<PAGE>   1
                                                                    EXHIBIT 3.1


                              RESTATED CERTIFICATE
                                       OF
                           INCORPORATION, AS AMENDED


         Fiber Optic Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:

         1.      The name of this corporation is Fiber Optic Communications,
Inc.  Fiber Optic Communications, Inc. was originally incorporated under the
same name.  The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of the State of Delaware on July 27, 1992.

         2.      Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation has
been duly adopted and restates, integrates and further amends the provisions of
the Certificate of Incorporation of this corporation.

         3.      This Restated Certificate of Incorporation was duly consented
to, and adopted by, the holders of (i) a majority of the outstanding shares of
common stock, par value $.01 per share, of the Corporation and 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, par value $.01 per share, of
this corporation ("Series 1 Preferred Stock"), consenting together as a class
and by (ii) over three-fourths (3/4s) of the outstanding shares of Series 1
Preferred Stock, acting without a meeting by unanimous written consent pursuant
to Section 228 of the General Corporation Law of the State of Delaware.

         4.      The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:

         FIRST:  The name of this corporation (the "Corporation") is "IXC
Communications, Inc."

         SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801.  The name of its
registered agent at such address is The Corporation Trust Company.

         THIRD:  The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.

         FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one



                                       1


<PAGE>   2
hundred million (100,000,000) shares of common stock, par value $.01 per share,
and (ii) three million (3,000,000) shares of preferred stock, par value $.01
per share.  The preferred stock may be issued at any time, and from time to
time, in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the "Board")
of the Corporation (authority to do so being hereby expressly vested in the
Board), and such resolution or resolutions shall also set forth the voting
powers, full or limited, or none, of each such series of preferred stock and
shall fix the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of each
such series of preferred stock.

                 Upon the filing of this Second Amendment to Restated
Certificate of Incorporation which amends Article FOURTH to read as set forth
above, and without any further action on the part of the holders thereof, each
issued and outstanding share of common stock will be reclassified and changed 
into 0.8083 shares of common stock.

         FIFTH:  The business and affairs of the Corporation shall be managed
by and under the direction of the Board.  The exact number of directors of the
Corporation shall be fixed by or in the manner provided in the Bylaws of the
Corporation (the "Bylaws").

         SIXTH:  In furtherance and not in limitation of the powers conferred
by statute, the Board is expressly authorized:

         (a)     to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors
of the Corporation in addition to the powers and authorities expressly
conferred upon them by statute;

         (b)     from time to time to set apart out of any funds or assets of
the Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board so to do;

         (c)     subject to the laws of the State of Delaware, from time to
time to sell, lease or otherwise dispose of any part or parts of the properties
of the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and

         (d)     in addition to the powers and authorities hereinbefore and by
the laws of the State of Delaware conferred upon the Board, to execute all such
powers and to do all acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the express provisions of such laws, of
the Restated Certificate of Incorporation of the Corporation and its Bylaws.





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<PAGE>   3
         SEVENTH:  Meetings of stockholders of the Corporation may be held 
within or without the State of Delaware, as the Bylaws provide.  The books 
of the Corporation may be kept (subject to any provision of applicable law)
outside the State of Delaware at such place or places as may be designated 
from time to time by the Board or in the Bylaws.

         EIGHTH:  The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
applicable laws, and all rights conferred on stockholders herein are granted
subject to this reservation.

         NINTH:  The Corporation is to have perpetual existence.

         TENTH:  A director of this Corporation shall not be personally liable
to the Corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, except for liability (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 Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware Corporation Law.  No amendment to or repeal
of this Article Tenth shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.

         ELEVENTH:

         A.      Designation of Two Series of Preferred Stock.  There are
hereby provided two series of preferred stock designated and to be known as
"10% Senior Series 1 Cumulative Redeemable Preferred Stock" and "10% Junior
Series 3 Cumulative Redeemable Preferred Stock."

         B.      Definitions.  As used in this Eleventh Article, the following
terms shall have the meanings indicated:

                 1.       "Common Stock" shall mean the common stock, $.01 par
value per share, issued or to be issued by the Corporation.

                 2.       "Original Issue Date" shall mean, with respect to any
share of Series Preferred Stock, the date of the original issuance of such
shares.





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<PAGE>   4
                 3.       "Preferred Stock" shall mean the preferred stock,
$.01 par value per share, issued or to be issued by the Corporation.

                 4.       "Series 1 Preferred Stock" shall mean the 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.

                 5.       "Series 3 Preferred Stock" shall mean the 10% Junior
Series 3 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.

                 6.       "Series Preferred Stock" shall mean, collectively,
the Series 1 Preferred Stock and the Series 3 Preferred Stock.

         C.      Number of Shares.  The number of shares constituting the
Series 1 Preferred Stock shall be 2,000.  The number of shares constituting the
Series 3 Preferred Stock shall be 12,550.

         D.      Rights, Preferences, Privileges and Restrictions.  The voting
powers and relative rights, preferences, restrictions and other mattes relating
to the Series Preferred Stock are as follows:

                 1.       Dividends.

                          (a)     The holders of shares of Series 1 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation or the Common Stock of
the Corporation, when, as and if declared by the Board, out of funds legally
available for the payment of dividends, cumulative dividends in an annual amount
equal to $100 per share, plus an amount determined by applying a 10% annual
rate, compounded annually, to any accrued but unpaid dividend amount from the
last day of the period when such dividend accrues to the actual date of payment
of such dividend, and no more.  The holders of shares of Series 3 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation (other than the Series
1 Preferred Stock) or the Common Stock of the Corporation, when as and if
declared by the Board, out of funds legally available for the payment of
dividends, cumulative dividends in an annual amount equal to $100 per share,
plus an amount determined by applying a 10% annual rate, compounded annually, to
any accrued but unpaid dividend amount from the last day of the period when such
dividend accrues to the actual date of payment of such dividend, and no more;
provided, however, that (i) the Corporation may pay dividends on the
Corporation's 7-1/4% Junior Convertible Preferred Stock Due 2007 ("Convertible
Preferred Stock") with additional shares of Convertible Preferred Stock and (ii)
the Corporation may pay dividends on the Corporation's 12-1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Initial Exchangeable Preferred
Stock") and 12-1/2% Series B Junior Exchangeable Preferred Stock Due 2009 (the
"Series B Stock") with additional shares of Initial Exchangeable Preferred Stock
and Series B Stock, respectively.  Such dividends on the outstanding shares of
Series Preferred Stock shall be payable on such date as the Board may from time
to time determine (each such date being a "dividend payment date").  The Board
may fix a record date for the determination of holders of shares of Series
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall not be more than sixty (60) days prior to the date fixed
for





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<PAGE>   5
the payment thereof.  Each such annual dividend shall be fully cumulative and
shall accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series Preferred
Stock shall accrue from the Original Issue Date of such share or such other
date as determined by the Board, except that dividends with respect to each
share of Series 3 Preferred Stock shall accrue from August 14, 1992.
Dividends, when, as and if declared, shall be payable in cash.

                          (b)     The holder of each outstanding fractional
share of Series Preferred Stock shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Series Preferred Stock with the same Original Issue Date and all such dividends
with respect to each such outstanding fractional share shall be fully
cumulative and shall accrue (whether or not declared) and shall be payable in
the same manner and at such times as provided for in Section 1(a).

                          (c)     All dividends paid with respect to the
outstanding shares of Series Preferred Stock pursuant to Section 1(a) shall be
paid pro rata to the holders of each class entitled thereto.  Each Series 1
Preferred Stock holder's pro rata share of such dividends shall be calculated
by multiplying the total dividends to be paid by the percentage of (i) the
aggregate accrued but unpaid dividends to the date such payment is made on all
issued and outstanding shares of Series 1 Preferred Stock represented by (ii)
the aggregate accrued but unpaid dividends to the date such payment is made on
all shares (including fractional shares) of Series 1 Preferred Stock held by
such holder, and no more.  Each Series 3 Preferred Stock holder's pro rata
share of such dividends shall be calculated by multiplying the total dividends
to be paid by the percentage of (i) the aggregate accrued but unpaid dividends
to the date such payment is made on all issued and outstanding shares of Series
3 Preferred Stock represented by (ii) the aggregate accrued but unpaid
dividends to the date such payment is made on all shares (including fractional
shares) of Series 3 Preferred Stock held by such holder, and no more.

                 2.       Liquidation Rights of Series Preferred Stock:

                          (a)     In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of outstanding shares of Series Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be
made in respect of the outstanding shares of any other Preferred Stock of the
Corporation or Common Stock of the Corporation, an amount equal to $1,000 per
share of Series Preferred Stock then outstanding, plus all accrued but unpaid
dividends thereon to the date such payment is actually made, and no more.  If
upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of the
outstanding shares of Series Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts set forth
above, then





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<PAGE>   6
the entire assets of the Corporation to be distributed shall be distributed (i)
first, ratably among the holders of outstanding shares of Series 1 Preferred
Stock based on the full preferential amounts for the number of outstanding
shares of Series 1 Preferred Stock held by each holder and (ii) second, ratably
among the holders of outstanding shares of Series 3 Preferred Stock based on
the full preferential amounts for the number of outstanding shares of Series 3
Preferred Stock held by each holder.  The Corporation will mail written notice
of such liquidation, dissolution or winding up, not less than sixty (60) days
prior to the payment date stated therein, to each record holder of Series
Preferred Stock.

                          (b)     A consolidation or merger of the Corporation
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation as those terms are
used in this Section 2 unless such consolidation, merger or sale shall be in
connection with a dissolution or winding up of the Corporation.

                          (c)     The payment of preferential amounts pursuant
to this Section 2 with respect to each outstanding fractional share of Series 1
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series 1
Preferred Stock with the same Original Issue Date.  The payment of preferential
amounts pursuant to this Section 2 with respect to each outstanding fractional
share of Series 3 Preferred Stock shall be equal to the ratably proportionate
amount of the preferential amount payable with respect to each outstanding
share of Series 3 Preferred Stock with the same Original Issue Date.

                 3.       Voluntary Redemption by the Corporation.

                          (a)     The Corporation, at the option of the Board,
may at any time or from time to time redeem the outstanding shares of Series 1
Preferred Stock in whole or in part from any source of funds legally available
therefor.  The Corporation, at the option of the Board, may at any time or from
time to time redeem the outstanding shares of Series 3 Preferred Stock in whole
or in part from any source of funds legally available therefor, provided that
there shall then be no outstanding shares of Series 1 Preferred Stock.

                          (b)     The redemption price for each outstanding
share of Series Preferred Stock shall be equal to $1,000 plus an amount equal
to any accrued and unpaid dividends on such share through the Redemption Date
(as defined below), whether or not declared (the "Redemption Price").

                          (c)     In the event of a redemption of only a part
of the outstanding shares of a class of Series Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of shares held by
each holder of outstanding shares of such class of Series Preferred Stock.





                                       6
<PAGE>   7
                          (d)     At least ten (10) days and not more than
sixty (60) days prior to the date fixed for any redemption of shares of a class
of Series Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice," and the class of Series Preferred Stock referenced in such
Redemption Notice shall be referred to herein as the "Redeemed Stock") shall be
sent, by registered mail, to each holder of record of the outstanding shares of
Redeemed Stock at his or her mailing address last shown on the records of the
Corporation.  Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice, and failure duly to give the notice by mail, or any defect
in the notice, to any holder of shares of such class of Series Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of such class of Series Preferred Stock.
The Redemption Notice shall state:

                                  (i)      whether all or less than all of the
outstanding shares of the class of Series Preferred Stock are to be redeemed
and the total number of shares being redeemed;

                                  (ii)     the number of outstanding shares of
Redeemed Stock held by the holder which the Corporation intends to redeem;

                                  (iii)    the Redemption Date and the
Redemption Price;

                                  (iv)     that from and after the Redemption
Date, dividends shall cease to accrue; and

                                  (v)      that the holder is to surrender to
the Corporation, in the manner and at the place designated, the certificate or
certificates representing the outstanding shares of Redeemed Stock to be
redeemed.

                          (e)     On or before the Redemption Date, each holder
of outstanding shares of Redeemed Stock shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired.  In the event less than
all of the shares represented by any such certificate or certificates are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares.  All shares of the class of Series Preferred Stock called
for redemption will cease to accrue dividends as of the Redemption Date.  After
the Redemption Date, holders of such class of Series Preferred Stock shall no
longer be treated as stockholders of the Corporation with respect to the shares
of Series Preferred Stock being redeemed, except with respect to the right to
receive the Redemption Price, without interest, upon the surrender of their
respective certificates.





                                       7
<PAGE>   8
                        (f)      The Corporation may, at its option, on or 
prior to the Redemption Date, deposit with its transfer agent or other 
redemption agent selected by the Board of Directors of the Corporation, as a 
trust fund, a sum sufficient to redeem the shares called for redemption, with 
irrevocable instructions and authority to such transfer agent or other 
redemption agent to give or complete the Redemption Notice and to pay to the 
respective holders of such shares, as evidenced by a list of such holders 
certified by an officer of the Corporation, the Redemption Price upon 
surrender of their respective share certificates.  Such deposit shall be 
deemed to constitute full payment of such shares to their holders.  In case 
the holders of any shares shall not, within five (5) years after such deposit,
claim the amount deposited for redemption thereof, such transfer agent or 
other redemption agent shall, upon demand, pay over to the Corporation the 
balance of such amount so deposited and shall thereupon be relieved of all 
responsibility to the holders thereof.  Any interest accrued on any funds so 
deposited shall belong to the Corporation, and shall be paid to it from time 
to time on demand.

                        (g)      All shares of Series 1 Preferred Stock which 
shall have been redeemed pursuant to this Section 3 shall thereupon be 
restored to the status of authorized but unissued shares of Series 1 Preferred
Stock.

                        (h)      All shares of Series 3 Preferred Stock which 
shall have been redeemed pursuant to this Section 3 shall thereupon be 
restored to the status of authorized but unissued shares of Series 3 Preferred
Stock.

         4.      Voting Rights.  Except as otherwise provided herein or by the
General Corporation Law of the State of Delaware, holders of outstanding shares
of Series 1 Preferred Stock shall have no voting rights.  At all meetings of
the stockholders of the Corporation and in the case of any actions of
stockholders in lieu of a meeting, each share of Series 3 Preferred Stock shall
entitle the holder thereof to one vote.  Except as otherwise provided herein or
by the General Corporation Law of the State of Delaware, the holders of Common
Stock and Series 3 Preferred Stock shall vote together as a single class, and
neither the Common Stock nor Series 3 Preferred Stock shall be entitled to vote
as a separate class on any matter to be voted on by shareholders of the
Corporation, except that the holders of the Series 3 Preferred Stock shall be
entitled to vote as a separate class to elect one member of the Board of
Directors of the Corporation.

         5.      Restrictions and Limitations.  Except as otherwise provided by
the General Corporation Law of the State of Delaware, no amendment to this
Restated Certificate of Incorporation shall be made by the Corporation which
would change any of the terms, rights, preferences, privileges or restrictions
provided herein so as to affect adversely any shares of Series Preferred Stock
without the prior written consent of the holders of at least a majority of each
of the Series 1 Preferred Stock and the Series 3 Preferred Stock entitled to
vote thereon and outstanding at the time such action is taken; provided that no
amendment will change (i) the rate or times at which or the manner in which
dividends on any series of the Series Preferred Stock accrue or become payable,
(ii) the preferences with





                                       8
<PAGE>   9
respect to dividends and liquidation payments set forth in Section 1 and 2 or
(iii) the percentage of the holders of the Series Preferred Stock required to
approve any changes described in clauses (i) or (ii) above, without the prior
written consent of the holders of at least three-fourths (3/4s) of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock, as applicable, then
outstanding; and, provided further, that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior written consent of
the holders of the applicable percentages of the Series 1 Preferred Stock and
the Series 3 Preferred Stock then outstanding.

         IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this 31st day of January 1994.


                                                  /s/  Ralph J. Swett 
                                            -------------------------------
                                               Ralph J. Swett, President

Attest:


  /s/ John J. Willingham                     
-----------------------------
John J. Willingham, Secretary







                                       9

<PAGE>   10
                       CERTIFICATE OF OWNERSHIP AND MERGER
                                     MERGING
                             IXC CARRIER GROUP, INC.
                                      INTO
                            IXC COMMUNICATIONS, INC.
                     (PURSUANT TO SECTION 253 OF THE GENERAL
                          CORPORATION LAW OF DELAWARE)


         IXC Communications, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:

         FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.

         SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of IXC Carrier Group, Inc., a Delaware corporation
(the "Merging Corporation").

         THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 6th day of October 1995, determined to merge
into itself the Merging Corporation on the conditions set forth in such
resolutions:

                  "RESOLVED, that the Corporation merge into itself its
         subsidiary, IXC Carrier Group, Inc., a Delaware corporation, and assume
         all of said subsidiary's liabilities and obligations;

                  FURTHER RESOLVED, that the President and Secretary of the
         Corporation be, and they hereby are, directed to make, execute and
         acknowledge a certificate of ownership and merger setting forth a copy
         of the resolutions to merge IXC Carrier Group, Inc. into the
         Corporation and to assume said subsidiary's liabilities and obligations
         and the date of adoption thereof and to file the same in the office of
         the Secretary of State of the State of Delaware and a certified copy
         thereof in the Office of the Recorder of Deeds of New Castle County;
         and

                  FURTHER RESOLVED, that the effective date of such merger is
         November 30, 1995."

         IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Ralph J. Swett, its President, and
John J. Willingham, its Secretary, this 28th day of November 1995.

                                            IXC COMMUNICATIONS, INC.,
                                            a Delaware corporation


                                            By: /s/ Ralph J. Swett
                                                --------------------------------
                                                Ralph J. Swett, President

ATTEST:


By: /s/ John J. Willingham
    ---------------------------------
    John J. Willingham, Secretary                      [SEAL]
<PAGE>   11
                                                                  EXECUTION COPY


                   CERTIFICATE OF DESIGNATION OF THE POWERS,
               PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
                   AND OTHER SPECIAL RIGHTS OF 7 1/4% JUNIOR
                    CONVERTIBLE PREFERRED STOCK DUE 2007 AND
              QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

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

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

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

   IXC Communications, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Corporation (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, at a meeting duly called and held on March 28, 1997, duly approved
and adopted the following resolution (the "Resolution"):

   RESOLVED that, pursuant to the authority vested in the Board of Directors by
  its Certificate of Incorporation, the Board of Directors does hereby create,
  authorize and provide for the issuance of 7 1/4% Junior Convertible Preferred
  Stock Due 2007, par value $.01 per share, with a stated value initially of
  $100 per share, consisting of up to 1,400,000 shares having the designation,
  preferences, relative, participating, optional and other special rights and
  the qualifications, limitations and restrictions thereof that are set forth
  in the Restated Certificate of Incorporation and in this Resolution as
  follows:

   (a)  Designation.  There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "7 1/4% Junior Convertible Preferred Stock Due 2007" (the
"Convertible Preferred Stock").  The number of shares constituting the
Convertible Preferred Stock shall be 1,400,000.  The liquidation preference of
the Convertible Preferred Stock shall be $100 per share (the "Liquidation 
Preference").
<PAGE>   12


   (b)  Rank.  The Convertible Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior
to all classes of common stock and to each other class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of
the Company, the terms of which do not expressly provide that it ranks senior
to, or on a parity with, the Convertible Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank on a parity with the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock"); and (iii) junior to each share of
Series 3 Preferred Stock now or hereafter outstanding and junior to each class
of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the Company, the terms of which hereafter established
classes or series expressly provide that such class or series will rank senior
to the Convertible Preferred Stock as to dividend rights or rights on
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Stock").  The Company may not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the approval
of the holders of at least two-thirds of the shares of Convertible Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class.
All claims of the holders of the Convertible Preferred Stock, including claims
with respect to dividend payments, redemption payments, mandatory repurchase
payments or rights upon liquidation, winding-up or dissolution, shall rank
junior to the claims of the holders of any debt of the Company and all other
creditors of the Company.

   (c)  Dividends.  (i)  Holders of the outstanding shares of Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of funds legally available therefor,
dividends on each share of the Convertible Preferred Stock at a rate per annum
equal to 7 1/4% of the Liquidation


                                       2
<PAGE>   13
Preference of such share payable quarterly (each such quarterly period being
herein called a "Dividend Period").  In addition to the dividends described in
the preceding sentence, holders of outstanding shares of Convertible Preferred
Stock which are Transfer Restricted Securities will be entitled to additional
dividends (the "Additional Dividends"), when, as and if declared by the Board
of Directors of the Company, out of funds legally available therefor, with
respect to the shares of Convertible Preferred Stock, which Additional
Dividends shall accrue as follows if any of the following events occur (each
such event in clauses (A) and (B) below being herein called a "Registration
Default"):  (A) if by August 31, 1997, the Shelf Registration Statement has not
been declared effective by the Commission; or (B) if after the Shelf
Registration Statement is declared effective (1) the Shelf Registration
Statement thereafter ceases to be effective; or (2) the Shelf Registration
Statement or the related prospectus ceases to be usable (in each case except as
permitted below) in connection with resales of Transfer Restricted Securities
in accordance with and during the periods specified herein because either (I)
any event occurs as a result of which the related prospectus forming part of
such Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or (II) it shall be necessary to amend such Shelf Registration
Statement or supplement the related prospectus, to comply with the Securities
Act or the Exchange Act or the respective rules thereunder.

   Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.

   A Registration Default referred to in clause (B) of paragraph (c)(i) shall
be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be


                                       3
<PAGE>   14
declared effective to permit Holders to use the related prospectus or (y) other
material events with respect to the Company that would need to be described in
the Shelf Registration Statement or the related prospectus and (ii) in the case
of clause (y), the Company proceeds promptly and in good faith to amend or
supplement the Shelf Registration Statement and related prospectus to describe
such events unless the Company has determined in good faith that there are
material legal or commercial impediments in doing so; provided, however, that
in any case if such Registration Default occurs for a continuous period in
excess of 45 days, Additional Dividends shall be payable in accordance with the
immediately preceding paragraphs of this paragraph (c)(i) from the day such
Registration Default initially occurs until such Registration Default is cured.

   Any amounts of Additional Dividends due pursuant to clauses (A) or (B) of
this paragraph (c)(i) or pursuant to the proviso contained in the preceding
sentence will be payable on the regular dividend payment dates with respect to
the Convertible Preferred Stock and on the same terms and conditions and
subject to the same limitations as pertain at such time for the payment of
regular dividends.  The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
liquidation preference of the outstanding shares of Convertible Preferred
Stock, multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.

   All dividends on the Convertible Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date or, in the case of additional
shares of Convertible Preferred Stock issued in payment of a dividend, from the
date of issuance of such additional shares of Convertible Preferred Stock, and
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date"), commencing on June
30, 1997 to holders of record on the March 15, June 15, September 15 and
December 15 immediately preceding the relevant Dividend Payment Date.  Any
dividend on the Convertible Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to March 31, 1999 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional
shares


                                       4
<PAGE>   15
(rounded to the nearest whole share) of Convertible Preferred Stock (the
"Additional Shares") equal to the dividend amount divided by the Liquidation
Preference of such Additional Shares.  With respect to dividends accrued after
March 31, 1999, all dividends shall be payable in cash; provided, however, that
to the extent and for so long as the Company is prohibited by the terms of any
of its indebtedness then outstanding or by the terms of the Series 3 Preferred
Stock of the Company or any agreement or instrument to which the Company is
then subject, from paying cash dividends on the Convertible Preferred Stock,
such dividends will accrue on each share at the rate per annum equal to 8 3/4%
of the Liquidation Preference per share (instead of the 7 1/4% rate set forth
in the first paragraph of this paragraph (c)(i)) (together with any Additional
Dividends then payable, which for purposes of this paragraph shall be payable
at a rate of 0.50% over and above the 8 3/4% rate) payable through the issuance
of a number of Additional Shares (rounded to the nearest whole share) equal to
the dividend amount on such share divided by the Liquidation Preference of such
Additional Shares on the relevant Dividend Payment Date.  Except as provided
herein, accrued and unpaid dividends, if any, will not bear interest or bear
dividends thereon.

   (ii)  All dividends paid with respect to shares of the Convertible Preferred
Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders
entitled thereto.

   (iii)  No full dividends may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or
before such period shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash,
a sum in cash sufficient for such payment set apart for such payment on the
Convertible Preferred Stock.  If full dividends are not so paid, the
Convertible Preferred Stock will share dividends pro rata with the Parity
Stock.

   (iv)  The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock
through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Convertible Preferred Stock and any Parity Stock
at the time such


                                       5
<PAGE>   16
dividends are payable have been paid or funds have been set apart for payment
of such dividends and (2) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with respect to the
Convertible Preferred Stock and any Parity Stock.  As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.

   (v)  Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to holders
of record on such date, not more than 45 days prior to the payment thereof, as
may be fixed by the Board of Directors of the Company.

   (vi)  Dividends payable on the Convertible Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.  Dividends payable on the Convertible
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.

   (vii)  Certificates of Common Stock relating to Convertible Preferred Stock
surrendered for conversion by a registered Holder during the period from the
close of business on any regular record date next preceding any Dividend
Payment Date to the opening of business on such Dividend Payment Date (except
Convertible Preferred Shares called for redemption on a Redemption Date within
such period) must be accompanied by payment in cash of an amount equal to the
accrued but unpaid dividends thereon which such registered Holder is to receive
on such Dividend Payment Date with respect to the Convertible Preferred Stock
so surrendered.

   (d)  Liquidation Preference.  (i)  Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Convertible
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, the Liquidation Preference of
the outstanding shares of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends


                                       6
<PAGE>   17
(whether or not earned or declared and including Additional Dividends, if any,)
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the Convertible Preferred Stock been the subject of
an Optional Redemption on such date) before any distribution is made on any
Junior Stock.  If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the
Convertible Preferred Stock and all Parity Stock are not paid in full, the
Convertible Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares
of Convertible Preferred Stock and the Parity Stock, respectively, if all
amounts payable thereon had been paid in full) in any distribution of assets of
the Company to which each is entitled.  After payment of the full amount of the
Liquidation Preference of the outstanding shares of Convertible Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.

   (ii)  For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up
of the Company.

   (e)  Redemption.  (i)  Optional Redemption.  (A)  The Convertible Preferred
Stock shall not be redeemable prior to April 3, 2000.  On or after April 3,
2000, each share of the Convertible Preferred Stock may be redeemed (subject to
the legal availability of funds therefor) at any time, in whole or in part, at
the option of the Company, at the redemption prices (expressed as a percentage
of the Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid Liquidated
Damages and all accrued and unpaid dividends to the date fixed for redemption
(the "Optional Redemption Date") (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Optional Redemption Date) (the


                                       7
<PAGE>   18
"Optional Redemption Price").  Notwithstanding the foregoing, prior to April 1,
2002, the Company shall only have the option to redeem shares of Convertible
Preferred Stock if, during the period of 30 consecutive Trading Days ending on
the Trading Day immediately preceding the date that the Redemption Notice is
mailed to holders, the Closing Bid Price for the Common Stock exceeded 150% of
the Conversion Price effective on the date of such Redemption Notice for at
least 20 of such Trading Days.  If redeemed during the 12-month period
beginning April 1 of each of the years set forth below (or in the case of the
year 2000, April 3), the Optional Redemption Price per share shall be the
applicable percentage of the Liquidation Preference of such share set forth
below plus, without duplication, in each case, an amount in cash equal to all
accrued and unpaid Liquidated Damages and all accrued and unpaid dividends
(including an amount equal to a prorated dividend from the immediately
preceding Dividend Payment Date to the Optional Redemption Date), if any, to
the Optional Redemption Date:

<TABLE>
<CAPTION>

       Year in which redemption occurs                 Percentage
       -------------------------------                 ----------
                <S>                                    <C>
                2000  . . . . . . . . . . . . .          104.83%
                2001  . . . . . . . . . . . . .          104.03%
                2002  . . . . . . . . . . . . .          103.22%
                2003  . . . . . . . . . . . . .          102.42%
                2004  . . . . . . . . . . . . .          101.61%
                2005  . . . . . . . . . . . . .          100.81%
                2006  . . . . . . . . . . . . .          100.00%
</TABLE>

   (B)  In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by holders of fewer than 100 shares (or all of the shares held by holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.

   (ii)  Mandatory Redemption.  Each share of the Convertible Preferred Stock
(if not earlier redeemed or converted) shall be subject to mandatory redemption
in whole (to the extent of lawfully available funds therefor) on March 31, 2007
(the "Mandatory Redemption Date") at a price equal to 100% of the Liquidation
Preference of such share, plus, without duplication, all accrued and unpaid
Liquidated Damages and accrued and unpaid dividends thereon (including


                                       8
<PAGE>   19
an amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price").

   (iii)  Procedure for Redemption.  (A)  On and after the Optional Redemption
Date or the Mandatory Redemption Date, as the case may be (the "Redemption
Date"), unless the Company defaults in the payment of the applicable redemption
price, dividends will cease to accumulate on shares of Convertible Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
paragraph (iii)(B) and the funds necessary for redemption (including an amount
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends
shall cease to accumulate on the Redemption Date on the shares to be redeemed
and, at the close of business on the day on which such funds are segregated and
set apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.

   (B)  With respect to a redemption pursuant to paragraph (e)(i) or (e)(ii),
the Company will send a written notice of redemption by first class mail to
each holder of record of shares of Convertible Preferred Stock, not fewer than
15 days nor more than 60 days prior to the Redemption Date at its registered
address (the "Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective.  The Redemption Notice shall state:

    (1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
  hereof;


                                       9
<PAGE>   20
     (2) the Optional Redemption Price or the Mandatory Redemption Price, as
  the case may be;

     (3) whether all or less than all the outstanding shares of the Convertible
  Preferred Stock are to be redeemed and the total number of shares of the
  Convertible Preferred Stock being redeemed;

     (4) the Redemption Date;

     (5) that the holder is to surrender to the Company, in the manner, at the
  place or places and at the price designated, his certificate or certificates
  representing the shares of Convertible Preferred Stock to be redeemed; and

     (6) that dividends on the shares of the Convertible Preferred Stock to be
  redeemed shall cease to accumulate on such Redemption Date unless the Company
  defaults in the payment of the Optional Redemption Price or the Mandatory
  Redemption Price, as the case may be.

   (C)  Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price or Mandatory Redemption Price, as the case may be, for such shares shall
be payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired.  In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.

   (f)  Voting Rights.  (i)  The holders of Convertible Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.

   (ii)  (A)  If (1) dividends on the Convertible Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend


                                       10
<PAGE>   21
Default"); or (2) the Company fails to redeem the Convertible Preferred Stock on
March 31, 2007, or fails to otherwise discharge any redemption obligation with
respect to the Convertible Preferred Stock, then the number of directors
constituting the Board of Directors of the Company will be increased by two and
the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors.  Each such event
described in clauses (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of Convertible Preferred
Stock then outstanding.

   (B)  The voting rights set forth in subparagraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Convertible Preferred Stock are paid in full in
cash, (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least two-thirds of the shares of Convertible Preferred Stock then outstanding
or (z) at any time there are less than 200,000 shares of Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of subparagraph (f)(ii)(A) above shall terminate and the number
of directors constituting the Board of Directors shall be decreased by two
(until the occurrence of any subsequent Voting Rights Triggering Event).  At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Convertible Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to subparagraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25% of the shares of Convertible Preferred Stock then outstanding or the
holders of 25% of the shares of Parity Stock then outstanding upon which like
rights have been confirmed and are exercisable addressed to the secretary of
the Company shall, call a special meeting of the Holders of Convertible
Preferred Stock and the holders of such Parity Stock for the purpose of
electing the directors which such holders are entitled to elect pursuant to the
terms hereof;


                                       11
<PAGE>   22
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days
after the voting power to elect directors shall have become vested, in which
case such meeting shall be deemed to have been called for such next annual
meeting.  If such meeting shall not be called by a proper officer of the
Company within 20 days after personal service to the secretary of the Company
at its principal executive offices, then the Holders of record of at least 25%
of the outstanding shares of Convertible Preferred Stock or the holders of 25%
of the shares of Parity Stock upon which like rights have been confirmed and
are exercisable may designate in writing one of their members to call such
meeting at the expense of the Company, and such meeting may be called by the
person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders.  Any holder of Convertible Preferred Stock or
such Parity Stock so designated shall have, and the Company shall provide,
access to the lists of holders of Convertible Preferred Stock and the holders
of such Parity Stock to be called pursuant to the provisions hereof.  If no
special meeting of the Holders of Convertible Preferred Stock and the holders
of such Parity Stock is called as provided in this paragraph (f)(ii), then such
meeting shall be deemed to have been called for the next annual meeting of
stockholders of the Company or special meeting of the holders of any other
capital stock of the Company.

   (C)  At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of Parity
Stock upon which like rights have been conferred and are exercisable) shall
have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Convertible Preferred
Stock (and such Parity Stock) shall be required to constitute a quorum thereof.

   (D)  Any vacancy occurring in the office of a director elected by the
Holders of Convertible Preferred Stock (and such Parity Stock) may be filled by
the remaining director elected by the Holders of Convertible Preferred Stock
(and such Parity Stock) unless and until such vacancy shall be filled by the
Holders of Convertible Preferred Stock (and such Parity Stock).


                                       12
<PAGE>   23
   (iii)  (A)  So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not authorize, create or increase the authorized
amount of any class or series of Senior Stock without the affirmative vote or
consent of holders of at least two-thirds of the shares of Convertible
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting (except that no such vote or consent
shall be required for the issuance of additional shares of Series 3 Preferred
Stock to be paid as dividends on such Series 3 Preferred Stock pursuant to the
terms of such Series 3 Preferred Stock).

   (B)  So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so as
to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock or to authorize the
issuance of any additional shares of Convertible Preferred Stock (except to
authorize the issuance of additional shares of Convertible Preferred Stock to
be paid as dividends on the Convertible Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least two-thirds of the issued and outstanding shares of Convertible Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.

   (C)  Except as set forth in paragraph (f)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, including the designation of a series of Convertible
Preferred Stock, or (y) the increase or decrease in the amount of authorized
Capital Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Convertible Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of shares
of Convertible Preferred Stock.

   (iv)  In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Convertible Preferred Stock entitled to vote with respect to
such matters shall be entitled to one vote for each share of Convertible
Preferred Stock held.


                                       13
<PAGE>   24
   (v)  Except as required by law, the Holders of the Convertible Preferred
Stock will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.

   (g)  Conversion.  (i)  At any time after 60 days from the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion.  Such conversion right shall expire at the
close of business on the Mandatory Redemption Date.  In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.

   The price at which Common Stock shall be delivered upon conversion (herein
called the "Conversion Price") shall be initially $23.46 per share of Common
Stock.  The Conversion Price shall be adjusted in certain instances as provided
in paragraph (g)(iv) and paragraph (g)(v).

   (ii)  In order to exercise the conversion privilege, the Holder of any share
of Convertible Preferred Stock to be converted shall surrender the certificate
for such share of Convertible Preferred Stock, duly endorsed or assigned to the
Company or in blank, at the office of the Transfer Agent or at any office or
agency of the Company maintained for that purpose, accompanied by written
notice to the Company in the form of Exhibit B that the Holder elects to
convert such share of Convertible Preferred Stock or, if fewer than all of the
shares of Convertible Preferred Stock represented by a single share certificate
are to be converted, the number of shares represented thereby to be converted.
Except as provided in paragraph (c)(viii), no payment or adjustment shall be
made upon any conversion on account of any dividends accrued on the shares of
Convertible Preferred Stock surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion.  Such notice shall also
contain the office or the address to which the Company should deliver shares of
Common Stock issuable upon conversion (and any other payments or certificates
related thereto).  Except as


                                       14
<PAGE>   25
provided in paragraph (c)(viii), in no event shall the Company be obligated to
pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Stock issued upon
such conversion.

   Shares of Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares of Convertible Preferred Stock for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of Convertible Preferred Stock as Holders shall cease, and the person or
persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
at such time.  As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the Company a
certificate or certificates for the number of full Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in paragraph (g)(iii) hereof.

   In the case of any conversion of fewer than all the shares of Convertible
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.

   (iii)  No fractional Common Stock shall be issued upon the conversion of a
share of Convertible Preferred Stock.  If more than one share of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
Convertible Preferred Stock so surrendered.  Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any share of
Convertible Preferred Stock, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (g)(iv)(7)) per share of Common Stock at the close of
business on the Business Day prior to the day of conversion.


                                       15
<PAGE>   26
   (iv)  The Conversion Price shall be adjusted from time to time by the
Company as follows:

    (1)  If the Company shall hereafter pay a dividend or make a distribution in
  Common Stock to all holders of any outstanding class or series of Common
  Stock of the Company, the Conversion Price in effect at the opening of
  business on the date following the date fixed for the determination of
  shareholders entitled to receive such dividend or other distribution shall be
  reduced by multiplying such Conversion Price by a fraction of which the
  numerator shall be the number of shares of Common Stock outstanding at the
  close of business on the Record Date (as defined in paragraph (g)(iv)(7))
  fixed for such determination and the denominator shall be the sum of such
  number of outstanding shares and the total number of shares constituting such
  dividend or other distribution, such reduction to become effective
  immediately after the opening of business on the day following the Record
  Date.  If any dividend or distribution of the type described in this
  paragraph (g)(iv)(i) is declared but not so paid or made, the Conversion
  Price shall again be adjusted to the Conversion Price which would then be in
  effect if such dividend or distribution had not been declared.

    (2)  If the Company shall offer or issue rights or warrants to all holders
  of its outstanding Common Stock entitling them to subscribe for or purchase
  Common Stock at a price per share less than the Current Market Price (as
  defined in paragraph (g)(iv)(7)) on the Record Date fixed for the
  determination of shareholders entitled to receive such rights or warrants,
  the Conversion Price shall be adjusted so that the same shall equal the price
  determined by multiplying the Conversion Price in effect at the opening of
  business on the date after such Record Date by a fraction of which the
  numerator shall be the number of shares of Common Stock outstanding at the
  close of business on the Record Date plus the number of shares of Common
  Stock which the aggregate offering price of the total number of shares of
  Common Stock subject to such rights or warrants would purchase at such
  Current Market Price and of which the denominator shall be the number of
  shares of Common Stock outstanding at the close of business on the Record
  Date plus the total number of additional shares of Common Stock subject to
  such


                                       16
<PAGE>   27
  rights or warrants for subscription or purchase.  Such adjustment shall
  become effective immediately after the opening of business on the day
  following the Record Date fixed for determination of shareholders entitled to
  purchase or receive such rights or warrants.  To the extent that shares of
  Common Stock are not delivered pursuant to such rights or warrants, upon the
  expiration or termination of such rights or warrants the Conversion Price
  shall again be adjusted to be the Conversion Price which would then be in
  effect had the adjustments made upon the issuance of such rights or warrants
  been made on the basis of delivery of only the number of shares of Common
  Stock actually delivered.  If such rights or warrants are not so issued, the
  Conversion Price shall again be adjusted to be the Conversion Price which
  would then be in effect if such date fixed for the determination of
  shareholders entitled to receive such rights or warrants had not been fixed.
  In determining whether any rights or warrants entitle the holders to
  subscribe for or purchase Common Stock at less than such Current Market
  Price, and in determining the aggregate offering price of such shares of
  Common Stock, there shall be taken into account any consideration received
  for such rights or warrants, with the value of such consideration, if other
  than cash, to be determined by the Board of Directors.

    (3)  If the outstanding shares of Common Stock shall be subdivided into a
  greater number of shares of Common Stock, the Conversion Price in effect at
  the opening of business on the day following the day upon which such
  subdivision becomes effective shall be proportionately reduced, and,
  conversely, if the outstanding shares of Common Stock shall be combined into
  a smaller number of shares of Common Stock, the Conversion Price in effect at
  the opening of business on the day following the day upon which such
  combination becomes effective shall be proportionately increased, such
  reduction or increase, as the case may be, to become effective immediately
  after the opening of business on the day following the day upon which such
  subdivision or combination becomes effective.

    (4)  If the Company shall, by dividend or otherwise, distribute to all
  holders of its shares of Common Stock shares of any class of capital stock of
  the Company (other than any dividends or distributions


                                       17
<PAGE>   28
  to which paragraph (g)(iv)(1) applies) or evidences of its indebtedness, cash
  or other assets (including securities, but excluding any rights or warrants
  of a type referred to in paragraph (g)(iv)(2) and excluding dividends and
  distributions paid exclusively in cash and excluding any capital stock,
  evidences of indebtedness, cash or assets distributed upon a merger or
  consolidation to which paragraph (g)(v) applies) (the foregoing hereinafter
  in this paragraph (g)(iv)(4) called the "Distributed Securities"), then, in
  each such case, the Conversion Price shall be reduced so that the same shall
  be equal to the price determined by multiplying the Conversion Price in
  effect immediately prior to the close of business on the Record Date (as
  defined in paragraph (g)(iv)(7)) with respect to such distribution by a
  fraction of which the numerator shall be the Current Market Price (determined
  as provided in paragraph (g)(iv)(7)) of the Common Stock on such date less
  the fair market value (as determined by the Board of Directors, whose
  determination shall be conclusive and described in a resolution of the Board
  of Directors) on such date of the portion of the Distributed Securities so
  distributed applicable to one share of Common Stock and the denominator shall
  be such Current Market Price, such reduction to become effective immediately
  prior to the opening of business on the day following the Record Date;
  provided, however, that, in the event the then fair market value (as so
  determined) of the portion of the Distributed Securities so distributed
  applicable to one share of Common Stock is equal to or greater than the
  Current Market Price on the Record Date, in lieu of the foregoing adjustment,
  adequate provision shall be made so that each holder of Convertible Preferred
  Stock shall have the right to receive upon conversion of a share of
  Convertible Preferred Stock (or any portion thereof) the amount of
  Distributed Securities such holder would have received had such holder
  converted such share of Convertible Preferred Stock (or portion thereof)
  immediately prior to such Record Date.  If such dividend or distribution is
  not so paid or made, the Conversion Price shall again be adjusted to be the
  Conversion Price which would then be in effect if such dividend or
  distribution had not been declared.  If the Board of Directors determines the
  fair market value of any distribution for purposes of this paragraph
  (g)(iv)(4) by reference to the actual or when issued trading market for any
  securities comprising all


                                       18
<PAGE>   29
  or part of such distribution, it must in doing so consider the prices in such
  market over the same period used in computing the Current Market Price 
  pursuant to paragraph (g)(iv)(7) to the extent possible.

  Rights or warrants distributed by the Company to all holders of Common Stock
  entitling the holders thereof to subscribe for or purchase shares of the
  Company's capital stock (either initially or under certain circumstances),
  which rights or warrants, until the occurrence of a specified event or events
  ("Dilution Trigger Event"): (i) are deemed to be transferred with such
  Common Stock; (ii) are not exercisable; and (iii) are also issued in respect
  of future issuances of Common Stock, shall be deemed not to have been
  distributed for purposes of this paragraph (g)(iv)(4) (and no adjustment to
  the Conversion Price under this paragraph (g)(iv)(4) shall be required) until
  the occurrence of the earliest Dilution Trigger Event, whereupon such rights
  and warrants shall be deemed to have been distributed and an appropriate
  adjustment to the Conversion Price under this paragraph (g)(iv)(4) shall be
  made.  If any such rights or warrants, including any such existing rights or
  warrants distributed prior to the date hereof, are subject to subsequent
  events, upon the occurrence of each of which such rights or warrants shall
  become exercisable to purchase different securities, evidences of
  indebtedness or other assets, then the occurrence of each such event shall be
  deemed to be such date of issuance and record date with respect to new rights
  or warrants (and a termination or expiration of the existing rights or
  warrants without exercise by the holder thereof).  In addition, in the event
  of any distribution (or deemed distribution) of rights or warrants, or any
  Dilution Trigger Event with respect thereto, that was counted for purposes of
  calculating a distribution amount for which an adjustment to the Conversion
  Price under this paragraph (g)(iv)(4) was made, (1) in the case of any such
  rights or warrants which shall all have been redeemed or repurchased without
  exercise by any holders thereof, the Conversion Price shall be readjusted
  upon such final redemption or repurchase to give effect to such distribution
  or Dilution Trigger Event, as the case may be, as though it were a cash
  distribution, equal to the per share redemption or repurchase price received
  by a holder or holders of Common Stock with respect to such rights or


                                       19
<PAGE>   30
  warrants (assuming such holder had retained such rights or warrants), made to
  all holders of Common Stock as of the date of such redemption or repurchase,
  and (2) in the case of such rights or warrants which shall have expired or
  been terminated without exercise by any holders thereof, the Conversion Price
  shall be readjusted as if such rights and warrants had not been issued.

  Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
  contrary, capital stock, rights, warrants, evidences of indebtedness, other
  securities, cash or other assets (including, without limitation, any rights
  distributed pursuant to any shareholder rights plan) shall be deemed not to
  have been distributed for purposes of this paragraph (g)(iv)(4) if the
  Company makes proper provision so that each holder of shares of Convertible
  Preferred Stock who converts a share of Convertible Preferred Stock (or any
  portion thereof) after the date fixed for determination of shareholders
  entitled to receive such distribution shall be entitled to receive upon such
  conversion, in addition to the Common Stock issuable upon such conversion,
  the amount and kind of such distributions that such holder would have been
  entitled to receive if such holder had, immediately prior to such
  determination date, converted such share of Convertible Preferred Stock into
  Common Stock.

  For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and (2),
  any dividend or distribution to which this paragraph (g)(iv)(4) is
  applicable that also includes Common Stock, or rights or warrants to
  subscribe for or purchase Common Stock to which paragraph (g)(iv)(2) applies
  (or both), shall be deemed instead to be (1) a dividend or distribution of
  the evidences of indebtedness, cash, assets, shares of capital stock, rights
  or warrants other than (A) such shares of Common Stock or (B) rights or
  warrants to which paragraph (g)(iv)(2) applies (and any Conversion Price
  reduction required by this paragraph (g)(iv)(4) with respect to such dividend
  or distribution shall then be made) immediately followed by (2) a dividend or
  distribution of such Common Stock or such rights or warrants (and any further
  Conversion Price reduction required by paragraph (g)(iv)(1) and (2) with
  respect to such dividend or distribution shall then be made), except that (1)
  the Record Date of such


                                       20
<PAGE>   31
  dividend or distribution shall be substituted as "the Record Date fixed for
  the determination of stockholders entitled to receive such dividend or other
  distribution", "Record Date fixed for such determination" and "Record Date"
  within the meaning of paragraph (g)(iv)(1) and as "the Record Date fixed for
  the determination of shareholders entitled to receive such rights or
  warrants", "the date fixed for the determination of the shareholders entitled
  to receive such rights or warrants" and "such Record Date" within the meaning
  of paragraph (g)(iv)(2), and (2) any share of Common Stock included in such
  dividend or distribution shall not be deemed "outstanding at the close of
  business on the date fixed for such determination" within the meaning of
  paragraph (g)(iv)(1).

    (5)  If the Company shall, by dividend or otherwise, distribute to all
  holders of its Common Stock cash (excluding any cash that is distributed upon
  a merger or consolidation to which paragraph (g)(v) applies or as part of a
  distribution referred to in paragraph (g)(iv)) in an aggregate amount that,
  combined together with (1) the aggregate amount of any other such
  distributions to all holders of its Common Stock made exclusively in cash
  within the 12 months preceding the date of payment of such distribution, and
  in respect of which no adjustment pursuant to this paragraph (g)(iv)(5) has
  been made, and (2) the aggregate of any cash plus the fair market value (as
  determined by the Board of Directors, whose determination shall be conclusive
  and described in a resolution of the Board of Directors) of consideration
  payable in respect of any tender offer by the Company or a Subsidiary of the
  Company for all or any portion of the Common Stock concluded within the 12
  months preceding the date of payment of such distribution, and in respect of
  which no adjustment pursuant to paragraph (g)(iv)(4) has been made, exceeds
  12.5% of the product of the Current Market Price (determined as provided in
  paragraph (g)(iv)(7)) on the Record Date with respect to such distribution
  times the number of shares of Common Stock outstanding on such date, then,
  and in each such case, immediately after the close of business on such date,
  the Conversion Price shall be reduced so that the same shall equal the price
  determined by multiplying the Conversion Price in effect immediately prior to
  the close of business on


                                       21
<PAGE>   32
  such Record Date by a fraction (i) the numerator of which shall be equal to
  the Current Market Price on the Record Date less an amount equal to the
  quotient of (x) the excess of such combined amount over such 12.5% amount
  divided by (y) the number of shares of Common Stock outstanding on the Record
  Date and (ii) the denominator of which shall be equal to the Current Market
  Price on such Record Date; provided, however, that, if the portion of the
  cash so distributed applicable to one share of Common Stock is equal to or
  greater than the Current Market Price of the Common Stock on the Record Date,
  in lieu of the foregoing adjustment, adequate provision shall be made so that
  each holder of Convertible Preferred Stock shall have the right to receive
  upon conversion of a share of Convertible Preferred Stock (or any portion
  thereof) the amount of cash such holder would have received had such holder
  converted such share of Convertible Preferred Stock (or portion thereof)
  immediately prior to such Record Date.  If such dividend or distribution is
  not so paid or made, the Conversion Price shall again be adjusted to be the
  Conversion Price which would then be in effect if such dividend or
  distribution had not been declared.

    (6)  If a tender or exchange offer made by the Company or any of its
  Subsidiaries for all or any portion of the Common Stock expires and such
  tender or exchange offer (as amended upon the expiration thereof) requires
  the payment to shareholders (based on the acceptance (up to any maximum
  specified in the terms of the tender offer) of Purchased Shares (as defined
  below)) of an aggregate consideration having a fair market value (as
  determined by the Board of Directors, whose determination shall be conclusive
  and described in a resolution of the Board of Directors) that, combined
  together with (1) the aggregate of the cash plus the fair market value (as
  determined by the Board of Directors, whose determination shall be conclusive
  and described in a resolution of the Board of Directors), as of the
  expiration of such tender offer, of consideration payable in respect of any
  other tender offers, by the Company or any of its Subsidiaries for all or any
  portion of the Common Stock expiring within the 12 months preceding the
  expiration of such tender offer and in respect of which no adjustment
  pursuant to this paragraph (g)(iv)(6) has been made and (2) the aggregate
  amount of any distributions to all holders of


                                       22
<PAGE>   33
  the Common Stock made exclusively in cash within 12 months preceding the
  expiration of such tender offer and in respect of which no adjustment
  pursuant to paragraph (g)(iv)(5) has been made, exceeds 12.5% of the product
  of the Current Market Price (determined as provided in paragraph (g)(iv)(7))
  as of the last time (the "Expiration Time") tenders could have been made
  pursuant to such tender offer (as it may be amended) times the number of
  shares of Common Stock outstanding (including any tendered shares) at the
  Expiration Time, then, and in each such case, immediately prior to the
  opening of business on the day after the date of the Expiration Time, the
  Conversion Price shall be adjusted so that the same shall equal the price
  determined by multiplying the Conversion Price in effect immediately prior to
  the close of business on the date of the Expiration Time by a fraction of
  which the numerator shall be the number of shares of Common Stock outstanding
  (including any tendered shares) at the Expiration Time multiplied by the
  Current Market Price of the Common Stock on the Trading Day next succeeding
  the Expiration Time and the denominator shall be the sum of (x) the fair
  market value (determined as aforesaid) of the aggregate consideration payable
  to shareholders based on the acceptance (up to any maximum specified in the
  terms of the tender offer) of all shares validly tendered and not withdrawn
  as of the Expiration Time (the shares deemed so accepted, up to any such
  maximum, being referred to as the "Purchased Shares") and (y) the product of
  the number of shares of Common Stock outstanding (less any Purchased Shares)
  at the Expiration Time and the Current Market Price of the Common Stock on
  the Trading Day next succeeding the Expiration Time, such reduction (if any)
  to become effective immediately prior to the opening of business on the day
  following the Expiration Time.  If the Company is obligated to purchase
  shares pursuant to any such tender offer, but the Company is permanently
  prevented by applicable law from effecting any such purchases or all such
  purchases are rescinded, the Conversion Price shall again be adjusted to be
  the Conversion Price which would then be in effect if such tender offer had
  not been made.  If the application of this paragraph (g)(iv)(6) to any tender
  offer would result in an increase in the Conversion Price, no adjustment
  shall be made for such tender offer under this paragraph (g)(iv)(6).


                                       23
<PAGE>   34
    (7)  For purposes of this paragraph (g)(iv), the following terms shall have
  the meaning indicated:

  "closing price" with respect to any securities on any day means the closing
  price on such day or, if no such sale takes place on such day, the average of
  the reported high and low prices on such day, in each case on The Nasdaq
  National Market or the New York Stock Exchange, as applicable, or, if such
  security is not listed or admitted to trading on such national market or
  exchange, on the principal national securities exchange or quotation system
  on which such security is quoted or listed or admitted to trading, or, if not
  quoted or listed or admitted to trading on any national securities exchange
  or quotation system, the average of the high and low prices of such security
  on the over-the-counter market on the day in question as reported by the
  National Quotation Bureau Incorporated or a similar generally accepted
  reporting service, or, if not so available, in such manner as furnished by
  any New York Stock Exchange member firm selected from time to time by the
  Board of Directors for that purpose, or a price determined in good faith by
  the Board of Directors, whose determination shall be conclusive and described
  in a resolution of the Board of Directors.

  "Current Market Price" means the average of the daily closing prices per
  share of Common Stock for the 10 consecutive trading days immediately prior
  to the date in question; provided, however, that (A) if the "ex" date (as
  hereinafter defined) for any event (other than the issuance or distribution
  requiring such computation) that requires an adjustment to the Conversion
  Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs
  during such 10 consecutive trading days, the closing price for each trading
  day prior to the "ex" date for such other event shall be adjusted by
  multiplying such closing price by the same fraction by which the Conversion
  Price is so required to be adjusted as a result of such other event, (B) if
  the "ex" date for any event (other than the issuance or distribution
  requiring such computation) that requires an adjustment to the Conversion
  Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs on
  or after the "ex" date for the issuance or distribution requiring such
  computation and prior to the day in question, the closing price for each
  trading day on and after the


                                       24
<PAGE>   35
  "ex" date for such other event shall be adjusted by multiplying such closing
  price by the reciprocal of the fraction by which the Conversion Price is so
  required to be adjusted as a result of such other event and (C) if the "ex"
  date for the issuance or distribution requiring such computation is prior to
  the day in question, after taking into account any adjustment required
  pursuant to clause (A) or (B) of this proviso, the closing price for each
  trading day on or after such "ex" date shall be adjusted by adding thereto
  the amount of any cash and the fair market value (as determined by the Board
  of Directors in a manner consistent with any determination of such value for
  purposes of paragraphs (g)(iv)(4) or (5), whose determination shall be
  conclusive and described in a resolution of the Board of Directors) of the
  evidence of indebtedness, shares of capital stock or assets being distributed
  applicable to one Common Stock as of the close of business on the day before
  such "ex" date.  For purposes of any computation under paragraph (g)(vi), the
  Current Market Price on any date shall be deemed to be the average of the
  daily closing prices per share of Common Stock for such day and the next two
  succeeding trading days; provided, however, that, if the "ex" date for any
  event (other than the tender offer requiring such computation) that requires
  an adjustment to the Conversion Price pursuant to paragraph (g)(iv)(1), (2),
  (3), (4), (5) or (6) occurs on or after the Expiration Time for the tender or
  exchange offer requiring such computation and prior to the day in question,
  the closing price for each trading day on and after the "ex" date for such
  other event shall be adjusted by multiplying such closing price by the
  reciprocal of the fraction by which the Conversion Price is so required to be
  adjusted as a result of such other event.  For purposes of this paragraph,
  the term "ex" date (I) when used with respect to any issuance or
  distribution, means the first date on which the Common Stock trades regular
  way on the relevant exchange or in the relevant market from which the closing
  price was obtained without the right to receive such issuance or
  distribution, (II) when used with respect to any subdivision or combination
  of Common Stock, means the first date on which the Common Stock trades
  regular way on such exchange or in such market after the time at which such
  subdivision or combination becomes effective and (III) when used with respect
  to any tender or exchange offer means the first date on which the Common


                                       25
<PAGE>   36
  Stock trades regular way on such exchange or in such market after the
  Expiration Time of such offer.  Notwithstanding the foregoing, whenever
  successive adjustments to the Conversion Price are called for pursuant to this
  paragraph (g)(iv), such adjustments shall be made to the Current Market Price
  as may be necessary or appropriate to effectuate the intent of this paragraph
  (g)(iv) and to avoid unjust or inequitable results, as determined in good
  faith by the Board of Directors.

  "fair market value" shall mean the amount which a willing buyer would pay a
  willing seller in an arm's-length transaction.

  "Record Date" shall mean, with respect to any dividend, distribution or other
  transaction or event in which the holders of Common Stock have the right to
  receive any cash, securities or other property or in which the Common Stock
  (or other applicable security) is exchanged for or converted into any
  combination of cash, securities or other property, the date fixed for
  determination of shareholders entitled to receive such cash, securities or
  other property (whether such date is fixed by the Board of Directors or by
  statute, contract or otherwise).

    (8)  No adjustment in the Conversion Price shall be required unless such
  adjustment would require an increase or decrease of at least 1% in such
  price; provided, however, that any adjustments which by reason of this
  paragraph (g)(iv)(8) are not required to be made shall be carried forward and
  taken into account in any subsequent adjustment.  All calculations under this
  paragraph (g)(iv)(8) shall be made by the Company and shall be made to the
  nearest cent or to the nearest one-hundredth of a share, as the case may be.
  No adjustment need be made for a change in the par value or no par value of
  the Common Stock.

    (9)  Whenever the Conversion Price is adjusted as herein provided, the
  Company shall promptly file with the Transfer Agent an Officers' Certificate
  setting forth the Conversion Price after such adjustment and setting forth a
  brief statement of the facts requiring such adjustment.  Promptly after
  delivery of such certificate, the Company shall prepare a notice of such
  adjustment of the Conversion Price setting forth the


                                       26
<PAGE>   37
  adjusted Conversion Price and the date on which each adjustment becomes
  effective and shall mail such notice of such adjustment of the Conversion
  Price to each holder of Convertible Preferred Stock at such holder's last
  address appearing on the register of holders maintained for that purpose
  within 20 days of the effective date of such adjustment.  Failure to deliver
  such notice shall not affect the legality or validity of any such adjustment.

    (10)  In any case in which this paragraph (g)(iv) provides that an
  adjustment shall become effective immediately after a Record Date for an
  event, the Company may defer until the occurrence of such event issuing to
  the holder of any share of Convertible Preferred Stock converted after such
  Record Date and before the occurrence of such event the additional Common
  Stock issuable upon such conversion by reason of the adjustment required by
  such event over and above the Common Stock issuable upon such conversion
  before giving effect to such adjustment.

    (11)  For purposes of this paragraph (g)(iv), the number of shares of Common
  Stock at any time outstanding shall not include shares held in the treasury
  of the Company but shall include shares issuable in respect of scrip
  certificates issued in lieu of fractions of Common Stock.  The Company shall
  not pay any dividend or make any distribution on Common Stock held in the
  treasury of the Company.

    (v)  In case of any consolidation of the Company with, or merger of the
  Company into, any other corporation, or in case of any merger of another
  corporation into the Company (other than a merger which does not result in
  any reclassification, conversion, exchange or cancellation of outstanding
  shares of Common Stock of the Company), or in case of any conveyance or
  transfer of the properties and assets of the Company substantially as an
  entirety, the holder of each share of Convertible Preferred Stock then
  outstanding shall have the right thereafter, during the period such
  Convertible Preferred Stock shall be convertible as specified in paragraph
  (g)(i), to convert such share of Convertible Preferred Stock only into the
  kind and amount of securities, cash and other property receivable upon such
  consolidation, merger, conveyance or transfer by a holder of the number of


                                       27
<PAGE>   38
  shares of Common Stock of the Company into which such share of Convertible
  Preferred Stock might have been converted immediately prior to such
  consolidation, merger, conveyance or transfer, assuming such holder of Common
  Stock of the Company failed to exercise his rights of election, if any, as to
  the kind or amount of securities, cash and other property receivable upon
  such consolidation, merger, conveyance or transfer (provided that, if the
  kind or amount of securities, cash and other property receivable upon such
  consolidation, merger, conveyance or transfer is not the same for each share
  of Common Stock of the Company in respect of which such rights of election
  shall not have been exercised ("nonelecting share"), then for the purpose of
  this paragraph (g)(v) the kind and amount of securities, cash and other
  property receivable upon such consolidation, merger, conveyance or transfer
  by each nonelecting share shall be deemed to be the kind and amount so
  receivable per share by a plurality of the nonelecting shares).  Such
  securities shall provide for adjustments which, for events subsequent to the
  effective date of the triggering event, shall be as nearly equivalent as may
  be practicable to the adjustments provided for in this paragraph (g)(v).  The
  above provisions of this Section shall similarly apply to successive
  consolidations, mergers, conveyances or transfers.

   (vi)  In case:

   (1) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or

   (2) the Company shall authorize the granting to all holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or

   (3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or transfer of all
or substantially all the assets of the Company; or


                                       28
<PAGE>   39
   (4) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;

then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up 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, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.  Failure to give the notice requested
by this Section or any defect therein shall not affect the legality or validity
of any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote
upon any such action.

   (vii)  The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock
(or out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Convertible
Preferred Stock, the full number of Common Stock then issuable upon the
conversion of all outstanding shares of Convertible Preferred Stock.

   (viii)  The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
Common Stock on conversion of the Convertible Preferred Stock pursuant hereto.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the holder of the share of


                                       29
<PAGE>   40
Convertible Preferred Stock or the shares of Convertible Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.

   (ix)  (1)  Notwithstanding any other provision in the preceding paragraphs
to the contrary, if any Change in Control occurs then, if the Company does not
elect to make a Change in Control Offer, the Conversion Price in effect shall
be adjusted immediately after such Change in Control as described below.  In
addition, in the event of a Common Stock Change in Control (as defined in this
paragraph (g)(ix)), each share of the Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Change in Control.  For purposes of
calculating any adjustment to be made pursuant to this paragraph in the event
of a Change in Control, immediately after such Change in Control:

    (A) in the case of a Non-Stock Change in Control (as defined in this
  paragraph (g)(ix)), the Conversion Price shall thereupon become the lower of
  (x) the Conversion Price in effect immediately prior to such Non-Stock Change
  in Control, but after giving effect to any other prior adjustments, and (y)
  the result obtained by multiplying the greater of the Applicable Price (as
  defined in this paragraph (g)(ix)) or the then applicable Reference Market
  Price (as defined in this paragraph (g)(ix)) by a fraction of which the
  numerator shall be $100.00 and the denominator shall be the then current
  Optional Redemption Price per share; and

    (B) in the case of a Common Stock Change in Control, the Conversion Price in
  effect immediately prior to such Common Stock Change in Control, but after
  giving effect to any prior adjustments, shall thereupon be adjusted by
  multiplying such Conversion Price by a fraction, of which the numerator shall
  be the Purchaser Stock Price (as defined in this paragraph (g)(ix)) and the
  denominator shall be the Applicable Price; provided, however, that in the
  event of a Common Stock Change in Control in which (x) 100% of the value of
  the consideration received by a holder of Common Stock is common stock of the
  successor, acquiror, or other third


                                       30
<PAGE>   41
  party (and cash, if any, is paid with respect to any fractional interests in
  such common stock resulting from such Common Stock Change in Control) and (y)
  all of the Common Stock will have been exchanged for, converted into, or
  acquired for, common stock (and cash with respect to fractional interests) of
  the successor, acquiror or other third party, the Conversion Price in effect
  immediately prior to such Common Stock Change in Control shall thereupon be
  adjusted by multiplying such Conversion Price by a fraction, of which the
  numerator shall be one (1) and the denominator shall be the number of shares
  of common stock of the successor, acquiror, or other third party received by
  a holder of one share of Common Stock as a result of such Common Stock Change
  in Control.

   (3)  For purposes of this paragraph (ix), the following terms shall have the
meanings indicated:

    "Applicable Price" means (i) in the event of a Non-Stock Change in Control
  in which the holders of the Common Stock receive only cash, the amount of
  cash received by the holder of one share of Common Stock and (ii) in the
  event of any other Non-Stock Change in Control or any Common Stock Change in
  Control, the average of the Closing Bid Prices for the Common Stock during
  the ten Trading Days prior to and including the record date for the
  determination of the holders of Common Stock entitled to receive cash,
  securities, property or other assets in connection with such Non-Stock Change
  in Control or Common Stock Change in Control or, if there is no such record
  date, the date upon which the holders of the Common Stock shall have the
  right to receive such cash, securities, property or other assets, in each
  case, as adjusted in good faith by the Board of Directors to appropriately
  reflect any of the events referred to in paragraph (g)(iv)(1) through (6).

    "Common Stock Change in Control" means any Change in Control in which more
  than 50% of the value (as determined in good faith by the Board of Directors
  of the Company) of the consideration received by holders of Common Stock
  consists of common stock that for each of the ten consecutive Trading Days
  referred to in the preceding paragraph has been admitted for listing or
  admitted for listing subject to notice of issuance on a national securities
  exchange or quoted on The Nasdaq


                                       31
<PAGE>   42
  National Market; provided, however, that a Change in Control shall not be a
  Common Stock Change in Control unless either (i) the Company continues to
  exist after the occurrence of such Change in Control and the outstanding
  shares of Convertible Preferred Stock continue to exist as outstanding shares
  of Convertible Preferred Stock, or (ii) not later than the occurrence of such
  Change in Control, the outstanding shares of Convertible Preferred Stock are
  converted into or exchanged for shares of convertible preferred stock of a
  corporation succeeding to the business of the Company, which convertible
  preferred stock has powers, preferences and relative, participating, optional
  or other rights, and qualifications, limitations and restrictions,
  substantially similar to those of the Convertible Preferred Stock.

    "Non-Stock Change in Control" means any Change in Control other than a
  Common Stock Change in Control.

    "Purchaser Stock Price" means, with respect to any Common Stock Change in
  Control, the product of (i) the number of shares of common stock received in
  such Common Stock Change of Control for each share of Common Stock, and (ii)
  the average of the per share Closing Prices for the common stock received in
  such Common Stock Change in Control for the ten consecutive Trading Days
  prior to and including the record date for the determination of the holders
  of Common Stock entitled to receive such common stock, or if there is no such
  record date, the date upon which the holders of the Common Stock shall have
  the right to receive such common stock, in each case, as adjusted in good
  faith by the Board of Directors to appropriately reflect any of the events
  referred to in paragraph (g)(iv)(1) through (6); provided, however, that if
  no such Closing Prices exist, then the Purchaser Stock Price shall be set at
  a price determined in good faith by the Board of Directors of the Company.

    "Reference Market Price" shall initially mean $13.50 (which is an amount
  equal to 66-2/3% of the reported last sale price for the Common Stock on The
  Nasdaq National Market on March 25, 1997), and in the event of any adjustment
  to the conversion prices other than as a result of a Change in Control, the
  Reference Market Price shall also be adjusted so that the ratio of the
  Reference Market Price to the Conversion Price


                                       32
<PAGE>   43
  after giving effect to any such adjustment shall always be the same as the
  ratio of $13.50 to the initial Conversion Price set forth in paragraph
  (g)(i).

   (h)  Change in Control.  (i)  Upon the occurrence of a Change of Control
(the date of such occurrence being the "Change in Control Date"), the Company
shall be obligated to (1) purchase all or a portion of each holder's
Convertible Preferred Stock in cash pursuant to the offer described in
paragraph (h)(iii) (the "Change of Control Offer") at a purchase price equal to
100% of the Liquidation Preference, plus, without duplication, all accrued and
unpaid Liquidated Damages and all accrued and unpaid dividends, if any, to the
Change of Control Payment Date, including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date or (2)
adjust the conversion price as provided under paragraph (g)(ix).
Notwithstanding the foregoing, the Company shall, prior to electing to make a
Change of Control Offer, make an offer to redeem all outstanding shares of
Series 3 Preferred Stock.

   (ii)  Prior to the mailing of the notice referred to in paragraph (h)(iii),
but in any event within 15 days following the date on which the Company knows
or reasonably should have known that a Change in Control has occurred, the
Company covenants that it shall promptly determine if the purchase of the
Convertible Preferred Stock would violate or constitute a default under the
Indenture or other indebtedness of the Company.

   (iii)  Within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
must send, by first-class mail, postage prepaid, a notice to each holder of
Convertible Preferred Stock.  Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the Company, and if permitted, such notice shall contain all instructions and
materials necessary to enable such holders to tender Convertible Preferred
Stock pursuant to the Change of Control Offer.  If the Change of Control Offer
would be permitted under the Indenture or other indebtedness of the Company,
such notice shall state:

    (A) that a Change of Control has occurred, that the Change of Control Offer
  is being made pursuant to


                                       33
<PAGE>   44
  this paragraph (h) and that all Convertible Preferred Stock validly tendered
  and not withdrawn will be accepted for payment;

    (B) the purchase price (including the amount of accrued dividends, if any)
  and the purchase date (which must be no earlier than 30 days nor later than
  75 days from the date such notice is mailed, other than as may be required by
  law) (the "Change of Control Payment Date");

    (C) that any shares of Convertible Preferred Stock not tendered will
  continue to accrue dividends;

    (D) that, unless the Company defaults in making payment therefor, any share
  of Convertible Preferred Stock accepted for payment pursuant to the Change of
  Control Offer shall cease to accrue dividends after the Change of Control
  Payment Date;

    (E) that holders electing to have any shares of Convertible Preferred Stock
  purchased pursuant to a Change of Control Offer will be required to surrender
  such shares of Convertible Preferred Stock, properly endorsed for transfer,
  together with such other customary documents as the Company and the Transfer
  Agent may reasonably request to the Transfer Agent and registrar for the
  Convertible Preferred Stock at the address specified in the notice prior to
  the close of business on the Business Day prior to the Change of Control
  Payment Date;

    (F) that holders will be entitled to withdraw their election if the Company
  receives, not later than five Business Days prior to the Change of Control
  Payment Date, a telegram, a telex, facsimile transmission or letter setting
  forth the name of the holder, the number of shares of Convertible Preferred
  Stock the holder delivered for purchase and a statement that such holder is
  withdrawing his election to have such shares of Convertible Preferred Stock
  purchased;

    (G) that holders whose shares of Convertible Preferred Stock are purchased
  only in part will be issued a new certificate representing the unpurchased
  shares of Convertible Preferred Stock; and


                                       34
<PAGE>   45
    (H) the circumstances and relevant facts regarding such Change of Control.

    If the Change of Control Offer would not be permitted under the Indenture 
or other indebtedness of the Company, such notice shall state the Conversion 
Price as adjusted pursuant to paragraph (g)(ix).

    (iv)  The Company will comply with any tender offer rules under the Exchange
Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer required to be made by the Company to repurchase the
shares of Convertible Preferred Stock as a result of a Change of Control.  To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Certificate of Designation, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Certificate of Designation by virtue
thereof.

    (v)  On the Change of Control Payment Date the Company shall (A) accept for
payment the shares of Convertible Preferred Stock validly tendered pursuant to
the Change of Control Offer, (B) pay to the holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate.  Unless the Company defaults in the payment for the shares of
Convertible Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Convertible
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.

    (vi)  To accept the Change of Control Offer, the holder of a share of
Convertible Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Convertible Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.

    (i)  Reissuance of Convertible Preferred Stock.  Shares of Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of


                                       35
<PAGE>   46
  Convertible Preferred Stock and shall (upon compliance with any applicable
  provisions of the laws of Delaware) have the status of authorized and
  unissued shares of Preferred Stock undesignated as to series and may be
  redesignated and reissued as part of any series of Preferred Stock; provided,
  however, that so long as any shares of Convertible Preferred Stock are
  outstanding, any issuance of such shares must be in compliance with the terms
  hereof.

   (j)  Business Day.  If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.

   (k)  Limitation on Mergers and Asset Sales.  The Company may not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any person unless:  (1) the successor, transferee or lessee
(if not the Company) is organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and the
Convertible Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of
such successor, transferee or lessee substantially the same powers, preference
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Convertible
Preferred Stock had immediately prior to such transaction; and (2) the Company
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with this
Certificate of Designation.  The successor, transferee or lessee will be the
successor company.

   (l)  Certificates.  (i)  Form and Dating.  The Convertible Preferred Stock
and the Transfer Agent's certificate of authentication shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Certificate of Designation.  The Convertible Preferred Stock
certificate may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company).  Each Convertible Preferred Stock certificate shall be dated
the date of its authentication.  The terms of the Convertible


                                       36
<PAGE>   47
Preferred Stock certificate set forth in Exhibit A are part of the terms of
this Certificate of Designation.

   (A)  Global Convertible Preferred Stock.  The Convertible Preferred Stock
sold in reliance on Rule 144A shall be issued initially in the form of one or
more fully registered global certificates with the global securities legend and
restricted securities legend set forth in Exhibit A hereto (the "Global
Convertible Preferred Stock"), which shall be deposited on behalf of the
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for DTC (or with such other custodian as DTC may direct), and
registered in the name of DTC or a nominee of DTC, duly executed by the Company
and authenticated by the Transfer Agent as hereinafter provided.  The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.

   (B)  Book-Entry Provisions.  In the event Global Convertible Preferred Stock
is deposited with or on behalf of DTC, the Company shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Convertible Preferred Stock certificates that (a) shall be registered in the
name of DTC for such Global Convertible Preferred Stock or the nominee of DTC
and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
instructions or held by the Transfer Agent as custodian for DTC.

   Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Certificate of Designation with respect to any Global Convertible
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Convertible Preferred Stock, and DTC may
be treated by the Company, the Transfer Agent and any agent of the Company or
the Transfer Agent as the absolute owner of such Global Convertible Preferred
Stock for all purposes whatsoever.  Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the


                                       37
<PAGE>   48
exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.

   (C)  Certificated Convertible Preferred Stock.  Convertible Preferred Stock
initially sold to certain "accredited investors" (as defined in Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act) or sold in offshore
transactions pursuant to Regulation S under the Securities Act will be issued
in fully registered certificated form ("Certificated Convertible Preferred
Stock").

   Except as provided in this paragraph (l)(i) or in paragraph (l)(iii), owners
of beneficial interests in Global Convertible Preferred Stock will not be
entitled to receive physical delivery of Certificated Convertible Preferred
Stock.

   After a transfer of any Convertible Preferred Stock during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Convertible Preferred Stock, all requirements pertaining to legends on such
Convertible Preferred Stock will cease to apply, the requirements requiring
that any such Convertible Preferred Stock issued to Holders be issued in global
form will cease to apply, and Certificated Convertible Preferred Stock without
legends will be available to the transferee of the Holder of such Convertible
Preferred Stock upon exchange of such transferring Holder's Convertible
Preferred Stock or directions to transfer such Holder's interest in the Global
Convertible Preferred Stock, as applicable.

   (ii)  Execution and Authentication.  Two Officers shall sign the Convertible
Preferred Stock for the Company by manual or facsimile signature.  The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Convertible Preferred Stock and may be in facsimile form.

   If an Officer whose signature is on Convertible Preferred Stock no longer
holds that office at the time the Transfer Agent authenticates the Convertible
Preferred Stock, the Convertible Preferred Stock shall be valid nevertheless.

   A Convertible Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of
authentication on the Convertible Preferred Stock.  The signature shall be
conclusive evidence


                                       38
<PAGE>   49
that the Convertible Preferred Stock has been authenticated under this
Certificate of Designation.

   The Transfer Agent shall authenticate and deliver  1,000,000 shares of
Convertible Preferred Stock for original issue upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company.  In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an
Officer or either an Assistant Treasurer or Assistant Secretary of the Company.
Such orders shall specify the number of shares of Convertible Preferred Stock
to be authenticated and the date on which the original issue of Convertible
Preferred Stock is to be authenticated.

   The Transfer Agent may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Convertible Preferred Stock.  Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Convertible Preferred Stock whenever the Transfer Agent may do so.  Each
reference in this Certificate of Designation to authentication by the Transfer
Agent includes authentication by such agent.  An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.

   (iii)  Transfer and Exchange.  (A)  Transfer and Exchange of Certificated
Convertible Preferred Stock.  When Certificated Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Certificated Convertible Preferred Stock or to exchange such Certificated
Convertible Preferred Stock for an equal number of shares of Certificated
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; provided, however, that
the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:

    (1) shall be duly endorsed or accompanied by a written instrument of
  transfer in form reasonably satisfactory to the Company and the Transfer
  Agent, duly executed by the Holder thereof or its attorney duly authorized in
  writing; and


                                       39
<PAGE>   50
   (2) in the case of Transfer Restricted Securities that are Certificated
 Convertible Preferred Stock, are being transferred or exchanged pursuant to
 an effective registration statement under the Securities Act or pursuant to
 clause (I), (II) or (III) below, and are accompanied by the following
 additional information and documents, as applicable:

     (I) if such Transfer Restricted Securities are being delivered to the
   Transfer Agent by a Holder for registration in the name of such Holder,
   without transfer, a certification from such Holder to that effect in
   substantially the form of Exhibit C hereto; or

     (II) if such Transfer Restricted Securities are being transferred to the
   Company or to a "qualified institutional buyer" ("QIB") in accordance with
   Rule 144A under the Securities Act or pursuant to an exemption from
   registration in accordance with Rule 144 or Regulation S under the
   Securities Act, a certification to that effect (in substantially the form of
   Exhibit C hereto); or

     (III) if such Transfer Restricted Securities are being transferred to an
   "accredited investor" as described in Rule 501(a)(1), (2), (3), (4), (5),
   (6) or (7) under the Securities Act that is acquiring the Securities for its
   own account, or for the account of such an accredited investor, in each case
   in a minimum principal amount of $100,000 for investment purposes and not
   with a view to, or for offer or sale in connection with, any distribution in
   violation of the Securities Act, or in reliance on another exemption from
   the registration requirements of the Securities Act: a certification to that
   effect in substantially the form of Exhibit C hereto, and if the Company or
   the Transfer Agent so requests, evidence reasonably satisfactory to them as
   to the compliance with the restrictions set forth in the legend set forth in
   paragraph (l)(iii)(G)(1) below.

   (B)  Restrictions on Transfer of Certificated Convertible Preferred Stock
for a Beneficial Interest in Global Convertible Preferred Stock.  Certificated
Convertible Preferred Stock may not be exchanged for a


                                       40
<PAGE>   51
beneficial interest in Global Convertible Preferred Stock except upon
satisfaction of the requirements set forth below.  Upon receipt by the
Transfer Agent of Certificated Convertible Preferred Stock, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to
the Transfer Agent, together with:

     (1) if such Certificated Convertible Preferred Stock is a Transfer
  Restricted Security, certification that such Certificated Convertible
  Preferred Stock is being transferred to a QIB in accordance with Rule 144A
  under the Securities Act; and

     (2) whether or not such Certificated Convertible Preferred Stock is a
  Transfer Restricted Security, written instructions directing the Transfer
  Agent to make, or to direct DTC to make, an adjustment on its books and
  records with respect to such Global Convertible Preferred Stock to reflect an
  increase in the number of shares of Convertible Preferred Stock represented
  by the Global Convertible Preferred Stock,

then the Transfer Agent shall cancel such Certificated Convertible Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock to be increased accordingly.  If no Global
Convertible Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Convertible Preferred Stock
representing the appropriate number of shares.

   (C)  Transfer and Exchange of Global Convertible Preferred Stock.  The
transfer and exchange of Global Convertible Preferred Stock or beneficial
interests therein shall be effected through DTC, in accordance with this
Certificate of Designation (including applicable restrictions on transfer set
forth herein, if any) and the procedures of DTC therefor.

   (D)  Transfer of a Beneficial Interest in Global Convertible Preferred Stock
for a Certificated Convertible Preferred Stock.


                                       41
<PAGE>   52
       (1)  Any person having a beneficial interest in Convertible Preferred
   Stock that is being transferred or exchanged pursuant to an effective
   registration statement under the Securities Act or pursuant to clause (I),
   (II) or (III) below may upon request, and if accompanied by the information
   specified below, exchange such beneficial interest for Certificated
   Convertible Preferred Stock representing the same number of shares of
   Convertible Preferred Stock.  Upon receipt by the Transfer Agent of written
   instructions or such other form of instructions as is customary for DTC from
   DTC or its nominee on behalf of any person having a beneficial interest in
   Global Convertible Preferred Stock and upon receipt by the Transfer Agent of
   a written order or such other form of instructions as is customary for DTC
   or the person designated by DTC as having such a beneficial interest in a
   Transfer Restricted Security only, and upon the following additional
   information and documents (all of which may be submitted by facsimile):

       (I) if such beneficial interest is being transferred to the person
     designated by DTC as being the owner of a beneficial interest in Global
     Convertible Preferred Stock, a certification from such person to that 
     effect (in substantially the form of Exhibit C hereto);

       (II) if such beneficial interest is being transferred to a QIB in
     accordance with Rule 144A under the Securities Act or pursuant to an
     exemption from registration in accordance with Rule 144 or Regulation S
     under the Securities Act, a certification to that effect (in substantially
     the form of Exhibit C hereto); or

       (III) if such beneficial interest is being transferred to an "accredited
     investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
     under the Securities Act that is acquiring the security for its own
     account, or for the account of such an accredited investor, in each case in
     a minimum principal amount of $100,000 for investment purposes and not with
     a view to, or for offer or sale in connection with, any distribution in
     violation of the Securities Act, or in reliance on another exemption from
     the registration requirements of the Securities Act, a


                                       42
<PAGE>   53
  certification to that effect from the transferor (in substantially the form
  of Exhibit C hereto), and if the Company or the Transfer Agent so requests,
  evidence reasonably satisfactory to them as to the compliance with the
  restrictions set forth in the legend set forth in paragraph (l)(iii)(G)(1)
  below;

then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will
execute and the Transfer Agent will authenticate and deliver to the transferee
Certificated Convertible Preferred Stock.

    (2)  Certificated Convertible Preferred Stock issued in exchange for a
  beneficial interest in a Global Convertible Preferred Stock pursuant to this
  paragraph (l)(iii)(D) shall be registered in such names and in such
  authorized denominations as DTC, pursuant to instructions from its direct or
  indirect participants or otherwise, shall instruct the Transfer Agent.  The
  Transfer Agent shall deliver such Certificated Convertible Preferred Stock to
  the persons in whose names such Convertible Preferred Stock are so registered
  in accordance with the instructions of DTC.

   (E)  Restrictions on Transfer and Exchange of Global Convertible Preferred
Stock.  Notwithstanding any other provisions of this Certificate of Designation
(other than the provisions set forth in paragraph (l)(iii)(F)), Global
Convertible Preferred Stock may not be transferred as a whole except by DTC to
a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor depository or a nominee of such
successor depository.

   (F)  Authentication of Certificated Convertible Preferred Stock.  If at any
time:

    (1) DTC notifies the Company that DTC is unwilling or unable to continue as
  depository for the Global Convertible Preferred Stock and a successor
  depository for the Global Convertible Preferred Stock is not appointed by the 
  Company within 90 days after delivery of such notice;


                                       43
<PAGE>   54


    (2) DTC ceases to be a clearing agency registered under the Exchange Act;

    (3) there shall have occurred and be continuing a Voting Rights Triggering
  Event; or

    (4) the Company, in its sole discretion, notifies the Transfer Agent in
  writing that it elects to cause the issuance of Certificated Convertible
  Preferred Stock under this Certificate of Designation,

then the Company will execute, and the Transfer Agent, upon receipt of a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Convertible Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Convertible Preferred Stock equal to the number of shares of Convertible
Preferred Stock represented by the Global Convertible Preferred Stock, in
exchange for such Global Convertible Preferred Stock.

   (G)  Legend.  (1)  Except as permitted by the following paragraph (2), each
certificate evidencing the Global Convertible Preferred Stock and the
Certificated Convertible Preferred Stock (and all Convertible Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:

  "THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
  INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A
  TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
  SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
  PLEDGED OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
  APPLICABLE EXEMPTION THEREFROM.  EACH PURCHASER OF THE SECURITY EVIDENCED
  HEREBY (OR THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS
  HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
  PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
  THEREUNDER.  THE HOLDER OF THE SECURITY EVIDENCED HEREBY (AND OF THE COMMON
  STOCK INTO WHICH THIS SECURITY IN CONVERTIBLE) AGREES FOR THE


                                       44
<PAGE>   55
  BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
  WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
  TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
  QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
  SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
  QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
  RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
  REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
  REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
  AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
  STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
  SECURITIES LAWS OF THE STATES OF THE UNITED STATES."

   (2)  Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by Global Convertible Preferred
Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:

     (I) in the case of any Transfer Restricted Security that is a Certificated
   Convertible Preferred Stock, the Transfer Agent shall permit the Holder
   thereof to exchange such Transfer Restricted Security for a Certificated
   Convertible Preferred Stock that does not bear the legend set forth above
   and rescind any restriction on the transfer of such Transfer Restricted
   Security; and

     (II) in the case of any Transfer Restricted Security that is represented
   by a Global Convertible Preferred Stock, the Transfer Agent shall permit the
   Holder thereof to exchange such Transfer Restricted Security for a
   Certificated Convertible Preferred Stock Security that does not bear the
   legend set forth above and rescind any restriction on the transfer of such
   Transfer Restricted Security, if the Holder's request for such exchange was
   made in reliance on Rule 144 and the Holder certifies to that effect in
   writing to the Transfer Agent (such certification to be in the form set
   forth on the reverse of the Transfer Restricted Security).


                                       45
<PAGE>   56
   (H)  Cancellation or Adjustment of Global Convertible Preferred Stock.  At
such time as all beneficial interests in Global Convertible Preferred Stock
have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock
shall be returned to DTC for cancellation or retained and canceled by the
Transfer Agent.  At any time prior to such cancellation, if any beneficial
interest in Global Convertible Preferred Stock is exchanged for Certificated
Convertible Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Convertible Preferred Stock represented by such Global Convertible
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Convertible
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

   (I)  Obligations with Respect to Transfers and Exchanges of Convertible
Preferred Stock.  (1) To permit registrations of transfers and exchanges, the
Company shall execute and the Transfer Agent shall authenticate Certificated
Convertible Preferred Stock and Global Convertible Preferred Stock as required
pursuant to the provisions of this paragraph (iii).

    (2)  All Certificated Convertible Preferred Stock and Global Convertible
  Preferred Stock issued upon any registration of transfer or exchange of
  Certificated Convertible Preferred Stock or Global Convertible Preferred
  Stock shall be the valid obligations of the Company, entitled to the same
  benefits under this Certificate of Designation as the Certificated
  Convertible Preferred Stock or Global Convertible Preferred Stock surrendered
  upon such registration of transfer or exchange.

    (3)  Prior to due presentment for registration of transfer of any shares of
  Convertible Preferred Stock, the Transfer Agent and the Company may deem and
  treat the person in whose name such shares of Convertible Preferred Stock are
  registered as the absolute owner of such Convertible Preferred Stock and
  neither the Transfer Agent nor the Company shall be affected by notice to the
  contrary.

    (4)  No service charge shall be made to a Holder for any registration of
  transfer or exchange upon surrender of any Convertible Preferred Stock


                                       46
<PAGE>   57
Certificate at the office of the Transfer Agent maintained for that purpose.
However, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Convertible Preferred Stock
Certificates.

  (5)  Upon any sale or transfer of shares of Convertible Preferred Stock
(including any Convertible Preferred Stock represented by a Global
Convertible Preferred Stock Certificate) pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144 under
the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:

   (A)   in the case of any Certificated Convertible Preferred Stock, the
         Transfer Agent shall permit the holder thereof to exchange such
         Convertible Preferred Stock for Certificated Convertible Preferred
         Stock that does not bear the legend set forth in paragraph (iii)(G)
         above and rescind any restriction on the transfer of such Convertible
         Preferred Stock; and

   (B)   in the case of any Global Convertible Preferred Stock, such
         Convertible Preferred Stock shall not be required to bear the legend
         set forth in paragraph (iii)(G) above but shall continue to be subject
         to the provisions of paragraph (iii)(D) hereof; provided, however,
         that with respect to any request for an exchange of Convertible
         Preferred Stock that is represented by Global Convertible Preferred
         Stock for Certificated Convertible Preferred Stock that does not bear
         the legend set forth in paragraph (iii)(G) above in connection with a
         sale or transfer thereof pursuant to Rule 144 (and based upon an
         opinion of counsel if the Company so requests), the Holder thereof
         shall certify in writing to the Transfer Agent that such request is
         being made pursuant to Rule 144 (such certification to be
         substantially in the form of Exhibit C hereto).


                                       47
<PAGE>   58
     (iv)  Replacement Certificates.  If a mutilated Convertible Preferred
  Stock certificate is surrendered to the Transfer Agent or if the Holder of a
  Convertible Preferred Stock certificate claims that the Convertible Preferred
  Stock certificate has been lost, destroyed or wrongfully taken, the Company
  shall issue and the Transfer Agent shall countersign a replacement
  Convertible Preferred Stock certificate if the reasonable requirements of the
  Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in
  effect in the State of New York are met.  If required by the Transfer Agent
  or the Company, such Holder shall furnish an indemnity bond sufficient in the
  judgment of the Company and the Transfer Agent to protect the Company and the
  Transfer Agent from any loss which either of them may suffer if a Convertible
  Preferred Stock certificate is replaced.  The Company and the Transfer Agent
  may charge the Holder for their expenses in replacing a Convertible Preferred
  Stock certificate.

     (v)  Temporary Certificates.  Until definitive Convertible Preferred Stock
  certificates are ready for delivery, the Company may prepare and the Transfer
  Agent shall countersign temporary Convertible Preferred Stock certificates.
  Temporary Convertible Preferred Stock certificates shall be substantially in
  the form of definitive Convertible Preferred Stock certificates but may have
  variations that the Company considers appropriate for temporary Convertible
  Preferred Stock certificates.  Without unreasonable delay, the Company shall
  prepare and the Transfer Agent shall countersign definitive Convertible
  Preferred Stock certificates and deliver them in exchange for temporary
  Convertible Preferred Stock certificates.

     (vi)  Cancellation.  (A) In the event the Company shall purchase or
  otherwise acquire Certificated Convertible Preferred Stock, the same shall
  thereupon be delivered to the Transfer Agent for cancellation.

   (B)  At such time as all beneficial interests in Global Convertible
Preferred Stock have either been exchanged for Certificated Convertible
Preferred Stock, redeemed, repurchased or canceled, such Global Convertible
Preferred Stock shall thereupon be delivered to the Transfer Agent for
cancellation.

   (C)  The Transfer Agent and no one else shall cancel and destroy all
Convertible Preferred Stock certificates surrendered for transfer, exchange,
replacement


                                       48
<PAGE>   59
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Transfer Agent to deliver canceled Convertible
Preferred Stock certificates to the Company.  The Company may not issue new
Convertible Preferred Stock certificates to replace Convertible Preferred Stock
certificates to the extent they evidence Convertible Preferred Stock which the
Company has purchased or otherwise acquired.

   (m)  Additional Rights of Holders.  In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Rights Agreement.

   (o)  Certain Definitions.  As used in this Certificate of Designation, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice  versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:

   "Business Day" means each day which is not a Legal Holiday.

   "capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.


                                       49
<PAGE>   60
   "Change in Control" or "Change of Control" means:  (i) the sale, lease,
transfer, conveyance other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), (other than officers, directors and stockholders
of the Company and their affiliates on the date of this Certificate of
Designation), becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting stock of the Company or (iv) the first day on which a
majority of the members of the board of directors (excluding the directors
elected pursuant to paragraph (f) are not Continuing Directors.

   "Closing Bid Price" means on any day the last reported bid price on such
day, or in case no bid takes place on such day, the average of the reported
closing bid and asked prices, in each case on the Nasdaq National Market or, if
the Common Stock is not quoted on such system, on the principal national
securities exchange on which such stock is listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any independent
registered broker-dealer firm, selected by the Company for that purpose.

   "Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of this Certificate of Designation or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.

   "Default" means any event which is, or after notice or passage of time or
both would be, a Voting Rights Triggering Event.

   "DTC" means The Depository Trust Company.


                                       50
<PAGE>   61
   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Holders" means the registered holders from time to time of the Convertible
Preferred Stock.

   "Indenture" means the Indenture dated as of October 5, 1995 between the
Company and IBJ Schroder Bank & Trust Company.

   "Issue Date" means the date on which the Convertible Preferred Stock is
initially issued.

   "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.

   "Liquidated Damages" means, with respect to any share of Convertible
Preferred Stock, the Additional Dividends then accrued, if any, on such share
pursuant to paragraph (c).

   "Officer" means the Chairman of the Board of Directors, the President, any
Vice President, the Treasurer, the Secretary or any Assistant Secretary of the
Company.

   "Officers' Certificate" means a certificate signed by two Officers.

   "Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent.  The counsel may be an employee of or counsel
to the Company or the Transfer Agent.

   "person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.

   "Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.


                                       51
<PAGE>   62
   "Registration Rights Agreement" means the Registration Rights Agreement
dated March 25, 1997 among the Company, Credit Suisse First Boston Corporation
and Dillon, Read & Co. Inc. with respect to the Convertible Preferred Stock.

   "SEC" or "Commission" means the Securities and Exchange Commission.

   "Securities Act" means the Securities Act of 1933.

   "Series 3 Preferred Stock" means the 10% Junior Series 3 Preferred Stock of
the Company.

   "Shelf Registration Statement" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement.

   "Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the Company or any Subsidiary or the
only general partners of which are the Company and one or more Subsidiaries or
one or more Subsidiaries.

   "Trading Day" means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any
day on which securities are not traded on the applicable securities exchange or
in the applicable securities market.

   "Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be ChaseMellon
Shareholder Services, L.L.C.

   "Transfer Restricted Securities" means each share of Convertible Preferred
Stock (or the shares of Common Stock into which such share of Convertible
Preferred Stock is convertible) (including additional shares of Convertible
Preferred Stock issued in payment of dividends on the


                                       52
<PAGE>   63
Convertible Preferred Stock, if any, as permitted in accordance with the terms
hereof) until (i) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (ii) the date on which such security is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act (or any successor
rule thereof) or would be saleable pursuant to Rule 144(k) under the Securities
Act had it not been held by, or had it never been held by, an affiliate of the
Company.

   "Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.


                                       53
<PAGE>   64
   IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by John J. Willingham, its Senior Vice
President and Chief Financial Officer, this 31st day of March, 1997.


                                         IXC COMMUNICATIONS, INC.,

                                         by    /s/ John J. Willingham 
                                            ----------------------------------
                                            Name:  John J. Willingham 
                                            Title: Senior Vice President
                                                   and Chief Financial Officer


                                       54
<PAGE>   65
                                                                       EXHIBIT A


                      FORM OF CONVERTIBLE PREFERRED STOCK

                                FACE OF SECURITY

   [THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.  EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  THE HOLDER OF THE SECURITY
EVIDENCED HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS
CONVERTIBLE) AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND
THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]*

   [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON



__________________________________

* Subject to removal upon registration under the Securities Act of 1933 or
  otherwise when the security shall no longer be a restricted security.
<PAGE>   66
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**

   [TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**

  IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.

                                                 Number of Shares of Convertible
Certificate Number                               Preferred Stock
[      ]                                         [       ]      

                                                            CUSIP NO.: [       ]


               7 1/4% Junior Convertible Preferred Stock Due 2007
                 (par value $0.01) (liquidation preference $100
                   per share of Convertible Preferred Stock)

                                       of

                            IXC Communications, Inc.


   IXC Communications, Inc., a Delaware corporation (the "Company"), hereby
certifies that [      ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 7 1/4%
Junior Convertible Preferred Stock Due 2007 (par value $0.01) (liquidation
preference $100 per share of Convertible Preferred Stock) (the "Convertible
Preferred Stock").  The shares of Convertible Preferred Stock are transferable
on the books and records of the Registrar, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer.  The designation, rights, privileges,





__________________________________

** Subject to removal if not a global security.


                                       2
<PAGE>   67
restrictions, preferences and other terms and provisions of the Convertible
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated March [  ],
1997, as the same may be amended from time to time (the "Certificate of
Designation").  Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation.  The Company will provide
a copy of the Certificate of Designation to a Holder without charge upon
written request to the Company at its principal place of business.

   Reference is hereby made to select provisions of the Convertible Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designation,
which select provisions and the Certificate of Designation shall for all
purposes have the same effect as if set forth at this place.

   Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.

   Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Convertible Preferred Stock shall not be
entitled to any benefit under the Certificate of Designation or be valid or
obligatory for any purpose.

   IN WITNESS WHEREOF, the Company has executed this certificate this [  ] day
of [   ], [   ].


                                          IXC COMMUNICATIONS, INC.,


                                          By: 
                                              -------------------------------
                                              Name:
                                              Title:

[Seal]
                                          By:  
                                              -------------------------------
                                              Name:
                                              Title:


                                       3
<PAGE>   68
                 TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION

   This is one of the Convertible Preferred Stock referred to in the within
mentioned Certificate of Designation.

Dated:   [   ], [  ]

                                                CHASEMELLON SHAREHOLDER
                                                SERVICES, L.L.C.
                                                as Transfer Agent,


                                                By:
                                                    ---------------------------
                                                    Authorized Signatory


                                       4
<PAGE>   69
                              REVERSE OF SECURITY

   Dividends on each share of Convertible Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate
of Designation (including Additional Dividends).

   The shares of Convertible Preferred Stock shall be redeemable as provided in
the Certificate of Designation.  The shares of Convertible Preferred Stock
shall be convertible into the Company's Common Stock in the manner and
according to the terms set forth in the Certificate of Designation.

   As required under Delaware law, the Company shall furnish to any Holder upon
request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.


                                       5
<PAGE>   70
                                   ASSIGNMENT

   FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Convertible Preferred Stock evidenced hereby to: 
                                                 ------------------------------

-------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)

-------------------------------------------------------------------------------
(Insert address and zip code of assignee)

and irrevocably appoints:

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

-------------------------------------------------------------------------------
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar.  The agent may substitute
another to act for him or her.

Date:
      ------------------------------

Signature: 
           -------------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)

Signature Guarantee:***
                       ------------------------------------------------------


------------------------
*** (Signature must be guaranteed by an "eligible guarantor institution" that
    is, a bank, stockbroker, savings and loan association or credit union
    meeting the requirements of the Registrar, which requirements include
    membership or participation in the Securities Transfer Agents Medallion
    Program ("STAMP") or such other "signature guarantee program" as may be
    determined by the Registrar in addition to, or in substitution for, STAMP,
    all in accordance with the Securities Exchange Act of 1934, as amended.)

                                       6
<PAGE>   71
                                                                       EXHIBIT B


                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder
             in order to Convert the Convertible, Preferred Stock)

The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 7 1/4% Junior Convertible Preferred Stock (the "Convertible Preferred
Stock"), represented by stock certificate No(s). _______________ (the
"Convertible Preferred Stock Certificates") into shares of common stock
("Common Stock") of IXC Communications, Inc. (the "Company") according to the
conditions of the Certificate of Designations, Preferences and Rights of the
Convertible Preferred Stock (the "Certificate of Designation"), as of the date
written below.  If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates.  No fee will be
charged to the holder for any conversion, except for transfer taxes, if any.  A
copy of each Convertible Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.

Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.

                        Date of Conversion: ________________________

                        Applicable Conversion Price: _______________

                        Number of shares of Convertible
                        Preferred Stock to be Converted: ____________


<PAGE>   72
                        Number of shares of
                        Common Stock to be Issued: _________________

                        Signature: _________________________________

                        Name: ______________________________________

                        Address:** _________________________________

                        Fax No.: ___________________________________


-----------------------------
 * The Company is not required to issue shares of Common Stock until the
   original Convertible Preferred Stock Certificate(s) (or evidence of loss,
   theft or destruction thereof) to be converted are received by the Company or
   its Transfer Agent.  The Company shall issue and deliver shares of Common
   Stock to an overnight courier not later than three business days following
   receipt of the original Convertible Preferred Stock Certificate(s) to be
   converted.

** Address where shares of Common Stock and any other payments or certificates
   shall be sent by the Company.

                                       2
<PAGE>   73
                                                                       EXHIBIT C

                  CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
            REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK

Re:  7 1/4% Junior Convertible Preferred Stock Due 2007 (the "Convertible
     Preferred Stock") of IXC Communications, Inc. (the "Company")

     This Certificate relates to ____ shares of Convertible Preferred Stock held
in [ ]  */ book-entry or [ ]  */ definitive form by _______________ (the
"Transferor").

The Transferor*:

  [ ]  has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Convertible Preferred Stock held by the
depository shares of Convertible Preferred Stock in definitive, registered form
equal to its beneficial interest in such Convertible Preferred Stock (or the
portion thereof indicated above); or

  [ ]  has requested the Transfer Agent by written order to exchange or
register the transfer of Convertible Preferred Stock.

   In connection with such request and in respect of such Convertible Preferred
Stock, the Transferor does hereby certify that the Transferor is familiar with
the Certificate of Designation relating to the above captioned Convertible
Preferred Stock and that the transfer of this Convertible Preferred Stock does
not require registration under the Securities Act of 1933 (the "Securities
Act") because */:

  [ ]  Such Convertible Preferred Stock is being acquired for the Transferor's
own account without transfer.

  [ ]  Such Convertible Preferred Stock is being transferred to the Company.

  [ ]  Such Convertible Preferred Stock is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests and together



__________________________________

*/Please check applicable box.
<PAGE>   74
with a certification in substantially the form of Exhibit E to the
Certificate of Designation).

   [ ]  Such Convertible Preferred Stock is being transferred to an accredited
investor within the meaning of Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification
in substantially the form of Exhibit D to the Certificate of Designation).

   [ ]  Such Convertible Preferred Stock is being transferred in reliance on and
in compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).


                                                -------------------------------
                                                  [INSERT NAME OF TRANSFEROR]

 Date:                                       By
       -------------------------------          -------------------------------


                                       2
<PAGE>   75
                                                                       EXHIBIT D

                              FORM OF CERTIFICATE
                    TO BE DELIVERED BY ACCREDITED INVESTORS

                                                            _____________, _____


ChaseMellon Shareholder Services, L.L.C.
Attention:  [          ]

Ladies and Gentlemen:

   In connection with our proposed purchase of certain 7 1/4% Junior
Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock"), of
IXC Communications, Inc., a Delaware corporation (the "Company"), we represent
that:

    (i) we are an "accredited investor" within the meaning of Rule
  501(a)(1),(2),(3),(4),(5),(6) or (7) under the Securities Act of 1933 (the
  "Securities Act") (an "Accredited Investor"), or an entity in which all of
  the equity owners are Accredited Investors;

    (ii) any purchase of Convertible Preferred Stock will be for our own account
  or for the account of one or more other Accredited Investors as to which we
  exercise sole investment discretion;

    (iii) we have such knowledge and experience in financial and business
  matters that we are capable of evaluating the merits and risks of purchasing
  Convertible Preferred Stock and we and any accounts for which we are acting
  are able to bear the economic risks of our or their investment;

    (iv) we are not acquiring Convertible Preferred Stock with a view to any
  distribution thereof in a transaction that would violate the Securities Act
  or the securities laws of any State of the United States or any other
  applicable jurisdiction; provided that the disposition of our property and
  the property of any accounts for which we are acting as fiduciary shall
  remain at all times without our control; and

    (v) we acknowledge that we have had access to such financial and other
  information, and have been afforded the opportunity to ask such questions of
  representatives of the Company and receive answers
<PAGE>   76
   thereto, as we deem necessary in connection with our decision to purchase
   Convertible Preferred Stock.

   We understand that the Convertible Preferred Stock has not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Convertible Preferred Stock, that such
Convertible Preferred Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act (and, unless such transfer occurs in a transaction meeting
the requirements of Rule 144A, based upon an opinion of counsel, if the Company
so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction.  We understand that the registrar will not be required to accept
for registration of transfer any shares of Convertible Preferred Stock, except
upon presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with.  We further understand that
the Convertible Preferred Stock purchased by us will bear a legend reflecting
the substance of this paragraph.  We further agree to provide to any person
acquiring any of the Convertible Preferred Stock from us a notice advising such
person that resales of the Convertible Preferred Stock are restricted as stated
herein.

   We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.


                                       2
<PAGE>   77
    THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE 
LAWS OF THE STATE OF NEW YORK.

                                                 Very truly yours,


                                                 -------------------------------
                                                     (Name of Transferee)

                                                 By: 
                                                     ---------------------------
                                                    Name:
                                                    Title:
                                                    Address:


                                       3
<PAGE>   78
                                                                       EXHIBIT E

                     FORM OF CERTIFICATE TO BE DELIVERED IN
               CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S

                                                                __________, ____

ChaseMellon Shareholder Services, L.L.C.
Attention:  [           ]

Ladies and Gentlemen:

   In connection with our proposed sale of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock") of IXC
Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:

    (i) the offer of the Convertible Preferred Stock was not made to a person 
  in the United States;

    (ii) at the time the buy order was originated, the transferee was outside
  the United States or we and any person acting on our behalf reasonably
  believed that the transferee was outside the United States;

    (iii) no directed selling efforts have been made by us in the United States
  in contravention of the requirements of Rule 903(b) or Rule 904(b) of
  Regulation S under the Securities Act of 1933 (the "Securities Act"), as
  applicable; and

    (iv) the transaction is not part of a plan or scheme by us to evade the
  registration requirements of the Securities Act.

    You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with

<PAGE>   79
respect to the matters covered hereby.  Terms used in this certificate have the
meanings set forth in Regulation S.

                                         Very truly yours,


                                         ----------------------------------
                                         (Name of Transferor)

                                         By:
                                            -------------------------------
                                            Name:
                                            Title:
                                            Address:


                                       2
<PAGE>   80

                            IXC COMMUNICATIONS, INC.

                    CERTIFICATE OF DESIGNATION OF THE POWERS,
                PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
                   AND OTHER SPECIAL RIGHTS OF 12 1/2% JUNIOR
           EXCHANGEABLE PREFERRED STOCK DUE 2009 AND 12 1/2% SERIES B
                JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009 AND
              QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF




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



                  IXC Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that (i) pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Sections
141(c)(2) and 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the Company in one
or more series and has authorized a committee of the Board of Directors (the
"Placement Committee") to adopt the resolution set forth below and (ii) the
Placement Committee duly approved and adopted the following resolution on August
14, 1997 (the "Resolution"):

                  RESOLVED that, pursuant to the authority vested in the Board
         of Directors by its Restated Certificate of Incorporation, and the
         authority vested by such Board of Directors in a committee of the Board
         (the "Placement Committee"), all the members of which are members of
         such Board, the Placement Committee does hereby create, authorize and
         provide for the issuance of 12 1/2% Junior Exchangeable Preferred Stock
         Due 2009, par value $0.01 per share, with a stated value of $1000 per
         share, initially consisting of up to 450,000 shares and 12 1/2% Series
         B Junior Exchangeable Preferred Stock Due 2009, par value $0.01 per
         share, with a stated value of $1,000 


<PAGE>   81
                                                                               2

         per share, initially consisting of up to 450,000 shares (collectively,
         the "Exchangeable Preferred Stock") having the designation,
         preferences, relative, participating, optional and other special rights
         and the qualifications, limitations and restrictions thereof that are
         set forth in the Restated Certificate of Incorporation and in this
         Resolution as follows:

                  (a) Designation. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Company (i) a series of Preferred
Stock designated as the "12 1/2% Junior Exchangeable Preferred Stock Due 2009"
(the "Initial Exchangeable Preferred Stock") and (ii) a series of Preferred
Stock designated as the "12 1/2% Series B Junior Exchangeable Preferred Stock
Due 2009" (the "Series B Stock"). The number of shares constituting the Initial
Exchangeable Preferred Stock shall be 450,000, and the number of shares
constituting the Series B Stock shall be 450,000. The Initial Exchangeable
Preferred Stock and the Series B Stock are referred to as the Exchangeable
Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock
shall be $1000 per share (the "Liquidation Preference").

                  (b) Rank. The Exchangeable Preferred Stock will, with respect
to dividend rights and rights on liquidation, winding-up and dissolution, rank
(i) senior to all classes of common stock and to each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which do not expressly provide that it
ranks senior to, or on a parity with, the Exchangeable Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution of the
Company (collectively referred to, together with all classes of common stock of
the Company, as "Junior Stock"); (ii) on a parity with each share of Convertible
Preferred Stock now or hereafter outstanding and on a parity with each other
class of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the 

<PAGE>   82
                                                                               3

Company, the terms of which expressly provide that such class or series will
rank on a parity with the Exchangeable Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); and (iii) junior to each share of Series 3 Preferred Stock now
or hereafter outstanding and junior to each class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company,
the terms of which hereafter established classes or series expressly provide
that such class or series will rank senior to the Exchangeable Preferred Stock
as to dividend rights or rights on liquidation, winding-up and dissolution of
the Company (collectively referred to as "Senior Stock"). All claims of the
holders of the Exchangeable Preferred Stock, including claims with respect to
dividend payments, redemption payments, mandatory repurchase payments or rights
upon liquidation, winding-up or dissolution, shall rank junior to the claims of
the holders of any debt of the Company and all other creditors of the Company.

                  (c) Dividends. (i) Holders of the outstanding shares of
Exchangeable Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available therefor, cumulative preferential dividends on each share of the
Exchangeable Preferred Stock at a rate per annum equal to 12 1/2% of the
Liquidation Preference of such share payable quarterly (each such quarterly
period being herein called a "Dividend Period"). In addition to the dividends
described in the preceding sentence, holders of outstanding shares of
Exchangeable Preferred Stock will be entitled to additional dividends (the
"Additional Dividends"), when, as and if declared by the Board of Directors of
the Company, out of funds legally available therefor, with respect to the shares
of Exchangeable Preferred Stock, which Additional Dividends shall accrue as
follows if any of the following events occur (each such event in clauses (A),
(B) and (C) below being herein called a "Registration Default"): (A) if by
October 6, 1997, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the SEC; (B) if by January 19, 1998,
neither the Registered Exchange Offer is consummated nor the Shelf 


<PAGE>   83
                                                                               4

Registration Statement declared effective by the SEC; or (C) if after January
19, 1998 and after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective (in each case except as permitted below) in
connection with resales of Exchangeable Preferred Stock in accordance with and
during the periods specified herein.

                  Additional Dividends shall accrue on the shares of
Exchangeable Preferred Stock from and including the date on which any such
Registration Default shall occur, to but excluding the date on which all such
Registration Defaults have been cured, at a rate of .50% per annum.

                  A Registration Default referred to in clause (C) of paragraph
(c)(i) shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Registration Statement to incorporate annual audited financial
information with respect to the Company where such post-effective amendment is
not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events with respect to the Company
that would need to be described in the Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company proceeds promptly and
in good faith to amend or supplement the Registration Statement and related
prospectus to describe such events unless the Company has determined in good
faith that there are material legal or commercial impediments in doing so;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 45 days, Additional Dividends shall be payable in
accordance with the immediately preceding paragraphs of this paragraph (c)(i)
from the day such Registration Default initially occurs until such Registration
Default is cured.

                  Any amounts of Additional Dividends due pursuant to clauses
(A), (B) or (C) of this paragraph (c)(i) or pursuant to the proviso contained in
the preceding sentence will be payable on the regular dividend payment dates
with 


<PAGE>   84
                                                                               5

respect to the Exchangeable Preferred Stock and on the same terms and
conditions and subject to the same limitations as pertain at such time for the
payment of regular dividends. The amount of Additional Dividends will be
determined by multiplying the applicable Additional Dividends rate by the
aggregate liquidation preference of the outstanding shares of Exchangeable
Preferred Stock, multiplied by a fraction, the numerator of which is the number
of days such Additional Dividend rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.

                  All dividends on the Exchangeable Preferred Stock, including
Additional Dividends, to the extent accrued, shall be cumulative, whether or not
earned or declared, on a daily basis from the Issue Date or, in the case of
additional shares of Exchangeable Preferred Stock issued in payment of a
dividend, from the date of issuance of such additional shares of Exchangeable
Preferred Stock, and shall be payable quarterly in arrears on each February 15,
May 15, August 15 and November 15 (each, a "Dividend Payment Date"), commencing
on November 15, 1997, to holders of record on the February 1, May 1, August 1
and November 1 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Exchangeable Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to February 15, 2001 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional shares
(including fractional shares) of Exchangeable Preferred Stock (the "Additional
Shares") equal to the dividend amount divided by the Liquidation Preference of
such Additional Shares. With respect to dividends accrued after February 15,
2001, all dividends shall be payable in cash.

                  Any dividend accruing after February 15, 2001 that is not paid
in cash on the relevant Dividend Payment Date shall accrue interest at a rate
per annum equal to the then applicable dividend rate per annum from such
Dividend Payment Date to the date of payment of such dividend. Such interest, if
any, shall be payable in cash on each Dividend Payment Date. Any accrued
interest not paid on a Dividend Payment Date shall accrue interest on such
interest pursuant to this paragraph. Any references herein to the payment of


<PAGE>   85
                                                                               6

accrued and unpaid dividends shall be deemed to include any such interest.

                  (ii) In the event the Company notifies the holders of
Exchangeable Preferred Stock of its election not to make a Change of Control
Offer (as defined in paragraph (h)(i)) pursuant to paragraph (h)(iii), then,
within 60 days of the occurrence of the applicable Change of Control, holders of
a majority of the outstanding shares of the Exchangeable Preferred Stock will
designate an Independent Financial Advisor to determine, within 20 days of such
designation, in the opinion of such firm, the appropriate dividend rate that the
Exchangeable Preferred Stock should bear so that, after such reset, the
Exchangeable Preferred Stock would have a market value of 101% of the
Liquidation Preference; provided, however, that no such reset shall be required
to be made if such Independent Financial Advisor determines that the
Exchangeable Preferred Stock has a market value of 101% or greater. If within 5
days of the designation of an Independent Financial Advisor by the Holders, the
Company determines that such Independent Financial Advisor is reasonably
unacceptable to the Company, the Company shall designate a second Independent
Financial Advisor to determine, within 15 days of such designation, in its
opinion, such an appropriate reset dividend rate for the Exchangeable Preferred
Stock. In the event that the two Independent Financial Advisors cannot agree,
within 25 days of the designation of an Independent Financial Advisor by the
Holders of a majority of the outstanding shares of the Exchangeable Preferred
Stock, on the appropriate reset dividend rate, the two Independent Financial
Advisors shall, within 10 days of such 25th day, designate a third Independent
Financial Advisor, which, within 15 days of designation, will determine, in its
opinion, an appropriate reset dividend rate which is between the two rates
selected by the first two Independent Financial Advisors. Upon the determination
of the reset rate, the Exchangeable Preferred Stock shall accrue and accumulate
dividends at the reset rate as of the date of occurrence of the Change of
Control; provided, however, that the reset rate shall in no event be less than
12 1/2% per annum or greater than 15% per annum. The reasonable fees and
expenses including reasonable fees and expenses of legal counsel, if any, and
customary 


<PAGE>   86
                                                                               7

indemnification of each of the three above-referenced Independent Financial
Advisors, shall be borne by the Company.

                  (iii) All dividends paid with respect to shares of the
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the holders entitled thereto.

                  (iv) No dividend may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or before
such period shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and, if payable in cash, a sum in
cash sufficient for such payment set apart for such payment on the Exchangeable
Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred
Stock will share dividends pro rata with the Parity Stock.

                  (v) The Company will not (A) declare, pay or set apart funds
for the payment of any dividend or other distribution with respect to any Junior
Stock or (B) redeem, purchase or otherwise acquire for consideration any Junior
Stock through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Exchangeable Preferred Stock and any Parity Stock
at the time such dividends are payable have been paid or funds have been set
apart for payment of such dividends and (2) sufficient funds have been paid or
set apart for the payment of the dividend for the current dividend period with
respect to the Exchangeable Preferred Stock and any Parity Stock. As used
herein, the term "dividend" does not include dividends payable solely in shares
of Junior Stock on Junior Stock or in options, warrants or rights to holders of
Junior Stock to subscribe or purchase any Junior Stock.

                  (vi) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, not more than 45 days prior 


<PAGE>   87
                                                                               8

to the payment thereof, as may be fixed by the Board of Directors of the
Company.

                  (vii) Dividends payable on the Exchangeable Preferred Stock
for any period other than a Dividend Period shall be computed on the basis of a
360-day consisting year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. Dividends payable on the Exchangeable
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.

                  (d) Liquidation Preference. (i) Upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, holders of
Exchangeable Preferred Stock will be entitled to be paid, out of the assets of
the Company available for distribution to its stockholders, the Liquidation
Preference of the outstanding shares of Exchangeable Preferred Stock, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends (whether or not earned or declared and including Additional Dividends,
if any,) thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up that would have been payable had the Exchangeable Preferred Stock
been the subject of an Optional Redemption on such date) before any distribution
is made on any Junior Stock. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Exchangeable Preferred Stock and all Parity Stock are not paid in full, the
Exchangeable Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares of
Exchangeable Preferred Stock and the Parity Stock, respectively, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Exchangeable Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Exchangeable Preferred Stock will not be entitled to any 


<PAGE>   88
                                                                               9

further participation in any distribution of assets of the Company.

                  (ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up of
the Company.

                  (e) Redemption. (i) Optional Redemption. (A) Except as set
forth in clause (B) below, the Exchangeable Preferred Stock shall not be
redeemable at the option of the Company prior to August 15, 2002. On or after
August 15, 2002, each share of the Exchangeable Preferred Stock may be redeemed
(subject to the legal availability of funds therefor) at any time, in whole or
in part, at the option of the Company, at the redemption prices (expressed as a
percentage of the Liquidation Preference of such share) set forth below, plus,
without duplication, an amount in cash equal to all accrued and unpaid dividends
to the date fixed for redemption (the "Optional Redemption Date") (including an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Optional Redemption Date) (the "Optional
Redemption Price"), if redeemed during the 12-month period beginning August 15
of each of the years set forth below:

<TABLE>
<CAPTION>
          Year in which redemption                       
          occurs                                     Percentage     
          ------                                     ----------               
          <S>                                              <C>      

          2002..................................           106.250% 
          2003..................................           105.000  
          2004..................................           103.750  
          2005..................................           102.500  
          2006..................................           101.250  
          2007 and thereafter...................           100.000  

</TABLE>

                  (B) At any time and from time to time prior to August 15,
2000, the Company may redeem in the aggregate up to 35% of the outstanding
shares of Exchangeable Preferred 


<PAGE>   89
                                                                              10

Stock with the proceeds of one or more Public Equity Offerings at a redemption
price (expressed as a percentage of the Liquidation Preference thereof) of
112.500% plus accrued and unpaid dividends, if any, to the redemption date
(including an amount in cash equal to a prorated dividend for any partial
dividend period); provided, however, that at least $195 million aggregate
Liquidation Preference of the Exchangeable Preferred Stock remains outstanding
after each such redemption.

                  (C) In the event of a redemption of only a portion of the then
outstanding shares of Exchangeable Preferred Stock, the Company shall effect
such redemption on a pro rata basis, except that the Company may redeem all of
the shares held by holders of fewer than 100 shares (or all of the shares held
by holders who would hold less than 100 shares as a result of such redemption),
as may be determined by the Company.

                  (ii) Mandatory Redemption. Each share of the Exchangeable
Preferred Stock (if not earlier redeemed or converted) shall be subject to
mandatory redemption in whole (to the extent of lawfully available funds
therefor) on August 15, 2009 (the "Mandatory Redemption Date") at a price equal
to 100% of the Liquidation Preference of such share, plus, without duplication,
all accrued and unpaid dividends thereon (including an amount equal to a
prorated dividend thereon from the immediately preceding Dividend Payment Date
to the Mandatory Redemption Date), if any, to the Mandatory Redemption Date (the
"Mandatory Redemption Price").

                  (iii) Procedure for Redemption. (A) On and after the Optional
Redemption Date or the Mandatory Redemption Date, as the case may be (the
"Redemption Date"), unless the Company defaults in the payment of the applicable
redemption price, dividends will cease to accumulate on shares of Exchangeable
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the Optional Redemption Price or
the Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
subparagraph (iii)(B) and the funds necessary for redemption (including an
amount 


<PAGE>   90
                                                                              11

in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends shall
cease to accumulate on the Redemption Date on the shares to be redeemed and, at
the close of business on the day on which such funds are segregated and set
apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.

                  (B) With respect to a redemption pursuant to paragraph (e)(i)
or (e)(ii), the Company will send a written notice of redemption by first class
mail to each holder of record of shares of Exchangeable Preferred Stock, not
fewer than 30 days nor more than 60 days prior to the Redemption Date at its
registered address (the "Redemption Notice"); provided, however, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Exchangeable Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:

                  (1) whether the redemption is pursuant to
         paragraph (e)(i) or (e)(ii) hereof;

                  (2) the Optional Redemption Price or the Mandatory
         Redemption Price, as the case may be;

                  (3) whether all or less than all the outstanding shares of the
         Exchangeable Preferred Stock are to be redeemed and the total number of
         shares of the Exchangeable Preferred Stock being redeemed;

                  (4) the Redemption Date;

                  (5) that the holder is to surrender to the Company, in the
         manner, at the place or places and at 


<PAGE>   91
                                                                              12

         the price designated, his certificate or certificates representing the
         shares of Exchangeable Preferred Stock to be redeemed; and

                  (6) that dividends on the shares of the Exchangeable Preferred
         Stock to be redeemed shall cease to accumulate on such Redemption Date
         unless the Company defaults in the payment of the Optional Redemption
         Price or the Mandatory Redemption Price, as
         the case may be.

                  (C) Each holder of Exchangeable Preferred Stock shall
surrender the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Company, duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price or Mandatory Redemption Price, as the case may
be, for such shares shall be payable in cash to the person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.

                  (f) Voting Rights. (i) The holders of Exchangeable Preferred
Stock, except as otherwise required under Delaware law or as set forth in
paragraphs (ii) and (iii) below, shall not be entitled to vote on any matter
required or permitted to be voted upon by the stockholders of the Company.

                  (ii) (A) If (1) dividends on the Exchangeable Preferred Stock
are in arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend Default"); (2) the Company fails to redeem the
Exchangeable Preferred Stock on August 15, 2009, or fails to otherwise discharge
any redemption obligation with respect to the Exchangeable Preferred Stock; (3)
a breach or violation of any of the provisions set forth under paragraph (l)
(Certain Additional Provisions) occurs and the breach or violation continues for
a period of 30 days or more after the Company 


<PAGE>   92
                                                                              13

receives notice thereof specifying the default from the holders of at least 25%
of the shares of Exchangeable Preferred Stock then outstanding; or (4) the
Company fails to pay at final maturity (giving effect to any applicable grace
period) the principal amount of any Indebtedness of the Company or any
Significant Subsidiary (other than any Permitted PSINet Non-Recourse Debt) or
the final maturity of any such Indebtedness is accelerated because of a default
and the total amount of such Indebtedness unpaid or accelerated exceeds $5
million, then the number of directors constituting the Board of Directors of the
Company will, subject to paragraph (f)(ii)(E), be increased by two and the
Holders of the then outstanding shares of Exchangeable Preferred Stock (together
with the holders of Parity Stock upon which like rights have been conferred and
are exercisable), voting separately and as a class, shall have the right and
power to elect such two additional directors. Each such event described in
clauses (1),(2),(3) or (4) above is a "Voting Rights Triggering Event".

                  (B) The voting rights set forth in paragraph (f)(ii)(A) above
will continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Exchangeable Preferred Stock are paid in full in
cash or (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least a majority of the outstanding shares of Exchangeable Preferred Stock then
outstanding, at which time the term of any directors elected pursuant to the
provisions of paragraph (f)(ii)(A) above (subject to the right of holders of any
other preferred stock to elect directors) shall terminate forthwith and the
number of directors constituting the Board of Directors shall be decreased by
two (until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Exchangeable Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to paragraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25% 


<PAGE>   93
                                                                              14

of the shares of Exchangeable Preferred Stock then outstanding or the holders of
25% of the shares of Parity Stock then outstanding upon which like rights have
been confirmed and are exercisable addressed to the secretary of the Company
shall, call a special meeting of the Holders of Exchangeable Preferred Stock and
the holders of such Parity Stock for the purpose of electing the directors which
such holders are entitled to elect pursuant to the terms hereof; provided,
however, that no such special meeting shall be called if the next annual meeting
of stockholders of the Company is to be held within 60 days after the voting
power to elect directors shall have become vested, in which case such meeting
shall be deemed to have been called for such next annual meeting. If such
meeting shall not be called by a proper officer of the Company within 20 days
after personal service to the secretary of the Company at its principal
executive offices, then the Holders of record of at least 25% of the outstanding
shares of Exchangeable Preferred Stock or the holders of 25% of the shares of
Parity Stock upon which like rights have been confirmed and are exercisable may
designate in writing one of their members to call such meeting at the expense of
the Company, and such meeting may be called by the person so designated upon the
notice required for the annual meetings of stockholders of the Company and shall
be held at the place for holding the annual meetings of stockholders. Any holder
of Exchangeable Preferred Stock or such Parity Stock so designated shall have,
and the Company shall provide, access to the lists of holders of Exchangeable
Preferred Stock and the holders of such Parity Stock to be called pursuant to
the provisions hereof. If no special meeting of the Holders of Exchangeable
Preferred Stock and the holders of such Parity Stock is called as provided in
this paragraph (f)(ii), then such meeting shall be deemed to have been called
for the next annual meeting of stockholders of the Company or special meeting of
the holders of any other capital stock of the Company.

                  (C) At any meeting held for the purposes of electing directors
at which the Holders of Exchangeable Preferred Stock (together with the holders
of Parity Stock upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a 


<PAGE>   94
                                                                              15

separate class, to elect directors as aforesaid, the presence in person or by
proxy of the holders of at least a majority in voting power of the outstanding
shares of Exchangeable Preferred Stock (and such Parity Stock) shall be required
to constitute a quorum thereof.

                  (D) Any vacancy occurring in the office of a director elected
by the Holders of Exchangeable Preferred Stock (and such Parity Stock) may be
filled by the remaining director elected by the Holders of Exchangeable
Preferred Stock (and such Parity Stock) unless and until such vacancy shall be
filled by the Holders of Exchangeable Preferred Stock (and such Parity Stock).

                  (E) In the event that an event occurs at any time which
results in the holders of any Parity Stock having voting rights to elect
directors to the Board of Directors, holders of Exchangeable Preferred Stock
shall, whether or not such event otherwise constitutes a Voting Rights
Triggering Event pursuant to paragraph (f)(ii)(A), have the voting rights set
forth in paragraphs (f)(ii)(A) and (f)(ii)(B), and such event shall be deemed
(for purposes of this paragraph (f) only) to constitute a Voting Rights
Triggering Event. In addition, in the event that during a time in which
directors elected by the holders of Exchangeable Preferred Stock pursuant to
this paragraph (f)(ii) are serving on the Board of Directors ("Previously-
Elected Directors") an event occurs which results in holders of Parity Stock
having voting rights to elect (voting together with the holders of Exchangeable
Preferred Stock) at least two directors to the Board of Directors, the holders
of Exchangeable Preferred Stock shall vote together with the holders of such
Parity Stock to elect such new directors, and upon the election of the new
directors the Previously-Elected Directors shall (unless such Previously-
Elected Directors are elected as new directors) cease to serve on the Board of
Directors.

                  (iii) (A) So long as any shares of the Exchangeable Preferred
Stock are outstanding, the Company will not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the affirmative
vote or consent of holders of at least 



<PAGE>   95
                                                                              16

two-thirds of the shares of Exchangeable Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting (except that no such vote or consent shall be required for the issuance
of additional shares of Series 3 Preferred Stock to be paid as dividends on such
Series 3 Preferred Stock pursuant to the terms of such Series 3 Preferred
Stock).

                  (B) So long as any shares of the Exchangeable Preferred Stock
are outstanding, the Company will not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Exchangeable Preferred Stock or to authorize the
issuance of any additional shares of Exchangeable Preferred Stock (except to
authorize the issuance of additional shares of Exchangeable Preferred Stock to
be paid as dividends on the Exchangeable Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least a majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.

                  (C) Except as set forth in paragraph (f)(iii)(A) or (B) above,
(x) the creation, authorization or issuance of any shares of any Junior Stock,
Parity Stock or Senior Stock, including the designation of a series of
Exchangeable Preferred Stock, or (y) the increase or decrease in the amount of
authorized Capital Stock of any class, including Preferred Stock, shall not
require the consent of Holders of Exchangeable Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of shares of Exchangeable Preferred Stock.

                  (D) Prior to the exchange of Exchangeable Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the Exchange
Indenture (except as expressly provided therein in respect of amendments without
the consent of holders of Exchange Debentures) without 


<PAGE>   96
                                                                              17

the affirmative vote or consent of holders of at least a majority of the shares
of Exchangeable Preferred Stock then outstanding, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.

                  (iv) In any case in which the Holders of Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Exchangeable Preferred Stock entitled
to vote with respect to such matters shall be entitled to one vote for each
share of Exchangeable Preferred Stock held.

                  (g) Exchange. (i) Exchange for Debentures. (A) The Company
may, at its option, on any scheduled Dividend Payment Date, exchange the
Exchangeable Preferred Stock, in whole but not in part, for the Exchange
Debentures; provided however, that (1) on the date of such exchange there are no
accumulated and unpaid dividends on the Exchangeable Preferred Stock (including
the dividends payable on such date) or other contractual impediment to such
exchange; (2) there shall be funds legally available sufficient therefor; (3)
immediately after giving effect to such exchange, no Default (as defined in the
Exchange Indenture) shall have occurred and be continuing, and (iv) the Company
shall have delivered to the Trustee under the Exchange Indenture an opinion of
counsel with respect to the due authorization and issuance of the Exchange
Debentures.

                  (B) Upon any exchange pursuant to this paragraph (g)(i),
holders of outstanding shares of Exchangeable Preferred Stock will be entitled
to receive $1.00 principal amount of Exchange Debentures for each $1.00 of
liquidation preference of Exchangeable Preferred Stock held by them. Exchange
Debentures issued in exchange for Exchangeable Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each holder of Exchangeable Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which such holder's
shares of Exchangeable Preferred Stock entitle such holder; 

<PAGE>   97
                                                                              18

provided, however, that the Company may pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000.

                  (ii) Procedures. (A) The Company will send a written notice of
exchange (the "Exchange Notice") by mail to each holder of record of shares of
Exchangeable Preferred Stock not fewer than 30 days nor more than 60 days before
the date fixed for such exchange (the "Exchange Date"); provided, however, that
no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Exchangeable
Preferred Stock to be exchanged except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. The Exchange Notice shall state:

                  (1) the Exchange Date;

                  (2) that the holder is to surrender to the Company, in the
         manner and at the place or places designated, his certificate or
         certificates representing the shares of Exchangeable Preferred Stock to
         be exchanged;

                  (3) that dividends on the shares of Exchangeable Preferred
         Stock to be exchanged shall cease to accrue on such Exchange Date
         whether or not certificates for shares of Exchangeable Preferred Stock
         are surrendered for exchange on such Exchange Date unless the Company
         shall default in the delivery of Exchange Debentures; and

                  (4) that interest on the Exchange Debentures shall accrue from
         the Exchange Date whether or not certificates for shares of
         Exchangeable Preferred Stock are surrendered for exchange on such
         Exchange Date.

                  (B) On and after the Exchange Date, dividends will cease to
accrue on the outstanding shares of Exchangeable Preferred Stock, and all rights
of the holders of Exchangeable Preferred Stock (except the right to receive
Exchange Debentures, an amount in cash, to the extent 


<PAGE>   98
                                                                              19

applicable, equal to the accumulated and unpaid dividends to the Exchange Date
and, if the Company so elects, cash in lieu of any Exchange Debenture that is in
a principal amount that is not an integral multiple of $1,000) will terminate.
The person entitled to receive the Exchange Debentures issuable upon such
exchange will be treated for all purposes as the registered holder of such
Exchange Debentures.

                  (C) On or before the Exchange Date, each holder of
Exchangeable Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner and at
the place designated in the Exchange Notice. The Company shall cause the
Exchange Debentures to be executed on the Exchange Date and, upon surrender in
accordance with the Exchange Notice of the certificates for any shares of
Exchangeable Preferred Stock so exchanged, duly endorsed (or otherwise in proper
form for transfer, as determined by the Company), such shares shall be exchanged
by the Company into Exchange Debentures. The Company shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.

                  (iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (g), the Company shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Exchange Indenture or the Exchange
Debentures, or the performance of the Company's obligations under the Exchange
Indenture or the Exchange Debentures, shall materially violate or conflict with
any applicable law or agreement or instrument then binding on the Company or if,
at the time of such exchange, the Company is insolvent or if it would be
rendered insolvent by such exchange.

                  (iv) Exchange of Initial Exchangeable Preferred Stock for
Series B Stock. The Series B Stock will be issued by the Company only in
connection with an exchange offer, on a share for share basis, for the Initial
Exchangeable Preferred Stock as required pursuant to the Registration Rights
Agreement. Each share of Series B Stock issued in exchange for a share of
Initial Exchangeable Preferred Stock 


<PAGE>   99
                                                                              20

will be deemed to have the same liquidation preference and accrued and unpaid
dividends as the share of Initial Exchangeable Preferred Stock so exchanged.

                  (h) Change of Control. (i) Upon the occurrence of a Change of
Control (the date of such occurrence being the "Change of Control Date"), the
Company shall either (1) offer to purchase each holder's Exchangeable Preferred
Stock in cash pursuant to the offer described in paragraph (h)(iii) (the "Change
of Control Offer") at a purchase price equal to 101% of the Liquidation
Preference thereof, plus, without duplication, all accrued and unpaid dividends,
if any, to the Change of Control Payment Date, including an amount in cash equal
to a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Change of Control Payment Date to the Change of Control Payment
Date or (2) notify each holder of the Company's election not to make an offer as
described in clause (1) above, in which case the dividend rate on the
Exchangeable Preferred Stock shall be subject to reset pursuant to paragraph
(c)(ii).

                  (ii) Prior to the mailing of the notice referred to in
paragraph (h)(iii), but in any event within 30 days following the date on which
the Company knows or reasonably should have known that a Change in Control has
occurred, the Company covenants that it shall promptly determine if the purchase
of the Exchangeable Preferred Stock would violate or constitute a default under
the indebtedness of the Company.

                  (iii) Within 30 days following the date on which the Company
knows or reasonably should have known that a Change in Control has occurred, the
Company must send, by first-class mail, postage prepaid, a notice to each holder
of Exchangeable Preferred Stock. Such notice shall state whether the Company has
elected to make an offer to purchase shares of Exchangeable Preferred Stock and
if it has so elected, such notice shall contain all instructions and materials
necessary to enable such holders to tender Exchangeable Preferred Stock pursuant
to the Change of 


<PAGE>   100
                                                                              21

Control Offer. If the Company has elected to make a Change of Control Offer,
such notice shall state:

                  (A) that a Change of Control has occurred, that a Change of
         Control Offer is being made pursuant to this paragraph (h) and that all
         Exchangeable Preferred Stock validly tendered and not withdrawn will be
         accepted for payment;

                  (B) the purchase price (including the amount of accrued
         dividends, if any) and the purchase date (which must be no earlier than
         30 days nor later than 60 days from the date such notice is mailed,
         other than as may be required by law) (the "Change of Control Payment
         Date");

                  (C) that any shares of Exchangeable Preferred Stock not
         tendered will continue to accrue dividends;

                  (D) that, unless the Company defaults in making payment
         therefor, any share of Exchangeable Preferred Stock accepted for
         payment pursuant to the Change of Control Offer shall cease to accrue
         dividends after the Change of Control Payment Date;

                  (E) that holders electing to have any shares of Exchangeable
         Preferred Stock purchased pursuant to a Change of Control Offer will be
         required to surrender stock certificates representing such shares of
         Exchangeable Preferred Stock, properly endorsed for transfer, together
         with such other customary documents as the Company and the Transfer
         Agent may reasonably request to the Transfer Agent and registrar for
         the Exchangeable Preferred Stock at the address specified in the notice
         prior to the close of business on the Business Day prior to the Change
         of Control Payment Date;

                  (F) that holders will be entitled to withdraw their election
         if the Company receives, not later than five Business Days prior to the
         Change of Control Payment Date, a telegram, a telex, facsimile
         transmission or letter setting forth the name of the 


<PAGE>   101
                                                                              22

         holder, the number of shares of Exchangeable Preferred Stock the holder
         delivered for purchase and a statement that such holder is withdrawing
         his election to have such shares of Exchangeable Preferred Stock
         purchased;

                  (G) that holders whose shares of Exchangeable Preferred Stock
         are purchased only in part will be issued a new certificate
         representing the unpurchased shares of Exchangeable Preferred Stock;
         and

                  (H) the circumstances and relevant facts regarding such Change
         of Control (including information with respect to pro forma historical
         income, cash flow and capitalization after giving effect to such Change
         of Control).

                  If the Company elects not to make a Change of Control Offer,
such notice shall state that the dividend rate on the Exchangeable Preferred
Stock is subject to adjustment pursuant to paragraph (c)(ii).

                  (iv) The Company will comply with any tender offer rules under
the Exchange Act which then may be applicable, including Rules 13e-4 and 14e-1,
in connection with any offer made by the Company to repurchase the shares of
Exchangeable Preferred Stock as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designation, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Certificate of Designation by virtue
thereof.

                  (v) On the Change of Control Payment Date the Company shall
(A) accept for payment the shares of Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the holders of
shares so accepted the purchase price therefor in cash and (C) cancel each
surrendered certificate and retire the shares represented thereby. Unless the
Company defaults in the payment for the shares of Exchangeable Preferred Stock
tendered pursuant to the Change of Control Offer, dividends will cease to accrue
with respect to the shares of 


<PAGE>   102
                                                                              23

Exchangeable Preferred Stock tendered and all rights of holders of such tendered
shares will terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.

                  (vi) To accept the Change of Control Offer, the holder of a
share of Exchangeable Preferred Stock shall deliver, on or before the 10th day
prior to the Change of Control Payment Date, written notice to the Company (or
an agent designated by the Company for such purpose) of such holder's
acceptance, together with certificates evidencing the shares of Exchangeable
Preferred Stock with respect to which the Change of Control Offer is being
accepted, duly endorsed for transfer.

                  (i) Conversion or Exchange. Except as otherwise provided
herein, the holders of shares of Exchangeable Preferred Stock shall not have any
rights hereunder to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or classes of
Capital Stock of the Company.

                  (j) Reissuance of Exchangeable Preferred Stock. Shares of
Exchangeable Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall not be reissued as
shares of Exchangeable Preferred Stock and shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Exchangeable Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.

                  (k) Business Day. If any payment, redemption or exchange shall
be required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.


<PAGE>   103
                                                                              24

                  (l) Certain Additional Provisions. The Company covenants and
agrees for the benefit of the Holders as follows:

                  (i) SEC Reports. The Company shall file with the Trustee and
provide Holders, within 15 days after it files them with the SEC, copies of its
annual report and the information, documents and other reports which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and provide the Trustee and Holders
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.

                  (ii) Limitation on Indebtedness. (A) The Company shall not
Incur, and shall not permit any Restricted Subsidiary to Incur, directly or
indirectly, any Indebtedness unless, on the date of such Incurrence and after
giving pro forma effect thereto (including pro forma application of the net
proceeds therefrom) and to any other Indebtedness Incurred or repaid since the
end of the period referred to below and the receipt and application of the
proceeds thereof, either (i) the Indebtedness to Operating Cash Flow Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Indebtedness is Incurred would have been not more than 5.0 to 1.0, or (ii) the
Company's Consolidated Capital Ratio as of the end of the most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such Indebtedness is Incurred is less than 2.0 to
1.0.


<PAGE>   104
                                                                              25

                  (B) Notwithstanding the foregoing paragraph (a), the Company
and its Restricted Subsidiaries may Incur any or all of the following
Indebtedness:

                  (1) Indebtedness Incurred pursuant to one or more Credit
         Agreements; provided, however, that, after giving effect to any such
         Incurrence, the aggregate principal amount of such Indebtedness then
         outstanding does not exceed the greater of (A) $150,000,000 and (B) 85%
         of the book value of the Accounts Receivables of the Company and its
         Restricted Subsidiaries;

                  (2) Indebtedness owed to and held by the Company or a
         Restricted Subsidiary; provided, however, that any subsequent issuance
         or transfer of any Capital Stock which results in any Restricted
         Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
         transfer of such Indebtedness (other than to the Company or another
         Restricted Subsidiary) shall be deemed, in each case, to constitute the
         Incurrence of such Indebtedness by the issuer thereof;

                  (3) the Exchange Debentures (including Exchange Debentures
         issued in lieu of cash interest payments with respect to Exchange
         Debentures);

                  (4) Indebtedness outstanding on the Issue Date (other than
         Indebtedness described in clause (1), (2) or (3) of this paragraph
         (l)(ii)(B));

                  (5) Refinancing Indebtedness in respect of Indebtedness
         Incurred pursuant to paragraph (l)(ii)(A) pursuant to clause (3) or (4)
         of this paragraph (l)(ii)(B) or this clause (5);

                  (6) Hedging Obligations consisting of Interest Rate Agreements
         directly related to Indebtedness permitted to be Incurred by the
         Company and its Restricted Subsidiaries pursuant to this Certificate of
         Designation.

                  (7) Indebtedness represented by Capital Lease Obligations,
         mortgage financings or purchase money 


<PAGE>   105
                                                                              26

         obligations, in each case Incurred for the purpose of financing all or
         any part of the purchase price or cost of construction or improvement
         of property used in the business of the Company or such Restricted
         Subsidiary;

                  (8) In the event that the PSINet Shares are held by the
         Company or a Restricted Subsidiary, the Incurrence by the Company or
         such Restricted Subsidiary of Permitted PSINet Non-Recourse Debt; and

                  (9) Indebtedness in an aggregate principal amount at any time
         outstanding which, together with the amount of all other Indebtedness
         of the Company and its Restricted Subsidiaries outstanding on the date
         of such Incurrence (other than Indebtedness permitted by clauses (1)
         through (8) of this paragraph (l)(ii)(B) and paragraph (l)(ii)(A)),
         does not exceed 5% of Consolidated Tangible Assets.

         (C) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to paragraph (l)(ii)(B) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Exchange Debentures to at least the
same extent as such Subordinated Obligations.

         (D) For purposes of determining compliance with this paragraph (l)(ii),
(1) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(2) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.

                  (iii) Limitation on Restricted Payments. (A) The Company shall
not, and shall not permit any Restricted 



<PAGE>   106
                                                                              27

Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:

                  (1) a Voting Rights Triggering Event shall have occurred and
         be continuing (or would result therefrom);

                  (2) the Company is not able to Incur an additional $1.00 of
         Indebtedness under paragraph (l)(ii)(A); or

                  (3) the aggregate amount of such Restricted Pay ment and all
         other Restricted Payments since the Issue Date would exceed the sum of:

                           (I) an amount equal to the Cumulative Operating Cash
                  Flor for the period (taken as one accounting period) from the
                  beginning of the first full fiscal quarter commencing after
                  the Issue Date to the end of the Company's most recently ended
                  fiscal quarter for which internal financial statements are
                  available at the time of such Restricted Payment less 1.50
                  times the Company's Cumulative Consolidated Interest Expense
                  for such period;

                           (II) the aggregate Net Cash Proceeds received by the
                  Company from the issuance or sale of its Parity Stock and
                  Junior Stock (in each case other than Disqualified Stock)
                  subsequent to the Issue Date (other than an issuance or sale
                  to a Subsidiary of the Company and other than an issuance or
                  sale to an employee stock ownership plan or to a trust
                  established by the Company or any of its Subsidiaries for the
                  benefit of their employees);

                           (III) the amount by which Indebtedness of the Company
                  is reduced on the Company's balance sheet upon the conversion
                  or exchange (other than by a Subsidiary of the Company)
                  subsequent to the Issue Date of any Indebtedness of the
                  Company convertible or exchangeable for Parity Stock or Junior
                  Stock (in each case other than Disqualified


<PAGE>   107

                                                                              28
                  Stock) of the Company (less the amount of any cash, or the
                  fair value of any other property, distributed by the Company
                  upon such conversion or exchange); and

                           (IV) an amount equal to the sum of (x) the net
                  reduction in Investments in any Person resulting from
                  dividends, repayments of loans or advances or other transfers
                  of assets (but excluding such interest, dividends, repayments,
                  advances or other transfers of assets to the extent any such
                  item increases Consolidated Net Income), in each case to the
                  Company or any Restricted Subsidiary from any Person
                  (including, without limitation, from Unrestricted
                  Subsidiaries), and (y) the portion (proportionate to the
                  Company's equity interest in such Subsidiary) of the fair
                  market value of the net assets of an Unrestricted Subsidiary
                  at the time such Unrestricted Subsidiary is designated a
                  Restricted Subsidiary; provided, however, that the foregoing
                  sum shall not exceed, in the case of any Person (including any
                  Unrestricted Subsidiary), the amount of Investments previously
                  made (and treated as a Restricted Payment) by the Company or
                  any Restricted Subsidiary in such Person.

                  (B) The provisions of paragraph (l)(iii)(A) shall not
prohibit:

                  (1) any Restricted Payment made out of the proceeds of the
         substantially concurrent sale of, or any acquisition of any Parity
         Stock or Junior Stock of the Company made by exchange for, other Parity
         Stock or Junior Stock, as the case may be, of the Company (in each case
         other than Disqualified Stock and other than Parity Stock or Junior
         Stock issued or sold to a Subsidiary of the Company or an employee
         stock ownership plan or to a trust established by the Company or any of
         its Subsidiaries for the benefit of their employees); provided,
         however, that (I) such Restricted Payment shall be excluded in the
         calculation of the amount of Restricted Payments and (II) the Net Cash
         Proceeds from such sale shall be excluded from the 


<PAGE>   108
                                                                              29

         calculation of amounts under paragraph (l)(iii)(A)(3)(II);

                  (2) dividends paid within 60 days after the date of
         declaration thereof if at such date of declaration such dividend would
         have complied with paragraph (l)(iii); provided, however, that at the
         time of payment of such dividend, no other Voting Rights Triggering
         Event shall have occurred and be continuing (or result therefrom);
         provided further, however, that such dividend shall be included in the
         calculation of the amount of Restricted Payments; or

                  (3) the repurchase or other acquisition of shares of, or
         options to purchase shares of, common stock of the Company or any of
         its Subsidiaries from employees, former employees, directors or former
         directors of the Company or any of its Subsidiaries (or permitted
         transferees of such employees, former employees, directors or former
         directors), pursuant to the terms of the agreements (including
         employment agreements) or plans (or amendments thereto) approved by the
         Board of Directors under which such individuals purchase or sell or are
         granted the option to purchase or sell, shares of such common stock;
         provided, however, that the aggregate amount of such repurchases and
         other acquisitions shall not exceed $1,000,000 in any calendar year;
         provided further, however, that such repurchases and other acquisitions
         shall be excluded in the calculation of the amount of Restricted
         Payments.

                  (iv) Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (A) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the 


<PAGE>   109
                                                                              30

Company, (B) make any loans or advances to the Company or (C) transfer any of
its property or assets to the Company, except:

                  (1) any encumbrance or restriction pursuant to an
         agreement in effect at or entered into on the Issue
         Date;

                  (2) any encumbrance or restriction with respect to a
         Restricted Subsidiary pursuant to an agreement relating to any
         Indebtedness Incurred by such Restricted Subsidiary on or prior to the
         date on which such Restricted Subsidiary was acquired by the Company
         (other than Indebtedness Incurred as consideration in, or to provide
         all or any portion of the funds or credit support utilized to
         consummate, the transaction or series of related transactions pursuant
         to which such Restricted Subsidiary became a Restricted Subsidiary or
         was acquired by the Company) and outstanding on such date;

                  (3) any encumbrance or restriction pursuant to an agreement
         effecting a Refinancing of Indebtedness Incurred pursuant to an
         agreement referred to in clause (1) or (2) of this paragraph (l)(iv) or
         this clause (3) or contained in any amendment to an agreement referred
         to in clause (1) or (2) of this paragraph (l)(iv) or this clause (3);
         provided, however, that the encumbrances and restrictions with respect
         to such Restricted Subsidiary contained in any such refinancing
         agreement or amendment are no less favorable to the holders of
         Exchangeable Preferred Stock than encumbrances and restrictions with
         respect to such Restricted Subsidiary contained in such predecessor
         agreements;

                  (4) any such encumbrance or restriction consisting of
         customary nonassignment provisions in leases governing leasehold
         interests to the extent such provisions restrict the transfer of the
         lease or the property leased thereunder;


<PAGE>   110
                                                                              31

                  (5) in the case of clause (C) above, restrictions contained in
         IRU Agreements, security agreements or mortgages securing Indebtedness
         or other obligations of a Restricted Subsidiary to the extent such
         restrictions restrict the transfer of the property subject to such
         security agreements or mortgages;

                  (6) any restriction with respect to a Restricted Subsidiary
         imposed pursuant to an agreement entered into for the sale or
         disposition of all or substantially all the Capital Stock or assets of
         such Restricted Subsidiary pending the closing of such sale or
         disposition; and

                  (7) any such encumbrance or restriction contained
         in the PSINet Agreement.

                  (v) Limitation on Affiliate Transactions. (A) The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
(1) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (2) the Company delivers to the Transfer
Agent (I) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $1,000,000 a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (II) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10,000,000, other than transactions with GE Capital
Communication and Excluded PSINet Transactions, an opinion as to the fairness to
the Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an investment banking firm of national
standing.


<PAGE>   111
                                                                              32

                  (B) The provisions of the foregoing paragraph (l)(v)(A) shall
not prohibit (1) any Restricted Payment permitted to be paid pursuant to
paragraph (l)(iii), (2) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors, (3) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors, (4) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $500,000 in the aggregate
outstanding at any one time, (5) any employment or consulting arrangement or
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (6) the payment of reasonable fees to
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or its Restricted Subsidiaries, (7) any Affiliate Transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries, (8) transactions in connection with Permitted Businesses between
the Company and GE Capital Communication, (9) transactions between the Company
or any Restricted Subsidiary specifically contemplated by the PSINet Agreement
and (10) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company. Notwithstanding the foregoing, Affiliate Transactions
shall not include any transaction involving the sale, purchase, repurchase,
redemption, transfer, exchange or other acquisition or disposition of Senior
Notes, Exchangeable Preferred Stock or Convertible Preferred Stock by or from,
or the payment of principal of, premium, if any, and interest on, or liquidation
preference of and dividend on, any Senior Notes, Exchangeable Preferred Stock or
Convertible Preferred Stock, as the case may be, to any Affiliate of the Company
or any Affiliate of a Restricted Subsidiary of the Company; provided, however,
that such transaction is offered substantially concurrently to all other holders
of Senior Notes, Exchangeable Preferred Stock or Convertible Preferred Stock, as
the case may be, on the same terms and conditions; 


<PAGE>   112
                                                                              33

provided further, however, that such transaction is approved by a majority of
the disinterested members of the Board of Directors, other than transactions in
connection with the payment of principal of, premium, if any, and interest on,
or liquidation preference of and dividends on, Senior Notes, Exchangeable
Preferred Stock or Convertible Preferred Stock, as the case may be, pursuant to
the provisions of the indenture or certificate of designation governing the
payment of interest and principal, dividends and liquidation preference,
optional redemption, repurchases from the proceeds of an asset disposition and
repurchases upon a change of control.

                  (vi) When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of transactions, all or substantially all its
assets to, any Person, unless: (1) the resulting, surviving or transferee Person
(the "Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume
all the obligations of the Company under the Exchangeable Preferred Stock; (2)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing, (3) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (l)(ii)(A); (4)
immediately after giving effect to such transaction, the Successor Company shall
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company immediately prior to such transaction; and (5) the
Company shall have delivered to the Trustee an Officers' Certificate, stating
that such consolidation, merger or transfer and such assumption (if any) comply
with this Certificate of Designation.


<PAGE>   113
                                                                              34

                  (m) Certificates. (i) Form and Dating. The Exchangeable
Preferred Stock and the Transfer Agent's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Certificate of Designation. The Exchangeable
Preferred Stock certificate may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Exchangeable Preferred Stock certificate shall
be dated the date of its authentication. The terms of the Exchangeable Preferred
Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designation.

                  (A) Global Exchangeable Preferred Stock. The Exchangeable
Preferred Stock sold in reliance on Rule 144A shall be issued initially in the
form of one or more fully registered global certificates with the global
securities legend and restricted securities legend set forth in Exhibit A hereto
(the "Global Exchangeable Preferred Stock"), which shall be deposited on behalf
of the purchasers represented thereby with the Transfer Agent, at its New York
office, as custodian for DTC (or with such other custodian as DTC may direct),
and registered in the name of DTC or a nominee of DTC, duly executed by the
Company and authenticated by the Transfer Agent as hereinafter provided. Subject
to the terms hereof and to the requirements of applicable law, the number of
shares of Exchangeable Preferred Stock represented by Global Exchangeable
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.

                  (B) Book-Entry Provisions. In the event Global Exchangeable
Preferred Stock is deposited with or on behalf of DTC, the Company shall execute
and the Transfer Agent shall authenticate and deliver initially one or more
Global Exchangeable Preferred Stock certificates that (a) shall be registered in
the name of DTC for such Global Exchangeable Preferred Stock or the nominee of
DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's


<PAGE>   114
                                                                              35

instructions or held by the Transfer Agent as custodian for DTC.

                  Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Certificate of Designation with respect to any Global
Exchangeable Preferred Stock held on their behalf by DTC or by the Transfer
Agent as the custodian of DTC or under such Global Exchangeable Preferred Stock,
and DTC may be treated by the Company, the Transfer Agent and any agent of the
Company or the Transfer Agent as the absolute owner of such Global Exchangeable
Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
exercise of the rights of a holder of a beneficial interest in any Global
Exchangeable Preferred Stock.

                  (C) Certificated Exchangeable Preferred Stock. Exchangeable
Preferred Stock initially sold in offshore transactions pursuant to Regulation S
under the Securities Act will be issued in fully registered certificated form
("Certificated Exchangeable Preferred Stock").

                  Except as otherwise provided by applicable law or as provided
in this paragraph (m)(i) or in paragraph (m)(iii), owners of beneficial
interests in Global Exchangeable Preferred Stock will not be entitled to receive
physical delivery of Certificated Exchangeable Preferred
Stock.

                  After a transfer of any Initial Exchangeable Preferred Stock
during the period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Exchangeable Preferred Stock, all requirements
pertaining to legends on such Initial Exchangeable Preferred Stock will cease to
apply, the requirements requiring that any such Initial Exchangeable Preferred
Stock issued to Holders be issued in global form will cease to apply, and
Certificated Exchangeable Preferred Stock without legends will be 


<PAGE>   115
                                                                              36

available to the transferee of the Holder of such Initial Exchangeable Preferred
Stock upon exchange of such transferring Holder's Initial Exchangeable Preferred
Stock or directions to transfer such Holder's interest in the Global
Exchangeable Preferred Stock, as applicable. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Exchangeable Preferred
Stock pursuant to which Holders of such Initial Exchangeable Preferred Stock are
offered Series B Stock in exchange for their Initial Exchangeable Preferred
Stock, all requirements that Initial Exchangeable Preferred Stock be issued in
global form will cease to apply and Certificated Exchangeable Preferred Stock
with the restricted securities legend set forth in Exhibit A hereto will be
available to Holders of such Initial Exchangeable Preferred Stock that do not
exchange their Initial Exchangeable Preferred Stock, and Series B Stock in
certificated form will be available to Holders that exchange such Initial
Exchangeable Preferred Stock in such Registered Exchange Offer.

                  (ii) Execution and Authentication. Two Officers shall sign the
certificates representing Exchangeable Preferred Stock for the Company by manual
or facsimile signature. The Company's seal shall be impressed, affixed,
imprinted or reproduced on the Exchangeable Preferred Stock and may be in
facsimile form.

                  If an Officer whose signature is on certificates representing
Exchangeable Preferred Stock no longer holds that office at the time the
Transfer Agent authenticates the Exchangeable Preferred Stock evidenced thereby,
the shares of Exchangeable Preferred Stock evidenced thereby shall be valid
nevertheless.

                  A certificate representing Exchangeable Preferred Stock shall
not be valid until an authorized signatory of the Transfer Agent manually signs
the certificate of authentication on the Exchangeable Preferred Stock. The
signature shall be conclusive evidence that the Exchangeable Preferred Stock has
been authenticated under this Certificate of Designation.


<PAGE>   116
                                                                              37

                  The Transfer Agent shall authenticate and deliver: (1) 300,000
shares of Initial Exchangeable Preferred Stock for original issue and (2)
300,000 shares of Series B Stock for issue only in a Registered Exchange Offer
pursuant to the Registration Rights Agreement, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an Officer
or either an Assistant Treasurer or Assistant Secretary of the Company. Such
orders shall specify the number of shares of Exchangeable Preferred Stock to be
authenticated and the date on which the original issue of Exchangeable Preferred
Stock is to be authenticated and whether the Exchangeable Preferred Stock is to
be Initial Exchangeable Preferred Stock or Series B Stock.

                  The Transfer Agent may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Exchangeable Preferred
Stock. Unless limited by the terms of such appointment, an authenticating agent
may authenticate Exchangeable Preferred Stock whenever the Transfer Agent may do
so. Each reference in this Certificate of Designation to authentication by the
Transfer Agent includes authentication by such agent. An authenticating agent
has the same rights as the Transfer Agent or agent for service of notices and
demands.

                  (iii) Transfer and Exchange. (A) Transfer and Exchange of
Certificated Exchangeable Preferred Stock. When Certificated Exchangeable
Preferred Stock is presented to the Transfer Agent with a request to register
the transfer of such Certificated Exchangeable Preferred Stock or to exchange
such Certificated Exchangeable Preferred Stock for an equal number of shares of
Certificated Exchangeable Preferred Stock of other authorized denominations, the
Transfer Agent shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the


<PAGE>   117
                                                                              38

Certificated Exchangeable Preferred Stock surrendered for transfer or exchange:

                  (1) shall be duly endorsed or accompanied by a written
         instrument of transfer in form reasonably satisfactory to the Company
         and the Transfer Agent, duly executed by the Holder thereof or its
         attorney duly authorized in writing; and

                  (2) in the case of Transfer Restricted Securities that are
         Certificated Exchangeable Preferred Stock, are being transferred or
         exchanged pursuant to an effective registration statement under the
         Securities Act or pursuant to clause (I) or (II) below, and are
         accompanied by the following additional information and documents, as
         applicable:

                           (I) if such Transfer Restricted Securities are being
                  delivered to the Transfer Agent by a Holder for registration
                  in the name of such Holder, without transfer, a certification
                  from such Holder to that effect in substantially the form of
                  Exhibit B hereto; or

                           (II) if such Transfer Restricted Securities are being
                  transferred to the Company or to a "qualified institutional
                  buyer" ("QIB") in accordance with Rule 144A under the
                  Securities Act or pursuant to an exemption from registration
                  in accordance with Rule 144 or Regulation S under the
                  Securities Act, a certification to that effect (in
                  substantially the form of Exhibit B hereto).

                  (B) Restrictions on Transfer of Certificated Exchangeable
Preferred Stock for a Beneficial Interest in Global Exchangeable Preferred
Stock. Certificated Exchangeable Preferred Stock may not be exchanged for a
beneficial interest in Global Exchangeable Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of Certificated Exchangeable Preferred Stock, duly endorsed or accompanied


<PAGE>   118
                                                                              39

by appropriate instruments of transfer, in form satisfactory to the Transfer
Agent, together with:

                  (1) if such Certificated Exchangeable Preferred Stock is a
         Transfer Restricted Security, certification that such Certificated
         Exchangeable Preferred Stock is being transferred to a QIB in
         accordance with Rule 144A under the Securities Act; and

                  (2) whether or not such Certificated Exchangeable Preferred
         Stock is a Transfer Restricted Security, written instructions directing
         the Transfer Agent to make, or to direct DTC to make, an adjustment on
         its books and records with respect to such Global Exchangeable
         Preferred Stock to reflect an increase in the number of shares of
         Exchangeable Preferred Stock represented by the Global Exchangeable
         Preferred Stock,

then the Transfer Agent shall cancel such Certificated Exchangeable Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Exchangeable Preferred Stock represented by the Global
Exchangeable Preferred Stock to be increased accordingly. If no Global
Exchangeable Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Exchangeable Preferred Stock
representing the appropriate number of shares.

                  (C) Transfer and Exchange of Global Exchangeable Preferred
Stock. The transfer and exchange of Global Exchangeable Preferred Stock or
beneficial interests therein shall be effected through DTC, in accordance with
this Certificate of Designation (including applicable restrictions on transfer
set forth herein, if any) and the procedures of DTC therefor.

                  (D) Transfer of a Beneficial Interest in Global Exchangeable
Preferred Stock for a Certificated Exchangeable Preferred Stock.


<PAGE>   119
                                                                              40

                  (1) Any person having a beneficial interest in Exchangeable
         Preferred Stock that is being transferred or exchanged pursuant to an
         effective registration statement under the Securities Act or pursuant
         to clause (I) or (II) below may upon request, and if accompanied by the
         information specified below, exchange such beneficial interest for
         Certificated Exchangeable Preferred Stock representing the same number
         of shares of Exchangeable Preferred Stock. Upon receipt by the Transfer
         Agent of written instructions or such other form of instructions as is
         customary for DTC from DTC or its nominee on behalf of any person
         having a beneficial interest in Global Exchangeable Preferred Stock and
         upon receipt by the Transfer Agent of a written order or such other
         form of instructions as is customary for DTC or the person designated
         by DTC as having such a beneficial interest in a Transfer Restricted
         Security only, and upon the following additional information and
         documents (all of which may be submitted by facsimile):

                           (I) if such beneficial interest is being transferred
                  to the person designated by DTC as being the owner of a
                  beneficial interest in Global Exchangeable Preferred Stock, a
                  certification from such person to that effect (in
                  substantially the form of Exhibit B hereto); or

                           (II) if such beneficial interest is being transferred
                  to a QIB in accordance with Rule 144A under the Securities Act
                  or pursuant to an exemption from registration in accordance
                  with Rule 144 or Regulation S under the Securities Act, a
                  certification to that effect (in substantially the form of
                  Exhibit B hereto);

then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Exchangeable
Preferred Stock represented by Global Exchangeable Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will execute
and the Transfer 


<PAGE>   120
                                                                              41

Agent will authenticate and deliver to the transferee Certificated Exchangeable
Preferred Stock.

                  (2) Certificated Exchangeable Preferred Stock issued in
         exchange for a beneficial interest in a Global Exchangeable Preferred
         Stock pursuant to this paragraph (m)(iii)(D) shall be registered in
         such names and in such authorized denominations as DTC, pursuant to
         instructions from its direct or indirect participants or otherwise,
         shall instruct the Transfer Agent. The Transfer Agent shall deliver
         such Certificated Exchangeable Preferred Stock to the persons in whose
         names such Exchangeable Preferred Stock are so registered in accordance
         with the instructions of DTC.

                  (E) Restrictions on Transfer and Exchange of Global
Exchangeable Preferred Stock. Notwithstanding any other provisions of this
Certificate of Designation (other than the provisions set forth in paragraph
(m)(iii)(F)), Global Exchangeable Preferred Stock may not be transferred as a
whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor depository or a
nominee of such successor depository.

                  (F)  Authentication of Certificated Exchangeable
Preferred Stock.  If at any time:

                  (1) DTC notifies the Company that DTC is unwilling or unable
         to continue as depository for the Global Exchangeable Preferred Stock
         and a successor depository for the Global Exchangeable Preferred Stock
         is not appointed by the Company within 90 days after delivery of such
         notice;

                  (2) DTC ceases to be a clearing agency registered
         under the Exchange Act;

                  (3) there shall have occurred and be continuing a
         Voting Rights Triggering Event; or


<PAGE>   121
                                                                              42

                  (4) the Company, in its sole discretion, notifies the Transfer
         Agent in writing that it elects to cause the issuance of Certificated
         Exchangeable Preferred Stock under this Certificate of Designation,

then the Company will execute, and the Transfer Agent, upon receipt of a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Exchangeable Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Exchangeable Preferred Stock equal to the number of shares of Exchangeable
Preferred Stock represented by the Global Exchangeable Preferred Stock, in
exchange for such Global Exchangeable Preferred Stock.

                  (G) Legend. (1) Except as permitted by the following paragraph
(2), each certificate evidencing the Global Exchangeable Preferred Stock and the
Certificated Exchangeable Preferred Stock (and all Exchangeable Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:

         "THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
         TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
         ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
         OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
         REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
         THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
         BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
         SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

         "THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
         (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
         TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
         A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
         (ii) IN AN 


<PAGE>   122
                                                                              43

         OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
         ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
         SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv)
         PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
         ACT OR (v) TO THE COMPANY, IN EACH OF CASES (i) THROUGH (iv) IN
         ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
         UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
         REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
         RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

         "BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
         "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT") OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
         SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.

                  (2) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by Global
Exchangeable Preferred Stock) pursuant to Rule 144 under the Securities Act or
an effective registration statement under the Securities Act:

                           (I) in the case of any Transfer Restricted Security
                  that is a Certificated Exchangeable Preferred Stock, the
                  Transfer Agent shall permit the Holder thereof to exchange
                  such Transfer Restricted Security for a Certificated
                  Exchangeable Preferred Stock that does not bear the legend set
                  forth above and rescind any restriction on the transfer of
                  such Transfer Restricted Security;

                           (II) in the case of any Transfer Restricted Security
                  that is represented by a Global Exchangeable Preferred Stock,
                  the Transfer Agent shall permit the Holder thereof to exchange
                  such Transfer Restricted Security for a Certificated
                  Exchangeable Preferred Stock Security that does not bear the
                  legend set forth above and rescind any restriction on the
                  transfer of such Transfer Restricted Security, if the Holder's
                  request for 


<PAGE>   123
                                                                              44

                  such exchange was made in reliance on Rule 144 and the Holder
                  certifies to that effect in writing to the Transfer Agent
                  (such certification to be in the form set forth on the reverse
                  of the Transfer Restricted Security); and

                           (III) in the case of any Transfer Restricted Security
                  that is represented by a Global Exchangeable Preferred Stock,
                  the Transfer Agent shall permit the Holder thereof to exchange
                  such Transfer Restricted Security (in connection with the
                  offer to exchange Series B Stock for Initial Exchangeable
                  Preferred Stock pursuant to the Registration Rights Agreement)
                  for another Global Exchangeable Preferred Stock that does not
                  bear the legend set forth above.

                  (H) Cancelation or Adjustment of Global Exchangeable Preferred
Stock. At such time as all beneficial interests in Global Exchangeable Preferred
Stock have either been exchanged for Certificated Exchangeable Preferred Stock,
redeemed, repurchased or canceled, such Global Exchangeable Preferred Stock
shall be returned to DTC for cancelation or retained and canceled by the
Transfer Agent. At any time prior to such cancelation, if any beneficial
interest in Global Exchangeable Preferred Stock is exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Exchangeable Preferred Stock represented by such Global Exchangeable
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Exchangeable
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

                  (I) Obligations with Respect to Transfers and Exchanges of
Exchangeable Preferred Stock. (1) To permit registrations of transfers and
exchanges, the Company shall execute and the Transfer Agent shall authenticate
Certificated Exchangeable Preferred Stock and Global Exchangeable Preferred
Stock as required pursuant to the provisions of this paragraph (iii).


<PAGE>   124
                                                                              45

                  (2) All Certificated Exchangeable Preferred Stock and Global
         Exchangeable Preferred Stock issued upon any registration of transfer
         or exchange of Certificated Exchangeable Preferred Stock or Global
         Exchangeable Preferred Stock shall be the valid obligations of the
         Company, entitled to the same benefits under this Certificate of
         Designation as the Certificated Exchangeable Preferred Stock or Global
         Exchangeable Preferred Stock surrendered upon such registration of
         transfer or exchange.

                  (3) Prior to due presentment for registration of transfer of
         any shares of Exchangeable Preferred Stock, the Transfer Agent and the
         Company may deem and treat the person in whose name such shares of
         Exchangeable Preferred Stock are registered as the absolute owner of
         such Exchangeable Preferred Stock and neither the Transfer Agent nor
         the Company shall be affected by notice to the contrary.

                  (4) No service charge shall be made to a Holder for any
         registration of transfer or exchange upon surrender of any Exchangeable
         Preferred Stock Certificate at the office of the Transfer Agent
         maintained for that purpose. However, the Company may require payment
         of a sum sufficient to cover any tax or other governmental charge that
         may be imposed in connection with any registration of transfer or
         exchange of Exchangeable Preferred Stock Certificates.

                  (5) Upon any sale or transfer of shares of Exchangeable
         Preferred Stock (including any Exchangeable Preferred Stock represented
         by a Global Exchangeable Preferred Stock Certificate) pursuant to an
         effective registration statement under the Securities Act, pursuant to
         Rule 144 under the Securities Act or pursuant to an opinion of counsel
         reasonably satisfactory to the Company that no legend is required:

                  (A)      in the case of any Certificated Exchangeable
                           Preferred Stock, the Transfer Agent shall
                           permit the holder thereof to exchange such


<PAGE>   125
                                                                              46

                           Exchangeable Preferred Stock for Certificated
                           Exchangeable Preferred Stock that does not
                           bear the legend set forth in
                           paragraph (iii)(G) above and rescind any
                           restriction on the transfer of such
                           Exchangeable Preferred Stock; and

                  (B)      in the case of any Global Exchangeable Preferred
                           Stock, such Exchangeable Preferred Stock shall not be
                           required to bear the legend set forth in paragraph
                           (iii)(G) above but shall continue to be subject to
                           the provisions of paragraph (iii)(D) hereof;
                           provided, however, that with respect to any request
                           for an exchange of Exchangeable Preferred Stock that
                           is represented by Global Exchangeable Preferred Stock
                           for Certificated Exchangeable Preferred Stock that
                           does not bear the legend set forth in paragraph
                           (iii)(G) above in connection with a sale or transfer
                           thereof pursuant to Rule 144 (and based upon an
                           opinion of counsel if the Company so requests), the
                           Holder thereof shall certify in writing to the
                           Transfer Agent that such request is being made
                           pursuant to Rule 144 (such certification to be
                           substantially in the form of Exhibit B hereto).

                  (iv) Replacement Certificates. If a mutilated Exchangeable
Preferred Stock certificate is surrendered to the Transfer Agent or if the
Holder of a Exchangeable Preferred Stock certificate claims that the
Exchangeable Preferred Stock certificate has been lost, destroyed or wrongfully
taken, the Company shall issue and the Transfer Agent shall countersign a
replacement Exchangeable Preferred Stock certificate if the reasonable
requirements of the Transfer Agent and of Section 8-405 of the Uniform
Commercial Code as in effect in the State of New York are met. If required by
the Transfer Agent or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Transfer Agent to protect the
Company and the Transfer Agent from any loss which 


<PAGE>   126
                                                                              47

either of them may suffer if a Exchangeable Preferred Stock certificate is
replaced. The Company and the Transfer Agent may charge the Holder for their
expenses in replacing a Exchangeable Preferred Stock certificate.

                  (v) Temporary Certificates. Until definitive Exchangeable
Preferred Stock certificates are ready for delivery, the Company may prepare and
the Transfer Agent shall countersign temporary Exchangeable Preferred Stock
certificates. Temporary Exchangeable Preferred Stock certificates shall be
substantially in the form of definitive Exchangeable Preferred Stock
certificates but may have variations that the Company considers appropriate for
temporary Exchangeable Preferred Stock certificates. Without unreasonable delay,
the Company shall prepare and the Transfer Agent shall countersign definitive
Exchangeable Preferred Stock certificates and deliver them in exchange for
temporary Exchangeable Preferred Stock certificates.

                  (vi) Cancelation. (A) In the event the Company shall purchase
or otherwise acquire Certificated Exchangeable Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancelation.

                  (B) At such time as all beneficial interests in Global
Exchangeable Preferred Stock have either been exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, such Global
Exchangeable Preferred Stock shall thereupon be delivered to the Transfer
Agent for cancelation.

                  (C) The Transfer Agent and no one else shall cancel and
destroy all Exchangeable Preferred Stock certificates surrendered for transfer,
exchange, replacement or cancelation and deliver a certificate of such
destruction to the Company unless the Company directs the Transfer Agent to
deliver canceled Exchangeable Preferred Stock certificates to the Company. The
Company may not issue new Exchangeable Preferred Stock certificates to replace
Exchangeable Preferred Stock certificates to the extent they evidence
Exchangeable Preferred Stock which the Company has purchased or otherwise
acquired.


<PAGE>   127
                                                                              48

                  (m) Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designation, Holders shall have
the rights set forth in the Registration Rights Agreement.

                  (n) Certain Definitions. As used in this Certificate of
Designation, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:

                  "Accounts Receivable" means, with respect to any Person, all
accounts receivable of such Person net of allowances for uncollectible accounts,
discounts, refunds and all other allowances as determined in accordance with
GAAP.

                  "Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (ii) or (iii) above is primarily engaged in a Related
Business.

                  "Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings 


<PAGE>   128
                                                                              49

correlative to the foregoing. For purposes of paragraphs (l)(iii) and (l)(v)
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.

                  "Asset Swap" means an exchange of assets by the Company or any
of its Restricted Subsidiaries for one or more Permitted Businesses, assets to
be used in a Permitted Business, or for a controlling equity interest in any
Person whose assets consist primarily of one or more Permitted Businesses.

                  "Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
dividend rate borne by the Exchangeable Preferred Stock compounded annually) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).

                  "Average Life" means, as of the date of determina tion, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multi plied by the amount of such payment by (ii) the sum of all
such payments.

                  "Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.

                  "Business Day" means each day which is not a Legal Holiday.


<PAGE>   129
                                                                              50

                  "Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.

                  "Capital Stock" of any Person means any and all shares, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into or exchangeable for
such equity.

                  "Change of Control" means the occurrence of any of the
following events:

                  (i) any "person" (as such term is used in Sections 13(d) and
         14(d) of the Exchange Act), other than one or more Permitted Holders,
         is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
         under the Exchange Act, except that for purposes of this clause (i)
         such 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, and
         except that any person that is deemed to have beneficial ownership of
         shares solely as a result of being part of a group pursuant to Rule
         13d-5(b)(1) shall not be deemed to have beneficial ownership of any
         shares held by a Permitted Holder forming a part of such group),
         directly or indirectly, of more than 50% of the total voting power of
         the Voting Stock of the Company (for the purposes of this clause (i),
         such other person shall be deemed to beneficially own any Voting Stock
         of a specified corporation held by a parent corporation, if such other
         person is the beneficial owner (as defined in this clause (i)),
         directly or indirectly, of more than 35% of the voting 



<PAGE>   130
                                                                              51

         power of the Voting Stock of such parent corporation and the Permitted
         Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the
         Exchange Act), directly or indirectly, in the aggregate a lesser
         percentage of the voting power of the Voting Stock of such parent
         corporation and do not have the right or ability by voting power,
         contract or otherwise to elect or designate for election a majority of
         the board of directors of such parent corporation);

                  (ii) during any period of two consecutive years, individuals
         who at the beginning of such period constituted the Board of Directors
         (together with any new directors whose election by such Board of
         Directors or whose nomination for election by the shareholders of the
         Company was approved by a vote of a majority of the directors of the
         Company then still in office who were either directors at the beginning
         of such period or whose election or nomination for election was
         previously so approved) cease for any reason to constitute a majority
         of the Board of Directors then in office; provided, however, that any
         directors elected by holders of Preferred Stock of the Company pursuant
         to any voting rights provisions included in the certificate of
         designation relating to such Preferred Stock shall be excluded in
         making any determination pursuant to this clause (ii); or

                  (iii) the merger or consolidation of the Company with or into
         another Person or the merger of another Person with or into the
         Company, or the sale of all or substantially all the assets of the
         Company to another Person (other than a Person that is controlled by
         the Permitted Holders), and, in the case of any such merger or
         consolidation, the securities of the Company that are outstanding
         immediately prior to such transaction and which represent 100% of the
         aggregate voting power of the Voting Stock of the Company are changed
         into or exchanged for cash, securities or property, unless pursuant to
         such transaction such securities are changed into or exchanged for, in
         addition to any other consideration, securities of the surviving
         corporation that represent immediately after such transaction, at 


<PAGE>   131
                                                                              52

         least a majority of the aggregate voting power of the Voting Stock of
         the surviving corporation.

                  Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred if, after such event that otherwise would constitute
a Change of Control, the Securities are rated Investment Grade by Moody's or
Standard & Poor's on the 30th day following the event that otherwise would
constitute a Change of Control (the "Change of Control Determination Date");
provided, however, that to the extent there is a "rating watch" with respect to
the Exchangeable Preferred Stock or other rating agency review on such 30th day,
then the Change of Control Determination Date shall be the first Business Day
thereafter on which the Exchangeable Preferred Stock is not subject to a "rating
watch" or other rating agency review by either Moody's or Standard & Poor's. The
term "Investment Grade", for such purpose, means a rating of Baa3 or higher in
the case of Moody's, or BBB- or higher in the case of Standard & Poor's.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Company" means the party named as such in this Certificate of
Designation until a successor replaces it and, thereafter, means the successor.

                  "Consolidated Capital Ratio" of any Person as of any date
means the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of such Person then outstanding to (ii) the greater of either (a)
the aggregate consolidated paid-in capital of such Person as of such date or (b)
the stockholders' equity as of such date as shown on the consolidated balance
sheet of such Person determined in accordance with GAAP.

                  "Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries,
without duplication, (i) interest expense attributable to capital leases and the
interest expense 


<PAGE>   132
                                                                              53

attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) noncash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all (A)
Preferred Stock of Restricted Subsidiaries and (B) Preferred Stock of the
Company that is Disqualified Stock, in each case held by Persons other than the
Company or a Restricted Subsidiary, (viii) interest incurred in connection with
Investments in discontinued operations, (ix) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by (or secured by the assets of) the Company or any Restricted Subsidiary and
(x) the cash contributions to any employee stock ownership plan or similar trust
to the extent such contributions are used by such plan or trust to pay interest
or fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.

                  "Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidi aries; provided, however,
that there shall not be included in such Consolidated Net Income:

                  (i) any net income of any Person (other than the Company) if
         such Person is not a Restricted Subsidiary, except that subject to the
         exclusion contained in clause (iv) below, the net income of any such
         Person for such period shall be included in such Consolidated Net
         Income up to the aggregate amount of cash actually distributed by such
         Person during such period to the Company or a Restricted Subsidiary as
         a dividend or other distribution (subject, in the case of a dividend or
         other distribution paid to a Restricted Subsidiary, to the limitations
         contained in clause (iii) below);

                  (ii) any net income (or loss) of any Person acquired by the
         Company or a Subsidiary in a pooling of interests transaction for any
         period prior to the date of such acquisition;


<PAGE>   133
                                                                              54

                  (iii) any net income of any Restricted Subsidiary if such
         Restricted Subsidiary is subject to restrictions, directly or
         indirectly, on the payment of dividends or the making of distributions
         by such Restricted Subsidiary, directly or indirectly, to the Company,
         except that subject to the exclusion contained in clause (iv) below,
         the net income of any such Restricted Subsidiary for such period shall
         be included in such Consolidated Net Income up to the aggregate amount
         of cash actually distributed by such Restricted Subsidiary during such
         period to the Company or another Restricted Subsidiary as a dividend or
         other distribution (subject, in the case of a dividend or other
         distribution paid to another Restricted Subsidiary, to the limitation
         contained in this clause);

                  (iv) any gain (but not loss) realized upon the sale or other
         disposition of any assets of the Company, its consolidated Subsidiaries
         or any other Person (including pursuant to any sale-and-leaseback
         arrangement) which is not sold or otherwise disposed of in the ordinary
         course of business and any gain (but not loss) realized upon the sale
         or other disposition of any Capital Stock of any Person;

                  (v) extraordinary gains or losses; and

                  (vi) the cumulative effect of a change in account
         ing principles.

Notwithstanding the foregoing, for the purpose of paragraph (l)(iii) only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from any Person (including any
Unrestricted Subsidiary) to the Company or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under paragraph (l)(iii) (A)(3)(IV) thereof.

                  "Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of: (i) the consolidated


<PAGE>   134
                                                                              55

equity of the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such Person
or a consolidated Subsidiary of such Person, (y) all investments as of such date
in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, as determined in
accordance with GAAP.

                  "Consolidated Tangible Assets" means, with respect to any
Person as of any date, the sum of the consolidated gross book value as reflected
in accounting books and records of such Person of all its property, both real
and personal, less (i) the net book value of all its licenses, patents, patent
applications, copyrights, trademarks, tradenames, goodwill, non-compete
agreements or organizational expenses and other like intangibles, (ii)
unamortized debt discount and expenses, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all other
proper reserves which should be provided in connection with the business
conducted by such Person, all of the foregoing as determined in accordance with
GAAP.

                  "Convertible Preferred Stock" means the Company's 7 1/4%
Junior Convertible Preferred Stock Due 2007.

                  "Credit Agreements" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit 


<PAGE>   135
                                                                              56

loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

                  "Cumulative Consolidated Interest Expense" means, with respect
to any Person, as of any date of determination, Consolidated Interest Expense
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of such Person's most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination.

                  "Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at such date of determination.

                  "Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.

                  "Default" means any event which is, or after notice or passage
of time or both would be, a Voting Rights Triggering Event.

                  "Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first 


<PAGE>   136
                                                                              57

anniversary of the Stated Maturity of the Exchangeable Preferred Stock;
provided, however, that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the Securities shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the
comparable provisions of the Exchange Indenture; provided further, however, that
the Company's Convertible Preferred Stock outstanding on the Issue Date (and any
shares of Convertible Preferred Stock issued as payment of a dividend on
Convertible Preferred Stock) shall be deemed not to constitute Disqualified
Stock.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Exchange Date" means the date on which the Securities are
exchanged for the Exchangeable Preferred Stock.

                  "Exchange Debentures" means the debentures issuable pursuant
to the Exchange Indenture.

                  "Exchange Offer Registration Statement" means a registration
statement filed with the SEC with respect to a Registered Exchange Offer.

                  "Exchange Indenture" means the Indenture dated as of August
15, 1997, by and between the Company and The Bank of New York, as Trustee,
governing the Exchange Debentures.

                  "Excluded PSINet Transactions" means any transaction between
the Company or any of its Restricted Subsidiaries with PSINet Inc., so long as
at the time of engaging in, or contracting to engage in, such transaction, the
Company and its Subsidiaries have not acquired shares of PSINet Common Stock
other than the PSINet Shares.


<PAGE>   137
                                                                              58

                  "GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Certificate of Designation shall be
computed in conformity with GAAP.

                  "GE Capital Communications" means GE Capital Communications
Services Corporation.

                  "Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such Person or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.

                  "Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.

                  "Holder" means the Person in whose name a share of
Exchangeable Preferred Stock is registered on the Transfer Agent's books.


<PAGE>   138
                                                                              59

                  "Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of principal
of a non-interest bearing or other discount security shall be deemed the
Incurrence of Indebtedness.

                  "Indebtedness" means, with respect to any Person
on any date of determination (without duplication):

                  (i) the principal in respect of (A) indebtedness of such
         Person for money borrowed and (B) indebtedness evidenced by securities,
         debentures, bonds or other similar instruments for the payment of which
         such Person is responsible or liable, including, in each case, any
         premium on such indebtedness to the extent such premium has become due
         and payable;

                  (ii) all Capital Lease Obligations of such Person and all
         Attributable Debt in respect of Sale/Leaseback Transactions entered
         into by such Person;

                  (iii) all obligations of such Person issued or assumed as the
         deferred purchase price of property, and all obligations of such Person
         under any title retention agreement (but excluding trade accounts
         payable arising in the ordinary course of business);

                  (iv) all obligations of such Person for the reimbursement of
         any obligor on any letter of credit, banker's acceptance or similar
         credit transaction (other than obligations with respect to letters of
         credit securing obligations (other than obligations described in
         clauses (i) through (iii) above) entered into in the ordinary course of
         business of such Person to the extent such letters of credit are not
         drawn upon or, if and to the extent drawn upon, such drawing is
         reimbursed no later than the tenth Business Day following payment on
         the letter of credit);


<PAGE>   139
                                                                              60

                  (v) the amount of all obligations of such Person with respect
         to the redemption, repayment or other repurchase of any Disqualified
         Stock or, with respect to any Subsidiary of such Person, the
         liquidation preference with respect to, any Preferred Stock (but
         excluding, in each case, any accrued dividends) of such Subsidiary
         (which will constitute Indebtedness Incurred by such Subsidiary and not
         Indebtedness Incurred by such Person);

                  (vi) all obligations of the type referred to in clauses (i)
         through (v) of other Persons and all dividends of other Persons for the
         payment of which, in either case, such Person is responsible or liable,
         directly or indirectly, as obligor, guarantor or otherwise, including
         by means of any Guarantee;

                  (vii) all obligations of the type referred to in clauses (i)
         through (vi) of other Persons secured by any Lien on any property or
         asset of such Person (whether or not such obligation is assumed by such
         Person), the amount of such obligation being deemed to be the lesser of
         the value of such property or assets or the amount of the obligation so
         secured; and

                  (viii) to the extent not otherwise included in this
         definition, Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.

                  "Indebtedness to Operating Cash Flow Ratio" means, as of any
date of determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of a Person and its Restricted Subsidiaries as of such
date on a consolidated basis, plus the aggregate liquidation preference of all
outstanding Preferred Stock of the Restricted Subsidiaries of such Person as of
such date (excluding any such Preferred Stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person), plus the 


<PAGE>   140
                                                                              61

aggregate liquidation preference or redemption amount of all Disqualified Stock
of such Person (excluding any Disqualified Stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person) as of such date to (b) Operating
Cash Flow of such Person and its Restricted Subsidiaries for the most recent
four-quarter period for which internal financial statements are available,
determined on a pro forma basis after giving effect to all acquisitions and
dispositions of assets (notwithstanding clause (ii) of the definition of
"Consolidated Net Income" and including Asset Swaps) made by such Person and its
Restricted Subsidiaries since the beginning of such four-quarter period through
such date as if such acquisitions and dispositions had occurred at the beginning
of such four-quarter period through such date as if such acquisitions and
dispositions had occurred at the beginning of such four-quarter period.

                  "Independent Financial Advisor" means a United States
investment banking firm of national standing in the United States which does
not, and whose directors, officers and employees or affiliates do not, have a
direct or indirect financial interest in the Company.

                  "Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations in
interest rates.

                  "Investment" in any Person means any direct or indirect
advance, loan or any other extensions of credit (other than advances, loans or
other extensions of credit to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender and other
than commission, travel, relocation and similar advances to directors, officers
and employees made in the ordinary course of business) (including by way of
Guarantee or similar arrangement) or capital contribution to any Person (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of such Person), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar 


<PAGE>   141
                                                                              62

instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and paragraph
(l)(iii), (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors;
provided further, however, that an acquisition of assets, Capital Stock or other
securities by the Company or any of its Restricted Subsidiaries shall not be
deemed to be an Investment to the extent the consideration for such Capital
Stock or other securities consists of common equity securities of the Company.

                  "IRU" means an indefeasible right to use fiber or
telecommunications capacity.

                  "IRU Agreement" means an agreement pursuant to which an
interest in an IRU is sold or leased or otherwise transferred.

                  "Issue Date" means the date on which the Initial Exchangeable
Preferred Stock is originally issued.

                  "IXC Internet Capital Contribution" means the contribution by
the Company to IXC Internet Services, Inc. (so long as IXC Internet Services, 
Inc. is a Subsidiary) of $10 million in cash, an IRU in two excess fibers in the
Company's network (including two fibers in network routes to be built or 
acquired in the future) and space in certain points of 


<PAGE>   142
                                                                              63

presence, in each case as contemplated in connection with the transactions
contemplated by the PSINet Agreement.

                  "Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York.

                  "Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).

                  "Moody's" means Moody's Investors Service, Inc. or its
successor.

                  "Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.

                  "Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.

                  "Officers' Certificate" means a certificate signed by two
Officers.

                  "Operating Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period, (A) plus
(i) extraordinary net losses, net losses on sales of assets outside the ordinary
course of business during such period and noncash charges relating to
write-downs of property and equipment, to the extent such losses and charges
were deducted in computing such Consolidated Net Income, plus (ii) provision for
taxes based on income or profits, to the extent such provision for taxes was
included in computing such Consolidated Net Income, and any provision for taxes
utilized in computing the net losses under clause (i) hereof, plus (iii)
Consolidated Interest Expense of such Person and its 


<PAGE>   143
                                                                              64

Restricted Subsidiaries for such period, to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other noncash charges (excluding any such noncash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other noncash charges were
deducted in computing such Consolidated Net Income and (B) less all noncash
income for such period (excluding any such noncash income to the extent it
represents an accrual of cash income in any future period or amortization of
cash income received in a period). Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other noncash charges of, a Restricted Subsidiary of the referent Person shall
be added to Consolidated Net Income to compute Operating Cash Flow only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person for such period and only if and to the extent such Restricted Subsidiary
could have paid such amount at the date of determination as a dividend or
similar distribution to the referent Person by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.

                  "Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.

                  "Permitted Business" means (i) any communications business and
(ii) any business reasonably related or ancillary thereto.


<PAGE>   144
                                                                              65

                  "Permitted Holders" means the officers and directors of the
Company, and Trustees of General Electric Pension Trust, Grumman Hill
Associates, Inc. and Grumman Hill Investments, L.P., and each of their
respective officers and directors and their Related Parties.

                  "Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary business is
a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to
the Company or any Restricted Subsidiary if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel, commission and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii) the
IXC Internet Capital Contribution; (ix) the Investment in PSINet Inc.
contemplated by the PSINet Agreement, including the Investment in shares of
PSINet Common Stock purchased pursuant to the PSINet Agreement and the $240
million value protection right provided for by the PSINet Agreement; and (x)
other Investments in any Person that in the aggregate do not exceed $30 million
(without regard to increases and decreases in the value of the Investments).


<PAGE>   145
                                                                              66

                  "Permitted PSINet Non-Recourse Debt" means Indebtedness where
(i) the holders of such Indebtedness expressly agree that they will look solely
to the shares of PSINet Common Stock held by the issuer of such Indebtedness for
payment on or in respect of such Indebtedness and expressly waive any recourse
they may have on or with respect to such Indebtedness to the Company or any
Restricted Subsidiary, (ii) neither the Company nor any Restricted Subsidiary
(A) provides credit support (whether or not in the form of an undertaking,
agreement or instrument which would constitute Indebtedness), other than the
pledge by the issuer of such Indebtedness of shares of PSINet Common Stock, or
(B) is directly or indirectly liable and (iii) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against the shares of PSINet Common Stock securing such
Indebtedness) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.

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

                  "Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.

                  "principal" of any debt security means the principal of the
Security plus the premium, if any, payable on the Security which is due or
overdue or is to become due at the relevant time.


<PAGE>   146
                                                                              67

                  "PSINet Agreement" means the IRU and Stock Purchase Agreement
dated as of July 22, 1997, between IXC Internet Services, Inc. and PSINet Inc.
and the related documents executed in connection therewith, in each case as in
effect as of the Issue Date.

                  "PSINet Common Stock" means the common stock of PSINet, Inc.

                  "PSINet Shares" means the shares of PSINet Common Stock
acquired by the Company or any Subsidiary pursuant to the terms of the PSINet
Agreement.

                  "Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.

                  "Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.

                  "Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with this Certificate of Designation,
including Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that (i) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced, (ii) such
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus accrued interest on the principal
amount of Indebtedness Refinanced, and fees and 


<PAGE>   147
                                                                              68

expenses, including any premium and defeasance costs) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company (unless such Subsidiary was obligated under, or a guarantor of, the
Indebtedness being Refinanced) or (y) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.

                  "Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to holders of Initial
Exchangeable Preferred Stock to issue and deliver to such holders, in exchange
for the Initial Exchangeable Preferred Stock, a like aggregate liquidation
preference of Series B Stock registered under the Securities Act.

                  "Registration Rights Agreement" means the Registration Rights
Agreement dated August 14, 1997, among the Company and Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley and Co. Incorporated.

                  "Related Business" means any Permitted Business, the
businesses conducted by the Company and the Restricted Subsidiaries on the Issue
Date and any business related, ancillary or complementary to such businesses
conducted by the Company and the Restricted Subsidiaries on the Issue Date.

                  "Related Party" with respect to any Permitted Holder means (i)
any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or (ii)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Permitted Holder or such other
Persons referred to in the immediately preceding clause (i).


<PAGE>   148
                                                                              69

                  "Representative" means any trustee, agent or representative
(if any) for an issue of Senior Indebtedness of the Company.

                  "Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of, in the case of the Company, any Junior Stock or, in the case of
any Restricted Subsidiary, any Capital Stock (including any payment in
connection with any merger or consolidation involving such Person) or similar
payment to the direct or indirect holders of such Stock (other than dividends or
distributions payable solely in Junior Stock (other than Disqualified Stock) and
dividends or distributions to the extent paid to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Junior Stock of the Company or
Capital Stock of any direct or indirect parent of the Company or (iii) the
making of any Investment in any Person (other than a Permitted Investment).

                  "Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.

                  "Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.

                  "SEC" means the Securities and Exchange Commission.

                  "Secured Indebtedness" means any Indebtedness of
the Company secured by a Lien.

                  "Senior Notes" means the Company's 12 1/2% Senior
Notes Due 2005.


<PAGE>   149
                                                                              70

                  "Series 3 Preferred Stock" means the Company's 10%
Junior Series 3 Cumulative Redeemable Preferred Stock.

                  "Shelf Registration Statement" means a registration statement
filed with the SEC covering resales of Exchangeable Preferred Stock.

                  "Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.

                  "Standard & Poor's" means Standard & Poor's Ratings Group, or
its successor.

                  "Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

                  "Subordinated Indebtedness" means the Exchange Debentures and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Exchange Debentures in right of
payment and is not subordinated by its terms to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness (as defined in the
Exchange Debenture).

                  "Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Exchange Debentures pursuant to
a written agreement to that effect.

                  "Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the 


<PAGE>   150
                                                                              71

occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.

                  "Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or any
agency thereof, (ii) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard 


<PAGE>   151
                                                                              72

& Poor's Ratings Group or "A" by Moody's Investors Service, Inc.

                  "Trustee" means the party named as such in the Exchange
Indenture until a successor replaces it and, thereafter, means the successor.

                  "Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.

                  "Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.

                  "Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien (excluding Liens incurred to secure obligations in respect of an IRU) on
any property of, the Company or any Restricted Subsidiary; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, the Investment
resulting from such designation would be permitted under paragraph (l)(iii). The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
paragraph (l)(iii)(A) and (y) no Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.


<PAGE>   152
                                                                              73

                  "U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.

                  "Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.

                  "Wholly Owned Restricted Subsidiary" means a Restricted
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or one or more Wholly Owned Subsidiaries.


<PAGE>   153
                  IN WITNESS WHEREOF, said IXC Communications, Inc., has caused
this Certificate of Designation to be signed by James F. Guthrie, its
Chief Financial Officer and Executive Vice President, this 19th day of 
August, 1997.


                                       IXC COMMUNICATIONS, INC.,

                                       By: /s/ JAMES F. GUTHRIE
                                           ----------------------------------
                                           Name: James F. Guthrie
                                           Title: Chief Financial Officer and
                                                  Executive Vice President



<PAGE>   154

                                                                       EXHIBIT A


                      FORM OF EXCHANGEABLE PREFERRED STOCK


                                FACE OF SECURITY

                  [THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS SECURITY MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (v) TO THE
ISSUER, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]*

                  [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.]*/


--------
 * Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.


<PAGE>   155
                                                                               2

                  [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OF PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.]**

                  [TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**


Certificate Number                        Number of Shares of Convertible
                                                          Preferred Stock
[ ]                                                                   [ ]

                                                           CUSIP NO.: [ ]


              12 1/2% Junior Exchangeable Preferred Stock Due 2009
                 (par value $0.01) (liquidation preference $1000
                                   per share)

                                       of

                            IXC Communications, Inc.


                  IXC Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that [ ] (the


--------
 ** Subject to removal if not a global security.


<PAGE>   156
                                                                               3

"Holder") is the registered owner of fully paid and non-assessable preferred
securities of the Company designated the 12 1/2% [Series B] Junior Exchangeable
Preferred Stock Due 2009 (par value $0.01) (liquidation preference $1000 per
share) (the "Exchangeable Preferred Stock"). The shares of Exchangeable
Preferred Stock are transferable on the books and records of the Registrar, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Exchangeable
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated August [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The ompany will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.

                  Reference is hereby made to select provisions of the
Exchangeable Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designation, which select provisions and the Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.

                  Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.

                  Unless the Transfer Agent's Certificate of Authentication
hereon has been properly executed, these shares of Exchangeable Preferred Stock
shall not be entitled to any benefit under the Certificate of Designation or be
valid or obligatory for any purpose.


                  IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].


                                                IXC COMMUNICATIONS, INC.,


<PAGE>   157
                                                                               4

                                       By:
                                          ----------------------------------
                                       Name:
                                       Title:

[Seal]

                                       By:
                                          ----------------------------------
                                       Name:
                                       Title:


<PAGE>   158
                                                                               5

                 TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Exchangeable Preferred Stock referred to in
the within mentioned Certificate of Designation.

Dated: [ ], [ ]

                                       THE BANK OF NEW YORK
                                         as Transfer Agent,


                                       By:
                                          ----------------------------------
                                       Authorized Signatory


<PAGE>   159
                                                                               6

                               REVERSE OF SECURITY


                  Dividends on each share of Exchangeable Preferred Stock shall
be payable at a rate per annum set forth in the face hereof or as provided in
the Certificate of Designation (including Additional Dividends).

                  The shares of Exchangeable Preferred Stock shall be redeemable
as provided in the Certificate of Designation. The shares of Exchangeable
Preferred Stock shall be exchangeable at the Company's option into the Company's
12-1/2% Subordinated Exchange Debentures Due 2009 in the manner and according to
the terms set forth in the Certificate of Designation.

                  As required under Delaware law, the Company shall furnish to
any Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.


<PAGE>   160
                                                                               7

                                   ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Exchangeable Preferred Stock evidenced hereby to:
                                                           ---------------------

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

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

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


(Insert assignee's social security or tax identification number)

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

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

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

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

--------------------------------------------------------------------------------
(Insert address and zip code of assignee)

and irrevocably appoints:

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

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

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agent to transfer the shares of Exchangeable Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.

Date:
     -----------------------

Signature:
          ---------------------------------
(Sign exactly as your name appears on the other side of this Exchangeable
Preferred Stock Certificate)

Signature Guarantee:***
                    --- ---------------------------------------------


------------------
          *** (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature 



<PAGE>   161
                                                                               8



------------
guarantee program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.)


<PAGE>   162

                                                                       EXHIBIT B


                  CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
            REGISTRATION OF TRANSFER OF EXCHANGEABLE PREFERRED STOCK

Re:      12 1/2% Junior Exchangeable Preferred Stock Due 2009 (the "Exchangeable
         Preferred Stock") of IXC Communications, Inc. (the "Company")

                  This Certificate relates to ____ shares of Exchangeable
Preferred Stock held in [ ] */ book-entry or [ ] */ definitive form by
_______________ (the "Transferor").

The Transferor*:

         [ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Exchangeable Preferred Stock held by
the depository shares of Exchangeable Preferred Stock in definitive, registered
form equal to its beneficial interest in such Exchangeable Preferred Stock (or
the portion thereof indicated above); or

         [ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Exchangeable Preferred Stock.

                  In connection with such request and in respect of such
Exchangeable Preferred Stock, the Transferor does hereby certify that the
Transferor is familiar with the Certificate of Designation relating to the above
captioned Exchangeable Preferred Stock and that the transfer of this
Exchangeable Preferred Stock does not require registration under the Securities
Act of 1933 (the "Securities Act") because */:

         [ ] Such Exchangeable Preferred Stock is being acquired for the
Transferor's own account without transfer.

         [ ] Such Exchangeable Preferred Stock is being transferred to the
Company.


-------- * /Please check applicable box.

<PAGE>   163
                                                                               2

         [ ] Such Exchangeable Preferred Stock is being transferred (i) to a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act), in reliance on Rule 144A or (ii) pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and, in the
case of clause (ii), based on an opinion of counsel if the Company so requests
and together with a certification in substantially the form of Exhibit C to the
Certificate of Designation).

         [ ] Such Exchangeable Preferred Stock is being transferred in reliance
on and in compliance with another exemption from the registration requirements
of the Securities Act (and based on an opinion of counsel if the Company so
requests).



                                           [INSERT NAME OF TRANSFEROR]

                                        
Date:                                   by
      ------------------                  -----------------------------------

<PAGE>   164

                                                                       EXHIBIT C


                     FORM OF CERTIFICATE TO BE DELIVERED IN
               CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S


                                                                ----------, ----

The Bank of New York
Attention: [ ]


Ladies and Gentlemen:

                  In connection with our proposed sale of certain 12 1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Exchangeable Preferred Stock") of
IXC Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:

                  (i) the offer of the Exchangeable Preferred Stock was not made
         to a person in the United States;

                  (ii) at the time the buy order was originated, the transferee
         was outside the United States or we and any person acting on our behalf
         reasonably believed that the transferee was outside the United States;

                  (iii) no directed selling efforts have been made by us in the
         United States in contravention of the requirements of Rule 903(b) or
         Rule 904(b) of Regulation S under the Securities Act of 1933 (the
         "Securities Act"), as applicable; and

                  (iv) the transaction is not part of a plan or scheme by us to
         evade the registration requirements of the Securities Act.

                  You and the Company are entitled to rely upon this letter and
you are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with 


<PAGE>   165
                                                                               4

respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.


                                Very truly yours,


                                ---------------------------------------------
                                (Name of Transferor)

                                by 
                                   ------------------------------------------
                                   Name:
                                   Title:
                                   Address: