IDM ENVIRONMENTAL CORP.

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES

                     AND RIGHTS OF SERIES RR PREFERRED STOCK



     The undersigned officer of IDM Environmental Corp., a corporation organized
and existing under the Business Corporation Act of the State of New Jersey, does
hereby  certify  that,  pursuant to authority  conferred by the  Certificate  of
Incorporation,  as  amended  to date,  and  pursuant  to the  provisions  of the
Business  Corporation Act of the State of New Jersey,  the Board of Directors of
IDM  Environmental  Corp.,  as of  August  10th,  1998 ,  adopted  a  resolution
providing  for  certain   powers,   designations,   preferences   and  relative,
participating, optional or other rights, and the qualifications,  limitations or
restrictions  thereof, of certain shares of Series RR Preferred Stock, $1.00 par
value, of the Corporation, which resolution is as follows:

     RESOLVED:  That, pursuant to the authority vested in the Board of Directors
of the Corporation  and in accordance  with the Business  Corporation Act of the
State of New Jersey  and the  provisions  of the  Corporation's  Certificate  of
Incorporation,  a series of 1,500  shares of the class of  authorized  Preferred
Stock,  par value $1.00 per share,  of the  Corporation is hereby created as the
Series RR Preferred Stock, and that the designation and number of shares thereof
and the voting powers,  preferences  and relative,  participating,  optional and
other  special  rights of the  shares of such  series,  and the  qualifications,
limitations and  restrictions  thereof,  are as set forth on Exhibit A  attached
hereto.

     EXECUTED as of this 10th day of August, 1998.

                                                     IDM ENVIRONMENTAL CORP.



                                                 By: /s/ Joel Freedman
                                                    ----------------------------
                                                     Joel A. Freedman, President

ATTEST:

/s/ Frank Falco
--------------------------
Frank A. Falco, Secretary

                                                  

<PAGE>



                                                        
                                    Exhibit A

A.   Description and Designation of Series RR Preferred Stock

     1.   Designation and Definitions.
          ---------------------------

          (a)  Designation.  A  total  of  1,500  shares  of  the  Corporation's
     previously   undesignated  Preferred  Stock,  $1.00  par  value,  shall  be
     designated as the "Series RR Preferred Stock." The original issue price per
     share of the Series RR Preferred Stock shall be $1,000 (the "Original Issue
     Price").

          (b) Certain  Definitions.  As used herein, the following terms, unless
     the context otherwise requires, have the following respective meanings:

               (i) "Average  Quoted  Price" means the average of the closing bid
          price of the Common Stock of the Corporation as reported by the Nasdaq
          SmallCap  Market or Nasdaq  National  Market or, if the  Corporation's
          Common  Stock is no  longer  traded  on a Nasdaq  market,  such  other
          exchange on which the Corporation's  Common Stock is then traded,  for
          the  five  (5)  trading  days   immediately   preceding  any  holder's
          Conversion Date, the Mandatory  Conversion Date (as defined in Section
          5(c)  below)  or  the  date  of  the  consummation  or  closing  of  a
          Fundamental Change, as the case may be.

               (ii)  "Conversion  Date" means each date on which the Corporation
          receives by telecopy  written  notice in accordance  with Section 5(j)
          hereof  from a holder of Series RR  Preferred  Stock that such  holder
          elects to convert shares of its Series RR Preferred Stock.

               (iii) "Fundamental  Change" means: (i) any sale, lease,  exchange
          or other  transfer  of all or  substantially  all of the assets of the
          Corporation;  or  (ii)  any  merger  or  consolidation  to  which  the
          Corporation is a party.  Notwithstanding the foregoing,  the following
          shall not be a Fundamental  Change: A merger or  consolidation  (a) to
          which the  Corporation  is a party;  (b) in which it is the  surviving
          corporation  and  there  is  no  resulting   reclassification  of  the
          outstanding  Common  Stock;  and (c)  after  giving  effect  to which,
          persons who were,  immediately  before the  consummation or closing of
          such merger or consolidation, holders of outstanding Common Stock will
          be the direct or  indirect  owners of  securities  of the  Corporation
          possessing,  on a fully diluted basis, at least  seventy-five  percent
          (75%) of the voting power of all voting  securities of the Corporation
          (excluding, for purposes of such computation, any such person who also
          is a party to such merger or consolidation).

               (iv) "Issue Date" means,  with respect to each share of Series RR
          Preferred Stock held by any holder,  the date on which the Corporation
          originally  issued  such  share to such  holder  (irrespective  of any
          subsequent  transfer or other  disposition  of such share to any other
          holder).


                                      A-1

<PAGE>


     2.   Dividends.

          (a) Preferred Dividend - Cash and/or In-Kind.  When and as declared by
     the  Board  of  Directors  and  to the  extent  permitted  by the  Business
     Corporation  Act of the  State of New  Jersey,  the  Corporation  shall pay
     preferential  dividends to the holders of the Series RR Preferred  Stock as
     provided in this Section 2(a).

               (i)  Preferred  Dividend.  Except as otherwise  provided  herein,
          dividends  on each share of Series RR  Preferred  Stock shall  accrue,
          cumulatively  on a daily  basis,  at the rate of six percent  (6%) per
          annum of the Original  Issue Price,  from and including the Issue Date
          of such share to and including the date on which the Liquidation Value
          of such share is paid or such share is  converted in  accordance  with
          the  provisions  hereof (the  "Preferred  Dividend").  Such  Preferred
          Dividend  will accrue  whether or not it has been declared and whether
          or not there are  profits,  surplus or other funds of the  Corporation
          legally available for its payment.

               (ii)  Semi-Annual  Payments.  Commencing on January 31, 1999, the
          Preferred  Dividend  shall be  payable  in cash  (subject  to  Section
          2(a)(v) below)  semi-annually,  for the actual number of days elapsed,
          on each July 31 and  January 31, to the holders of record of shares of
          Series RR Preferred Stock as of the tenth (10th) trading day preceding
          the applicable dividend payment date.

               (iii) No Interest.  Accrued but unpaid Preferred  Dividends shall
          not bear interest.  Preferred Dividends paid in cash in an amount less
          than the  total  amount  of such  dividends  at the time  accrued  and
          payable shall be allocated on a share-by-share  basis among all shares
          of Series RR Preferred Stock at the time outstanding.

               (iv) Payment Upon  Conversion.  On the date on which any holder's
          shares of Series RR Preferred  Stock are  converted  into Common Stock
          pursuant to Section 5 hereof,  the  accrued  Preferred  Dividend  with
          respect to the shares so converted  shall be paid to such holder.  All
          accrued   Preferred   Dividends   also  shall  be  payable   upon  the
          liquidation, dissolution or winding up of the Corporation.

               (v)  Payment  in  Common  Stock.  The  Corporation,  at its  sole
          discretion,  may pay the  Preferred  Dividends in cash or in shares of
          Common  Stock at the then fair market  value per share of Common Stock
          as of the  date on  which  the  Preferred  Dividend  is  payable.  For
          purposes  of this  Section  2(a)(v),  fair  market  value shall be the
          average  of  the  closing  bid  price  of  the  Common  Stock  of  the
          Corporation  as  reported  by the  Nasdaq  SmallCap  Market  or Nasdaq
          National  Market or, if the  Corporation's  Common  Stock is no longer
          traded  on  a  Nasdaq  market,   such  other  exchange  on  which  the
          Corporation's  Common Stock is then  traded,  for the five (5) trading
          days immediately preceding the date on which the Preferred Dividend is
          payable.


                                      A-2

<PAGE>


               (vi) Fractional  Shares.  Notwithstanding  anything herein to the
          contrary,  no  fractional  shares  shall be  issued  pursuant  to this
          Section 2, and the number of shares of Common  Stock  issued  upon the
          payment of the Preferred  Dividend  shall be rounded up or down to the
          nearest whole share.

          (b)  Declared  Dividends  on Common  Stock.  If the Board of Directors
     shall declare a cash dividend payable upon the then  outstanding  shares of
     Common Stock (other than a stock  dividend on the Common Stock  distributed
     solely in the form of additional  shares of Common  Stock),  the holders of
     the Series RR referred  Stock shall be entitled to the amount of  dividends
     on the  Series  RR  Preferred  Stock as would be  declared  payable  on the
     largest  number of whole  shares of Common  Stock  into which the shares of
     Series RR Preferred  Stock held by each holder  thereof  could be converted
     pursuant to the provisions of Section 5  hereof,  such number determined as
     of the  record  date for the  determination  of  holders  of  Common  Stock
     entitled to receive such  dividend.  Such  determination  of "whole shares"
     shall be based upon the  aggregate  number of shares of Series RR Preferred
     Stock held by each  holder,  and not upon each share of Series RR Preferred
     Stock so held by the holder.

          (c) Dividends on Other Securities. Subject to the foregoing provisions
     of this Section 2, the Board of Directors  may declare and the  Corporation
     may pay or set  apart  for  payment,  or cause the  accrual  of,  stated or
     cumulative  dividends  and other  distributions  on the Series A  Preferred
     Stock or the  Series C  Preferred  Stock of the  Corporation,  or any other
     series  of  preferred  stock  hereafter  designated,  and may  purchase  or
     otherwise redeem any of the same (or any warrants, rights, options or other
     securities exercisable therefor or convertible or exchangeable there into),
     and the holders of Series RR Preferred Stock shall not be entitled to share
     therein.

3.   Liquidation, Dissolution or Winding Up.
     --------------------------------------

          (a) Treatment at Liquidation,  Dissolution or Winding Up. In the event
     of any liquidation,  dissolution or winding up of the Corporation,  whether
     voluntary or  involuntary,  or in the event of its  insolvency,  before any
     distribution or payment is made to any holders of Common Stock or any other
     class or series of capital stock of the Corporation designated to be junior
     to the Series RR Preferred Stock, and subject to the liquidation rights and
     preferences  of any class or series of Preferred  Stock  designated  by the
     Board of  Directors  in the future to be senior to or on a parity  with the
     Series RR Preferred  Stock with  respect to  liquidation  preferences,  the
     holder of each share of Series RR  Preferred  Stock shall be entitled to be
     paid first out of the assets of the Corporation  available for distribution
     to holders of the Corporation's capital stock of all classes,  whether such
     assets are capital,  surplus or  earnings,  an amount equal to the Original
     Issue Price per share of Series RR Preferred Stock held by any holder, plus
     the Preferred  Dividend  accruing to the Series RR Preferred Stock pursuant
     to Section 2 above (the  "Liquidation  Value").  For purposes  hereof,  the
     Series RR Preferred Stock shall rank on liquidation  junior to the Series A
     Preferred Stock and on parity with the Series C Preferred  Stock.  


                                      A-3

<PAGE>


          If, upon  liquidation,  dissolution or winding up of the  Corporation,
     the  assets  of  the   Corporation   available  for   distribution  to  its
     stockholders  shall be  insufficient  to pay the  holders  of the Series RR
     Preferred  Stock the full amount to which they otherwise would be entitled,
     the  holders  of Series RR  Preferred  Stock  shall  share  ratably  in any
     distribution  of available  assets pro rata in proportion to the respective
     liquidation  preference  amounts  which  would  otherwise  be payable  upon
     liquidation  with  respect  to the  outstanding  shares  of the  Series  RR
     Preferred Stock if all liquidation  preference amounts with respect to such
     shares  were  paid in full,  based  upon the  aggregate  Liquidation  Value
     payable upon all shares of Series RR Preferred Stock then outstanding.

          After such payment  shall have been made in full to the holders of the
     Series RR Preferred  Stock,  or funds necessary for such payment shall have
     been set aside by the  Corporation  in trust for the  account of holders of
     the Series RR Preferred  Stock so as to be available for such payment,  the
     remaining assets available for  distribution  shall be distributed  ratably
     among the  holders of the  Common  Stock and any class or series of capital
     stock  designated to be junior to the Series RR Preferred Stock (if any) in
     right of payment  upon any  liquidation,  dissolution  or winding up of the
     Corporation.

          The amounts set forth above shall be subject to  equitable  adjustment
     by the Board of  Directors  whenever  there shall  occur a stock  dividend,
     stock     split,     combination,     reorganization,     recapitalization,
     reclassification  or other similar event  involving a change in the capital
     structure of the Series RR Preferred Stock.

          (b) Distributions Other than Cash. Whenever the distributions provided
     for in this Section shall be payable in property other than cash, the value
     of such  distribution  shall be the fair market  value of such  property as
     determined  in good  faith by the  Board of  Directors.  All  distributions
     (including  distributions other than cash) made hereunder shall be made pro
     rata to the holders of Series RR Preferred Stock.

          (c)  Events  Not  Deemed  a   Liquidation.   Neither   the  merger  or
     consolidation of the Corporation into or with any other corporation(s), nor
     the sale or transfer by the  Corporation  of all or any part of its assets,
     nor the reduction of the capital stock of the  Corporation,  will be deemed
     to be a  liquidation,  dissolution or winding up of the  Corporation  under
     this Section 3.

4.   Voting Power.
     ------------

          (a) General.  The holders of Series RR  Preferred  Stock will not have
     any voting  rights  except as set forth below or as otherwise  from time to
     time required by law.


                                      A-4

<PAGE>

 
          To the extent  that  under New  Jersey law the vote of the  holders of
     Series RR Preferred  Stock,  voting  separately as a class,  is required to
     authorize  a given  action  of the  Corporation,  the  affirmative  vote or
     consent of the holders of at least a majority of the outstanding  shares of
     Series RR Preferred  Stock shall  constitute the approval of such action by
     the class. To the extent that under New Jersey law the holders of Series RR
     Preferred  Stock are  entitled to vote on a matter  with  holders of Common
     Stock,  voting  together  as one class,  each share of Series RR  Preferred
     Stock  shall be entitled to a number of votes equal to the number of shares
     of Common Stock into which it is then convertible using the record date for
     the  taking  of such  vote of  stockholders  as the  date as of  which  the
     Conversion Price is calculated.  Holders of Series RR Preferred Stock shall
     be entitled  to notice of all  shareholders  meetings  or written  consents
     regardless of whether they would be entitled to vote with respect  thereto,
     which notice would be provided  pursuant to the  Corporation's  by-laws and
     applicable statutes.

 
          (b)Amendments  to  Charter.  For so long as there  are any  shares  of
     Series RR Preferred Stock outstanding,  the Corporation shall not amend its
     Certificate of Incorporation or this Certificate of Designation without the
     approval, by vote or written consent, of the holders of at least a majority
     of the then  outstanding  shares  of  Series  RR  Preferred  Stock,  voting
     together as a class, each share of Series RR Preferred Stock to be entitled
     to one vote in each instance,  if such amendment would adversely affect the
     rights of the  holders of Series RR  Preferred  Stock;  provided,  that the
     creation,  or increase in the authorized  number of shares, of any class or
     series  of  stock  ranking  prior  to or on a parity  with  the  Series  RR
     Preferred  Stock either as to dividends  or upon  liquidation  shall not be
     deemed to adversely affect the rights of the holders of Series RR Preferred
     Stock for purposes of this Section 4(b).

5.   Conversion Rights.
     -----------------
 
          (a)Conversion  at the  Option of  Holders.  Beginning  the  earlier of
     ninety (90) days after the Issue Date to such holder, or upon the Effective
     Date of the Registration Statement, each such holder of Series RR Preferred
     Stock shall have the right, at such holder's option, to convert up to fifty
     percent  (50%) of the  shares  of Series RR  Preferred  Stock  held by such
     holder  into such number of fully paid and  nonassessable  shares of Common
     Stock as shall be determined by multiplying  the number of shares of Series
     RR Preferred Stock to be converted by a fraction, the numerator of which is
     the Original  Issue Price,  and the  denominator of which is the applicable
     Conversion Price (as defined below). Beginning thirty (30) days thereafter,
     all of  the  Preferred  Stock  shall,  at the  option  of  the  Holder,  be
     convertible.


                                      A-5
<PAGE>

 
          (b)Conversion  Price.  The conversion price per share (the "Conversion
     Price") shall be equal to the lesser of subsections (i) and (ii) below.

 
               (i)  $2.25;

               (ii) Seventy-five (75%) of the Average Quoted Price.

          c)Conversion at Option of Corporation.  At any time after the close of
     business  on the  second  (2nd) year  anniversary  of the date on which the
     Securities  and Exchange  Commission  declares  effective the  registration
     statement  registering  the shares of Common Stock issuable upon conversion
     of the Series RR Preferred  Stock, all of the shares of Series RR Preferred
     Stock shall be  convertible,  at the option of the  Corporation,  into such
     number of fully paid and  nonassessable  shares of Common Stock as shall be
     determined by multiplying the number of shares of Series RR Preferred Stock
     outstanding  on the  Mandatory  Conversion  Date (as  defined  below)  by a
     fraction,  the  numerator  of which is the Original  Issue  Price,  and the
     denominator of which is the applicable Conversion Price.

     The Corporation shall give notice of its exercise of such conversion option
to all holders of Series RR Preferred  Stock no later than five (5) trading days
before the date as of which the  Corporation has elected to make such conversion
effective  (such  effective date of the  conversion,  the "Mandatory  Conversion
Date"). Each holder of Series RR Preferred Stock as of the Mandatory  Conversion
Date  shall,   promptly  after  such  date,  surrender  for  conversion  to  the
Corporation  at its principal  office or to any transfer agent for the Series RR
Preferred Stock or the Common Stock all certificates  representing all shares of
Series RR Preferred  Stock held by such holder,  accompanied by a written notice
specifying the name or names in which such holder wishes the  certificate(s) for
shares of Common Stock to be issued.

     Effective  as of the close of business on the  Mandatory  Conversion  Date,
each share of Series RR Preferred Stock then outstanding shall be (and be deemed
to have been) converted automatically, without any further action by the holders
thereof,  into shares of Common Stock.  Such conversion  shall be deemed to have
occurred  whether  or  not  the  certificates   representing   such  shares  are
surrendered to the Corporation or its transfer agent.

 
          (d)Limitation  on  Number  of  Shares.  Additionally,  notwithstanding
     anything set forth in this Section 5 to the contrary:

 
               (i)in no event  shall any  holder of Series RR  Preferred  Stock,
          prior to earlier to occur of the Mandatory Conversion Date or the date
          of the consummation or closing of a Fundamental Change, be entitled to
          convert  Series RR Preferred  Stock into shares of Common Stock to the
          extent that (x) the number of shares of the Corporation's Common Stock
          beneficially  owned by such  holder  and its  affiliates  (other  than
          shares of Common Stock which may be deemed  beneficially owned through
          the  ownership of the  unconverted  portion of the shares of Series RR
          Preferred  Stock held by such holder) plus (y) the number of shares of
          Common Stock issuable upon such conversion  would result in beneficial
          ownership  by the holder and its  affiliates  of more than 9.9% of the
          shares of Common Stock then outstanding.  For purposes of this Section
          5(d),  beneficial  ownership  shall be determined  in accordance  with
          Section 13(d) of the Securities Exchange Act of 1934, as amended,  and
          Regulation  13D and 13G  promulgated  thereunder,  except as otherwise
          provided in clause (x) of this Section 5(d).  Each holder shall,  upon
          delivering to the  Corporation a notice of election to convert  shares
          of Series RR Preferred  Stock in accordance  with Section 5(j) hereof,
          be required to provide the Corporation  with a  certification  in form
          and substance  reasonably  satisfactory to the  Corporation,  that the
          conversion of the Series RR Preferred  Stock being  converted will not
          result in such holder and its  affiliates  beneficially  holding  more
          than 9.9%,  determined  as  heretofore  provided,  of the  outstanding
          shares of Common Stock on such  Conversion  Date. If the holder cannot
          make such certification, the shares of Series RR Preferred Stock to be
          converted  shall not be  convertible.  Notwithstanding  the foregoing,
          upon the Mandatory Conversion Date or upon the consummation or closing
          of a Fundamental  Change, all such shares of Series RR Preferred Stock
          then  outstanding  shall be converted  into Common Stock in accordance
          with Section 5(c) or 5(h), as applicable.

                                      A-6
<PAGE>

 
                    (ii)the  maximum  number of shares  which  will be issued on
               conversion  of the Series RR Preferred  Stock and exercise of the
               Redemption  Warrants,  if any, is  3,600,000  (the  "Share  Cap")
               unless and until the  shareholders of the Corporation  shall have
               approved  the  issuance of shares of Common Stock beyond the Cap,
               subject to the redemption  rights of the holders of the Series RR
               Preferred  Stock set  forth in  Sections  4(i)(x)  and (y) of the
               Securities Purchase Agreement.
 
 
          (e)Equitable Adjustment. If the Corporation at any time subdivides (by
     any stock split,  stock  dividend or otherwise) its  outstanding  shares of
     Common Stock into a greater number of shares, the Conversion Price shall be
     proportionately  reduced,  and,  conversely,  if the outstanding  shares of
     Common Stock are combined into a smaller  number of shares,  the Conversion
     Price shall be proportionately increased.

 
          (f)Dividends  Other  Than  Common  Stock  Dividends.  In the event the
     Corporation  shall  make or  issue,  or  shall  fix a  record  date for the
     determination  of holders of Common Stock entitled to receive a dividend or
     other  distribution  (other than a  distribution  in  liquidation  or other
     distribution  otherwise  provided  for herein)  with  respect to the Common
     Stock  payable in (i)  securities of the  Corporation  other than shares of
     Common  Stock,   or  (ii)  other  assets   (excluding   cash  dividends  or
     distributions), then and in each such event provision shall be made so that
     the holders of the Series RR Preferred  Stock shall receive upon conversion
     thereof  in  addition  to the number of shares of Common  Stock  receivable
     thereupon, the number of securities or such other assets of the Corporation
     which they would have  received had their  Series RR  Preferred  Stock been
     converted  into  Common  Stock  on the  date of  such  event  and had  they
     thereafter,  during the period from the date of such event to and including
     the  Conversion  Date,  retained  such  securities  or  such  other  assets
     receivable  by them during such  period,  giving  application  to all other
     adjustments called for during such period under this Section 5 with respect
     to the rights of the holders of the Series RR Preferred Stock.

                                      A-7
<PAGE>

 
          (g)Capital  Reorganization  or  Reclassification.  If the Common Stock
     issuable  upon the  conversion  of the Series RR  Preferred  Stock shall be
     changed into the same or different number of shares of any class or classes
     of capital  stock,  whether by  capital  reorganization,  recapitalization,
     reclassification  or otherwise  (other than a subdivision or combination of
     shares or stock dividend  provided for elsewhere in this Section 5,  or the
     sale of all or  substantially  all of the  Corporation's  capital  stock or
     assets to any other  person),  then and in each such  event the  holders of
     Series RR Preferred  Stock shall have the right  thereafter to convert such
     shares  into the kind and  amount  of  shares  of  capital  stock and other
     securities   and   property    receivable    upon   such    reorganization,
     recapitalization,  reclassification  or other  change by the holders of the
     number of  shares  of Common  Stock  into  which  such  shares of Series RR
     Preferred  Stock  might  have  been  converted  immediately  prior  to such
     reorganization,  recapitalization,  reclassification or change, all subject
     to further adjustment as provided herein.

 
          (h)Mandatory  Conversion  -  Fundamental  Change.  If any  Fundamental
     Change  shall  occur,   then  each  share  of  Series  RR  Preferred  Stock
     outstanding as of the date of the  consummation or closing thereof shall be
     (and be deemed to have been) converted  automatically,  without any further
     action  by the  holders  thereof,  into  such  number  of  fully  paid  and
     nonassessable  shares of Common Stock as shall be determined by multiplying
     the number of shares of Series RR Preferred  Stock  outstanding on the date
     of such consummation or closing date by a fraction,  the numerator of which
     is the Original Issue Price, and the denominator of which is the applicable
     Conversion  Price. Such conversion shall be deemed to have occurred whether
     or not the  certificates  representing  such shares are  surrendered to the
     Corporation or its transfer agent.

     The Corporation shall give notice of a proposed or anticipated  Fundamental
Change to all holders of the Series RR  Preferred  Stock not later than ten (10)
trading days before the expected  closing or  consummation  of such  Fundamental
Change.  The  Corporation  also  shall  give  prompt  notice of the  closing  or
consummation of such  Fundamental  Change to all holders of record of the Series
RR Preferred Stock as of the date of such closing or  consummation.  Each holder
of Series RR Preferred Stock shall thereupon  promptly surrender for conversion,
to the  Corporation  at its  principal  office or to any transfer  agent for the
Series RR Preferred Stock or the Common Stock, all certificates representing all
shares  of Series RR  Preferred  Stock  held by such  holder,  accompanied  by a
written  notice  specifying  the name or names in which such  holder  wishes the
certificate(s) for shares of Common Stock to be issued.

 
          (i)Certificate as to Adjustments;  Notice by Corporation. In each case
     of  an  adjustment  or  readjustment  of  the  Original  Issue  Price,  the
     Corporation  at its expense will furnish each holder of Series RR Preferred
     Stock  so  affected  with  a  certificate  prepared  by an  officer  of the
     Corporation, showing such adjustment or readjustment, and stating in detail
     the facts upon which such adjustment or readjustment is based.

                                      A-8


<PAGE>
 
          (j)Exercise  of  Conversion  Privilege.  To  exercise  its  conversion
     privilege,  a holder of Series RR Preferred Stock shall give written notice
     by telecopy to the  Corporation  at its  principal  office that such holder
     elects  to  convert  shares  of its  Series  RR  Preferred  Stock and shall
     thereafter  surrender the original  certificate(s)  representing the shares
     being converted to the Corporation at its principal office together with an
     originally  executed copy of such notice.  Such notice shall also state the
     name or names (with its address or  addresses,  as well as the  address(es)
     for  delivery)  in which the  certificate(s)  for  shares  of Common  Stock
     issuable upon such conversion shall be issued.  The  certificate(s) for the
     shares of Series RR Preferred  Stock  surrendered  for conversion  shall be
     accompanied by proper assignment thereof to the Corporation or in blank. As
     promptly  as  practicable  after  the  Corporation  receives  the  original
     certificate(s)  for the shares of Series RR Preferred Stock surrendered for
     conversion,  the proper  assignment  thereof to the Corporation or in blank
     and  the  original  notice  of  conversion  (collectively,   the  "Original
     Documentation"), but in no event more than three (3) trading days after the
     Corporation's receipt of the Original Documentation,  the Corporation shall
     issue and deliver to the holder of the shares of Series RR Preferred  Stock
     being  converted,  at the addresses set forth therefor by the holder,  such
     certificate(s)  as it may request for the number of whole  shares of Common
     Stock  issuable  upon the  conversion of such shares of Series RR Preferred
     Stock in accordance  with the provisions of this Section 5. Such conversion
     shall be  deemed to have been  effected  immediately  prior to the close of
     business on the Conversion  Date, and at such time the rights of the holder
     as holder of the converted  shares of Series RR Preferred Stock shall cease
     and the person(s) in whose name(s) any  certificate(s) for shares of Common
     Stock shall be issuable upon such conversion shall be deemed to have become
     the holder(s) of record of the shares of Common Stock represented  thereby.
     If the  Corporation  fails  to  issue  and  deliver  to  such  holder  such
     certificate(s)  for shares of Common  Stock  within  three (3) trading days
     after  the  Corporation's  receipt  of  the  Original  Documentation,   the
     Corporation shall pay the liquidated  damages set forth in Section 5 of the
     Stock Purchase Agreement between the Corporation and the initial purchasers
     of the Series RR Preferred Stock.

 
          (k)Fractional  Shares.  No fractional  shares of Common Stock or scrip
     representing  fractional  shares  shall be issued  upon the  conversion  of
     shares of Series RR Preferred  Stock.  Instead of any fractional  shares of
     Common Stock that would  otherwise be issuable upon conversion of Series RR
     Preferred  Stock,  the number of shares issuable upon  conversion  shall be
     rounded up or down to the nearest whole share.

 
          (l)Partial Conversion.  In the event some but not all of the shares of
     Series RR Preferred Stock represented by a certificate(s)  surrendered by a
     holder are converted,  the  Corporation  shall execute and deliver to or on
     the  order  of  the  holder,  at the  expense  of  the  Corporation,  a new
     certificate  representing the number of shares of Series RR Preferred Stock
     which were not converted.  Such new certificate shall be so delivered on or
     prior  to  the  date  set  forth  in  Section 5(j)   for  the  delivery  of
     certificates for shares of Common Stock.

                                      A-9
<PAGE>

 
          (m)Reservation  of Common Stock.  The  Corporation  shall at all times
     reserve and keep  available out of its  authorized  but unissued  shares of
     Common  Stock,  solely for the purpose of effecting  the  conversion of the
     shares of the Series RR Preferred Stock,  200% of such number of its shares
     of Common  Stock as shall  from time to time be  sufficient  to effect  the
     conversion  of all  outstanding  shares of the  Series RR  Preferred  Stock
     (including  any  shares of Series RR  Preferred  Stock  represented  by any
     warrants,  options,  subscription  or  purchase  rights  for the  Series RR
     Preferred Stock),  and if at any time the number of authorized but unissued
     shares  of Common  Stock  shall  not be 200% of the  number of such  shares
     sufficient to effect the conversion of all then  outstanding  shares of the
     Series RR  Preferred  Stock  (including  any shares of Series RR  Preferred
     Stock  represented  by any  warrants,  options,  subscriptions  or purchase
     rights for the Series RR Preferred  Stock),  then the Corporation  shall be
     deemed to be in breach and  default of its  obligations  hereunder,  and in
     addition  to all  charges,  claims and rights at law or in equity that each
     holder shall be entitled to, the Corporation shall use all means reasonably
     available to it, and promptly take any and all actions as may be necessary,
     to increase  its  authorized  but  unissued  shares of Common Stock to such
     number  of  shares  as  shall  be 200% of the  amount  sufficient  for such
     purpose.

     6. Redemption and Repurchase Rights. The Corporation shall have no right to
redeem and holders of shares of Series RR Preferred Stock shall have no right to
cause the Corporation to redeem,  any or all of the outstanding shares of Series
RR Preferred Stock, except as follows:

 
          (a)in the event that a holder of shares of Series RR  Preferred  Stock
     submits  Original  Documentation  relating to the  conversion  of shares of
     Series RR  Preferred  Stock in the manner  provided for in Section 5(j) and
     the  number of shares of Common  Stock  issuable  upon such  conversion  is
     limited  by reason of the Share Cap  described  in  Section  5(d)(ii),  the
     Corporation  shall,  on demand of any holder of Series RR Preferred  Stock,
     redeem any portion of the Series RR Preferred  Stock not  exercisable  as a
     result of such  limitation at a redemption  price equal to $1,200 per share
     plus accrued  dividends (the "Share Cap Redemption  Price").  The Share Cap
     Redemption  Price  shall be payable  within  five (5)  business  days after
     demand for such redemption is made.

 
          (b)in the event that the Corporation enters into a New Transaction (as
     defined in the  Securities  Purchase  Agreement [the  "Securities  Purchase
     Agreement"])  pursuant to which the shares of Series RR Preferred Stock are
     being  offered) and the holders elect not to exercise  their Right of First
     Refusal (as defined in the Securities Purchase Agreement"), the Corporation
     shall redeem the outstanding  shares of Series RR Preferred Stock then held
     (the  "Outstanding  Preferred Stock") for an amount equal to (i) the sum of
     one hundred twenty-five percent (125%) of the liquidation preference of the
     Outstanding  Preferred  Stock plus all accrued but unpaid  dividends on the
     Outstanding  Preferred  Stock (the  "Redemption  Amount"),  and (ii) in the
     event the  average  of the  closing  bid price of the  Common  Stock of the
     Corporation as reported by the Nasdaq  SmallCap  Market or Nasdaq  National
     Market  or, if the  Corporation's  Common  Stock is no  longer  traded on a
     Nasdaqmarket,  such other exchange on which the Corporation's  Common Stock
     is then traded,  for the five (5) trading days  immediately  preceding  the
     closing date of the New Transaction  exceeds $3.25 per share,  the issuance
     of warrants (the "Redemption Warrants") exercisable to purchase a number of
     shares of Common Stock of the  Corporation  equal to 461,539  multiple by a
     fraction  the  numerator  of which is the  number of shares of  Outstanding
     Preferred  Stock  and the  denominator  of which is 1,500.  The  Redemption
     Warrants  shall be  exercisable  at $3.25 per share  (subject to  equitable
     adjustment in the case of stock splits, stock dividends, mergers or similar
     transactions  after the date  hereof),  shall have  piggyback  registration
     rights and shall be  exercisable  for a period of two years from the date a
     registration  statement  is filed in  which  the  shares  of  Common  Stock
     underlying the Redemption  Warrants are registered.  The Redemption  Amount
     and  Redemption  Warrant  shall be  delivered  to the  holders  within five
     business days following the expiration of the Right of First Refusal.

                                      A-10

<PAGE>

7.   Notices of Record Date. In the event of any:
     -----------------------

 
          (a)taking by the  Corporation  of a record of the holders of any class
     of securities  for the purpose of determining  the holders  thereof who are
     entitled to receive any  dividend  or other  distribution,  or any right to
     subscribe for, purchase or otherwise acquire any shares of capital stock of
     any class or any other  securities  or  property,  or to receive  any other
     right, or

 
          (b)capital reorganization of the Corporation,  any reclassification or
     recapitalization  of the capital  stock of the  Corporation,  any merger or
     consolidation of the  Corporation,  or any transfer of all or substantially
     all of the assets of the Corporation to any other Corporation, or any other
     entity or person, or

 
          (c) voluntary or involuntary dissolution, liquidation or winding up of
     the Corporation,

     then and in each such event the  Corporation  shall telecopy and thereafter
     mail or cause to be mailed to each  holder of Series RR  Preferred  Stock a
     notice  specifying (i) the date on which any such record is to be taken for
     the purpose of such  dividend,  distribution  or right and a description of
     such  dividend,  distribution  or  right,  (ii) the date on which  any such
     reorganization,      reclassification,      recapitalization,     transfer,
     consolidation,  merger, dissolution,  liquidation or winding up is expected
     to become effective, and (iii) the time, if any, that is to be fixed, as to
     when the holders of record of Common Stock (or other  securities)  shall be
     entitled to exchange their shares of Common Stock (or other securities) for
     securities  or  other  property   deliverable  upon  such   reorganization,
     reclassification,   recapitalization,   transfer,  consolidation,   merger,
     dissolution, liquidation or winding up. Such notice shall be telecopied and
     thereafter  mailed by first  class  mail,  postage  prepaid,  or by express
     overnight  courier  service,  at  least  ten  (10)  days  prior to the date
     specified in such notice on which such action is to be taken. 

                                      A-11
<PAGE>


8.   General.
     --------
 
          (a)Replacement of Certificates.  Upon the Corporation's  receipt, from
     the  holder of any  certificate  evidencing  shares of Series RR  Preferred
     Stock, of evidence reasonably satisfactory to the Corporation (an affidavit
     of such holder will be satisfactory) of the ownership and the loss,  theft,
     destruction or mutilation of such certificate,  and in the case of any such
     loss,   theft  or  destruction,   upon  receipt  of  indemnity   reasonably
     satisfactory to the  Corporation,  and in the case of any such  mutilation,
     upon surrender of such certificate,  the Corporation (at its expense) shall
     execute  and deliver to such  holder,  in lieu of such  certificate,  a new
     certificate  that represents the number of shares  represented by, is dated
     the date of, is issued in the name of the holder  of, and is  substantially
     identical   in  form  of,  such  lost,   stolen,   destroyed  or  mutilated
     certificate.

 
          (b)Payment of Taxes.  The Corporation  shall pay all taxes (other than
     taxes based upon income) and other governmental charges that may be imposed
     in  connection  with the issuance or delivery of any shares of Common Stock
     (or  other  of the  Corporation's  securities)  that  results  from (i) the
     conversion  of  shares  of  Series  RR  Preferred  Stock  pursuant  to this
     Certificate of  Designations  or (ii) the  application  of Section  2(a)(v)
     hereof.  Notwithstanding the foregoing,  if the Corporation,  pursuant to a
     notice from a holder of any shares of Series RR  Preferred  Stock,  effects
     the  issuance or  delivery  of any shares of Common  Stock (or other of the
     Corporation's  securities)  in any name(s) other than such  holder's  name,
     then such holder shall deliver to the Corporation with the aforesaid notice
     (A) all  transfer  taxes and other  governmental  charges  payable upon the
     issuance or delivery of  securities  in such other  name(s) or (B) evidence
     satisfactory  to the  Corporation  that such taxes and charges have been or
     shall be paid in full.

 
          (c)Status  of  Redeemed  or  Converted  Shares.  Shares  of  Series RR
     Preferred Stock that are redeemed,  converted or otherwise  acquired by the
     Corporation  in any manner  (including  by purchase or  exchange)  shall be
     canceled  and  upon  cancellation  (i)  shall no  longer  be  deemed  to be
     outstanding,  (ii) shall become authorized but unissued shares of preferred
     stock  undesignated  as to  series  and (iii)  may be  reissued  as part of
     another series of preferred stock.

                                      A-12

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