<PAGE>

                              THIRD AMENDED AND RESTATED

                             CERTIFICATE OF INCORPORATION

                                          OF

                             PLATINUM ENTERTAINMENT, INC.

                        (ORIGINAL CERTIFICATE OF INCORPORATION
                               FILED NOVEMBER 21, 1991)


     PLATINUM ENTERTAINMENT, INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Law"), does hereby certify:

   A.     That the Board of Directors of the Corporation adopted a resolution
setting forth the Third Amended and Restated Certificate of Incorporation set
forth below, declaring it advisable and submitting it to the stockholders
entitled to vote in respect thereof for their consideration of such Third
Amended and Restated Certificate of Incorporation.

     B.   That by written consent executed in accordance with Section 228 of the
Law, the holders of a majority of the outstanding stock entitled to vote
thereon, and a majority of the outstanding stock of each class entitled to vote
thereon as a class, has voted in favor of the adoption of the Third Amended and
Restated Certificate of Incorporation set forth below.

     C.   That the Third Amended and Restated Certificate of Incorporation set
forth below has been duly adopted in accordance with Sections 242 and 245 of the
Law:


                                      ARTICLE I

     The name of the Corporation is:  Platinum Entertainment, Inc.


                                      ARTICLE II

     The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, County of New Castle.  The name of its registered
agent is The Corporation Trust Company.

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                                     ARTICLE III

     The nature of the business to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.


                                      ARTICLE IV

     The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Eighty-Seven Million Eight Hundred Thirty-Five
Thousand and One Hundred Fifty-Two (87,835,152), divided into:

     (i)    Two Hundred Forty Thousand (240,000) shares of Class A Common Stock
            having a par value of $0.001 per share (the "Class A Common Stock");

     (ii)   One Million Eighty Thousand (1,080,000) shares of Class B Common
            Stock having a par value of $0.001 per share (the "Class B Common
            Stock");

     (iii)  Forty Million (40,000,000) shares of Common Stock having a par value
            of $0.001 per share (the "Common Stock"); and

     (iv)   Forty-Six Million Five Hundred Fifteen Thousand One Hundred
            Fifty-Two (46,515,152) shares of Preferred Stock having a par value
            of $0.001 per share (the "Preferred Stock"), of which Eighteen
            Million Two Hundred Fifty-Seven Thousand Five Hundred Seventy-Six
            (18,257,576) shares shall be of a series designated "Series A-1
            Non-Convertible Preferred Stock" (the "Series A-1 Preferred Stock"),
            Eighteen Million Two Hundred Fifty-Seven Thousand Five Hundred
            Seventy-Six (18,257,576) shares shall be of a series designated
            "Series A-2 Convertible Preferred Stock" (the "Series A-2 Preferred
            Stock"), and the balance of which may be issued from time to time in
            one or more series as set forth in Section E of this ARTICLE IV.

     As of the date of the filing of this Third Amended and Restated Certificate
of Incorporation, each issued share of Class A Common Stock, Class B Common
Stock and Common Stock of the Corporation shall be reclassified and changed into
one-twenty-fifth of one share of Class A Common Stock, Class B Common Stock and
Common Stock, respectively, in each case having the terms specified in this
ARTICLE IV.  Each outstanding stock certificate which immediately prior to the
date hereof represented a number of shares of Class A Common Stock, Class B
Common Stock and Common Stock shall, without any action on the part of the
holder, hereupon and hereafter, until surrendered as hereinafter provided,
represent that number of shares of Class A Common Stock, Class B Common Stock or
Common Stock, as the case may be, equal to one-twenty-fifth of the number of
shares of the Class A Common Stock, Class B Common Stock or Common Stock
represented by such certificate.  The registered holder of each such certificate
may on or after the date hereof surrender such certificate to the Corporation
for cancellation and, upon such surrender, shall receive in exchange therefor,
without charge, a new certificate registered in the name of such holder
representing that number of shares of 


                                         -2-

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Class A Common Stock, Class B Common Stock or Common Stock, as the case may be,
equal to one-twenty-fifth of the number of shares of the Class A Common Stock,
Class B Common Stock or Common Stock which, prior to the date of filing hereof,
was represented by the certificate(s) representing shares of Class A Common
Stock, Class B Common Stock or Common Stock.  

     In connection with each exchange of certificates contemplated by the
paragraph above, the Corporation may pay to the exchanging holders cash in an
amount equal to the Market Price of any fractional shares in lieu of issuing
such fractional shares.  "MARKET PRICE" of any security means the average of the
closing prices of such security's sales on all recognized securities exchanges
on which such security may at the time be listed, or, if there has been no sale
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 p.m., New York time, or, if on any
day such security is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day.  If at any time such security is
not listed on any recognized securities exchange or quoted in the NASDAQ System
or the over-the-counter market, the "Market Price" will be the fair value
thereof determined in good faith by the Board of Directors of the Corporation. 

     The powers, preferences and relative, participating, optional or other
rights of the capital stock and the qualifications, limitations or restrictions
thereof are as follows:

     SECTION A.  CLASS A COMMON STOCK, CLASS B
                 COMMON STOCK AND COMMON STOCK

     1.   VOTING RIGHTS.  Except as otherwise required by law, the holders of
each share of Class A Common Stock, Class B Common Stock and Common Stock shall
have one vote per share on each matter submitted to a vote of the stockholders
of the Corporation.  Except as otherwise required by law or expressly provided
herein, Class A Common Stock, Class B Common Stock, Common Stock, Series A-1
Preferred Stock and Series A-2 Preferred Stock shall vote together and not as
separate classes or series.

     2.   DIVIDEND RIGHTS.  Subject to all of the rights of any series of
Preferred Stock now or hereafter authorized, holders of Class A Common Stock,
Class B Common Stock and Common Stock shall be entitled to receive on a per
share basis such dividends and other distributions in cash, stock or property of
the Corporation as may be declared thereon by the Board of Directors from time
to time out of assets or funds of the Corporation legally available therefor. 
In addition and subject to the restrictions set forth in the first sentence of
this Section A.2., dividends shall be declared and paid to holders of either
Class A Common Stock, Class B Common Stock or Common Stock only if such
dividends are declared and paid to holders of such classes on an equal per share
basis.


                                         -3-
<PAGE>

     If at any time a distribution of Class A Common Stock, Class B Common
Stock, Common Stock or any other securities of the Corporation is to be made to
holders of either Class A Common Stock, Class B Common Stock or Common Stock
(hereinafter sometimes referred to as a "share distribution"), such share
distribution may be declared and paid only as follows:

          (a)  A share distribution consisting of shares of Class A Common Stock
     to holders of Class A Common Stock; provided, there shall also be a
     simultaneous share distribution consisting of shares of Class B Common
     Stock to holders of Class B Common Stock and shares of Common Stock to
     holders of Common Stock on an equal per share basis; or 

          (b)  A share distribution consisting of shares of Class B Common Stock
     to holders of Class B Common Stock; provided, there shall also be a
     simultaneous share distribution consisting of shares of Class A Common
     Stock to holders of Class A Common Stock and shares of Common Stock to
     holders of Common Stock on an equal per share basis; or 

          (c)  A share distribution consisting of shares of Common Stock to
     holders of Common Stock; provided, there shall also be a simultaneous share
     distribution consisting of shares of Class A Common Stock to holders of
     Class A Common Stock and shares of Class B Common Stock to holders of Class
     B Common Stock on an equal per share basis; or 

          (d)  A share distribution consisting of any other class of securities
     of the Corporation to the holders of Class A common Stock, Class B Common
     Stock and Common Stock on an equal per share basis.

     3.   LIQUIDATION RIGHTS.  In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or involuntary
(sometimes referred to herein as a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation, subject to
the liquidation preferences of any holders of any outstanding Preferred Stock
now or hereafter authorized, the remaining assets and funds (the "Funds") of the
Corporation shall be divided as follows:  (i) Class A Common Stock shall have
first priority to the Funds, paid among and ratably to the holders of Class A
Common Stock, up to an amount equal to eight dollars and thirty-three cents
($8.33) per share multiplied by the number of shares of Class A Common Stock
then issued and outstanding; (ii) after the priority described in (i) shall have
been satisfied, Class B Common Stock shall next have priority to the Funds, paid
among and ratably to the holders of Class B Common Stock, up to an amount equal
to two dollars and fifty cents ($2.50) per share multiplied by the number of
shares of Class B Common Stock then issued and outstanding; and (iii) the
remainder of the Funds, if any, shall be paid among and ratably to the holders
of Class A Common Stock, Class B Common Stock, Common Stock and Series A-2
Preferred Stock, based upon the number of shares of Class A Common Stock, Class
B Common Stock and Common Stock then held by such. holders and the number
(including any fraction) of shares of Common Stock into which the shares of
Series A-2 Preferred Stock then held by such holders are convertible.  The per
share liquidation preferences stated above for the Class A Common Stock and the
Class B Common Stock shall be equitably 


                                         -4-
<PAGE>

adjusted as determined by the Corporation's Board of Directors in the event of a
stock split, stock dividend, reverse split, combination or other
recapitalization which would necessitate an adjustment.  For purposes of this
ARTICLE IV, except for a sale of all or substantially all of the assets of the
Corporation which shall be treated as a Liquidation under this ARTICLE IV, the
merger or consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, in which consolidation or merger the stockholders of the
Corporation receive distributions in cash or securities of another corporation
or corporations as a result of such consolidation or merger, shall not be
treated as a Liquidation.  Notwithstanding anything to the contrary contained in
this Third Amended and Restated Certificate of Incorporation, this Section A.3.
and the rights contained herein may be altered or amended only with the approval
of holders of a majority of the shares of Class A Common Stock, with respect to
rights relating to the Class A Common Stock, and the Class B Common Stock, with
respect to rights relating to the Class B Common Stock.

     4.   STOCK SPLITS.  The Corporation may not split, divide or combine the
shares of the Class A Common Stock, the Class B Common Stock or the Common
Stock, unless, at the same time, the Corporation splits, divides or combines, as
the case may be, the shares of the Class A Common Stock, the Class B Common
Stock and the Common Stock in the same proportion and manner.

     5.   CONVERSION.  

          (a)  CONVERSION PROCEDURE.

               (i)  Any holder of shares of Class A Common Stock or Class B
Common Stock may at any time convert all or any number of such shares held by
such holder into an equal number of shares of Common Stock.

               (ii) Each conversion of shares of Class A Common Stock or Class B
Common Stock will be deemed to have been effected as of the close of business on
the date on which the certificate or certificates representing such shares to be
converted have been surrendered at the principal office of the Corporation.  At
such time as such conversion has been effected, the rights of the holder of such
shares of Class A Common Stock or Class B Common Stock as such holder will cease
and the person (or entity) or persons (or entities) in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.

               (iii)     As soon as possible after a conversion has been
effected (but in any event within three business days in the case of subsection
(A) and (B) below), the Corporation will deliver to the converting holder:

                    (A)  a certificate or certificates representing the number
          of shares of Common Stock issuable by reason of such conversion in
          such name or names and such denomination or denominations as the
          converting holder has specified;


                                         -5-

<PAGE>

                    (B)  payment in cash of an amount equal to all dividends
          declared but unpaid with respect to each share converted; and

                    (C)  a certificate representing any shares of Class A Common
          Stock or Class B Common Stock which were represented by the
          certificate or certificates delivered to the Corporation in connection
          with such conversion but which were not converted. 

               (iv) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class A Common Stock or Class B Common Stock will be
made without charge to the holders of such shares for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Common Stock.  Upon
conversion of each share of Class A Common Stock or Class B Common Stock, the
Corporation will take all such actions as are possible in order to insure that
the Common Stock issuable with respect to such conversion will be validly
issued, fully paid and nonassessable.

               (v)  The Corporation will not close its books against the
transfer of shares of Class A Common Stock or Class B Common Stock or of Common
Stock issued or issuable upon conversion of shares of Class A Common Stock or
Class B Common Stock in any manner which interferes with the timely conversion
of shares of Class A Common Stock or Class B Common Stock.

          (b)  NOTICES.

               (i)  The Corporation will give written notice to all holders of
shares of Class A Common Stock and Class B Common Stock as soon as possible but
in any event at least 20 days prior to the date on which the Corporation closes
its books or takes a record (A) with respect to any dividend or distribution
upon Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to
any Liquidation.

               (ii) The Corporation will also give written notice to the holders
of shares of Class A Common Stock and Class B Common Stock as soon as possible
but in any event at least 20 days prior to the date on which any Liquidation
will take place.

          (c)  RESERVATION OF COMMON STOCK.  The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of Class
A Common Stock and Class B Common Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Class A Common Stock and Class B Common Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of Class A
Common Stock and Class B Common Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.


                                         -6-

<PAGE>

          (d)  TAXES AND CHARGES.  The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Class A Common Stock or
Class B Common Stock.

          (e)  PROTECTION OF CONVERSION RIGHTS.  The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issuance or sale of securities or
take 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 the
carrying out of all the provisions of this Section A.5. and will take all
actions that may be necessary or appropriate in order to protect the rights of
the holders of shares of Class A Common Stock and Class B Common Stock to
convert such shares against impairment.

          (f)  AUTOMATIC CONVERSION.  The shares of Class A Common Stock and
Class B Common Stock shall automatically be converted into the number of shares
of Common Stock into which the shares of Class A Common Stock and Class B Common
Stock are then convertible upon the closing of a Qualified Public Offering;
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless certificates evidencing such shares of Class A Common Stock and Class B
Common Stock being converted are either delivered to the Corporation or any
transfer agent or the holder notifies the Corporation or any transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith.  Upon the automatic conversion of
Class A Common Stock and Class B Common Stock, the holder of such Class A Common
Stock and Class B Common Stock shall surrender the certificates representing
such shares at the office of the Corporation or of any transfer agent for the
Common Stock.  Thereupon, there shall be issued and delivered to such holder,
promptly at such office and in his name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Class A Common Stock and Class B Common
Stock surrendered were convertible on the date on which such automatic
conversion occurred.

          (g)  CANCELLATION OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK. 
No share or shares of Class A Common Stock or Class B Common Stock acquired by
the Corporation by reason of conversion or otherwise shall be reissued, and all
such shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.

     SECTION B.  SERIES A-1 PREFERRED STOCK

     1.   RANK.  As to distributions upon Liquidation, the shares of Series A-1
Preferred Stock shall rank senior to the Class A Common Stock, the Class B
Common Stock, the Common Stock and the Series A-2 Preferred Stock.

     2.   VOTING RIGHTS.  Except as otherwise required by law or expressly
provided herein, each share of Series A-1 Preferred Stock shall not entitle the
holder thereof to vote on any 


                                         -7-

<PAGE>

matters submitted to a vote of the stockholders of the Corporation.  Except as
otherwise required by law or expressly provided herein, the holders of Series
A-1 Preferred Stock, Series A-2 Preferred Stock, Class A Common Stock, Class B
Common Stock and Common Stock shall vote together and not as separate classes or
series. 

     3.   DIVIDEND RIGHTS.  In each of the first two years in which shares of
Series A-1 Preferred Stock are outstanding, the holders of shares of Series A-1
Preferred Stock shall be entitled to receive, on a per share basis, when and as
declared by the Board of Directors out of funds legally available therefor and
before any dividends are declared on any shares of any other capital stock of
the Corporation, cumulative cash dividends at the annual rate of 1.65 cents per
share (such number to be adjusted proportionately in the event the shares of
Series A-1 Preferred Stock are subdivided into a larger number or combined into
a small number).  Such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, on the first day of the year in
which such dividends may be payable.  After the first two years in which shares
of Series A-1 Preferred Stock are outstanding, the holders of shares of Series
A-1 Preferred Stock shall be entitled to receive, on a per share basis, such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor, provided that
such dividends and other distributions shall not exceed an annual rate of 2.3
cents per share (such number to be adjusted proportionately in the event the
shares of Series A-1 Preferred Stock are subdivided into a larger number or
combined into a small number).

     4.   LIQUIDATION RIGHTS.

          (a)  In the event of any Liquidation (as defined in Section A.3. of
this ARTICLE IV, including the penultimate sentence of such Section), each
holder of shares of Series A-1 Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation legally available for
distribution to its stockholders, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of the Class A Common
Stock, the Class B Common Stock, the Common Stock or the Series A-2 Preferred
Stock, an amount equal to the Series A-1 Liquidation Price per share of Series
A-1 Preferred Stock held by such holder.  If upon any Liquidation, the assets to
be distributed to the holders of Series A-1 Preferred Stock shall be
insufficient to permit the payment in full to such holders of the aforesaid
preferential amount, then all of the assets of the Corporation available for
distribution to the holders of Series A-1 Preferred Stock shall be distributed
to such holders ratably in proportion to the full preferential amount each such
holder is otherwise entitled to receive.

          (b)  After the payment or the setting aside for such payment of the
preferential amounts payable upon a Liquidation to the holders of Series A-1
Preferred Stock hereunder, the holders of Series A-1 Preferred Stock as such
shall have no right or claim to any of the remaining assets of the Corporation. 

          (c)  If any of the assets of the Corporation are to be distributed
other than in cash for purposes of satisfying the liquidation preference of any
shares of capital stock of the Corporation, then the Board of Directors of the
Corporation shall determine the fair market value of the assets to be
distributed to the holders of Series A-1 Preferred Stock, Series A-2


                                         -8-

<PAGE>


Preferred Stock, Class A Common Stock, Class B Common Stock or Common Stock,
subject to the consent of the holders of a majority of the shares of Series A-1
Preferred Stock then outstanding.  If the Corporation does not promptly receive
the consent of the holders of a majority of the shares of Series A-1 Preferred
Stock then outstanding, then the Board of Directors of the Corporation shall
promptly engage independent competent appraisers to determine the value of the
assets to be distributed.  The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
Series A-1 Preferred Stock of the appraiser's valuation.

     5.   REDEMPTION.

          (a)  The Corporation may at its option redeem, on any date designated
pursuant to clause (b) of this Section B.5. (an "Optional Redemption Date"), all
or part of the Series A-1 Preferred Stock then outstanding.  Notwithstanding the
preceding sentence, (i) on June 30, 2000 (the "First Mandatory Redemption
Date"), the Corporation shall redeem the lesser of (A) one-half of the shares of
Series A-1 Preferred Stock originally issued (such number of shares to be
proportionately adjusted in the event of a subdivision or combination of the
Series A-1 Preferred Stock) and (B) all of the Series A-1 Preferred Stock
outstanding on such Redemption Date and (ii) on June 30, 2001 (the "Second
Mandatory Redemption Date" and, collectively with an Optional Redemption Date
and the First Redemption Date, a "Redemption Date"), the Corporation shall
redeem all of the Series A-1 Preferred Stock then outstanding.  The Corporation
shall redeem all shares of Series A-1 Preferred Stock to be redeemed on a
Redemption Date by payment on such Redemption Date to the holder thereof of a
price per share equal to the Series A-1 Redemption Price.  Any such redemption
shall be allocated ratably among all holders of Series A-1 Preferred Stock in
accordance with the number of shares of Series A-1 Preferred Stock then held.

          (b)  At least 30 but no more than 60 days prior to a Redemption Date,
the Corporation shall give written notice to the holders of Series A-1 Preferred
Stock setting forth (i) the Redemption Date, the number of shares of Series A-1
Preferred Stock being redeemed, the Series A-1 Redemption Price and that the
holder is to surrender to the Corporation in the manner and at the place
designated, the certificate or certificates representing the shares of Series
A-1 Preferred to be redeemed or (ii) that the Corporation does not have funds
legally available for the redemption of the Series A-1 Preferred Stock on such
Redemption Date.

          (c)  So long as any shares of Series A-1 Preferred Stock are
outstanding, no shares of any other class or series of the capital stock of the
Corporation will be redeemed, purchased or otherwise acquired for any
consideration (and no moneys shall be paid to or made available for a sinking
fund for the redemption of any shares of such stock) by the Corporation, other
than (i) the repurchase of certain shares of Class B Common Stock, Common Stock
and stock options therefor held by certain employees of the Corporation and
other parties in exchange for the right to receive bonuses as contemplated on
Schedule 5.10 of the Series A Purchase Agreement, provided, however, that no
such bonus shall be paid to any such party in connection with any such exchange
so long as any shares of Series A-1 Preferred Stock are outstanding; and (ii)
the repurchase of shares of Common Stock from any employee of the Corporation
(other than the officers and directors of the Corporation) upon the termination
of such employee's employment by the Corporation, provided that such repurchase
is approved by 


                                         -9-
<PAGE>

a majority of the entire Board of Directors of the Corporation.  The Corporation
will not permit any Subsidiary to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
would be permitted, pursuant to this paragraph, to purchase or otherwise acquire
such shares at such time and in such manner.

          (d)  In addition to, and without any limitation whatsoever upon, the
redemption rights set forth in clause (a) of this Section B.5., the holders of
Series A-1 Preferred Stock shall have the following redemption rights:

               (i)  If at any time a Change in Ownership (as hereinafter
defined) has occurred or the Corporation obtains knowledge that a Change in
Ownership is to occur, the Corporation shall give prompt written notice of such
Change in Ownership, describing in reasonable detail the definitive terms and
date of consummation thereof, to each holder of Series A-1 Preferred Stock, but
in any event such notice shall not be given later than five days after the
occurrence of such Change in Ownership.  The holder or holders of shares of
Series A-1 Preferred Stock then outstanding may elect to require the Corporation
to redeem all or any portion of the Series A-1 Preferred Stock owned by such
holder or holders at a price per share equal to the Series A-1 Redemption Price
by giving written notice to the Corporation of such election prior to the later
of (a) 30 days after receipt of the Corporation's notice and (b) 20 days prior
to the consummation of the Change in Ownership (the "Expiration Date").  The
Corporation shall give prompt written notice of any such election to all other
holders of Series A-1 Preferred Stock within five days after the receipt
thereof, and each such holder shall have until the later of (a) the Expiration
Date or (b) ten days after receipt of such second notice to elect (by giving
written notice to the Corporation) to require the Corporation to redeem, at a
price per share equal to the Series A-1 Redemption Price, all or any portion of
the shares of Series A-1 Preferred Stock owned by such holder.  Upon receipt of
such election(s), the Corporation shall be obligated to redeem the aggregate
number of shares of Series A-1 Preferred Stock specified therein on the later of
(a) the occurrence of the Change in Ownership or (b) ten days after the
Corporation's receipt of such election(s).  If in any case a proposed Change in
Ownership does not occur, all elections for redemption in connection therewith
shall be automatically rescinded.  The term "Change in Ownership" means any sale
or issuance or series of sales and/or issuances of shares of the Corporation's
capital stock by the Corporation or any holders thereof which results in any
Person or group of affiliated Persons (other than the holders of Common Stock
and Preferred Stock as of the date of the Series A Purchase Agreement (as
hereinafter defined)) owning capital stock of the Corporation possessing the
voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors.

               (ii) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change, describing in
reasonable detail the definitive terms and date of consummation thereof, to each
holder of Series A-1 Preferred Stock not more than 45 days nor less than 30 days
prior to the consummation thereof (the "Initial Series A-1 Redemption Notice"). 
The holder or holders of the Series A-1 Preferred Stock then outstanding may
elect to require the Corporation to redeem all or any portion of the Series A-1
Preferred Stock owned by such holder or holders at a price per share equal to
the Series A-1 Redemption Price by giving written notice to the Corporation of
such election prior to the later of (a) 20 days prior to the consummation of the
Fundamental Change or (b) 30 days after receipt of the Initial Series A-1
Redemption Notice from the Corporation.  The Corporation shall give 


                                         -10-

<PAGE>


prompt written notice of such election to all other holders of Series A-1 
Preferred Stock (but in any event within five days prior to the consummation 
of the Fundamental Change), and each such holder shall have until ten days 
after the receipt of such notice to elect (by written notice given to the 
Corporation) to require the Corporation to redeem, at a price per share equal 
to the Series A-1 Redemption Price, all or any portion of the Series A-1 
Preferred Stock owned by such holder.  Upon receipt of such election(s), the 
Corporation shall be obligated to redeem the aggregate number of shares of 
Series A-1 Preferred Stock specified therein upon the consummation of such 
Fundamental Change.  If any proposed Fundamental Change does not occur, all 
elections for redemption in connection therewith shall be automatically 
rescinded.  The term "Fundamental Change" means any merger or consolidation 
to which the Corporation is a party, except for a merger in which the 
Corporation is the surviving corporation and, after giving effect to such 
merger, the holders of the Corporation's outstanding capital stock 
immediately prior to the merger shall own the Corporation's outstanding 
capital stock possessing the voting power (under ordinary circumstances) to 
elect a majority of the Corporation's Board of Directors after such merger.

          (e)  Each holder of Series A-1 Preferred Stock to be redeemed shall
surrender to the Corporation, on or prior to the redemption date specified in
such notice, the certificate or certificates representing the number of shares
specified in such notice.  In the event less than all the shares represented by
any such certificate are to be redeemed, the Corporation shall issue a new
certificate representing the unredeemed shares.  Payment of the redemption price
is due, and shall be paid in full in cash, on the applicable redemption date.
The redemption price applicable to each share of Series A-1 Preferred Stock
being redeemed shall be paid to the order of the person whose name appears as
the owner on the certificate or certificates surrendered for redemption upon
surrender of such certificate or certificates to the Corporation or its transfer
agent.  Despite being called or tendered for redemption, shares of Series A-1
Preferred Stock shall remain outstanding until the full redemption price
applicable to such shares has been paid by the Corporation to the holder of such
shares.

          (f)  Notwithstanding anything to the contrary contained herein, Series
A-1 Preferred Stock shall be subject to automatic and mandatory redemption in
the event of a Qualified Public Offering upon the closing of such offering (and
as a condition thereof) at the Series A-1 Redemption Price (which shall in such
event be paid in full in cash; provided, however, that a holder of shares of
Series A-1 Preferred Stock may elect, by providing written notice to the
Corporation, to receive the Series A-1 Redemption Price in shares of Common
Stock (valued at the initial public offering price) with respect to all or a
portion of such holder's shares of Series A-1 Preferred Stock).

          (g)  If the funds of the Corporation legally available therefor shall
be insufficient to discharge in full any redemption requirement set forth in
this Section B.5., funds to the extent legally available for such purpose shall
be set aside, and the maximum number of full shares of Series A-1 Preferred
Stock that can be redeemed with such funds shall be redeemed from the holders of
the Series A-1 Preferred Stock, PRO RATA based on the aggregate Series A-1
Redemption Price of the shares to be redeemed from such holders.  Thereafter,
the Corporation shall redeem shares of Series A-1 Preferred Stock ratably as set
forth above from the holders of such shares as funds legally available therefor
become available and supplementary redemption notices setting forth the date of
redemption, the number of shares of 


                                         -11-

<PAGE>

Series A-1 Preferred Stock being redeemed, the Series A-1 Redemption Price and
that the holder is to surrender to the Corporation in the manner and at the
place designated, the certificate or certificates representing the shares of
Series A-1 Preferred to be redeemed, shall be delivered to such holders of
Series A-1 Preferred Stock.  Such supplementary redemption notices shall specify
a redemption date which shall be not less than 10 nor more than 30 days after
the date of such notice.

          (h)  The Corporation shall not, and shall not permit any Subsidiary of
the Corporation to, purchase or acquire any shares of Series A-1 Preferred Stock
other than pursuant to the terms of this Section or pursuant to an offer made on
the equivalent terms to all holders of Series A-1 Preferred Stock at the time
outstanding.

     6.   CANCELLATION OF SERIES A-1 PREFERRED STOCK.  No share or shares of
Series A-1 Preferred Stock acquired by the Corporation by reason of redemption,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.

     SECTION C.  SERIES A-2 PREFERRED STOCK

     1.   RANK.  As to distributions upon Liquidation, the shares of Series A-2
Preferred Stock shall rank (a) junior to the liquidation preferences of the
Class A Common Stock, the Class B Common Stock and the Series A-1 Preferred
Stock and (b) otherwise on a parity with the Class A Common Stock, the Class B
Common Stock and the Common Stock.

     2.   VOTING RIGHTS.  Except as otherwise required by law or expressly
provided herein, each share of Series A-2 Preferred Stock shall entitle the
holder thereof to vote on all matters submitted to a vote of the stockholders of
the Corporation and to have the number of votes equal to the number of shares of
Common Stock into which such share of Series A-2 Preferred Stock is then
convertible pursuant to the provisions hereof, assuming for this purpose only
that shares of Series A-2 Preferred Stock are convertible into fractional
shares, at the record date for the determination of stockholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken or any written consent of stockholders is solicited.  Except as
otherwise required by law or expressly provided herein, the holders of shares of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Class A Common Stock,
Class B Common Stock and Common Stock shall vote together and not as separate
classes or series.

     3.   DIVIDEND RIGHTS.  The holders of shares of Series A-2 Preferred Stock
shall be entitled to receive ratably, subject to the provisions of law and on a
parity with the Class A Common Stock, the Class B Common Stock and the Common
Stock (based upon the number of shares of the Class A Common Stock, the Class B
Common Stock and the Common Stock then held by such holders and the number
(including any fraction) of shares of the Common Stock into which the shares of
Series A-2 Preferred Stock then held by such holders are then convertible), such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefore.

     4.   LIQUIDATION RIGHTS.


                                         -12-

<PAGE>

          (a)  After the payment or the setting aside for such payment of the
preferential amounts payable upon a Liquidation to the holders of Class A Common
Stock and Class B Common Stock pursuant to Section A.3. of this ARTICLE IV and
to the holders of Series A-1 Preferred Stock pursuant to Section B.4. of this
ARTICLE IV, all of the remaining assets of the Corporation, if any, shall be
distributed to the holders of shares of Class A Common Stock, Class B Common
Stock and Common Stock and the holders of shares of Series A-2 Preferred Stock
ratably based upon the number of shares of Class A Common Stock, Class B Common
Stock and Common Stock then held by such holders and the number (including any
fraction) of shares of Common Stock into which the shares of Series A-2
Preferred Stock then held by such holders are then convertible.

          (b)  Nothing contained in this Section C.4. shall be deemed to prevent
any holder of Series A-2 Preferred Stock from exercising such holder's right of
conversion pursuant to Section C.6. hereof with respect to any share of Series
A-2 Preferred Stock at any time prior to the distribution of the Corporation's
assets in the Liquidation.

     5.   REPURCHASE.

          (a)  The Corporation shall not, and shall not permit any Subsidiary of
the Corporation to, purchase or acquire any shares of Series A-2 Preferred Stock
other than pursuant to an offer made on the equivalent terms to all holders of
Series A-2 Preferred Stock at the time outstanding.

          (b)  In connection with any redemption of the Series A-1 Preferred
Stock pursuant to Section B.5. of this ARTICLE IV, any holder of shares of
Series A-2 Preferred may elect to sell, at the time of such redemption, to the
Corporation up to .01% of such shares of Series A-2 Preferred Stock at a price
per share equal to the fair market value of such shares as reasonably determined
in good faith by the Board of Directors of the Corporation.

     6.   CONVERSION.

          (a)  CONVERSION PROCEDURE.

               (i)  Any holder of shares of Series A-2 Preferred Stock may, at
any time, convert all or any number of such shares held by such holder into a
number of shares of Common Stock computed by multiplying the number of such
shares to be converted by thirty-three cents (33CENTS) (such amount to be
adjusted proportionately in the event the shares of Series A-2 Preferred Stock
are subdivided into a greater number or combined into a lesser number) and
dividing the result by the Series A-2 Conversion Price (as hereinafter defined)
then in effect.

               (ii) Each conversion of shares of Series A-2 Preferred Stock will
be deemed to have been effected as of the close of business on the date on which
the certificate or certificates representing such shares to be converted have
been surrendered at the principal office of the Corporation.  At such time as
such conversion has been effected, the rights of the holder of such shares of
Series A-2 Preferred Stock as such holder will cease and the person (or entity)
or persons (or entities) in whose name or names any certificate or certificates
for shares of 


                                         -13-

<PAGE>

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

               (iii)     As soon as possible after a conversion has been
effected (but in any event within three business days in the case of subsection
(A) and (B) below), the Corporation will deliver to the converting holder:

                    (A)  a certificate or certificates representing the number
          of shares of Common Stock issuable by reason of such conversion in
          such name or names and such denomination or denominations as the
          converting holder has specified;

                    (B)  payment in cash of an amount equal to all dividends
          declared but unpaid with respect to each share converted, plus the
          amount payable under subsection (vi) below with respect to such
          conversion; and

                    (C)  a certificate representing any shares of Series A-2
          Preferred Stock which were represented by the certificate or
          certificates delivered to the Corporation in connection with such
          conversion but which were not converted.

               (iv) The issuance of certificates for shares of Common Stock upon
conversion of shares of Series A-2 Preferred Stock will be made without charge
to the holders of such shares of Series A-2 Preferred Stock for any issuance tax
in respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Common Stock.  Upon
conversion of each share of Series A-2 Preferred Stock, the Corporation will
take all such actions as are necessary in order to insure that the Common Stock
issuable with respect to such conversion will be validly issued, fully paid and
nonassessable.

               (v)  The Corporation will not close its books against the
transfer of shares of Series A-2 Preferred Stock or of Common Stock issued or
issuable upon conversion of shares of Series A-2 Preferred Stock in any manner
which interferes with the timely conversion of shares of Series A-2 Preferred
Stock.

               (vi) If any fractional interest in a share of Common Stock would,
except for the provisions of this subsection (vi), be deliverable upon any
conversion of shares of Series A-2 Preferred Stock, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to the Market Price (as defined below) of such fractional interest
as of the date of conversion.  "MARKET PRICE" of any security means the average
of the closing prices of such security's sales on all recognized securities
exchanges on which such security may at the time be listed, or, if there has
been no sale on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System (as hereinafter defined) as of 4:00
P.M., New York time, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such 


                                         -14-
<PAGE>

day.  If at any time such security is not listed on any recognized securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof reasonably determined in good
faith by the Board of Directors of the Corporation.

          (b)  SERIES A-2 CONVERSION PRICE.

               (i)  The initial Series A-2 Conversion Price for Series A-2
Preferred Stock will be eight dollars and thirty-three cents ($8.33).  In order
to prevent dilution of the conversion rights granted under this Section C.6.,
the Series A-2 Conversion Price will be subject to adjustment from time to time
pursuant to this Section C.6.

               (ii) If and whenever on or after the original date of issuance of
shares of Series A-2 Preferred Stock the Corporation issues or sells, or in
accordance with Section C.6.(c) is deemed to have issued or sold, any share of
its Common Stock for a consideration per share less than the Series A-2
Conversion Price in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, or deemed issuance or sale, the Series
A-2 Conversion Price will be reduced, in order to increase the number of shares
of Common Stock into which Series A-2 Preferred Stock is convertible, to that
price per share determined by multiplying the Series A-2 Conversion Price in
effect immediately prior to such issuance or sale, or deemed issuance or sale,
by a fraction (x) the numerator of which shall be the sum of (A) the number of
shares of Common Stock outstanding and which in accordance with Section C.6.(c)
have been, and continue to be, deemed outstanding (other than any such shares
which may be deemed to be outstanding and which are referred to in clause (x) of
such Section C.6.(c)) immediately prior to the issuance or sale or deemed
issuance or sale of such Common Stock, plus (B) the number of shares of Common
Stock then issuable upon conversion of the shares of Class A Common Stock and
Class B Common Stock outstanding immediately prior to the issuance or deemed
issuance of such Common Stock, plus (C) the number of shares of Common Stock
which the aggregate consideration (if any) received by the Corporation for the
total number of such shares of Common Stock so issued or sold or deemed issued
or sold would purchase at the Series A-2 Conversion Price in effect immediately
prior to such issue or sale or deemed issuance or sale, and (y) the denominator
of which shall be the sum of (A) the number of shares of Common Stock
outstanding and which in accordance with Section C.6.(c) have been, and continue
to be, deemed outstanding (other than any such shares which may be deemed to be
outstanding and which are referred to in clause (x) of such Section C.6.(c))
immediately prior to such issue or sale, or deemed issuance or sale plus, (B)
the number of shares of Common Stock then issuable upon conversion of the shares
of Class A Common Stock and Class B Common Stock outstanding immediately prior
to such issue or sale or deemed issuance or sale, plus (C) the number of such
shares of Common Stock so issued or sold or deemed issued or sold; provided,
however, that additional shares of Common Stock issued or sold without
consideration shall be deemed to have been issued or sold for $.001 per share.

          (c)  EFFECT ON SERIES A-2 CONVERSION PRICE OF CERTAIN EVENTS.  For
purposes of determining the adjusted Series A-2 Conversion Price under Section
C.6.(b), the following will be applicable:

               (i)  ISSUANCE OF OPTIONS.  If the Corporation in any manner
grants any rights or options to subscribe for or to purchase Common Stock or any
stock or other securities 


                                         -15-
<PAGE>

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") 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 is less than the Series A-2 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 such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share.  For purposes of this Section, the
"price per share for which Common Stock is issuable" will be 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 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 to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of Options or upon
the conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options.  No further adjustment of the Series A-2 Conversion
Price will be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.

               (ii) ISSUANCE OF CONVERTIBLE SECURITIES.  If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon such conversion or exchange is less than
the Series A-2 Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share.  For the purposes of this Section, the "price per share for which
Common Stock is issuable" will be 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 Convertible Securities.  No
further adjustment of the Series A-2 Conversion Price will be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Series A-2 Conversion
Price had been or are to be made pursuant to other provisions of this Section
C.6., no further adjustment of the Series A-2 Conversion Price will be made by
reason of such issue or sale.

               (iii)     CHANGE IN OPTION PRICE OR CONVERSION RATE.  If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, and such change is not due
solely to the operation of anti-dilution provisions similar in nature to those
set forth in this Section C.6., the Series A-2 Conversion Price in effect at the
time of such change will be 


                                         -16-
<PAGE>

readjusted to the Series A-2 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 changed conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of the Series A-2
Conversion Price then in effect, such adjustment will not be effective until 30
days after written notice thereof has been given by the Corporation to all
holders of shares of Series A-2 Preferred Stock (except no notice need be given
and no delay in such adjustment shall occur if such adjustment is made pursuant
to the terms of such Options or Convertible Securities upon their original
issuance). 

               (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES.  Upon the expiration of any Option or the termination of any right
to convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A-2 Conversion Price then in effect hereunder will
be adjusted to the Series A-2 Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.

               (v)  CALCULATION OF CONSIDERATION RECEIVED.  If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor will be deemed to be the
net amount received by the Corporation therefor.  In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price thereof as of the date of
receipt.  If any Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Corporation is the surviving
Corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
Corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be.  The fair value of any consideration other than
cash and securities will be reasonably determined in good faith by the Board of
Directors of the Corporation.

               (vi) INTEGRATED TRANSACTIONS.  In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued without consideration.

               (vii)     TREASURY SHARES.  The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Corporation or any subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.

               (viii)    RECORD DATE.  If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then for purposes of this Section 


                                         -17-

<PAGE>

C.6. such record date will 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 upon the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may be.

               (ix) CERTAIN EVENTS.  If any event occurs of the type
contemplated by the provisions of this Section C.6. but not expressly provided
for by such provisions (including, without limitation, the granting of stock or
capital appreciation rights, phantom stock rights or other rights with equity
features), then the Board of Directors of the Corporation shall make an
appropriate adjustment in the Series A-2 Conversion Price so as to protect the
rights of the holders of Series A-2 Preferred Stock; provided that no such
adjustment shall increase the Series A-2 Conversion Price as otherwise
determined pursuant to this Section C.6. or decrease the number of shares of
Common Stock issuable upon conversion of each share of Series A-2 Preferred
Stock.

               (x)  CERTAIN EXCEPTIONS.  Anything herein to the contrary
notwithstanding, no adjustment will be made to the Series A-2 Conversion Price
by reason of (i) the issuance of shares of Common Stock upon exercise of options
outstanding on the date of filing of this Third Amended and Restated Certificate
of Incorporation, (ii) the issuance after the date of the Series A Purchase
Agreement of options to employees, officers, directors or consultants of the
Corporation for the purchase, when taken together, of an aggregate of up to
16,000 shares of Common Stock (such number to be proportionately adjusted in the
event of a subdivision or a combination of the Common Stock) (the "Future
Options") (iii) shares of Common Stock issued upon exercise of the Future
Options, (iv) the issuance of shares of Common Stock upon conversion of Class A
Common Stock, Class B Common Stock or Series A-2 Preferred Stock, and (v) the
issuance of shares of Class A Common Stock, Class B Common Stock or Common Stock
upon a subdivision or combination of the Common Stock for which an adjustment to
the Series A-2 Conversion Price is made pursuant to Section C.6.(d).

          (d)  SUBDIVISION OR COMBINATION OF COMMON STOCK.  If the Corporation
at any time after the date of filing of this Third Amended and Restated
Certificate of Incorporation subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Series A-2 Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced, and if the
Corporation at any time after the date of filing of this Third Amended and
Restated Certificate of Incorporation combines (by reverse stock split or
otherwise) its outstanding shares of Common Stock into a smaller number of
shares, the Series A-2 Conversion Price in effect immediately prior to such
combination will be proportionately increased.

          (e)  REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. 
Any capital reorganization, reclassification, consolidation, merger or sale of
all or substantially all of the Corporation's assets to another person or entity
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an "Organic Change."  Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the shares of Series A-2 Preferred Stock then
outstanding) to insure that each of the holders 


                                         -18-

<PAGE>

of Series A-2 Preferred Stock will thereafter have the right to acquire and
receive, in lieu of or in addition to the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
shares of Series A-2 Preferred Stock, such shares of stock, securities or assets
as such holder would have received in connection with such Organic Change if
such holder had converted his Series A-2 Preferred Stock immediately prior to
such Organic Change.  In any such case, the Corporation will make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the shares of Series A-2 Preferred Stock then outstanding) to insure that the
provisions of this Section C.6. will thereafter be applicable to Series A-2
Preferred Stock (including, in the case of any such consolidation, merger or
sale in which the successor corporation or purchasing corporation is other than
the Corporation, an immediate adjustment of the Series A-2 Conversion Price to
the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and a corresponding immediate adjustment in the number of shares
of Common Stock acquirable and receivable upon conversion of shares of Series
A-2 Preferred Stock, if the value so reflected is less than the Series A-2
Conversion Price in effect immediately prior to such consolidation, merger or
sale).  The Corporation will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor corporation (if other
than the Corporation) resulting from consolidation or merger or the corporation
purchasing such assets assumes by written instrument (in form reasonably
satisfactory to the holders of a majority of the shares of Series A-2 Preferred
Stock then outstanding), the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.

          (f)  NOTICES.

                (i) Immediately upon any adjustment of the Series A-2 Conversion
Price, the Corporation will give written notice thereof to all holders of shares
of Series A-2 Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.

               (ii) The Corporation will give written notice to all holders of
shares of Series A-2 Preferred Stock as soon as possible but in any event at
least 20 days prior to the date on which the Corporation closes its books or
takes a record (A) with respect to any dividend or distribution upon Common
Stock, (B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Liquidation.

              (iii) The Corporation will also give written notice to the
holders of shares of Series A-2 Preferred Stock as soon as possible but in any
event at least 20 days prior to the date on which any Liquidation will take
place.

          (g)  PURCHASE RIGHTS.  If at any time the Corporation grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of Common
Stock ("Purchase Rights"), then each holder of shares of Series A-2 Preferred
Stock will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
conversion of such holder's shares of Series A-2 Preferred Stock immediately
before the date on which a record is 


                                         -19-

<PAGE>

taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

          (h)  RESERVATION OF COMMON STOCK.  The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Series A-2 Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A-2 Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A-2 Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.

          (i)  TAXES AND CHARGES.  The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Series A-2 Preferred Stock.

          (j)  PROTECTION OF CONVERSION RIGHTS.  The Corporation shall not amend
its Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issuance or sale of securities or
take 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 the
carrying out of all the provisions of this Section C.6. and will take all
actions that may be necessary or appropriate in order to protect the rights of
the holders of shares of Series A-2 Preferred Stock to convert such shares
against impairment.

          (k)  AUTOMATIC CONVERSION.  The shares of Series A-2 Preferred Stock
shall automatically be converted into shares of Common Stock at the Series A-2
Conversion Price then in effect upon the earlier to occur of (i) the date on
which a majority of the shares of Series A-2 Preferred Stock originally issued
and outstanding (such number to be adjusted proportionately in the event the
shares of Series A-2 Preferred Stock are subdivided into a greater number or
combined into a lesser number) shall have been converted into shares of Common
Stock or (ii) the closing of a Qualified Public Offering; provided, however,
that the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless certificates
evidencing such shares of Series A-2 Preferred Stock being converted are either
delivered to the Corporation or any transfer agent or the holder notifies the
Corporation or any transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith.  Upon the automatic conversion of Series A-2 Preferred
Stock, the holder of such Series A-2 Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of any
transfer agent for the Common Stock.  Thereupon, there shall be issued and
delivered to such holder, promptly at such office and in his name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series A-2
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred.  In connection with the Qualified Public Offering, any
former holder of 


                                         -20-

<PAGE>

shares of Series A-2 Preferred Stock converted pursuant to this paragraph (k) of
this Section C.6. may elect to sell, at such time, to the Corporation up to .01%
of its Common Stock at a price per share equal to the price per share received
by the Corporation in the Qualified Public Offering upon notice and delivery of
such shares to the Corporation.  

     7.   BOARD REPRESENTATION.  (a)  For so long as any Series A-2 Preferred
Stock shall remain outstanding, except as provided in clause (b) of this Section
7, the Board of Directors of the Corporation, and any committee thereof, shall
at all times have at least two members that have been designated by the holders
of a majority of the Series A-2 Preferred Stock.

          (b)  For so long as any Series A-2 Preferred Stock shall remain
outstanding, subject to the terms of Section D of this Article IV, without the
affirmative vote, or written consent, of the holders of not less than a majority
of the outstanding shares of Series A-2 Preferred Stock, the number of members
of the Board of Directors shall not exceed nine; provided however, that (i) the
number of members of the Board of Directors may be increased to ten (without
such affirmative vote, or written consent) by the addition of two members who
are approved by the Chief Executive Officer of the Corporation and by the
affirmative vote, or written consent, of the holders of not less than a majority
of the outstanding shares of Series A-2 Preferred Stock and (ii) so long as such
additional two members are members of the Board of Directors of the Corporation,
the number of members of the Board of Directors designated pursuant to clause
(a) of this Section 7 shall be reduced to one.

     8.   CANCELLATION OF SERIES A-2 PREFERRED STOCK.  No share or shares of
Series A-2 Preferred Stock acquired by the Corporation by reason of redemption,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.

     SECTION D.  SERIES A PREFERRED STOCK: GENERAL PROVISIONS

     1.   EVENTS OF NONCOMPLIANCE.

          (a)  DEFINITION.  An Event of Noncompliance shall be deemed to have
occurred if:

               (i)  the Corporation fails to make any redemption payment with
respect to the Series A Preferred Stock which it is obligated to make hereunder,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;

               (ii) the Corporation breaches or otherwise fails to perform or
observe any other covenant or agreement set forth herein or in the Series A
Purchase Agreement; provided, that no Event of Noncompliance shall be deemed to
have occurred under this subparagraph (ii) if either (x) holder(s) of a majority
of the shares of Series A Preferred Stock then outstanding shall not have
provided written notice to the Corporation specifying the nature of such breach
or failure or (y) the Corporation establishes (to the reasonable satisfaction of
the holders of a majority of the Series A Preferred Stock then outstanding) that
(a) the particular Event of Noncompliance has not been caused by knowing or
purposeful conduct by the 


                                         -21-

<PAGE>

Corporation or any Subsidiary, (b) the Corporation has exercised, and continues
to exercise, its best efforts to expeditiously cure the Event of Noncompliance
(if cure is possible), (c) the Event of Noncompliance is not material to the
financial condition, operating results, operations, assets, rights or business
prospects of the Corporation and its Subsidiaries, taken as a whole, and (d) the
Event of Noncompliance is not material to any holder's investment in the Series
A Preferred Stock;

               (iii)     any default or the happening of any other event shall
occur under one or more indentures, agreements or other instruments under which
any Indebtedness of the Corporation or any Subsidiary may be issued, the effect
of which is the acceleration of the maturity of Indebtedness of the Corporation
outstanding thereunder which, in the aggregate, equals of exceeds $250,000;

               (iv) a receiver, conservator, custodian, liquidator or trustee of
the Corporation or any Subsidiary or of all or any of the assets of any of them,
is appointed by court order and such order remains in effect for more than
thirty (30) days; or an order for relief is entered under the federal bankruptcy
laws with respect to the Corporation or any Subsidiary; or any of the material
assets of any of them is sequestered by court order and such order remains in
effect for more than thirty (30) days after such filing;

               (v)  the Corporation or any Subsidiary files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law;

               (vi) the Corporation or any Subsidiary makes an assignment for
the benefit of its creditors, or admits in writing its inability to pay, or in
fact does not pay, its debts generally as they become due, or consents to the
appointment of a receiver, conservator, custodian, liquidator or trustee of the
Corporation or any Subsidiary, or all or any part of the property of any of
them; or

               (vii)     any representation or warranty contained in the Series
A Purchase Agreement or required to be furnished to any holder of Series A
Preferred Stock pursuant to the Series A Purchase Agreement is false, inaccurate
or misleading in any material respect on the date or dates made or furnished,
subject to the survival provisions of Section 9.2 of the Series A Purchase
Agreement; provided, that no Event of Noncompliance shall be deemed to have
occurred under this subparagraph (vii) if either (a) the Corporation establishes
(to the reasonable satisfaction of the holders of a majority of the Series A
Preferred Stock then outstanding) that such false, inaccurate or misleading
representation or warranty is not material to any holder's investment in the
Series A Preferred Stock or (b) the Corporation shall have redeemed all of the
shares of Series A-1 Preferred Stock by payment of the full redemption price
therefore.

          (b)  ELECTION OF DIRECTORS.  (i)  If at any time there has occurred
and is continuing an Event of Noncompliance and such Event of Noncompliance has
continued for a period of at least 14 days, the holders of Series A Preferred
Stock shall have the exclusive and special right (in addition to any other
voting rights), voting separately as a class, to elect, at any 


                                         -22-

<PAGE>

annual meeting of stockholders, at a special meeting held in place thereof, at a
special meeting of the holders of Series A Preferred Stock called as hereinafter
provided, or by written consent, a majority of the members of the Board of
Directors.

               (ii) At any time after an Event of Noncompliance has occurred and
is continuing, the secretary of the Corporation may and, upon written request of
holders of record of at least 20% of the shares of Series A Preferred Stock then
outstanding addressed to him at the registered office of the Corporation shall,
call a special meeting of the holders of Series A Preferred Stock for the
purpose of electing such members of the Board of Directors, such meeting to be
held at the registered office of the Corporation, or such other place as such
request shall specify, as soon as practicable after the receipt of such request,
upon the notice provided by law and the by-laws of the Corporation for the
holding of special meetings of stockholders.  If such special meeting shall not
be called by the secretary within 3 days after receipt of such request, then the
holders of record of at least 20% of the shares of Series A Preferred Stock then
outstanding may designate in writing one of their number to call such a meeting
at the place designated by such holders and upon the notice above provided, and
any person so designated for that purpose shall have access to the stock records
of the Corporation for such purpose.

               (iii)     At any meeting at which the holders of Series A
Preferred Stock shall be entitled to elect a majority of the members of the
Board of Directors as provided above, the holders of a majority of the shares of
Series A Preferred Stock then outstanding present in person or by proxy shall
constitute a quorum for the election of such directors, and the vote of the
holders of shares representing a majority of the shares of Series A Preferred
Stock so present at any such meeting at which there shall be such a quorum shall
be sufficient to elect such directors.  The election of such directors shall
automatically increase the number of members of the Board of Directors by the
number of directors so elected.  Therefore, the number of additional directors
to be elected by such holders shall be equal to the total number of directors
immediately prior to such election, plus one (e.g., if there were five
directors, the number of additional directors would be six).  The persons so
elected as directors by the holders of Series A Preferred Stock shall hold
office until the next annual meeting of stockholders and until their successors
shall have been elected by such holders or until there shall be no existing
Event of Noncompliance.  Upon there ceasing to be any existing Event of
Noncompliance, any directors so elected by the holders of Series A Preferred
Stock shall forthwith cease to be directors of the Corporation, and the number
of directorships shall automatically be reduced accordingly.  If a vacancy
occurs in a directorship elected by the holders of Series A Preferred Stock
voting separately as a class, a successor may be appointed by the remaining
directors or director so elected by the holders of Series A Preferred Stock. 

               (iv) At any meeting at which the holders of Series A Preferred
Stock shall be entitled to elect the majority of the members of the Board of
Directors as provided above, or any adjournment thereof, (A) the absence of a
quorum of the holders of Series A Preferred Stock shall not prevent the election
of directors other than those to be elected by the holders of Series A Preferred
Stock voting separately as a class, (B) the absence of a quorum of the holders
of classes or series of stock entitled to elect directors other than those
elected by the holders of Series A Preferred Stock shall not prevent the
election of the directors to be elected by the holders of Series A Preferred
Stock voting separately as a class, (C) in the 


                                         -23-

<PAGE>

absence of a quorum of the holders of Series A Preferred Stock, the holders of
shares representing a majority of the shares of Series A Preferred Stock present
in person or by proxy shall have power to adjourn from time to time the meeting
for the election of the directors which they are entitled to elect voting
separately as a class, without notice other than announcement at the meeting,
until a quorum shall be present, and (D) in the absence of a quorum of the
holders of the classes or series of stock entitled to elect directors other than
those elected by the holders of Series A Preferred Stock, the holders of a
majority of such classes or series present in person or by proxy shall have
power to adjourn from time to time the meeting for the election of the directors
which they are entitled to elect, without notice other than announcement at the
meeting, until a quorum shall be present.

               (v)  At any time after the holders of Series A Preferred Stock
shall have become entitled to elect a majority of the Board of Directors
pursuant to this Section D.1., such holders may do so by a consent in writing
setting forth the action so taken, and signed by the holders of shares
representing a majority of the shares of Series A Preferred Stock then
outstanding.

          (c)  REDEMPTION OF SERIES A-1 PREFERRED STOCK.  In addition to the
rights set forth in paragraph (b) of this Section D.1., if at any time an Event
of Noncompliance has occurred and has (other than with respect to an Event of
Noncompliance under Section D.1.(a)(i)) continued uncured for a period of at
least 14 days, the holders of a majority of the shares of Series A-1 Preferred
Stock then outstanding may demand (by written notice delivered to the
Corporation) immediate redemption of all or any portion of the Series A-1
Preferred Stock owned by such holders at a price per share equal to the Series
A-1 Redemption Price.  The Corporation will give prompt written notice of such
election to the other holders of Series A-1 Preferred Stock (but in any event
within 10 days after receipt of the initial demand for redemption), and each
such other holder may demand immediate redemption of all or any portion of such
holder's Series A-1 Preferred Stock by giving written notice thereof to the
Corporation within 30 days after receipt of the Corporation's notice.  The
Corporation will redeem all Series A-1 Preferred Stock as to which rights under
this paragraph have been exercised at the Series A-1 Redemption Price, within 45
days after receipt of the initial demand for redemption on the terms and
conditions provided in Section B.5. for a redemption of Series A-1 Preferred
Stock.

          (d)  OTHER RIGHTS.  If an Event of Noncompliance exists, each holder
of shares of Series A Preferred Stock shall also have any other rights to which
such holder is entitled to under any contract or agreement at any time and any
other rights which such holder may have pursuant to applicable law.

          (e)  DELAYS OR OMISSIONS.  No failure to exercise or delay in the
exercise of any right, power or remedy accruing to any holder of Series A
Preferred Stock upon any Event of Noncompliance hereunder shall impair such
right, power or remedy of such holder or shall it be construed to be a waiver of
any such Event of Noncompliance, or an acquiescence therein, or of or in any
similar Event of Noncompliance thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any Event of Noncompliance
theretofore or thereafter occurring.


                                         -24-

<PAGE>

     2.   DEFINITIONS.  As used in Section B, Section C or Section D of this
ARTICLE IV, the following terms have the following meanings:

          "Indebtedness" of any Person shall mean the principal of, premium, if
any, and unpaid interest on (a) indebtedness for money borrowed from others; (b)
indebtedness guaranteed, directly or indirectly, in any manner by such Person,
or in effect guaranteed, directly or indirectly, in any manner by such Person
through an agreement, contingent or otherwise, to supply funds to, or in any
other manner invest in, the debtor, or to purchase indebtedness, or to purchase
and pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling the debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss; (c) all
indebtedness secured by any mortgage, lien, pledge, charge or other encumbrance
upon property owned by such Person, even though such Person has not in any
manner become liable for the payment of such indebtedness; (d) all indebtedness
of such Person created or arising under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security agreement
with respect to property acquired by such Person even though the rights and
remedies of the seller, lessor or lender under such agreement or lease in the
event of default may be limited to repossession or sale of such property; and
(e) renewals, extensions and refunding of any such indebtedness.

          "Person" means an individual, a partnership, a Corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.

          "Public Offering" means a firm commitment underwritten public offering
of Common Stock to the public pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended, other than an offering
made in connection with a business acquisition or combination or an employee
benefit plan.

          "Qualified Public Offering" means a Public Offering in which:

          (i)    the aggregate gross proceeds received by the Corporation
                 in such Public Offering equals or exceeds Ten Million
                 Dollars ($10,000,000); 

          (ii)   the price per share received by the Corporation in such
                 Public Offering is equal to or greater than $10.00; and

          (iii)  upon the closing of such Public Offering, the Common Stock
                 will either be quoted on the National Association of
                 Securities Dealers Automated Quotation System/National
                 Market Systems ("NASDAQ System") or listed on the American
                 Stock Exchange or the New York Stock Exchange.

          "Series A Purchase Agreement" means that certain Series A-1 and Series
A-2 Preferred Stock Purchase Agreement dated as of June 30, 1994 by and between
the Corporation, Frontenac VI Limited Partnership, certain other investors and
certain other persons, as such agreement may from time to time be amended in
accordance with its terms.


                                         -25-

<PAGE>

          "Series A-1 Liquidation Price" means 29.7 cents per share (such amount
to be proportionately decreased in the event the Series A-1 Preferred Stock is
subdivided into a greater 1number or increased in the event the Series A-1
Preferred Stock is combined into a lesser number), plus accrued but unpaid
dividends on such share, plus declared but unpaid dividends on such share, and
plus the amount (if any) by which (a) the sum of accrued but unpaid dividends on
such share and dividends paid on such share is less than (b) 3.3 cents (such
amount to be proportionately decreased in the event the Series A-1 Preferred
Stock is subdivided into a greater number or increased in the event the
Series A-1 Preferred Stock is combined into a lesser number).

          "Series A Preferred Stock" means any of the Series A-1 Preferred Stock
or the Series A-2 Preferred Stock.

          "Series A-1 Redemption Price" means 29.7 cents per share (such amount
to be proportionately decreased in the event the Series A-1 Preferred Stock is
subdivided into a greater number or increased in the event the Series A-1
Preferred Stock is combined into a lesser number), plus accrued but unpaid
dividends on such share, plus declared but unpaid dividends on such share, and
plus the amount (if any) by which (a) the sum of accrued but unpaid dividends on
such share and dividends paid on such share is less than (b) 3.3 cents (such
amount to be proportionately decreased in the event the Series A-1 Preferred
Stock is subdivided into a greater number or increased in the event the
Series A-1 Preferred Stock is combined into a lesser number).

          "Subsidiary" means any Corporation, association or other business
entity of which securities or other ownership interests representing more than
fifty percent (50%) of the ordinary voting power are, at the time as of which
any determination is being made, owned or controlled by the Corporation or one
or more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.

     3.   MISCELLANEOUS.

          (a)  NOTICES.  Except as otherwise expressly provided hereunder, all
notices referred to in Section B, Section C or Section D of this ARTICLE IV
shall be in writing and shall be delivered personally or by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier services, charges prepaid, and shall be deemed to have been
given when personally delivered to such holder, one (1) business day after the
same is delivered to such an overnight courier service, charges prepaid, or five
(5) business days after the same has been so deposited in the United States
mail, certified or registered mail, return receipt requested, postage prepaid,
and addressed (i) to the Corporation, at its principal executive offices and
(ii) to any holder of Series A Preferred Stock, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).

          (b)  REGISTRATION OF TRANSFER.  The Corporation shall keep at its
principal office a register for the registration of Series A Preferred Stock. 
Upon the surrender of any certificate representing Series A Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new


                                         -26-
<PAGE>

certificate or certificates in exchange therefor representing in the aggregate
the number of shares of Series A Preferred Stock represented by the surrendered
certificate.  Each such new certificate shall be registered in such name and
shall represent such number of shares of Series A Preferred Stock as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.

          (c)  REPLACEMENT OF CERTIFICATES.  Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of Series A Preferred Stock, and, in the case
of any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of Series A Preferred Stock represented by such lost, stolen, destroyed
or mutilated certificate.

          (d)  AMENDMENT AND WAIVER.  No amendment, modification or waiver shall
be binding or effective with respect to any provision of Section B, Section C or
this Section D of this ARTICLE IV hereof, and no change in the terms of such
Sections may be accomplished by merger or consolidation of the Corporation with
another corporation or entity, without the prior written consent of the holders
of a majority of the shares of Series A Preferred Stock outstanding at the time
such action is taken.

     SECTION E.     ADDITIONAL SERIES OF PREFERRED STOCK.  

     Subject to the terms contained in any designation of a series of Preferred
Stock and subject to the other provisions of this Third Amended and Restated
Certificate of Incorporation, the Board of Directors of the Corporation (the
"Board of Directors") is hereby expressly authorized to provide for the issuance
of and to issue shares of the Preferred Stock in series, and by filing a
certificate pursuant to the laws of the State of Delaware, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof.  The number
of authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
any Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the certificate or certificates establishing such series
of Preferred Stock.

     C.   GENERAL PROVISIONS.

     1.   VOTING.  Except as provided by law or this Third Amended and Restated
Certificate of Incorporation with respect to voting by class or series, the
holder of each outstanding share of stock of the Corporation (regardless of
class or series) shall be entitled to one vote (except with respect to any
greater or lesser vote or no vote which may be fixed by this Third Amended and
Restated Certificate of Incorporation or by the resolution of the Board of
Directors providing for the issue of a series of Preferred Stock, in which event
the holder of


                                         -27-

<PAGE>

each outstanding share of such series shall be entitled to such vote or no vote
as may be fixed in such resolution), on each matter submitted to a vote at a
meeting of stockholders.

     2.   QUORUM AT STOCKHOLDERS' MEETINGS.  At any meeting of stockholders, the
presence in person or by proxy of the holders of record of issued and
outstanding shares of stock of the Corporation entitled to vote a majority of
the votes entitled to be voted at such meeting shall constitute a quorum for all
purposes, except as otherwise provided by this Third Amended and Restated
Certificate of Incorporation or required by applicable law.


                                      ARTICLE V

     This Third Amended and Restated Certificate of Incorporation shall not be
amended, and no series of Preferred Stock shall be designated (other than the
Series A Preferred Stock), to do any of the following without the affirmative
vote or written consent of the holders of not less than a majority of the
outstanding shares of Series A Preferred Stock:

     (a)  amend or repeal any provision of, or add any provision to, this Third
          Amended and Restated Certificate of Incorporation, if such action
          would alter or change the preferences, rights, privileges or powers
          of, or the restrictions provided for the benefit of, the Series A
          Preferred Stock, or increase or decrease the number of shares of the
          Series A Preferred Stock authorized;

     (b)  authorize or issue shares of any class of stock not authorized herein,
          or of any series of Preferred Stock, having any preference or priority
          as to dividends or assets superior to or on a parity with any such
          preference or priority of the Series A Preferred Stock, issue any
          shares of the Series A Preferred Stock (other than pursuant to the
          Series A Purchase Agreement), or authorize or issue shares of stock of
          any class or any bonds, debentures, notes or other obligations
          convertible into or exchangeable for, or having option rights to
          purchase, any shares of Series A Preferred Stock or of any other class
          or series of stock of the Corporation having any preference or
          priority as to dividends or assets superior to or on a parity with any
          such preference or priority of the Series A Preferred Stock;

     (c)  reclassify any stock into shares having any preference or priority as
          to dividends or assets superior to or on a parity with any such
          preference or priority of the Series A Preferred Stock; 

     (d)  amend or repeal any provision of this ARTICLE V.


                                      ARTICLE VI

     The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than seven nor more
than fifteen persons.  The exact number shall be determined from time to time by
resolution adopted by the affirmative 


                                         -28-

<PAGE>

vote of a majority of the directors in office at the time of adoption of such
resolution.  Initially, the number of directors shall be eleven.

     Such directors shall be divided into three classes, Class I, Class II and
Class III; with Class I and Class II each having four members and Class III
having three members.  At the election of directors immediately following the
adoption of this Third Amended and Restated Certificate of Incorporation,
Class I directors will be elected for a one-year term, Class II directors will
be elected for a two-year term and Class III directors will be elected for a
three-year term.  At each annual meeting of stockholders after such election,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term.  If the number of directors is changed,
any increase or decrease shall be apportioned among the classes by the Board of
Directors so as to maintain the number of directors in each class as nearly
equal as reasonably possible, and any additional director of any class elected
to fill a vacancy resulting from an increase in such class shall hold office for
a term that shall coincide with the remaining term of that class.  In no case
will a decrease in the number of directors shorten the term of any incumbent
director even though such decrease may result in an inequality of the classes
until the expiration of such term.  A director shall hold office until the
annual meeting of the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement or removal from office.  No director elected by the
stockholders of the Corporation may be removed except for cause.  Except as
required by law or the provisions of this Third Amended and Restated Certificate
of Incorporation, all vacancies on the Board of Directors and newly-created
directorships shall be filled by the Board of Directors.  Any director elected
to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor.

     Notwithstanding the foregoing, whenever the holders of any one or more
class or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorship shall be governed by the terms
of this Third Amended and Restated Certificate of Incorporation and any
resolutions of the Board of Directors applicable thereto, and such directors so
elected shall not be divided into classes pursuant to this Article VI. 
Notwithstanding anything to the contrary contained in this Third Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least 80% of the shares entitled to vote generally in the election of directors
shall be required to amend, alter or repeal, or to adopt any provision
inconsistent with, this Article VI. 

     In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, amend or repeal the
By-laws of the Corporation.


                                     ARTICLE VII

     Election of directors need not be by written ballot unless the By-laws of
the Corporation so provide.


                                         -29-

<PAGE>

                                     ARTICLE VIII

     The Corporation reserves the right to amend, alter or repeal any provision
contained in this Third Amended and Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
the stockholders herein are granted subject to this reservation.


                                      ARTICLE IX

     The Corporation shall indemnify, in accordance with and to the full extent
now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
Corporation), by reason of his acting as a director of the Corporation (and the
Corporation, in the discretion of the Board of Directors, may so indemnify a
person by reason of the fact that he is or was an officer or employee of the
Corporation or is or was serving at the request of the Corporation in any other
capacity for or on behalf of the Corporation) against any liability or expense
actually and reasonably incurred by such person in respect thereof; provided,
however, that the Corporation shall not be obligated to indemnify any such
person (i) with respect to proceedings, claims or actions initiated or brought
voluntarily by such person and not by way of defense, or (ii) for any amounts
paid in settlement of an action effected without the prior written consent of
the Corporation to such settlement.  Such indemnification is not exclusive of
any other right to indemnification provided by law, agreement or otherwise.


                                      ARTICLE X

     No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided, however, that this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.


                                      ARTICLE XI

     No amendment to or repeal of Article IX or X of this Third Amended and
Restated Certificate of Incorporation shall apply to or have any effect on the
rights of any individual referred to in Articles IX or X for or with respect to
acts or omissions of such individual occurring prior to such amendment or
repeal.


                                     ARTICLE XII


                                         -30-

<PAGE>

     (a)  WRITTEN CONSENT.  At any time after the closing of a Public Offering,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.

     (b)  SPECIAL MEETINGS.  Special meetings of stockholders of the Corporation
may be called upon not less than ten nor more than 60 days' written notice only
by the Board of Directors pursuant to a resolution approved by a majority of the
Board of Directors.

     (c)  AMENDMENT.  Notwithstanding anything contained in this Third Amended
and Restated Certificate of Incorporation to the contrary, the affirmative vote
of the holders of at least 80% of the shares entitled to vote generally in the
election of directors shall be required to amend, alter or repeal, or to adopt
any provision inconsistent with, this Article XII. 


                                     ARTICLE XIII

     Meetings of stockholders may be held within or without the State of
Delaware as the By-Laws of the Corporation may provide.  The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors of the Corporation
or in the By-laws of the Corporation.  Election of directors need not be by
written ballot unless the By-laws of the Corporation so provide.


                                     ARTICLE XIV

     The By-laws of the Corporation may be altered, amended, or repealed or new
By-laws may be adopted by the Board of Directors or by the vote of the holders
of 66-2/3% of the shares entitled to vote generally for the election of
directors if notice of such alteration, amendment, repeal or adoption of new
By-laws is contained in the notice of such special meeting.


     IN WITNESS WHEREOF, the Corporation has caused this Third Amended and
Restated Certificate of Incorporation to be signed by its Chairman and Chief
Executive Officer on February 27, 1996.

                                   PLATINUM ENTERTAINMENT, INC.



                                   By:  /s/ Steven Devick
                                        -----------------
                                        Steven Devick
                                        Chairman and Chief Executive Officer


                                         -31-

<PAGE>

                     CERTIFICATE OF RETIREMENT AND PROHIBITION OF

                                 REISSUANCE OF SHARES

                                          OF

                             PLATINUM ENTERTAINMENT, INC.

               (Pursuant to Section 243 of the General Corporation Law
                              of the State of Delaware)

It is hereby certified that:

     1.   The name of the corporation (hereinafter called the "corporation") is

                             Platinum Entertainment, Inc.

     2.   On March 15, 1996, the corporation retired 240,000 shares of its Class
A Common Stock, 1,080,000 shares of its Class B Common Stock, 18,257,576 shares
of its Series A-1 Non-Convertible Preferred Stock and 18,257,576 shares of its
Series A-2 Convertible Preferred Stock.

     3.   The Restated Certificate of Incorporation of the corporation prohibits
the reissuance of the shares of Class A Common Stock, Class B Common Stock,
Series A-1 Non-Convertible Preferred Stock and Series A-2 Convertible Preferred
Stock when so retired, and the shares so retired constitute all the authorized
shares of Class A Common Stock, Class B Common Stock, Series A-1 Non-Convertible
Preferred Stock and Series A-2 Convertible Preferred Stock; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this Certificate as therein
provided, the Restated Certificate of Incorporation of said corporation shall be
amended so as to effect a reduction in the authorized number of shares of the
corporation by the elimination therefrom of all reference to (i) said Class A
Common Stock, comprising Two Hundred Forty Thousand (240,000) shares of the par
value of $.001 each, (ii) said Class B Common Stock, comprising One Million
Eighty Thousand (1,080,000) shares of the par value of $.001 each, (iii) said
Series A-1 Non-Convertible Preferred Stock, comprising Eighteen Million Two
Hundred Fifty Seven Thousand Five Hundred Seventy Six (18,257,576) shares of the
par value of $.001 each, and (iv) said Series A-2 Convertible Preferred Stock
comprising Eighteen Million Two Hundred Fifty Seven Thousand Five Hundred
Seventy Six (18,257,576) shares of the par value of $.001 each.


                              Steven Devick
                              Chairman of the Board

Attest:


Douglas C. Laux
Secretary

<PAGE>


                            PLATINUM ENTERTAINMENT, INC. 

                       CERTIFICATE OF THE POWERS, DESIGNATIONS,
                            PREFERENCES AND RIGHTS OF THE
                        SERIES B CONVERTIBLE PREFERRED STOCK,
                              PAR VALUE $.001 PER SHARE

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


          The following resolution was duly adopted by the Board of Directors of
Platinum Entertainment Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, on December 12, 1997, by vote at a meeting of the Board of
Directors:

          RESOLVED that, pursuant to the authority expressly granted to the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, there be created from the 10,000,000 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock"), of the Corporation
authorized to be issued pursuant to the Certificate of Incorporation, a series
of Preferred Stock consisting of 20,000 shares of Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the voting powers, designations,
preferences and relative, participating, optional or other special rights of
which, and qualifications, limitations or restrictions thereof, shall be as
follows:

          1.   DEFINITIONS.  As used herein, the following terms shall have 
the following meanings:

               1.1  "Affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such first Person.  For the purpose of this
definition, "control" shall mean, as to any Person, the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

               1.2  "Affiliate Warrants" shall mean the warrant for an aggregate
of 135,000 shares of Common Stock to be issued to Platinum Venture Partners II,
L.P., as nominee, and the warrant for an aggregate of 315,000 shares of Common
Stock to be issued to Platinum Venture Partners II, L.P., as nominee, each 

<PAGE>
                                                                               2

such warrant to be issued on the Closing Date (as defined in the Investment
Agreement).

               1.3  "Board of Directors" shall mean the Board of Directors of
the Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.

               1.4  "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.

               1.5  "Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Corporation, as amended from time to time.

               1.6  "Change of Control" shall mean (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
assets of the Corporation to any Person or group of Persons acting in concert as
a partnership or other group within the meaning of Rule 13d-5 under the Exchange
Act (a "GROUP OF PERSONS"), (ii) the merger or consolidation of the Corporation
with or into another corporation with the effect that the then existing
stockholders of the Corporation hold less than 50% of the combined voting power
of the then outstanding securities of the surviving corporation of such merger
or the corporation resulting from such consolidation ordinarily (and apart from
rights accruing under special circumstances) having the right to vote in the
election of directors, (iii) the replacement of a majority of the Board of
Directors, over a two-year period, from the directors who constituted the Board
of Directors at the beginning of such period, and such replacement shall not
have been approved by the Board of Directors (or its replacements approved by
the Board of Directors) as constituted at the beginning of such period, or (iv)
a Person or Group of Persons (other than the Investors and their Affiliates)
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Corporation representing 49% or more of the combined voting power of the then
outstanding securities of the Corporation ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors.

               1.7  "Class A Common Stock" shall mean the class of Class A
Common Stock, par value $.001 per share, of the Corporation or any other class
of stock resulting from successive changes or reclassifications of such Class A
Common Stock consisting solely of changes in par value, or from par value to no
par value, or as a result of a subdivision or combination.

               1.8  "Class B Common Stock" shall mean the class of Class B
Common Stock, par value $.001 per share, of the Corporation or any other class
of 


                                         -32-

<PAGE>
                                                                               3

stock resulting from successive changes or reclassifications of such Class B
Common Stock consisting solely of changes in par value, or from par value to no
par value, or as a result of a subdivision or combination.

               1.9  "Closing Price" of the Common Stock, as of any day, shall
mean (a) the last reported sale price of such stock (regular way), or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, in either case as reported on the principal national securities exchange
on which such stock is listed or admitted to trading or (b) if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
last reported sale price, or in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
the Common Stock, in either case reported on NASDAQ, or a similar service if
NASDAQ is no longer reporting such information.
               
               1.10 "Common Stock" shall mean the class of Common Stock, par
value $.001 per share, of the Corporation or any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

               1.11 "Common Stock Conversion Rate" shall mean, as of any date, a
rate for each share of Series B Preferred Stock equal to (i) the Liquidation
Value thereof plus all accrued and unpaid dividends thereon (whether or not
declared), divided by (ii) the Conversion Price in effect as of such date.

               1.12 "Conversion Price" shall mean (x) prior to the expiration of
the Thirty Day Period (as defined below), $5.9375 per share of Common Stock, as
adjusted hereunder (the "Initial Conversion Price"), or (y) after the expiration
of the Thirty Day Period, the lesser of (1) the Initial Conversion Price, as
adjusted hereunder, and (2) 100% of the average of the daily Closing Price per
share of Common Stock for the 30 consecutive trading days following the release
by the Corporation of its consolidated earnings statement for the fiscal year
ending May 31, 1998 (the "Thirty Day Period"), subject to appropriate adjustment
for the events described in Section 4.5(a) herein if any such event occurs
during the Thirty Day Period; provided that if the shares of Common Stock are
not then traded on any national securities exchange or quoted by NASDAQ or a
similar service, the Closing Price for the foregoing purposes shall be deemed to
be the fair market value of the shares of Common Stock as determined in good
faith by the Board of Directors of the Corporation.  If the Board of Directors
is unable to determine the fair market value, or if the holders of a majority of
the outstanding shares of Series B Preferred Stock disagree with the Board's
determination of fair market value then the fair market value will be determined
by an Independent Financial Expert in accordance with the provisions set forth
in the definition of Current Market Price herein.  The Conversion 

<PAGE>
                                                                               4

Price as determined in accordance with the foregoing shall be adjusted from time
to time in accordance with the provisions of Section 4.

               1.13 "Current Market Price" shall mean, with respect to each
share of Common Stock as of any date, the average of the daily Closing Prices
per share of Common Stock for the 10 consecutive Trading Days commencing 15
Trading Days prior to such date; provided that if on any such date the shares of
Common Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Current Market Price for
a share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors.  If the Board of Directors
is unable to determine the fair market value, or if the holders of a
majority-in-interest of the shares of Series B Preferred Stock disagree with the
Board's determination of fair market value by written notice delivered to the
Corporation within five (5) business days after the Board's determination
thereof is communicated in writing to holders of the Series B Preferred Stock
affected thereby, which notice specifies a majority-in-interest of such holders'
determination of fair market value, then the Corporation and a
majority-in-interest of such holders shall select an Independent Financial
Expert which shall determine such fair market value.  If the Corporation and
such holders are unable to agree upon an Independent Financial Expert within
fifteen (15) days after the request of such holders, each of the Corporation and
such holders shall select an Independent Financial Expert within five (5) days
following the expiration of such fifteen (15) day period, and these Independent
Financial Experts shall select a third Independent Financial Expert.  The
determination of fair market value by such Independent Financial Expert shall be
final, binding and conclusive on the Corporation and all holders of the Series B
Preferred Stock.  All costs and fees of any of the Independent Financial Experts
retained in accordance with the foregoing shall be borne by the Corporation. 

          1.14 "Dividend Amount" shall mean an amount per share of Series B
Preferred Stock (rounded to the nearest $ .01) equal to (1) $30 per $1,000
Liquidation Value of Series B Preferred Stock during the first year after the
Issue Date,(2) $35 per $1,000 Liquidation Value of Series B Preferred Stock
during the second year after the Issue Date, (3)$40 per $1,000 Liquidation Value
of Series B Preferred Stock during the third year after the Issue Date,(4) $45
per $1,000 Liquidation Value of Series B Preferred Stock during the fourth and
fifth years after the Issue Date and (5) $50 per $1,000 Liquidation Value of
Series B Preferred Stock at all times after the fifth anniversary of the Issue
Date.

               1.15 "Dividend Rate" shall mean (1) 3% per quarter during the
first year after the Issue Date,(2) 3.5% per quarter during the second year
after the Issue Date,(3) 4% per quarter during the third year after the Issue
Date, (4) 4.5% per quarter during the fourth and fifth years after the Issue
Date and (5) 5% per quarter at all times after the fifth anniversary of the
Issue Date.

<PAGE>
                                                                               5

               1.16 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

               1.17 "Excluded Securities" means (a) shares of Common Stock
issued upon conversion or exercise of convertible securities, warrants and
options of the Corporation outstanding on the Issue Date, (b) shares of Common
Stock, and options to purchase such shares, issued to officers, directors,
employees or former employees of, or consultants to, the Corporation or any of
its subsidiaries pursuant to any equity incentive plan, agreement or other
arrangement which has been approved by a vote of at least two-thirds (2/3rds) of
the Board of Directors, (c) shares of Common Stock issued upon conversion of the
shares of Series B Preferred Stock, (d) shares of Common Stock issued upon
exercise of the warrants issued to the purchasers of the shares of Series B
Preferred Stock pursuant to the Investment Agreement, (e) shares of Common Stock
issued upon the conversion of the Series C Preferred Stock, (f) shares of Common
Stock issued upon exercise of the Affiliate Warrants and (g) shares of Common
Stock issued upon exercise of the Harnick Warrant.          

               1.18 "Harnick Warrant" means the warrant to purchase 50,000
shares of Common Stock to be issued to Carl D. Harnick on the Closing Date (as
defined in the Investment Agreement).

               1.19 "Issue Date" shall mean the Closing Date (as defined in the
Investment Agreement).

               1.20 "Investment Agreement" shall mean the Investment Agreement,
dated as of October 12, 1997, as amended, between the Corporation, the Investors
and certain other parties thereto, as hereafter amended from time to time.

               1.21 "Investors" shall mean MAC Music LLC, a Delaware limited
liability company, and SK-Palladin Partners, LP, a Delaware limited partnership.


               1.22 "Junior Stock" shall mean the Common Stock, the Class A
Common Stock, the Class B Common Stock, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock and the shares of any other class or series of stock
of the Corporation which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be junior to the Series B Preferred
Stock in respect of the right to receive dividends and to participate in any
distribution of assets other than by way of dividends.

               1.23 "Liquidation Value" shall have the meaning assigned to such
term in Section 6.1 hereof.

<PAGE>
                                                                               6

               1.24 "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.

               1.25 "Parity Stock" shall mean the shares of Series C Preferred
Stock and shares of any other class or series of stock of the Corporation which,
by the terms of the Certificate of Incorporation or of the instrument by which
the Board of Directors, acting pursuant to authority granted in the Certificate
of Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall, in the event that the stated dividends thereon are not paid in
full, be entitled to share ratably with the Series B Preferred Stock in the
payment of dividends, including accumulations, if any, in accordance with the
sums which would be payable on such shares if all dividends were declared and
paid in full, and shall, in the event that the amounts payable thereon on
liquidation are not paid in full, be entitled to share ratably with the Series B
Preferred Stock in any distribution of assets other than by way of dividends in
accordance with the sums which would be payable in such distribution if all sums
payable were discharged in full; PROVIDED, HOWEVER, that the term "Parity Stock"
shall be deemed to refer (i) in Section 2.2 hereof, to any stock which is Parity
Stock in respect of the right to receive dividends and (ii) in Section 6 hereof,
to any stock which is Parity Stock in respect of any distribution of assets
other than by way of dividends.

               1.26 "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust, limited
liability company, unincorporated organization, estate, other entity or
government or any agency or political subdivision thereof.

               1.27 "Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or by any of its subsidiaries whether for cash,
shares of capital stock of the Corporation, other securities of the Corporation,
evidences of indebtedness of the Corporation or any other Person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Corporation), or
any combination thereof, effected while any of the shares of Series B Preferred
Stock are outstanding, which purchase is subject to Section 13(e) of the
Exchange Act or is made pursuant to an offer made available to all holders of
Common Stock.

               1.28 "Senior Stock" shall mean the shares of any class or series
of stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be senior to the
Series B Preferred Stock in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of dividends.

<PAGE>
                                                                               7

               1.29 "Series A-1 Preferred Stock" shall mean the class of
Series A-1 Non Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-1 Non Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

               1.30 "Series A-2 Preferred Stock" shall mean the class of
Series A-2 Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-2 Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

               1.31 "Series C Preferred Stock" shall mean the class of Series C
Convertible Preferred Stock, par value $.001 per share, of the Corporation or
any other class of stock resulting from successive changes or reclassifications
of such Series C Convertible Preferred Stock consisting solely of changes in par
value, or from par value to no par value, or as a result of a subdivision or
combination.

               1.32 "Series C Certificate of Designation" shall mean the
Certificate of the Powers, Designations, Preferences and Rights of the Series C
Preferred Stock, in the form filed by the Corporation with the Secretary of
State of Delaware, as the same may be amended from time to time.

               1.33 "Trading Day" shall mean, so long as the Common Stock is
listed or admitted to trading on a national securities exchange, a day on which
the principal national securities exchange on which the Common Stock is listed
is open for the transaction of business, or, if the Common Stock is not so
listed or admitted for trading on any national securities exchange, a day on
which NASDAQ is open for the transaction of business.

          2.   DIVIDENDS.

               2.1  The holders of the outstanding shares of Series B Preferred
Stock shall be entitled to receive quarterly dividends, when, as and if declared
by the Board of Directors out of funds legally available therefor.  Each
quarterly dividend shall be an amount per share (rounded to the nearest $.01)
equal to the Dividend Amount and shall be payable on the last Business Day of
August, November, February and May in each year (each a "Dividend Payment
Date"), to the holders of record of Series B Preferred Stock at the close of
business on the preceding Business Day, or such other dates as are fixed by the
Board Directors within ten (10) days prior to the Dividend Payment Date (each a
"Record Date").  Such dividends shall become payable beginning on the first
Dividend Payment Date for which the Record Date is subsequent to the Issue Date.
Dividends on each share of Series B Preferred Stock shall be cumulative and
shall accrue on a day-to-day basis, 

<PAGE>
                                                                               8

whether or not earned, from and after the day immediately succeeding the date on
which such share was issued, and shall be payable in cash (except upon
conversion).  Dividends on the Series B Preferred Stock that are not declared
and paid when due will compound quarterly on each Dividend Payment Date at the
Dividend Rate. Dividends payable for any partial dividend period shall be
computed on the basis of actual days elapsed over a 360 day year.

               2.2  Except as hereinafter provided in this Section 2.2, unless
(a) full cumulative dividends on the outstanding shares of Series B Preferred
Stock and any Parity Stock that shall have accrued and become payable as of any
date shall have been paid, or declared and funds shall have been set apart for
payment thereof, and (b) all applicable redemption, exchange and repurchase
obligations with respect to the outstanding shares of Series B Preferred Stock
and any Parity Stock shall have been satisfied, no dividend or other
distribution (payable other than in shares of Junior Stock) shall be paid to the
holders of Junior Stock or Parity Stock, and no shares of Series B Preferred
Stock, Parity Stock or Junior Stock shall be purchased or redeemed by the
Corporation or any of its subsidiaries (except by conversion into or exchange
for, or out of the net cash proceeds from the concurrent sale of, Junior Stock),
nor shall any monies be paid or made available for a sinking fund for the
purchase or redemption of any Series B Preferred Stock, Junior Stock or Parity
Stock.  When dividends are not paid in full upon the shares of Series B
Preferred Stock and any Parity Stock, all dividends declared upon shares of
Series B Preferred Stock and all Parity Stock shall be declared pro rata so that
the amount of dividends declared per share on Series B Preferred Stock and all
such Parity Stock shall in all cases bear to each other the same ratio that
accrued cumulative dividends per share on the shares of Series B Preferred Stock
and all such Parity Stock bear to each other.  Holders of shares of Series B
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends, as herein provided,
on Series B Preferred Stock. 

          3.   REDEMPTION.

               3.1  The Corporation may, at its sole option, subject to the
provisions of Section 2.2, redeem at any time after the Issue Date, out of funds
legally available therefor, all (or, in accordance with Section 3.2, less than
all) of the outstanding shares of Series B Preferred Stock at a redemption price
for each share of Series B Preferred Stock called for redemption pursuant to
this Section 3.1 equal to the Redemption Price (as hereinafter defined).  The
term "Redemption Price" shall mean, with respect to each share of Series B
Preferred Stock, an amount equal to the Liquidation Value thereof and all
accrued and unpaid dividends thereon to the redemption date.  With respect to
each share of Series B Preferred Stock properly tendered for redemption, if the
Corporation fails to pay the redemption price upon such tender, the Corporation
shall also pay an amount equal to interest on the amount determined in the above
sentence at 12% per annum, compounded on a quarterly 

<PAGE>
                                                                               9

basis, from the date fixed for redemption to the date the Redemption Price is
actually paid.

               3.2  The Corporation may not redeem outstanding shares of Series
B Preferred Stock pursuant to Section 3.1 above unless it concurrently redeems
shares of Series C Preferred Stock pursuant to Section 3.1 of the Series C
Certificate of Designations.  In the event that fewer than all the outstanding
shares of Series B Preferred Stock and Series C Preferred Stock are to be
redeemed pursuant to Section 3.1 above and pursuant to Section 3.1 of the Series
C Certificate of Designation, the number of shares of Series B Preferred Stock
and Series C Preferred Stock to be redeemed shall be redeemed on a pro rata
basis based on the number of shares held by each holder thereof.

               3.3  In the event the Corporation shall elect to redeem shares of
Series B Preferred Stock pursuant to Section 3.1, it shall provide notice of
such redemption by first class mail, postage prepaid, mailed not less than sixty
(60) nor more than ninety (90) days prior to the redemption date, to each record
holder of the shares to be redeemed, at such holder's address as the same
appears on the books of the Corporation.  Each such notice shall state:  (i) the
time and date as of which the redemption shall occur; (ii) the total number of
shares of Series B Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the Redemption Price; (iv) that shares of
Series B Preferred Stock called for redemption may be converted at any time
prior to the time and date fixed for redemption (unless (x) the Corporation
shall default in the payment of the Redemption Price, in which case such right
shall not terminate at such time and date or (y) the holders of such shares do
not yet have the right to convert such shares under Section 4 below); (v) the
Common Stock Conversion Rate; (vi) the place or places where certificates for
such shares are to be surrendered for payment of the Redemption Price; and
(vii) that dividends on the shares to be redeemed will cease to accrue on such
redemption date.

               3.4  If notice of redemption shall have been given by the
Corporation as provided in Section 3.3, dividends on the shares of Series B
Preferred Stock so called for redemption shall cease to accrue, such shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation with respect to shares so called for
redemption (except the right to receive from the Corporation the Redemption
Price without interest and except the right to convert such shares in accordance
with Section 4) shall cease (including any right to receive dividends otherwise
payable on any Dividend Payment Date that would have occurred after the time and
date of redemption) from and after the time and date fixed in the notice of
redemption as the time and date of redemption (unless the Corporation shall
default in the payment of the Redemption Price, in which case such rights shall
not terminate at such time and date).  Upon surrender (in accordance with the
notice of redemption) of the certificate or certificates for any shares to be so
redeemed (properly endorsed or assigned for transfer, if the Corporation shall
so 

<PAGE>
                                                                              10

require and the notice of redemption shall so state), such shares shall be
redeemed by the Corporation at the Redemption Price.  In case fewer than all the
shares represented by any such certificate are to be redeemed, a new certificate
shall be issued representing the unredeemed shares, without cost to the holder
thereof, together with the amount of cash, if any, in lieu of fractional shares.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of one year from the redemption date shall revert to
the general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the redemption price without interest.  Any
interest accrued on funds so deposited shall be paid to the Corporation from
time to time.

          4.   CONVERSION RIGHTS.

               4.1  Each holder of a share of Series B Preferred Stock shall
have the right, at any time after the second anniversary of the Issue Date, or,
as to any share of Series B Preferred Stock called for redemption with a date
fixed for redemption which is after the second anniversary of the Issue Date, at
any time prior to the time and date fixed for such redemption (unless the
Corporation defaults in the payment of the Redemption Price, in which case such
right shall not terminate at such time and date), to convert such share into
fully paid and nonassessable shares of Common Stock at the Common Stock
Conversion Rate as of the date of conversion.

               4.2  No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Series B Preferred
Stock.  Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series B Preferred
Stock, the Corporation shall, subject to Section 4.5(e), make a cash payment
(calculated to the nearest $.01) equal to such fraction multiplied by the
Closing Price of the Common Stock on the last Trading Day prior to the date of
conversion.

               4.3  Any holder of shares of Series B Preferred Stock electing to
convert such shares into Common Stock shall surrender the certificate or
certificates for such shares at the offices of the Corporation (or at such other
place as the Corporation may designate by notice to the holders of shares of
Series B Preferred Stock) during regular business hours, duly endorsed to the
Corporation or in blank, or accompanied by instruments of transfer to the
Corporation or in blank, in form reasonably satisfactory to the Corporation, and
shall give written notice to the Corporation at such offices that such holder
elects to convert such shares of Series B Preferred Stock.  As soon as
practicable after any holder deposits certificates for shares of Series B
Preferred Stock, accompanied by the written notice above prescribed, the
Corporation shall issue and deliver at such office to the holder for whose
account such shares were surrendered, or to his nominee, certificates
representing the number of shares of Common Stock and the cash in lieu of
fractional shares, if any, to which such holder is entitled upon such
conversion.

<PAGE>
                                                                              11

               4.4  Conversion shall be deemed to have been made as of the date
that certificates for the shares of Series B Preferred Stock to be converted and
the written notice, are received by the Corporation; and the Person entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Stock on such date.  The
Corporation shall not be required to deliver certificates for shares of Common
Stock while the stock transfer books for such stock or for Series B Preferred
Stock are duly closed for any purpose, but certificates for shares of Common
Stock shall be issued and delivered as soon as practicable after the opening of
such books.

               4.5  The Common Stock Conversion Rate shall be adjusted from time
to time as follows:

                    (a)  If the Corporation shall, at any time or from time to
time while any shares of the Series B Preferred Stock are outstanding, (i) pay a
dividend on its Common Stock in shares of its capital stock, (ii) combine its
outstanding shares of Common Stock into a smaller number of shares,
(iii) subdivide its outstanding shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Corporation, then the Common Stock Conversion Rate in effect immediately
before such action shall be adjusted so that the holders of the Series B
Preferred Stock, upon conversion of shares thereof immediately following such
action, shall be entitled to receive the kind and amount of shares of capital
stock of the Corporation which they would have owned or been entitled to receive
upon or by reason of such event if such shares of Series B Preferred Stock had
been converted immediately before the record date or effective date for such
action.

                    (b)  If the Corporation shall, at any time or from time to
time while any of the Series B Preferred Stock is outstanding, issue or sell, or
fix a record date for the issuance of, (A) Common Stock (or securities
convertible or exchangeable into or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for shares of Common Stock) (other than
Excluded Securities), in any such case, at a price per share (treating the price
per share of securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of the security
convertible into or exchangeable or exercisable for Common Stock plus (ii) any
additional consideration initially payable upon the conversion of such security
into or the exchange or exercise of such security for Common Stock, divided by
(y) the number of shares of Common Stock initially underlying such exercisable,
convertible or exchangeable security) that is less than the greater of the
Current Market Price of the Common Stock and the Conversion Price on the date of
such issuance or such record date (the "Measuring Price"), then the Common Stock
Conversion Rate shall be adjusted so that it shall equal the rate determined by
multiplying the Common Stock Conversion Rate in effect immediately prior to
giving 

<PAGE>
                                                                              12

effect to this Section 4.5 by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (calculated to include the shares
of Common Stock underlying the Warrants issued under the Investment Agreement,
the shares of Common Stock underlying the Affiliate Warrants, the shares of
Common Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in-the-money") on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase (or into or for
which the exercisable, convertible or exchangeable securities so offered are
initially exercisable, convertible or exchangeable), and the denominator of
which shall be the number of shares of Common Stock outstanding (calculated to
include the shares of Common Stock underlying the Warrants issued under the
Investment Agreement, the shares of Common Stock underlying the Affiliate
Warrants, the shares of Common Stock underlying the Harnick Warrant and all then
currently exerciseable, convertible and exchangeable securities that are
"in-the-money") on the date of issuance of such rights, options or warrants plus
the number of shares which the aggregate offering price of the total number of
shares so offered for subscription or purchase (or the aggregate purchase price
of the exercisable, convertible or exchangeable securities so offered plus the
aggregate amount of any additional consideration initially payable upon
exercise, conversion or exchange for or into Common Stock) would purchase at
such Measuring Price.  

                    (c)  If the Corporation shall, at any time or from time to
time while any of the Series B Preferred Stock is outstanding, distribute to all
holders of shares of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Corporation is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Corporation's retained earnings and (ii) dividends payable in
shares of Common Stock for which adjustment is made under Section 4.5(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Corporation (excluding those for which adjustment is made under Section 4.5(b)),
then in each such case the Common Stock Conversion Rate shall be adjusted so
that it shall equal the rate determined by multiplying the Common Stock
Conversion Rate in effect immediately prior to the date of such distribution by
a fraction, the numerator of which shall be the Current Market Price of the
Common Stock on the record date referred to below, and the denominator of which
shall be such Current Market Price of the Common Stock less the then fair market
value (as determined by the Board of Directors in good faith or, if requested by
the holders of a majority of the Series B Preferred Stock, by an Independent
Financial Expert selected in the manner described in the definition of the term
"Current Market Price") of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such rights, options or warrants
applicable to one share of Common Stock (provided that such denominator shall
never be less than $.01).

<PAGE>
                                                                              13

                    (d)  If the Corporation or any subsidiary thereof shall, at
any time or from time to time while any of the Series B Preferred Stock is
outstanding, make a Pro Rata Repurchase, the Common Stock Conversion Rate shall
be adjusted by multiplying the Common Stock Conversion Rate in effect
immediately prior to such action by a fraction (which in no event shall be less
than one (1)), the numerator of which shall be the product of (i) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
minus the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (ii) the Current Market Price of the Common Stock as of the day
immediately preceding the first public announcement by the Corporation of the
intent to effect such Pro Rata Repurchase, and the denominator of which shall be
(i) the product of (x) the number of shares of Common Stock outstanding
immediately before such Pro Rata Repurchase and (y) the Current Market Price of
the Common Stock as of the day immediately preceding the first public
announcement by the Corporation of the intent to effect such Pro Rata Repurchase
minus (ii) the aggregate purchase price of the Pro Rata Repurchase (provided
that such denominator shall never be less than $.01).

                    (e)  All calculations under this Section 4.5 shall be made
to the nearest $.01 (with $.005 being rounded upward), one-hundredth of a share
(with .005 being rounded upward) or, in the case of a conversion rate, one
ten-thousandth (with .00005 being rounded upward).  Notwithstanding any other
provision of this Section 4.5, the Corporation shall not be required to make any
adjustment of the Common Stock Conversion Rate unless such adjustment would
require an increase or decrease of at least 0.05% of such rate.  Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase or decrease of at
least 0.05% in such rate.  Any adjustments under this Section 4.5 shall be made
successively whenever an event requiring such an adjustment occurs.

                    (f)  Whenever an adjustment in the Common Stock Conversion
Rate is required, the Corporation shall promptly cause to be mailed (but in any
event not later than five (5) days after the date of the event giving rise to
such adjustment) first-class postage prepaid, to the holders of record of the
outstanding shares of Series B Preferred Stock, notice of such adjustment and a
certificate of a firm of independent public accountants of recognized national
standing selected by the Board of Directors (who shall be appointed at the
Corporation's expense and who may be the independent public accountants
regularly employed by the Corporation) setting forth the adjusted Common Stock
Conversion Rate in effect as of such date determined as provided herein.  Such
notice and certificate shall set forth in reasonable detail such facts as shall
be necessary to show the reason for and the manner of computing such adjustment.

                    (g)  In the event that at any time as a result of an
adjustment made pursuant to this Section 4.5, the holder of any share of
Series B 

<PAGE>
                                                                              14

Preferred Stock thereafter surrendered for conversion shall become entitled to
receive any shares of stock of the Corporation other than shares of Common
Stock, the conversion rate of such other shares so receivable upon conversion of
any such share of Series B Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in subparagraphs (a) through
(f) and (h) of this Section 4.5, and the provisions of this Section 4 with
respect to the Common Stock shall apply on like or similar terms to any such
other shares and the determination of the Board of Directors as to any such
adjustment shall be conclusive.

                    (h)  No adjustment shall be made pursuant to this Section if
the effect thereof would be to reduce the Conversion Price below the par value
of the Common Stock.

               4.6  In case (a) any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and which does not result
in any reclassification of, or change (other than a change in par value or from
par value to no par value or from no par value to par value, or as a result of a
subdivision or combination) in, outstanding shares of Common Stock or (b) any
sale or conveyance of all or substantially all of the property and assets of the
Corporation is effected in such a way that the holders of Common Stock shall be
entitled to receive stock or other securities or assets with respect to or in
exchange for Common Stock, then upon conversion of each share of Series B
Preferred Stock the holder thereof shall be entitled to receive the kind and
amount of shares of stock or other securities and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock into which such shares of Series B Preferred Stock could have been
converted immediately prior to such consolidation, merger, sale or conveyance,
subject to adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4.  The Corporation shall not
enter into any of the transactions referred to in clause (a) or (b) of the
preceding sentence unless provision shall be made so as to give effect to the
provisions set forth in this Section 4.6.  The provisions of this Section 4.6
shall apply similarly to successive consolidations, mergers, sales or
conveyances.

               4.7  The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
stock, for the purpose of effecting the conversion of the shares of Series B
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock into such Common Stock at any
time (assuming that, at the time of the computation of such number of shares,
all such Common Stock would be held by a single holder).  The Corporation shall
from time to time, in accordance with the laws of the State of Delaware, use its
best efforts to cause the authorized amount of Common Stock to be increased if
the aggregate of the authorized amount of the Common Stock remaining 

<PAGE>
                                                                              15

unissued and the issued shares of such Common Stock in its treasury (other than
any shares of such Common Stock reserved for issuance in any other connection)
shall not be sufficient to permit the conversion of the shares of Series B
Preferred Stock into the Common Stock.  The Corporation covenants that any
shares of Common Stock issued upon conversions of the Series B Preferred Stock
shall be validly issued, fully paid and nonassessable.

               4.8 If any shares of Common Stock which would be issuable upon
conversion of shares of Series B Preferred Stock hereunder require registration
with or approval of any governmental authority before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible cause such shares to be duly registered or approved, as the case may
be.

               4.9  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 shares of Series B Preferred Stock pursuant hereto.  The
Corporation shall not, however, be required to pay any tax which is payable in
respect of any transfer involved in the issue or delivery of Common Stock in a
name other than that in which the shares of Series B 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.

               4.10 For purposes of this Section 4, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Corporation or any
subsidiary.  The Corporation shall not pay a dividend or make any distribution
on shares of Common Stock held in the treasury of the Corporation.

               4.11 If any action or transaction would require adjustment of the
Common Stock Conversion Rate pursuant to more than one paragraph of this
Section 4, only one adjustment shall be made and each such adjustment shall be
the amount of adjustment that has the highest absolute value.

               4.12 In case:

                    (a)  of a consolidation or merger to which the Corporation
     is a party and for which approval of any stockholders of the Corporation is
     required; or

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

                    (c)  of any Pro Rata Repurchase;

<PAGE>
                                                                              16

then, in each case, the Corporation shall cause to be mailed, first-class
postage prepaid, to the holders of record of the outstanding shares of Series B
Preferred Stock, at least twenty (20) days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of any distribution or grant of rights or warrants
triggering an adjustment to the Common Stock Conversion Rate pursuant to this
Section 4, or, if a record is not to be taken, the date as of which the holders
of record of Common Stock entitled to such distribution, rights or warrants are
to be determined, or (y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata
Repurchase is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding up or Pro Rata Repurchase.  Failure to give the notice
specified hereunder shall have no effect on the status or effectiveness of the
action to which the required notice relates.

          5.   VOTING.

               5.1  The shares of Series B Preferred Stock shall have no voting
rights except as required by law or as set forth below:

                    (a)  If on the fifth anniversary of the Issue Date any
shares of Series B Preferred Stock remain outstanding, then the number of
directors constituting the Board of Directors shall be increased by four (4) (in
addition to any such increase in directorships required by any similar provision
of the Certificate of Incorporation or the certificate of designation in respect
of any other class or series of preferred stock of the Corporation) and the
holders of shares of Series B Preferred Stock (in addition to all other rights)
shall have the exclusive right, voting separately as a class, to elect eight (8)
directors of the Corporation.

                    (b) Such voting rights may be exercised initially either by
written consent or at a special meeting of the holders of the shares of Series B
Preferred Stock having such voting rights, called as hereinafter provided, or at
any annual meeting of stockholders held for the purpose of electing directors,
and thereafter at each such annual meeting until such time as shares of Series B
Preferred Stock are no longer outstanding, at which time or times such voting
rights and the term of the directors elected pursuant to Section 5.1(a) shall
terminate.

                    (c)  At any time when such voting rights shall have vested
in holders of shares of Series B Preferred Stock described in Section 5.1(a),
and if such rights shall not already have been exercised by written consent, a
proper officer of the Corporation may call, and, upon the written request,
addressed to the Secretary of the Corporation, of the record holders of shares
representing twenty-five percent (25%) of the voting power of the shares then
outstanding of Series B 

<PAGE>
                                                                              17

Preferred Stock, shall call, a special meeting of the holders of shares of 
Series B 

Preferred Stock.  Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation, or, if none, at a
place designated by the Board of Directors.  Notwithstanding the provisions of
this Section 5.1(c), no such special meeting shall be called during a period
within 60 days immediately preceding the date fixed for the next annual meeting
of stockholders.

                    (d)  At any meeting held for the purpose of electing
directors at which the holders of shares of Series B Preferred Stock shall have
the right to elect directors as provided herein, the presence in person or by
proxy of the holders of shares representing more than fifty percent (50%) in
voting power of the then outstanding shares of Series B Preferred Stock having
such right shall be required and shall be sufficient to constitute a quorum of
such class for the election of directors by such class.

                    (e)  Any director elected by holders of shares of Series B
Preferred Stock pursuant to the voting right created under this Section 5.1
shall hold office until the next annual meeting of stockholders (unless such
term has previously terminated pursuant to Section 5.1(b)) and any vacancy in
respect of any such director shall be filled only by vote of the remaining
director[s] so elected, or if there be no such remaining director, by the
holders of shares of Series B Preferred Stock by written consent or at a special
meeting called in accordance with the procedures set forth in Section 5.1(c),
or, if no such special meeting is called or written consent executed, at the
next annual meeting of stockholders.  Upon any termination of such voting right,
subject to applicable law, the term of office of all directors elected by
holders of shares of Series B Preferred Stock voting separately as a class
pursuant to this Section 5.1 shall terminate.

                    (f)  So long as any shares of Series B Preferred Stock
remain outstanding, unless a greater percentage shall then be required by law,
the Corporation shall not, without the affirmative vote at a meeting or the
written consent with or without a meeting of the holders of shares of Series B
Preferred Stock representing at least a majority of the aggregate voting power
on the matters set forth in this Section 5.1(f) of shares of Series B Preferred
Stock, voting as a separate class, (i) authorize or issue any Senior Stock or
Parity Stock or reclassify any Junior Stock as Parity Stock or Senior Stock or
reclassify any Parity Stock as Senior Stock, (ii) amend, alter or repeal any of
the provisions of the Certificate of Incorporation, so as in any such case to
materially and adversely affect the preferences, special rights, powers or
privileges of the shares of Series B Preferred Stock, (iii) redeem, repurchase,
retire or otherwise acquire any capital stock or options to purchase capital
stock of the Corporation (other than purchases of capital stock or options from
employees of the Corporation or any of its subsidiaries in connection with
termination of employment or from other Persons providing services to the
Corporation or any of its subsidiaries in an amount not to exceed $1,000,000 in
the aggregate for all such

<PAGE>
                                                                              18

purchases after the Issue Date) or (iv) declare or pay any dividends or other
distributions with respect to Junior Stock or Parity Stock.

                    (g)  In addition to the foregoing, the holders of the Series
B Preferred Stock shall have such other voting, consent and approval rights as
are specified in the Investment Agreement.

                    (h)  In exercising the voting rights set forth in this
Section 5.1, each share of Series B Preferred Stock shall have a number of votes
equal to its Liquidation Value.

               5.2  No consent of holders of shares of Series B Preferred Stock
shall be required for (i) the creation of any indebtedness of any kind of the
Corporation or (ii) the authorization or issuance of any class of Junior Stock.

          6.   LIQUIDATION RIGHTS.

               6.1  Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series B Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to stockholders, in preference to the
holders of, and before any payment or distribution shall be made on, Junior
Stock, the amount of $1,000 per share (the "Liquidation Value"), plus an amount
equal to all accrued and unpaid dividends to the date of final distribution
(whether or not declared).

               6.2  Neither the sale, exchange or other conveyance (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation nor the merger or consolidation of
the Corporation into or with any other corporation, or the merger or
consolidation of any other corporation into or with the Corporation, shall be
deemed to be a dissolution, liquidation or winding up, voluntary or involuntary,
for the purposes of this Section 6.

               6.3  After the payment to the holders of the shares of Series B
Preferred Stock of full preferential amounts provided for in this Section 6, the
holders of Series B Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation.

               6.4  In the event the assets of the Corporation available for
distribution to the holders of shares of Series B Preferred Stock upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Section 6.1, no such distribution shall be made
on account of any shares of any Parity Stock upon such dissolution, liquidation
or winding up unless proportionate distributive amounts shall be paid on account
of the shares of Series B Preferred 

<PAGE>
                                                                              19

Stock, ratably, in proportion to the full distributable amounts for which
holders of all Parity Stock are entitled upon such dissolution, liquidation or
winding up.

          7.   CHANGE OF CONTROL

               7.1  In the event that the Corporation becomes aware of a Change
of Control or pending Change of Control, the Corporation shall make an offer
(the "Change of Control Offer") to purchase all of the outstanding shares of
Series B Preferred Stock at a purchase price for each share of Series B
Preferred Stock equal to the Repurchase Price (as hereinafter defined) on the
effective date of such Change of Control (the "Trigger Date").  The Repurchase
Price will be payable (x) in cash, in the case of a Change of Control pursuant
to clause (i) through (iii) of the definition of a Change of Control and (y), at
the Corporation's election, either in cash or in Common Stock, in the case of a
Change of Control pursuant to clause (iv) of the definition of a Change of
Control.  In the event that the Corporation elects to pay the Repurchase Price
in Common Stock, such Common Stock shall be concurrently registered under the
Act and under the securities or blue sky laws of any jurisdiction designated by
any holder of Series B Preferred Stock which accepts the Change of Control
Offer.  The term "Repurchase Price" shall mean, with respect to each share of
Series B Preferred Stock, (x) if paid in cash, 110% of the sum of the
Liquidation Value thereof and any accrued and unpaid dividends thereon to the
date of such purchase, or (y) if paid in Common Stock, 125% of the sum of the
Liquidation Value thereof and any accrued and unpaid dividends thereon to the
date of such purchase. With respect to each share of Series B Preferred Stock
properly tendered for repurchase, if the Corporation fails to pay the Repurchase
Price upon such tender, the Corporation shall also pay an amount equal to
interest on the amount determined in the above sentence at 12% per annum,
compounded on a quarterly basis, from the date fixed for repurchase to the date
the Repurchase Price is actually paid.  The Change of Control Offer must be made
as soon as practicable and if possible not less than sixty (60) days prior to
the Trigger Date, shall remain open for at least forty (40) and not more than
fifty (50) days (or such longer time as may be required by applicable law or
regulation) and shall comply, to the extent required, with the applicable
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.

               7.2  In the event the Corporation is required to make a Change of
Control Offer pursuant to Section 7.1, it shall provide notice of such Change of
Control Offer (the "Notice of Offer") by first class mail, postage prepaid, to
each record holder of the shares of Series B Preferred Stock, at such holder's
address as the same appears on the books of the Corporation.  Each such Notice
of Offer shall state: (i) that the Corporation is offering to purchase all
outstanding shares of Series B Preferred Stock and that such offer is
irrevocable; (ii) the Trigger Date, which will be the date on which any such
purchase will be consummated; (iii) the total number of shares of Series B
Preferred Stock which the Corporation is offering to purchase from such holder;
(iv) the Repurchase Price; (v) the last day on which the 

<PAGE>
                                                                              20

Change of Control Offer may be accepted (the "Expiration Date"), (vi) the place
or places where certificates for shares of Series B Preferred Stock are to be
surrendered for payment of the Repurchase Price and (vii) in the event of a
Change of Control pursuant to clause (iv) of the definition of a Change of
Control, the terms, amount and kind of consideration paid or to be paid and the
identity, if known by the Corporation, of the Person or Group of Persons
triggering such Change of Control and whether the Corporation is electing to pay
the Repurchase Price in cash or Common Stock.

               7.3  Any holder of outstanding shares of Series B Preferred Stock
may, at its sole option, elect to accept the Change of Control Offer with
respect to all or less than all of such holder's outstanding Series B Preferred
Stock by delivering written notice of such acceptance to the Corporation on or
before the Expiration Date.  On the Trigger Date, the Corporation will pay to
each holder that has accepted the Change of Control Offer the Repurchase Price
for the shares of Series B Preferred Stock which such holder has elected to sell
to the Corporation against delivery (in accordance with the Notice of Offer) of
the certificate or certificates for any shares to so purchased (properly
endorsed or assigned for transfer, if the Corporation shall so require and the
Notice of Offer shall so state).  In case fewer than all the shares represented
by any such certificate are to be repurchased, a new certificate shall be issued
representing the shares which are not purchased, without cost of the holder
thereof, together with the amount of cash, if any, in lieu of fractional shares.
     

          8.   TRANSACTIONS WITH AFFILIATES.  As long as any shares of Series B
Preferred Stock remain outstanding, the Corporation shall not, and shall not
permit any of its subsidiaries to, enter into any transaction with any Affiliate
of the Corporation or such subsidiary (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
services, with or to any Affiliate and investments, loans or advances by or to
any Affiliate) except for transactions entered into in good faith pursuant to
the reasonable requirements of the business of the Corporation or such
subsidiary and on terms substantially no less favorable to the Corporation or
such subsidiary than those that the Corporation or such subsidiary would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Corporation or such subsidiary.

          9.   OTHER PROVISIONS.

               9.1  Shares of Series B Preferred Stock issued and reacquired 
will, upon compliance with the applicable requirements of Delaware law, have 
the status of authorized but unissued shares of Preferred Stock of the 
Corporation undesignated as to series and may with any and all other 
authorized but unissued shares of Preferred Stock of the Corporation be 
designated or redesignated and issued or reissued, as the case may be, as 
part of any series of Preferred Stock of the

<PAGE>
                                                                              21

Corporation, except that any issuance or reissuance of shares of Series B 
Preferred Stock must be in compliance with this certificate of designation.

               9.2  The Corporation shall be entitled to recognize the exclusive
right of a Person registered on its records as the holder of shares of Series B
Preferred Stock, and such record holder shall be deemed the holder of such
shares for all purposes.

               9.3  All notice periods referred to herein shall commence on the
date of the mailing of the applicable notice.

          IN WITNESS WHEREOF, Platinum Entertainment, Inc. has caused this
certificate to be signed and attested this 12th day of December, 1997.

                         PLATINUM ENTERTAINMENT, INC.

                         By: /s/ Steven Devick
                            ---------------------------------
                         Name:  Steven Devick
                         Title: Chief Executive Officer

<PAGE>

                            PLATINUM ENTERTAINMENT, INC. 

                       CERTIFICATE OF THE POWERS, DESIGNATIONS,
                            PREFERENCES AND RIGHTS OF THE
                        SERIES C CONVERTIBLE PREFERRED STOCK,
                              PAR VALUE $.001 PER SHARE

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


          The following resolution was duly adopted by the Board of Directors of
Platinum Entertainment Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, on December 12, 1997, by vote at a meeting of the Board of
Directors:

          RESOLVED that, pursuant to the authority expressly granted to the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, there be created from the 10,000,000 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock"), of the Corporation
authorized to be issued pursuant to the Certificate of Incorporation, a series
of Preferred Stock consisting of 2,500 shares of Series C Convertible Preferred
Stock (the "Series C Preferred Stock"), the voting powers, designations,
preferences and relative, participating, optional or other special rights of
which, and qualifications, limitations or restrictions thereof, shall be as
follows:

          1.   DEFINITIONS.  As used herein, the following terms shall have the 
following meanings:

               1.1  "Affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such first Person.  For the purpose of this
definition, "control" shall mean, as to any Person, the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

               1.2  "Affiliate Warrants" shall mean the warrant for an aggregate
of 135,000 shares of Common Stock to be issued to Platinum Venture Partners II,
L.P., as nominee, and the warrant for an aggregate of 315,000 shares of Common
Stock to be issued to Platinum Venture Partners II, L.P., as nominee, each such
warrant to be issued on the Closing Date (as defined in the Investment
Agreement).

<PAGE>
                                                                               2

               1.3  "Board of Directors" shall mean the Board of Directors of
the Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.

               1.4  "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.

               1.5  "Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Corporation, as amended from time to time.

               1.6  "Change of Control" shall mean (i) the direct or indirect 
sale, lease, exchange or other transfer of all or substantially all of the 
assets of the Corporation to any Person or group of Persons acting in concert 
as a partnership or other group within the meaning of Rule 13d-5 under the 
Exchange Act (a "GROUP OF PERSONS"), (ii) the merger or consolidation of the 
Corporation with or into another corporation with the effect that the then 
existing stockholders of the Corporation hold less than 50% of the combined 
voting power of the then outstanding securities of the surviving corporation 
of such merger or the corporation resulting from such consolidation 
ordinarily (and apart from rights accruing under special circumstances) 
having the right to vote in the election of directors, (iii) the replacement 
of a majority of the Board of Directors, over a two-year period, from the 
directors who constituted the Board of Directors at the beginning of such 
period, and such replacement shall not have been approved by the Board of 
Directors (or its replacements approved by the Board of Directors) as 
constituted at the beginning of such period, or (iv) a Person or Group of 
Persons (other than the Investors and their Affiliates, employees, partners 
or members) shall, as a result of a tender or exchange offer, open market 
purchases, privately negotiated purchases or otherwise, have become the 
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 
securities of the Corporation representing 49% or more of the combined voting 
power of the then outstanding securities of the Corporation ordinarily (and 
apart from rights accruing under special circumstances) having the right to 
vote in the election of directors. Notwithstanding the foregoing, no Change 
of Control shall be deemed to have occurred (a) upon the acquisition of any 
shares of Common Stock of the Company pursuant to the exercise of any 
warrants issued pursuant to the Investment Agreement, (b) upon the exercise 
of any of the rights and privileges granted to each of the Purchasers 
pursuant to Section 6.2.5 of the Investment Agreement, (c) upon the exercise 
of any rights and privileges granted to the holders of the Series B Preferred 
Stock pursuant to Section 5.1 of the Series B Certificate of Designation or 
(d) otherwise as a result of the equity ownership or designation of directors 
by the Investors of their Affiliates, employees, partners or members.

               1.7  "Class A Common Stock" shall mean the class of Class A
Common Stock, par value $.001 per share, of the Corporation or any other class
of stock resulting from successive changes or reclassifications of such Class A
Common Stock consisting solely of changes in par value, or from par value to no
par value, or as a result of a subdivision or combination.

<PAGE>
                                                                               3

               1.8  "Class B Common Stock" shall mean the class of Class B
Common Stock, par value $.001 per share, of the Corporation or any other class
of stock resulting from successive changes or reclassifications of such Class B
Common Stock consisting solely of changes in par value, or from par value to no
par value, or as a result of a subdivision or combination.

               1.9  "Closing Price" of the Common Stock, as of any day, shall
mean (a) the last reported sale price of such stock (regular way), or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, in either case as reported on the principal national securities exchange
on which such stock is listed or admitted to trading or (b) if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
last reported sale price, or in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
the Common Stock, in either case reported on NASDAQ, or a similar service if
NASDAQ is no longer reporting such information.

               1.10 "Common Stock" shall mean the class of Common Stock, par
value $.001 per share, of the Corporation or any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

               1.11 "Common Stock Conversion Rate" shall mean, as of any date, a
rate for each share of Series B Preferred Stock equal to (i) the Liquidation
Value thereof plus all accrued and unpaid dividends thereon (whether or not
declared), divided by (ii) the Conversion Price in effect as of such date.

               1.12 "Conversion Price" shall mean (x) prior to the expiration 
of the Thirty Day Period (as defined below), $5.9375 per share of Common 
Stock, as adjusted hereunder (the "Initial Conversion Price"), or (y) after 
the expiration of the Thirty Day Period, the lesser of (1) the Initial 
Conversion Price, as adjusted hereunder, and (2) 100% of the average of the 
daily Closing Price per share of Common Stock for the 30 consecutive trading 
days following the release by the Corporation of its consolidated earnings 
statement for the fiscal year ending May 31, 1998 (the "Thirty Day Period"), 
subject to appropriate adjustment for the events described in Section 4.5(a) 
herein if any such event occurs during the Thirty Day Period; provided that 
if the shares of Common Stock are not then traded on any national securities 
exchange or quoted by NASDAQ or a similar service, the Closing Price for the 
foregoing purposes shall be deemed to be the fair market value of the shares 
of Common Stock as determined in good faith by the Board of Directors of the 
Corporation. If the holders of a majority of the outstanding shares of Series 
B Preferred Stock disagree with the Board's determination of fair market 
value for purposes of the Series B Preferred Stock, the fair market value for 
purposes of the Series C Preferred Stock shall be the fair market value 
determined for purposes of the

<PAGE>                                                                         4

Series B Preferred Stock.  The Conversion Price as determined in accordance 
with the foregoing shall be adjusted from time to time in accordance with the 
provisions of Section 4.

               1.13 "Current Market Price" shall mean, with respect to each 
share of Common Stock as of any date, the average of the daily Closing Prices 
per share of Common Stock for the 10 consecutive Trading Days commencing 15 
Trading Days prior to such date; provided that if on any such date the shares 
of Common Stock are not listed or admitted for trading on any national 
securities exchange or quoted by NASDAQ or a similar service, the Current 
Market Price for a share of Common Stock shall be the fair market value of 
such share as determined in good faith by the Board of Directors; PROVIDED, 
HOWEVER, that if the holders of the shares of Series B Preferred Stock disagree
with the Board's determination of fair market value for purposes of the 
Series B Preferred Stock, the fair market value for purposes of the Series 
C Preferred Stock shall be the fair market value determined for purposes of 
the Series B Preferred Stock.

               1.14 "Dividend Amount" shall mean an amount per share of Series C
Preferred Stock (rounded to the nearest $ .01) equal to (1) $30 per $1,000 
Liquidation Value of Series C Preferred Stock during the first year after 
the Issue Date, (2) $35 per $1,000 Liquidation Value of Series C Preferred 
Stock during the second year after the Issue Date, (3) $40 per $1,000 
Liquidation Value of Series C Preferred Stock during the third year after the 
Issue Date, (4) $45 per $1,000 Liquidation Value of Series C Preferred Stock 
during the fourth and fifth years after the Issue Date and (5) $50 per $1,000 
Liquidation Value of Series C Preferred Stock at all times after the fifth 
anniversary of the Issue Date.

               1.15 "Dividend Rate" shall mean (1) 3% per quarter during the
first year after the Issue Date, (2) 3.5% per quarter during the second year
after the Issue Date, (3) 4% per quarter during the third year after the Issue
Date, (4) 4.5% per quarter during the fourth and fifth years after the Issue
Date and (5) 5% per quarter at all times after the fifth anniversary of the
Issue Date.

               1.16 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

               1.17 "Excluded Securities" means (a) shares of Common Stock
issued upon conversion or exercise of convertible securities, warrants and
options of the Corporation outstanding on the Issue Date, (b) shares of Common
Stock, and options to purchase such shares, issued to officers, directors,
employees or former employees of, or consultants to, the Corporation or any of
its subsidiaries pursuant to any equity incentive plan, agreement or other
arrangement which has been approved by a vote of at least two-thirds (2/3rds) of
the Board of Directors, (c) shares of Common Stock issued upon conversion of the
shares of Series B Preferred Stock, (d) shares of Common Stock issued upon
exercise of the warrants 

<PAGE>
                                                                               5

issued to the purchasers of the shares of Series B Preferred Stock pursuant to
the Investment Agreement, (e) shares of Common Stock issued upon the conversion
of the Series C Preferred Stock, (f) shares of Common Stock issued upon exercise
of the Affiliate Warrants and (g) shares of Common Stock issued upon exercise of
the Harnick Warrant.

               1.18 "Harnick Warrant" means the warrant to purchase 50,000
shares of Common Stock to be issued to Carl D. Harnick on the Closing Date (as
defined in the Investment Agreement).

               1.19 "Issue Date" shall mean the Closing Date (as defined in the
Investment Agreement).

               1.20 "Investment Agreement" shall mean the Investment Agreement,
dated as of October 12, 1997, as amended, between the Corporation, the Investors
and certain other parties thereto, as hereafter amended from time to time.

               1.21 "Investors" shall mean MAC Music LLC, a Delaware limited
liability company, and SK-Palladin Partners, LP, a Delaware limited partnership.

               1.22 "Junior Stock" shall mean the Common Stock, the Class A
Common Stock, the Class B Common Stock, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock and the shares of any other class or series of stock
of the Corporation which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be junior to the Series C Preferred
Stock in respect of the right to receive dividends and to participate in any
distribution of assets other than by way of dividends.

               1.23 "Liquidation Value" shall have the meaning assigned to such
term in Section 6.1 hereof.

               1.24 "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.

               1.25 "Parity Stock" shall mean the shares of Series B Preferred
Stock and shares of any other class or series of stock of the Corporation which,
by the terms of the Certificate of Incorporation or of the instrument by which
the Board of Directors, acting pursuant to authority granted in the Certificate
of Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall, in the event that the stated dividends thereon are not paid in
full, be entitled to share ratably with the Series C Preferred Stock in the
payment of dividends, including accumulations, if any, in accordance with the
sums which would be payable on such 

<PAGE>
                                                                               6

shares if all dividends were declared and paid in full, and shall, in the event
that the amounts payable thereon on liquidation are not paid in full, be
entitled to share ratably with the Series C Preferred Stock in any distribution
of assets other than by way of dividends in accordance with the sums which would
be payable in such distribution if all sums payable were discharged in full;
PROVIDED, HOWEVER, that the term "Parity Stock" shall be deemed to refer (i) in
Section 2.2 hereof, to any stock which is Parity Stock in respect of the right
to receive dividends and (ii) in Section 6 hereof, to any stock which is Parity
Stock in respect of any distribution of assets other than by way of dividends.

               1.26 "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust, limited
liability company, unincorporated organization, estate, other entity or
government or any agency or political subdivision thereof.

               1.27 "Pro Rata Repurchase" shall mean any purchase of shares of
Common Stock by the Corporation or by any of its subsidiaries whether for cash,
shares of capital stock of the Corporation, other securities of the Corporation,
evidences of indebtedness of the Corporation or any other Person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Corporation), or
any combination thereof, effected while any of the shares of Series C Preferred
Stock are outstanding, which purchase is subject to Section 13(e) of the
Exchange Act or is made pursuant to an offer made available to all holders of
Common Stock.

               1.28 "Senior Stock" shall mean the shares of any class or series
of stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be senior to the
Series B Preferred Stock in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of dividends.

               1.29 "Series A-1 Preferred Stock" shall mean the class of
Series A-1 Non Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-1 Non Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

               1.30 "Series A-2 Preferred Stock" shall mean the class of
Series A-2 Convertible Preferred Stock, par value $.001 per share, of the
Corporation or any other class of stock resulting from successive changes or
reclassifications of such Series A-2 Convertible Preferred Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.

<PAGE>
                                                                               7

               1.31 "Series B Preferred Stock" shall mean the class of Series 
B Convertible Preferred Stock, par value $.001 per share, of the Corporation 
or any other class of stock resulting from successive changes or 
reclassifications of such Series B Convertible Preferred Stock consisting 
solely of changes in par value, or from par value to no par value, or as a 
result of a subdivision or combination.

               1.32 "Series B Certificate of Designation" shall mean the
Certificate of the Powers, Designations, Preferences and Rights of the Series
B Preferred Stock, Par Value $.001 Per Share, in the form filed by the
Corporation with the Secretary of State of Delaware, as the same may be
amended from time to time.

               1.33 "Trading Day" shall mean, so long as the Common Stock is
listed or admitted to trading on a national securities exchange, a day on which
the principal national securities exchange on which the Common Stock is listed
is open for the transaction of business, or, if the Common Stock is not so
listed or admitted for trading on any national securities exchange, a day on
which NASDAQ is open for the transaction of business.

          2.   DIVIDENDS.

               2.1  The holders of the outstanding shares of Series C Preferred
Stock shall be entitled to receive quarterly dividends, when, as and if declared
by the Board of Directors out of funds legally available therefor.  Each
quarterly dividend shall be an amount per share (rounded to the nearest $.01)
equal to the Dividend Amount and shall be payable on the last Business Day of
August, November, February and May in each year (each a "Dividend Payment
Date"), to the holders of record of Series C Preferred Stock at the close of
business on the preceding Business Day, or such other dates as are fixed by the
Board Directors within ten (10) days prior to the Dividend Payment Date (each a
"Record Date").  Such dividends shall become payable beginning on the first
Dividend Payment Date for which the Record Date is subsequent to the Issue Date.
Dividends on each share of Series C Preferred Stock shall be cumulative and
shall accrue on a day-to-day basis, whether or not earned, from and after the
day immediately succeeding the date on which such share was issued, and shall be
payable in cash (except upon conversion).  Dividends on the Series C Preferred
Stock that are not declared and paid when due will compound quarterly on each
Dividend Payment Date at the Dividend Rate. Dividends payable for any partial
dividend period shall be computed on the basis of actual days elapsed over a 360
day year.

               2.2  Except as hereinafter provided in this Section 2.2, unless
(a) full cumulative dividends on the outstanding shares of Series C Preferred
Stock and any Parity Stock that shall have accrued and become payable as of any
date shall have been paid, or declared and funds shall have been set apart for
payment thereof, and (b) all applicable redemption, exchange and repurchase
obligations with respect to 

<PAGE>
                                                                               8

the outstanding shares of Series C Preferred Stock and any Parity Stock shall
have been satisfied, no dividend or other distribution (payable other than in
shares of Junior Stock) shall be paid to the holders of Junior Stock or Parity
Stock, and no shares of Series C Preferred Stock, Parity Stock or Junior Stock
shall be purchased or redeemed by the Corporation or any of its subsidiaries
(except by conversion into or exchange for, or out of the net cash proceeds from
the concurrent sale of, Junior Stock), nor shall any monies be paid or made
available for a sinking fund for the purchase or redemption of any Series C
Preferred Stock, Junior Stock or Parity Stock; PROVIDED, HOWEVER, nothing set 
forth herein shall prohibit or limit the Corporation's ability to (i) 
purchase shares of Series B Preferred Stock in accordance with the terms of 
Section 7 of the Series B Certificate of Designation, or (ii) purchase in 
accordance with the terms set forth therein any of the warrants issued 
pursuant to the Investment Agreement following a "change of control" as 
defined in such warrants unless, in the cases of both clauses (i) and (ii), 
the Corporation is also required to purchase shares of Series C Preferred 
Stock pursuant to Section 7 of this Certificate of Designation.  When dividends
are not paid in full upon the shares of Series C Preferred Stock and any Parity
Stock, all dividends declared upon shares of Series C Preferred Stock and all 
Parity Stock shall be declared pro rata so that the amount of dividends declared
per share on Series C Preferred Stock and all such Parity Stock shall in all 
cases bear to each other the same ratio that accrued cumulative dividends per 
share on the shares of Series C Preferred Stock and all such Parity Stock bear 
to each other. Holders of shares of Series C Preferred Stock shall not be 
entitled to any dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on Series C Preferred Stock. 

          3.   REDEMPTION.

               3.1  The Corporation may, at its sole option, subject to the
provisions of Section 2.2, redeem at any time after the Issue Date, out of funds
legally available therefor, all (or, in accordance with Section 3.2, less than
all) of the outstanding shares of Series C Preferred Stock at a redemption price
for each share of Series C Preferred Stock called for redemption pursuant to
this Section 3.1 equal to the Redemption Price (as hereinafter defined).  The
term "Redemption Price" shall mean, with respect to each share of Series C
Preferred Stock, an amount equal to the Liquidation Value thereof and all
accrued and unpaid dividends thereon to the redemption date.  With respect to
each share of Series C Preferred Stock properly tendered for redemption, if the
Corporation fails to pay the redemption price upon such tender, the Corporation
shall also pay an amount equal to interest on the amount determined in the above
sentence at 12% per annum, compounded on a quarterly basis, from the date fixed
for redemption to the date the Redemption Price is actually paid.

               3.2  The Corporation may not redeem outstanding shares of Series
C Preferred Stock pursuant to Section 3.1 above unless it concurrently redeems
shares of Series B Preferred Stock pursuant to Section 3.1 of the Series B 
Certificate

<PAGE>
                                                                               9

of Designation.  In the event that fewer than all the outstanding shares of 
Series C Preferred Stock and Series B Preferred Stock are to be redeemed 
pursuant to Section 3.1 above and pursuant to Section 3.1 of the Series B 
Certificate of Designation, the number of shares of Series C Preferred Stock
and Series B Preferred Stock to be redeemed shall be redeemed on a pro rata 
basis based on the number of shares held by each holder thereof.

               3.3  In the event the Corporation shall elect to redeem shares of
Series C Preferred Stock pursuant to Section 3.1, it shall provide notice of
such redemption by first class mail, postage prepaid, mailed not less than sixty
(60) nor more than ninety (90) days prior to the redemption date, to each record
holder of the shares to be redeemed, at such holder's address as the same
appears on the books of the Corporation.  Each such notice shall state:  (i) the
time and date as of which the redemption shall occur; (ii) the total number of
shares of Series C Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the Redemption Price; (iv) that shares of
Series C Preferred Stock called for redemption may be converted at any time
prior to the time and date fixed for redemption (unless (x) the Corporation
shall default in the payment of the Redemption Price, in which case such right
shall not terminate at such time and date or (y) the holders of such shares do
not yet have the right to convert such shares under Section 4 below); (v) the
Common Stock Conversion Rate; (vi) the place or places where certificates for
such shares are to be surrendered for payment of the Redemption Price; and
(vii) that dividends on the shares to be redeemed will cease to accrue on such
redemption date.

               3.4  If notice of redemption shall have been given by the
Corporation as provided in Section 3.3, dividends on the shares of Series C
Preferred Stock so called for redemption shall cease to accrue, such shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation with respect to shares so called for
redemption (except the right to receive from the Corporation the Redemption
Price without interest and except the right to convert such shares in accordance
with Section 4) shall cease (including any right to receive dividends otherwise
payable on any Dividend Payment Date that would have occurred after the time and
date of redemption) from and after the time and date fixed in the notice of
redemption as the time and date of redemption (unless the Corporation shall
default in the payment of the Redemption Price, in which case such rights shall
not terminate at such time and date).  Upon surrender (in accordance with the
notice of redemption) of the certificate or certificates for any shares to be so
redeemed (properly endorsed or assigned for transfer, if the Corporation shall
so require and the notice of redemption shall so state), such shares shall be
redeemed by the Corporation at the Redemption Price.  In case fewer than all the
shares represented by any such certificate are to be redeemed, a new certificate
shall be issued representing the unredeemed shares, without cost to the holder
thereof, together with the amount of cash, if any, in lieu of fractional shares.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at 

<PAGE>
                                                                              10

the end of one year from the redemption date shall revert to the general funds
of the Corporation, after which reversion the holders of such shares so called
for redemption shall look only to the general funds of the Corporation for the
payment of the redemption price without interest.  Any interest accrued on funds
so deposited shall be paid to the Corporation from time to time.

          4.   CONVERSION RIGHTS.

               4.1  Each holder of a share of Series C Preferred Stock shall
have the right, at any time after the second anniversary of the Issue Date, or,
as to any share of Series C Preferred Stock called for redemption with a date
fixed for redemption which is after the second anniversary of the Issue Date, at
any time prior to the time and date fixed for such redemption (unless the
Corporation defaults in the payment of the Redemption Price, in which case such
right shall not terminate at such time and date), to convert such share into
fully paid and nonassessable shares of Common Stock at the Common Stock
Conversion Rate as of the date of conversion.

               4.2  No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Series C Preferred
Stock.  Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series C Preferred
Stock, the Corporation shall, subject to Section 4.5(e), make a cash payment
(calculated to the nearest $.01) equal to such fraction multiplied by the
Closing Price of the Common Stock on the last Trading Day prior to the date of
conversion.

              4.3  Any holder of shares of Series C Preferred Stock electing to
convert such shares into Common Stock shall surrender the certificate or
certificates for such shares at the offices of the Corporation (or at such other
place as the Corporation may designate by notice to the holders of shares of
Series C Preferred Stock) during regular business hours, duly endorsed to the
Corporation or in blank, or accompanied by instruments of transfer to the
Corporation or in blank, in form reasonably satisfactory to the Corporation, and
shall give written notice to the Corporation at such offices that such holder
elects to convert such shares of Series C Preferred Stock.  As soon as 
practicable after any holder deposits certificates for shares of Series C
Preferred Stock, accompanied by the written notice above prescribed, the
Corporation shall issue and deliver at such office to the holder for whose 
account such shares were surrendered, or to his nominee, certificates
representing the number of shares of Common Stock and the cash in lieu of
fractional shares, if any, to which such holder is entitled upon such
conversion.

               4.4  Conversion shall be deemed to have been made as of the date
that certificates for the shares of Series C Preferred Stock to be converted and
the written notice, are received by the Corporation; and the Person entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Stock on such date.  The
Corporation shall not be 

<PAGE>
                                                                              11

required to deliver certificates for shares of Common Stock while the stock
transfer books for such stock or for Series C Preferred Stock are duly closed
for any purpose, but certificates for shares of Common Stock shall be issued and
delivered as soon as practicable after the opening of such books.

               4.5  The Common Stock Conversion Rate shall be adjusted from time
to time as follows:

                    (a)  If the Corporation shall, at any time or from time to
time while any shares of the Series C Preferred Stock are outstanding, (i) pay a
dividend on its Common Stock in shares of its capital stock, (ii) combine its
outstanding shares of Common Stock into a smaller number of shares,
(iii) subdivide its outstanding shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Corporation, then the Common Stock Conversion Rate in effect immediately
before such action shall be adjusted so that the holders of the Series C
Preferred Stock, upon conversion of shares thereof immediately following such
action, shall be entitled to receive the kind and amount of shares of capital
stock of the Corporation which they would have owned or been entitled to receive
upon or by reason of such event if such shares of Series C Preferred Stock had
been converted immediately before the record date or effective date for such
action.

                    (b)  If the Corporation shall, at any time or from time to
time while any of the Series C Preferred Stock is outstanding, issue or sell, or
fix a record date for the issuance of, (A) Common Stock (or securities
convertible or exchangeable into or exercisable for Common Stock) (other than
Excluded Securities) or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable or exercisable for shares of Common Stock) (other than
Excluded Securities), in any such case, at a price per share (treating the price
per share of securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of the security
convertible into or exchangeable or exercisable for Common Stock plus (ii) any
additional consideration initially payable upon the conversion of such security
into or the exchange or exercise of such security for Common Stock, divided by
(y) the number of shares of Common Stock initially underlying such exercisable,
convertible or exchangeable security) that is less than the greater of the
Current Market Price of the Common Stock and the Conversion Price on the date of
such issuance or such record date (the "Measuring Price"), then the Common Stock
Conversion Rate shall be adjusted so that it shall equal the rate determined by
multiplying the Common Stock Conversion Rate in effect immediately prior to
giving effect to this Section 4.5 by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding (calculated to include the
shares of Common Stock underlying the warrants issued under the Investment
Agreement, the shares of Common Stock underlying the Affiliate Warrants, the
shares of Common Stock underlying the Harnick Warrant and all then currently
exerciseable, convertible and 

<PAGE>
                                                                              12

exchangeable securities that are "in-the-money") on the date of issuance of such
rights, options or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase (or into or for which the exercisable,
convertible or exchangeable securities so offered are initially exercisable,
convertible or exchangeable), and the denominator of which shall be the number
of shares of Common Stock outstanding (calculated to include the shares of
Common Stock underlying the warrants issued under the Investment Agreement, the
shares of Common Stock underlying the Affiliate Warrants, the shares of Common
Stock underlying the Harnick Warrant and all then currently exerciseable,
convertible and exchangeable securities that are "in-the-money") on the date of
issuance of such rights, options or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate purchase price of the exercisable,
convertible or exchangeable securities so offered plus the aggregate amount of
any additional consideration initially payable upon exercise, conversion or
exchange for or into Common Stock) would purchase at such Measuring Price.  

                    (c)  If the Corporation shall, at any time or from time to
time while any of the Series C Preferred Stock is outstanding, distribute to all
holders of shares of its Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Corporation is the
continuing or surviving corporation and the Common Stock is not changed or
exchanged) cash, evidences of indebtedness, securities or other assets
(excluding (i) ordinary course cash dividends to the extent such dividends do
not exceed the Corporation's retained earnings and (ii) dividends payable in
shares of Common Stock for which adjustment is made under Section 4.5(a)) or
rights, options or warrants to subscribe for or purchase securities of the
Corporation (excluding those for which adjustment is made under Section 4.5(b)),
then in each such case the Common Stock Conversion Rate shall be adjusted so
that it shall equal the rate determined by multiplying the Common Stock 
Conversion Rate in effect immediately prior to the date of such distribution by
a fraction, the numerator of which shall be the Current Market Price of the
Common Stock on the record date referred to below, and the denominator of which
shall be such Current Market Price of the Common Stock less the then fair market
value (as determined by the Board of Directors in good faith or, if requested by
the holders of the Series B Preferred Stock in accordance with the terms of the 
Series B Certificate of Designation, the fair market value determined pursuant 
to the Series B Certificate of Designation) of the portion of the cash, 
evidences of indebtedness, securities or other assets so distributed or of such 
rights, options or warrants applicable to one share of Common Stock (provided 
that such denominator shall never be less than $.01).

                    (d)  If the Corporation or any subsidiary thereof shall, at
any time or from time to time while any of the Series C Preferred Stock is
outstanding, make a Pro Rata Repurchase, the Common Stock Conversion Rate shall
be adjusted by multiplying the Common Stock Conversion Rate in effect
immediately 

<PAGE>
                                                                              13

prior to such action by a fraction (which in no event shall be less than one
(1)), the numerator of which shall be the product of (i) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase minus the
number of shares of Common Stock repurchased in such Pro Rata Repurchase and
(ii) the Current Market Price of the Common Stock as of the day immediately
preceding the first public announcement by the Corporation of the intent to
effect such Pro Rata Repurchase, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Pro Rata Repurchase and (y) the Current Market Price of the Common
Stock as of the day immediately preceding the first public announcement by the
Corporation of the intent to effect such Pro Rata Repurchase minus (ii) the
aggregate purchase price of the Pro Rata Repurchase (provided that such
denominator shall never be less than $.01).

                    (e)  All calculations under this Section 4.5 shall be made
to the nearest $.01 (with $.005 being rounded upward), one-hundredth of a share
(with .005 being rounded upward) or, in the case of a conversion rate, one
ten-thousandth (with .00005 being rounded upward).  Notwithstanding any other
provision of this Section 4.5, the Corporation shall not be required to make any
adjustment of the Common Stock Conversion Rate unless such adjustment would
require an increase or decrease of at least 0.05% of such rate.  Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase or decrease of at
least 0.05% in such rate.  Any adjustments under this Section 4.5 shall be made
successively whenever an event requiring such an adjustment occurs.

                    (f)  Whenever an adjustment in the Common Stock Conversion
Rate is required, the Corporation shall promptly cause to be mailed (but in any
event not later than five (5) days after the date of the event giving rise to
such adjustment) first-class postage prepaid, to the holders of record of the
outstanding shares of Series C Preferred Stock, notice of such adjustment and a
certificate of a firm of independent public accountants of recognized national
standing selected by the Board of Directors (who shall be appointed at the
Corporation's expense and who may be the independent public accountants
regularly employed by the Corporation) setting forth the adjusted Common Stock
Conversion Rate in effect as of such date determined as provided herein.  Such
notice and certificate shall set forth in reasonable detail such facts as shall
be necessary to show the reason for and the manner of computing such adjustment.

                    (g)  In the event that at any time as a result of an
adjustment made pursuant to this Section 4.5, the holder of any share of
Series C Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of stock of the Corporation other than shares of
Common Stock, the conversion rate of such other shares so receivable upon
conversion of any such share of Series C Preferred Stock shall be subject to
adjustment from time to time in a 

<PAGE>
                                                                              14

manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in subparagraphs (a) through (f) and (h) of
this Section 4.5, and the provisions of this Section 4 with respect to the
Common Stock shall apply on like or similar terms to any such other shares and
the determination of the Board of Directors as to any such adjustment shall be
conclusive.

                    (h)  No adjustment shall be made pursuant to this Section if
the effect thereof would be to reduce the Conversion Price below the par value
of the Common Stock.

               4.6  In case (a) any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and which does not result
in any reclassification of, or change (other than a change in par value or from
par value to no par value or from no par value to par value, or as a result of a
subdivision or combination) in, outstanding shares of Common Stock or (b) any
sale or conveyance of all or substantially all of the property and assets of the
Corporation is effected in such a way that the holders of Common Stock shall be
entitled to receive stock or other securities or assets with respect to or in
exchange for Common Stock, then upon conversion of each share of Series C
Preferred Stock the holder thereof shall be entitled to receive the kind and
amount of shares of stock or other securities and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock into which such shares of Series C Preferred Stock could have been
converted immediately prior to such consolidation, merger, sale or conveyance,
subject to adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4.  The Corporation shall not
enter into any of the transactions referred to in clause (a) or (b) of the
preceding sentence unless provision shall be made so as to give effect to the
provisions set forth in this Section 4.6.  The provisions of this Section 4.6
shall apply similarly to successive consolidations, mergers, sales or
conveyances.

               4.7  The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
stock, for the purpose of effecting the conversion of the shares of Series C
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series C Preferred Stock into such Common Stock at any
time (assuming that, at the time of the computation of such number of shares,
all such Common Stock would be held by a single holder).  The Corporation shall
from time to time, in accordance with the laws of the State of Delaware, use its
best efforts to cause the authorized amount of Common Stock to be increased if
the aggregate of the authorized amount of the Common Stock remaining unissued
and the issued shares of such Common Stock in its treasury (other than any
shares of such Common Stock reserved for issuance in any other connection) shall
not be sufficient to permit the conversion of the shares of Series C Preferred
Stock into the Common Stock.  The Corporation covenants that 

<PAGE>
                                                                              15

any shares of Common Stock issued upon conversions of the Series C Preferred
Stock shall be validly issued, fully paid and nonassessable.

               4.8 If any shares of Common Stock which would be issuable upon
conversion of shares of Series C Preferred Stock hereunder require registration
with or approval of any governmental authority before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible cause such shares to be duly registered or approved, as the case may
be.

               4.9  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 shares of Series C Preferred Stock pursuant hereto.  The
Corporation shall not, however, be required to pay any tax which is payable in
respect of any transfer involved in the issue or delivery of Common Stock in a
name other than that in which the shares of Series C 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.

               4.10 For purposes of this Section 4, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Corporation or any
subsidiary.  The Corporation shall not pay a dividend or make any distribution
on shares of Common Stock held in the treasury of the Corporation.

               4.11 If any action or transaction would require adjustment of the
Common Stock Conversion Rate pursuant to more than one paragraph of this
Section 4, only one adjustment shall be made and each such adjustment shall be
the amount of adjustment that has the highest absolute value.

               4.12 In case:

                    (a)  of a consolidation or merger to which the Corporation
     is a party and for which approval of any stockholders of the Corporation is
     required; or

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

                    (c)  of any Pro Rata Repurchase;

then, in each case, the Corporation shall cause to be mailed, first-class
postage prepaid, to the holders of record of the outstanding shares of Series C
Preferred Stock, at least twenty (20) days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the 

<PAGE>
                                                                              16

purpose of any distribution or grant of rights or warrants triggering an
adjustment to the Common Stock Conversion Rate pursuant to this Section 4, or,
if a record is not to be taken, the date as of which the holders of record of
Common Stock entitled to such distribution, rights or warrants are to be
determined, or (y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation, winding up or Pro Rata
Repurchase is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding up or Pro Rata Repurchase.  Failure to give the notice
specified hereunder shall have no effect on the status or effectiveness of the
action to which the required notice relates.

          5.   VOTING.   The shares of Series C Preferred Stock shall have no
voting rights except as required by law.

          6.   LIQUIDATION RIGHTS.

               6.1  Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series C Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to stockholders, in preference to the
holders of, and before any payment or distribution shall be made on, Junior
Stock, the amount of $1,000 per share (the "Liquidation Value"), plus an amount
equal to all accrued and unpaid dividends to the date of final distribution
(whether or not declared).

               6.2  Neither the sale, exchange or other conveyance (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation nor the merger or consolidation of
the Corporation into or with any other corporation, or the merger or
consolidation of any other corporation into or with the Corporation, shall be
deemed to be a dissolution, liquidation or winding up, voluntary or involuntary,
for the purposes of this Section 6.

               6.3  After the payment to the holders of the shares of Series C
Preferred Stock of full preferential amounts provided for in this Section 6, the
holders of Series C Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation.

               6.4  In the event the assets of the Corporation available for
distribution to the holders of shares of Series C Preferred Stock upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Section 6.1, no such distribution shall be made
on account of any shares of any Parity Stock upon such dissolution, liquidation
or winding up unless proportionate 

<PAGE>
                                                                              17

distributive amounts shall be paid on account of the shares of Series C
Preferred Stock, ratably, in proportion to the full distributable amounts for
which holders of all Parity Stock are entitled upon such dissolution,
liquidation or winding up.

          7.   CHANGE OF CONTROL

               7.1  In the event that the Corporation becomes aware of a Change
of Control or pending Change of Control, the Corporation shall make an offer
(the "Change of Control Offer") to purchase all of the outstanding shares of
Series C Preferred Stock at a purchase price for each share of Series C
Preferred Stock equal to the Repurchase Price (as hereinafter defined) on the
effective date of such Change of Control (the "Trigger Date").  The Repurchase
Price will be payable (x) in cash, in the case of a Change of Control pursuant
to clause (i) through (iii) of the definition of a Change of Control and (y), at
the Corporation's election, either in cash or in Common Stock, in the case of a
Change of Control pursuant to clause (iv) of the definition of a Change of
Control.  In the event that the Corporation elects to pay the Repurchase Price
in Common Stock, such Common Stock shall be concurrently registered under the
Act and under the securities or blue sky laws of any jurisdiction designated by
any holder of Series C Preferred Stock which accepts the Change of Control
Offer.  The term "Repurchase Price" shall mean, with respect to each share of
Series C Preferred Stock, (x) if paid in cash, 110% of the sum of the
Liquidation Value thereof and any accrued and unpaid dividends thereon to the
date of such purchase, or (y) if paid in Common Stock, 125% of the sum of the
Liquidation Value thereof and any accrued and unpaid dividends thereon to the
date of such purchase. With respect to each share of Series C Preferred Stock
properly tendered for repurchase, if the Corporation fails to pay the Repurchase
Price upon such tender, the Corporation shall also pay an amount equal to
interest on the amount determined in the above sentence at 12% per annum,
compounded on a quarterly basis, from the date fixed for repurchase to the date
the Repurchase Price is actually paid.  The Change of Control Offer must be made
as soon as practicable and if possible not less than sixty (60) days prior to
the Trigger Date, shall remain open for at least forty (40) and not more than
fifty (50) days (or such longer time as may be required by applicable law or
regulation) and shall comply, to the extent required, with the applicable
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.

               7.2  In the event the Corporation is required to make a Change of
Control Offer pursuant to Section 7.1, it shall provide notice of such Change of
Control Offer (the "Notice of Offer") by first class mail, postage prepaid, to
each record holder of the shares of Series C Preferred Stock, at such holder's
address as the same appears on the books of the Corporation.  Each such Notice
of Offer shall state: (i) that the Corporation is offering to purchase all
outstanding shares of Series C Preferred Stock and that such offer is
irrevocable; (ii) the Trigger Date, which will be the date on which any such
purchase will be consummated; (iii) the total number of shares of Series C
Preferred Stock which the Corporation is offering 

<PAGE>
                                                                              18

to purchase from such holder; (iv) the Repurchase Price; (v) the last day on
which the Change of Control Offer may be accepted (the "Expiration Date"), (vi)
the place or places where certificates for shares of Series C Preferred Stock
are to be surrendered for payment of the Repurchase Price and (vii) in the event
of a Change of Control pursuant to clause (iv) of the definition of a Change of
Control, the terms, amount and kind of consideration paid or to be paid and the
identity, if known by the Corporation, of the Person or Group of Persons
triggering such Change of Control and whether the Corporation is electing to pay
the Repurchase Price in cash or Common Stock.

               7.3  Any holder of outstanding shares of Series C Preferred Stock
may, at its sole option, elect to accept the Change of Control Offer with
respect to all or less than all of such holder's outstanding Series C Preferred
Stock by delivering written notice of such acceptance to the Corporation on or
before the Expiration Date.  On the Trigger Date, the Corporation will pay to
each holder that has accepted the Change of Control Offer the Repurchase Price
for the shares of Series C Preferred Stock which such holder has elected to sell
to the Corporation against delivery (in accordance with the Notice of Offer) of
the certificate or certificates for any shares to so purchased (properly
endorsed or assigned for transfer, if the Corporation shall so require and the
Notice of Offer shall so state).  In case fewer than all the shares represented
by any such certificate are to be repurchased, a new certificate shall be issued
representing the shares which are not purchased, without cost of the holder
thereof, together with the amount of cash, if any, in lieu of fractional shares.
     

          8.   OTHER PROVISIONS.

               8.1  Shares of Series C Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Delaware law, have the
status of authorized but unissued shares of Preferred Stock of the Corporation
undesignated as to series and may with any and all other authorized but unissued
shares of Preferred Stock of the Corporation be designated or redesignated and
issued or reissued, as the case may be, as part of any series of Preferred Stock
of the Corporation, except that any issuance or reissuance of shares of Series C
Preferred Stock must be in compliance with this certificate of designation.

<PAGE>
                                                                              19

               8.2  The Corporation shall be entitled to recognize the exclusive
right of a Person registered on its records as the holder of shares of Series C
Preferred Stock, and such record holder shall be deemed the holder of such
shares for all purposes.

               8.3  All notice periods referred to herein shall commence on the
date of the mailing of the applicable notice.

          IN WITNESS WHEREOF, Platinum Entertainment, Inc. has caused this
certificate to be signed and attested this 12th day of December, 1997.

                         PLATINUM ENTERTAINMENT, INC.

                         By: /s/ Steven Devick
                            ---------------------------------
                         Name:   Steven Devick
                         Title:  Chief Executive Officer