Exhibit 3.2


                           CERTIFICATE OF DESIGNATION

                                       for

                      SERIES A CONVERTIBLE PREFERRED STOCK

                                       of

                                  PROCEPT, INC.

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

         PROCEPT, 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 (the "Board
of Directors") by the 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 adopted the following resolution establishing a series of 30,061
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 by the Certificate of Incorporation, a series of
         Preferred Stock, par value $.01 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 special rights of, the shares of such
         series and the qualifications, limitations and restrictions thereof are
         as follows:

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

         I. 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 30,061. Such series is referred to herein as the "Series A
Preferred Stock." Such number of shares may be increased or decreased by
resolution of the Board of Directors; 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.

                  B. As used in this Certificate of Designation, the following
terms shall have the following meanings:

                           1. The "Closing Bid Price" for any security for each
                  trading day shall be the reported per share closing bid price
                  of such security regular way on the Stock Market on 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 relevant Stock Market on
                  such trading day.


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                           2. "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. If the
                  Corporation and the holders of a majority of the Series A
                  Preferred Stock then outstanding 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 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 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.

                           3. "Market Price" shall mean the average Closing Bid
                  Price for twenty (20) consecutive trading days, ending with
                  the trading day prior to the date as of which the Market Price
                  is being determined (with appropriate adjustments for
                  subdivisions or combinations of shares effected during such
                  period), 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.

                           4. "Registered Holders" shall mean, at any time, the
                  holders of record of the Series A Preferred Stock.

                           5. The "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, shall mean The Nasdaq National Market
                  System ("NNM") or The Nasdaq SmallCap Market ("SCM" and,
                  together with NNM, "Nasdaq") or, if such security is not
                  quoted on Nasdaq, shall mean the OTC Bulletin Board or, if
                  such security is not quoted on the OTC Bulletin Board, shall
                  mean the over-the-counter market as furnished by any NASD
                  member firm selected from time to time by the Corporation for
                  that purpose.

                           6. A "trading day" shall mean a day on which the
                  relevant Stock Market is open for the transaction of business.

                           7. "Trading Price" shall mean the lower of (i) the
                  average Closing Bid Price of the Common Stock (with
                  appropriate adjustments for subdivisions or combinations of
                  shares effected during such period) for the thirty (30)
                  consecutive trading days immediately preceding the date as of
                  which the Trading Price is being determined, (ii) the average
                  Closing Bid Price of the Common Stock (with appropriate
                  adjustments for subdivisions or combinations of shares
                  effected during such period) for five (5) consecutive trading
                  days, immediately preceding the date as of which the Trading
                  Price is being determined, and (iii) the average Closing Bid
                  Price of the Common Stock (with appropriate adjustments for
                  subdivisions or combinations of shares effected during such
                  period) for five (5) consecutive trading days, immediately
                  succeeding the date as of which the Trading Price is

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                  being determined, provided that if the prices referred to in
                  the definition of Closing Bid Price cannot be determined for
                  any of such periods, "Trading Price" shall mean Fair Market
                  Value.

         II.      Dividends and Distributions.

                  A. Commencing on the Reset Date (as defined in Subsection
4(a)), the holders of the Series A Preferred Stock shall be entitled to receive
cumulative dividends on each share of Series A Preferred Stock, 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 annually in arrears or
at such time as the conversion of, and with respect to, any shares of Series A
Preferred Stock that are converted. Such dividends shall be paid in cash, or at
the option of the Company, in kind, with duly authorized, fully paid and non-
assessable shares of Series A Preferred Stock. Such dividends shall accrue
monthly 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 $140.00 plus
all accrued but unpaid dividends (subject to appropriate adjustment to reflect
any stock split, combination, reclassification or reorganization of the Series A
Preferred Stock).

                  B. In addition to the foregoing, subject to the rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, 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, 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 (as defined below) of the Corporation unless
and until a special dividend or distribution of $140.00 per share (subject to
appropriate adjustment to reflect any stock split, combination, reclassification
or reorganization of the Series A Preferred Stock) has been declared and paid on
the Series A Preferred Stock. In the event that such special dividend or
distribution is declared and paid on the Series A Preferred Stock, an aggregate
per share dividend or distribution equal to (i) $140.00 divided by (ii) the
effective Conversion Rate (as defined below) at the time of such special
dividend or distribution on the Series A Preferred Stock may be declared and
paid on the Common Stock. Except as aforesaid, the Corporation shall not declare
any dividend or distribution on any Junior Stock or stock on a parity with the
Series A Preferred Stock, unless the Corporation shall, concurrently with the
declaration of such dividend or distribution on the Junior Stock or stock on a
parity with the Series A Preferred Stock, declare a like dividend or
distribution, as the case may be, on the Series A Preferred Stock.

                  D. Any dividend or distribution (other than that referenced in
the first sentence of Subsection II.C.) payable to the holders of the Series A
Preferred Stock pursuant to this Section II 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.


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                  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
II shall not be deemed to include any distribution made in connection with or in
lieu of any Liquidation Event (as defined below).

                  G. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock which may be in arrears.

                  H. So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series A
Preferred Stock, for any period unless all dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series A Preferred Stock.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series A Preferred Stock and any
other class or series of stock ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon such other stock shall be
declared pro rata so that the amounts of dividends per share declared on the
Series A Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of the
Series A Preferred Stock and on such other stock bear to each other.

                  I. So long as any shares of the Series A Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series A Preferred Stock shall have been paid or set apart for payment.

                  J. "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.

         III.     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


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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 for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to $140.00 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 $140.00 per share may be paid
in cash, property (valued as provided in Subsection III.B. and/or securities
(valued as provided in Subsection III.B. of the entity surviving such Merger
Transaction. In the case of property or in the event that any such securities
are subject to an investment letter or other similar restriction on
transferability, the value of such property or securities shall be determined by
agreement between the Corporation and the holders of a majority of the Series A
Preferred Stock then outstanding. 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
shareholders 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. Notwithstanding item (iii) of the first sentence
of this Subsection III.A. any consolidation, merger, combination, reorganization
or other transaction in which the Corporation is not the surviving entity but
the stockholders of the Corporation immediately prior to such transaction own in
excess of 50% of the voting power of the corporation surviving such transaction
and own such interest in substantially the same proportions as prior to such
transaction, shall not be considered a Liquidation Event provided that the
surviving corporation shall make appropriate provisions to ensure that the terms
of this Certificate of Designation survive any such transaction as provided in
Subsection IV.C.2. 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 III.A. hereof
shall be valued as follows:

                     1. Securities not subject to an investment letter or other
                  similar restriction on free marketability:

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

                        (b) If not actively traded on a Stock Market, the value
                     shall be the Fair Market Value.

                     2. For 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.


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                        3. For all other securities, the value shall be the Fair
                     Market Value thereof.

         IV.      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 IV.B., 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 $0.48675 (the "Conversion Price") and shall be
subject to adjustment as provided herein. The rate at which each share 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
$100.00.

                     The Conversion Price is subject to adjustment immediately
upon the earliest of (i) the approval by the holders of Common Stock of the
Corporation of the transactions contemplated by the Purchase Agreement (as
defined below) and the Letter of Intent between the Corporation and Paramount
Capital, Inc., dated June 29, 1997 (the "Letter of Intent"), to the extent such
approval is necessary pursuant to Rule 4460(i) of the National Association of
Securities Dealers' Marketplace Rules, (ii) any event which renders such
stockholder approval unnecessary or which renders such rule inapplicable and
(iii) September 30, 1997 (such earliest date, the "Approval Date"). In such
event, the Conversion Price shall be reduced to equal the lesser of (x) $0.29
and (y) 50% of the Trading Price at such Approval Date. The Conversion Price is
further subject to adjustment, upon the Series B Final Closing Date (as defined
in the Letter of Intent), if the conversion price of the preferred stock (the
"Series B Preferred Stock") sold in the Series B Offering (as defined in the
Letter of Intent) is less than two times the Conversion Price. In such event,
the Conversion Price shall be reduced to equal 50% of the conversion price of
such Series B Preferred Stock as in effect on any of the respective closing
dates in the Series B Offering. In the event that there is no Series B Final
Closing Date, or the above referenced Series B Offering is not commenced or
otherwise terminated, if the price per share of Common Stock (or the effective
price, conversion price or exercise price per share of Common Stock, as the case
may be, of a security convertible into or exchangeable for Common Stock) offered
to investors in the next offering or series of related offerings of equity
securities of the Corporation (or any securities convertible into or exercisable
for equity securities), whether in a public offering or a private placement,
following the offering of Series A Units which yields gross proceeds to the
Corporation in excess of $2,000,000 in the aggregate (a "Qualified Offering")
shall be less than two times the Conversion Price then in effect, the Conversion
Price shall be reduced to equal 50% of the lowest of any such offering price (or
effective price, conversion price or exercise price, as the case may be) per
share of Common Stock to investors in such Qualified Offering.

                     The Board of Directors, 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 of this Subsection IV.A. and, in the event an initial conversion
price is so specified, it shall be applicable to all shares of the Series A
Preferred Stock.


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                     The Corporation shall prepare a certificate signed by the
Chairman 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 of this Subsection IV.A., or that no adjustment
is necessary, and setting forth the Conversion Rate in effect as of the Series B
Final Closing Date (as defined in the Letter of Intent), the final closing date
of any Qualified Offering or the Approval Date shall be mailed as promptly as
practicable after the Series B Final Closing Date, the final closing date of any
Qualified Offering or the Approval 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 adjustment pursuant to the
provisions of Subsection IV.C. in effect immediately prior to June 30, 1998 (the
"Reset Date") shall be adjusted and reset effective as of the Reset Date if the
Market Price as of the Reset Date (the "12-Month Trading Price") is less than
140% 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 1.40, and (B) 25% 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.

                     Furthermore, in the event that the terms of the Series B
Preferred Stock or of any Qualified Offering Security requires that such
security's conversion price, exercise price or effective price (the "B or
Qualified Share Price") be reduced in a manner analogous to the above described
reset (a "B or Qualified Reset"), the Conversion Price then in effect shall be
adjusted on the date of such B or Qualified Reset (the "Second Reset Date") to
be the lesser of (a) the product of (i) the Conversion Price at such time
multiplied by (ii) a fraction, the numerator of which shall be the B or
Qualified Share Price immediately succeeding such B or Qualified Reset and the
denominator of which shall be the B or Qualified Share Price immediately
preceding such B or Qualified Reset and (b) the B or Qualified Share Price
immediately following such B or Qualified Reset. In addition, if there is no B
or Qualified Reset by June 30, 1999, then the Conversion Price in effect
immediately prior to June 30, 1999 (the "Alternative Second Reset Date") shall
be adjusted and reset effective as of the Alternative Second Reset Date if the
Market Price as of the Second Reset Date (the "24-Month Trading Price") is less
than 200% of the applicable Conversion Price (a "Second Reset Event") provided,
however, that there shall be no reset of the Conversion Price pursuant to this
paragraph if (i)


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the Company conducts a B or Qualified Offering; (ii) the securities issued by
the Company in such B or Qualified Offering contain a reset provision analogous
to the one described in the previous paragraph and (iii) no B or Qualified Reset
is required pursuant to the terms of such B or Qualified securities because the
Market Price is in excess of the applicable target price as of the date
prescribed for such reset pursuant to the terms of the B or Qualified
securities. Upon the occurrence of a Second Reset Event, the Conversion Price
shall be reduced to be equal to the greater of (A) the 24-Month Trading Price
divided by 2.00, and (B) 25% 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 Second
Reset Date or the Alternative Second Reset Date as the case may be, 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 Second Reset Date or the
Alternative Second Reset Date as the case may be shall be mailed as promptly as
practicable after the Second Reset Date or the Alternative Second Reset Date as
the case may be 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 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


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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
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 IV.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.

                     1. Except as otherwise provided herein, in the event the
                  Corporation shall, at any time or from time to time after the
                  date hereof, (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 received (determined
                  as provided in Subparagraph IV.C.4.(e)) 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.

                     2. 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


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                  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 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 IV.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.

                     3. After each adjustment of the Conversion Price pursuant
                  to this Subsection IV.C., the Corporation will promptly
                  prepare a certificate signed by the Chairman 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 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.


                                     - 10 -

<PAGE>


                     4. For purposes of Subsection IV.C.1 hereof, 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 (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 (i) the sale or other issuance 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 (ii) 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 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


                                     - 11 -

<PAGE>



                     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 Subsection
                     IV.C.1. 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 Subsection IV.C.1.

                        (c) In case of the sale 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 Subsection IV.C.1 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 Subsection IV.C.1.

                        (d) In case the Corporation shall modify the rights of
                     conversion, exchange or exercise of any of the securities
                     referred to in (b) and (c) above 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
                     pursuant to the terms of any such convertible, exchangeable
                     or exercisable instrument, so that the consideration per
                     share received by the Corporation after such modification
                     is less than either the Conversion Price or the Market
                     Price 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 IV.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


                                     - 12 -

<PAGE>



                     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 (i) 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 (ii) had
                     adjustments been made on the basis of the Conversion Price
                     as adjusted under clause (i) of this sentence 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 the Registered Holders of
                     in excess of 10% 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.

                     5. Notwithstanding any other provision hereof, no
                  adjustment to the Conversion Price will be made:

                        (a) upon the exercise of any of the options or warrants
                     outstanding on the date hereof under the Corporation's
                     existing stock option plans; or

                        (b) upon the issuance or exercise of options which may
                     hereafter be granted with the approval of the Board of
                     Directors, or exercised, under any employee benefit plan of
                     the Corporation 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 price referenced in the definition of Closing
                     Bid Price cannot be


                                     - 13 -

<PAGE>



                     determined, the Fair Market Value) of the Common Stock as
                     of the date of grant thereof; or

                        (c) upon the issuance of stock which may hereafter be
                     purchased or sold with the approval of the Board of
                     Directors, under the 1993 Employee Stock Purchase Plan of
                     the Corporation to officers, directors, consultants or
                     employees, but only with respect to such shares as are
                     purchased and/or sold in accordance with the current plan
                     and at prices no lower than 85% of the Closing Bid Price
                     (or, if the prices referenced in the definition of Closing
                     Bid Price cannot be determined, 85% of the Fair Market
                     Value) of the Common Stock as of the date of purchase
                     and/or sale thereof; or

                        (d) upon issuance or exercise of the Placement Warrants,
                     or the Advisory Warrants, (as defined in the Letter of
                     Intent between the Corporation, Paramount Capital, Inc.
                     (the "Placement Agent"), the Aries Domestic Fund, L.P. and
                     The Aries Trust, dated as of June 29, 1997 (the "Letter of
                     Intent")) (collectively, the "Paramount Warrants"), upon
                     the exercise or conversion of the Class A and Class B
                     Warrants (as defined in the Securities Purchase Agreement
                     dated as of June 30, 1997 (the "Purchase Agreement")) or
                     any A Notes (as defined in the Purchase Agreement) or upon
                     the issuance, conversion or exercise of the Series B
                     Preferred Stock or the Class C Warrants to be issued (i) on
                     or prior to the Series B Final Closing Date or (ii)
                     pursuant to the exercise of the Paramount Warrants, or upon
                     the issuance, conversion or exercise of any Series A or
                     Series B Preferred Stock or Class A, Class B or Class C
                     Warrants approved in writing by the Placement Agent, or
                     upon the issuance of any other equity securities of the
                     Corporation to the extent that such issuance causes an
                     adjustment to the Conversion Price pursuant to the second
                     paragraph of Subsection IV.A.; or

                        (e) 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 issuance 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
                     Subsection IV.C.1 in connection with the issuance or sale
                     of such securities or any modification of the terms
                     thereof; or

                        (f) 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


                                     - 14 -

<PAGE>



                     the date of the original sale of the Series A Preferred
                     Stock or were thereafter issued or sold.

Subparagraph IV.C.4.(d) shall nevertheless apply to any modification of the
rights of conversion, exchange or exercise of any of the securities referred to
in Subparagraphs (a), (b), (c), (e), (f) and, to the extent effected with
respect to fewer than all of such securities, Subparagraph (c) of this Paragraph
IV.C.5. Notwithstanding the foregoing, IV.C.4.(d) shall not apply to any
modification of the exercise price of, or number of shares of Common Stock
subject to, the Class A, Class B or Class C Warrants that are required by the
terms of those respective instruments.

                     6. As used in this Subsection IV.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
                  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 Certificate of Incorporation as Common
                  Stock on the date of the original issue of the Series A
                  Preferred Stock or (i), in the case of any reclassification,
                  change, consolidation, merger, sale or conveyance of the
                  character referred to in Subsection IV.C.2 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.

                     7. Any determination as to whether an adjustment in the
                  Conversion Price in effect hereunder is required pursuant to
                  Subsection IV.A. or IV.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 the Board of Directors of 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 as of the
close of business on the day of conversion.


                                     - 15 -

<PAGE>



                  E. Concurrent Grant. 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 Subsection IV.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.

                  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:

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

                     2. 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

                     3. 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


                                     - 16 -

<PAGE>



                     4. 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

                     5. 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 for the
Series A Preferred Stock, and shall cause to be mailed to the Registered
Holders, 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 the Registered Holders 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 IV, 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 $.01 per share,
the current par value of the Common Stock into which the Series A Preferred
Stock is convertible.


                                     - 17 -

<PAGE>



                  I. Ambiguities/Errors. The Board of Directors of the
Corporation shall have the power, subject to the approval of the Placement
Agent, to resolve any ambiguity or correct any error in the provisions relating
to the convertibility of the Series A Preferred Stock.

            V.    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 if
the Closing Bid Price (or, if the price referenced in the definition of Closing
Bid Price cannot be determined, the Fair Market Value) of the Common Stock shall
have exceeded 300% of the then applicable Conversion Price for the 20
consecutive trading days ending three 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 IV 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 IV.

                  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.

            VI.   [Reserved]

            VII.  Voting Rights.

                  A. General. Except as otherwise provided herein, in the
Certificate of Incorporation or the By-laws of the Corporation or as required by
applicable law, 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 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


                                     - 18 -

<PAGE>



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. Notwithstanding the
above, until the Approval Date, the holders of Series A Preferred Stock shall
not be entitled to vote in any election of directors of the Corporation, except
to the extent that exercise of such voting rights would not cause a violation of
Rule 4460(i) of the National Association of Securities Dealers Market Place
Rules.

                  B. Class Voting Rights. In addition to any vote specified in
Section VII.A., so long as at least 5% of the shares of Series A Preferred Stock
shall be outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least 50% of all outstanding Series A Preferred
Stock, voting separately as a class, (i) amend, alter or repeal 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) approve the
alteration or change to the rights, preferences or privileges of the Series A
Preferred Stock, (iii) incur or voluntarily repay prior to the maturity thereof
any indebtedness in excess of $100,000 or (iv) authorize or issue, or increase
the authorized amount of, any equity security ranking prior to, or on a parity
with, the Series A Preferred Stock (other than additional Series A Preferred
Stock approved in writing by the holders of greater than 50% of the outstanding
shares of Series A Preferred Stock) (A) upon a Liquidation Event, (B) with
respect to the payment of any dividends or distributions or (C) with respect to
voting rights (except for class voting rights required by law).

            VIII. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series A Preferred Stock, when issued, 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 and (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.

            IX.   Status of Acquired Shares. Shares of Series A Preferred Stock
received upon conversion pursuant to Section IV or Section V or otherwise
acquired by the Corporation will be 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.

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

            XI.   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 changes as
shall be necessary to render the provision in question effective and valid under
applicable law.


                                     - 19 -

<PAGE>


            XII.  No Amendment nor Impairment. The Corporation shall not amend
its Certificate of Incorporation nor 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.

            XIII. Repurchase Requirement. The holders of Series A Preferred
Stock may, pursuant to the Non-Approval Put (as defined and contained in the
Purchase Agreement), elect to require the Corporation to repurchase any or all
of their respective shares of the Series A Preferred Stock under the
circumstances set forth in Section 7.27 of the Purchase Agreement.

                  IN WITNESS WHEREOF, Stanley C. Erck, President of the
Corporation, acting for and on behalf of the Corporation, has hereunto
subscribed his name on August 1, 1997.

                                                     PROCEPT, INC.



                                                     By /s/ Stanley C. Erck
                                                        ------------------------
                                                        Name: Stanley C. Erck
                                                        Title: President


                                     - 20 -