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                                                                     EXHIBIT 3.9

                     CERTIFICATE OF DESIGNATIONS, PREFERENCES
              AND RIGHTS OF SERIES 1998-A CONVERTIBLE PREFERRED STOCK

                                        OF

                                    ECOGEN INC.

                                        ***


      Ecogen Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware,

      DOES HEREBY CERTIFY:

      That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation (as amended) of said corporation, and
pursuant to the provisions of Section 151 of Title 8 of the Delaware Code of
1953, said Board of Directors, adopted a resolution providing for which
resolution is as follows:

             RESOLVED, that a series of the Corporation's Preferred Stock
      consisting of 35,000 shares of Preferred Stock, be and hereby is,
      designated as "Series 1998-A Convertible Preferred Stock", par value $.01
      per share (the "Series A Preferred Stock"), and that the Series A
      Preferred Stock shall have the designations, powers, preferences, rights
      and qualifications, limitations and restrictions as set forth in the
      Certificate of Designation, Preferences and Rights of Series 1998-A
      Convertible Preferred Stock (the "Series A Certificate") attached as
      Exhibit A.

      That said Series A Certificate states that the Board of Directors does
hereby fix and herein state and express such designations, powers, preferences
and relative and other special rights and qualifications, limitations and
restrictions thereof as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein).

             Section 1.       Designation, Amount and Par Value.  The series of
preferred stock shall be designated as 8% Series 1998-A Convertible
Preferred Stock (the "Preferred Stock") and the number of shares so designated
shall be 35,000 (which shall not be subject to increase without the consent of
the holders of the Preferred Stock (each, a "Holder" and collectively, the
"Holders")).  Each share of Preferred Stock shall have a par value of $.01 and
a stated value of $100.00 (the "Stated Value").  Of the designated shares of
Preferred Stock, 20,000 shares of Preferred Stock are being issued initially,
and up to 15,000 shares of Preferred Stock are being authorized for payment of
dividends in shares of Preferred Stock when, as and if, declared by the Board
of Directors.
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             Section 2.       Dividends.

             (a)   Holders of 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 8% per annum (the
"Dividend Rate"), payable on a semi-annual basis on June 30 and December 31 of
each year during the term hereof (each a "Dividend Payment Date"), commencing on
June 30, 1998, in cash or shares of Preferred Stock (the "Preferred Dividend"),
provided, that in connection with a conversion of the Preferred Stock, the
Company shall be entitled to pay dividends in the form of Common Stock, subject
to the terms and conditions set forth herein, at the option of the Company.
Dividends on the Preferred Stock shall be calculated on the basis of a 360-day
year, shall accrue daily commencing on the Original Issue Date (as defined in
Section 8), and shall be deemed to accrue from 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. Any dividends not paid
on any Dividend Payment Date shall continue to accrue and shall be due and
payable upon conversion of the Preferred Stock. A party that holds shares of
Preferred Stock on a Dividend Payment Date 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
Preferred Stock subsequent to the applicable record date. Except as otherwise
provided herein, if at any time the Company pays less than the total amount of
dividends then accrued on account of Preferred Stock, such payment shall be
distributed ratably among the Holders based upon the number of shares held by
each Holder. The Company shall provide the Holders notice of its intention to
pay dividends in cash or shares of Preferred Stock not less than 10 Business
Days prior to any Dividend Payment Date for as long as shares of Preferred Stock
are outstanding. If dividends are paid in the form of Preferred Stock, the
number of shares of Preferred Stock issuable on account of such dividend shall
equal the cash amount of such dividend on such Dividend Payment Date divided by
the Stated Value. If dividends are paid in shares of Common Stock, the number of
shares of Common Stock issuable on account of such dividend shall equal the cash
amount of such dividend on such Dividend Payment Date divided by the Conversion
Price (as defined below) on such date. The Company shall not be required to
issue stock certificates representing fractions of shares of Preferred Stock and
shall make a cash payment in respect of any final fraction of a share based on
the product of such fractional share and the Stated Value.

             (b)   Notwithstanding anything to the contrary contained
herein, the Company may not pay dividends in the form of Preferred Dividends or
in shares of Common Stock and must deliver cash in respect thereof if on the
Dividend Payment Date:

                   (i) (A) the number of shares of Preferred Stock at the time


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authorized for issuance for the payment of Preferred Dividends on such Dividend
Payment Date, together with the number of shares held as treasury stock, is
insufficient to satisfy the Company's then existing obligations to issue shares
of Preferred Stock for the payment of such Preferred Dividends on such Dividend
Payment Date, or (B) the sum of (i) the number of shares of Common Stock at the
time reserved for issuance upon conversion of (x) the shares of Preferred Stock
outstanding on such Dividend Payment Date, and (y) the Preferred Dividends on
such Dividend Payment Date, (ii) the number of authorized but unissued shares of
Common stock not reserved for any purpose, (iii) the number of authorized but
unissued shares of Common Stock not reserved for all other purposes, and (iv)
the number of shares held as treasury stock, is insufficient to satisfy the
Company's then existing conversion and other obligations to issue shares of
Common Stock for all purposes;

                     (ii)     the Common Stock is not then listed on the Nasdaq
National Market ("NASDAQ"), the NASDAQ SmallCap Market or other national
securities exchange; or

                     (iii)    the Company has failed to timely satisfy its
conversion obligations hereunder.

             (c)     So long as any 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 8), nor shall the Company 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, except for repurchases effected by the Company on the open market,
pursuant to a direct stock purchase plan or in connection with the Company's
401(k) plan.

             Section 3.       Voting Rights.  Except as otherwise provided 
herein and as otherwise required by law, the Preferred Stock shall have no
voting rights. However, so long as any shares of Preferred Stock are
outstanding, the Company shall not and shall cause its subsidiaries not to,
without the affirmative vote of the Holders of all of the shares of the
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock, (b) alter or amend this
Certificate of Designation, (c) authorize or create any class of stock ranking
as to dividends or distribution of assets upon a Liquidation (as defined in
Section 4) senior to the Preferred Stock, except for any series of Preferred
Stock issued and sold in accordance with the Purchase Agreement, (d) increase
the authorized number of shares of Preferred Stock or (e) enter into any
agreement with respect to the foregoing.

             Section 4.       Liquidation.  Upon any liquidation, dissolution or
winding-

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up of the Company, whether voluntary or involuntary (a "Liquidation"), the
Holders shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value plus all accrued but unpaid dividends per share,
whether declared or not, 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
distributed to the Holders of Preferred Stock shall be distributed among the
Holders of 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, or 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 Preferred Stock.

             Section 5.       Conversion.

             (a)(i)  Each share of Preferred Stock shall be convertible into
shares of Common Stock (subject to reduction pursuant to Section
5(a)(ii) hereof and Section 3.8 of the Purchase Agreement) at the Conversion
Ratio (as defined in Section 8) at the option of the Holder, at any time and
from time to time, from and after the date (the "Initial Conversion Date")
which is the earlier of (i) that date the Underlying Securities Registration
Statement (as defined in Section 8) is declared effective by the Commission, or
(ii) the 120th day following the Original Issue Date; provided, that, (A) on
and after the Initial Conversion Date, the Holders shall only be entitled to
convert up to (i) 25% of the number of shares of Preferred Stock originally
issued on the Original Issue Date, and (ii) any Preferred Dividends issued on
such shares of Preferred Stock, (B) on and after the first month anniversary of
the Initial Conversion Date, the Holders shall only be entitled to convert up
to (i) 50% of the number of shares of Preferred Stock originally issued on the
Original Issue Date, and (ii) any Preferred Dividends issued on such shares of
Preferred Stock, (C) on and after the second month anniversary of the Initial
Conversion Date, the Holders shall only be entitled to covert up to (i) 75% of
the number of shares of Preferred Stock, originally issued on the Original
Issue Date, and (ii) any Preferred Dividends issued on such shares of Preferred
Stock, and (D) on and after the third month anniversary of the Initial
Conversion Date, the Holders shall be entitled to convert all of the shares of
Preferred Stock originally issued on the Original Issue Date, together with all
Preferred Dividends issued on such shares of Preferred Stock.  Holders shall
effect conversions by surrendering the certificate or certificates representing
the shares of Preferred Stock to be converted to the Company, together with the
form of conversion notice attached hereto as Exhibit A ( a "Conversion
Notice").  Each 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 may not be prior to the date the Holder delivers such
Conversion 

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Notice to the Company by facsimile (the "Conversion Date"). If no Conversion
Date is specified in a Conversion Notice, the Conversion Date shall be the date
that the Conversion Notice is deemed delivered to the Company hereunder. If the
Holder is converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall promptly deliver to such Holder (in the manner and within the time
set forth in Section 5(b)) a certificate for such number of shares as have not
been converted.

             (ii)    At no time while the Common Stock is listed for
trading on the NASDAQ or the Nasdaq SmallCap Market shall the Company
issue on conversions of Preferred Stock an aggregate number of shares of Common
Stock that, when added to the number of shares underlying the Trigger Warrants
(as hereinafter defined) if the same were to be issued at such time, and the
number of shares of Common Stock, if any, theretofore issued on conversion of
the Company's 8% Series 1998-B Convertible Preferred Stock, if hereafter
authorized and issued pursuant to the Purchase Agreement, would equal or exceed
20% of the number of shares of Common Stock issued and outstanding on the
Original Issue Date unless the Company shall have theretofore (A) obtained the
vote of shareholders ("Shareholder Approval"), if any, as may be required by
the rules and regulations of the Nasdaq Stock Market (or successor thereto)
applicable to approve the issuance of Common Stock in excess of the Issuable
Maximum in a private placement whereby shares of Common Stock are deemed to
have been issued at a price that is less than the greater of book or fair
market value of the Common Stock, or (B) obtained an exemption from the
requirement for Shareholder Approval from The Nasdaq Stock Market (a "Nasdaq
Exemption").  The maximum number of shares of Common Stock that can be issued
on conversions of Preferred Stock under this Section 5(a)(ii) is referred to as
the "Issuable Maximum."  At such time as the Company has issued, on conversions
of Preferred Stock, a number of shares of Common Stock equal to the Issuable
Maximum and has not theretofore obtained Shareholder Approval or a Nasdaq
Exemption (the "Trigger Date"), the Company shall either (i) redeem all
outstanding shares of Preferred Stock and Preferred Dividends at a price equal
to the Optional Redemption Price (as defined in Section 6(c) hereof) pursuant
to the terms and conditions of Section 6(c) hereof (the "Initial Optional
Redemption"), provided, that the conditions listed in Section 6(a)(i)-(iii)
shall not apply to the Initial Optional Redemption, or (ii) within a period of
75 days from the Trigger Date (the "Trigger Period") obtain Shareholder
Approval or a Nasdaq Exemption.  On the Trigger Date, if the Company has not
exercised its right to effect the Initial Optional Redemption, the Company
shall issue to the Holders (and distribute pro rata among the Holders based on
the relative number of shares of Preferred Stock held) warrants (the "Trigger
Warrants") to purchase a number of shares of Common Stock equal to 15% of the
quotient obtained by dividing (x) the Stated Value of the Excess Preferred
Stock (as defined below) by (y) the lower of the Per Share Market Value on the
Trigger Date or on the date such warrants are actually distributed to the
Holders (the Trigger Date or such other date, as applicable, is referred to as
the "Measurement Date"). 

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Such warrants shall be substantially in the form attached as Exhibit B to the
Purchase Agreement and shall entitle the holders thereof to purchase shares of
Common Stock at any time during the five year period following the date on which
such warrants are actually distributed to the Holders at an exercise price per
share equal to 101% of the Per Share Market Value on the Measurement Date. From
and after the Trigger Date until the earlier of (I) the date on which a
Shareholder Approval or a Nasdaq Exemption has been obtained, and (II) the
expiration of the Trigger Period, the Dividend Rate shall be increased to 16%
per annum. From and after the expiration of the Trigger Period, if the Company
shall not have theretofore obtained either the Shareholder Approval or a Nasdaq
Exemption, and until such date, if any, as the Company obtains Shareholder
Approval or a Nasdaq Exemption, the Dividend Rate shall 20% per annum and the
Optional Redemption Price (as defined in Section 6(c)) with respect to any
redemption taking place thereafter shall be equal to the Redemption Amount (as
defined in Section 7). Unless the Company shall have theretofore obtained
Shareholder Approval or a Nasdaq Exemption, (I) if any Holder delivers a
Conversion Notice as a result of which such Holder would be entitled to a number
of shares of Common Stock that would result in the issuance of a number of
shares of Common Stock in excess of the Issuable Maximum, then the Company shall
issue in connection with such conversion such number of shares of Common Stock
as would not result in the aggregate issuances exceeding the Issuable Maximum;
and (II) if more than one Holder has delivered a Conversion Notice at the same
time as a result of which such Holders would be entitled to a number of shares
of Common Stock that would result in the issuance of a number of shares of
Common Stock in excess of the Issuable Maximum, then the Company shall issue the
maximum number of shares of Common Stock permissible to such Holders pro rata in
accordance with the number of shares of Preferred Stock submitted for
conversion; and (III) if at any time the Conversion Price is such that if all
then outstanding and unconverted shares of Preferred Stock were converted into
Common Stock the number of shares of Common Stock that would be issued would
equal or exceed 85% of the Issuable Maximum, the Company shall give prompt
notice thereof to all Holders.

             (b)(i)  Not later than three (3) Business Days after any
Delivery Date (as hereinafter defined), 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 required by Section 3.1(b)
of the Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of shares of Preferred Stock (subject to
reduction pursuant to Section 5(a)(ii)), and (ii) one or more certificates
representing the number of shares of Preferred Stock not converted.  The
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are either delivered for
conversion to the Company or any transfer agent for the Preferred Stock or
Common Stock, or the Holder of such Preferred Stock notifies the Company that
such certificates have been lost, stolen or destroyed and provides a bond (or
other adequate security) reasonably satisfactory to the Company to indemnify
the Company 

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from any loss incurred by it in connection therewith, and the Company shall not
be required to deliver certificates evidencing the shares of Common Stock to an
address outside the United States. The date such certificates or affidavit are
delivered is referred to as the "Delivery Date." If the Delivery Date has not
occurred on or prior to the tenth Business Day following the Conversion Date,
then the Company may, on notice to the Holder, rescind the conversion. The
Company shall, upon request of the Holder, if available, use its reasonable best
efforts to deliver any certificate or certificates required to be delivered by
the Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate or
certificates, including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid dividends
hereunder, are not delivered to or as directed by the applicable Holder by the
fifth (5th) Trading Day after the Delivery Date, the Holder shall be entitled by
written notice to the Company at any time on or before its 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.

                     (ii)     If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, prior to the fifth (5th)
Trading Day after the Delivery Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, $5,000 for each day after such
fifth (5th) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's failure
to deliver certificates representing shares of Common Stock upon damages for the
Company's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversions of Preferred Stock or as payment of dividends thereon by the fifth
(5th) Trading Day after the Conversion Date, the Holder may, subject to Section
5(a)(ii), by notice to the Company, require the Company to issue Underlying
Shares pursuant to Section 5(c), except that for such purpose the Conversion
Price applicable thereto shall be the lesser of the Conversion Price on the
Conversion Date and the Conversion Price on the date of such Holder demand. Any
such Underlying Shares will be subject to the provision of this Section.

                     (iii)    In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i), including for purposes hereof, any
shares of Common Stock to be issued on the 

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Conversion Date on account of accrued but unpaid dividends hereunder, prior to
the fifth (5th) Trading Day after the Delivery Date, and if after such fifth
(5th) Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Holder of the Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in
addition to any remedies available to or elected by the Holder) the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the aggregate
stated value of the shares of Preferred Stock for which such conversion was not
timely honored. For example, if the Holder purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 aggregate stated value of the shares of
Preferred Stock, the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In.

                     (iv)     The provisions of clauses (ii) and (iii) of this
Section 5(b) shall not apply if the Company is not required to honor a
Conversion Notice other than by reason of a breach by the Company of the terms
hereof, of the Purchase Agreement or of the Registration Rights Agreement.

             (c)(i)  The conversion price for each share of Preferred Stock
(the "Conversion Price") in effect on any Conversion Date shall be the lesser of
(1) 120% of the average of the Per Share Market Values for the ten (10) Trading
Days immediately preceding the Original Issue Date (the "Initial Conversion
Price"), and (b) 100% of the average of the two (2) lowest Per Share Market
Values during the ten (10) consecutive Trading Day period immediately preceding
the applicable Conversion Date; provided, however, that such ten (10) Trading
Day period shall be extended for the number of Trading Days during such period
in which (A) trading in the Common Stock was suspended from the NASDAQ or such
other national securities exchange or market on which the Common Stock is then
listed, or (B) after the date of effectiveness, the Underlying Securities
Registration Statement ceases to be effective, of (C) after the date of
effectiveness, the Prospectus included in the Underlying Securities Registration
Statement may not be used by the Holder for the resale of Underlying Shares. If:
(a) the Underlying Securities Registration Statement is not filed on or prior to
the Filing Date (as defined in the Registration Rights Agreement (if the Company
files such Underlying Securities Registration Statement without affording the
Holder the opportunity to review and comment on the same as required by Section
3(a) of the Registration Rights Agreement, the Company shall be in violation of
this clause (a)), or (b) the Company fails to file with the Commission a request
for acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), within five (5) days of
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that an Underlying Securities Registration Statement
will not be "reviewed," or will not be subject to further review, or (c) the

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Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the 120th day after the Original Issue Date, or (d)
such Underlying Securities Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities (as such term is defined in the Registration Rights
Agreement) at any time prior to the expiration of the "Effectiveness Period" (as
such term is defined in the Registration Rights Agreement), without being
succeeded within ten (10) Business Days by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission, (e)
trading in the Common Stock shall be suspended from the NASDAQ (other than
temporary suspensions of less than one day pending release of material
information by the Company), or (f) if the conversion rights of the Holders are
suspended for any reason (any such failure or breach being referred to as an
"Event," and for purpose of clauses (a), (c), (e) and (f) the date on which such
Event occurs, or for purposes of clause (b) the date on which such five (5) day
period is exceeded, or for purposes of clause (d) the date which such 10 Trading
Day-period is exceeded, being referred to as "Event Date"), the Company shall,
on the Event Date and on the first day of each monthly anniversary of the Event
Date until such time as the applicable Event is cured, pay to the Holder 2.5% of
the aggregate Stated Value of the shares of Preferred Stock then held by such
Holder, in cash, as liquidated damages and not as a penalty. The provisions of
this Section are not exclusive and shall in no way limit the Company's
obligations under the Registration Rights Agreement.

                     (ii)     If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or pari
passu securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a large 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 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(c)(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
subdivision, combination or re-classification.

                     (iii)    If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights, warrants or options to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the Initial Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such rights,
warrants or options, plus the number of shares of Common Stock which the

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aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock offered for subscription or
purchase. 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, warrant or option to purchase shares
of Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant
or option shall expire and shall not have been exercised, the Conversion Price
shall immediately upon such expiration shall be recomputed and effective
immediately upon such expiration shall 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 upon the issuance of other rights
or warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights, warrants, or options 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, warrants or options actually
exercised.

                     (iv)     If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while any shares of Preferred Stock are outstanding, shall issue shares of
Common Stock or rights, warrants, options, or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("Common Stock
Equivalents") entitling any Person to acquire shares of Common Stock at a price
per share less than the Conversion Price, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of shares of
Common Stock or such Common Stock Equivalents plus the number of shares of
Common Stock which the offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Conversion Price, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock so
issued or issuable, provided, that for purposes hereof, all shares of Common
Stock that are issuable upon exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued.

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


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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, if the Holders of a majority in interest of the Preferred Stock
dispute such valuation, 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 Preferred Stock then outstanding; and provided, further, that the
Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in good faith, 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 the 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.

                     (vi)     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.

                     (vii)    Whenever the Conversion Price is adjusted pursuant
to Section 5(c)(ii), (iii), (iv), or (v) the Company shall promptly mail to each
Holder, a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.

                     (viii)   In case of any reclassification of the Common
Stock, or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property (other than compulsory share
exchanges which constitute Change of Control Transactions), the Holders of the
Preferred Stock then outstanding shall have the right thereafter to convert such
shares only into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification or share exchange would have been entitled.  This
provision shall similarly apply to successive reclassifications or share
exchanges.

                                      -11-
<PAGE>   12

                     (ix)     If (a) the Company shall declare a dividend (or
any other distribution) on its Common Stock, (b) the Company shall declare a
special nonrecurring cash dividend on or a redemption of its Common Stock, (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, (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, 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, of
any compulsory share of 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 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 or share exchange is expected to become effective or
close, 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, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; 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. Holders are entitled to convert shares of Preferred Stock during
the 20 day period commencing the date of such notice to the effective date of
the event triggering such notice.

                     (x)      No adjustment in the Conversion Price under
Sections 5(c)(ii), (iii), (iv) or (v) shall be required to be made if such
adjustment would result in a change of less than $.10 in the Conversion Price,
but any adjustments not made by reason of this clause (x) shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment(s) which, together with any adjustment(s) so carried forward, shall
require an increase or decrease of at least $.10 in the Conversion Price then in
effect.

             (d)     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 Preferred Stock and
Preferred Dividend (assuming payment of all dividends in the form of Preferred
Dividends in accordance with the terms hereof), each as herein provided, free
from preemptive rights or any other actual contingent 

                                      -12-
<PAGE>   13
purchase rights of persons other than the Holders of Preferred Stock, not less
than such number of shares of Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5(a) and Section 5(c)) upon the conversion of all
outstanding shares of Preferred Stock and payment of dividends hereunder
(assuming payment of all dividends in shares of Preferred Stock in accordance
with the terms hereof). 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, nonassessable and freely tradeable, subject to the legend
requirements of Section 3.1(b) of the Purchase Agreement.

             (e)     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 Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.

             (f)     The issuance of certificates for shares of Common Stock
on conversion of 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.

             (g)     Shares of Preferred Stock converted into Common Stock
shall be canceled.  The Company may not reissue any shares of Preferred Stock.

             (h)     Any and all notices or other communications or
deliveries to be provided by the Holders of the Preferred Stock
hereunder, including, without limitation, any Conversion Notice, shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the Chief
Executive Officer of the Company at the facsimile telephone number or address
of the principal place of business of the Company as set forth in the Purchase
Agreement.  Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder of Preferred Stock at the facsimile telephone number
or address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal 

                                      -13-
<PAGE>   14

place of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (Eastern
Standard Time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 8:00 p.m. (Eastern Standard Time) on any
date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii)
upon receipt, if sent by a nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given.

             Section 6.       Optional Redemption.

             (a)     The Company shall have the right, exercisable at any
time upon not less than ten (10) Trading Days notice (an "Optional
Redemption Notice") to the Holders of the Preferred Stock given at any time
after the Original Issue Date, to redeem all or any portion of the shares of
Preferred Stock which have not previously been converted or redeemed, at a
price equal to the Optional Redemption Price (as defined below), provided, that
the Company shall not be entitled to deliver an Optional Redemption Notice to
the Holders if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to satisfy
the Company's conversion obligations of all shares of Preferred Stock then
outstanding, or (ii) the shares of Common Stock issuable upon conversion of
shares of Preferred Stock then outstanding are not registered for resale
pursuant to an effective registration statement that names the Holders as
selling stockholders thereunder and may not be sold without volume restrictions
pursuant to Rule 144 promulgated under the Securities Act, as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in the form and substance acceptable to the Holders
and such transfer agent, or (iii) the Common Stock is not then listed on the
NASDAQ.  The entire Optional Redemption Price shall be paid in cash.  Holders
of Preferred Stock may convert (and the Company shall honor such conversions in
accordance with the terms hereof) any shares of Preferred Stock, including
shares subject to an Optional Redemption Notice, during the period from the
date thereof through the 10th Trading Day after the receipt of an Optional
Redemption Notice.

             (b)     If any portion of the Optional Redemption Price shall
not be paid by the Company within seven (7) calendar days after the tenth (10th)
Trading Day after the delivery of an Optional Redemption Notice, interest shall
accrue thereon at the rate of 15% per annum until the Optional Redemption Price
plus all such interest is paid in full.  In addition, if any portion of the
Optional Redemption Price remains unpaid for more than seven (7) calendar days
after the date due, the Holder of the Preferred Stock subject to such redemption
may elect, by written notice to the Company given at any time thereafter, to
either (i) demand conversion of all or any portion of the shares of Preferred
Stock for 

                                      -14-
<PAGE>   15

which such Optional Redemption Price, plus accrued liquidated damages, has not
been paid in full (the "Unpaid Redemption Shares"), in which event the
Conversion Price for such shares shall be the lower of the Conversion Price
calculated on the date the Optional Redemption Price was originally due and the
Conversion Price as of the Holder's written demand for conversion, or (ii)
invalidate ab initio such redemption, notwithstanding anything herein contained
to the contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days of its receipt of such election deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption 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 (3) Trading Days
from receipt of Holder's notice of such election, return to the Holder all of
the Unpaid Redemption Shares.

             (c)     The "Optional Redemption Price" shall, except as
provided in Section 5(a)(ii), equal the sum of (i) 125% of the Stated Value of
the shares of Preferred Stock subject to redemption hereunder and all accrued
but unpaid dividends per share of Preferred Stock subject to redemption
hereunder, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such shares of Preferred Stock.

             Section 7.       Triggering Events.

             (a)     Upon the occurrence of a Triggering Event, each Holder
shall (in addition to all other rights it may have hereunder or under applicable
law), have the right, exercisable at the sole option of such Holder, to require
the Company to purchase all or a portion of the Preferred Stock then held by
such Holder for a redemption price, in cash, equal to the sum of (i) the Payment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the Holder and (B) the Per
Share Market Value on the date such purchase is demanded or the date the
redemption price hereunder is paid in full, whichever is greater. If the Company
fails to pay the redemption price hereunder in full pursuant to this Section
within seven (7) days after the date of a demand therefor, the Company will pay
interest thereon at a rate of 15% per annum, accruing daily from such seventh
day until the redemption price, plus all such interest thereon, is paid in full.
For purposes of this Section, a share of Preferred Stock is outstanding until
such date as the Holder shall have received Underlying Shares upon a conversion
(or attempted conversion) thereof.

             (b)     A "Triggering Event" means any one or more of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgement, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body);

                     (i)      the failure of the Company to use its best efforts
to cause an 

                                      -15-
<PAGE>   16

Underlying Securities Registration Statement to be declared effective
by the Commission on or prior to the 180th day after the Original Issue Date and
such failure is not cured within five (5) days after notice from a Holder;

                     (ii)     if, during the Effectiveness Period, the
effectiveness of the Underlying Securities Registration Statement
lapses for any reason for more than ten (10) consecutive Business Days or more
than fifteen (15) Business Days in any 12-month period, or the Holder shall
have been advised by the Company that is not permitted to resell Registrable
Securities under the Underlying Securities registration Statement for more than
ten (10) consecutive Business Days or more than fifteen (15) Business Days in
any 12-month period, in each case other than (A) as a result of a stop order or
similar order issued by the Commission not at the request of the Company; or
(B) solely as a result of actions taken by the Holder.

                     (iii)    the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the 20th day after the Delivery
Date or the Company shall provide notice to any Holder, including by way of
public announcement, at any time, of its intention not to comply with requests
for conversion of any Preferred Stock in accordance with the terms hereof;

                     (iv)     the Company shall be a party to any Change of
Control Transaction which has been approved by the Board of Directors of the
Company, and a Holder shall have given notice to the Company of its intention
that such Change of Control transaction be a Triggering Event;

                     (v)      the Company shall fail to make any payments
required to be made under Sections 5(b)(ii), 5(b)(iii) or 5(c)(i) within thirty
(30) days after the same are due and such failure is not cured within five (5)
days after notice from a Holder;

                     (vi)     the Company shall fail for any reason to pay all
amounts required pursuant to a Buy-In within seven (7) days after notice is
deemed delivered hereunder and such failure is not cured within five (5) days
after notice from a Holder; or

                     (vii)    the Company shall fail to have available a
sufficient number of authorized and unreserved shares of Common Stock to issue
to such Holder upon a conversion hereunder.

             Section 8.       Definitions.  For the purposes hereof, the
following terms shall have the following meanings:

             "Business Day" means any day except Saturday, Sunday and any day
which shall be a Federal legal holiday or a day on which banking institutions in
the State of New 

                                      -16-
<PAGE>   17

York are authorized or required by law or other governmental action to close.

             "Change of Control Transaction" means the occurrence of any of: (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 50% of the voting securities of the Company, (ii) a sale or other
disposition via a single transaction or series of related transactions by the
Company or any of its subsidiaries of all or substantially all of the assets of
the Company and its subsidiaries, taken as a whole, other than a sale to a
wholly owned subsidiary of the Company; (iii) the merger or consolidation of the
Company with or into another entity, if the stockholders of the Company
immediately before such merger or consolidation do not own, directly or
indirectly, immediately following such merger or consolidation, more than 50% of
the combined voting power of the resulting outstanding voting securities in
substantially the same proportion as their pre-merger or pre-consolidation
ownership, or sale of all or substantially all of the assets of the Company in
one or a series of related transactions or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i), (ii) or (iii).

             "Common Stock" means the Company's common stock, $.01 par value, 
and 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 and unpaid dividends but only to the
extent not theretofore paid in shares of Preferred Stock in accordance with the
terms hereof, 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 which are junior in rights to dividends or liquidation
preference to the Preferred Stock.

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

             "Payment Amount" for each share of Preferred Stock means the sum of
(i) the greater of (A) 130% of the Stated Value and all accrued dividends with
respect to such share, and (B) the product of (a) the Per Share Market Value on
the Trading Day immediately preceding (x) the date of the Triggering Event or
the Conversion Date, as the case may be, or (y) the date of payment in full by
the Company of the applicable redemption price, whichever is greater, and (b)
the Conversion Ratio calculated on the date of the Triggering Event, or the
Conversion Date, as the case may be, and (ii) all other

                                      -17-
<PAGE>   18

amounts, costs, expenses and liquidated damages due in the respect of such
shares of 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 or
the Nasdaq SmallCap Market, as the case may be, or any other stock exchange or
quotation system on which the Common Stock is then listed, or if there is no
such price on such date, then the closing bid price on such exchange or
quotation system on which the Common Stock is listed for trading on the date
nearest preceding such date, or (b) if the Common Stock is not listed then on
the NASDAQ or the Nasdaq SmallCap Market or any stock exchange or quotation
system, 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) at the close of business on such date, or (c) if the Common
Stock is not then 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 in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a majority
in interest of the shares of the Preferred Stock and approved by the Company.

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

             "Purchaser Agreement" means the Convertible Preferred Stock 
Purchase Agreement, dated as of the Original Issue Date, among the Company and
the original Holder of the Preferred Stock.

             "Redemption Amount" for each share of Preferred Stock means the
greater of (A) the Optional Redemption Amount, or (B) the sum of (i)
116% (the "Percentage") of the Stated Value and all accrued dividends with
respect to such share, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such share of Preferred Stock, provided,
that, if any redemption pursuant to Section 5(a)(ii) occurs after the first
anniversary of the Original Issue Date but prior to the second anniversary of
the Original Issue Date, the Percentage shall increase to 132% for any such
redemption occurring during such period, thereafter, on each subsequent yearly
anniversary of the Original Issue Date, the Percentage shall be increased by an
additional 16% for any such redemption occurring during such yearly period
(e.g. the Percentage shall be 148% for such redemption occurring after the
second anniversary of the Original Issue Date and prior to the third
anniversary of the Original Issue Date).

             "Registration Rights Agreement" means the Registration Rights

                                      -18-
<PAGE>   19

Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holder of the Preferred Stock.

             "Trading Day" means (a) day on which the Common Stock is traded on
the NASDAQ or the Nasdaq SmallCap Market as the case may be, or other securities
market or exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the NASDAQ or the Nasdaq SmallCap Market or on any
exchange or market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, 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); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.

             "Underlying Securities Registration Statement" means a registration
statement that meets the requirement of the Registration Rights Agreement and
requires the resale of all Underlying Shares by the recipient thereof, who shall
be named as a "selling stockholder" thereunder.

             "Underlying Shares" means, collectively, the shares of Common Stock
into which the Shares are convertible in accordance with the terms hereof.





                                      -19-