CERTIFICATE OF DESIGNATION


                                       of


                      SERIES A CONVERTIBLE PREFERRED STOCK


                                       of


                   CONVERSION TECHNOLOGIES INTERNATIONAL, INC.


                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware


          CONVERSION TECHNOLOGIES  INTERNATIONAL,  INC., a corporation organized
and existing under the laws of the State of Delaware (the  "Corporation"),  does
hereby  certify  that,  pursuant  to the  authority  conferred  on the  Board of
Directors  of the  Corporation  by  the  Amended  and  Restated  Certificate  of
Incorporation,  as amended to date (the "Certificate of Incorporation"),  of the
Corporation and in accordance with Section 151 of the General Corporation Law of
the State of Delaware,  the Board of Directors  of the  Corporation  adopted the
following resolution  establishing a series of 880,000 shares of Preferred Stock
of the Corporation designated as "Series A Convertible Preferred Stock":

          RESOLVED,  that  pursuant to the  authority  conferred on the Board of
     Directors of this Corporation by the Certificate of Incorporation, a series
     of Preferred  Stock,  par value,  $.001 per share,  of the  Corporation  is
     hereby  established  and created,  and that the  designation  and number of
     shares thereof and the voting and other powers,  preferences  and relative,
     participating,  optional  or other  rights of the shares of such series and
     the qualifications, limitations and restrictions thereof are as follows:

                      Series A Convertible Preferred Stock
                      ------------------------------------

        1.  Designation and Amount, and Definitions.
            ----------------------------------------

          (a) There shall be a series of Preferred Stock designated as "Series A
Convertible  Preferred Stock" and the number of shares  constituting such series
shall be  880,000,  subject to  adjustment  as provided  herein.  Such series is
referred to herein as the "Series A Preferred Stock".  Such number of shares may
be increased  prior to the Final Closing Date (as defined below) or decreased by
resolution of the Board of Directors of the Corporation; provided, however, that
no decrease  shall  reduce the number of shares of Series A  Preferred  Stock to
fewer than the number of shares then issued and outstanding.


<PAGE>

          (b) As used in this  Certificate of  Designation,  the following terms
shall have the following meanings, unless the context otherwise requires:

          (i)  "Market  Price"  shall  mean the  average  Closing  Bid Price (as
          defined  below),  for the thirty  (30)  consecutive  trading  days (as
          defined  below),  ending  with the trading day prior to the date as of
          which  the  Market  Price is being  determined,  provided  that if the
          prices  referred to in the  definition  of Closing Bid Price cannot be
          determined  for such  period,  "Market  Price"  shall mean Fair Market
          Value (as defined below).

          (ii) "Fair Market Value" of any asset  (including any security)  means
          the  fair  market  value   thereof  as  mutually   determined  by  the
          Corporation  and the  holders of a majority  of the Series A Preferred
          Stock then outstanding.

          (iii) "Stock  Market" shall mean,  with respect to any  security,  the
          principal  national  securities  exchange  on which such  security  is
          listed or admitted  to trading  or, if such  security is not listed or
          admitted to trading on any national  securities  exchange,  The Nasdaq
          National Market System or The Nasdaq  SmallCap  Market  (collectively,
          "Nasdaq")  or,  if such  security  is not  quoted on  Nasdaq,  the OTC
          Bulletin  Board or, if such security is not quoted on the OTC Bulletin
          Board,  the  over-the-counter  market as  furnished by any NASD member
          firm selected from time to time by the Corporation for that purpose.

          (iv) The  "Closing Bid Price" of any  security,  for each trading day,
          shall mean the price at which such security was last  exchanged on the
          Stock Market during such trading day or, if there were no transactions
          on such trading day, the average of the reported closing bid and asked
          prices,  regular  way, of such  security  on the Stock  Market on such
          trading day.

          (v) A "trading day" shall mean a day on which the Stock Market is open
          for the transaction of business.

        2.  Dividends and Distributions.
            ----------------------------

          (a)  Commencing  on the Reset  Date (as  defined  in  Subsection  4(a)
below), the holders of the Series A Preferred Stock shall be entitled to receive
cumulative dividends on each share of Series A Preferred Stock, payable in cash,
or at the option of the Company, in kind, at the rate of 10% per annum (computed
on the basis of a 360-day  year of twelve 30 day  months) of the  Dividend  Base
Amount (as defined  below),  payable  semi-annually  in arrears.  If the Company
elects  to pay in  kind,  such  dividends  shall  be  paid  in  additional  duly
authorized,  fully paid and non assessable  shares of Series A Preferred  Stock.
Such  dividends  shall  accrue  and  accumulate  whether  or not they  have been
declared  and  whether or not there are  profits,  surplus or other funds of the
Corporation  legally available for the payment of dividends.  The "Dividend Base
Amount" shall be $10.00 (subject to appropriate  adjustment to reflect any stock
split, combination, reclassification or reorganization of the Series A Preferred
Stock).


                                      -2-
<PAGE>

          (b) In addition to the  foregoing,  subject to the prior and  superior
rights of the  holders of any  shares of any  series or class of  capital  stock
ranking  prior and  superior  to the  shares of Series A  Preferred  Stock  with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive,  as, when and if declared by the Board of  Directors of the
Corporation,  out of assets  legally  available for that  purpose,  dividends or
distributions in cash, stock or otherwise.

          (c) The Corporation  shall not declare any dividend or distribution on
any Junior Stock,  unless the Corporation shall have paid all accrued cumulative
dividends on the Series A Preferred  Stock pursuant to Subsection  2(a), if any,
and shall, concurrently with the declaration of such dividend or distribution on
the Junior Stock,  declare a like dividend or distribution,  as the case may be,
on the Series A  Preferred  Stock in an amount per share equal to (x) the amount
of the dividend or distribution  per share of Common Stock multiplied by (y) the
effective Conversion Rate at the time of such dividend or distribution.

          (d) Any  dividend  or  distribution  (other  than that  referenced  in
Subsection 2(a)) payable to the holders of the Series A Preferred Stock pursuant
to this Section 2 shall be paid to such holders at the same time as the dividend
or  distribution  on  the  Junior  Stock  or  any  other  capital  stock  of the
Corporation by which it is measured is paid.

          (e)  All  dividends  or  distributions  declared  upon  the  Series  A
Preferred Stock shall be declared pro rata per share.

          (f) Any reference to "distribution"  contained in this Section 2 shall
not be deemed to include any distribution  made in connection with or in lieu of
any Liquidation Event (as defined below).

          (g)  "Junior  Stock"  shall  mean the  Common  Stock and any shares of
preferred  stock of any series or class of the  Corporation,  whether  presently
outstanding  or  hereafter  issued,  which are  junior to the shares of Series A
Preferred Stock with respect to (i) the  distribution of assets on any voluntary
or involuntary liquidation,  dissolution or winding up of the Corporation,  (ii)
dividends or (iii) voting.

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

          (a) In the event of a (i)  liquidation,  dissolution  or winding up of
the  Corporation,  whether  voluntary  or  involuntary,  (ii)  a sale  or  other
disposition  of all or  substantially  all of the assets of the  Corporation  or
(iii)  any   consolidation,   merger,   combination,   reorganization  or  other
transaction in which the  Corporation  is not the surviving  entity or shares of
Common  Stock  constituting  in  excess  of  50%  of  the  voting  power  of the
Corporation  are  exchanged  for or changed into stock or  securities of another
entity, cash and/or any other property (a "Merger Transaction") (items (i), (ii)
and (iii) of this  sentence  being  collectively  referred to as a  "Liquidation
Event"),  after payment or provision for payment of debts and other  liabilities
of the Corporation, the holders of the Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation  available for
distribution to its  stockholders,  whether such assets are capital,  surplus or
earnings, before any payment or declaration and setting apart


                                      -3-
<PAGE>

for  payment of any amount  shall be made in  respect  of any Junior  Stock,  an
amount  equal to $13.50 per share plus an amount  equal to all  declared  and/or
accrued unpaid dividends  thereon;  provided,  however,  in the case of a Merger
Transaction,  such  amount  per share may be paid in cash,  property  (valued as
provided in Subsection 3(b)) and/or securities (valued as provided in Subsection
3(b)) of the entity surviving such Merger  Transaction.  If upon any Liquidation
Event,  whether  voluntary or  involuntary,  the assets to be distributed to the
holders of the Series A  Preferred  Stock  shall be  insufficient  to permit the
payment to such stockholders of the full preferential  amounts  aforesaid,  then
all of the assets of the  Corporation to be distributed  shall be so distributed
ratably  to the  holders  of the  Series A  Preferred  Stock on the basis of the
number of shares of Series A Preferred Stock held. A consolidation  or merger of
the Corporation  with or into another  corporation,  other than in a transaction
described in this Subsection 3(a) above,  shall not be considered a liquidation,
dissolution or winding up of the  Corporation or a sale or other  disposition of
all or  substantially  all of the assets of the  Corporation and accordingly the
Corporation  shall make  appropriate  provision to ensure that the terms of this
Certificate of Designation survive any such transaction.  All shares of Series A
Preferred  Stock shall rank as to payment upon the occurrence of any Liquidation
Event  senior to the Common  Stock as provided  herein and,  unless the terms of
such  series  shall  provide  otherwise,  senior  to  all  other  series  of the
Corporation's preferred stock.

          (b) Any securities or other property to be delivered to the holders of
the Series A Preferred  Stock pursuant to Subsection 3(a) hereof shall be valued
as follows:

          (i) In the case of securities  not subject to an investment  letter or
          other similar restriction on free marketability:

          (A)  If traded on the Stock  Market,  the value  shall be deemed to be
               the Market Price of such  securities as of the third day prior to
               the date of valuation.

          (B)  If not traded on the Stock  Market,  the value  shall be the Fair
               Market Value of such securities.

          (ii) In the case of  securities  for which  there is an active  public
          market  but  which  are  subject  to an  investment  letter  or  other
          restrictions on free marketability, the value shall be the Fair Market
          Value  thereof,  determined by  discounting  appropriately  the Market
          Price thereof.

          (iii) In the case of all  other  securities  and  property,  the value
          shall be the Fair Market Value thereof.

If the holders of a majority of the Series A Preferred Stock and the Corporation
are unable to reach agreement on any valuation  matter,  such valuation shall be
submitted to and determined by a nationally  recognized  independent  investment
bank selected by the Board of Directors of the  Corporation and the holders of a
majority of the Series A Preferred Stock then outstanding (or, if such selection
cannot be agreed  upon  promptly,  or in any event  within  ten days,  then such
valuation  shall  be  made by a  nationally  recognized  independent  investment
banking firm selected


                                      -4-
<PAGE>

by the American Arbitration  Association in New York City in accordance with its
rules), the costs of which valuation shall be paid for by the Corporation.

        4.  Conversion.
            -----------

          (a) Right of Conversion.  The shares of Series A Preferred Stock shall
be  convertible,  in whole or in part,  at the option of the holder  thereof and
upon notice to the Corporation as set forth in Subsection 4(b) below, into fully
paid and  nonassessable  shares of Common  Stock and such other  securities  and
property as  hereinafter  provided.  The initial  conversion  price per share of
Common Stock shall be equal to the lesser of (i) $1.25 and (ii) the Market Price
of the Common  Stock as of the initial  closing date of the issuance and sale of
the Series A Preferred  Stock (the  "Conversion  Price") and shall be subject to
adjustment  as  provided  herein.  The rate at  which  each  share  of  Series A
Preferred  Stock is convertible  at any time into Common Stock (the  "Conversion
Rate") shall be determined by dividing the then existing  Conversion  Price into
$10.00.

          Subject to adjustment  pursuant to the  provisions of Subsection  4(c)
below,  in the  event  that the  Conversion  Price in effect at the time of each
Interim  Closing Date (as defined  below) and the Final Closing Date (as defined
below)  is  greater  than the  Market  Price of the  Common  Stock as of (x) any
interim  closing date of the  issuance and sale of the Series A Preferred  Stock
(each an "Interim  Closing  Date") or (y) the final closing date of the issuance
and sale of the Series A Preferred  Stock (the "Final Closing  Date"),  then the
Conversion Price shall be adjusted to equal the lesser of any such Market Price.
If there is any  change in the  Conversion  Price as a result  of the  preceding
sentence,  then the  Conversion  Rate shall be changed  accordingly as set forth
above.

          The Board of Directors of the Corporation,  or a committee  designated
by it for such purpose,  may specify an initial  conversion  price applicable to
the shares of Series A  Preferred  Stock  issued at any  closing  lower than the
initial  conversion  price that would otherwise obtain pursuant to the preceding
paragraphs  and, in the event an initial  conversion  price is so specified,  it
shall be applicable to all shares of the Series A Preferred Stock.

          The  Corporation  shall  prepare  a  certificate  signed  by the Chief
Executive Officer or President,  and by the Treasurer or an Assistant  Treasurer
or the Secretary or an Assistant Secretary, of the Corporation setting forth the
Conversion Rate as of the Final Closing Date,  showing in reasonable  detail the
facts upon which such adjusted  Conversion Rate is based,  and such  certificate
shall  forthwith  be filed with the  transfer  agent of the  Series A  Preferred
Stock. A notice stating that the Conversion  Rate has been adjusted  pursuant to
the second preceding paragraph, or that no adjustment is necessary,  and setting
forth the Conversion Rate in effect as of the Final Closing Date shall be mailed
as promptly as  practicable  after the Final Closing Date by the  Corporation to
all record  holders of the Series A Preferred  Stock at their last  addresses as
they shall appear in the stock transfer books of the Corporation.

          The  Conversion   Price  (subject  to  adjustments   pursuant  to  the
provisions of  Subsection  4(c) below) in effect  immediately  prior to the date
that is 12 months  after the Final  Closing Date of the issuance and sale of the
Series A  Preferred  Stock  (the  "Reset  Date")  shall be


                                      -5-
<PAGE>

adjusted  and reset  effective  as of the Reset Date if the average  Closing Bid
Price  of the  Common  Stock  for  the  twenty  (20)  consecutive  trading  days
immediately preceding the Reset Date (the "12-Month Trading Price") is less than
135% of the  then  applicable  Conversion  Price  (a  "Reset  Event").  Upon the
occurrence of a Reset Event,  the Conversion  Price shall be reduced to be equal
to the greater of (A) the 12-Month Trading Price divided by 1.35, and (B) 50% of
the then applicable  Conversion  Price. If there is any change in the Conversion
Price as a result of the preceding  sentence,  then the Conversion Rate shall be
changed  accordingly  as set  forth  above.  The  Corporation  shall  prepare  a
certificate signed by the principal financial officer of the Corporation setting
forth the Conversion Rate as of the Reset Date, showing in reasonable detail the
facts upon which  such  Conversion  Rate is based,  and such  certificate  shall
forthwith be filed with the transfer  agent of the Series A Preferred  Stock.  A
notice  stating  that the  Conversion  Rate has been  adjusted  pursuant to this
paragraph, or that no adjustment is necessary,  and setting forth the Conversion
Rate in effect as of the Reset Date shall be mailed as promptly  as  practicable
after the Reset Date by the  Corporation  to all record  holders of the Series A
Preferred  Stock at their  last  addresses  as they  shall  appear  in the stock
transfer books of the Corporation.

          (b) Conversion Procedures.  Any holder of shares of Series A Preferred
Stock  desiring to convert  such shares into Common  Stock shall  surrender  the
certificate or  certificates  evidencing such shares of Series A Preferred Stock
at the office of the  transfer  agent for the Series A  Preferred  Stock,  which
certificate or certificates,  if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer to the  Corporation or in blank,  accompanied  by  irrevocable  written
notice to the  Corporation  that the holder  elects so to convert such shares of
Series A Preferred  Stock and  specifying  the name or names  (with  address) in
which a certificate or certificates  evidencing shares of Common Stock are to be
issued.  The  Corporation  need not deem a notice of  conversion  to be received
unless the holder complies with all the provisions  hereof. The Corporation will
instruct the transfer agent (which may be the Corporation) to make a notation of
the date that a notice of conversion is received,  which date shall be deemed to
be the date of receipt for purposes hereof.

          The Corporation  shall,  as soon as practicable  after such deposit of
certificates  evidencing  shares of Series A Preferred Stock  accompanied by the
written  notice  and  compliance  with any other  conditions  herein  contained,
deliver at such office of such  transfer  agent to the person for whose  account
such shares of Series A Preferred Stock were so  surrendered,  or to the nominee
or nominees of such person, certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled as aforesaid,  together with
a cash  payment  for  adjustment  of any  fraction  of a  share  as  hereinafter
provided. Subject to the following provisions of this paragraph, such conversion
shall be deemed to have been made as of the date of such surrender of the shares
of Series A Preferred Stock to be converted,  and the person or persons entitled
to  receive  the Common  Stock  deliverable  upon  conversion  of such  Series A
Preferred  Stock  shall be treated  for all  purposes  as the  record  holder or
holders  of such  Common  Stock  on  such  date;  provided,  however,  that  the
Corporation  shall not be  required  to convert any shares of Series A Preferred
Stock  while the stock  transfer  books of the  Corporation  are  closed for any
purpose, but the surrender of Series A Preferred Stock for conversion during any
period  while such books are so closed  shall become  effective  for  conversion
immediately  upon the  reopening of such books as if the surrender had been made
on the date of such  reopening,  and the


                                      -6-
<PAGE>

conversion  shall  be at  the  conversion  rate  in  effect  on  such  date.  No
adjustments in respect of any dividends on shares  surrendered for conversion or
any dividend on the Common Stock issued upon  conversion  shall be made upon the
conversion of any shares of Series A Preferred Stock.

          All notices of conversion  shall be  irrevocable;  provided,  however,
that if the  Corporation has sent notice of an event pursuant to Subsection 4(g)
hereof,  a holder of Series A Preferred  Stock may, at its election,  provide in
its notice of conversion that the conversion of its shares of Series A Preferred
Stock  shall  be  contingent   upon  the   occurrence  of  the  record  date  or
effectiveness  of such event (as specified by such  holder),  provided that such
notice of conversion is received by the Corporation prior to such record date or
effective date, as the case may be.

          (c) Adjustment of Conversion Rate and Conversion Price.

          (i) Except as otherwise  provided herein, in the event the Corporation
          shall,  at any time or from time to time after the original issue date
          of the  Series A  Preferred  Stock,  (1) sell or issue  any  shares of
          Common  Stock for a  consideration  per share less than either (i) the
          Conversion  Price in effect on the date of such  sale or  issuance  or
          (ii) the Market  Price of the Common  Stock as of the date of the sale
          or issuance,  (2) issue any shares of Common Stock as a stock dividend
          to the  holders of Common  Stock,  or (3)  subdivide  or  combine  the
          outstanding  shares of Common Stock into a greater or lesser number of
          shares (any such sale,  issuance,  subdivision  or  combination  being
          herein called a "Change of Shares"),  then, and  thereafter  upon each
          further Change of Shares,  the Conversion Price in effect  immediately
          prior to such Change of Shares shall be changed to a price (rounded to
          the nearest cent)  determined by multiplying  the Conversion  Price in
          effect immediately prior thereto by a fraction, the numerator of which
          shall be the sum of the number of shares of Common  Stock  outstanding
          immediately prior to the sale or issuance of such additional shares or
          such  subdivision  or  combination  and the number of shares of Common
          Stock which the aggregate consideration,  if any, received (determined
          as provided in subsection  4(c)(v)(E)  below) for the issuance of such
          additional  shares would purchase at the greater of (i) the Conversion
          Price in effect on the date of such  issuance or (ii) the Market Price
          of the Common  Stock as of such  date,  and the  denominator  of which
          shall be the number of shares of Common Stock outstanding  immediately
          after  the  sale  or  issuance  of  such  additional  shares  or  such
          subdivision or combination. Such adjustment shall be made successively
          whenever such an issuance is made.

          (ii) In case of any reclassification,  capital reorganization or other
          change  of  outstanding  shares  of  Common  Stock,  or in case of any
          consolidation or merger of the Corporation with or into another entity
          (other than a consolidation  or merger in which the Corporation is the
          continuing  entity and which does not result in any  reclassification,
          capital reorganization or other change of outstanding shares of Common
          Stock  other  than  the  number  thereof),  or in case of any  sale or
          conveyance to another entity of the property of the Corporation as, or
          substantially as, an entirety (other than a  sale/leaseback,  mortgage
          or other


                                      -7-
<PAGE>

          financing   transaction),   the  Corporation   shall  cause  effective
          provision  to be made so that  each  holder  of a share  of  Series  A
          Preferred Stock shall be entitled to receive,  upon conversion of such
          share of Series A  Preferred  Stock,  the kind and number of shares of
          stock or other securities or property (including cash) receivable upon
          such   reclassification,   capital  reorganization  or  other  change,
          consolidation, merger, sale or conveyance by a holder of the number of
          shares of Common  Stock into  which  such share of Series A  Preferred
          Stock  was  convertible  immediately  prior to such  reclassification,
          capital reorganization or other change, consolidation, merger, sale or
          conveyance. Any such provision shall include provision for adjustments
          that  shall  be as  nearly  equivalent  as may be  practicable  to the
          adjustments  provided for in this  Subsection  4(c).  The  Corporation
          shall not effect any such  consolidation,  merger or sale unless prior
          to, or simultaneously with, the consummation thereof the successor (if
          other  than the  Corporation)  resulting  from such  consolidation  or
          merger or the entity  purchasing  assets or other  appropriate  entity
          shall  assume,  by written  instrument  executed and  delivered to the
          transfer  agent  for the  Series  A  Preferred  Stock  (the  "Transfer
          Agent"),  the  obligation  to  deliver  to the holder of each share of
          Series A Preferred  Stock such shares of stock,  securities  or assets
          as, in accordance with the foregoing  provisions,  such holders may be
          entitled to receive and the other  obligations  under this  Agreement.
          The  foregoing   provisions   shall   similarly  apply  to  successive
          reclassifications,   capital  reorganizations  and  other  changes  of
          outstanding  shares of Common Stock and to successive  consolidations,
          mergers, sales or conveyances.

          (iii)  If,  at any time or from time to time,  the  Corporation  shall
          issue or distribute to the holders of shares of Common Stock  evidence
          of its  indebtedness,  any other  securities of the Corporation or any
          cash,  property or other assets (excluding an issuance or distribution
          governed by one of the preceding  subsections of this  Subsection 4(c)
          and also excluding cash  dividends or cash  distributions  paid out of
          net profits legally available therefor in the full amount thereof (any
          such  non-excluded  event being herein called a "Special  Dividend")),
          then in each case the holders of the Series A Preferred Stock shall be
          entitled  to a  proportionate  share of any such  Special  Dividend as
          though they were the  holders of the number of shares of Common  Stock
          of the Corporation into which their shares of Series A Preferred Stock
          are convertible as of the record date fixed for the  determination  of
          the  holders of Common  Stock of the  Corporation  entitled to receive
          such Special Dividend.

          (iv) After each  adjustment of the  Conversion  Price pursuant to this
          Subsection  4(c), the Corporation  will promptly prepare a certificate
          signed  by  the  Chief  Executive  Officer  or  President,  and by the
          Treasurer or an Assistant  Treasurer or the  Secretary or an Assistant
          Secretary,  of the Corporation setting forth: (i) the Conversion Price
          as so  adjusted,  (ii)  the  Conversion  Rate  corresponding  to  such
          Conversion  Price and (iii) a brief statement of the facts  accounting
          for  such   adjustment.   The  Corporation  will  promptly  file  such
          certificate  with the Transfer Agent and cause a brief summary thereof
          to be sent by ordinary first class mail to


                                      -8-
<PAGE>

          each registered  holder of Series A Preferred Stock at his or her last
          address  as it shall  appear  on the  registry  books of the  Transfer
          Agent. No failure to mail such notice nor any defect therein or in the
          mailing  thereof  shall  affect the validity of such  adjustment.  The
          affidavit of an officer of the Transfer  Agent or the  Secretary or an
          Assistant  Secretary  of the  Corporation  that such  notice  has been
          mailed shall,  in the absence of fraud, be prima facie evidence of the
          facts stated  therein.  The Transfer Agent may rely on the information
          in the  certificate  as true and correct and has no duty or obligation
          to independently verify the amounts or calculations set forth therein.

          (v) For purposes of Paragraph 4(c)(i), the following provisions (A) to
          (E) shall also be applicable:

          (A)  No adjustment of the  Conversion  Price shall be made unless such
               adjustment would require an increase or decrease of at least $.01
               in such price;  provided that any adjustments  which by reason of
               this Subparagraph 4(c)(v)(A) are not required to be made shall be
               carried  forward  and  shall be made at the time of and  together
               with  the  next  subsequent   adjustment  which,   together  with
               adjustments  so carried  forward,  shall  require an  increase or
               decrease of at least $.01 in the Conversion  Price then in effect
               hereunder.

          (B)  In case  of (1)  the  sale  by the  Corporation  (including  as a
               component of a unit) of any rights or warrants to  subscribe  for
               or purchase,  or any options for the purchase of, Common Stock or
               any securities  convertible into or exchangeable for Common Stock
               (such securities  convertible,  exercisable or exchangeable  into
               Common Stock being herein called  "Convertible  Securities"),  or
               (2) the issuance by the  Corporation,  without the receipt by the
               Corporation  of any  consideration  therefor,  of any  rights  or
               warrants to  subscribe  for or  purchase,  or any options for the
               purchase of, Common Stock or Convertible  Securities,  whether or
               not such rights,  warrants or options, or the right to convert or
               exchange   such   Convertible    Securities,    are   immediately
               exercisable,  and the  consideration  per share for which  Common
               Stock is issuable  upon the exercise of such rights,  warrants or
               options or upon the  conversion  or exchange of such  Convertible
               Securities  (determined  by dividing  (x) the  minimum  aggregate
               consideration,  as set forth in the instrument  relating  thereto
               without  regard  to  any   antidilution  or  similar   provisions
               contained  therein for a  subsequent  adjustment  of such amount,
               payable to the  Corporation  upon the  exercise  of such  rights,
               warrants  or  options,  plus the  consideration  received  by the
               Corporation for the issuance or sale of such rights,  warrants or
               options,  plus, in the case of such Convertible  Securities,  the
               minimum aggregate amount, as set forth in the instrument relating
               thereto without regard to any antidilution or similar  provisions
               contained therein for a subsequent  adjustment of such amount, of
               additional  consideration,  if any,  other than such  Convertible
               Securities,  payable upon the conversion or exchange thereof,  by
               (y) the


                                      -9-
<PAGE>

               total maximum  number,  as set forth in the  instrument  relating
               thereto without regard to any antidilution or similar  provisions
               contained therein for a subsequent  adjustment of such amount, of
               shares of Common Stock issuable upon the exercise of such rights,
               warrants  or options or upon the  conversion  or exchange of such
               Convertible Securities issuable upon the exercise of such rights,
               warrants or options) is less than either the Conversion  Price or
               the  Market  Price  of the  Common  Stock  as of the  date of the
               issuance or sale of such rights,  warrants or options,  then such
               total maximum  number of shares of Common Stock issuable upon the
               exercise  of  such  rights,  warrants  or  options  or  upon  the
               conversion or exchange of such Convertible  Securities (as of the
               date of the issuance or sale of such rights, warrants or options)
               shall be deemed to be "Common  Stock" for  purposes of  Paragraph
               4(c)(i)  hereof  and  shall be  deemed  to have  been sold for an
               amount equal to such  consideration  per share and shall cause an
               adjustment to be made in accordance with Paragraph 4(c)(i).

          (C)  In case of the sale or other  issuance by the  Corporation of any
               Convertible Securities, whether or not the right of conversion or
               exchange thereunder is immediately exercisable, and the price per
               share for which Common Stock is issuable  upon the  conversion or
               exchange of such Convertible  Securities  (determined by dividing
               (x) the total amount of consideration received by the Corporation
               for the sale of such  Convertible  Securities,  plus the  minimum
               aggregate amount, as set forth in the instrument relating thereto
               without  regard  to  any   antidilution  or  similar   provisions
               contained therein for a subsequent  adjustment of such amount, of
               additional  consideration,  if any,  other than such  Convertible
               Securities,  payable upon the conversion or exchange thereof,  by
               (y) the total  maximum  number,  as set  forth in the  instrument
               relating  thereto  without regard to any  antidilution or similar
               provisions contained therein for a subsequent  adjustment of such
               amount, of shares of Common Stock issuable upon the conversion or
               exchange of such Convertible  Securities) is less than either the
               Conversion  Price or the Market  Price of the Common  Stock as of
               the date of the sale of such  Convertible  Securities,  then such
               total maximum  number of shares of Common Stock issuable upon the
               conversion or exchange of such Convertible  Securities (as of the
               date of the sale of such Convertible  Securities) shall be deemed
               to be "Common Stock" for purposes of Paragraph  4(c)(i) and shall
               be  deemed  to  have  been  sold  for an  amount  equal  to  such
               consideration  per share and shall cause an adjustment to be made
               in accordance with Paragraph 4(c)(i).

          (D)  In case the  Corporation  shall modify the rights of  conversion,
               exchange  or  exercise  of any of the  securities  referred to in
               Subparagraphs  (B) or (C) of this Paragraph  4(c)(v) or any other
               securities  of  the  Corporation  convertible,   exchangeable  or
               exercisable for shares of Common Stock, for any reason other than
               an event that would require  adjustment to prevent  dilution,  so
               that the consideration per share received by the Corporation


                                      -10-
<PAGE>

               after such  modification is less than either the Conversion Price
               or the Market  Price of the Common  Stock as of the date prior to
               such  modification,  then  such  securities,  to the  extent  not
               theretofore exercised, converted or exchanged, shall be deemed to
               have expired or terminated  immediately prior to the date of such
               modification and the Corporation  shall be deemed for purposes of
               calculating any  adjustments  pursuant to this Subsection 4(c) to
               have issued such new  securities  upon such new terms on the date
               of modification. Such adjustment shall become effective as of the
               date upon  which such  modification  shall  take  effect.  On the
               expiration or cancellation  of any such right,  warrant or option
               or the  termination or  cancellation of any such right to convert
               or exchange any such Convertible Securities, the Conversion Price
               then in effect  hereunder  shall  forthwith be readjusted to such
               Conversion  Price as would have obtained (a) had the  adjustments
               made upon the issuance or sale of such rights, warrants,  options
               or  Convertible  Securities  been  made  upon  the  basis  of the
               issuance of only the number of shares of Common Stock theretofore
               actually   delivered  (and  the  total   consideration   received
               therefor)  upon the exercise of such rights,  warrants or options
               or upon the conversion or exchange of such Convertible Securities
               and (b) had adjustments  been made on the basis of the Conversion
               Price as adjusted  under clause (a) for all  transactions  (which
               would have affected such  adjusted  Conversion  Price) made after
               the  issuance  or sale  of  such  rights,  warrants,  options  or
               Convertible Securities.

          (E)  In  case  of  the  sale  of  any  shares  of  Common  Stock,  any
               Convertible  Securities,  any rights or warrants to subscribe for
               or purchase,  or any options for the purchase of, Common Stock or
               Convertible   Securities,   the  consideration  received  by  the
               Corporation  therefor shall be deemed to be the gross sales price
               therefor without deducting therefrom any expense paid or incurred
               by the Corporation or any  underwriting  discounts or commissions
               or concessions  paid or allowed by the  Corporation in connection
               therewith.  In the event that any  securities  shall be issued in
               connection with any other securities of the Corporation, together
               comprising   one  integral   transaction  in  which  no  specific
               consideration  is allocated  among the  securities,  then each of
               such  securities  shall be deemed to have  been  issued  for such
               consideration  as the  Board  of  Directors  of  the  Corporation
               determines in good faith;  provided,  however, that if holders of
               more than 25% of the then  outstanding  Series A Preferred  Stock
               disagree with such  determination,  the Corporation shall retain,
               at its own expense,  an independent  investment  banking firm for
               the purpose of obtaining an appraisal.

          (iv)  Notwithstanding any other provision hereof, no adjustment to the
          Conversion Price will be made:


                                      -11-
<PAGE>

          (A)  upon (i) the  exercise of any of the options  outstanding  on the
               date hereof under the  Corporation's  existing stock option plans
               or (ii) the issuance or exercise of options  which may  hereafter
               be  granted  with the  approval  of the  Board of  Directors,  or
               exercised,  under  any bona  fide  employee  benefit  plan of the
               Corporation  approved  by the  Board of  Directors  to  officers,
               directors,  consultants  or  employees,  but only with respect to
               such  options  as are  exercisable  at prices  no lower  than the
               Closing Bid Price (or, if the prices referenced in the definition
               of Closing Bid Price cannot be determined, the Fair Market Value)
               of the Common Stock as of the date of grant thereof; or

          (B)  upon the sale of any shares of Common Stock, warrants to purchase
               Common  Stock  or  Convertible  Securities  in a firm  commitment
               underwritten  public  offering,  including,  without  limitation,
               shares sold upon the exercise of any overallotment option granted
               to the underwriters in connection with such offering; or

          (C)  upon issuance or exercise of the  Placement  Warrants (as defined
               in the Placement  Agency  Agreement  between the  Corporation and
               Paramount  Capital,   Inc.,  dated  as  of  April  1,  1997,  the
               "Placement  Warrants"),  or  upon  the  issuance,  conversion  or
               exercise of the Series A Preferred  Stock included in the Premium
               Preferred Units of the Corporation  issued (i) on or prior to the
               Final  Closing Date (plus any such Units  issued  pursuant to the
               over-allotment  option granted  pursuant to such Placement Agency
               Agreement)  or (ii)  pursuant to the  exercise  of the  Placement
               Warrants  or  the   conversion  or  exercise  of  the  securities
               underlying such Placement Warrants; or

          (D)  upon  the  issuance  or  sale  of  Common  Stock  or  Convertible
               Securities  pursuant to the  exercise  of any rights,  options or
               warrants to receive,  subscribe  for or purchase,  or any options
               for the purchase  of,  Common  Stock or  Convertible  Securities,
               whether or not such rights,  warrants or options were outstanding
               on the date of the original sale of the Series A Preferred  Stock
               or were  thereafter  issued or sold,  provided that an adjustment
               was either  made or not  required to be made in  accordance  with
               Paragraph 4(c)(i) in connection with the issuance or sale of such
               securities or any modification of the terms thereof; or

          (E)  upon the  issuance  or sale of Common  Stock upon  conversion  or
               exchange  of  any  Convertible  Securities,   provided  that  any
               adjustments required to be made upon the issuance or sale of such
               Convertible  Securities or any  modification of the terms thereof
               were so made, and whether or not such Convertible Securities were
               outstanding  on the  date of the  original  sale of the  Series A
               Preferred Stock or were thereafter issued or sold.


                                      -12-
<PAGE>

     Subparagraph 4(c)(v)(D) shall nevertheless apply to any modification of the
     rights  of  conversion,  exchange  or  exercise  of any  of the  securities
     referred to in Subparagraph  (A) or, to the extent effected with respect to
     less than all of the outstanding  Series A Preferred Stock, as the case may
     be, (C) of this Paragraph 4(c)(vi).

     (vii) As used in this  Subsection  4(c), the term "Common Stock" shall mean
     and include the  Corporation's  Common Stock  authorized on the date of the
     original issue of the Series A Convertible  Preferred  Stock and shall also
     include  any  capital  stock  of any  class of the  Corporation  thereafter
     authorized  which  shall not be  limited  to a fixed sum or  percentage  in
     respect of the rights of the holders  thereof to  participate  in dividends
     and  in  the  distribution  of  assets  upon  the  voluntary   liquidation,
     dissolution or winding up of the Corporation;  provided,  however, that the
     shares  issuable  upon  conversion  of the Series A  Preferred  Stock shall
     include  only  shares  of  such  class  designated  in  the   Corporation's
     Certificate  of  Incorporation  as Common Stock on the date of the original
     issue of the Series A Convertible Preferred Stock or (i) in the case of any
     reclassification,  change, consolidation, merger, sale or conveyance of the
     character referred to in Paragraph  4(c)(ii) hereof, the stock,  securities
     or  property  provided  for in such  section  or  (ii)  in the  case of any
     reclassification  or change  in the  outstanding  shares  of  Common  Stock
     issuable upon  conversion of the Series A Preferred  Stock as a result of a
     subdivision or combination or consisting of a change in par value,  or from
     par value to no par value,  or from no par value to par value,  such shares
     of Common Stock as so reclassified or changed.

     (viii) Any  determination  as to whether an  adjustment  in the  Conversion
     Price in effect hereunder is required pursuant to Subsection 4(c), or as to
     the amount of any such adjustment,  if required,  shall be binding upon the
     holders of the Series A Preferred Stock and the Corporation if made in good
     faith by agreement of the  Corporation and the holders of a majority of the
     Preferred  Stock then  outstanding.  If the  holders  of a majority  of the
     Preferred Stock then  outstanding and the Corporation  shall disagree as to
     any  adjustment,  then the issue shall be submitted to and determined by an
     arbitration panel of the American Arbitration  Association in New York City
     in accordance with its rules, the cost of which  arbitration  shall be paid
     for by the Corporation.

          (d) No Fractional  Shares. No fractional shares or scrip  representing
fractional  shares of Common Stock shall be issued upon  conversion  of Series A
Preferred  Stock.  If more than one  certificate  evidencing  shares of Series A
Preferred  Stock shall be  surrendered  for  conversion  at one time by the same
holder,  the number of full shares  issuable  upon  conversion  thereof shall be
computed  on the basis of the  aggregate  number of shares of Series A Preferred
Stock so  surrendered.  Instead of any  fractional  share of Common  Stock which
would  otherwise be issuable upon conversion of any shares of Series A Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fractional
interest  in an amount  equal to the same  fraction  of the Market  Price of the
Common Stock as of the close of business on the day of conversion.


                                      -13-
<PAGE>

          (e) Grant of Rights, Warrants or Options in Lieu of Adjustment. If and
whenever the  Corporation  shall grant to the holders of Common Stock,  as such,
rights or  warrants  to  subscribe  for or to  purchase,  or any options for the
purchase of, Common Stock or securities  convertible into or exchangeable for or
carrying a right, warrant or option to purchase Common Stock, the Company may at
its option  elect  concurrently  therewith  to grant,  to each holder (as of the
record date for such  transaction) of Series A Preferred Stock then outstanding,
the  rights,  warrants  or  options to which  each such  holder  would have been
entitled if, on the record date used to determine the  stockholders  entitled to
the rights,  warrants or options being granted by the Company,  such holder were
the holder of record of the number of whole shares of Common Stock then issuable
upon conversion of his or her Series A Preferred  Stock. If the Company shall so
elect under this Subsection  4(e), then such grant by the Company to the holders
of the  Series  A  Preferred  Stock  shall  be in lieu of any  adjustment  which
otherwise may be called for pursuant to Subsection 4(c).

          (f) Reservation of Shares;  Transfer Taxes; Etc. The Corporation shall
at all times  reserve and keep  available,  out of its  authorized  and unissued
shares of Common Stock,  solely for the purpose of effecting  the  conversion of
the Series A Preferred Stock,  such number of shares of its Common Stock free of
preemptive  rights as shall be sufficient to effect the conversion of all shares
of Series A Preferred Stock from time to time  outstanding  (including,  without
limitation,  shares of Common Stock  issuable  upon  conversion  of the Series A
Preferred  Stock in the case of a Reset Event).  The  Corporation  shall use its
best  efforts  from time to time,  in  accordance  with the laws of the State of
Delaware,  to increase the authorized number of shares of Common Stock if at any
time the number of shares of authorized,  unissued and  unreserved  Common Stock
shall not be  sufficient to permit the  conversion  of all the  then-outstanding
shares of Series A Preferred Stock.

          The Corporation shall pay any and all issue or other taxes that may be
payable  in  respect  of any issue or  delivery  of  shares  of Common  Stock on
conversion of the Series A Preferred Stock. The Corporation  shall not, however,
be  required  to pay any tax which may be payable  in  respect  of any  transfer
involved  in the issue or  delivery  of Common  Stock  (or other  securities  or
assets)  in a name  other  than that in which the  shares of Series A  Preferred
Stock so converted were registered,  and no such issue or delivery shall be made
unless and until the person  requesting  such issue has paid to the  Corporation
the  amount  of  such  tax  or  has  established,  to  the  satisfaction  of the
Corporation, that such tax has been paid.

          (g) Prior Notice of Certain Events. In case:

          (i)  the  Corporation   shall  declare  any  dividend  (or  any  other
          distribution); or

          (ii) the  Corporation  shall  authorize the granting to the holders of
          Common  Stock of rights or warrants to  subscribe  for or purchase any
          shares of stock of any class or of any other rights or warrants; or

          (iii)  of  any   reclassification   of  Common  Stock  (other  than  a
          subdivision  or  combination  of the  outstanding  Common Stock,  or a
          change in par value, or from par value to no par value, or from no par
          value to par value); or


                                      -14-
<PAGE>

          (iv) of any consolidation or merger (including,  without limitation, a
          Merger  Transaction) to which the Corporation is a party and for which
          approval of any stockholders of the Corporation shall be required,  or
          of the sale or transfer of all or  substantially  all of the assets of
          the Corporation or of any compulsory share exchange whereby the Common
          Stock is converted into other securities, cash or other property; or

          (v)  of the  voluntary  or  involuntary  dissolution,  liquidation  or
          winding  up of  the  Corporation  (including,  without  limitation,  a
          Liquidation Event);

          then the Corporation  shall cause to be filed with the Transfer Agent,
and shall  cause to be mailed to the holders of record of the Series A Preferred
Stock,  at their last  addresses  as they shall  appear upon the stock  transfer
books of the Corporation,  at least 20 days prior to the applicable  record date
hereinafter  specified, a notice stating (x) the date on which a record (if any)
is to be taken for the  purpose of such  dividend,  distribution  or granting of
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, distribution,
rights  or  warrants  are  to be  determined  and a  description  of  the  cash,
securities or other  property to be received by such holders upon such dividend,
distribution  or  granting  of rights or  warrants or (y) the date on which such
reclassification,   consolidation,   merger,  sale,  transfer,  share  exchange,
dissolution, liquidation or winding up or other Liquidation Event is expected to
become  effective,  the date as of which it is expected  that  holders of Common
Stock of record  shall be entitled to exchange  their shares of Common Stock for
securities  or other  property  deliverable  upon  such  exchange,  dissolution,
liquidation  or winding  up or other  Liquidation  Event and the  consideration,
including securities or other property, to be received by such holders upon such
exchange;  provided,  however, that no failure to mail such notice or any defect
therein or in the mailing  thereof  shall affect the  validity of the  corporate
action required to be specified in such notice.

          (h) Other Changes in Conversion  Rate.  The  Corporation  from time to
time may  increase the  Conversion  Rate by any amount for any period of time if
the period is at least 20 days and if the  increase  is  irrevocable  during the
period. Whenever the Conversion Rate is so increased, the Corporation shall mail
to holders of record of the Series A Preferred Stock a notice of the increase at
least 15 days before the date the increased  Conversion  Rate takes effect,  and
such notice shall state the increased  Conversion Rate and the period it will be
in effect.

          The  Corporation  may make such increases in the  Conversion  Rate, in
addition to those  required or allowed by this Section 4, as shall be determined
by it, as evidenced by a resolution of the Board of  Directors,  to be advisable
in  order to avoid or  diminish  any  income  tax to  holders  of  Common  Stock
resulting  from any dividend or  distribution  of stock or issuance of rights or
warrants to purchase or  subscribe  for stock or from any event  treated as such
for income tax purposes.

          Notwithstanding  anything to the contrary herein, in no case shall the
Conversion  Price be  adjusted to an amount  less than  $.00025  per share,  the
current par value of the Common Stock into which the Series A Preferred Stock is
convertible.


                                      -15-
<PAGE>

          (i)  Ambiguities/Errors.  The  holders of a  majority  of the Series A
Preferred Stock  outstanding and the Corporation shall have the power to resolve
by agreement  any ambiguity or correct any error in the  provisions  relating to
the  convertibility  of the Series A Preferred  Stock,  and their  actions in so
doing shall be final and conclusive.  If the holders of a majority of the Series
A Preferred Stock then outstanding and the Corporation  shall disagree as to any
ambiguity  or  correction  of  any  error  in  the  provisions  relating  to the
convertibility of the Series A Preferred Stock then the issue shall be submitted
to  and  determined  by  an  arbitration  panel  of  the  American   Arbitration
Association  in New York City in  accordance  with its rules,  the cost of which
arbitration shall be paid for by the Corporation.

          5. Mandatory Conversion. At any time on or after the Reset Date, the
Corporation,  at its  option,  may  cause  the  Series A  Preferred  Stock to be
converted  in  whole,  or in part,  on a pro rata  basis,  into  fully  paid and
nonassessable  shares of Common Stock at the then effective  Conversion Rate and
such other  securities and property as herein  provided if the closing bid price
of the Common Stock shall have exceeded 200% of the then  applicable  Conversion
Price for at least 20  trading  days in any 30  consecutive  trading  day period
ending three (3) days prior to the date of notice of  conversion.  Any shares of
Series  A  Preferred  Stock  so  converted  shall  be  treated  as  having  been
surrendered by the holder  thereof for  conversion  pursuant to Section 4 on the
date of such mandatory  conversion (unless previously converted at the option of
the holder).

          No  greater  than 60 nor fewer  than 20 days  prior to the date of any
such mandatory conversion, notice by first class mail, postage prepaid, shall be
given to the holders of record of the Series A Preferred  Stock to be converted,
addressed to such holders at their last addresses as shown on the stock transfer
books of the  Corporation.  Each such  notice  shall  specify the date fixed for
conversion,  the place or places for  surrender  of shares of Series A Preferred
Stock, and the then effective Conversion Rate pursuant to Section 4.

          Any notice which is mailed as herein  provided  shall be  conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail,  whether or not the holder of the Series A Preferred  Stock  receives such
notice;  and failure properly to give such notice by mail, or any defect in such
notice,  to the  holders  of the  shares to be  converted  shall not  affect the
validity of the  proceedings  for the conversion of any other shares of Series A
Preferred  Stock.  On or after the date fixed for  conversion  as stated in such
notice,  each  holder  of shares  called to be  converted  shall  surrender  the
certificate evidencing such shares to the Corporation at the place designated in
such notice for conversion. Notwithstanding that the certificates evidencing any
shares  properly  called for  conversion  shall not have been  surrendered,  the
shares  shall no longer be deemed  outstanding  and all rights  whatsoever  with
respect to the shares so called for conversion  (except the right of the holders
to convert such shares upon  surrender  of their  certificates  therefor)  shall
terminate.

          6.  Voting Rights.
              --------------

          (a) General.  Except as otherwise  provided herein, in the Certificate
of  Incorporation  or the  By-laws,  the holders of shares of Series A Preferred
Stock,  the holders of shares of Common Stock and the holders of any other class
or series of shares  entitled to vote with the Common Stock shall vote  together
as  one  class  on  all  matters  submitted  to a vote  of  stockholders


                                      -16-
<PAGE>

of the  Corporation.  In any such vote,  each share of Series A Preferred  Stock
shall entitle the holder thereof to cast the number of votes equal to the number
of votes which  could be cast in such vote by a holder of the Common  Stock into
which such share of Series A Preferred  Stock is  convertible on the record date
for such vote, or if no record date has been established,  on the date such vote
is taken.  Any shares of Series A Preferred Stock held by the Corporation or any
entity  controlled by the Corporation shall not have voting rights hereunder and
shall not be counted in determining the presence of a quorum.

          (b) Class Voting Rights.  In addition to any vote specified in Section
6(a), so long as 50% of the shares of Series A Preferred Stock  (including those
shares of Series A Preferred  Stock issued or issuable  upon the exercise of the
Placement Warrants or any other warrants or options for the purchase of Series A
Preferred  Stock) shall be outstanding,  the affirmative  vote or consent of the
holders of at least 66.67% of all  outstanding  Series A Preferred  Stock voting
separately  as a class shall be necessary to permit or effect any one or more of
the following:  (i) the amendment,  alteration or repeal of any provision of the
Certificate of  Incorporation,  or the Bylaws of the Corporation so as adversely
to affect the  relative  rights,  preferences,  qualifications,  limitations  or
restrictions  of the  Series  A  Preferred  Stock,  (ii)  the  authorization  or
issuance,  or increase of the authorized  amount of, any security  ranking prior
to, or on a parity  with,  the Series A Preferred  Stock (A) upon a  Liquidation
Event or (B) with respect to the payment of any  dividends or  distributions  or
(C) with respect to voting rights, (iii) the amendment,  alteration or repeal of
any  provision  of or the rights,  preferences,  or  privileges  of the Series A
Preferred  Stock,   (iv)  any  liquidation,   dissolution  or  sale  of  all  or
substantially  all of the  assets  of the  Corporation,  (v) the  incurrence  of
indebtedness  in excess of $100,000 in the  aggregate  (other than  non-recourse
equipment lease lines secured solely by the purchased equipment and indebtedness
incurred for working  capital  purposes  secured solely by the  receivables  and
inventory of the Corporation) or (vi) the repurchase of any of the securities of
the  Corporation  (other than  repurchases  from employees of the Corporation of
restricted  securities issued pursuant to employee benefit plans approved by the
Corporation's Board of Directors in connection with termination of employment at
prices no greater than the prices paid by any such employees for such restricted
securities).  The vote as contemplated herein shall specifically not be required
for (x) issuances of Common Stock, (y) the  authorization,  issuance or increase
in the amount of the Series A Preferred Stock prior to the Final Closing Date or
(z) any  consolidation  or  merger  of the  Corporation  with  or  into  another
corporation  in which the  Corporation  is not the surviving  entity,  a sale or
transfer  of all or part of the  Corporation's  assets for cash,  securities  or
other property, or a compulsory share exchange.

          7.   Outstanding   Shares.   For  purposes  of  this   Certificate  of
Designation,  all  issued  shares of Series A  Preferred  Stock  shall be deemed
outstanding  except  (i) from the date,  or the deemed  date,  of  surrender  of
certificates evidencing shares of Series A Preferred Stock, all shares of Series
A  Preferred  Stock  converted  into  Common  Stock,   (ii)  from  the  date  of
registration of transfer,  all shares of Series A Preferred Stock held of record
by the  Corporation or any subsidiary of the  Corporation  and (iii) any and all
shares of Series A  Preferred  Stock held in escrow  prior to  delivery  of such
stock by the Corporation to the initial beneficial owners thereof.

          8.  Status of  Acquired  Shares.  Shares of Series A  Preferred  Stock
received  upon  conversion  pursuant  to  Section 4 or  Section  5 or  otherwise
acquired by the  Corporation  will be


                                      -17-
<PAGE>

restored to the status of  authorized  but unissued  shares of Preferred  Stock,
without designation as to class, and may thereafter be issued, but not as shares
of Series A Preferred Stock.

          9. Preemptive  Rights. The Series A Preferred Stock is not entitled to
any  preemptive  or  subscription  rights in  respect of any  securities  of the
Corporation.

          10. No Amendment or Impairment.  The  Corporation  shall not amend its
Certificate of Incorporation or participate in any  reorganization,  transfer of
assets, consolidation,  merger, dissolution,  issue or sale of securities or any
other  voluntary  action,  for the  purpose of  avoiding or seeking to avoid the
observance  or  performance  of any of the  terms to be  observed  or  performed
hereunder  by the  Corporation,  but will at all times in good  faith  assist in
carrying out all such action as may be reasonably  necessary or  appropriate  in
order to protect  the rights of the  holders  of the  Series A  Preferred  Stock
against impairment.

          11.  Severability  of Provisions.  Whenever  possible,  each provision
hereof  shall be  interpreted  in a manner as to be  effective  and valid  under
applicable  law,  but if any  provision  hereof is held to be  prohibited  by or
invalid under  applicable law, such provision  shall be ineffective  only to the
extent of such  prohibition or  invalidity,  without  invalidating  or otherwise
adversely  affecting the remaining  provisions  hereof.  If a court of competent
jurisdiction  should  determine  that a  provision  hereof  would  be  valid  or
enforceable  if a period of time were  extended  or  shortened  or a  particular
percentage were increased or decreased,  then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.

                                  * * * * * * *


                                      -18-
<PAGE>

     IN WITNESS WHEREOF, Conversion Technologies International, Inc., has caused
this  certificate  to be signed on its behalf by William L. Amt, its  President,
this 29th day of August, 1997.
   




                                 CONVERSION TECHNOLOGIES INTERNATIONAL, INC.



                                 By: /s/ William L. Amt
                                     ------------------
                                 Name:  William L. Amt
                                 Title: President and Chief Executive Officer



ATTEST:


/s/ Jack D. Hays, Jr.
---------------------
Jack D. Hays, Jr.
Secretary