EXHIBIT 4.0

                                    Exhibit A

                           Certificate of Designation

There is hereby created a series of the Preferred Stock of this corporation to
consist of 5,200 of the shares of Series E Preferred Stock, $1000 par value per
share, which this corporation now has authority to issue.

1. The distinctive designation of the series shall be "Series E Convertible
Preferred Stock" (the "Preferred Stock" or the "Series E Preferred Stock"). The
number of shares of Series E Convertible Preferred Stock shall be 5,200.

2. For purposes of this Certificate of Designation and the Company's Certificate
of Incorporation, (i) any series of Preferred Stock of the Company entitled to
dividends and liquidation preference on a parity with the Series E Preferred
Stock shall be referred to as "Parity Preferred Stock," (ii) any series of
Preferred Stock ranking senior to the Series E and Parity Preferred Stock with
respect to dividends and liquidation preference shall be referred to as "Senior
Stock," and (iii) the Common Stock and any series of Preferred Stock ranking
junior to the Series E and Parity Preferred Stock with respect to dividends and
liquidation preference shall be referred to as "Junior Stock." As of the date of
this Certificate of Designation there is not outstanding any Parity Preferred
Stock.

3. In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, after setting apart or paying in full the
preferential amounts due to holders of Senior Stock, the holders of Series E
Preferred Stock and Parity Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Company to the holders of Junior Stock or Common Stock by reason of their
ownership thereof, an amount equal to their full liquidation preference, which
in the case of shares of Series E Preferred Stock shall be $1,000 per share,
plus accrued and unpaid dividends (the "Redemption Value"). If, upon such
liquidation, dissolution or winding-up of the Company, the assets of the Company
available for distribution to the holders of its stock be insufficient to permit
the distribution in full of the amounts receivable as aforesaid by the holders
of Preferred Stock and Parity Preferred Stock, then all such assets of the
Company shall be distributed ratably among the holders of Preferred Stock and
Parity Preferred Stock in proportion to the amounts which each would have been
entitled to receive if such assets were sufficient to permit distribution in
full as aforesaid. Neither the consolidation nor merger of the Company nor the
sale, lease or transfer by the Company of all or any part of its assets shall be
deemed to be a liquidation, dissolution or winding-up of the Company for the
purposes of this paragraph.

4.       Certain Definitions and References.

         (a)      The Preferred is being issued under Private Placement Purchase
                  Agreements between the Company and the holders of the
                  Preferred (each, a "Subscription Agreement").

         (b)      The terms "Registration Statement" and "Completion Date" shall
                  have the meanings attributed thereto in the Subscription
                  Agreement, and the term "Effective Date" means the date on
                  which the Registration Statement shall be declared to be
                  effective.

5.       Dividends

         (a)      The holders of the Preferred Stock shall be entitled to
                  receive a dividend, payable quarterly on the first day of each
                  calendar quarter commencing July 1, 1998 or on earlier
                  conversion or redemption of the Preferred Stock, which accrues
                  from the date of issuance at the annual rate of $70 per share,
                  provided that the annual rate shall be $180 during any First
                  Delay Period and the annual rate shall be $240 during any
                  Extended Delay Period. At the option of the Company, these
                  dividends may be deferred, accrued and paid on the earlier of
                  conversion or required redemption of the Preferred Stock.

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                  (i)      The reference to the "First Delay Period" shall apply
                           only if the Effective Date has not occurred by the
                           close of business 90 days following the Completion
                           Date and means the period which begins the next day
                           and ends on the earlier of 180 days following the
                           Completion Date or the Effective Date.

                  (ii)     The reference to the "Extended Delay Period" shall
                           apply only if the Effective Date has not occurred by
                           180 days following the Completion Date and means the
                           period which begins the next day and ends on the
                           Effective Date.

         (b)      The dividends shall be payable at the option of the Company
                  either in cash or in shares of Common Stock which on the date
                  of the dividend payment are convertible into shares of Common
                  Stock which have a value equal to the dividend, provided that
                  dividends may be paid in Common Stock only if the public sale
                  thereof is then permitted . The value of each share of Common
                  Stock for the purposes of any dividend payment shall be equal
                  to the average of the closing bid prices therefor on the
                  NASDAQ Small Cap Market on the last five trading days prior to
                  the date of the payment.

         (c)      Nothing in this Certificate shall limit any other remedies
                  which may be available to the Holder by reason of any delay in
                  the filing or the effectiveness of the Registration Statement.

6.       Conversion

         (a)      The holder shall have the right at any time, subject to the
                  restrictions noted below, in its sole discretion, to convert
                  the Preferred Stock, in whole or in part, into a number of
                  shares (the "Conversion Shares") of the Company's common stock
                  (the "Common Stock") equal to $1,000 per share converted
                  divided by the Conversion Price. The Conversion Price means
                  the lesser of (1) $3 or (2) 85% of the average of the closing
                  bid price of a share of Common Stock of the Company during the
                  five trading days prior to such conversion.

         (b)      In the event that the holder elects to exercise its conversion
                  rights hereunder, it shall give to the Company written notice
                  (by fax or overnight courier service or personal delivery) of
                  such election and shall surrender its Preferred Stock to the
                  Company for cancellation. Conversion shall be effective upon
                  the giving of such notice provided that the certificate for
                  the converted Preferred is received by the Company within
                  three days thereafter. The Company shall, within three
                  business days after receipt by the Company of notice of
                  conversion and the Preferred being converted, deliver
                  irrevocable instructions to its transfer agent (with a copy to
                  Holder) to DWAC the shares of Common Stock issuable on such
                  conversion.


         (c)      The Preferred Stock shall on March 15, 2000 automatically
                  convert into Common Stock at the then Conversion Price,
                  provided that such conversion shall occur on such date only if
                  the Company's listing on the NASDAQ Small Cap or National
                  Market has then been in effect at all times from and after
                  January 1, 1999, and only if the Common Stock issuable upon
                  conversion of the Preferred Stock may then be resold publicly
                  pursuant to an effective registration statement under the
                  Securities Act of 1933 or under Rule 144 thereunder. If by
                  reason of the proviso in the preceding sentence the Preferred
                  shall not convert automatically on March 15, 2000, the Holder
                  may, in addition to such Holder's other remedies, by written
                  notice to the Company, require the Company forthwith to redeem
                  the Preferred at a redemption price equal to $1,000 per share
                  plus accrued dividends. The redemption price shall accrue
                  interest payable on demand at the rate of 15% per annum.


         (d)      The Company shall reserve for issuance on conversion and
                  exercise of the Preferred and the Warrant (as defined in the
                  Subscription Agreement) the number shares of Common Stock
                  which would be issuable under the Preferred if converted at a
                  Conversion Price of $1.50. The Company 


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                  shall use its diligent efforts promptly to list on NASDAQ all
                  shares of Common Stock which are issued upon conversion of
                  this Preferred.

         (e)      Conversion of the Preferred is subject to the following
                  restrictions:

                  (i)      If the Effective Date shall have occurred on or
                           before the 90th day after the Completion Date, no
                           more than 10% of the initial principal amount of this
                           Note shall be convertible in any calendar month (with
                           the unconverted portion of each month's installment
                           being carried forward to later months); provided that
                           this restriction shall not apply so long as the
                           closing bid price of a share of Common Stock is $3.50
                           or more on NASDAQ (or such other securities exchange
                           where the common stock may then be listed);

                  The Preferred shall be convertible at any time only to the
                           extent that Holder would not as a result of such
                           exercise (and after giving effect to any shares or
                           warrants or other securities owned by Holder)
                           beneficially own more that 4.99% of the then
                           outstanding Common Stock. Beneficial ownership shall
                           be defined in accordance with Rule 13d-3 under the
                           Securities Exchange Act of 1934. The opinion of
                           counsel to Holder shall prevail in the event of any
                           dispute on the calculation of Holder's beneficial
                           ownership.

         (f)      If any capital reorganization or reclassification of the
                  common stock, or consolidation, or merger of the Company with
                  or into another corporation, or the sale or conveyance of all
                  or substantially all of its assets to another corporation
                  shall be effected, then, as a condition precedent of such
                  reorganization or sale, the following provision shall be made:
                  The Holder of the Preferred shall from and after the date of
                  such reorganization or sale have the right to receive (in lieu
                  of the shares of common stock of the Company immediately
                  theretofore receivable with respect to the Preferred, upon the
                  exercise of conversion rights), such shares of stock,
                  securities or assets as would have been issued or payable with
                  respect to or in exchange for the number of outstanding shares
                  of such common stock immediately theretofore receivable with
                  respect to the Preferred (assuming the Preferred were then
                  convertible). In any such case, appropriate provision shall be
                  made with respect to the rights and interests of the Holders
                  to the end that such conversion rights (including, without
                  limitation, provisions for appropriate adjustments) shall
                  thereafter be applicable, as nearly as may be practicable in
                  relation to any shares of stock, securities or assets
                  thereafter deliverable upon the exercise thereof.

         (g)      In the event that the Holder proposes to convert all or any
                  portion of the Preferred at a conversion price of less than
                  $2.00, the Company shall at its option be entitled to redeem
                  all or any portion of the Preferred proposed to be converted.
                  Such option shall be exercisable by paying to the Holder,
                  within three business days after the date of such proposed
                  conversion, 115% of the amount of principal proposed to be
                  converted, together with accrued and unpaid dividends.

         (h)      The Company covenants to call a special meeting of
                  shareholders which will be held on or before July 15, 1998 and
                  at which the Company's shareholders will be asked to approve
                  the issuance of shares on conversion of the Preferred and
                  Warrants issued to the Purchasers (on such terms as defined in
                  the Subscription Agreement). The Board of Directors of the
                  Company will recommend that the shareholders of the Company
                  vote in favor of such approval. Until such approval is
                  obtained, the maximum number of shares which will be issued on
                  conversion of the Preferred and exercise of the Warrants is
                  19.9%, issuable on a first converted-first exercised basis.
                  Should such approval not be obtained by July 15, 1998, then
                  until such approval is obtained, the Company shall on demand
                  by Holder made at any time or times, redeem any portion of the
                  Preferred designated for redemption (the "Redeemed Portion")
                  at a redemption price per share equal to $1150 plus accrued
                  dividends. The redemption price shall be payable within five
                  business days after demand for redemption is made and shall
                  accrue interest payable on demand at 11% per annum.


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7. Purchase for Investment. The Holder, by acceptance of shares of Preferred,
acknowledges that the Preferred (and the Common Stock into which the Preferred
is convertible) has not been registered under the Act, covenants and agrees with
the Company that such Holder is taking and holding the Preferred (and the Common
Stock into which the Preferred is convertible) for investment purposes and not
with a view to, or for sale in connection with, a distribution thereof and that
the Preferred (and the Common Stock into which the Preferred is convertible) may
not be assigned, hypothecated or otherwise disposed of in the absence of an
effective registration statement under the Act or an opinion of counsel for the
Holder, which counsel shall be reasonably satisfactory to the Company, to the
effect that such disposition is in compliance with the Act, and represents and
warrants that such Holder is an "accredited investor" that such Holder has, or
with its representative has, such knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks in respect of
this Preferred (and the Common Stock into which the Preferred is convertible)
and is able to bear the economic risk of such investment.

8. The Company covenants and agrees that all shares of Common Stock which may be
issued upon conversion of this Preferred will, upon issuance, be duly and
validly issued, fully paid and non-assessable and no personal liability will
attach to the holder thereof.

9. Certain Events of Mandatory Redemption.

         (a) An "event of redemption" with respect to this Preferred shall exist
         if any of the following shall occur, if:

                  (i)      The Company shall breach or fail to comply with any
                           provision of this Preferred and such breach or
                           failure shall continue for 15 days after written
                           notice by any Holder of any Preferred to the Company;

                  (ii)     A receiver, liquidator or trustee of the Company or
                           of a substantial part of its properties shall be
                           appointed by court order and such order shall remain
                           in effect for more than 15 days; or the Company shall
                           be adjudicated bankrupt or insolvent; or a
                           substantial part of the property of the Company shall
                           be sequestered by court order and such order shall
                           remain in effect for more than 15 days; or a petition
                           to reorganize the Company under any bankruptcy,
                           reorganization or insolvency law shall be filed
                           against the Company and shall not be dismissed within
                           45 days after such filing;

                  (iii)    The Company shall file a petition in voluntary
                           bankruptcy or request reorganization under any
                           provision of any bankruptcy, reorganization or
                           insolvency law, or shall consent to the filing of any
                           petition against it under any such law;

                  (iv)     The Company shall make an assignment for the benefit
                           of its creditors, or admit in writing its inability
                           to pay its debts generally as they become due, or
                           consent to the appointment of a receiver, trustee or
                           liquidator of the Company, or of all or any
                           substantial part of its properties.

         (b) If an event of redemption shall occur, the Holder may, in addition
         to such Holder's other remedies, by written notice to the Company,
         require the Company forthwith to redeem the Preferred at a redemption
         price equal to $1,000 per share plus accrued dividends. The redemption
         price shall accrue interest payable on demand at the rate of 11% per
         annum.

10. Without the consent of a majority in interest of the holders of the
Preferred, the Company shall not create any class of equity security which is
senior to or on parity with the Preferred in liquidation rights, other than in
connection with the sale of shares to existing stockholders of the Company; or
to an entity whose relationship with the Company creates intangible value for
the Company; or to fund merger and/or acquisition related activity.


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11. All share, redemption and similar amounts are subject to appropriate
adjustment in the event of stock splits, stock dividends, recapitalization and
similar events.



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12. Miscellaneous.

         (a) All notices and other communications required or permitted to be
         given hereunder shall be in writing and shall be given (and shall be
         deemed to have been duly given upon receipt) by delivery in person, by
         telegram, by facsimile, recognized overnight mail carrier, telex or
         other standard form of telecommunications, or by registered or
         certified mail, postage prepaid, return receipt requested, addressed as
         follows: (a) if to the Holder, to such address as such Holder shall
         furnish to the Company in accordance with this Section, or (b) if to
         the Company, to its headquarters office, or to such other address as
         the Company shall furnish to the Holder in accordance with this
         Section.

         (b) The waiver of any event of default or the failure of the Holder to
         exercise any right or remedy to which it may be entitled shall not be
         deemed a waiver of any subsequent event of default or of the Holder's
         right to exercise that or any other right or remedy to which the Holder
         is entitled.

         (c) The Holder shall be entitled to recover its reasonable legal and
         other costs of collecting on this Preferred and such costs shall accrue
         interest payable on demand at the rate of 7% per annum.

         (d) In addition to all other remedies to which the Holder may be
         entitled hereunder, Holder shall also be entitled to decrees of
         specific performance without posting bond or other security.


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                                                                       Exhibit B

Neither this Warrant nor the shares of Common Stock issuable on exercise of this
Warrant have been registered under the Securities Act of 1933. None of such
securities may be transferred in the absence of registration under such Act or
an opinion of counsel to the effect that such registration is not required.

                               SCANGRAPHICS, INC.

WARRANT

DATED:

Number of Shares:

Holder:

Address:

-------------------------------


1. THIS CERTIFIES THAT the Holder is entitled to purchase from SCANGRAPHICS,
INC., a Pennsylvania corporation (hereinafter called the "Company"), at $3.00
per share the number of shares of the Company's common stock ("Common Stock")
set forth above.

2. All rights granted under this Warrant shall expire on March 15, 2002, subject
to earlier termination as set forth in Section 3.

3. Early Expiration.

         (a)      The following terms shall have the following definitions:

                  (i)      Effective Date means the date of the effectiveness of
                           the registration statement (the "Registration
                           Statement") referred to in a Private Placement
                           Purchase Agreement dated as of the date of this
                           Warrant.

                  (ii)     The "30-day Price" means the closing bid price (on
                           NASDAQ or such other securities exchange where the
                           common stock may then be listed) of the Common Stock
                           on not less than 30 days in any consecutive 45-day
                           period (the "Test Period") which begins after the
                           Effective Date and through which the Registration
                           Statement continues to be effective.

         (b) If any 30-day Price is not less than $6 per share in any Test
         Period, then, as of the end of such Test Period, this Warrant shall
         expire as to 1/3 of the shares of Common stock initially purchasable
         thereunder.

         (c) If any 30-day Price is not less than $8 per share in any Test
         Period, then, as of the end of such Test Period, this Warrant shall
         expire as to 2/3 of the shares of Common stock initially purchasable
         thereunder on a basis which is cumulative with any expiration
         theretofore occurring under Section (b).


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         (d)      If any 30-day Price is not less than $10 per share in any Test
                  period, then, as of the end of such Test Period, then as of
                  the last day of the test Period, this Warrant shall expire in
                  full.

4. Notwithstanding anything to the contrary contained herein, Holder shall not
have the right to exercise this Warrant so long as and to the extent that at the
time of such exercise, such exercise would cause the Holder then to be the
"beneficial owner" (after giving effect to all other securities owned by Holder)
of 5% or more of the Company's then outstanding Common Stock. For purposes
hereof, the term "beneficial owner" shall have the meaning ascribed to it in
Section 13(d) of the Securities Exchange Act of 1934. The opinion of legal
counsel to Holder, in form and substance satisfactory to the Company and the
Company's counsel, shall prevail in all matters relating to the amount of
Holder's beneficial ownership.

5. This Warrant and the Common Stock issuable on exercise of this Warrant (the
"Underlying Shares") may be transferred, sold, assigned or hypothecated, only if
registered by the Company under the Securities Act of 1933 (the "Act") or if the
Company has received from counsel to the Company a written opinion to the effect
that registration of the Warrant or the Underlying Shares is not necessary in
connection with such transfer, sale, assignment or hypothecation. The Warrant
and the Underlying Shares shall be appropriately legended to reflect this
restriction and stop transfer instructions shall apply. The Holder shall through
its counsel provide such information as is reasonably necessary in connection
with such opinion.

6. The Company covenants to call a special meeting of shareholders which will be
held on or before July 15, 1998 and at which the Company's shareholders will be
asked to approve the issuance of shares on conversion of the Preferred and
Warrants issued to the Purchasers (each such terms as defined in the
Subscription Agreement). The Board of Directors of the Company will recommend
that the shareholders of the Company vote in favor of such approval. Until such
approval is obtained, the maximum number of shares which will be issued on
conversion of the Preferred and exercise of the Warrants is 19.9%, issuable on a
first converted, first exercised basis. Should such approval not be obtained by
July 15, 1998, then until such approval is obtained, the Company shall on demand
by Holder made at any time or times, redeem any portion of the Preferred
designated for redemption (the "Redeemed Portion") at a redemption price per
share equal to the pre-tax profit Holder would have earned had Holder, at the
close of business on the date of its demand for redemption, exercised the
Redeemed Portion and simultaneously sold the shares received on such exercise at
the closing NASDAQ sales price on such date. The redemption price shall be
payable within five business days after demand for redemption is made, and shall
accrue interest payable on demand at 11% per annum.

7. The holder of this warrant is entitled to certain registration rights under
the Subscription Agreement.

8. Any permitted assignment of this Warrant shall be effected by the Holder by
(i) executing a standard form of assignment, (ii) surrendering the Warrant for
cancellation at the office of the Company accompanied by the opinion of counsel
to the Company referred to above; and (iii) unless in connection with an
effective registration statement which covers the sale of this Warrant and or
the shares underlying the Warrant, delivery to the Company of a statement by the
transferee (in a form acceptable to the Company and its counsel) that such
Warrant is being acquired by the Holder for investment and not with a view to
its distribution or resale; whereupon the Company shall issue, in the name or
names specified by the Holder (including the Holder) new Warrants representing
in the aggregate rights to purchase the same number of Shares as are purchasable
under the Warrant surrendered. Such Warrants shall be exercisable immediately
upon any such assignment of the number of Warrants assigned. The transferor will
pay all relevant transfer taxes. Replacement warrants shall bear the same legend
as is borne by this Warrant.

9. The term "Holder" should be deemed to include any permitted record transferee
of this Warrant.

10. The Company covenants and agrees that all shares of Common Stock which may
be issued upon exercise hereof will upon issuance, be duly and validly issued,
fully paid, and non-assessable; and no personal liability will attach to the
holder thereof. The Company further covenants and agrees that during the periods
within which this 


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Warrant may be exercised the Company at all times will have authorized and
reserved a sufficient number of shares of Common Stock for issuance upon
exercise of this Warrant and all other Warrants.

11. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.

12. If as a result of reorganization, merger, consolidation, liquidation,
recapitalization, stock split; combination of shares or stock dividends payable
with respect to such Common Stock, the outstanding shares of Common Stock of the
Company are at any time increased or decreased or changed into or exchanged for
a different number or kind of share or other security of the Company or of
another corporation, then appropriate adjustments in the number and kind of such
securities then subject to this Warrant and in the exercise price shall be made
effective as of the date of such occurrence so that the position of the Holder
upon exercise will be the same as it would have been had it owned immediately
prior to the occurrence of such events the Common Stock subject to this Warrant.
Such adjustment shall be made successively whenever any event listed above shall
occur and the Company will notify the Holder of the Warrant of each such
adjustment. Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject to this
Warrant adjusted accordingly.

13. The rights represented by this Warrant may be exercised at any time within
the period above specified by (i) surrender of this Warrant (with a standard
purchase form properly executed) at the principal executive office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company); (ii) payment to the Company of the exercise price for the
number of Shares specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) unless in connection with an
effective registration statement which covers the sale of the shares underlying
the Warrant, the delivery to the Company of a statement by the Holder (in a form
acceptable to the Company and its counsel) that such Shares are being acquired
by the Holder for investment and not with a view to their distribution or
resale.

14. The certificates for the Common Stock so purchased shall be DWAC'd to the
Holder within a reasonable time, not exceeding five business days after all
requisite documentation has been provided, after the rights represented by this
Warrant shall have been so exercised, and shall bear a restrictive legend with
respect to any applicable securities laws.

15. This Warrant shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania. The federal and state courts in the city of
Philadelphia shall have exclusive jurisdiction over this instrument and the
enforcement thereof. Service of process shall be effective if by certified mail,
return receipt requested. All notices shall be in writing and shall be deemed
given upon receipt by the party to whom addressed. This instrument shall be
enforceable by decrees of specific performances well as other remedies.

     IN WITNESS WHEREOF, Scangraphics, Inc. has caused this Warrant to be signed
by its duly authorized officers under Its corporate seal, and to be dated as of
the date set forth above.

                               SCANGRAPHICS, INC.

                               By:__________________________

                               Title:________________________


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