
                                                               Exhibit 3(i)(c)


                   FORM OF CERTIFICATE OF DESIGNATION OF
                    SERIES B CONVERTIBLE PREFERRED STOCK
                     OF CLEAN DIESEL TECHNOLOGIES, INC.


          Pursuant to Section 151 of the General Corporation Law of the
state of Delaware, Clean Diesel Technologies, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
state of Delaware, in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:

          That pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board") in Article 4 of the Certificate
of Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of
the General Corporation Law of the state of Delaware, the Board on ______
__, 1998, adopted the following resolution creating a series of preferred
stock designated as Series B Convertible Preferred Stock.

          RESOLVED, that, pursuant to the authority expressly granted and
vested in the Board by the provisions of the Certificate of Incorporation,
there hereby is created, out of the 100,000 shares of preferred stock,
$0.05 par value per share, authorized in Article 4 of the Certificate of
Incorporation (the "Preferred Stock"), a series (the "Series") of the
Preferred Stock consisting of 50,000 shares, which Series shall have the
following powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions.

          Section 1. Designation and Size of Issue; Ranking. (a) The
designation of this Series shall be "Series B Convertible Preferred Stock"
("Convertible Preferred Stock"). The number of shares of this Series shall
be 50,000 registered shares, $0.05 par value per share. The price and
liquidation preference (the "Liquidation Preference") of shares of this
Series shall be $______ per share.

          (b) The shares of Convertible Preferred Stock shall rank senior
to all other classes of equity securities of the Corporation as to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, unless the terms of such equity securities
provide otherwise.

          Section 2. Dividends. (a) The Holders of record shall be entitled
to receive, when, as and if declared by the Board out of funds of the
Corporation legally available therefor, cash dividends at the annual rate
of 9% of the Liquidation Preference of each share; provided, however, that
in lieu of making dividends in cash, the Corporation may elect, by giving
written notice to each Holder, to pay dividends in kind at the annual rate
of 11% of the Liquidation Preference (cash dividends and dividends in kind
are each deemed "Preferred Dividends"). Dividends payable to the Holders
are payable quarterly in arrears, on the first business day of January,
April, July and October of each year (each such date being hereinafter
referred to as a "Dividend Payment Date"), commencing __________. Preferred
Dividends on shares of Convertible Preferred Stock shall be cumulative and
shall accrue from the date of original issuance. Preferred Dividends shall
be payable to Holders of record as they appear on the stock register of the
Corporation on such record dates, not less than 15 nor more than 60 days
preceding the Dividend Payment Date thereof, as shall be fixed by the
Board. Preferred Dividends (or amounts equal to accrued and unpaid
Preferred Dividends) payable on shares of Convertible Preferred Stock for
any period less than a full quarterly dividend period (or, in the case of
the first Preferred Dividend, from the date of initial issuance of the
shares of Convertible Preferred Stock to, but excluding, the first Dividend
Payment Date) shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in any period less than
one month. Preferred Dividends shall accrue on a daily basis whether or not
there are funds of the Corporation legally available for the payment of
such dividends and whether or not such Preferred Dividends are declared.
Accrued but unpaid Preferred Dividends shall accrue as of the Dividend
Payment Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid Preferred Dividends.

          (b) Any dividend payment made on the shares of Convertible
Preferred Stock shall first be credited against the earliest accrued but
unpaid dividend due with respect to the shares of Convertible Preferred
Stock.

          Section 3. Conversions.

          (a) Conversion at Option of a Holder. Shares of Convertible
Preferred Stock are convertible (at the Liquidation Preference of $______
per share), in whole or in part, at the option of the Holder thereof
("Optional Conversion"), unless previously redeemed, into shares of Common
Stock, par value of $0.05 ("Common Stock"), at a conversion price of $_____
per share of Common Stock (equivalent to a conversion rate of 33 shares of
Common Stock for each share of Convertible Preferred Stock so converted),
which conversion price will be deemed to have been paid in full, at no
extra cost to the Holder thereof, with the tendering of the Convertible
Preferred Stock in connection with the conversion thereof, subject to
adjustment as set forth below (the "Conversion Price") .

          Optional Conversion of shares of Convertible Preferred Stock may
be effected by delivering certificates evidencing such shares of
Convertible Preferred Stock, together with written notice of conversion and
a proper assignment of such certificates to the Corporation or in blank, to
the office of the transfer agent for the shares of Convertible Preferred
Stock or to any other office or agency maintained by the Corporation for
that purpose and otherwise in accordance with Optional Conversion
procedures established by the Corporation. Each Optional Conversion shall
be deemed to have been effected immediately before the close of business on
the date on which the foregoing requirements shall have been satisfied. The
Optional Conversion shall be at the Conversion Price in effect at such time
and on such date.

          The Holders at the close of business on a record date for any
payment of declared Preferred Dividends shall be entitled to receive the
Preferred Dividend payable on such shares of Convertible Preferred Stock on
the corresponding Dividend Payment Date notwithstanding the Optional
Conversion of such shares of Convertible Preferred Stock following such
record date and before such Dividend Payment Date. However, shares of
Convertible Preferred Stock surrendered for Optional Conversion after the
close of business on a record date for any payment of declared Preferred
Dividends and before the opening of business on the next succeeding
Dividend Payment Date must be accompanied by payment to the Corporation in
cash of an amount equal to the Preferred Dividends on such shares of
Convertible Preferred Stock to be converted attributable to the current
quarterly dividend period payable on such date. A Holder on any Dividend
Payment Date will receive the dividend on such shares of Convertible
Preferred Stock payable on that date and will be able to convert such
shares of Convertible Preferred Stock after the record date for such
dividend without paying an amount equal to such dividend to the Corporation
upon the Optional Conversion. Except as provided above, upon any Optional
Conversion of shares of Convertible Preferred Stock, the Corporation shall
make no payment of or allowance for unpaid Preferred Dividends, whether or
not in arrears on such shares of Convertible Preferred Stock as to which
Optional Conversion has been effected or for previously declared dividends
or distributions on the shares of Common Stock issued upon Optional
Conversion.

          (b) Conversion at the Option of the Corporation. The Corporation
can force the Holder to convert his Convertible Preferred Stock, in whole
or in part, into shares of Common Stock at any time on or after the date
that the average Closing Price (as defined in Section 12) of the shares of
Common Stock equal or exceed $4.50 for 20 consecutive Trading Days. Such
conversion may at the election of the Holders of 60% of the issued and
outstanding shares of this Series B Convertible Preferred Stock be
scheduled to occur, on a pro rata basis quarterly over 18 months.

          (c) Mandatory Conversion. Subject to the provision for adjustment
set forth below, each share of Convertible Preferred Stock shall be
automatically converted into a number of shares of Common Stock at the
Conversion Price in the event that the Corporation consummates a Qualified
IPO (as defined in Section 12) (such event, a "Mandatory Conversion"). In
the event of a Mandatory Conversion, accrued and unpaid dividends will also
convert into shares of Common Stock, on the same terms as the underlying
Preferred Stock.

          (d) Deemed Issuance of Additional Common Stock. The shares of
Common Stock ultimately Issuable (as defined in Section 12) upon exercise
of an option (including the shares of Common Stock ultimately Issuable upon
conversion or exercise of a Convertible Security (as defined in Section 12)
Issuable pursuant to an option) are deemed to be Issued when the option is
Issued. The shares of Common Stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security
Issued pursuant to an option) shall be deemed Issued upon Issuance of the
Convertible Security. The maximum number of shares of Common Stock Issuable
is determined without regard to any future adjustments permitted under the
instrument creating the options or Convertible Securities.

          (e) Adjustment of Conversion Price for Diluting Issuances.

               (i) Weighed Average Adjustment. If the Corporation Issues
     additional Common Stock after the original Issuance date of the
     Convertible Preferred Stock and the consideration per share of
     additional Common Stock (determined pursuant to this Section 3(f)) is
     less than the Conversion Price in effect immediately before such
     Issue, the Conversion Price in effect immediately before such Issue
     shall be reduced, concurrently with such Issue, to a price (calculated
     to the cent) determined by multiplying the Conversion Price by a
     fraction:

                    (A) the numerator of which is the number of shares of
          Common Stock outstanding immediately before such Issue plus the
          number of shares of Common Stock that the aggregate consideration
          received by the Corporation for such additional Common Stock
          would purchase at the Conversion Price in effect immediately
          before such Issue, and

                    (B) the denominator of which is the number of shares of
          Common Stock outstanding immediately before such Issue plus the
          number of shares of such additional Common Stock.

               (ii) Adjustment of Number of Shares. Upon each adjustment of
     the Conversion Price, the number of shares of Common Stock issuable
     upon conversion of the Convertible Preferred Stock shall be increased
     to equal the quotient obtained by dividing (a) the product resulting
     from multiplying (x) the number of shares of Common Stock issuable
     upon conversion of the Convertible Preferred Stock and (y) the
     Conversion Price, in each case as in effect immediately before such
     adjustment, by (b) the adjusted Conversion Price.

               (iii) Securities Deemed Outstanding. For the purpose of this
     Section 3, all securities issuable upon exercise of any outstanding
     Convertible Securities or options, warrants, or other rights to
     acquire securities of the Corporation shall be deemed to be
     outstanding.

          (f) No Adjustment for Issuances Following Deemed Issuances. No
adjustment to the Conversion Price shall be made upon the exercise of
options or conversion of Convertible Securities.

          (g) Adjustment Following Changes in Terms of Options or
Convertible Securities. If the consideration payable to, or the number of
shares of Common Stock Issuable by, the Corporation increases or decreases,
respectively, pursuant to the terms of any outstanding options or
Convertible Securities, the Conversion Price shall be recomputed to reflect
such increase or decrease. The recomputation shall be made as of the time
of the Issuance of the options or Convertible Securities. Any changes in
the Conversion Price that occurred after such Issuance because other shares
of additional Common Stock were Issued or deemed Issued shall also be
recomputed.

          (h) Recomputation Upon Expiration of Options or Convertible
Securities. The Conversion Price computed upon the original Issue of any
options or Convertible Securities, and any subsequent adjustments based
thereon, shall be recomputed when any options or rights of conversion under
Convertible Securities expire without having been exercised. In the case of
Convertible Securities or options for Common Stock, the Conversion Price
shall be recomputed as if the only shares of additional Common Stock Issued
were the shares of Common Stock actually Issued upon the exercise of such
securities, if any, and as if the only consideration received therefor was
the consideration actually received upon the Issue, exercise or conversion
of the options or Convertible Securities. In the case of options or
Convertible Securities, the Conversion Price shall be recomputed as if the
only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the
Corporation (determined pursuant to Section 3(f)), if any, upon the Issue
of the options for the Convertible Securities.

          (i) Limit on Readjustments. No readjustment of the Conversion
Price pursuant to Section 3(h) or 3(i) shall increase the Conversion Price
more than the amount of any decrease made in respect of the Issue of any
options or Convertible Securities.

          (j) 30-Day Options. In the case of any options that expire by
their terms not more than 30 days after the date of Issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such options.

          (k) Computation of Consideration. The consideration received by
the Corporation for the Issue of any additional Common Stock shall be
computed as follows:

               (i) Cash. Cash shall be valued at the amount of cash
     received by the Corporation, excluding amounts paid or payable for
     accrued interest or accrued dividends.

               (ii) Property. Property other than cash shall be computed at
     the fair market value thereof at the time of the Issue as determined
     in good faith by the Board.

               (iii) Mixed Consideration. The consideration for additional
     Common Stock Issued together with other property of the Corporation
     for consideration that covers both shall be determined in good faith
     by the Board.

               (iv) Options and Convertible Securities. The consideration
     per share of additional Common Stock for options and Convertible
     Securities shall be determined by dividing:

                    (A) the total amount, if any, received or receivable by
          the Corporation for the Issue of the options or Convertible
          Securities, plus the minimum amount of additional consideration
          (as set forth in the instruments relating thereto; without regard
          to any provision contained therein for a subsequent adjustment of
          such consideration) payable to the Corporation upon exercise of
          the options or conversion of the Convertible Securities, by

                    (B) the maximum number of shares of Common Stock (as
          set forth in the instruments relating thereto, without regard to
          any provision contained therein for a subsequent adjustment of
          such number) ultimately Issuable upon the exercise of such
          options or the conversion of such Convertible Securities.

          (l) Stock Dividends. In case at any time the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation which is payable in Common Stock or Convertible Securities, any
Common Stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.

          (m) Adjustment for Certain Special Dividends. In case the
Corporation shall declare a dividend upon the Common Stock payable
otherwise than out of earnings or earned surplus, determined in accordance
with generally accepted accounting principles, and otherwise than in Common
Stock or Convertible Securities, the Conversion Price in effect immediately
subsequent to the declaration of such dividend shall be determined by
subtracting from the Conversion Price in effect immediately prior to such
declaration the amount of cash (or, if the distribution is for property
other than cash, the fair market value of such property determined
reasonably and in good faith by the Board) distributed in respect of one
share of Common Stock. For the purpose of the foregoing, a dividend other
than in cash shall be considered payable out of earnings or earned surplus
(other than revaluation of paid in surplus) only to the extent that such
earnings or earned surplus are charged an amount equal to the fair value of
such dividend as determined, reasonably and in good faith, by the Board.
Such reductions shall take effect as of the date on which a record is taken
for the purpose of such dividend, or, if a record is not taken, the date as
of which the holder of Common Stock of record entitled to such dividend are
determined.

          (n) Subdivision or Combination of Stock. In case the Corporation
shall at any time subdivide the outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior
to such subdivision shall be proportionately reduced and the number of
shares issuable upon conversion of the Convertible Preferred Stock
immediately prior to such subdivisions shall be proportionately increased,
and conversely, in case the outstanding shares of Common Stock shall be
combined at any time into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased and the number of shares issuable upon conversion of the
Convertible Preferred Stock immediately prior to such combination shall be
proportionately reduced.

          (o) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Corporation (i) consolidates with or
merges into any other corporation and is not the continuing or surviving
corporation of such consolidation or merger, or (ii) permits any other
corporation to consolidate with or merge into the Corporation and the
Corporation is the continuing or surviving corporation but, in connection
with such consolidation or merger, the Common Stock is changed into or
exchanged for stock or other securities of any other corporation or cash or
any other assets, or (iii) transfers all or substantially all of its
properties and assets to any other corporation, or (iv) effects a capital
reorganization or reclassification of the capital stock of the Corporation
in such a way that holders of Common Stock shall be entitled to receive
stock, securities, cash or assets with respect to or in exchange for Common
Stock, then, and in each such case, proper provision shall be made so that,
upon the basis and upon the terms and in the manner provided in this
Section 3(p), upon the conversion of the Convertible Preferred Stock at any
time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, each Holder shall be entitled to
receive (at the Conversion Price in effect for shares issuable upon such
conversion of the Convertible Preferred Stock immediately prior to such
consummation), in lieu of shares issuable upon such conversion of the
Convertible Preferred Stock prior to such consummation, the stock and other
securities, cash and assets to which such Holder would have been entitled
upon such consummation if such Holder had so converted such Convertible
Preferred Stock immediately prior thereto (subject to adjustments
subsequent to such corporate action as nearly equivalent as possible to the
adjustments provided for in this Section 3).

          (p) Notice of Adjustment. Whenever the number of shares issuable
upon the conversion of the Convertible Preferred Stock or the Conversion
Price is adjusted, as provided in this Section 3, the Corporation shall
prepare and mail to each Holder a certificate setting forth (i) the
Conversion Price and the number of shares issuable upon the conversion of
the Convertible Preferred Stock after such adjustment, (ii) a brief
statement of the facts requiring such adjustment and (iii) the computation
by which such adjustment was made.

          (q) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares of Common Stock
owned or held by or for the account of the Corporation. The disposition of
any shares of Common Stock owned or held by or for the account of the
Corporation shall be considered an issue of Common Stock for the purpose of
this Section 3.

          (r) Certain Adjustment Rules.

               (i) The provisions of this Section 3 shall similarly apply
     to successive transactions.

               (ii) If the Corporation shall declare any dividend referred
     to in Section 3 (m) or Section 3 (n) and if any Holder converts all or
     any part of the Convertible Preferred Stock after such declaration,
     but before the payment of such dividend, the Corporation may elect to
     defer, until the payment of such dividend, issuing to such Holder the
     shares of Common Stock issuable upon such conversion over and above
     the shares issuable upon such conversion on the basis of the
     Conversion Price in effect prior to such adjustment; provided,
     however, that the Corporation shall deliver to each such Holder a due
     bill or other appropriate instrument evidencing such Holder's right to
     receive such additional shares upon the payment of such dividend.

               (iii) If the Corporation shall declare any dividend referred
     to in Section 3(m) or Section 3(n) and shall legally abandon such
     dividend prior to payment, then no adjustment shall be made pursuant
     to this Section 3 in respect of such declaration.

          (s) Exceptions to Adjustment to Conversion Price. Notwithstanding
anything herein to the contrary, no adjustment to the Conversion Price or
the number of shares issuable upon exercise of the Warrants shall be made
in the case of the following:

               (i) the issuance of any shares of Common Stock upon
     conversion of the Convertible Preferred Stock;

               (ii) the grant of options or stock awards to purchase or
     acquire Common Stock to employees, officers or directors of the
     Corporation, or the adjustment of the exercise price thereof pursuant
     to the Corporation's 1994 Incentive Plan or any successor plan or
     plans thereto (the "Plan"); and

               (iii) the issuance of shares of Common Stock to any
     employees, officers or directors of the Corporation upon the exercise
     or settlement of any stock award to purchase or acquire Common Stock
     granted pursuant to the Plan.

          Section 4. No Fractional Shares. No fractional shares or script
representing fractional shares of Common Stock shall be issued upon
conversion of any shares of Convertible Preferred Stock. In lieu of any
fractional share otherwise issuable in respect of the aggregate number of
shares of Convertible Preferred Stock of any holder that are converted on
any Optional Conversion, such holder shall be entitled to receive an amount
in cash (computed to the nearest cent) equal to the same fraction of the
Closing Price of the Common Stock determined as of the second Trading Day
(as defined in Section 12) immediately preceding the effective date of
conversion. If more than one share of Convertible Preferred Stock shall be
surrendered for conversion at one time by or for the same holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of the
Convertible Preferred Stock so surrendered.

          Section 5. Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized and unissued
Common Stock, solely for issuance upon the conversion of shares of
Convertible Preferred Stock, as herein provided, free from preemptive
rights, such maximum number of shares of Common Stock as shall from time to
time be issuable upon the Optional Conversion of all the shares of
Convertible Preferred Stock then outstanding.

          Section 6. Payment of Taxes. The Corporation shall pay any and
all documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on the
conversion of shares of Convertible Preferred Stock pursuant to Section 3;
provided, however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any registration of transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that of the registered holder of shares of Convertible Preferred Stock
converted or to be converted, 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 any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.

          Section 7. Liquidation Preference. In the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the Corporation,
and subject to the rights of holders of any other series of Preferred
Stock, the holders of outstanding shares of Convertible Preferred Stock are
entitled to receive the sum of $_______ per share in cash for each share of
Convertible Preferred Stock, plus accrued and unpaid Preferred Dividends
thereon, out of the assets of the Corporation available for distribution to
stockholders, before any distribution of assets is made to holders of
Common Stock or any other capital stock ranking junior to the shares of
Convertible Preferred Stock upon liquidation, dissolution, or winding up.
If, upon any voluntary or involuntary liquidation, dissolution, or winding
up of the Corporation, the assets of the Corporation are insufficient to
permit the payment of the full preferential amounts payable with respect to
the shares of Convertible Preferred Stock, the Holders shall share ratably
in any distribution of assets of the Corporation in proportion to the full
respective preferential amounts to which they are entitled, in each case on
a per share basis. After payment of the full amount of the liquidating
distribution to which they are entitled, the Holders shall not be entitled
to any further participation in any distribution of assets by the
Corporation. A consolidation or merger of the Corporation with or into one
or more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger), or a sale, lease or
exchange of all or substantially all of the assets of the Corporation shall
not be deemed to be a voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation.

          Section 8. Effect of Conversions. The person or persons in whose
name or names any certificate or certificates for shares of Common Stock
shall be issuable upon any conversion shall be deemed to have become on the
date of any such conversion the holder or holders of record of the shares
represented thereby; provided, however, that if any surrender on any date
when the stock transfer books of the Corporation shall be closed the person
or persons in whose name or names the certificate or certificates for such
shares are to be issued shall be the record holder or holders thereof for
all purposes at the opening of business on the next succeeding day on which
such stock transfer books are open.

          Section 9. Reissuance. Shares of Convertible Preferred Stock that
have been issued and reacquired by the Corporation in any manner, including
shares purchased, exchanged, redeemed or converted, shall not be reissued
as part of such Series and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and
unisssued shares of the Preferred Stock undesignated as to series and may
be redesignated and reissued as part of any other series of Preferred
Stock.

          Section 10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision hereof is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions
hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were
extended or shortened or a particular percentage were increased or
decreased, then such Court may make such change as shall be necessary to
render the provision in question effective and valid under applicable law.

          Section 11. Voting Rights. The Holders shall be entitled to vote
on all matters and shall be entitled to the number of votes per share of
Convertible Preferred Stock equal to the number of votes per share a holder
of the shares of Common Stock into which Convertible Preferred Stock is
convertible is entitled to, at the record date for the determination of the
stockholders entitled to vote on all matters. Except as required by law, or
as otherwise provided in this Section 11, the holders of shares of
Preferred Stock and Common Stock shall vote together as a single class and
not as separate classes.

          Section 12. Definitions. As used herein:

               (i) the term "business day" shall mean any day other than a
     Saturday, Sunday, or a day on which banking institutions in the state
     of New York are authorized or obligated by law or executive order to
     close or are closed because of a banking moratorium or otherwise;

               (ii) the term "Change of Control" shall mean that a person
     or group of persons (other than Fuel-Tech N.V. ("FTNV") and/or its
     affiliates and other persons acting with or on behalf of FTNV and/or
     its affiliates) shall, as a result of a tender or exchange offer, open
     market purchases, privately negotiated purchases or otherwise, have
     become, directly or indirectly, the beneficial owner of more than 50%
     of the Corporation's outstanding Common Stock;

               (iii) the term "Closing Price" shall mean (1) if the Common
     Stock is listed on one or more stock exchanges or is quoted on the
     NASDAQ National Market (the "National Market"), the average of the
     closing sales prices of a share of Common Stock on the primary
     national or regional stock exchange on which such shares are listed or
     on the National Market if quoted thereon or (2) if the Common Stock is
     not so listed or quoted but is traded in the over the counter market
     (other than the National Market), the average of the closing bid and
     asked prices of a share of Common Stock, in the case of clauses (1)
     and (2), for the 20 Trading Days (or such lesser number of trading
     days as the Common Stock shall have been so listed, quoted or traded)
     immediately prior to the date of measurement ((l) or (2), the
     "Principal Trading Market").

               (iv) the term "Convertible Securities" shall mean any
     evidences of indebtedness, shares of stock, or other securities
     directly or indirectly convertible into or exchangeable for Common
     Stock.

               (v) the term "Issue" means to grant, issue, sell, assume or
     fix a record date for determining persons entitled to receive, any
     security (including options), whichever of the foregoing is first to
     occur;

               (vi) the term "Qualified IPO" shall mean the closing of the
     sale of shares of Common Stock in a bona fide, firm commitment,
     underwritten public offering pursuant to an effective registration
     statement under the Securities Act of 1933, as amended, (i) resulting
     in at least $10,000,000 of gross proceeds at a price per share of at
     least 200% of the Conversion Price being received by the Company;

               (vii) the term "record date" shall be such date as from time
     to time fixed by the Board of Directors with respect to the receipt of
     dividends, the receipt of a redemption price upon redemption or the
     taking of any action or exercise of any voting rights permitted
     hereby; and

               (viii) the term "Trading Day" shall mean any day during
     which the Principal Market shall be open for business and the
     Company's Common Stock shall have traded on such Principal Market.

          Section 13. Transferability. No Holder of shares of this Series B
Convertible Preferred Stock shall directly or indirectly, sell, distribute,
transfer, assign, pledge, hypothecate or otherwise dispose of or encumber
any of such shares or any shares of Common Stock issuable upon the
conversion of such shares, unless such transfer is made pursuant to either
(i) an effective registration statement under the Securities Act of 1933,
as amended, and any applicable state securities laws, or (ii) an available
exemption from the registration requirements of the Securities Act of 1933
and applicable state securities laws. Certificates representing shares of
Series B Preferred Stock will include a legend to the effect that such
securities may not be transferred to any residents of any of the following
states: Arizona, Florida, Georgia, Ohio, Pennsylvania or Texas.

          IN WITNESS WHEREOF, Clean Diesel Technologies, Inc. has caused
this Certificate of Designation to be signed this ___ day of _____, 1998.

                                       CLEAN DIESEL TECHNOLOGIES, INC.

                                       By:
                                          ----------------------------
                                          Name: Charles W. Grinnell
                                          Title: Vice President

