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                                                                     EXHIBIT 4.5


              CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                          CONVERTIBLE PREFERRED STOCK

                                       OF

                            AURORA ELECTRONICS, INC.

                        (Pursuant to Section 151 of the
                       Delaware General Corporation Law)

                  ___________________________________________


                 AURORA ELECTRONICS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that, pursuant to authority vested in the Board of Directors of the Corporation
by Article Fourth of the Restated Certificate of Incorporation, as amended, of
the Corporation, the following resolution was adopted as of February 16, 1996
by the Board of Directors of the Corporation pursuant to Section 141 of the
Delaware General Corporation Law:

                 "RESOLVED that, pursuant to authority vested in the Board of
Directors of the Corporation by Article Fourth of the Corporation's Restated
Certificate of Incorporation, as amended, of the total authorized number of
1,000,000 shares of Preferred Stock, par value $.01 per share, of the
Corporation, there shall be designated a series of 400,000 shares which shall
be issued in and constitute a single series to be known as "Convertible
Preferred Stock" (hereinafter called the "Convertible Preferred Stock").  The
shares of Convertible Preferred Stock shall have the voting powers,
designations, preferences and other special rights, and qualifications,
limitations and restrictions thereof set forth below:

                 1.       Dividends.  (a) The holders of shares of Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
for such purpose, cash dividends at the rate of $7.00 per share per annum, and
no more, payable as provided herein or when and as declared by the Board of
Directors of the Corporation.  Such dividends shall be cumulative and shall
accrue from and after the date of issue whether or not declared and whether or
not there are any funds of the Corporation legally available for the payment of
dividends. Accrued but unpaid
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dividends shall not bear interest. The Board of Directors of the Corporation
may fix a record date for the determination of holders of Convertible Preferred
Stock entitled to receive payment of a dividend declared thereon, which record
date shall be no more than 60 days prior to the date fixed for the payment
thereof.

                 (b)      As long as any shares of Convertible Preferred Stock
shall remain outstanding, in no event shall any dividend be declared or paid
upon, nor shall any distribution be made upon, any Junior Capital Stock (as
defined herein), other than a dividend or distribution payable solely in shares
of common stock of the Corporation, nor shall any shares of Junior Capital
Stock be purchased or redeemed by the Corporation, nor shall any moneys be paid
to or made available for a sinking fund for the purchase or redemption of
shares of any Junior Capital Stock, unless, in each such case, (i) full
cumulative dividends on the outstanding shares of Convertible Preferred Stock
shall have been declared and paid and (ii) any arrears or defaults in any
redemption of shares of Convertible Preferred Stock shall have been cured.
The term "Junior Capital Stock" as used herein means any shares of capital
stock of the Corporation, including the Corporation's Common Stock, par value
$.03 per share (the "Common Stock"), other than shares of the Corporation's
capital stock permitted to rank on a parity with or senior to the Convertible
Preferred Stock pursuant to Section 6 hereof.

                 2.       Redemption.      The shares of Convertible Preferred
Stock shall be redeemable as follows:

                 (a)      Mandatory Redemption. On September 30, 2006, subject
to the terms of the Credit Agreement dated as of March 29, 1996 (the "Credit
Agreement"), among Aurora Electronics Group, Inc., the Corporation and the
Guarantors named therein, the Lenders named therein and Chemical Bank, as
Agent, the Corporation shall redeem (the "Mandatory Redemption") all of the
shares of Convertible Preferred Stock then outstanding, at a redemption price
of $100 per share, plus all accrued but unpaid dividends to which the holders
of the Convertible Preferred Stock are then entitled pursuant to Section 1
above as of such date.

                 (b)      Optional Redemption. Subject to the terms of the
Credit Agreement, upon the occurrence of any of the following (each a
"Corporate Disposition"):

                 (i)      the sale, lease or transfer, whether direct or
         indirect, of all or substantially all of the assets of the Company and
         its subsidiaries, taken as a whole, in one transaction or a series of
         related transactions, to any "person" or "group" other than the WCAS
         Group, or





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                 (ii)     the acquisition of "beneficial ownership" by any
         "person" or "group" other than the WCAS Group, of voting stock of the
         Corporation representing more than 50% of the voting power of all
         outstanding shares of such voting stock, whether by way of merger or
         consolidation or otherwise,

then each holder of any share or shares of Convertible Preferred Stock shall
have the right, at such holder's option, to require the Corporation to redeem
(the "Optional Redemption"), any or all of such holder's shares of Convertible
Preferred Stock (any such redemption of less than all of a holder's shares to
be in integral multiples of 1,000 shares) on or prior to the effective date of
such Corporate Disposition, at a redemption price of $100 plus all accrued but
unpaid dividends to which the holders of the Convertible Preferred Stock are
then entitled pursuant to Section 1 above as of such date. Such option shall be
exercised by written notice to the Corporation given within fifteen days of the
date of receipt of the Redemption Notice (as defined herein) to be delivered
pursuant to Section 2(e) below.

                 For purposes of this Certificate of Designations: (i) the
terms "person" and "group" shall have the meaning set forth in Section 13(d)(3)
of the Exchange Act, whether or not applicable, (ii) the term "beneficial
owner" shall have the meaning set forth in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a person shall be deemed
to have "beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time or upon the occurrence of certain events, (iii) any "person" or
"group" will be deemed to beneficially own any voting stock of the Company so
long as such person or group beneficially owns, directly or indirectly, in the
aggregate a majority of the voting stock of a registered holder of the voting
stock of the Company, and (iv) the term "WCAS Group" shall mean Welsh, Carson,
Anderson & Stowe VII, L.P., a Delaware limited partnership ("WCAS VII"), WCAS
Capital Partners II, L.P., a Delaware limited partnership ("WCAS CP II"), and
any general partners thereof.

                 Any date on which any shares of Convertible Preferred Stock
are to be redeemed as herein provided is hereinafter called a "Redemption
Date."   The price at which any shares of Convertible Preferred Stock are to be
redeemed as herein provided is hereinafter called the "Redemption Price."

                 (c)      Notice of Redemption. At least 20 days (and not more
than 60 days) prior to any Redemption Date (which in the case of any Optional
Redemption shall be prior to the effective date of any such sale, lease or
transfer of assets or consolidation, merger or other transaction), written
notice thereof (a "Redemption Notice") shall be mailed, by first class or
registered





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mail, postage prepaid, to each holder of record of Convertible Preferred Stock,
at his, her or its address last shown on the records of the transfer agent of
the Convertible Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). The Redemption Notice shall set forth (i)
the Redemption Date, (ii) the Redemption Price, (iii) in the case of the
Mandatory Redemption, the total number of shares to be redeemed from all
holders and the number of shares to be redeemed from such holder, and (iv) in
the case of an Optional Redemption, a description of the events which will,
upon the occurrence thereof, constitute a Corporate Disposition, including a
summary description of the terms thereof, and such holder's right to exercise
its option to require a redemption under Section 2(b) hereof. In the case of a
Mandatory Redemption, the Redemption Notice shall call upon such holder to
surrender to the Corporation, in the manner and at the place designated, his or
its certificate or certificates representing any shares of Convertible
Preferred Stock to be redeemed.

                 (d)      Redeemed or Otherwise Acquired Shares to be Retired.
On or prior to a Redemption Date, all holders of shares of Convertible
Preferred Stock to be redeemed shall surrender their certificates representing
such shares to the Corporation, in the manner and at the place designated in
the Redemption Notice, and against such surrender the Redemption Price of such
shares shall be paid to the order of the person whose name appears on each such
certificate as the owner thereof. Each surrendered certificate shall be
canceled. From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
shares of redeemed Convertible Preferred Stock as holders of such shares of
Convertible Preferred Stock (except the right to receive the Redemption Price
without interest against surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation (or its transfer agent, if any) or
be deemed to be outstanding for any purpose whatsoever.

                 (e)      Shares to be Redeemed or Purchased. If the funds of
the Corporation legally available for redemption of Convertible Preferred Stock
on any Redemption Date are insufficient, after redemption of any other shares
ranking senior thereto, to redeem the full number of shares of Convertible
Preferred Stock to be redeemed on such date, those funds which are legally
available shall be used to redeem the maximum possible number of such shares of
Convertible Preferred Stock ratably from each holder whose shares are otherwise
required to be redeemed. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Convertible
Preferred Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of the shares





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which the Corporation was theretofore obligated to redeem, ratably on the basis
set forth in the preceding sentence.

                 3.       Liquidation, Dissolution or Winding Up. (a)        In
the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the holders of shares of Convertible Preferred Stock
then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, before any payment
shall be made to the holders of any shares of Junior Capital Stock by reason of
their ownership thereof, an amount equal to $100 per share of Convertible
Preferred Stock, plus all accrued but unpaid dividends to which the holders of
the Convertible Preferred Stock are then entitled pursuant to Section 1 above
as of such date, and no more. If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation available
for distribution to its stockholders (after making all distributions to which
holders of capital stock ranking senior to the Convertible Preferred Stock
shall be entitled) shall be insufficient to pay the holders of shares of
Convertible Preferred Stock the full amount to which they shall be entitled
pursuant to this Section 3(a), the holders of shares of Convertible Preferred
Stock, and any other shares ranking on a parity therewith, shall share ratably
in any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in
respect of the shares of Convertible Preferred Stock held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.

                 (b)      After the payment of all amounts required to be paid
pursuant to Section 3(a) to the holders of shares of Convertible Preferred
Stock, and any other shares ranking on a parity therewith, upon the
dissolution, liquidation or winding up of the Corporation, the holders of
shares of Junior Capital Stock then outstanding shall share in any distribution
of the remaining assets and funds of the Corporation in the manner provided by
law, in the Restated Certificate of Incorporation of the Corporation, as
amended, or as provided in any pertinent Certificate of Designations of the
Corporation, as the case may be.

                 (c)      No Corporate Disposition shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 3 (unless in connection therewith the liquidation of the Corporation is
specifically approved).

                 4.       Conversion. The shares of Convertible Preferred Stock
shall be convertible as follows:

                 (a)      Right to Convert. Subject to the terms and conditions
of this Section 4, the holder of any share or shares of Convertible Preferred
Stock shall have the right, at his, her or





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its option at any time, to convert any such shares of Convertible Preferred
Stock (except that upon any liquidation of the Corporation the right of
conversion shall terminate as to all shares at the close of business 15 days
after notice thereof has been given to the holders of Convertible Preferred
Stock as provided in Section 4(h) hereof) into such number of fully paid and
nonassessable whole shares of Common Stock as is obtained by (i) multiplying
the number of shares of Convertible Preferred Stock so to be converted by $100,
(ii) adding the Additional Conversion Amount (as defined in Section 4(c)
herein), if any, and (iii) dividing the result by the conversion price of
$2.125 or, if there has been an adjustment of the conversion price, by the
conversion price as last adjusted and in effect at the date any share or shares
of Convertible Preferred Stock are surrendered for conversion (such price, or
such price as last adjusted, being referred to herein as the "Conversion
Price"). Such right of conversion shall be exercised by the holder thereof by
giving written notice that the holder elects to convert a stated number of
shares of Convertible Preferred Stock into Common Stock (such number shall
either be an integral multiple of 1,000 or the total number of shares held by
such holder) and by surrender of a certificate or certificates for the shares
so to be converted to the Corporation at its principal office (or such other
office or agency of the Corporation as the Corporation may designate by notice
in writing to the holder or holders of the Convertible Preferred Stock) at any
time during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address), subject to
compliance with applicable laws to the extent such designation shall involve a
transfer, in which the certificate or certificates for shares of Common Stock
shall be issued.

                 (b)      Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt by the Corporation of the written notice referred to
in Section 4(a) above and surrender of the certificate or certificates for the
share or shares of the Convertible Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to
the holder, registered in such name or names as such holder may direct, subject
to compliance with applicable laws to the extent such designation shall involve
a transfer, a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares of Convert-
ible Preferred Stock. To the extent permitted by law, such conversion shall be
deemed to have been effected and the Conversion Price shall be determined as of
the close of business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates for such share
or shares shall have been surrendered as aforesaid, and at such time the rights
of the holder of such share or shares of Convertible Preferred Stock shall
cease, and the person or persons in whose name or names any certificate or
certificates for shares of





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Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.


                 (c)      Fractional Shares; Dividends; Partial Conversion.

                 (i)      No fractional shares shall be issued upon conversion
         of the Convertible Preferred Stock into Common Stock and the number of
         shares of Common Stock to be issued shall be rounded to the nearest
         whole share. If any fractional interest in a share of Common Stock
         would, except for the provisions of this Section 4(c), be deliverable
         upon any such conversion, the Corporation, in lieu of delivering the
         fractional share thereof, shall pay to the holder surrendering the
         Convertible Preferred Stock for conversion an amount in cash equal to
         the current fair market value of such fractional interest as
         determined in good faith by the Board of Directors of the Corporation.

                 (ii)     Upon the conversion of any shares of Convertible
         Preferred Stock, the Corporation will pay the holder thereof, out of
         funds legally available for such purpose, any accrued but unpaid
         dividends thereon to the date of such conversion. In the event that
         the Corporation is for any reason unable to pay some or all of such
         accrued but unpaid dividends, any amount not so paid shall (for
         purposes of Section 4(a) hereof) constitute the "Additional Conversion
         Amount." No other payment or adjustment shall be made upon any
         conversion on account of the Convertible Preferred Stock so converted
         or the Common Stock issued upon such conversion.

                  (iii)   In case the number of shares of Convertible Preferred
         Stock represented by the certificate or certificates surrendered
         pursuant to Section 4(a) exceeds the number of shares converted, the
         Corporation shall, upon such conversion, execute and deliver to the
         holder thereof, at the expense of the Corporation, a new certificate
         or certificates for the number of shares of Convertible Preferred
         Stock represented by the certificate or certificates surrendered which
         are not to be converted.

                 (d)      Adjustment of Price Upon Issuance of Common Shares.
Except as provided in Section 4(e) hereof, if and whenever (after the date of
effectiveness of this Certificate of Designation and whether or not any shares
of Convertible Preferred Stock shall at the time have been issued and be
outstanding) the Corporation shall issue or sell, or is, in accordance with
subparagraphs (d)(i) through (d)(vii), deemed to have issued or sold, any
shares of its Common Stock without consideration or for a consideration per
share less than the Conversion Price in





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effect immediately prior to the time of such issue or sale, then, forthwith
upon such issue or sale, the Conversion Price shall be adjusted to the price
(calculated to the nearest cent) determined by dividing (x) an amount equal to
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (including as outstanding all shares of Common
Stock issuable upon conversion of outstanding Convertible Preferred Stock)
multiplied by the then existing Conversion Price, and (B) the consideration, if
any, received by the Corporation upon such issue or sale, by (y) the total
number of shares of Common Stock outstanding immediately after such issue or
sale (including as outstanding all shares of Common Stock issuable upon
conversion of outstanding Convertible Preferred Stock without giving effect to
any adjustment in the number of shares so issuable by reason of such issue and
sale).

                 No adjustment of the Conversion Price, however, shall be made
in an amount less than $.01 per share, and any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more.

                 For purposes of this Section 4(d), the following subparagraphs
(i) through (vii) shall also be applicable:

                 (i)      Issuance of Rights or Options. Subject to Section
         4(e) hereof, in case at any time the Corporation shall in any manner
         grant (whether directly or by assumption in a merger or otherwise) any
         rights to subscribe for or to purchase, or any options for the
         purchase of, Common Stock or any stock (other than shares of
         Convertible Preferred Stock) or securities convertible into or
         exchangeable for Common Stock (such rights or options being herein
         called "Options" and such convertible or exchangeable stock or
         securities being herein called "Convertible Securities") whether or
         not such Options or the right to convert or exchange any such
         Convertible Securities are immediately exercisable, and the price per
         share for which Common Stock is issuable upon the exercise of such
         Options or upon conversion or exchange of such Convertible Securities
         (determined by dividing (A) the total amount, if any, received or
         receivable by the Corporation as consideration for the granting of
         such Options, plus the minimum aggregate amount of additional
         consideration payable to the Corporation upon the exercise of all such
         Options, plus, in the case of such Options which relate to Convertible
         Securities, the minimum aggregate amount of additional consideration,
         if any, payable upon the issue or sale of such Convertible Securities
         and upon the conversion or exchange thereof, by (B) the total maximum
         number of shares of Common Stock issuable upon the exercise of such
         Options or upon the conversion or





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         exchange of all such Convertible Securities issuable upon the exercise
         of such Options) shall be less than the Conversion Price in effect
         immediately prior to the time of the granting of such Options, then
         the total maximum number of shares of Common Stock issuable upon the
         exercise of such Options or upon conversion or exchange of the total
         maximum amount of such Convertible Securities issuable upon the
         exercise of such Options shall be deemed to have been issued for such
         price per share as of the date of granting of such Options and
         thereafter shall be deemed to be outstanding. Except as otherwise
         provided in subparagraph (iii) below, no adjustment of the Conversion
         Price shall be made upon the actual issue of such Common Stock or of
         such Convertible Securities upon exercise of such Options or upon the
         actual issue of such Common Stock upon conversion or exchange of such
         Convertible Securities.

                 (ii)     Issuance of Convertible Securities. Subject to
         Section 4(e) hereof, in case the Corporation shall in any manner issue
         (whether directly or by assumption in a merger or otherwise) or sell
         any Convertible Securities, whether or not the rights to exchange or
         convert thereunder are immediately exercisable, and the price per
         share for which Common Stock is issuable upon such conversion or
         exchange (determined by dividing (A) the total amount received or
         receivable by the Corporation as consideration for the issue or sale
         of such Convertible Securities, plus the minimum aggregate amount of
         additional consideration, if any, payable to the Corporation upon the
         conversion or exchange thereof, by (B) the total maximum number of
         shares of Common Stock issuable upon the conversion or exchange of all
         such Con- vertible Securities) shall be less than the Conversion Price
         in effect immediately prior to the time of such issue or sale, then
         the total maximum number of shares of Common Stock issuable upon
         conversion or exchange of all such Convertible Securities shall be
         deemed to have been issued for such price per share as of the date of
         the issue or sale of such Convertible Securities and thereafter shall
         be deemed to be outstanding, provided that (x) except as otherwise
         provided in subparagraph (iii) below, no adjustment of the Conversion
         Price shall be made upon the actual issue of such Common Stock upon
         conversion or exchange of such Convertible Securities, and (y) if any
         such issue or sale of such Convertible Securities is made upon
         exercise of any Option to purchase any such Convertible Securities for
         which adjustments of the Conversion Price have been or are to be made
         pursuant to other provisions of this Section 4(d), no further
         adjustment of the Conversion Price shall be made by reason of such
         issue or sale.

                 (iii)    Change in Option Price or Conversion Rate. Upon the
         happening of any of the following events, namely, if the





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         purchase price provided for in any Option referred to in subparagraph
         (i), the additional consideration, if any, payable upon the conversion
         or exchange of any Convertible Securities referred to in subparagraph
         (i) or (ii), or the rate at which any Convertible Securities referred
         to in subparagraph (i) or (ii) are convertible into or exchangeable
         for Common Stock shall change at any time (in each case other than
         under or by reason of provisions designed to protect against
         dilution), the Conversion Price in effect at the time of such event
         shall forthwith be readjusted to the Conversion Price which would have
         been in effect at such time had such Options or Convertible Securities
         still outstanding provided for such changed purchase price, additional
         consideration or conversion rate, as the case may be, at the time
         initially granted, issued or sold; and on the expiration of any such
         Option or the termination of any such right to convert or exchange
         such Convertible Securities, the Conversion Price then in effect
         hereunder shall forth- with be increased to the Conversion Price which
         would have been in effect at the time of such expiration or
         termination had such Option or Convertible Securities, to the extent
         outstanding immediately prior to such expiration or termination, never
         been issued, and the Common Stock issuable thereunder shall no longer
         be deemed to be outstanding. If the purchase price provided for in any
         such Option referred to in subparagraph (i) or the rate at which any
         Convertible Securities referred to in subparagraph (i) or (ii) are
         convertible into or exchangeable for Common Stock shall be reduced at
         any time under or by reason of provisions with respect thereto
         designed to protect against dilution, then, in case of the delivery of
         Common Stock upon the exercise of any such Option or upon conversion
         or exchange of any such Convertible Securities, the Conversion Price
         then in effect hereunder shall forthwith be adjusted to such
         respective amount as would have been obtained had such Option or
         Convertible Securities never been issued as to such Common Stock and
         had adjustments been made upon the issuance of the shares of Common
         Stock delivered as aforesaid, but only if as a result of such
         adjustment the Conversion Price then in effect hereunder is thereby
         reduced.

                 (iv)     Stock Dividends. In case the Corporation shall
         declare a dividend or make any other distribution upon any stock of
         the Corporation payable in Common Stock, Options or Convertible
         Securities, any Common Stock, Options 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.

                 (v)      Subdivision or Combination of Stock. In case the
         Corporation shall at any time subdivide its outstanding shares of
         Common Stock into a greater number of shares, the





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         Conversion Price in effect immediately prior to such subdivision shall
         be proportionately reduced, and conversely, in case the outstanding
         shares of Common Stock of the Corporation shall be combined into a
         smaller number of shares, the Conversion Price in effect immediately
         prior to such combination shall be proportionately increased.

                 (vi)     Consideration for Stock. In case any shares of Common
         Stock, Options or Convertible Securities shall be issued or sold for
         cash, the consideration received therefor shall be deemed to be the
         amount received by the Corporation therefor, without deduction
         therefrom of any expenses incurred or any underwriting commissions or
         concessions paid or allowed by the Corporation in connection
         therewith.  In case any shares of Common Stock, Options or Convertible
         Securities shall be issued or sold for a consideration other than
         cash, the amount of the consideration other than cash received by the
         Corporation shall be deemed to be the fair value of such consideration
         as determined in good faith by the Board of Directors of the
         Corporation, without deduction of any expenses incurred or any
         underwriting commissions or concessions paid or allowed by the
         Corporation in connection therewith.  The amount of consideration
         deemed to be received by the Corporation pursuant to the foregoing
         provisions of this subparagraph (vi) upon any issuance and/or sale of
         shares of Common Stock, Options or Convertible Securities, pursuant to
         an established compensation plan of the Corporation, to directors,
         officers or employees of the Corporation in connection with their
         employment shall be increased by the amount of any tax benefit
         realized by the Corporation as a result of such issuance and/or sale,
         the amount of such tax benefit being the amount by which the Federal
         and/or state income or other tax liability of the Corporation shall be
         reduced by reason of any deduction or credit in respect of such
         issuance and/or sale. In case any Options shall be issued in
         connection with the issue and sale of other securities of the
         Corporation, together comprising one integral transaction in which no
         specific consideration is allocated to such Options by the parties
         thereto, such Options shall be deemed to have been issued without
         consideration.

                 (vii)    Record Date. In case the Corporation shall take a
         record of the holders of its Common Stock for the purpose of entitling
         them (A) to receive a dividend or other distribution payable in Common
         Stock, Options or Convertible Securities, or (B) to subscribe for or
         purchase Common Stock, Options or Convertible Securities, then such
         record date shall be deemed to be the date of the issue or sale of the
         shares of Common Stock deemed to have been issued or sold upon the
         declaration of such dividend or the making of such





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         other distribution or the date of the granting of such right of
         subscription or purchase, as the case may be.

                 (e)      Certain Issues of Stock Excepted. Anything herein to
the contrary notwithstanding, the Corporation shall not make any adjustment of
the Conversion Price in the case of (i) the issuance of shares of Convertible
Preferred Stock pursuant to that certain Securities Purchase Agreement, dated
as of February 21, 1996, as amended, among the Corporation, WCAS VII, WCAS CP
II and the several persons named on Schedule I thereto; (ii) the issuance of
shares of Common Stock upon conversion of Convertible Preferred Stock; (iii)
the issuance of up to 4,737,270 shares of Common Stock to employees of the
Corporation or its subsidiaries, either directly or pursuant to stock options,
pursuant to plans or arrangements approved by the Board of Directors of the
Corporation; or (iv) the issuance of shares of Common Stock in respect of any
Convertible Securities issued by the Corporation prior to the date of said
Securities Purchase Agreement.

                 (f)      Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation (a
"Reorganization") shall be effected in such a way (including, without
limitation, by way of consolidation or merger) that holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such Reorganization, lawful
and adequate provision (in form satisfactory to the holders of a majority of
the then outstanding shares of Convertible Preferred Stock) shall be made
whereby each holder of a share or shares of Convertible Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such
share or shares of the Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such stock immediately theretofore so receivable had such Reorga-
nization not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of such holder to the end that
the provisions hereof (including without limitation provisions for adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights (including an immediate adjustment,
by reason of such Reorganization, of the Conversion Price to the value for the
Common Stock reflected by the terms of such Reorganization if the value so
reflected is less than the Conversion Price in effect immediately prior to such
Reorganization). In the event of a merger or consolidation of the Corporation
as a result of which a greater or lesser number of shares of common stock (or
other equity interests, of





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<PAGE>   13
the case may be) of the surviving corporation or business entity are issuable
to holders of Common Stock of the Corporation outstanding immediately prior to
such merger or consolidation, the Conversion Price in effect immediately prior
to such merger or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Corporation. The Corporation will not effect any Corporate
Disposition unless prior to the consummation thereof the acquiring corporation
or other business entity, or successor corporation or other business entity (if
other than the Corporation) resulting from such Corporate Disposition, as the
case may be, shall assume by written instrument (in form reasonably
satisfactory to the holders of a majority of the shares of Convertible
Preferred Stock at the time outstanding) executed and mailed or delivered to
each holder of a share or shares of Convertible Preferred Stock at the last
address of such holder appearing on the books of the Corporation (or its
transfer agent, if any), the obligation to deliver to such holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive.

                 (g)      Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, addressed to each holder
of shares of Convertible Preferred Stock at the address of such holder as shown
on the books of the Corporation (or its transfer agent, if any), which notice
shall state the Conversion Price resulting from such adjustment, setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based.

                 (h)      Other Notices. In case at any time:

                 (i)      the Corporation shall declare any dividend upon its
         Common Stock payable in cash or stock or make any other distribution
         to the holders of its Common Stock;

                 (ii)     the Corporation shall offer for subscription pro rata
         to the holders of its Common Stock any additional shares of stock of
         any class or other rights;

                 (iii)    there shall be any Reorganization or Corporate
         Disposition or the Corporation shall become aware of any event or
         events that could reasonably be expected to result in a Reorganization
         or Corporate Disposition; or

                 (iv)     there shall be a voluntary or involuntary
         dissolution, liquidation or winding up of the Corporation;

then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of
Convertible Preferred Stock at the





                                     13
<PAGE>   14
address of such holder as shown on the books of the Corporation (or its
transfer agent, if any), (A) at least 15 days' prior written notice of the date
on which the books of the Corporation (or its transfer agent) shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such Reorganization or
Corporate Disposition, and (B) in the case of any such Reorganization or
Corporate Disposition, at least 15 days' prior written notice of the date when
the same shall take place. Such notice in accordance with the foregoing clause
(A) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (B)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such Reorganization or Corporate Disposition, as the case may
be.

                 (i)      Conversion at Corporation's Option. All outstanding
shares of Convertible Preferred Stock shall, at the option of the Corporation,
be automatically converted into Common Stock if at any time the Corporation
shall effect a firm commitment public offering of Common Stock or Convertible
Securities registered pursuant to the Securities Act of 1933, as amended,
resulting in proceeds to the Corporation and/or selling stockholders of not
less than $20,000,000, after deduction of underwriting discounts and
commissions but before deduction of other expenses of issuance, and in which
the offering price to the public (or, in the case of a sale of Convertible
Securities, the price per share of Common Stock payable upon conversion
thereof) is not less than two times the Conversion Price. Such conversion shall
be effected at the time of and subject to the closing of the sale of such
shares of Common Stock.

                 (j)      Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of issuance upon the conversion of the
Convertible Preferred Stock as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding shares
of Convertible Preferred Stock. All shares of Common Stock which shall be so
issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges arising out of or by reason of the issue
thereof, and, without limiting the generality of the foregoing, the Corporation
covenants that it will from time to time take all such action as may be requi-
site to assure that the par value per share of the Common Stock is at all times
equal to or less than the effective Conversion Price. The Corporation will take
all such action within its control as may be necessary on its part to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirements of any national securities





                                     14
<PAGE>   15
exchange upon which the Common Stock of the Corporation may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if after such action the total number of shares of Common
Stock issued and outstanding and thereafter issuable upon exercise of all
options and conversion of Convertible Securities, including upon conversion of
the Convertible Preferred Stock, would exceed the total number of shares of
Common Stock then authorized by the Corporation's Restated Certificate of
Incorporation.

                 (k)      No Reissuance of Convertible Preferred Stock. Shares
of Convertible Preferred Stock that are converted into shares of Common Stock
as provided herein shall not be reissued.

                 (l)      Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of the Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Convertible
Preferred Stock which is being converted.

                 (m)      Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion
of any shares of Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Convertible Preferred Stock.

                 (n)      Definition of Common Stock. As used in this Section
4, the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.03 per share, as constituted on the date of filing of
this Certificate of Designation and shall also include any capital stock of any
class of the Corporation thereafter authorized that shall not be limited to a
fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided, however, that such term, when used to describe the
securities receivable upon conversion of shares of the Convertible Preferred
Stock of the Corporation, shall include only shares designated as Common Stock
of the Corporation on the date of filing of this Certificate of Designations,
any shares resulting from any combination or subdivision thereof referred to in
subparagraph (v) of Section 4(d), or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4(f).





                                     15
<PAGE>   16
                 5.       Voting. Except as otherwise provided by law or in
Section 6 below, the holders of Convertible Preferred Stock shall vote together
with the holders of Common Stock on all matters to be voted on by the
stockholders of the Corporation, and each holder of Convertible Preferred Stock
shall be entitled to one vote for each share of Common Stock that would be
issuable to such holder upon the conversion of all the shares of Convertible
Preferred Stock held by such holder on the record date for the determination of
stockholders entitled to vote.

                 6.       Restrictions. So long as any shares of Convertible
Preferred Stock are outstanding, without the consent of the holders of a
majority of the Convertible Preferred Stock at the time outstanding given in
person or by proxy, either in writing or at a special meeting called for that
purpose at which the holders of the Convertible Preferred Stock shall vote
separately as a class, the Corporation may not (i) effect, validate or permit a
Corporate Disposition; (ii) effect or validate the amendment, alteration or
repeal of any provision hereof which would amend or repeal the dividend,
voting, conversion, redemption or liquidation rights of the Convertible
Preferred Stock set forth herein; (iii) effect or validate the amendment,
alteration or repeal of any provision of the Restated Certificate of Incor-
poration or the By-laws of the Corporation; or (iv) (A) create or authorize any
additional class or series of stock ranking senior to or on a parity with the
Convertible Preferred Stock as to dividends or as to rights upon redemption,
liquidation, dissolution or winding up, or (B) increase the authorized number
of shares of the Convertible Preferred Stock or of any other class or series of
capital stock of the Corporation ranking senior to or on a parity with the
Convertible Preferred Stock as to dividends or as to rights upon redemption,
liquidation, dissolution or winding up, whether any such creation or
authorization or increase shall be by means of amendment hereof, amendment of
the Restated Certificate of Incorporation of the Corporation, Certificate of
Designation or amendment thereof, merger, consolidation or otherwise.

                 7.       Reacquired Shares. Any shares of Convertible
Preferred Stock, which are redeemed or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof and the number of authorized shares of Convertible
Preferred Stock shall be reduced accordingly.





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<PAGE>   17
                 IN WITNESS WHEREOF, this Certificate of Designations has been
executed by the Corporation by its Chairman and Chief Executive Officer this
29th day of March, 1996.


                                           AURORA ELECTRONICS, INC.



                                           By ____________________________
                                                   Chairman and Chief
                                                   Executive Officer





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