and property
                  receivable  upon such  consolidation  or merger by a holder of
                  the number of Common Shares into which such Series B Preferred
                  Shares  might have been  converted  immediately  prior to such
                  consolidation or merger.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series B Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the market price (as  hereinabove  defined) of one Common
                  Share on the Effective Conversion Date.

                  (E)  Reservation of Shares Issuable Upon Conversion.  The
                  Corporation shall at all times use its best efforts to
                  reserve and keep available out of its authorized but

                                       19

<PAGE>



                  unissued  Common  Shares,  solely for the purpose of effecting
                  the conversion of the Series B Preferred  Shares,  such number
                  of its Common  Shares as shall from time to time be sufficient
                  to effect the conversion of all outstanding Series B Preferred
                  Shares,  and if at any  time  the  number  of  authorized  but
                  unissued  Common  Shares shall not be sufficient to effect the
                  conversion of all then outstanding  Series B Preferred Shares,
                  the Corporation  will, as its sole obligation,  subject to the
                  requirements  of  applicable  state law,  take such  corporate
                  action as may, in the opinion of its counsel,  be necessary to
                  increase its  authorized  but unissued  Common  Shares to such
                  number  of shares as shall be  sufficient  for such  purposes;
                  provided, however that nothing contained herein shall preclude
                  the Corporation  from satisfying its obligations in respect of
                  the conversion of the Series B Preferred Shares by delivery of
                  purchased  Common Shares which are held in the treasury of the
                  Corporation.

                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series B  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of  the  surrender  of  the   certificate(s)  as  required  by
                  subsections (iv) and (v) hereof.

                  (G)      Statutory Restrictions.  The foregoing provisions
                  for conversion of the Series B Preferred Shares shall be
                  subject to all applicable statutory limitations and
                  restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary liquidation, dissolution or winding up of the
                  Corporation, the holders of Series B Preferred Shares

                                       20

<PAGE>



                  will be entitled to receive,  prior and in  preference  to any
                  distribution of the assets or surplus funds of the Corporation
                  to the holders of any Common Shares by reason of the ownership
                  thereof,  and on a pari passu  basis  with the  holders of the
                  Series A Preferred  Shares, if any, an amount equal to (i) the
                  fixed sum of five  dollars  ($5.00)  per share and no more and
                  (ii) all accrued and unpaid  dividends due with respect to the
                  Series B Preferred  Shares (the  "Preferential  Amount").  If,
                  upon the  occurrence  of such an event,  the  assets and funds
                  thus  distributed  among the  holders  of  Series B  Preferred
                  Shares  shall be  insufficient  to permit the  payment to such
                  holders  of the full  Preferential  Amount,  then,  the entire
                  assets  and funds of the  Corporation  legally  available  for
                  distribution  to the holders of the Series B Preferred  Shares
                  shall be distributed  ratably among such holders in accordance
                  with the  respective  amounts  which  would be payable on such
                  shares if all amounts payable thereon were paid in full. After
                  the payment or setting apart of the full Preferential  Amounts
                  required  to be paid to the  holders  of Series A and Series B
                  Preferred  Shares,  the holders of Common  Shares or any other
                  stock of the Corporation  ranking in liquidation junior to the
                  Series A and Series B  Preferred  Shares  shall be entitled to
                  receive  ratably all remaining  assets or surplus funds of the
                  Corporation.  Neither  the  merger  or  consolidation  of  the
                  Corporation,  nor the sale, lease or conveyance of all or part
                  of  its  assets,   shall  be  deemed  to  be  a   liquidation,
                  dissolution  or winding up of the affairs of the  Corporation,
                  either  voluntarily  or  involuntarily,  within the meaning of
                  this section.

         (vii)    Sinking  Fund.  The Series B Preferred  Shares shall not be
                  entitled to the  benefit of any  sinking fund to be applied to
                  their purchase or redemption.

                  (e)  Series C Preferred Shares.  A series of Preferred
Shares is hereby created, to be limited in amount to 1,090,910 of the 5,000,000 
authorized Preferred Shares.  The designation, relative rights, powers, 
preferences, qualifications and limitations are as follows:

                                       21

<PAGE>





         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series C Preferred
                  Shares (hereinafter the "Series C Preferred Shares").

         (ii)     Dividends.

                  (A) The holders of Series C Preferred Shares, in preference to
                  the  holders of Common  Shares and on a pari passu  basis with
                  the  holders  of  Series  A  Preferred  Shares  and  Series  B
                  Preferred Shares,  if any, shall be entitled to receive,  when
                  and as declared by the Board of  Directors,  dividends  at the
                  rate of twenty-seven  and one-half cents ($.275) per share per
                  annum, and no more.  Subject to the requirements of applicable
                  law,  dividends  on the  Series C  Preferred  Shares  shall be
                  payable  annually,  when  and  as  declared  by the  Board  of
                  Directors,  commencing in 1994. Such dividends on the Series C
                  Preferred  Shares  shall be  cumulative  so that if all or any
                  part of such dividends shall not have been paid or distributed
                  in any year,  or  declared  and set  apart,  the amount of the
                  deficiency (without interest) shall be paid or distributed, or
                  declared   and  set  apart,   before  any  dividend  or  other
                  distribution  shall be paid upon,  or  declared  and set apart
                  for,  Common Shares.  Declared but unpaid  dividends shall not
                  bear interest.

                  (B)  Except  as  hereinafter   provided  and  subject  to  the
                  requirements of applicable law, including, without limitation,
                  the obtaining of any necessary  approvals or consents from the
                  holders of the Common Shares and/or Series A Preferred  Shares
                  and/or  Series B  Preferred  Shares  of the  Corporation,  any
                  dividend  declared on the Series C Preferred  Shares  shall be
                  paid in cash or, at the option of the  Corporation,  in Common
                  Shares of the  Corporation  having a market price,  on the day
                  immediately  preceding  the date on  which  such  dividend  is
                  declared (the  "Valuation  Date"),  equal to the amount of the
                  dividend. As used herein, the term "market price" shall

                                       22

<PAGE>



                  mean the closing selling price or, if not available,  the mean
                  of the closing bid and asked prices, or, if not available, the
                  mean of the highest bid and lowest asked prices, of the Common
                  Shares as quoted on a national securities exchange,  or in the
                  over-the-counter  market  as  reported  by  NASDAQ  or, if not
                  available, by the National Quotation Bureau, Incorporated,  as
                  the case may be,  or, if there is no  selling  or bid or asked
                  price on a particular  day, then the closing selling price or,
                  if not  available,  the  mean of the  closing  bid  and  asked
                  prices, or, if not available,  the mean of the highest bid and
                  lowest  asked  prices on the nearest  trading date before that
                  day and for which such prices are available, and if the Common
                  Shares are not listed on such an  exchange or traded in such a
                  market on the Valuation  Date,  then the market price shall be
                  determined   by  the  Board  of   Directors   by  taking  into
                  consideration all relevant factors, including, but not limited
                  to, the Corporation's net worth, prospective earning power and
                  dividend paying capacity.

         (iii)    Voting  Rights.  The holders of the Series C Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series C Preferred Share
                  entitled to vote at such  meetings as is set forth below,
                  voting  together with the holders of Common Shares, and other
                  Preferred Shares who are entitled to vote, if any such shares
                  are then  outstanding, and not as a separate class, except as
                  required by law. The number of votes to which the holders of
                  the Series C Preferred Shares  shall be entitled  to vote for
                  each Series C Preferred Share shall equal the number of Common
                  Shares of the Corporation into which such Series C Preferred
                  Share is convertible multiplied by six (6).

         (iv)     Redemption.  The Series C Preferred Shares shall not be
                  subject to mandatory redemption by either the Corporation
                  or the holders thereof.




                                       23

<PAGE>


         (v)      Conversion.

                  (A) Conversion Right and Price.  Each Series C Preferred Share
                  shall be convertible,  at the option of the holder thereof, at
                  the  office of the  Corporation,  into  such  number of Common
                  Shares of the  Corporation  as is  determined  by dividing two
                  dollars seventy-five cents ($2.75) by the Conversion Price (as
                  hereinafter   defined).   For   purposes   hereof,   the  term
                  "Conversion  Price" shall mean two dollars  seventy-five cents
                  ($2.75), subject to adjustment as hereinafter set forth.

                  (B) Procedure.  Before any holder of Series C Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series C Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance  with (i) above and the written notice  pursuant to
                  and in accordance  with (ii) above,  or such shorter period of
                  time as the Board of Directors shall determine with respect to
                  any particular conversion (such thirtieth (30th) day or end of
                  shorter  period of time being  hereinafter  referred to as the
                  "Effective  Conversion  Date"),  the holder shall thereupon be
                  deemed  to be  the  holder  of  record  of the  Common  Shares
                  issuable  upon  conversion,  notwithstanding  that  the  stock
                  transfer books of the Corporation shall then be closed or that
                  the  certificate(s)  representing such Common Shares shall not
                  then be  actually  delivered  to the  holder.  Subject  to the
                  provisions   hereof,   immediately   following  the  Effective
                  Conversion  Date,  the  Corporation  shall cause its  transfer
                  agent  to  issue  and  deliver  to such  holder  of  Series  C
                  Preferred  Shares a  certificate(s)  for the  number of Common
                  Shares to which the holder shall be entitled.

                  (C)  Adjustment of Conversion Price.

                  (i)  In the event that the Corporation shall (a) pay any
                  dividend on its Common Shares payable in Common Shares;

                                       24

<PAGE>



                  (b) effect a  subdivision  of its  outstanding  shares  into a
                  greater  number of Common Shares (by  reclassification,  stock
                  split or  otherwise  than by payment  of a dividend  in Common
                  Shares);  (c) effect a  combination  or  consolidation  of its
                  outstanding  Common  Shares  into a lesser  number  of  Common
                  Shares (by reclassification,  reverse split or otherwise); (d)
                  issue by  reclassification,  exchange or  substitution  of its
                  Common Shares any shares of capital  stock of the  Corporation
                  or effect any other  transaction  having similar  effect,  the
                  Conversion  Price in effect  immediately  prior to such action
                  shall be adjusted so that upon the exercise of the  conversion
                  right  hereof at any time  after the  occurrence  of any event
                  described  above,  the holder shall be entitled to receive the
                  Common  Shares to which such  holder  would have been  finally
                  entitled, after giving effect to the occurrence of such event,
                  as if such holder had converted the Series C Preferred  Shares
                  immediately   prior  to  the  occurrence  of  such  event.  An
                  adjustment  made  pursuant to this  paragraph (C) shall become
                  effective  immediately  after the record date in the case of a
                  dividend  and shall  become  effective  immediately  after the
                  effective  date  in the  case of a  subdivision,  combination,
                  reclassification, exchange or substitution.

                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make  appropriate  provision so that
                  the holder of each Series C Preferred  Share then  outstanding
                  shall have the right to  convert  such share into the kind and
                  amount of shares or other  securities and property  receivable
                  upon such consolidation or merger by a holder of the number of
                  Common Shares into which such Series C Preferred  Shares might
                  have been converted immediately prior to such consolidation or
                  merger.


                                       25

<PAGE>



                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series C Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the market price (as  hereinabove  defined) of one Common
                  Share on the Effective Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation shall at all times use its best efforts to reserve
                  and keep available out of its  authorized but unissued  Common
                  Shares,  solely for the purpose of effecting the conversion of
                  the  Series C  Preferred  Shares,  such  number of its  Common
                  Shares as shall from time to time be  sufficient to effect the
                  conversion of all outstanding  Series C Preferred Shares,  and
                  if at any time the number of  authorized  but unissued  Common
                  Shares shall not be sufficient to effect the conversion of all
                  then outstanding  Series C Preferred  Shares,  the Corporation
                  will, as its sole  obligation,  subject to the requirements of
                  applicable  state law, take such  corporate  action as may, in
                  the opinion of its  counsel,  be  necessary  to  increase  its
                  authorized but unissued Common Shares to such number of shares
                  as shall be sufficient  for such purposes;  provided,  however
                  that nothing  contained  herein shall preclude the Corporation
                  from  satisfying its  obligations in respect of the conversion
                  of the Series C  Preferred  Shares by  delivery  of  purchased
                  Common   Shares   which  are  held  in  the  treasury  of  the
                  Corporation.

                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series C  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the Corporation may, in its sole

                                       26

<PAGE>



                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of  the  surrender  of  the   certificate(s)  as  required  by
                  subsections (iv) and (v) hereof.

                  (G)  Statutory  Restrictions.  The  foregoing  provisions  for
                  conversion  of the Series C Preferred  Shares shall be subject
                  to all applicable statutory limitations and restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary  liquidation,  dissolution  or  winding  up of the
                  Corporation,  the holders of Series C Preferred Shares will be
                  entitled  to  receive,   prior  and  in   preference   to  any
                  distribution of the assets or surplus funds of the Corporation
                  to the holders of any Common Shares by reason of the ownership
                  thereof, and on a pari passu basis with the holders of the 
                  Series A and Series B Preferred  Shares, if 
                  any,  an  amount  equal to (i) the  fixed  sum of two  dollars
                  seventy-five  ($2.75)  per  share  and no more  and  (ii)  all
                  accrued and unpaid  dividends due with respect to the Series C
                  Preferred  Shares (the  "Preferential  Amount").  If, upon the
                  occurrence  of  such an  event,  the  assets  and  funds  thus
                  distributed  among the  holders of Series C  Preferred  Shares
                  shall be insufficient to permit the payment to such holders of
                  the full  Preferential  Amount,  then,  the entire  assets and
                  funds of the Corporation legally available for distribution to
                  the  holders  of  the  Series  C  Preferred  Shares  shall  be
                  distributed  ratably among such holders in accordance with the
                  respective  amounts  which  would be payable on such shares if
                  all  amounts  payable  thereon  were  paid in full.  After the
                  payment  or  setting  apart of the full  Preferential  Amounts
                  required  to be paid to the  holders of Series A, Series B and
                  Series C Preferred Shares, the holders of Common Shares or any
                  other stock of the Corporation  ranking in liquidation  junior
                  to the Series A, Series B and Series C Preferred  Shares shall
                  be entitled to receive ratably all remaining assets or surplus
                  funds of the Corporation.  Neither the merger or consolidation
                  of the  Corporation,  nor the sale, lease or conveyance of all
                  or part of its  assets,  shall be deemed to be a  liquidation,
                  dissolution or winding up of the

                                       27

<PAGE>



                  affairs of the Corporation, either voluntarily or
                  involuntarily, within the meaning of this section.

         (vii)    Sinking  Fund.  The Series C Preferred  Shares shall not be
                  entitled to the benefit of any sinking fund to be applied to
                  their purchase or redemption.

                  (f) Series D Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 1,413,337 of the 5,000,000 authorized
Preferred  Shares.  The  designation,   relative  rights,  powers,  preferences,
qualifications and limitations are as follows:

         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series D Preferred
                  Shares (hereinafter the "Series D Preferred Shares").

         (ii)     Dividends.

                  (A) The holders of Series D Preferred Shares, in preference to
                  the  holders of Common  Shares and on a pari passu  basis with
                  the holders of Series A Preferred  Shares,  Series B Preferred
                  Shares  and  Series  C  Preferred  Shares,  if any,  shall  be
                  entitled  to  receive,  when and as  declared  by the Board of
                  Directors,  dividends at the rate of twenty-five  cents ($.25)
                  per share per annum, and no more.  Subject to the requirements
                  of applicable law,  dividends on the Series D Preferred Shares
                  shall be payable  annually,  when and as declared by the Board
                  of Directors, commencing in 1994. Such dividends on the Series
                  D Preferred  Shares shall be  cumulative so that if all or any
                  part of such dividends shall not have been paid or distributed
                  in any year,  or  declared  and set  apart,  the amount of the
                  deficiency (without interest) shall be paid or distributed, or
                  declared   and  set  apart,   before  any  dividend  or  other
                  distribution  shall be paid upon,  or  declared  and set apart
                  for,  Common Shares.  Declared but unpaid  dividends shall not
                  bear interest.

                                       28

<PAGE>



                  For dividend purposes,  in the event Series D Preferred Shares
                  are issued in  exchange  for Series C  Preferred  Shares,  the
                  Series D Preferred  Shares shall be deemed to have been issued
                  as of the date of issuance  of the Series C  Preferred  Shares
                  for which they were exchanged.

                  (B)  Except  as  hereinafter   provided  and  subject  to  the
                  requirements of applicable law, including, without limitation,
                  the obtaining of any necessary  approvals or consents from the
                  holders of the Common Shares and/or Series A Preferred  Shares
                  and/or  Series B Preferred  Shares  and/or  Series C Preferred
                  Shares of the Corporation, any dividend declared on the Series
                  D Preferred  Shares shall be paid in cash or, at the option of
                  the Corporation,  in Common Shares of the Corporation having a
                  market  price,  on the day  immediately  preceding the date on
                  which such dividend is declared (the "Valuation Date"),  equal
                  to the  amount  of the  dividend.  As used  herein,  the  term
                  "market price" shall mean the closing selling price or, if not
                  available,  the mean of the closing bid and asked prices,  or,
                  if not available, the mean of the highest bid and lowest asked
                  prices,   of  the  Common  Shares  as  quoted  on  a  national
                  securities  exchange,  or in the  over-the-counter  market  as
                  reported  by NASDAQ  or,  if not  available,  by the  National
                  Quotation  Bureau,  Incorporated,  as the case may be,  or, if
                  there is no selling or bid or asked price on a particular day,
                  then the closing selling price or, if not available,  the mean
                  of the closing bid and asked prices, or, if not available, the
                  mean of the highest bid and lowest asked prices on the nearest
                  trading  date  before  that day and for which such  prices are
                  available,  and if the Common Shares are not listed on such an
                  exchange  or traded in such a market  on the  Valuation  Date,
                  then the  market  price  shall be  determined  by the Board of
                  Directors by taking into  consideration  all relevant factors,
                  including,  but not limited to, the  Corporation's  net worth,
                  prospective earning power and dividend paying capacity.

         (iii)    Voting Rights.  The holders of the Series D Preferred
                  Shares shall be entitled to vote on all matters at all
                  meetings of the shareholders of the Corporation, and

                                       29

<PAGE>



                  shall be  entitled  to such  number of votes for each Series D
                  Preferred  Share  entitled to vote at such  meetings as is set
                  forth  below,  voting  together  with the  holders  of  Common
                  Shares,  and other Preferred  Shares who are entitled to vote,
                  if any such shares are then outstanding, and not as a separate
                  class, except as required by law. The number of votes to which
                  the holders of the Series D Preferred Shares shall be entitled
                  to vote for each  Series D  Preferred  Share  shall  equal the
                  number of Common  Shares of the  Corporation  into  which such
                  Series D Preferred Share is convertible multiplied by six (6).

         (iv)     Redemption.  The Series D Preferred Shares shall not be
                  subject to mandatory redemption by either the Corporation
                  or the holders thereof.

         (v)      Conversion.

                  (A) Conversion Right and Price.  Each Series D Preferred Share
                  shall be convertible,  at the option of the holder thereof, at
                  the  office of the  Corporation,  into  such  number of Common
                  Shares of the  Corporation  as is  determined  by dividing two
                  dollars  fifty  cents  ($2.50)  by the  Conversion  Price  (as
                  hereinafter   defined).   For   purposes   hereof,   the  term
                  "Conversion Price" shall mean two dollars fifty cents ($2.50),
                  subject to adjustment as hereinafter set forth.

                  (B) Procedure.  Before any holder of Series D Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series D Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance  with (i) above and the written notice  pursuant to
                  and in accordance  with (ii) above,  or such shorter period of
                  time as the Board of Directors

                                       30

<PAGE>



                  shall  determine  with  respect to any  particular  conversion
                  (such  thirtieth  (30th) day or end of shorter  period of time
                  being  hereinafter  referred to as the  "Effective  Conversion
                  Date"),  the holder shall thereupon be deemed to be the holder
                  of record  of the  Common  Shares  issuable  upon  conversion,
                  notwithstanding   that  the  stock   transfer   books  of  the
                  Corporation  shall  then be closed or that the  certificate(s)
                  representing  such  Common  Shares  shall not then be actually
                  delivered  to the holder.  Subject to the  provisions  hereof,
                  immediately  following  the  Effective  Conversion  Date,  the
                  Corporation  shall  cause  its  transfer  agent to  issue  and
                  deliver  to  such  holder  of  Series  D  Preferred  Shares  a
                  certificate(s)  for the  number of Common  Shares to which the
                  holder shall be entitled.

                  (C)  Adjustment of Conversion Price.

                  (i) In the  event  that  the  Corporation  shall  (a)  pay any
                  dividend on its Common Shares  payable in Common  Shares;  (b)
                  effect a subdivision of its outstanding  shares into a greater
                  number of Common Shares (by  reclassification,  stock split or
                  otherwise than by payment of a dividend in Common Shares); (c)
                  effect  a  combination  or  consolidation  of its  outstanding
                  Common  Shares  into a lesser  number  of  Common  Shares  (by
                  reclassification,  reverse split or  otherwise);  (d) issue by
                  reclassification,  exchange  or  substitution  of  its  Common
                  Shares  any  shares of  capital  stock of the  Corporation  or
                  effect  any  other  transaction  having  similar  effect,  the
                  Conversion  Price in effect  immediately  prior to such action
                  shall be adjusted so that upon the exercise of the  conversion
                  right  hereof at any time  after the  occurrence  of any event
                  described  above,  the holder shall be entitled to receive the
                  Common  Shares to which such  holder  would have been  finally
                  entitled, after giving effect to the occurrence of such event,
                  as if such holder had converted the Series D Preferred  Shares
                  immediately   prior  to  the  occurrence  of  such  event.  An
                  adjustment  made  pursuant to this  paragraph (C) shall become
                  effective  immediately  after the record date in the case of a
                  dividend  and shall  become  effective  immediately  after the
                  effective  date  in the  case of a  subdivision,  combination,
                  reclassification, exchange or substitution.

                                       31

<PAGE>



                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make  appropriate  provision so that
                  the holder of each Series D Preferred  Share then  outstanding
                  shall have the right to  convert  such share into the kind and
                  amount of shares or other  securities and property  receivable
                  upon such consolidation or merger by a holder of the number of
                  Common Shares into which such Series D Preferred  Shares might
                  have been converted immediately prior to such consolidation or
                  merger.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series D Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the market price (as  hereinabove  defined) of one Common
                  Share on the Effective Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation shall at all times use its best efforts to reserve
                  and keep available out of its  authorized but unissued  Common
                  Shares,  solely for the purpose of effecting the conversion of
                  the  Series D  Preferred  Shares,  such  number of its  Common
                  Shares as shall from time to time be  sufficient to effect the
                  conversion of all outstanding  Series D Preferred Shares,  and
                  if at any time the number of  authorized  but unissued  Common
                  Shares shall not be sufficient to effect the conversion of all
                  then outstanding  Series D Preferred  Shares,  the Corporation
                  will, as its sole  obligation,  subject to the requirements of
                  applicable  state law, take such  corporate  action as may, in
                  the opinion of its  counsel,  be  necessary  to  increase  its
                  authorized but unissued Common Shares to such number of shares
                  as shall be sufficient

                                       32

<PAGE>



                  for such purposes;  provided,  however that nothing  contained
                  herein shall  preclude the  Corporation  from  satisfying  its
                  obligations  in  respect  of the  conversion  of the  Series D
                  Preferred  Shares by delivery of purchased Common Shares which
                  are held in the treasury of the Corporation.

                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series D  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of  the  surrender  of  the   certificate(s)  as  required  by
                  subsections (iv) and (v) hereof.

                  (G)  Statutory  Restrictions.  The  foregoing  provisions  for
                  conversion  of the Series D Preferred  Shares shall be subject
                  to all applicable statutory limitations and restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary  liquidation,  dissolution  or  winding  up of the
                  Corporation,  the holders of Series D Preferred Shares will be
                  entitled  to  receive,   prior  and  in   preference   to  any
                  distribution of the assets or surplus funds of the Corporation
                  to the holders of any Common Shares by reason of the ownership
                  thereof, and on a pari passu basis with the  holders of the
                  Series A,  Series B and Series C Preferred Shares, if any, an
                  amount equal to (i) the fixed sum of two dollars fifty cents
                  ($2.50) per share and no more and (ii) all accrued and unpaid
                  dividends due with respect to the Series D Preferred  Shares
                  (the "Preferential Amount").  If, upon the occurrence of such
                  an event, the assets and funds thus distributed among the 
                  holders of Series D Preferred Shares shall be insufficient to
                  permit the payment to such holders of the

                                       33

<PAGE>



                  full Preferential Amount, then, the entire assets and funds of
                  the  Corporation  legally  available for  distribution  to the
                  holders of the Series D Preferred  Shares shall be distributed
                  ratably among such holders in accordance  with the  respective
                  amounts  which  would be payable on such shares if all amounts
                  payable  thereon  were  paid in full.  After  the  payment  or
                  setting apart of the full Preferential  Amounts required to be
                  paid to the holders of Series A, Series B, Series C and Series
                  D Preferred Shares,  the holders of Common Shares or any other
                  stock of the Corporation  ranking in liquidation junior to the
                  Series A,  Series B,  Series C and Series D  Preferred  Shares
                  shall be entitled to receive  ratably all remaining  assets or
                  surplus  funds  of the  Corporation.  Neither  the  merger  or
                  consolidation  of the  Corporation,  nor the  sale,  lease  or
                  conveyance of all or part of its assets, shall be deemed to be
                  a liquidation, dissolution or winding up of the affairs of the
                  Corporation,  either voluntarily or involuntarily,  within the
                  meaning of this section.

         (vii)    Sinking  Fund.  The Series D Preferred  Shares shall not be
                  entitled to the benefit of any sinking fund to be applied to
                  their purchase or redemption.

                 (g) Series E Preferred  Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 1,085,000 of the 5,000,000 authorized
Preferred  Shares.  The  designation,   relative  rights,  powers,  preferences,
qualifications and limitations are as follows:

         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series E Preferred
                  Shares (hereinafter the "Series E Preferred Shares").

         (ii)     Dividends.


                                       34

<PAGE>



                  (A) The holders of Series E Preferred Shares, in preference to
                  the  holders of Common  Shares and on a pari passu  basis with
                  the holders of Series A Preferred  Shares,  Series B Preferred
                  Shares,  Series C  Preferred  Shares  and  Series D  Preferred
                  Shares,  if any,  shall be entitled  to  receive,  when and as
                  declared by the Board of  Directors,  dividends at the rate of
                  twenty-two and one-half cents ($.225) per share per annum, and
                  no  more.  Subject  to the  requirements  of  applicable  law,
                  dividends  on the Series E Preferred  Shares  shall be payable
                  annually,  when and as  declared  by the  Board of  Directors,
                  commencing in 1996.  Such  dividends on the Series E Preferred
                  Shares shall be  cumulative so that if all or any part of such
                  dividends shall not have been paid or distributed in any year,
                  or  declared  and set  apart,  the  amount  of the  deficiency
                  (without  interest) shall be paid or distributed,  or declared
                  and set apart, before any dividend or other distribution shall
                  be paid upon,  or declared and set apart for,  Common  Shares.
                  Declared but unpaid dividends shall not bear interest.

                  (B)  Except  as  hereinafter   provided  and  subject  to  the
                  requirements of applicable law, including, without limitation,
                  the obtaining of any necessary  approvals or consents from the
                  holders of the Common Shares and/or Series A Preferred  Shares
                  and/or  Series B Preferred  Shares  and/or  Series C Preferred
                  Shares  and/or Series D Preferred  Shares of the  Corporation,
                  any dividend  declared on the Series E Preferred  Shares shall
                  be paid in cash  or,  at the  option  of the  Corporation,  in
                  Common Shares of the Corporation, the number of which shall be
                  equal to the amount of the dividend  divided by the Conversion
                  Price (as hereinafter defined) then in effect.

         (iii)    Voting  Rights.  The holders of the Series E Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series E Preferred  Share
                  entitled to vote at such  meetings as is set forth below,
                  voting together with the holders of Common Shares, and other
                  Preferred Shares who are entitled to vote, if any such shares
                  are then outstanding, and not as a separate class, except as

                                       35

<PAGE>



                  required  by law.  The number of votes to which the holders of
                  the Series E  Preferred  Shares  shall be entitled to vote for
                  each Series E Preferred Share shall equal the number of Common
                  Shares of the  Corporation  into which such Series E Preferred
                  Share is convertible.

         (iv)     Redemption.  The Series E Preferred Shares shall not be
                  subject to mandatory redemption by either the Corporation
                  or the holders thereof.

         (v)      Conversion.

                  (A) Conversion Right and Price.  Each Series E Preferred Share
                  shall be convertible,  at the option of the holder thereof, at
                  the  office of the  Corporation,  into  such  number of Common
                  Shares of the  Corporation  as is  determined  by dividing two
                  dollars  eighty-one  and  one-quarter  cents  ($2.8125) by the
                  Conversion  Price  (as  hereinafter  defined).   For  purposes
                  hereof,  the term  "Conversion  Price"  shall mean two dollars
                  eighty-one  and  one-quarter   cents  ($2.8125),   subject  to
                  adjustment as hereinafter set forth.

                  (B) Procedure.  Before any holder of Series E Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series E Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance  with (i) above and the written notice  pursuant to
                  and in accordance  with (ii) above,  or such shorter period of
                  time as the Board of Directors shall determine with respect to
                  any particular conversion (such thirtieth (30th) day or end of
                  shorter  period of time being  hereinafter  referred to as the
                  "Effective  Conversion  Date"),  the holder shall thereupon be
                  deemed  to be  the  holder  of  record  of the  Common  Shares
                  issuable  upon  conversion,  notwithstanding  that  the  stock
                  transfer

                                       36

<PAGE>



                  books of the  Corporation  shall  then be  closed  or that the
                  certificate(s)  representing such Common Shares shall not then
                  be actually delivered to the holder. Subject to the provisions
                  hereof,  immediately  following the Effective Conversion Date,
                  the  Corporation  shall cause its transfer  agent to issue and
                  deliver  to  such  holder  of  Series  E  Preferred  Shares  a
                  certificate(s)  for the  number of Common  Shares to which the
                  holder shall be entitled.

                  (C)  Adjustment of Conversion Price.

                  (i) In the  event  that  the  Corporation  shall  (a)  pay any
                  dividend on its Common Shares  payable in Common  Shares;  (b)
                  effect a subdivision of its outstanding  shares into a greater
                  number of Common Shares (by  reclassification,  stock split or
                  otherwise than by payment of a dividend in Common Shares); (c)
                  effect  a  combination  or  consolidation  of its  outstanding
                  Common  Shares  into a lesser  number  of  Common  Shares  (by
                  reclassification,  reverse split or  otherwise);  (d) issue by
                  reclassification,  exchange  or  substitution  of  its  Common
                  Shares  any  shares of  capital  stock of the  Corporation  or
                  effect  any  other  transaction  having  similar  effect,  the
                  Conversion  Price in effect  immediately  prior to such action
                  shall be adjusted so that upon the exercise of the  conversion
                  right  hereof at any time  after the  occurrence  of any event
                  described  above,  the holder shall be entitled to receive the
                  Common  Shares to which such  holder  would have been  finally
                  entitled, after giving effect to the occurrence of such event,
                  as if such holder had converted the Series E Preferred  Shares
                  immediately   prior  to  the  occurrence  of  such  event.  An
                  adjustment  made  pursuant to this  paragraph (C) shall become
                  effective  immediately  after the record date in the case of a
                  dividend  and shall  become  effective  immediately  after the
                  effective  date  in the  case of a  subdivision,  combination,
                  reclassification, exchange or substitution.

                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of, or change (other than a change

                                       37

<PAGE>



                  in par  value or from par value to no par value or from no par
                  value  to  par  value,  or  as  a  result  of  subdivision  or
                  combination)   in,   outstanding   Common  Shares,   then  the
                  Corporation,  or such successor  corporation,  as the case may
                  be,  shall make  appropriate  provision  so that the holder of
                  each Series E Preferred Share then outstanding  shall have the
                  right to convert such share into the kind and amount of shares
                  or  other   securities  and  property   receivable  upon  such
                  consolidation  or merger  by a holder of the  number of Common
                  Shares into which such Series E  Preferred  Shares  might have
                  been  converted  immediately  prior to such  consolidation  or
                  merger.

                  (iii) In the event, as of June 30, 1996, the Common Shares are
                  listed on an Exchange or traded in the OTC Market and the June
                  1996 Common  Share  Price (as  hereinafter  defined)  does not
                  equal or exceed  the  Conversion  Price  then in  effect,  the
                  Conversion Price shall thereupon,  effective June 30, 1996, be
                  reduced to equal the June 1996  Common  Share  Price.  As used
                  herein, (a) the term "June 1996 Common Share Price" shall mean
                  the average of the "market prices" of the Common Shares of the
                  Corporation  during the last five (5) trading days immediately
                  preceding  June 30, 1996 and (b) the term "market price" shall
                  mean the closing bid price or, if not  available,  the highest
                  bid price of the Common  Shares as quoted on an Exchange or in
                  the OTC Market, as reported by NASDAQ or, if not available, by
                  NQBI.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series E Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the market price (as  hereinabove  defined) of one Common
                  Share on the Effective Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation shall at all times use its best efforts to reserve
                  and keep available out of its  authorized but unissued  Common
                  Shares,  solely for the purpose of effecting the conversion of
                  the Series E Preferred

                                       38

<PAGE>



                  Shares, such number of its Common Shares as shall from time to
                  time be sufficient to effect the conversion of all outstanding
                  Series E  Preferred  Shares,  and if at any time the number of
                  authorized but unissued  Common Shares shall not be sufficient
                  to effect  the  conversion  of all then  outstanding  Series E
                  Preferred   Shares,   the   Corporation   will,  as  its  sole
                  obligation,  subject to the  requirements of applicable  state
                  law, take such corporate  action as may, in the opinion of its
                  counsel,  be necessary to increase its authorized but unissued
                  Common  Shares to such number of shares as shall be sufficient
                  for such purposes;  provided,  however that nothing  contained
                  herein shall  preclude the  Corporation  from  satisfying  its
                  obligations  in  respect  of the  conversion  of the  Series E
                  Preferred  Shares by delivery of purchased Common Shares which
                  are held in the treasury of the Corporation.

                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series E  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of the  surrender  of the  certificate(s)  as  required by the
                  subsection (v).

                  (G)  Statutory  Restrictions.  The  foregoing  provisions  for
                  conversion  of the Series E Preferred  Shares shall be subject
                  to all applicable statutory limitations and restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary liquidation, dissolution or winding up of the
                  Corporation, the holders of Series E Preferred Shares
                  will be entitled to receive, prior and in preference to
                  any distribution of the assets or surplus funds of the

                                       39

<PAGE>



                  Corporation  to the holders of any Common  Shares by reason of
                  the  ownership  thereof,  and on a pari  passu  basis with the
                  holders  of the  Series  A,  Series B,  Series C and  Series D
                  Preferred Shares, if any, an amount equal to (i) the fixed sum
                  of two dollars  eighty-one and one-quarter cents ($2.8125) per
                  share and no more and (ii) all  accrued  and unpaid  dividends
                  due  with  respect  to the  Series  E  Preferred  Shares  (the
                  "Preferential  Amount").  If, upon the  occurrence  of such an
                  event, the assets and funds thus distributed among the holders
                  of Series E Preferred  Shares shall be  insufficient to permit
                  the payment to such holders of the full  Preferential  Amount,
                  then, the entire assets and funds of the  Corporation  legally
                  available  for  distribution  to the  holders  of the Series E
                  Preferred  Shares  shall be  distributed  ratably  among  such
                  holders in accordance with the respective  amounts which would
                  be payable on such shares if all amounts  payable thereon were
                  paid in full.  After the payment or setting  apart of the full
                  Preferential  Amounts  required  to be paid to the  holders of
                  Series A,  Series B, Series C, Series D and Series E Preferred
                  Shares, the holders of Common Shares or any other stock of the
                  Corporation  ranking  in  liquidation  junior to the Series A,
                  Series B,  Series C,  Series D and Series E  Preferred  Shares
                  shall be entitled to receive  ratably all remaining  assets or
                  surplus  funds  of the  Corporation.  Neither  the  merger  or
                  consolidation  of the  Corporation,  nor the  sale,  lease  or
                  conveyance of all or part of its assets, shall be deemed to be
                  a liquidation, dissolution or winding up of the affairs of the
                  Corporation,  either voluntarily or involuntarily,  within the
                  meaning of this section.

         (vii)    Sinking Fund.  The Series E Preferred Shares shall not be
                  entitled to the benefit of any sinking fund to be applied to
                  their purchase or redemption.

                  (h) Series F Preferred Shares. A series of Preferred Shares is
hereby created,  to be limited in amount to 415,250 of the 5,000,000  authorized
Preferred  Shares.  The  designation,   relative  rights,  powers,  preferences,
qualifications and limitations are as follows:




                                       40

<PAGE>



         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series F Preferred
                  Shares (hereinafter the "Series F Preferred Shares").

         (ii)     Dividends.

                  The  holders  of Series F  Preferred  Shares,  on a pari passu
                  basis with the  holders  of the  Corporation's  Common  Shares
                  (based upon the number of Common  Shares into which the Series
                  F  Preferred  Shares are  convertible),  shall be  entitled to
                  receive  such  dividends  as may be  declared  by the Board of
                  Directors.  Declared  but  unpaid  dividends  shall  not  bear
                  interest.

                  The rights of the  holders of the  Series F  Preferred  Shares
                  shall be junior and  subordinate  to the rights of the holders
                  of the  Series A,  Series B,  Series C,  Series D and Series E
                  Preferred Shares of the Corporation to receive  dividends,  as
                  well as to the right of any other series of  Preferred  Shares
                  of the  Corporation  hereafter  created  which  shall have any
                  preferential  right to receive dividends before the holders of
                  the Common Shares.

         (iii)    Voting  Rights.  The holders of the Series F Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series F Preferred Share
                  entitled to vote at such  meetings as is set forth below,
                  voting together with the holders of Common Shares, and other
                  Preferred Shares who are entitled to vote, if any such shares
                  are then outstanding, and not as a separate class,  except as
                  required by law. The number of votes to which the holders of
                  the Series F Preferred Shares shall be entitled to vote for
                  each Series F Preferred Share shall equal the number of Common
                  Shares of the Corporation into which such Series F Preferred
                  Share is convertible.




                                       41

<PAGE>





         (iv)     Redemption.  The Corporation may elect, at its option,  at any
                  time and from time to time, by notice given as provided below,
                  to  redeem  all  or  any  part  of the  outstanding  Series  F
                  Preferred  Shares,  from  any or  all  holders  thereof,  at a
                  redemption  price  of five  dollars  ($5.00)  per  share  (the
                  "Redemption Price").

                  If the  Corporation  elects to  redeem  all or any part of the
                  outstanding   Series  F  Preferred  Shares,   notice  of  such
                  redemption (the "Redemption Notice") shall be given by mailing
                  the same to every  holder of record of any  shares  then to be
                  redeemed, not less than thirty (30) prior to the date fixed as
                  the date for the redemption  thereof (the "Redemption  Date"),
                  at the respective  addresses of such holders as the same shall
                  appear on the stock  transfer  books of the  Corporation.  The
                  Redemption  Notice  shall state that the shares  specified  in
                  such  notice  will  be  redeemed  by  the  Corporation  at the
                  Redemption  Price on the Redemption  Date,  upon the surrender
                  for  cancellation,  at the place designated in such notice, of
                  the certificate(s)  representing the shares so to be redeemed,
                  properly  endorsed for transfer,  or  accompanied  by a proper
                  instrument  of  assignment  and  transfer,   and  bearing  all
                  necessary  transfer tax stamps  thereto  affixed and canceled.
                  Following  receipt  of the  Redemption  Notice and at any time
                  before the Redemption  Date,  each holder of shares called for
                  redemption may elect to convert all or any part of such shares
                  into  Common  Shares  of the  Corporation  pursuant  to and in
                  accordance with (v) below.  On and after the Redemption  Date,
                  each  holder  of  shares  called  for  redemption  who has not
                  converted  such shares shall be entitled to receive  therefor,
                  in cash, the Redemption Price upon  presentation and surrender
                  at the place  designated in such notice of the  certificate(s)
                  for shares  held by such  holder  and  called for  redemption,
                  properly  endorsed  for  transfer  or  accompanied  by  proper
                  instruments  of  assignment  or  transfer,   and  bearing  all
                  necessary transfer tax stamps thereto affixed and




                                       42

<PAGE>



                  canceled.  If the Corporation  shall give notice of redemption
                  as  aforesaid,  all  shares  called  for  redemption  and  not
                  converted  shall  be  deemed  to  have  been  redeemed  on the
                  Redemption  Date,  whether  or not the  certificates  for said
                  shares shall be surrendered  for redemption and  cancellation,
                  and said shares so called for redemption  shall from and after
                  said date cease to  represent  any  interest  whatever  in the
                  Corporation  or its  property,  and the holders  thereof shall
                  have no rights other than the right to receive the  Redemption
                  Price, without interest thereon.

         (v)      Conversion.

                  (A) Conversion Right and Price.  Each Series F Preferred Share
                  shall be convertible,  at the option of the holder thereof, at
                  the  office of the  Corporation,  into  such  number of Common
                  Shares of the  Corporation  as is  determined by dividing five
                  dollars  ($5.00)  by  the  Conversion  Price  (as  hereinafter
                  defined).  For purposes hereof,  the term  "Conversion  Price"
                  shall mean five  dollars  ($5.00),  subject to  adjustment  as
                  hereinafter set forth.

                  (B) Procedure.  Before any holder of Series F Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall (i)(a) surrender the certificate(s) therefor,
                  duly endorsed, at the office of the Corporation and (ii) shall
                  give written notice to the Corporation at such office that the
                  holder elects to convert the same into Common Shares and shall
                  further state therein the number of Series F Preferred  Shares
                  being converted.  Subject to the provisions hereof,  effective
                  thirty  (30) days  following  the later of the  receipt by the
                  Corporation   of  the   certificate(s)   pursuant  to  and  in
                  accordance  with (i) above and the written notice  pursuant to
                  and in accordance  with (ii) above,  or such shorter period of
                  time as the Board of Directors shall determine with respect to
                  any particular conversion (such thirtieth (30th) day or end of
                  shorter  period of time being  hereinafter  referred to as the
                  "Effective




                                       43

<PAGE>



                  Conversion  Date"), the holder shall thereupon be deemed to be
                  the  holder of  record  of the  Common  Shares  issuable  upon
                  conversion,  notwithstanding  that the stock transfer books of
                  the   Corporation   shall   then  be   closed   or  that   the
                  certificate(s)  representing such Common Shares shall not then
                  be actually delivered to the holder. Subject to the provisions
                  hereof,  immediately  following the Effective Conversion Date,
                  the  Corporation  shall cause its transfer  agent to issue and
                  deliver  to  such  holder  of  Series  F  Preferred  Shares  a
                  certificate(s)  for the  number of Common  Shares to which the
                  holder shall be entitled.

                  (C)  Adjustment of Conversion Price.

                  (i) In the  event  that  the  Corporation  shall  (a)  pay any
                  dividend on its Common Shares  payable in Common  Shares;  (b)
                  effect a subdivision of its outstanding  shares into a greater
                  number of Common Shares (by  reclassification,  stock split or
                  otherwise than by payment of a dividend in Common Shares); (c)
                  effect  a  combination  or  consolidation  of its  outstanding
                  Common  Shares  into a lesser  number  of  Common  Shares  (by
                  reclassification,  reverse split or  otherwise);  (d) issue by
                  reclassification,  exchange  or  substitution  of  its  Common
                  Shares  any  shares of  capital  stock of the  Corporation  or
                  effect  any  other  transaction  having  similar  effect,  the
                  Conversion  Price in effect  immediately  prior to such action
                  shall be adjusted so that upon the exercise of the  conversion
                  right  hereof at any time  after the  occurrence  of any event
                  described  above,  the holder shall be entitled to receive the
                  Common  Shares to which such  holder  would have been  finally
                  entitled, after giving effect to the occurrence of such event,
                  as if such holder had converted the Series F Preferred  Shares
                  immediately   prior  to  the  occurrence  of  such  event.  An
                  adjustment  made  pursuant to this  paragraph (C) shall become
                  effective  immediately  after the record date in the case of a
                  dividend  and shall  become  effective  immediately  after the
                  effective  date  in the  case of a  subdivision,  combination,
                  reclassification, exchange or substitution.





                                       44

<PAGE>



                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make  appropriate  provision so that
                  the holder of each Series F Preferred  Share then  outstanding
                  shall have the right to  convert  such share into the kind and
                  amount of shares or other  securities and property  receivable
                  upon such consolidation or merger by a holder of the number of
                  Common Shares into which such Series F Preferred  Shares might
                  have been converted immediately prior to such consolidation or
                  merger.

                  (iii) In the event,  as of October 10, 1997, the Common Shares
                  are listed on a national  securities  exchange (an "Exchange")
                  or traded in the  over-the-counter  market (the "OTC  Market")
                  and the  October  1997  Common  Share  Price  (as  hereinafter
                  defined) does not equal or exceed the Conversion Price then in
                  effect,  the  Conversion  Price  shall  thereupon,   effective
                  October 10, 1997,  be reduced to equal the October 1997 Common
                  Share Price. As used herein, (a) the term "October 1997 Common
                  Share Price" shall mean the average of the "market  prices" of
                  the Common Shares of the  Corporation  during the trading days
                  from October 1, 1997 through October 10, 1997 and (b) the term
                  "market  price"  shall  mean  the  closing  price  or,  if not
                  available, the average of the closing bid and asked prices or,
                  if not  available,  the  average of the highest bid and lowest
                  asked prices of the Common  Shares as quoted on an Exchange or
                  in the OTC Market, as reported by NASDAQ or, if not available,
                  by the  National  Quotation  Bureau,  Incorporated;  provided,
                  however,  that,  in no event  shall  the  Conversion  Price be
                  reduced to less than three  dollars  fifty  cents  ($3.50) per
                  share  (subject to  adjustment  pursuant to the  provisions of
                  subparagraphs  (i) and (ii) of this paragraph (C)) pursuant to
                  the




                                       45

<PAGE>



                  provisions of this subparagraph (iii). Any adjustment pursuant
                  to the provisions of this subparagraph  (iii) shall apply only
                  to such Series F Preferred  Shares which are outstanding as of
                  the  effective  date of the  adjustment  and  shall  not apply
                  retroactively  with  respect to any Series F Preferred  Shares
                  theretofore converted.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series F Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the market price (as  hereinabove  defined) of one Common
                  Share on the Effective Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation shall at all times use its best efforts to reserve
                  and keep available out of its  authorized but unissued  Common
                  Shares,  solely for the purpose of effecting the conversion of
                  the  Series F  Preferred  Shares,  such  number of its  Common
                  Shares as shall from time to time be  sufficient to effect the
                  conversion of all outstanding  Series F Preferred Shares,  and
                  if at any time the number of  authorized  but unissued  Common
                  Shares shall not be sufficient to effect the conversion of all
                  then outstanding  Series F Preferred  Shares,  the Corporation
                  will, as its sole  obligation,  subject to the requirements of
                  applicable  state law, take such  corporate  action as may, in
                  the opinion of its  counsel,  be  necessary  to  increase  its
                  authorized but unissued Common Shares to such number of shares
                  as shall be sufficient  for such purposes;  provided,  however
                  that nothing  contained  herein shall preclude the Corporation
                  from  satisfying its  obligations in respect of the conversion
                  of the Series F  Preferred  Shares by  delivery  of  purchased
                  Common   Shares   which  are  held  in  the  treasury  of  the
                  Corporation.

                  (F)  Lost, Stolen or Destroyed Certificates.  In the
                  event that the holder shall notify the Corporation that




                                       46

<PAGE>



                  the certificate(s) representing Series F Preferred Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of the  surrender  of the  certificate(s)  as required by this
                  subsection (v).

                  (G)  Statutory  Restrictions.  The  foregoing  provisions  for
                  conversion  of the Series F Preferred  Shares shall be subject
                  to all applicable statutory limitations and restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary  liquidation,  dissolution  or  winding  up of the
                  Corporation,  the holders of Series F Preferred Shares will be
                  entitled  to  receive,   prior  and  in   preference   to  any
                  distribution of the assets or surplus funds of the Corporation
                  to the holders of any Common Shares by reason of the ownership
                  thereof, and on a pari passu basis with
                  the  holders of the Series A, Series B, Series C, Series D and
                  Series E  Preferred  Shares,  if any,  an amount  equal to the
                  fixed sum of five  dollars  ($5.00) per share and no more (the
                  "Preferential  Amount").  If, upon the  occurrence  of such an
                  event, the assets and funds thus distributed among the holders
                  of Series F Preferred  Shares shall be  insufficient to permit
                  the payment to such holders of the full  Preferential  Amount,
                  then, the entire assets and funds of the  Corporation  legally
                  available  for  distribution  to the  holders  of the Series F
                  Preferred  Shares  shall be  distributed  ratably  among  such
                  holders in accordance with the respective  amounts which would
                  be payable on such shares if all amounts  payable thereon were
                  paid in full.  After the payment or setting  apart of the full
                  Preferential  Amounts  required  to be paid to the  holders of
                  Series A, Series B, Series




                                       47

<PAGE>



                  C,  Series D,  Series E and  Series F  Preferred  Shares,  the
                  holders of Common Shares or any other stock of the Corporation
                  ranking  in  liquidation  junior to the  Series  A,  Series B,
                  Series C,  Series D,  Series E and Series F  Preferred  Shares
                  shall be entitled to receive  ratably all remaining  assets or
                  surplus  funds  of the  Corporation.  Neither  the  merger  or
                  consolidation  of the  Corporation,  nor the  sale,  lease  or
                  conveyance of all or part of its assets, shall be deemed to be
                  a liquidation, dissolution or winding up of the affairs of the
                  Corporation,  either voluntarily or involuntarily,  within the
                  meaning of this section.

         (vii)    Sinking  Fund.  The Series F Preferred  Shares shall not be
                  entitled to the  benefit of any  sinking fund to be applied to
                  their purchase or redemption.

                  (i) Series G Preferred  Shares. A series of Preferred Stock is
hereby created,  to be limited in amount to 145,000 of the 5,000,000  authorized
shares  of  Preferred   Stock.  The   designation,   relative  rights,   powers,
preferences, qualifications and limitations are as follows:

                  Section 1.  Designation, Amount and Par Value.  The
                              ---------------------------------
series of  Preferred  Stock  shall be  designated  as the  Series G  Convertible
Preferred  Stock (the "Series G Preferred  Stock"),  and the number of shares so
designated shall be 145,000, of which 20,000 is reserved for issuance solely for
payment of stock dividends,  if any,  hereunder.  The par value of each share of
Preferred  Stock  shall be $.001.  Each share of  Preferred  Stock  shall have a
stated value of $20 per share (the "Stated Value"). The Series G Preferred Stock
shall rank, with respect to dividends and  distributions  upon a Liquidation (as
hereinafter  defined)  or  otherwise,  pari  passu  with  each  other  series of
preferred  stock of the  Company  outstanding  as of the  Original  Issue  Date,
including  without  limitation the Company's Series B Preferred Stock,  Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred



                                       48

<PAGE>



Stock,  and shall rank pari passu with  respect to dividends  and  distributions
upon a Liquidation or otherwise with each other series of preferred stock of the
Company  hereafter  created  unless the terms of such other  series of preferred
stock  expressly  states that such series ranks junior to the Series G Preferred
Stock.  All such other  series of  preferred  stock  ranking pari passu with the
Series G Preferred Stock is referred to as the "Other Preferred Stock."

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

                  (a) Holders of Series G  Preferred  Stock shall be entitled to
receive,  when and as declared by the Board of  Directors  out of funds  legally
available therefor,  and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 5% per annum,
payable,  in cash  or (at the  Company's  option)  shares  of  Common  Stock  or
additional Series G Preferred Stock, which the Company shall immediately convert
into shares of Common Stock at the Conversion Ratio (as hereinafter defined), in
arrears  on the  Conversion  Date (as  hereinafter  defined)  without  interest.
Dividends  on the Series G Preferred  Stock shall accrue  daily  commencing  the
Original  Issue Date (as  defined in Section 7) and shall be deemed to accrue on
such  date  whether  or not  earned or  declared  and  whether  or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. The party that holds the Series G Preferred Stock on an applicable
record date for any dividend  payment will be entitled to receive such  dividend
payment and any other accrued and unpaid  dividends  which accrued prior to such
dividend payment date,  without regard to any sale or disposition of such Series
G Preferred  Stock  subsequent  to the  applicable  record date but prior to the
applicable dividend payment date. Except as otherwise provided herein, if at any
time the Company pays less than the total  amount of  dividends  then accrued to
the Series G Preferred  Stock,  such payment shall be distributed  ratably among
the holders of such series based upon the number of shares held by each holder.

                  (b) So long as any  Series  G  Preferred  Stock  shall  remain
outstanding,  neither the  Company  nor any  subsidiary  thereof  shall  redeem,
purchase or otherwise  acquire directly or indirectly any Junior  Securities (as
defined in Section 7), nor shall the Company



                                       49

<PAGE>



directly  or  indirectly  pay or declare any  dividend or make any  distribution
(other than a dividend or  distribution  described in Section 5) upon, nor shall
any  distribution  be made in respect of, any Junior  Securities,  nor shall any
monies be set aside for or  applied to the  purchase  or  redemption  (through a
sinking fund or otherwise) of any Junior  Securities unless all dividends on the
Series G Preferred Stock for all past dividend periods shall have been paid.

                  Section 3.  Voting  Rights.  The holders of Series G Preferred
                  ---------------------------
Stock shall be entitled  vote on all matters for which  holders of the Company's
Common  Stock are  entitled to vote,  and shall vote  together  with such Common
Stock as a single  class.  Each  share of  Series  G  Preferred  Stock  shall be
entitled  to the number of votes on such  matters as equals the number of shares
of Common Stock  issuable  upon  conversion  of such share of Series G Preferred
Stock had such share been  converted  on the Original  Issue Date in  accordance
with the terms  hereof.  So long as any shares of Series G  Preferred  Stock are
outstanding,  the Company shall not, without the affirmative vote of the holders
of a majority  of the shares of the Series G Preferred  Stock then  outstanding,
(i) alter or change  adversely  the powers,  preferences  or rights given to the
Series G Preferred  Stock (except that the  foregoing  shall not be construed to
limit the ability of the  Company,  without the vote of such  holders,  to grant
such  voting  rights  or,  subject  to the other  provisions  set forth  herein,
conversion  rights,  as it may  determine  with  regard to shares of its capital
stock now or  hereafter  authorized)  or (ii)  authorize  or create any class of
stock ranking as to dividends or  distribution  of assets upon a Liquidation (as
defined below) senior to, or prior to the Series G Preferred Stock.

                  Section 4. Liquidation.  Upon any liquidation,  dissolution or
                  -----------------------
winding-up of the Company,  whether voluntary or involuntary (a  "Liquidation"),
the holders of shares of Series G  Preferred  Stock shall be entitled to receive
out of the assets of the  Company,  whether  such assets are capital or surplus,
for each share of Series G Preferred  Stock an amount equal to the Stated Value,
plus an amount equal to accrued but unpaid dividends per share, whether declared
or not, but without  interest,  before any distribution or payment shall be made
to the holders of any Junior Securities,  and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be



                                       50

<PAGE>



distributed  shall be distributed  among the holders of Series G Preferred Stock
ratably in accordance with the respective  amounts that would be payable on such
shares if all amounts payable  thereon were paid in full. A sale,  conveyance or
disposition  of all or  substantially  all of the  assets of the  Company or the
effectuation  by the Company of a transaction or series of related  transactions
in which more than 50% of the voting  power of the  Company is disposed of shall
be deemed a Liquidation; provided that, a consolidation or merger of the Company
with  or  into  any  other  company  or  companies  shall  not be  treated  as a
Liquidation,  but instead  shall be subject to the  provisions of Section 5. The
Company shall mail written notice of any such liquidation, not less than 45 days
prior to the payment  date  stated  therein,  to each record  holder of Series G
Preferred Stock.

                  Section 5.  Conversion.
                  -----------------------

                  (a) Each share of Preferred  Stock shall be  convertible  into
shares of Common  Stock at the  Conversion  Ratio at the option of the holder in
whole or in part at any time after the expiration of the earlier to occur of (i)
90 days after the Original  Issue Date and (ii) the date that the Securities and
Exchange  Commission (the "Commission")  declares effective under the Securities
Act of 1933, as amended (the "Securities Act"), the registration  statement (the
"Registration Statement") contemplated by the Registration Rights Agreement (the
"Registration  Rights  Agreement"),  by and between the Company and the original
holder of Series G Preferred  Stock relating to the Series G Preferred Stock and
the  shares  of  Common  Stock  into  which  the  Series  G  Preferred  Stock is
convertible  in accordance  with the terms  hereof.  Any  conversion  under this
Section  5(a) shall be of a minimum  amount of at least 1,000 shares of Series G
Preferred  Stock.  The holder  shall  effect  conversions  by  surrendering  the
certificate or certificates  representing the shares of Series G Preferred Stock
to be converted  to the Company,  together  with the form of  conversion  notice
attached hereto as Exhibit A (the "Holder Conversion  Notice") in the manner set
forth in Section 5(j). Each Holder Conversion Notice shall specify the number of
shares of Series G Preferred  Stock to be  converted  and the date on which such
conversion is to be effected, which date may not be prior to the date the holder
delivers such Notice by facsimile  (the "Holder  Conversion  Date").  Subject to
Section 5(c) and, as to the original holder (or its sole designee), subject to



                                       51

<PAGE>



Section  3.11 of the Purchase  Agreement  (as defined in Section 7), each Holder
Conversion Notice, once given, shall be irrevocable. If the holder is converting
less than all shares of Series G Preferred Stock  represented by the certificate
or certificates  tendered by the holder with the Holder Conversion  Notice,  the
Company shall  promptly  deliver to the holder a certificate  for such number of
shares as have not been converted.

                  (b) Provided  that 10 Trading Days shall have elapsed from the
date the Commission  declared the  Registration  Statement  effective  under the
Securities  Act, each share of the Series G Preferred Stock shall be convertible
into shares of Common Stock at the Conversion Ratio at the option of the Company
in whole or in part at any time on or after the expiration of one year after the
Original  Issue Date;  provided,  however,  that the Company is not permitted to
deliver a Company Conversion Notice (as defined below) within 10 days of issuing
any press release or other public  statement  relating to such  conversion.  The
Company shall effect such conversion by delivering to the holders of such shares
of  Series G  Preferred  Stock to be  converted  a  written  notice  in the form
attached hereto as Exhibit B (the "Company  Conversion  Notice"),  which Company
Conversion  Notice,  once given,  shall be irrevocable.  Each Company Conversion
Notice shall specify the number of shares of Preferred Stock to be converted and
the date on which such conversion is to be effected, which date will be at least
one Trading Day after the date the Company  delivers such Notice by facsimile to
the holder (the "Company  Conversion Date"). The Company shall give such Company
Conversion Notice in accordance with Section 5(j) below at least one Trading Day
before the Company  Conversion  Date. Any such conversion shall be effected on a
pro rata  basis  among  the  holders  of  Series  G  Preferred  Stock.  Upon the
conversion  of  shares  of  Series  G  Preferred  Stock  pursuant  to a  Company
Conversion  Notice,  the holders of the Series G Preferred Stock shall surrender
the certificates representing such shares at the office of the Company or of any
transfer agent for the Series G Preferred  Stock or Common Stock. If the Company
is converting less than all shares of the Series G Preferred  Stock, the Company
shall, upon conversion of such shares subject to such Company  Conversion Notice
and  receipt of the  certificate  or  certificates  representing  such shares of
Series G Preferred Stock deliver to the holder or holders a certificate for such
number of shares of Series G Preferred Stock as have not been converted. Each of
a Holder



                                       52

<PAGE>



Conversion  Notice and a Company  Conversion  Notice is  sometimes  referred  to
herein as a "Conversion  Notice," and each of a "Holder  Conversion  Date" and a
"Company  Conversion  Date" is  sometimes  referred  to herein as a  "Conversion
Date."

                  (c) (i) If on any  Conversion  Date for any shares of Series G
Preferred  Stock  applicable to any  conversion  under Section 5(a) or 5(b), the
average Per Share Market Value of the Common Stock for the five (5) Trading Days
immediately preceding the Conversion Date exceeds 150% of the Initial Conversion
Price (as hereinafter defined), the number of shares issuable upon conversion of
such shares of Series G  Preferred  Stock shall be reduced by a number of shares
equal to 50% of (A) the amount by which such Per Share Market Value exceeds 150%
of the Initial  Conversion  Price,  divided by (B) such average Per Share Market
Value,  times (C) the number of shares which would  otherwise  be issuable  upon
such conversion, but for the reduction provided for in this Section 5(c)(i).

                      (ii)  Not later than three Trading Days after the
Conversion  Date,  the Company will deliver to the holder (i) a  certificate  or
certificates which shall be free of restrictive legends and trading restrictions
(other  than  those  then  required  by law  and as set  forth  in the  Purchase
Agreement),  representing  the number of shares of Common  Stock being  acquired
upon the  conversion of shares of Series G Preferred  Stock and (ii) one or more
certificates  representing  the number of shares of Series G Preferred Stock not
converted;  provided,  however that the Company  shall not be obligated to issue
certificates  evidencing the shares of Common Stock issuable upon  conversion of
any shares of Series G Preferred Stock until certificates evidencing such shares
of Series G Preferred  Stock are either  delivered for conversion to the Company
or any transfer agent for the Series G Preferred  Stock or Common Stock,  or the
holder  notifies the Company that such  certificates  have been lost,  stolen or
destroyed and provides a bond (or other adequate security reasonably  acceptable
to the Company)  satisfactory  to the Company to indemnify  the Company from any
loss incurred by it in connection therewith.  The Company shall, upon request of
the holder,  use its best  efforts to deliver any  certificate  or  certificates
required to be delivered by the Company  under this Section 5(c)  electronically
through  the  Depository  Trust  Corporation  or  another  established  clearing
corporation performing similar functions. In the case of a



                                       53

<PAGE>



conversion  pursuant  to a Holder  Conversion  Notice,  if such  certificate  or
certificates are not delivered by the date required under this Section 5(c), the
holder  shall be  entitled  by written  notice to the  Company at any time on or
before such holder's receipt of such certificate or certificates thereafter,  to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.

                  (d) (i) The  conversion  price  for  each  share  of  Series G
Preferred Stock (the "Conversion  Price") in effect on any Conversion Date shall
be the lesser of (a) the average Per Share Market Value for the five (5) Trading
Days immediately  preceding the Original Issuance Date (the "Initial  Conversion
Price")  and (b) 80% of the  average  Per  Share  Market  Value for the five (5)
Trading Days immediately preceding the Conversion Date; provided,  however, that
the  percentage  set  forth in clause  (b)  above is  subject  to  reduction  in
accordance with the Registration Rights Agreement.

                      (ii)  If the Company, at any time while any shares
of Series G Preferred Stock are  outstanding,  (a) shall pay a stock dividend or
otherwise  make  a  distribution  or  distributions  on  shares  of  its  Junior
Securities  payable in shares of its capital stock (whether payable in shares of
its Common Stock or of capital stock of any class),  (b)  subdivide  outstanding
shares of Common Stock into a larger number of shares,  (c) combine  outstanding
shares  of  Common  Stock  into a  smaller  number  of  shares,  or (d) issue by
reclassification  of shares of Common  Stock any shares of capital  stock of the
Company,  the Initial Conversion Price designated in Section 5(d)(i)(a) shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the  number  of shares  of  Common  Stock  outstanding  after  such  event.  Any
adjustment  made  pursuant  to this  Section  5(d)(ii)  shall  become  effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective  immediately
after  the  effective  date  in  the  case  of  a  subdivision,  combination  or
reclassification.

                      (iii)  If the Company, at any time while any shares
of Series G Preferred Stock are outstanding, shall issue rights or



                                       54

<PAGE>



warrants to all holders of Common  Stock (and not to the holders of the Series G
Preferred  Stock)  entitling them to subscribe for or purchase  shares of Common
Stock at a price per share less than the Per Share  Market Value of Common Stock
at the record date mentioned below,  the Initial  Conversion Price designated in
Section  5(d)(i)(a) shall be multiplied by a fraction,  of which the denominator
shall be the number of shares of Common Stock  (excluding  treasury  shares,  if
any)  outstanding  on the date of issuance  of such rights or warrants  plus the
number  of  additional  shares of  Common  Stock  offered  for  subscription  or
purchase,  and of which the  numerator  shall be the  number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the  aggregate  offering
price of the total number of shares so offered would  purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued,  and shall become  effective  immediately  after the record date for the
determination  of  stockholders  entitled to receive  such  rights or  warrants.
However,  upon the  expiration of any right or warrant to purchase  Common Stock
the issuance of which resulted in an adjustment in the Initial  Conversion Price
designated in Section 5(d)(i)(a) pursuant to this Section 5(d)(iii), if any such
right or warrant  shall  expire and shall not have been  exercised,  the Initial
Conversion  Price designated in Section  5(d)(i)(a) shall  immediately upon such
expiration  be  recomputed  and effective  immediately  upon such  expiration be
increased  to the  price  which it would  have been  (but  reflecting  any other
adjustments  in the  Conversion  Price made  pursuant to the  provisions of this
Section 5 after the issuance of such rights or warrants)  had the  adjustment of
the Conversion Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of shares
of Common Stock actually  purchased upon the exercise of such rights or warrants
actually exercised.

                      (iv)     If the Company, at any time while shares of
Series G Preferred  Stock are  outstanding,  shall  distribute to all holders of
Common Stock (and not to holders of Series G Preferred  Stock)  evidences of its
indebtedness  or assets or rights or warrants to  subscribe  for or purchase any
security  (excluding those referred to in Section  5(d)(iii) above) then in each
such case the Initial Conversion Price at which each share of Series G Preferred
Stock shall thereafter be convertible shall be determined by



                                       55

<PAGE>



multiplying  the Initial  Conversion  Price in effect  immediately  prior to the
record date fixed for  determination  of  stockholders  entitled to receive such
distribution  by a  fraction  of which  the  denominator  shall be the Per Share
Market Value of Common Stock  determined as of the record date mentioned  above,
and of which the  numerator  shall be such Per Share  Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith;  provided,  however that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally  recognized or major regional  investment  banking
firm or firm of independent  certified public accountants of recognized standing
(which may be the firm that regularly  examines the financial  statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Series G Preferred Stock;  and provided,  further that
the Company, after receipt of the determination by such Appraiser shall have the
right to select an  additional  Appraiser,  in which case the fair market  value
shall be equal to the average of the  determinations by each such Appraiser.  In
either case the  adjustments  shall be described in a statement  provided to all
holders of Preferred Stock of the portion of assets or evidences of indebtedness
so distributed  or such  subscription  rights  applicable to one share of Common
Stock.  Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.

                      (v)     All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be.

                      (vi)    Whenever the Initial Conversion Price is
adjusted  pursuant to Section  5(d)(ii),(iii),  (iv) or (v),  the Company  shall
promptly mail to each holder of Series G Preferred Stock, a notice setting forth
the Initial  Conversion  Price after such  adjustment  and setting forth a brief
statement of the facts requiring such adjustment.

                      (vii)   In case of any reclassification of the
Common Stock, any consolidation or merger of the Company with or



                                                        56

<PAGE>



into another  person,  the sale or transfer of all or  substantially  all of the
assets of the Company or any  compulsory  share  exchange  pursuant to which the
Common Stock is converted into other securities,  cash or property,  the holders
of the Series G Preferred Stock then outstanding shall have the right thereafter
to convert  such shares only into the shares of stock and other  securities  and
property  receivable  upon or  deemed  to be held by  holders  of  Common  Stock
following such reclassification,  consolidation, merger, sale, transfer or share
exchange, and the holders of the Series G Preferred Stock shall be entitled upon
such event to receive such amount of securities or property as the shares of the
Common Stock of the Company  into which such shares of Series G Preferred  Stock
could  have  been  converted   immediately   prior  to  such   reclassification,
consolidation,  merger,  sale,  transfer  or  share  exchange  would  have  been
entitled.  The terms of any such consolidation,  merger, sale, transfer or share
exchange  shall  include  such terms so as to  continue to give to the holder of
Series G Preferred  Stock the right to receive the  securities  or property  set
forth  in  this  Section   5(d)(vii)   upon  any   conversion   following   such
consolidation,  merger,  sale, transfer or share exchange.  This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.

                      (viii)  If:

                              (a)     the Company shall declare a dividend
                                      (or any other distribution) on its
                                      Common Stock; or
                              (b)     the Company shall declare a special
                                      nonrecurring cash dividend on or a
                                      redemption of its Common Stock; or
                              (c)     the Company shall authorize the
                                      granting to all holders of the
                                      Common Stock rights or warrants to
                                      subscribe for or purchase any shares
                                      of capital stock of any class or of
                                      any rights; or
                              (d)     the approval of any stockholders of
                                      the Company shall be required in
                                      connection with any reclassification
                                      of the Common Stock of the Company



                                                        57

<PAGE>



                                      (other than a subdivision  or  combination
                                      of  the   outstanding   shares  of  Common
                                      Stock),  any  consolidation  or  merger to
                                      which the Company is a party,  any sale or
                                      transfer  of all or  substantially  all of
                                      the   assets  of  the   Company,   or  any
                                      compulsory   share  exchange  whereby  the
                                      Common  Stock  is  converted   into  other
                                      securities, cash or property; or
                              (e)     the Company shall authorize the
                                      voluntary or involuntary
                                      dissolution, liquidation or winding-
                                      up of the affairs of the Company;

then the Company shall cause to be filed at each office or agency maintained for
the purpose of  conversion  of Series G Preferred  Stock,  and shall cause to be
mailed to the holders of Preferred  Stock at their last  addresses as they shall
appear upon the stock books of the Company,  at least 20 calendar  days prior to
the applicable record or effective date hereinafter  specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such  dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the  holders of Common  Stock of record to be  entitled  to
such  dividend,  distributions,   redemption,  rights  or  warrants  are  to  be
determined,  or (y) the  date on  which  such  reclassification,  consolidation,
merger, sale, transfer, share exchange,  dissolution,  liquidation or winding-up
is expected to become  effective,  and the date as of which it is expected  that
holders of Common Stock of record shall be entitled to exchange  their shares of
Common  Stock  for   securities  or  other   property   deliverable   upon  such
reclassification,   consolidation,   merger,  sale,  transfer,  share  exchange,
dissolution,  liquidation or winding-up;  provided, however, that the failure to
mail such  notice or any defect  therein  or in the  mailing  thereof  shall not
affect the  validity of the  corporate  action  required to be specified in such
notice.

                      (ix)     In any case in which this Section shall require
that an adjustment be made effective as of the record date for a
specified event, the Company may elect to defer until occurrence of



                                                        58

<PAGE>



such  event (A)  issuing to the  holder,  if Series G  Preferred  Stock is to be
converted after such record date, the Underlying  Shares and other capital stock
of the  Company,  if any,  issuable  upon  such  conversion  over and  above the
Underlying Shares and other capital stock of the Company,  if any, issuable upon
such conversion thereof on the basis of the Conversion Price prior to adjustment
and (B) paying to the holder  any amount in cash in lieu of a  fractional  share
pursuant to the terms hereof, provided,  however, that the Company shall deliver
to the holder a due bill or other appropriate instrument evidencing the holder's
right to receive such additional  Underlying Shares,  other capital stock and/or
cash upon the occurrence of the event requiring such adjustment.

                  (e) If at any time conditions  shall arise by reason of action
taken by the  Company  which in the  opinion of the Board of  Directors  are not
adequately covered by the other provisions hereof and which might materially and
adversely  affect  the  rights  of the  holders  of  Series  G  Preferred  Stock
(different than or distinguished  from the effect generally on rights of holders
of any  class  of the  Company's  capital  stock)  or if at any  time  any  such
conditions  are  expected to arise by reason of any action  contemplated  by the
Company,  the Company shall mail a written notice briefly  describing the action
contemplated  and the material  adverse  effects of such action on the rights of
the holders of Series G Preferred  Stock at least 20 calendar  days prior to the
effective  date of such  action,  and an  Appraiser  selected  by the holders of
majority in  interest of the Series G Preferred  Stock shall give its opinion as
to the adjustment,  if any (not inconsistent  with the standards  established in
this  Section  5),  of  the  Conversion  Price  (including,  if  necessary,  any
adjustment as to the  securities  into which shares of Series G Preferred  Stock
may  thereafter  be  convertible)  and any  distribution  which  is or  would be
required to  preserve  without  diluting  the rights of the holders of shares of
Series G Preferred Stock; provided,  however, that the Company, after receipt of
the  determination  by such  Appraiser,  shall  have  the  right  to  select  an
additional Appraiser, in which case the adjustment shall be equal to the average
of the adjustments  recommended by each such  Appraiser.  The Board of Directors
shall make the adjustment recommended forthwith upon the receipt of such opinion
or opinions or the taking of any such action  contemplated,  as the case may be;
provided, however, that no such adjustment of the Conversion Price shall be made
which in the



                                       59

<PAGE>



opinion of the  Appraiser(s)  giving the  aforesaid  opinion or  opinions  would
result in an increase of the Conversion  Price to more than the Conversion Price
then in effect.

                  (f) The Company  covenants  that it will at all times  reserve
and keep available out of its  authorized  and unissued  Common Stock solely for
the purpose of issuance upon  conversion  of Series G Preferred  Stock as herein
provided,  free from preemptive rights or any other actual  contingent  purchase
rights of persons  other  than the  holders of Series G  Preferred  Stock,  such
number of shares of Common  Stock as shall be issuable  (taking into account the
adjustments  and  restrictions of Section 5(b) and Section 5(d) hereof) upon the
conversion  of all  outstanding  shares of Series G Preferred  Stock,  and in no
circumstances  shall such reserved and available  shares of Common Stock be less
than twice the number of shares of Common  Stock which  would be  issuable  upon
conversion of the Series G Preferred Stock were such conversion  effected on the
Original Issue Date. The Company  covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly  authorized,  issued
and fully paid and nonassessable.

                  (g) Upon a  conversion  hereunder  the  Company  shall  not be
required to issue stock certificates  representing fractions of shares of Common
Stock,  but may if  otherwise  permitted,  make a cash payment in respect of any
final  fraction of a share based on the Per Share Market Value at such time.  If
the Company elects not, or is unable, to make such a cash payment, the holder of
a share of Series G Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.

                  (h) The issuance of certificates for shares of Common Stock on
conversion  of Series G  Preferred  Stock  shall be made  without  charge to the
holders thereof for any  documentary  stamp or similar taxes that may be payable
in respect  of the issue or  delivery  of such  certificate,  provided  that the
Company  shall not be  required to pay any tax that may be payable in respect of
any transfer  involved in the issuance and delivery of any such certificate upon
conversion  in a name other than that of the holder of such shares of  Preferred
Stock so  converted  and the  Company  shall not be required to issue or deliver
such certificates  unless or until the person or persons requesting the issuance
thereof  shall  have paid to the  Company  the  amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.


                                       60

<PAGE>



                  (i) Shares of Series G Preferred  Stock  converted into Common
Stock or redeemed  pursuant to the terms hereof shall be canceled and shall have
the status of authorized but unissued shares of preferred stock.

                  (j) Each Holder  Conversion Notice shall be given by facsimile
and by mail, postage prepaid,  addressed to the attention of the Chief Financial
Officer of the  Company at the  facsimile  telephone  number and  address of the
principal place of business of the Company. Each Company Conversion Notice shall
be given by facsimile and by mail, postage prepaid,  addressed to each holder of
Series G Preferred Stock at the facsimile  telephone  number and address of such
holder  appearing on the books of the Company or provided to the Company by such
holder  for  the  purpose  of  such  Company  Conversion  Notice,  or if no such
facsimile  telephone  number  or  address  appears  or is so  provided,  at  the
principal place of business of the holder. Any such notice shall be deemed given
and effective upon the earliest to occur of (i)(a) if such Conversion  Notice is
delivered  via  facsimile at the facsimile  telephone  number  specified in this
Section 5(j) prior to 6:00 p.m.  (Eastern  Standard Time) on any date, such date
(or, in the case of a Company  Conversion  Notice, the next Trading Day) or such
later date as is specified in the Conversion  Notice, and (b) if such Conversion
Notice is delivered via facsimile at the facsimile telephone number specified in
this Section 5(j) after 6:00 p.m.  (Eastern Standard Time) on any date, the next
date (or, in the case of a Company Conversion Notice, the next Trading Day after
such next day) or such later date as is specified in the Conversion Notice, (ii)
five days after deposit in the United States mails or (iii) upon actual  receipt
by the party to whom such notice is required to be given.

                  Section 6.  Company Redemption Option.
                  --------------------------------------

                  The Company  may, at its option,  redeem any  outstanding  and
unconverted  Series G Preferred  Stock on the third  anniversary of the Original
Issue Date (the "Optional Redemption Date"),  provided that the Company notifies
the holders  thereof no later than the third  business day prior to the Optional
Redemption Date of its intention to do so.



                                       61

<PAGE>



                  If  the  Company  elects  to  redeem  such   outstanding   and
unconverted  shares of Series G Preferred  Stock, the redemption price per share
(the  "Optional  Redemption  Price")  shall  equal the  Conversion  Price on the
Optional Redemption Date and shall be paid by the Company to the holders of such
unconverted  Series G Preferred  Stock on the Optional  Redemption  Date. If any
portion of the Optional Redemption Price shall not be paid by the Company within
7 calendar days after the Optional  Redemption  Date,  such Optional  Redemption
Price shall be increased by an amount  accruing from the 7th day to the 21st day
after the Optional  Redemption  Date at the rate of 5% per annum,  from the 22nd
day to the 60th day at 8% per annum and from the 61st day until paid at the rate
of 12% per annum.  However,  if any  portion of the  Optional  Redemption  Price
remains  unpaid more than 7 calendar  days after the Optional  Redemption  Date,
then the holder may elect, by written notice to the Company given within 45 days
after  the  Optional  Redemption  Date,  to  either  (i)  demand  conversion  in
accordance  with the formula and the time frame  therefor set forth in Section 5
for a  conversion  at the option of the holder  hereof of all Series G Preferred
Shares for which the Optional Redemption Price, plus interest, has not been paid
in full (the "Unpaid Optional Redemption Shares"),  in which event the Per Share
Market  Price for such shares  shall be the lower of the Per Share  Market Price
calculated on the Optional  Redemption Date and the Per Share Market Price as of
the  holder's  written  demand for  conversion,  or (ii) demand that the Company
withdraw its election to force such redemption.  If the holder elects option (i)
above,  the Company  shall  within  three  business  days of its receipt of such
election  deliver  to the  holder  the  shares of  Common  Stock  issuable  upon
conversion of the Unpaid  Shares  subject to such holder  conversion  demand and
otherwise  perform its obligations  hereunder with respect  thereto;  or, if the
Holder elects option (ii) above,  the Company shall  promptly,  and in any event
not later than three  business  days from  receipt  of  holder's  notice of such
election, return to the holder all of the Unpaid Optional Redemption Shares.

                  Section 7.  Definitions.  For the purposes hereof, the
                  -----------------------
following terms shall have the following meanings:

                  "Common Stock" means shares now or hereafter authorized
of the class of Common Stock, par value $.001, of the Company and



                                       62

<PAGE>



stock of any  other  class  into  which  such  shares  may  hereafter  have been
reclassified or changed.

                  "Conversion  Ratio" means,  at any time, a fraction,  of which
the numerator is Stated Value plus accrued but unpaid dividends (which shall not
include  dividends  paid upon  conversion)  and of which the  denominator is the
Conversion Price at such time.

                  "Junior  Securities"  means  the  Common  Stock  and all other
equity securities of the Company, except the Other Preferred Stock.

                  "Original  Issue  Date"  shall  mean  the  date  of the  first
issuance of any shares of the Series G Preferred Stock  regardless of the number
of transfers of any particular shares of Series G Preferred Stock and regardless
of the number of  certificates  which may be issued to  evidence  such  Series G
Preferred Stock.

                  "Per Share Market Value" means on any particular  date (a) the
closing  bid  price  per share of the  Common  Stock on such date on The  NASDAQ
SmallCap  Market or other market or stock exchange on which the Common Stock has
been  listed or if there is no such price on such  date,  then the  closing  bid
price on such market or exchange on the date nearest preceding such date, or (b)
if the Common Stock is not listed on The NASDAQ SmallCap Market or any market or
stock   exchange,   the  closing  bid  for  a  share  of  Common  Stock  in  the
over-the-counter  market, as reported by the NASDAQ Stock Market at the close of
business  on such date,  or (c) if the Common  Stock is not quoted on the NASDAQ
Stock  Market,  the  closing  bid  price  for a share  of  Common  Stock  in the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated (or similar  organization or agency  succeeding to its functions of
reporting  prices),  of (d) if the  Common  Stock is no longer  reported  by the
National  Quotation  Bureau  Incorporated  (or  similar  organization  or agency
succeeding to its functions of reporting prices),  then the average of the "Pink
Sheet" quotes for the relevant conversion period as determined by the holder, or
(e) if the Common Stock is no longer  publicly traded the fair market value of a
share of Common  Stock as  determined  by an  Appraiser  (as  defined in Section
5(d)(iv)  above) selected in good faith by the holders of a majority in interest
of the shares of the  Series G  Preferred  Stock;  provided,  however,  that the
Company,  after receipt of the  determination by such Appraiser,  shall have the
right to select an additional Appraiser, in which



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<PAGE>



case, the fair market value shall be equal to the average of the  determinations
by each such Appraiser.

                  "Person" means a corporation,  an association,  a partnership,
organization,  a business, an individual,  a government or political subdivision
thereof or a governmental agency.

                  "Purchase Agreement" means the Convertible Preferred
Stock Purchase Agreement between the Company and the original
holder of the Series G Preferred Stock.

                  "Trading  Day"  means (a) a day on which the  Common  Stock is
traded on The NASDAQ  SmallCap  Market or principal  stock exchange on which the
Common  Stock has been  listed,  or (b) if the Common Stock is not listed on The
NASDAQ SmallCap Market or any stock exchange, a day on which the Common Stock is
traded in the  over-the-counter  market, as reported by the NASDAQ Stock Market,
or (c) if the Common  Stock is not quoted on the NASDAQ Stock  Market,  a day on
which the Common Stock is quoted in the  over-the-counter  market as reported by
the National  Quotation  Bureau  Incorporated  (or any similar  organization  or
agency succeeding its functions of reporting prices).



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<PAGE>



                                    EXHIBIT A
                              NOTICE OF CONVERSION
                            AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder
in order to Convert shares of Series G Preferred Stock)

The  undersigned  hereby  elects  to  convert  the  number of shares of Series G
Convertible  Preferred Stock indicated  below,  into shares of Common Stock, par
value U.S.$.001 per share (the "Common Stock"),  of AMNEX,  Inc. (the "Company")
according to the conditions  hereof, as of the date written below. If shares are
to be issued in the name of a person  other than  undersigned,  the  undersigned
will pay all  transfer  taxes  payable with  respect  thereto and is  delivering
herewith such  certificates and opinions as reasonably  requested by the Company
in  accordance  therewith.  No fee  will  be  charged  to  the  Holder  for  any
conversion, except for such transfer taxes, if any.

Conversion calculations:   ___________________________________________________
                            Date to Effect Conversion

                           ---------------------------------------------------
                           Number of shares of Series G Preferred
                              Stock to be Converted

                           ---------------------------------------------------
                           Applicable Conversion Price

                           ---------------------------------------------------
                           Signature

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

                           ---------------------------------------------------
                           Address:


         The Company  undertakes to promptly upon its receipt of this conversion
notice (and, in any case prior to the time it effects the  conversion  requested
hereby),  notify the  converting  holder by facsimile of the number of shares of
Common Stock  outstanding  on such date and the number of shares of Common Stock
which would be issuable to the holder if the conversion requested in this



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<PAGE>



conversion notice were effected in full,  whereupon,  the holder may, within one
day of the notice from the Company,  revoke the conversion  requested  hereby to
the extent that it determines that such conversion  would result in it owning in
excess of 4.9% of the  outstanding  shares of Common Stock on such date, and the
Company shall issue to the holder one or more certificates  representing  shares
of Series G Preferred  Stock which have not been  converted  as a result of this
provision.  If the holder waives the  applicability of this limitation by notice
to the Company  delivered upon its receipt of the Company's notice regarding the
number  of  outstanding  shares  of Common  Stock or if the  Purchaser  fails to
respond to the  Company's  notice within one day  thereafter,  the Company shall
effect in full the conversion requested in this notice.



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<PAGE>



                                    EXHIBIT B

                                   AMNEX, INC.

                             NOTICE OF CONVERSION AT
                           THE ELECTION OF THE COMPANY


The undersigned in the name and on behalf of AMNEX,  Inc. (the "Company") hereby
notifies the  addressee  hereof that the Company  hereby  elects to exercise its
right to convert [ ] shares of its Series G Convertible  Preferred Stock held by
the Holder  into  shares of Common  Stock,  par value  U.S.$.001  per share (the
"Common  Stock") of the Company  according to the terms  hereof,  as of the date
written  below.  No fee  will  be  charged  to the  Holder  for  any  conversion
hereunder,  except for such transfer  taxes, if any which may be incurred by the
Company if shares are to be issued in the name of a person other than the person
to whom this notice is addressed.


Conversion calculations:   ___________________________________________________
                            Date to Effect Conversion

                           ---------------------------------------------------
                           Number of Shares of Preferred Stock
                           to be Converted

                           ---------------------------------------------------
                           Applicable Conversion Price

                           ---------------------------------------------------
                           Number of Shares of Common Stock
                           Outstanding as at the Close of Trading on
                           the Conversion Date


                           AMNEX, INC.


                           By:________________________________________________

                              Title:__________________________________________





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<PAGE>
         (j) Series L Preferred  Shares. A series of Preferred Shares is hereby
created,  to be  limited  in  amount  to  200,000  of the  5,000,000  authorized
Preferred  Shares.  The  designation,   relative  rights,  powers,  preferences,
qualifications and limitations are as follows:
         (i)      Designation  of  Series.  The  designation  of the  series  of
                  Preferred  Shares  created  hereby shall be Series L Preferred
                  Shares (hereinafter the "Series L Preferred Shares").

         (ii)     Dividends. The holders of Series L Preferred Shares, on a pari
                  passu  basis  with the  holders  of the  Corporation's  Common
                  Shares  (based upon the number of Common Shares into which the
                  Series L Preferred Shares are convertible), Series F Preferred
                  Shares  and  any  other  series  of  Preferred  Shares  of the
                  Corporation  hereafter  created  which shall have a pari passu
                  right  with  the  holders  of the  Common  Shares  to  receive
                  dividends,  shall be entitled to receive such dividends as may
                  be declared  by the Board of  Directors.  Declared  but unpaid
                  dividends shall not bear interest.

                  The rights of the  holders of the  Series L  Preferred  Shares
                  shall be junior and  subordinate  to the rights of the holders
                  of the Series A,  Series B,  Series C,  Series D, Series E and
                  Series  G  Preferred  Shares  of the  Corporation  to  receive
                  dividends,  as well as to the  right of any  other  series  of
                  Preferred  Shares of the Corporation  hereafter  created which
                  shall have any preferential  right to receive dividends before
                  the holders of the Common Shares.

         (iii)    Voting  Rights.  The holders of the Series L Preferred  Shares
                  shall be entitled to vote on all matters at all meetings of 
                  the shareholders of the Corporation, and shall be entitled to
                  such number of votes for each Series L Preferred Share 
                  entitled to vote at such  meetings as is set forth below,  
                  voting  together with the holders of Common  Shares, and other
                  Preferred  Shares who are entitled to vote, if any such shares
                  are then outstanding, and not as a separate  class,  except as
                  required by law.  The  number of votes to which the holders of
                  the Series L Preferred Shares shall be entitled to vote for 
                  each Series L Preferred Share shall equal the number of Common
                  Shares of the Corporation into which such Series L Preferred
                  Share would convert upon the occurrence of the Mandatory 
                  Conversion Event(as hereinafter defined).

         (iv)     Redemption.  The Series L Preferred Shares shall not be
                  subject to mandatory redemption by either the Corporation
                  or the holders thereof.

         (v)      Conversion.

                  (A) Mandatory Conversion Event and Price. Immediately upon the
                  filing  with  the  Secretary  of  State  of  New  York  of the
                  Certificate  of  Amendment  (as   hereinafter   defined)  (the
                  "Mandatory  Conversion Event"),  each Series L Preferred Share
                  shall   convert  into  fifteen  (15)  Common   Shares  of  the
                  Corporation (the "Conversion Ratio"), subject to adjustment as
                  hereinafter set forth.

                  (B) Procedure.  Before any holder of Series L Preferred Shares
                  shall be entitled to receive  Common  Shares upon  conversion,
                  the holder shall surrender the certificate(s)  therefor,  duly
                  endorsed, at the principal offices of the Corporation. Subject
                  to the provisions hereof, effective upon the occurrence of the
                  Mandatory Conversion Event (the "Effective  Conversion Date"),
                  the  holder  shall  thereupon  be deemed  to be the  holder of
                  record  of  the  Common  Shares   issuable  upon   conversion,
                  notwithstanding   that  the  stock   transfer   books  of  the
                  Corporation  shall  then be closed or that the  certificate(s)
                  representing  such  Common  Shares  shall not then be actually
                  delivered  to the holder.  Subject to the  provisions  hereof,
                  promptly   following  the  Effective   Conversion   Date,  the
                  Corporation  shall  cause  its  transfer  agent to  issue  and
                  deliver to such holder of Series L Preferred Shares a
                  certificate for the number of Common Shares to which the
                  holder shall be entitled.
                  
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<PAGE>

                  (C)  Adjustment of Conversion Ratio.

                  (i) In the  event  that  the  Corporation  shall  (a)  pay any
                  dividend on its Common Shares  payable in Common  Shares;  (b)
                  effect a subdivision of its outstanding  shares into a greater
                  number of Common Shares (by  reclassification,  stock split or
                  otherwise than by payment of a dividend in Common Shares); (c)
                  effect  a  combination  or  consolidation  of its  outstanding
                  Common  Shares  into a lesser  number  of  Common  Shares  (by
                  reclassification,  reverse split or  otherwise);  (d) issue by
                  reclassification,  exchange  or  substitution  of  its  Common
                  Shares  any  shares of  capital  stock of the  Corporation  or
                  effect  any  other  transaction  having  similar  effect,  the
                  Conversion  Ratio in effect  immediately  prior to such action
                  shall be adjusted so that,  in the event of the  occurrence of
                  the  Mandatory   Conversion   Event  at  any  time  after  the
                  occurrence of any event described  above,  the holder shall be
                  entitled  to receive  the Common  Shares to which such  holder
                  would have been finally  entitled,  after giving effect to the
                  occurrence of such event,  as if such holder had converted the
                  Series L Preferred Shares  immediately prior to the occurrence
                  of such event.  An adjustment  made pursuant to this paragraph
                  (C) shall become effective  immediately  after the record date
                  in  the  case  of  a  dividend  and  shall  become   effective
                  immediately  after  the  effective  date  in  the  case  of  a
                  subdivision,   combination,   reclassification,   exchange  or
                  substitution.

                  (ii) In case of any  consolidation  or  merger  to  which  the
                  Corporation is a party,  other than a merger or  consolidation
                  in  which  the  Corporation  is the  surviving  or  continuing
                  corporation and which does not result in any  reclassification
                  of,  or change  (other  than a change in par value or from par
                  value to no par value or from no par value to par value, or as
                  a result of subdivision or combination) in, outstanding Common
                  Shares, then the Corporation,  or such successor  corporation,
                  as the case may be, shall make appropriate  provisions so that
                  the holder of each Series L Preferred Share then outstanding

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<PAGE>



                  shall have the right to  convert  such share into the kind and
                  amount of shares or other  securities and property  receivable
                  upon such consolidation or merger by a holder of the number of
                  Common Shares into which such Series L Preferred  Shares might
                  have been converted immediately prior to such consolidation or
                  merger.

                  (D) Fractional  Shares.  No fractional  Common Shares shall be
                  issued upon conversion of Series L Preferred  Shares.  In lieu
                  of any fractional  shares to which the holder would  otherwise
                  be entitled,  the  Corporation  shall pay, in cash,  an amount
                  equal to the  product of (i) such  fraction  of a share  times
                  (ii) the  market  price of one Common  Share on the  Effective
                  Conversion Date.

                  (E)  Reservation  of  Shares  Issuable  Upon  Conversion.  The
                  Corporation  shall at all times reserve and keep available out
                  of its authorized but unissued  Common Shares,  solely for the
                  purpose of effecting the  conversion of the Series L Preferred
                  Shares, such number of its Common Shares as shall from time to
                  time be sufficient to effect the conversion of all outstanding
                  Series L Preferred  Shares;  provided,  however,  that nothing
                  contained   herein  shall   preclude  the   Corporation   from
                  satisfying its obligations in respect of the conversion of the
                  Series L Preferred  Shares by delivery of Common  Shares which
                  are held in the treasury of the  Corporation.  Notwithstanding
                  the  foregoing,  the  Corporation  shall not be  obligated  to
                  reserve and keep  available  out its  authorized  but unissued
                  Common Shares,  or issue,  any Common Shares to the holders of
                  the Series L Preferred  Shares  unless and until it shall have
                  filed with the Secretary of State of New York a Certificate of
                  Amendment of its Certificate of  Incorporation  as a result of
                  which there will be a sufficient  number of authorized  Common
                  Shares of the  Corporation  available  for  issuance  upon the
                  conversion  of the Series L Preferred  Shares and the exercise
                  of any and all  outstanding  purchase,  exchange or conversion
                  rights for the acquisition of Common Shares of the Corporation
                  (the "Certificate of Amendment").



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<PAGE>



                  (F) Lost, Stolen or Destroyed Certificates.  In the event that
                  the   holder   shall   notify   the   Corporation   that   the
                  certificate(s)  representing  Series L  Preferred  Shares have
                  been  lost,  stolen or  destroyed  and  either  (i)  provide a
                  letter, in form satisfactory to the Corporation, to the effect
                  that he will indemnify the Corporation  from any loss incurred
                  by  it  in  connection  therewith,   and/or  (ii)  provide  an
                  indemnity bond in such amount as is reasonably required by the
                  Corporation,  the  Corporation  having the option of  electing
                  either (i) or (ii) or both, the  Corporation  may, in its sole
                  discretion,  accept such letter and/or  indemnity bond in lieu
                  of the  surrender  of the  certificate(s)  as required by this
                  subsection (v).

                  (G)  Statutory  Restrictions.  The  foregoing  provisions  for
                  conversion  of the Series L Preferred  Shares shall be subject
                  to all applicable statutory limitations and restrictions.

         (vi)     Liquidation Preference.  In the event of any voluntary or
                  involuntary liquidation, dissolution or winding up of the
                  Corporation, the holders of Series L Preferred Shares
                  will be entitled to receive, prior and in preference to
                  any distribution of the assets or surplus funds of the
                  Corporation to the holders of any Common Shares by reason
                  of the ownership thereof, and on a pari passu basis with
                  the holders of the Series A, Series B, Series C, Series
                  D, Series E, Series F, and Series G Preferred Shares and
                  any Series H, Series I, Series J, and/or Series K
                  Preferred Shares hereafter authorized, an amount equal to
                  the fixed sum of forty-five dollars and forty-five cents
                  ($45.45) per share and no more (the "Preferential
                  Amount").  If, upon the occurrence of such an event, the
                  assets and funds thus distributed among the holders of
                  Series L Preferred Shares shall be insufficient to permit
                  the payment to such holders of the full Preferential
                  Amount, then, the entire assets and funds of the
                  Corporation legally available for distribution to the
                  holders of the Series L Preferred Shares shall be
                  distributed ratably among such holders in accordance with
                  the respective amounts which would be payable on such
                  shares if all amounts payable thereon were paid in full.

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<PAGE>



                  After the  payment or setting  apart of the full  Preferential
                  Amounts required to be paid to the holders of Series A, Series
                  B, Series C, Series D, Series E, Series F, Series G and Series
                  L Preferred Shares and any Series H, Series I, Series J and/or
                  Series K Preferred Shares hereafter authorized, the holders of
                  Common Shares or any other stock of the Corporation ranking in
                  liquidation junior to the Series A, Series B, Series C, Series
                  D, Series E, Series F, Series G and Series L Preferred  Shares
                  and any Series H, Series I, Series J and/or Series K Preferred
                  Shares  hereafter  authorized,  shall be  entitled  to receive
                  ratably  all   remaining   assets  or  surplus  funds  of  the
                  Corporation.  Neither  the  merger  or  consolidation  of  the
                  Corporation,  nor the sale, lease or conveyance of all or part
                  of  its  assets,   shall  be  deemed  to  be  a   liquidation,
                  dissolution  or winding up of the affairs of the  Corporation,
                  either  voluntarily  or  involuntarily,  within the meaning of
                  this section.

          (vii)   Sinking Fund.  The Series L Preferred Shares shall not be 
                  entitled to the benefit of any sinking fund to be applied to 
                  their purchase or redemption."

         (5) No holder of any shares of the  Corporation  shall,  because of his
ownership of shares of the  Corporation,  have a  pre-emptive  or other right to
purchase,  subscribe for, or take any part of any shares of the Corporation,  or
any part of any notes,  debentures,  bonds, or other securities convertible into
or providing for options or warrants to purchase shares of the Corporation which
are issued, offered, or sold by the Corporation after its incorporation, whether
the shares, notes, debentures,  bonds, or other securities be authorized by this
certificate  of  incorporation  or by an amended  certificate  duly filed and in
effect  at the  time of the  issuance,  offer,  or sale of such  shares,  notes,
debentures,  bonds, or other  securities.  Any part of the shares  authorized by
this Certificate of Incorporation,  or by an amended certificate duly filed, and
any part of any notes,  debentures,  bonds, or other securities convertible into
or providing for options or warrants to purchase  shares of the  Corporation may
at any  time be  issued,  offered  for  sale,  and  sold or  disposed  of by the
Corporation,  pursuant to a  resolution  of its Board of  Directors  and to such
persons and upon such terms and conditions as the Board of Directors may, in its
sole discretion,  deem proper and advisable,  without first offering to existing
shareholders  any  part of such  shares,  notes,  debentures,  bonds,  or  other
securities.




                                       72

<PAGE>




         (6)  The Secretary of State is designated as the agent of the 
Corporation upon whom process against the Corporation may be served, and the 
address to which the Secretary of State shall mail a copy of any process against
the Corporation served upon him is 101 Park Avenue, New York, New York 10178, 
Attention:  Vice President - General Counsel.

         (7) A director of the Corporation shall not be personally liable to the
Corporation  or its  shareholders  for  damages  for any  breach  of duty in his
capacity as a director, unless a judgment or other final adjudication adverse to
him  establishes  that (i) his acts or  omissions  were in bad faith or involved
intentional  misconduct  or a  knowing  violation  of law or (ii) he  personally
gained  in fact a  financial  or other  advantage  to  which he was not  legally
entitled or (iii) his acts violated Section 719 of the Business Corporation Law.
Neither  the  amendment  nor repeal of this  Article 7, nor the  adoption of any
provision of the Certificate of Incorporation  inconsistent with this Article 7,
shall  eliminate or reduce the effect of this Article 7 in respect of any matter
occurring,  or any cause of action,  suit or claim  that but for this  Article 7
would  accrue or  arise,  prior to such  amendment,  repeal  or  adoption  of an
inconsistent provision.






                                       73