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                                                                    EXHIBIT 4.14

                                                                       EXHIBIT A


               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                      SERIES C CONVERTIBLE PREFERRED STOCK

                                       OF

                            AURORA ELECTRONICS, INC.

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

                   -------------------------------------------


               AURORA ELECTRONICS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that, pursuant to authority vested in the Board of Directors of the Corporation
by Article Fourth of the Restated Certificate of Incorporation, as amended, of
the Corporation, the following resolution was adopted as of October 1, 1997 by
the Board of Directors of the Corporation pursuant to Section 141 of the
Delaware General Corporation Law:

               "RESOLVED that, pursuant to authority vested in the Board of
Directors of the Corporation by Article Fourth of the Corporation's Restated
Certificate of Incorporation, as amended, of the total authorized number of
1,000,000 shares of Preferred Stock, par value $.01 per share, of the
Corporation, there shall be designated a series of 25,000 shares which shall be
issued in and constitute a single series to be known as "Series C Convertible
Preferred Stock" (hereinafter called the "Series C Convertible Preferred
Stock"). The shares of Series C Convertible Preferred Stock shall have the
voting powers, designations, preferences and other special rights, and
qualifications, limitations and restrictions thereof set forth below:


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

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

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

               (a) Mandatory Redemption. On September 30, 2006, subject to the
terms of the Credit Agreement dated as of 



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<PAGE>   3

March 29, 1996 (as amended, the "Credit Agreement"), among Aurora Electronics
Group, Inc., the Corporation and the Guarantors named therein, the Lenders named
therein and The Chase Manhattan Bank (formerly known as Chemical Bank, N.A.), as
Agent, the Corporation shall redeem (the "Mandatory Redemption") all of the
shares of Series C Convertible Preferred Stock then outstanding, at a redemption
price of $100 per share, plus all accrued but unpaid dividends to which the
holders of the Series C Convertible Preferred Stock are then entitled pursuant
to Section 1 above as of such date.

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

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

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

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



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

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

               (c) Notice of Redemption. At least 20 days (and not more than 60
days) prior to any Redemption Date (which in the case of any Optional Redemption
shall be prior to the effective date of any such sale, lease or transfer of
assets or consolidation, merger or other transaction), written notice thereof (a
"Redemption Notice") shall be mailed, by first class or registered mail, postage
prepaid, to each holder of record of Series C Convertible Preferred Stock, at
his, her or its address last shown on the records of the transfer agent of the
Series C Convertible Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). The Redemption Notice shall set forth (i) the
Redemption Date, (ii) the Redemption Price, (iii) in the case of the Mandatory
Redemption, the total number of shares to be redeemed from all holders and the
number of shares to be redeemed from such holder, and (iv) in the case of an
Optional Redemption, a description of the events which will, upon the occurrence
thereof, constitute a Corporate Disposition, including a summary description of
the terms thereof, and 



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such holder's right to exercise its option to require a redemption under Section
2(b) hereof. In the case of a Mandatory Redemption, the Redemption Notice shall
call upon such holder to surrender to the Corporation, in the manner and at the
place designated, his or its certificate or certificates representing any shares
of Series C Convertible Preferred Stock to be redeemed.

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

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



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obligated to redeem, ratably on the basis set forth in the preceding sentence.

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

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



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

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

               (a) Right to Convert. Subject to the terms and conditions of this
Section 4, the holder of any share or shares of Series C Convertible Preferred
Stock shall have the right, at his, her or its option at any time, to convert
any such shares of Series C Convertible Preferred Stock (except that upon any
liquidation of the Corporation the right of conversion shall terminate as to all
shares at the close of business 15 days after notice thereof has been given to
the holders of Series C Convertible Preferred Stock as provided in Section 4(h)
hereof) into such number of fully paid and nonassessable whole shares of Common
Stock as is obtained by (i) multiplying the number of shares of Series C
Convertible Preferred Stock so to be converted by $100, (ii) adding the
Additional Conversion Amount (as defined in Section 4(c) herein), if any, and
(iii) dividing the result by the conversion price of $1.09 or, if there has been
an adjustment of the conversion price, by the conversion price as last adjusted
and in effect at the date any share or shares of Series C Convertible Preferred
Stock are surrendered for conversion (such price, or such price as last
adjusted, being referred to herein as the "Conversion Price"). Such right of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Series C
Convertible Preferred Stock into Common Stock (such number shall either be an
integral multiple of 1,000 or the total number of shares held by such holder)
and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Series C Convertible Preferred Stock) at any
time during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address), subject to
compliance with applicable laws to the extent such designation shall involve a
transfer, in which the certificate or certificates for shares of Common Stock
shall be issued.



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

               (c)    Fractional Shares; Dividends; Partial Conversion.

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

            (ii) Upon the conversion of any shares of Series C Convertible
        Preferred Stock, the Corporation will pay the holder thereof, out of
        funds legally available for such purpose, any accrued but unpaid
        dividends thereon to the 



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

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

               (d) Adjustment of Price Upon Issuance of Common Shares. Except as
provided in Section 4(e) hereof, if and whenever (after the date of
effectiveness of this Certificate of Designations and whether or not any shares
of Series C Convertible Preferred Stock shall at the time have been issued and
be outstanding) the Corporation shall issue or sell, or is, in accordance with
subparagraphs (d)(i) through (d)(vii), deemed to have issued or sold, any shares
of its Common Stock without consideration or for a consideration per share less
than the Conversion Price in effect immediately prior to the time of such issue
or sale, then, forthwith upon such issue or sale, the Conversion Price shall be
adjusted to the price (calculated to the nearest cent) determined by dividing
(x) an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issue or sale (including as outstanding
all shares of Common Stock issuable upon conversion of outstanding Series C
Convertible Preferred Stock) multiplied by the then existing Conversion Price,
and (B) the consideration, if any, received by the Corporation upon such issue
or sale, by (y) the total number of shares of Common Stock outstanding
immediately after such issue or sale (including as outstanding all shares of
Common Stock issuable upon conversion of outstanding Series C Convertible
Preferred Stock without giving effect to any adjust-



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<PAGE>   10

ment in the number of shares so issuable by reason of such issue and sale).

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

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

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



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

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



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        further adjustment of the Conversion Price shall be made by reason of
        such issue or sale.

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




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        as a result of such adjustment the Conversion Price then in effect
        hereunder is thereby reduced.

            (iv) Stock Dividends. In case the Corporation shall declare a
        dividend or make any other distribution upon any stock of the
        Corporation payable in Common Stock, Options or Convertible Securities,
        any Common Stock, Options or Con- vertible Securities, as the case may
        be, issuable in payment of such dividend or distribution shall be deemed
        to have been issued or sold without consideration, and the Conversion
        Price shall be reduced as if the Corporation had subdivided its
        outstanding shares of Common Stock into a greater number of shares, as
        provided in subparagraph (v).

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

            (vi) Consideration for Stock. In case any shares of Common Stock,
        Options or Convertible Securities shall be issued or sold for cash, the
        consideration received therefor shall be deemed to be the amount
        received by the Corporation therefor, without deduction therefrom of any
        expenses incurred or any underwriting commissions or concessions paid or
        allowed by the Corporation in connection therewith. In case any shares
        of Common Stock, Options or Convertible Securities shall be issued or
        sold for a consideration other than cash, the amount of the
        consideration other than cash received by the Corporation shall be
        deemed to be the fair value of such consideration as determined in good
        faith by the Board of Directors of the Corporation, without deduction of
        any expenses incurred or any underwriting commissions or concessions
        paid or allowed by the Corporation in connection therewith. The amount
        of consideration deemed to be received by the Corporation pursuant to
        the foregoing provisions of this subparagraph (vi) upon any issuance
        and/or sale of shares of Common Stock, Options or Convertible



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        Securities, pursuant to an established compensation plan of the
        Corporation, to directors, officers or employees of the Corporation in
        connection with their employment shall be increased by the amount of any
        tax benefit realized by the Corporation as a result of such issuance
        and/or sale, the amount of such tax benefit being the amount by which
        the Federal and/or state income or other tax liability of the
        Corporation shall be reduced by reason of any deduction or credit in
        respect of such issuance and/or sale. In case any Options shall be
        issued in connection with the issue and sale of other securities of the
        Corporation, together comprising one integral transaction in which no
        specific consideration is allocated to such Options by the parties
        thereto, such Options shall be deemed to have been issued without
        consideration.

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

               (e) Certain Issues of Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not make any adjustment of the
Conversion Price in the case of (i) the issuance of shares of Series C
Convertible Preferred Stock pursuant to that certain Series C Convertible
Preferred Stock Purchase Agreement, dated as of October 2, 1997, among the
Corporation, WCAS VII and the several other persons named on Schedule I thereto;
(ii) the issuance of shares of Common Stock upon conversion of Series C
Convertible Preferred Stock; (iii) the issuance of up to 5,559,887 shares of
Common Stock to employees of the Corporation or its subsidiaries, either
directly or pursuant to stock options, pursuant to plans or arrangements
approved by the Board of Directors of the Corporation; or (iv) the issuance of
shares of Common Stock in respect of any Convertible 



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<PAGE>   15

Securities issued by the Corporation prior to the date of said Series C
Convertible Preferred Stock Purchase Agreement.

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



                                       15
<PAGE>   16

The Corporation will not effect any Corporate Disposition unless prior to the
consummation thereof the acquiring corporation or other business entity, or
successor corporation or other business entity (if other than the Corporation)
resulting from such Corporate Disposition, as the case may be, shall assume by
written instrument (in form reasonably satisfactory to the holders of a majority
of the shares of Series C Convertible Preferred Stock at the time outstanding)
executed and mailed or delivered to each holder of a share or shares of Series C
Convertible Preferred Stock at the last address of such holder appearing on the
books of the Corporation (or its transfer agent, if any), the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.

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

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

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

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

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

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



                                       16
<PAGE>   17

then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Series C
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation (or its transfer agent, if any), (A) at least 15 days' prior
written notice of the date on which the books of the Corporation (or its
transfer agent) shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such Reorganization or Corporate Disposition, and (B) in the case of any
such Reorganization or Corporate Disposition, at least 15 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (A) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (B) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such Reorganization or Corporate Disposition, as the
case may be.

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

               (j) Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized but unis- sued Common Stock,
solely for the purpose of issuance upon the conversion of the Series C
Convertible Preferred Stock as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Series 



                                       17
<PAGE>   18

C Convertible Preferred Stock. All shares of Common Stock which shall be so
issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges arising out of or by reason of the issue
thereof, and, without limiting the generality of the foregoing, the Corporation
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Conversion Price. The Corporation will
take all such action within its control as may be necessary on its part to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or regulation, or of any requirements of any national
securities exchange upon which the Common Stock of the Corporation may be
listed. The Corporation will not take any action which results in any adjustment
of the Conversion Price if after such action the total number of shares of
Common Stock issued and outstanding and thereafter issuable upon exercise of all
options and conversion of Convertible Securities, including upon conversion of
the Series C Convertible Preferred Stock, would exceed the total number of
shares of Common Stock then authorized by the Corporation's Restated Certificate
of Incorporation.

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

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

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



                                       18
<PAGE>   19

the timely conversion of such Series C Convertible Preferred Stock.

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

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

               6. Restrictions. So long as any shares of Series C Convertible
Preferred Stock are outstanding, without the consent of the holders of a
majority of the Series C Convertible Preferred Stock at the time outstanding
given in person or by proxy, either in writing or at a special meeting called
for that purpose at which the holders of the Series C Convertible Preferred
Stock shall vote separately as a class, the Corporation may not (i) effect,
validate or permit a Corporate Disposition; (ii) effect or validate the
amendment, alteration or repeal of any provision 




                                       19
<PAGE>   20

hereof which would amend or repeal the dividend, voting, conversion, redemption
or liquidation rights of the Series C Convertible Preferred Stock set forth
herein; (iii) effect or validate the amendment, alteration or repeal of any
provision of the Restated Certificate of Incorporation or the By-laws of the
Corporation; or (iv) (A) create or authorize any additional class or series of
stock ranking senior to or on a parity with the Series C Convertible Preferred
Stock as to dividends or as to rights upon redemption, liquidation, dissolution
or winding up, or (B) increase the authorized number of shares of the Series C
Convertible Preferred Stock or of any other class or series of capital stock of
the Corporation ranking senior to or on a parity with the Series C Convertible
Preferred Stock as to dividends or as to rights upon redemption, liquidation,
dissolution or winding up, whether any such creation or authorization or
increase shall be by means of amendment hereof, amendment of the Restated
Certificate of Incorporation of the Corporation, Certificate of Designations or
amendment thereof, merger, consolidation or otherwise.

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

               8. Pari Passu Treatment. Except as and to the extent expressly
set forth hereinabove, each of the Series C Convertible Preferred Stock and the
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Convertible Preferred Stock"), of the Corporation and the Convertible Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"), of the
Corporation shall be pari passu to the other in all respects, including without
limitation with respect to voting rights (and which the holders of Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock shall vote as a single class on all matters for which such
holders are entitled to vote, including any vote required by law, the Restated
Certificate of Incorporation of the Corporation, any Certificates of
Designations of the Corporation or otherwise), liquidation preference,
redemption rights and preference and rights to receive dividends.



                                       20
<PAGE>   21

               IN WITNESS WHEREOF, this Certificate of Designations has been
executed by the Corporation by its Chairman and Chief Executive Officer this 2nd
day of October, 1997.


                                            AURORA ELECTRONICS, INC.



                                            By /s/ Jim C. Cowart
                                               --------------------------------
                                                Jim C. Cowart
                                                Chairman and Chief
                                                  Executive Officer