Document:

<PAGE>   1
Exhibit 4.12

                    NINTH AMENDED AND RESTATED REVOLVING NOTE

$ 40,000,000                                                    December , 1999

     FOR VALUE RECEIVED, USA TRUCK, INC., a corporation organized and existing
under the laws of the State of Delaware ("Borrower") I hereby promises to pay to
the order of FIRST AMERICAN NATIONAL BANK, operating as DEPOSIT GUARANTY
NATIONAL BANK ("Lender") the principal sum of FORTY MILLION AND NO/100 DOLLARS
($40,000,000.00) or, if less, the outstanding aggregate principal amount of all
Revolving Loans (as defined in the Revolving Credit Agreement referred to below)
made by Lender to Borrower, on the Revolving Loan Commitment Termination Date,
(as defined in the Revolving Credit Agreement), and to pay interest on the
unpaid principal balance of each Revolving Loan from the date of such Revolving
Loan, until said principal amount is paid in full, at the times and at the rate
or rates specified in the Revolving Credit Agreement. During the term of this
Revolving Note the Borrower may borrow, repay and reborrow hereunder.

     This Note shall be deemed to be a contract made under the law of the State
of Mississippi and for all purposes shall be governed by and construed in
accordance with the laws of the State of Mississippi.

     Borrower expressly waives any presentment, demand, protest or notice of any
kind in connection with this Note, now or hereafter, required by applicable law.

     Borrower agrees to pay and save Lender harmless from and against liability
for payment of all expenses (including, but not limited to, attorneys, fees and
costs) arising in connection with the enforcement by Lender of its rights under
this Note.

     Payments of principal and interest are to be made in immediately available
funds to, First American National Bank, operating as Deposit Guaranty National
Bank, at its main office in Jackson, Mississippi, in lawful money of the United
States of America.

     This Note is the Revolving Note issued pursuant to that certain Fourth
Amended and Restated Revolving Credit Agreement dated as of December 30, 1992,
as amended July 21, 1993, December 13, 1993, December 22, 1994, December 28,
1995, December 30, 1996, December 30, 1997, October 30, 1998, October 28, 1999
and of even date herewith, between Borrower and Lender (as amended, modified and
restated from time to time, the "Revolving Credit Agreement") and is entitled to
the benefits and subject to the terms thereof. This Note constitutes an
amendment, extension and restatement of that certain Fourth Amended and Restated
Revolving Note from Borrower to Lender dated December 30, 1992 in the original
stated principal amount of $12,000,000. This Note is subject to prepayment on
the terms and in the manner set forth in the Revolving Credit Agreement, and
this Note may be declared due and payable prior to its date of maturity in
accordance with the terms thereof. The Revolving Credit Agreement also provides
for the making by Lender to Borrower of revolving loan advance from time to time
in an amount not to exceed the U. S. Dollar amount above written and contains
provisions for the acceleration of the maturity hereof upon the terms and
conditions therein specified. This Note is subject to conversion to a term note
in accordance with the terms and provisions of the Revolving Credit Agreement.

     "Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions in the State of Mississippi are authorized to
close.

                                       USA TRUCK, INC., a Delaware Corporation

                                       By: Jerry D. Orler
                                           -------------------------------------
                                       Title: CFO & Secretary
                                              ----------------------------------

                                       1<PAGE>   1

Exhibit 4.17

                            Banc One Leasing Corporation        Tel 800 334 5422
                            1111 Polaris Parkway, Suite A3
                            Columbus OH  43240

Jerry Orler                                                     October 25, 1999
Chief Financial Officer
USA Truck, Inc.
3200 Industrial Park
Van Buren, AR  72956

Dear Mr. Orler:

We are pleased to confirm that Banc One Leasing Corporation (LESSOR) has
committed to an additional Lease Line of Credit not to exceed $6,000,000.00 to
USA Truck, Inc. (LESSEE) for the type(s) of equipment as set forth below:

                 New and Used Freightliner and Navistar Tractors

This Commitment will expire October 12, 2000, subject to the following
conditions:

     1.   The amount advanced shall not exceed the amount committed.

     2.   In LESSOR'S sole judgement, there shall not have been a material
          adverse change in the financial condition or business of LESSEE or any
          guarantor.

     3.   There shall not have been a change in the Internal Revenue Code of
          1986 or any regulation thereunder, which in LESSOR'S sole judgement
          would adversely affect the economics to LESSOR of the transaction.

     4.   At the end of each fiscal quarter of LESSEE, LESSEE'S tangible net
          worth shall be no less than $18,553,000 plus an amount equal to 50% of
          its annual after tax profits for each fiscal year subsequent to March
          31, 1993. All financial covenant terms and definitions per generally
          accepted accounting principles.

     5.   Used tractors will be subject to LESSOR approval.

     6.   Successful acquisition of CARCO Carrier Corporation.

                                       1
<PAGE>   2

USA Truck, Inc.
October 25, 1999
Page 2

If the Lease Line of Credit covered by this Commitment is not funded by October
12, 2000, this Commitment shall expire.

The details of the particular Equipment Schedules funded under this Lease Line
of Credit may vary, as LESSOR may deem necessary in its sole judgement on such
items as:

1.   Term of transaction

2.   Rental rate factor

3.   Documentation required

The Commitment is subject to the terms and conditions outlined herein, contained
in each Equipment Schedule, and in the Master Lease Agreement. By execution of
this letter, you will be agreeing to these terms. If this Commitment Letter is
not received within 15 days of the above date, this Commitment is withdrawn.

On behalf of Banc One Leasing Corporation, please accept my thanks for the
opportunity to be of service. Should you have any questions, please contact
Shane Taylor at (214) 290-2304 or David Hicks at (615) 369-0650.

Sincerely,

/s/Donald C. Boodey

Donald C.Boodey
Assistant Vice President

Acknowledged and agreed this 25 day of October, 1999

USA Truck, Inc.
-----------------------------------
LESSEE

By: /s/ Jerry D. Orler
   --------------------------------
Title: CFO & SEC
      -----------------------------

                                       2<PAGE>   1

                                                                    EXHIBIT 4.2

                    CERTIFICATE OF DESIGNATION OF THE POWERS
                    PREFERENCES AND RELATIVE, PARTICIPATING,
                  OPTIONAL AND OTHER SPECIAL RIGHTS OF 13 1/2%
                   SENIOR PAYMENT-IN-KIND PREFERRED STOCK, AND
              QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

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

                  Source Media, Inc. (the "Corporation"), 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
Certificate of Incorporation, as amended (hereinafter referred to as the
"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, 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 13 1/2% Senior Payment-In-Kind Preferred Stock, par value $.01 per
         share, with a stated value of $25.00 per share, consisting of
         1,000,000 shares, having the designations, preferences, relative,
         participating, optional and other special rights and the
         qualifications, limitations and restrictions thereof that are set
         forth in the 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 Corporation a class of Preferred
Stock designated as the "13 1/2% Senior PIK Preferred Stock due 2007." The
number of shares constituting such class shall be 1,000,000 and are referred to
herein as the "Senior Preferred Stock." 800,000 shares of Senior Preferred
Stock shall be initially issued with an additional 200,000 shares reserved for
issuance in accordance with paragraph (c)(i) hereof. The liquidation preference
of the Senior Preferred Stock shall be $25.00 per share.

         (b) Liquidation Preference. The Senior Preferred Stock shall, with
respect to dividends and distributions upon liquidation, winding-up and
dissolution of the Corporation, rank senior to all classes of Common Stock of
the Corporation and to each other class of Capital Stock of the Corporation or
series of Preferred Stock of the Corporation hereafter created other than as
permitted in the following sentence (collectively, referred to as "Junior
Stock"). The Corporation may not issue any class or series of Capital Stock
that ranks (x) on a parity with the Senior Preferred

<PAGE>   2

Stock as to dividends and distributions upon liquidation, winding-up and
dissolution (collectively, referred to as "Parity Stock") that was not approved
by the Holders in accordance with paragraph (f)(ii)(A) hereof (to the extent
such approval is required) or (y) senior to the Senior Preferred Stock as to
dividends and distributions upon liquidation, winding-up and dissolution of the
Corporation (collectively referred to as "Senior Stock") that was not approved
by the Holders in accordance with paragraph (f)(ii)(B) hereof.

         (c) Dividends. (i) Beginning on the Issue Date, the Holders of the
outstanding shares of Senior Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends (the "Regular Dividends") on each share of Senior
Preferred Stock, at a rate per annum equal to 13 1/2% of the liquidation
preference per share of the Senior Preferred Stock, payable quarterly; provided
that so long as a Triggering Event shall have occurred and be continuing,
additional dividends will accumulate on the Senior Preferred Stock at a rate
per annum of 2% of the liquidation preference per share of the Senior Preferred
Stock, payable quarterly; and provided further, that the Regular Dividend rate
per annum is subject to increase as provided for in clause (vi) below. All
Regular Dividends shall be cumulative, whether or not earned or declared, on a
daily basis from the date of issuance of the Senior Preferred Stock and shall
be payable quarterly in arrears on each Regular Dividend Payment Date,
commencing on the first Regular Dividend Payment Date after the Issue Date.
Regular Dividends (including Additional Dividends, if any) accumulating on or
prior to November 1, 2002 may be paid, at the Corporation's option, either in
cash or by the issuance of additional shares of Senior Preferred Stock
(including fractional shares) having an aggregate liquidation preference equal
to the amount of such Regular Dividends (but not less than $1.00). In the event
that on or prior to November 1, 2002 Regular Dividends are declared and paid
through the issuance of additional shares of Senior Preferred Stock as provided
in the previous sentence, such Regular Dividends shall be deemed paid in full
and shall not accumulate. Regular Dividends accumulating after November 1, 2002
must be paid in cash. Each Regular Dividend shall be payable, out of funds
legally available therefor, to the Holders of record as they appear on the
stock books of the Corporation on the Regular Dividend Record Date immediately
preceding the related Regular Dividend Payment Date.

         (ii) All Regular Dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.

         (iii) Regular Dividends accruing after November 1, 2002 on the Senior
Preferred Stock for any past Dividend Period and Regular Dividends in
connection with any optional redemption pursuant to paragraph (e)(i) 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 forty-five (45)
days prior to the payment thereof, as may be fixed by the Board of Directors of
the Corporation.

         (iv) So long as any share of the Senior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for payment
any dividend on any Junior Stock or Parity Stock or make any payment on account
of, or set apart for payment money for a sinking or

                                       -2-
<PAGE>   3

other similar fund for, the purchase, redemption or other retirement of, any
Junior Stock or Parity Stock or any warrants, rights, calls or options
exercisable for or convertible into any Junior Stock or Parity Stock whether in
cash, obligations or shares of the Corporation or other property, and shall not
permit any corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any Junior Stock or Parity Stock or any such
warrants, rights, calls or options unless full cumulative dividends determined
in accordance herewith on the Senior Preferred Stock have been paid (or are
deemed paid) in full.

         (v) Regular Dividends payable on the Senior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period for
which payable. The amount of Additional Dividends will be determined consistent
with the preceding sentence and by multiplying the applicable Additional
Dividends by a fraction, the numerator of which is the number of days (not to
exceed 90) such rate was applicable during any Dividend Period and the
denominator of which is 360.

         (vi) Additional Dividends shall become due and payable with respect to
the Senior Preferred Stock as set forth in the Registration Rights Agreement.

         (d) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders of shares of Senior Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the liquidation
preference for each share outstanding, plus, without duplication, (x) an amount
in cash equal to accumulated and unpaid Regular Dividends and Additional
Dividends thereon to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated Regular Dividend for the period from
the last Dividend Payment Date to the date fixed for liquidation, dissolution
or winding up) before any distribution is made on Junior Stock, including,
without limitation, Common Stock of the Corporation. Except as provided in the
preceding sentence, Holders of Senior Preferred Stock shall not be entitled to
any distribution in the event of any liquidation, dissolution or winding up of
the affairs of the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the Holders of
outstanding shares of the Senior Preferred Stock and all Parity Stock, then the
holders of all such shares shall share equally and ratably in such distribution
of assets in proportion to the full liquidation preference to which each is
entitled until such preferences are paid in full, and then in proportion to
their respective amounts of accumulated but unpaid dividends.

         (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 Corporation nor the consolidation or merger of the Corporation with or into
one or more entities shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation.

                                        -3-
<PAGE>   4

         (e) Redemption.

         (i) Optional Redemption. Up to 35% of the Senior Preferred Stock will
be redeemable, at the Corporation's option, at any time or in part from time to
time, on or prior to November 1, 2000 out of the Net Cash Proceeds of one or
more Equity Offerings by the Corporation so long as there is a Public Market as
at the time of such redemption, at a redemption price equal to 113.50% of the
liquidation preference thereof, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends (including, but not limited to,
an amount in cash equal to a prorated dividend for the period from the
immediately preceding Dividend Payment Date to the redemption date). After
November 1, 2000 and prior to November 1, 2002, the Senior Preferred Stock is
not redeemable. On or after November 1, 2002, the Senior Preferred Stock will
be redeemable, at the Corporation's option, in whole at any time or in part
from time to time, at the following redemption prices (expressed as a
percentage of liquidation preference) if redeemed during the twelve-month
period commencing on November 1 of the applicable year set forth below plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends (including, but not limited to, an amount in cash equal to a prorated
dividend for the period from the immediately preceding dividend payment date to
the Redemption Date):

<TABLE>
<CAPTION>
                  Year              Percentage
                  ----              ----------
                  <S>               <C>
                  2002                      106.75%
                  2003                      104.50%
                  2004                      102.25%
         2005 and thereafter                100.000%
</TABLE>

                  (ii) Mandatory Redemption. The Senior Preferred Stock will be
subject to mandatory redemption, subject to contractual and other restrictions
with respect thereto and to the legal availability of funds therefor, in the
manner provided in paragraph (e)(iii) hereof, in whole on November 1, 2007 at a
redemption price equal to 100% of the then effective liquidation preference
thereof, plus, without duplication, all accumulated and unpaid dividends to the
date of redemption.

                  (iii) Procedures to Redemption. (A) At least thirty (30) days
and not more than sixty (60) days prior to the date fixed for any redemption of
the Senior Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Senior Preferred Stock at such
Holder's address as it appears on the stock books of the Corporation, provided
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 Senior Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Corporation
has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:

                                       -4-
<PAGE>   5

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

                  (2) the redemption price;

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

                  (4) the date fixed for redemption;

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

                  (6) that dividends on the shares of the Senior Preferred
         Stock to be redeemed shall cease to accumulate on such Redemption Date
         unless the Corporation defaults in the payment of the redemption
         price.

         (B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior Preferred Stock
to the Corporation, duly endorsed (or otherwise in proper form for transfer, as
determined by the Corporation), in the manner and at the place designated in
the Redemption Notice, and on the Redemption Date the full redemption price 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.

         (C) On and after the Redemption Date, unless the Corporation fails to
make payment in full of the applicable redemption price, dividends on the
Senior Preferred Stock called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the redemption price; provided, however, that if a notice of redemption
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in cash in respect of all
dividends that will accumulate to the Redemption Date) shall have been
irrevocably deposited in trust for the equal and ratable benefit for the
Holders of the shares to be redeemed, then, at the close of business on the day
on which such funds are segregated and set aside, the Holders of the shares to
be redeemed shall cease to be stockholders of the Corporation and shall be
entitled only to receive the redemption price.

         (f) Voting Rights. (i) The Holders of Senior Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall

                                       -5-
<PAGE>   6

not be entitled or permitted to vote on any matter required or permitted to be
voted upon by the stockholders of the corporation.

                  (ii) (A) So long as any shares of the Senior Preferred Stock
are outstanding, the Corporation shall not authorize or issue any class of
Parity Stock without the affirmative vote or consent of Holders of at least a
majority of the then outstanding shares of Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange 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; provided, however,
that no such vote or consent shall be necessary in connection with (i) the
authorization and issuance of additional shares of Senior Preferred Stock
pursuant to the provisions of paragraph (c) of this Certificate of Designation
or (ii) the authorization and issuance of that number of shares of Exchange
Preferred Stock and/or the Private Exchange Preferred Stock not in excess of
1,712,000 shares less the sum of (x) that number of shares of Senior Preferred
Stock not exchanged in the Exchange Offer and/or Private Exchange Offer and (y)
that number of shares of Senior Preferred Stock payable as dividends on such
other shares of Senior Preferred Stock referred to in clause (x), assuming
accumulation of the maximum number of Additional Dividends payable and assuming
a Triggering Event had occurred and would remain continuing until November 1,
2007; and provided further, however, that the Corporation may issue Parity
Stock if after giving effect to such issuance the Consolidated Coverage Ratio
is greater than 1.7 to 1.

                  (B) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any class of Senior
Stock without the affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Senior Preferred Stock, Exchange Preferred Stock
and Private Exchange 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, unless after giving effect to the
issuance of any such preferred stock the Consolidated Coverage Ratio is greater
than 1.7 to 1.0.

                  (C) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or voting
rights of holders of shares of Senior Preferred Stock without the affirmative
vote or consent of Holders of at least a majority of the issued and outstanding
shares of (x) Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange 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, if a corresponding amendment is to be made to
the certificate of designation governing the Exchange Preferred Stock and
Private Exchange Stock which amendment, together with such amendment to this
Certificate of Designation, affects the Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange Preferred Stock identically in all
material respects (a "Corresponding Amendment") or (y) Senior 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, if such amendment is not a Corresponding

                                       -6-
<PAGE>   7

Amendment. It is understood that no affirmative vote or consent of Holders of
Senior Preferred Stock shall be required in connection with any amendment to
the Corporation's certificate of incorporation that increases the number of
authorized shares of Senior Preferred Stock so that there is a sufficient
number of authorized shares of Senior Preferred Stock to pay dividends on the
Senior Preferred Stock in additional shares of Preferred Stock.

                  Notwithstanding the foregoing clauses (B) and (C), any
Restricted Subsidiary of the Corporation may consolidate with, merge into or
transfer all or part of its properties and assets to the Corporation.

                  For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Corporation, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Corporation shall
be deemed to be the transfer of all or substantially all of the properties and
assets of the Corporation.

                  (iii) (A) If (i) after November 1, 2002, dividends on the
Senior Preferred Stock required to be paid in cash are in arrears and unpaid or
(ii) the Corporation is subject to a material default on its outstanding
indebtedness or (iii) the Corporation fails to redeem the Senior Preferred
Stock on or before November 1, 2007 or fails to discharge any redemption
obligation with respect to the Senior Preferred Stock or (iv) the Corporation
fails to make a Change of Control Offer if such an offer is required by the
provisions set forth under paragraph (h)(i) hereof or fails to purchase shares
of Senior Preferred Stock from holders who elect to have such shares purchased
pursuant to the Change of Control Offer or (v) a breach or violation of any of
the provisions described under paragraph (l) hereof occurs and the breach or
violation continues for a period of 60 days or more after the Corporation
receives notice thereof specifying the default from the holders of at least 25%
of the shares of Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange Preferred Stock then outstanding or (vi) the Corporation fails to pay
at the final stated maturity (giving effect to any extensions thereof) the
principal amount of any Indebtedness of the Corporation or any Restricted
Subsidiary of the Corporation, or the final stated maturity of any such
Indebtedness is accelerated, if the aggregate principal amount of such
Indebtedness, together with the aggregate principal amount of any other such
Indebtedness in default for failure to pay principal at the final stated
maturity (giving effect to any extensions thereof) or which has been
accelerated, aggregates $3,000,000 or more at any time, in each case, after a
20-day period during which such default shall not have been cured or such
acceleration rescinded or (vii) the Corporation (x) shall fail to amend its
certificate of incorporation to increase the number of shares of authorized
Senior Preferred Stock in an amount sufficient to allow it to pay dividends on
the Senior Preferred Stock in additional shares of Senior Preferred Stock and
(y) shall fail to pay such dividends, when due, in cash, then the number of
directors constituting the board of directors of the Corporation will be
adjusted to permit the holders of a majority of the then outstanding shares of
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange Preferred
Stock, voting together and as a class, to elect two directors to the board of
directors of the Corporation. Such voting rights will continue until such

                                       -7-
<PAGE>   8

time as, in the case of a dividend default, all accumulated and unpaid
dividends on the Senior Preferred Stock are paid in full in cash and, in all
other cases, any failure, breach or default giving rise to such voting rights
is remedied, cured or waived by the holders of at least a majority of the
shares of Senior Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock then outstanding, at which time the term of any directors
elected pursuant to the provisions of this paragraph shall terminate. Each such
event described in clauses (i) through (vii) above is referred to herein as a
"Triggering Event."

                  (B) The right of the Holders of Senior Preferred Stock,
Exchange Preferred Stock and Private Exchange Preferred Stock voting together
as a separate class to elect members of the Board of Directors as set forth in
subparagraph (f)(iii)(A) above shall continue until such time as (x) in the
event such right arises due to a failure to pay a dividend, all accumulated
dividends that are in arrears on the Senior Preferred Stock, Exchange Preferred
Stock and Private Exchange Preferred Stock are paid in full in cash; and (y) in
all other cases, the failure, breach or default giving rise to such Triggering
Event is remedied, cured or waived by the holders of at least a majority of the
shares of Senior Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock then outstanding, at which time (1) the special right of the
Holders of Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange Preferred Stock so to vote as a class for the election of directors
and (2) the term of office of the directors elected by the Holders of the
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange Preferred
Stock shall each terminate and the directors elected by the holders of Common
Stock or Capital Stock (other than the Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange Preferred Stock) shall constitute the
entire Board of Directors. At any time after voting power to elect directors
shall have become vested and be continuing in the Holders of Senior Preferred
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock pursuant
to paragraph (f)(iii) hereof, or if vacancies shall exist in the offices of
directors elected by the Holders of Senior Preferred Stock, Exchange Preferred
Stock and Private Exchange Preferred Stock, a proper officer of the Corporation
may, and upon the written request of the Holders of record of at least
twenty-five percent (25%) of the shares of Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange Preferred Stock then outstanding addressed
to the secretary of the Corporation shall, call a special meeting of the
Holders of the Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange Preferred Stock, for the purpose of electing directors which such
Holders are entitled to elect. If such meeting shall not be called by a proper
officer of the Corporation within twenty (20) days after personal service of
said written request upon the secretary of the Corporation, or within twenty
(20) days after mailing the same within the United States by certified mail,
addressed to the secretary of the Corporation at its principal executive
offices, then the Holders of record of at least twenty-five percent (25%) of
the outstanding shares of Senior Preferred Stock, Exchange Preferred Stock and
Private Exchange Preferred Stock may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such meeting may be
called by the Person so designated upon the notice required for the annual
meetings of stockholders of the Corporation and shall be held at the place for
holding the annual meetings of stockholders. Any Holder of Senior Preferred
Stock, Exchange

                                      -8-
<PAGE>   9

Preferred Stock or Private Exchange Preferred Stock so designated shall have,
and the Corporation shall provide, access to the lists of stockholders to be
called pursuant to the provisions hereof.

                  (C) At any meeting held for the purpose of electing directors
at which the Holders of Senior Preferred Stock, Exchange Preferred Stock and
Private Exchange Preferred Stock 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 of the outstanding shares of Senior
Preferred Stock, Exchange Preferred Stock and Private Exchange Preferred Stock
entitled to vote thereat shall be required to constitute a quorum of such
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange Preferred
Stock.

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

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

                  (g) Mergers and Consolidations. The Corporation shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of its assets to any Person, unless: (A) the resulting,
surviving or transferee Person (the "Successor Corporation") shall be a
corporation, partnership, trust or limited liability company organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia and the Successor Corporation (if not the Corporation)
shall expressly assume all the obligations of the Corporation under the Senior
Preferred Stock; (B) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor
Corporation or any Subsidiary of the Successor Corporation as a result of such
transaction as having been Incurred by the Successor Corporation or such
Restricted Subsidiary at the time of such transaction), no Triggering Event
shall have occurred and be continuing; (C) immediately after giving effect to
such transaction, the Successor Corporation would be able to incur at least an
additional $1.00 of Indebtedness pursuant to paragraph (l)(i); and (D) the
Consolidated Net Worth of the resulting, surviving, or transferee corporation
is not less than that of the Corporation immediately prior to the transaction;
(E) there has been delivered to the Transfer Agent an Opinion of Counsel to the
effect that holders of the Senior Preferred Stock will not recognize income,
gain or loss for U.S. Federal income tax purposes as a result of such
consolidation, merger, conveyance, transfer or lease and will be subject to
U.S. Federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such consolidation, merger,
conveyance, transfer or lease had not occurred; and (F) the Corporation shall
have delivered to the Transfer Agent an Officers' Certificate and an Opinion

                                      -9-
<PAGE>   10

of Counsel, each stating that such consolidation, merger or transfer comply
with this Certificate of Designation.

                  The Successor Corporation will succeed to, and be substituted
for, and may exercise every right and power of, the Corporation under the
Certificate of Designation, but in the case of a lease of all or substantially
all its assets, the Corporation will not be released from the obligation to pay
the liquidation preference or dividends on the Preferred Stock.

                  Notwithstanding the foregoing clauses (B) and (C), any
Restricted Subsidiary of the Corporation may consolidate with, merge into or
transfer all or part of its properties and assets to the Corporation.

                  (h) Change of Control. (i) Within 20 days of the occurrence
of a Change of Control, the Corporation shall make an offer to purchase (the
"Change of Control Offer") the outstanding Senior Preferred Stock at a purchase
price equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid Regular
Dividends (including Additional Dividends, if any) thereon (including an amount
in cash equal to a prorated Regular Dividend for the period from the
immediately preceding Regular Dividend Payment Date to the Change of Control
Payment Date) (such applicable purchase price being hereinafter referred to as
the "Change of Control Purchase Price") in accordance with the procedures set
forth in this paragraph (h).

                  (ii) Within 20 days of the occurrence of a Change of Control,
the Corporation also shall (i) cause a notice of the Change of Control to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each holder of Senior Preferred Stock, at the address appearing on
the stock books of the Corporation, a notice stating:

                  (1) that the Change of Control Offer is being made pursuant
         to this paragraph (h) and that all Senior Preferred Stock tendered
         will be accepted for payment, and otherwise subject to the terms and
         conditions set forth herein;

                  (2) the Change of Control Purchase Price and the purchase
         date (which shall be a Business Day no earlier than 20 Business Days
         from the date such notice is mailed (the "Change of Control Payment
         Date"));

                  (3) that any Senior Preferred Stock not tendered will
         continue to accumulate dividends;

                  (4) that, unless the Corporation defaults in the payment of
         the Change of Control Purchase Price, any Senior Preferred Stock
         accepted for payment pursuant to the Change of Control Offer shall
         cease to accumulate dividends after the Change of Control Payment
         Date;

                                      -10-
<PAGE>   11

                  (5) that holders accepting the offer to have their Senior
         Preferred Stock purchased pursuant to a Change of Control Offer will
         be required to surrender their certificates representing Senior
         Preferred Stock to the Corporation at the address specified in the
         notice prior to the close of business on the Business Day preceding
         the Change of Control Payment Date;

                  (6) that holders will be entitled to withdraw their
         acceptance if the Corporation receives, not later than the close of
         business on the third Business Day preceding the Change of Control
         Payment Date, a telegram, telex, facsimile transmission or letter
         setting forth the name of the holder, the number of shares of Senior
         Preferred Stock delivered for purchase, and a statement that such
         holder is withdrawing his election to have such Senior Preferred Stock
         purchased;

                  (7) that holders whose Senior Preferred Stock is being
         purchased only in part will be issued new certificates representing
         the number of shares of Senior Preferred Stock equal to the
         unpurchased portion of the certificates surrendered; and

                  (8) any other procedures that a holder must follow to accept
         a Change of Control Offer or effect withdrawal of such acceptance.

                  (iii) In the event that a Change of Control occurs and the
holders of Senior Preferred Stock exercise their right to require the
Corporation to purchase Senior Preferred Stock, if such purchase constitutes a
"tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time,
the Corporation will comply with the requirements of Rule 14e-1 as then in
effect with respect to such repurchase and, in the event of a conflict between
the requirements of the Exchange Act and this Certificate of Designation, the
provisions of the Exchange Act shall govern.

                  (iv) On the Change of Control Payment Date, the Corporation
shall (A) accept for payment the shares of Senior Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) promptly mail to the
Holders of shares so accepted the Change of Control Purchase Price therefor and
(C) cancel and retire each surrendered Certificate and execute a new Senior
Preferred Stock certificate equal to any unpurchased shares represented by a
certificate surrendered. Unless the Corporation defaults in the payment for the
shares of Senior Preferred Stock tendered pursuant to the Change of Control
Offer, dividends shall cease to accrue with respect to the shares of Senior
Preferred Stock tendered and all rights of Holders of such tendered shares
shall terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.

                  (v) Prior to the mailing of the notice referred to in
paragraph (g)(ii), but in any event within 20 days following the date on which
a Change of Control occurs, the Corporation covenants that, if the purchase of
the Senior Preferred Stock would violate or constitute a default or be
prohibited under the Indenture or any other instrument governing Indebtedness
outstanding at the time, then the Corporation will, to the extent needed to
permit such purchase of Senior Preferred

                                      -11-
<PAGE>   12

Stock, either (i) repay in full all Indebtedness under the Indenture or any
such other instrument, as the case may be, or (ii) obtain the requisite
consents under the Indenture or any such other instrument, as the case may be,
to permit the redemption of the Senior Preferred Stock as provided above. The
Corporation will first comply with the covenant in the preceding sentence
before it will be required to redeem Senior Preferred Stock pursuant to the
provisions described above.

                  (i) Conversion or Exchange. The Holders of shares of Senior
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 Corporation other
than the Exchange Preferred Stock and the Private Exchange Preferred Stock as
provided in the Registration Rights Agreement dated as of the date hereof.

                  (j) Reissuance of Senior Preferred Stock. Shares of Senior
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, 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
that any issuance of such shares of Preferred Stock 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.

                  (l) Certain Additional Provisions.

                  (i) Limitation on Indebtedness. (A) The Corporation shall
not, and shall not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness if on the date thereof the Consolidated Coverage Ratio would be
greater than 2.0:1.

                  (B) Notwithstanding the foregoing paragraph (A), the
         Corporation and its Restricted Subsidiaries may Incur the following
         Indebtedness:

                  (i) Indebtedness of the Corporation or any Restricted
         Subsidiary under Bank Indebtedness and under standby letters of credit
         or reimbursement obligations with respect thereto issued in the
         ordinary course of business and consistent with industry practice,
         provided, however, that the aggregate principal amount of any
         Indebtedness Incurred pursuant to this clause (i) shall not exceed $10
         million at any time outstanding;

                  (ii) Indebtedness represented by Capitalized Lease
         Obligations, mortgage financings or purchase money 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 or
         equipment used in a Permitted Business or Incurred to refinance any
         such purchase price or

                                      -12-
<PAGE>   13

         cost of construction or improvement, in each case Incurred no later
         than 365 days after the date of such acquisition or the date of
         completion of such construction or improvement; provided, however, that
         the principal amount of any Indebtedness Incurred pursuant to this
         clause (ii), together with Indebtedness Incurred in connection with
         Sale/Leaseback Transactions in accordance with paragraph (l)(v) hereof,
         shall not exceed $5 million at any time outstanding;

                  (iii) Indebtedness of the Corporation owing to and held by
         any Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary
         owing to and held by the Corporation or any Wholly-Owned Subsidiary;
         provided, however, that any subsequent issuance or transfer of any
         Capital Stock or any other event which results in any such
         Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
         subsequent transfer of any such Indebtedness (except to the
         Corporation or any Wholly-Owned Subsidiary) shall be deemed, in each
         case, to constitute the Incurrence of such Indebtedness by the issuer
         thereof;

                  (iv) Indebtedness represented by (w) the Notes, (x) the
         Guarantees, (y) Existing Indebtedness and (z) any Refinancing
         Indebtedness Incurred in respect of any Indebtedness described in this
         clause (iv) or Incurred pursuant to paragraph (A);

                  (v) (A) Indebtedness of a Restricted Subsidiary Incurred and
         outstanding on the date on which such Restricted Subsidiary was
         acquired by the Corporation (other than Indebtedness Incurred in
         anticipation of, 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 Subsidiary or was otherwise acquired by the Corporation);
         provided, however, that at the time such Restricted Subsidiary is
         acquired by the Corporation, the Corporation would have been able to
         Incur $1.00 of additional Indebtedness pursuant to paragraph (A) above
         after giving effect to the Incurrence of such Indebtedness pursuant to
         this clause (v) and (B) Refinancing Indebtedness Incurred by a
         Restricted Subsidiary in respect of Indebtedness Incurred by such
         Restricted Subsidiary pursuant to this clause (v);

                  (vi) Indebtedness (A) in respect of performance bonds,
         bankers' acceptances and surety or appeal bonds provided by the
         Corporation or any of its Restricted Subsidiaries to their customers
         in the ordinary course of their business, (B) in respect of
         performance bonds or similar obligations of the Corporation or any of
         its Restricted Subsidiaries for or in connection with pledges,
         deposits or payments made or given in the ordinary course of business
         in connection with or to secure statutory, regulatory or similar
         obligations, including obligations under health, safety or
         environmental obligations, (C) arising from Guarantees to suppliers,
         lessors, licensees, contractors, franchises or customers of
         obligations (other than Indebtedness) Incurred in the ordinary course
         of business and (D) under Currency Agreements and Interest Rate
         Agreements; provided, however, that in the case of Currency Agreements
         and Interest Rate Agreements, such Currency Agreements and Interest
         Rate

                                      -13-
<PAGE>   14

         Agreements are entered into for bona fide hedging purposes of the
         Corporation or its Restricted Subsidiaries (as determined in good
         faith by the Board of Directors of the Corporation) and correspond in
         terms of notional amount, duration, currencies and interest rates as
         applicable, to Indebtedness of the Corporation or its Restricted
         Subsidiaries Incurred without violation of the Certificate of
         Designation or to business transactions of the Corporation or its
         Restricted Subsidiaries on customary terms entered into in the
         ordinary course of business;

                  (vii) Indebtedness arising from agreements providing for
         indemnification, adjustment of purchase price or similar obligations,
         or from Guarantees or letters of credits, surety bonds or performance
         bonds securing any obligations of the Corporation or any of its
         Restricted Subsidiaries pursuant to such agreements, in each case
         Incurred in connection with the disposition of any business assets or
         Restricted Subsidiary of the Corporation (other than Guarantees of
         Indebtedness or other obligations Incurred by any Person acquiring all
         or any portion of such business assets or Restricted Subsidiary of the
         Corporation for the purpose of financing such acquisition) in a
         principal amount not to exceed the gross proceeds actually received by
         the Corporation or any of its Restricted Subsidiaries in connection
         with such disposition; provided, however, that the principal amount of
         any Indebtedness Incurred pursuant to this clause (vii) when taken
         together with all Indebtedness Incurred pursuant to this clause (vii)
         and then outstanding, shall not exceed $1 million;

                  (viii) Indebtedness consisting of (A) Guarantees by the
         Corporation or a Subsidiary Guarantor of Indebtedness Incurred by a
         Wholly-Owned Subsidiary without violation of the Certificate of
         Designation (so long as the Corporation or such Subsidiary Guarantor,
         as the case may be, could have Incurred such Indebtedness directly
         without violation of the Certificate of Designation) and (B)
         Guarantees by a Restricted Subsidiary of Senior Indebtedness Incurred
         by the Corporation without violation of the Certificate of Designation
         (so long as such Restricted Subsidiary could have Incurred such
         Indebtedness directly without violation of the Certificate of
         Designation);

                  (ix) Indebtedness arising from the honoring by a bank or
         other financial institution of a check, draft or similar instrument
         issued by the Corporation or its Restricted Subsidiaries drawn against
         insufficient funds in the ordinary course of business in an amount not
         to exceed $250,000 at any time, provided that such Indebtedness is
         extinguished within two business days of its Incurrence; and

                  (x) Indebtedness (other than Indebtedness described in
         clauses (i) - (ix)) in a principal amount which, when taken together
         with the principal amount of all other Indebtedness Incurred pursuant
         to this clause (x) and then outstanding, will not exceed $4 million
         (it being understood that any Indebtedness Incurred under this clause
         (x) shall cease to be deemed Incurred or outstanding for purposes of
         this clause (x) (but shall be deemed to be Incurred for purposes of
         paragraph (A)) from and after the first date on which the

                                      -14-
<PAGE>   15

         Corporation or its Restricted Subsidiaries could have Incurred such
         Indebtedness under the foregoing paragraph (A) without reliance upon
         this clause (x)).

                  (C) The Corporation will not permit any Unrestricted
Subsidiary to Incur any Indebtedness other than Non-Recourse Debt.

                  (ii) Limitation on Restricted Payments. (A) The Corporation
shall not, and shall not permit any of its Restricted Subsidiaries, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Corporation or any of its Restricted
Subsidiaries) except (A) dividends or distributions payable in its Capital
Stock (other than Disqualified Stock) or in options, warrants or other rights
to purchase such Capital Stock, and (B) dividends or distributions payable to
the Corporation or any of its Restricted Subsidiaries by any of its
Subsidiaries (and if the Subsidiary paying the dividend or making the
distribution is not a Wholly-Owned Subsidiary, to its other holders of Capital
Stock on a pro rata basis), (ii) purchase, redeem, retire or otherwise acquire
for value any Capital Stock of the Corporation held by Persons other than a
Wholly-Owned Subsidiary of the Corporation or any Capital Stock of a Restricted
Subsidiary of the Corporation held by any Affiliate of the Corporation, other
than a Wholly-Owned Subsidiary (in either case, other than in exchange for its
Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of purchase, repurchase or acquisition or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment as described in preceding clauses (i)
through (iv) being referred to as a "Restricted Payment"); if at the time the
Corporation or such Restricted Subsidiary makes such Restricted Payment:

                  (1) the Corporation shall have paid a dividend, on the most
         recent Dividend Payment Date, by the issuance of additional Preferred
         Stock; or

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

                  (3) the Corporation is not able to Incur an additional $1.00
         of Indebtedness pursuant to paragraph (A) of paragraph (l)(i); or

                  (4) the aggregate amount of such Restricted Payment and all
         other Restricted Payments declared or made subsequent to the Issue
         Date would exceed the sum of (A) 50% of the Consolidated Net Income
         accrued during the period (treated as one accounting period) from the
         first day of the fiscal quarter beginning on or after the Issue Date
         to the end of the most recent fiscal quarter ending prior to the date
         of such Restricted Payment as to which

                                      -15-
<PAGE>   16

         financial results are available (but in no event ending more than 135
         days prior to the date of such Restricted Payment) (or, in case such
         Consolidated Net Income shall be a deficit, minus 100% of such
         deficit); (B) the aggregate net proceeds received by the Corporation
         from the issue or sale of its Capital Stock (other than Disqualified
         Stock) or other capital contributions subsequent to the Issue Date
         (other than net proceeds received from an issuance or sale of such
         Capital Stock to (x) a Subsidiary of the Corporation, (y) an employee
         stock ownership plan or similar trust or (z) management employees of
         the Corporation or any Subsidiary of the Corporation); provided,
         however, that the value of any non-cash net proceeds, shall be as
         determined by the Board of Directors in good faith, except that in the
         event the value of any non-cash net proceeds shall be $1 million or
         more, the value shall be as determined in writing by an independent
         investment banking firm of nationally recognized standing; (C) the
         amount by which Indebtedness of the Corporation is reduced on the
         Corporation's balance sheet upon the conversion or exchange (other
         than by a Restricted Subsidiary of the Corporation) subsequent to the
         Issue Date of any Indebtedness of the Corporation convertible or
         exchangeable for Capital Stock of the Corporation (less the amount of
         any cash, or other property, distributed by the Corporation upon such
         conversion or exchange); and (D) the amount equal to the net reduction
         in Investments (other than Permitted Investments) made after the Issue
         Date by the Corporation or any of its Restricted Subsidiaries in any
         Person resulting from (i) repurchases or redemptions of such
         Investments by such Person, proceeds realized upon the sale of such
         Investment to an unaffiliated purchaser, repayments of loans or
         advances or other transfers of assets by such Person to the
         Corporation or any Restricted Subsidiary of the Corporation or (ii)
         the redesignation of Unrestricted Subsidiaries as Restricted
         Subsidiaries (valued in each case as provided in the definition of
         "Investment") not to exceed, in the case of any Unrestricted
         Subsidiary, the amount of Investments previously included in the
         calculation of the amounts of Restricted Payments; provided, however,
         that no amount shall be included under this clause (D) to the extent
         it is already included in Consolidated Net Income.

                  (B) Notwithstanding the foregoing, the Corporation shall not,
and shall not permit any of its Restricted Subsidiaries, to make Investments in
Interactive Channel, Inc. or Interactive Channel Technologies, Inc., if at the
time of such Investment:

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

                  (2) the aggregate amount of such Investment and all other
         Investments in Interactive Channel, Inc. made subsequent to the Issue
         Date would exceed the sum of (A) $34.0 million; (B) 50% of the
         Adjusted Consolidated Net Income accrued during the period (treated as
         one accounting period) from the first day of the fiscal quarter
         beginning on or after the Issue Date to the end of the most recent
         fiscal quarter ending prior to the date of such Investment as to which
         financial results are available (but in no event ending more than 135
         days prior to the date such Restricted Payment) (or, in the such
         Adjusted Consolidated

                                      -16-
<PAGE>   17

         Net Income shall be a deficit, minus 100% of such deficit); and (C)
         the aggregate net proceeds received by the Corporation from the issue
         or sale of its Capital Stock (other than Disqualified Stock) or other
         capital contributions subsequent to the Issue Date as calculated in
         accordance with paragraph (A)(3)(B) above.

                  (C) The provisions of paragraph (A) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Corporation made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Corporation (other than Disqualified
Stock and other than Capital Stock issued or sold to a Subsidiary, an employee
stock ownership plan or similar trust or management employees of the
Corporation or any Subsidiary of the Corporation); provided, however, that (A)
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from clause (3) (B) of paragraph (A); (ii) any purchase or redemption
of Subordinated Obligations of the Corporation made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Subordinated Obligations
of the Corporation in compliance with (l)(i) hereof; provided, however, that
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments; (iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments; and (iv) dividends paid within 60 days after the date of declaration
if at such date of declaration such dividend would have complied with this
provision; provided, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; provided, however, that in
each case, no Triggering Event shall have occurred or be continuing at the time
of such payment or as a result thereof.

                  (D) For purposes of determining compliance with the foregoing
covenant, Restricted Payments may be made with cash or non-cash assets,
provided that any Restricted Payment made other than in cash shall be valued at
the fair market value (determined, subject to the additional requirements of
the immediately succeeding proviso, in good faith by the Board of Directors) of
the assets so utilized in making such Restricted Payment, provided, further
that (i) in the case of any Restricted Payment made with capital stock or
indebtedness, such Restricted Payment shall be deemed to be made in an amount
equal to the greater of the fair market value thereof and the liquidation
preference (if any) or principal amount of the capital stock or indebtedness,
as the case may be, so utilized, and (ii) in the case of any Restricted Payment
in an aggregate amount in excess of $1 million, a written opinion as to the
fairness of the valuation thereof (as determined by the Corporation) for
purposes of determining compliance with paragraph (l)(ii) shall be issued by an
independent investment banking firm of national standing.

                  (E) No later than the date of making any Restricted Payment,
the Corporation shall deliver to the Trustee an Officer's Certificate stating
that such Restricted Payment complies with this Certificate of Designation and
setting forth in reasonable detail the basis upon which the

                                      -17-
<PAGE>   18

required calculations were computed, which calculations may be based upon the
Corporation's latest available quarterly financial statements and a copy of any
required investment banker's opinion.

                  (iii) Limitation on Affiliate Transactions. (A) The
Corporation will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into or conduct any transaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with or for the benefit of any
Affiliate of the Corporation, other than a Wholly-Owned Subsidiary (an
"Affiliate Transaction") unless: (i) the terms of such Affiliate Transaction
are no less favorable to the Corporation or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time of such transaction
in arm's length dealings with a Person who is not such an Affiliate; (ii) in
the event such Affiliate Transaction involves an aggregate amount in excess of
$1 million, the terms of such transaction have been approved by a majority of
the members of the Board of Directors of the Corporation and by a majority of
the disinterested members of such Board, if any (and such majority or
majorities, as the case may be, determines that such Affiliate Transaction
satisfies the criteria in (i) above); and (iii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $2 million, the
Corporation has received a written opinion from an independent investment
banking firm of nationally recognized standing that such Affiliate Transaction
is fair to the Corporation or such Restricted Subsidiary, as the case may be,
from a financial point of view.

                  (B) The foregoing paragraph (A) shall not apply to (i) any
Restricted Payment permitted to be made pursuant to paragraph (l)(ii) hereof,
(ii) any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, or any stock options and stock ownership plans for the benefit of
employees, officers and directors, consultants and advisors approved by the
Board of Directors of the Corporation, (iii) loans or advances to employees in
the ordinary course of business of the Corporation or any of its Restricted
Subsidiaries in aggregate amount outstanding not to exceed $250,000 at any
time, (iv) loans or advances to senior management of the Corporation which
loans and advances are secured by shares of Common Stock of the Corporation
owned by such senior management, in an aggregate amount outstanding not to
exceed $750,000, (v) any transaction between Wholly-Owned Subsidiaries, (vi)
indemnification agreements with, and the payment of fees and indemnities to,
directors, officers and employees of the Corporation and its Restricted
Subsidiaries, in each case in the ordinary course of business, (vii)
transactions pursuant to agreements in existence on the Issue Date which are
(x) described in the Corporation's offering memorandum dated October 30, 1997
or (y) otherwise, in the aggregate, immaterial to the Corporation and its
Restricted Subsidiaries taken as a whole, (viii) any employment,
non-competition or confidentiality agreements entered into by the Corporation
or any of its Restricted Subsidiaries with its employees in the ordinary course
of business, and (ix) the issuance of Capital Stock of the Corporation (other
than Disqualified Stock).

                  (iv) Limitation on Issuances of Capital Stock of Restricted
Subsidiaries. The Corporation will not permit any of its Restricted
Subsidiaries to issue any Capital Stock to any

                                      -18-
<PAGE>   19

Person (other than to the Corporation or a Wholly-Owned Subsidiary of the
Corporation) or permit any Person (other than the Corporation or a Wholly-Owned
Subsidiary of the Corporation) to own any Capital Stock of a Restricted
Subsidiary of the Corporation, if in either case as a result thereof such
restricted Subsidiary would no longer be a Restricted Subsidiary of the
Corporation; provided, however, that this provision shall not prohibit (x) the
Corporation or any of its Restricted Subsidiaries from selling or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary or (y) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with the Certificate of Designation.

                  (v) Limitation on Sale/Leaseback Transactions. The
Corporation will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, Guarantee or otherwise become liable with
respect to any Sale/Leaseback Transaction with respect to any property or
assets unless (a) the Corporation or such Restricted Subsidiary, as the case
may be, would be entitled to pursuant to this Certificate of Designation Incur
Indebtedness secured by a Permitted Lien on such property or assets in an
amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, (b) the Net Cash Proceeds from such Sale/Leaseback
Transaction are at least equal to the fair market value of the property or
assets subject to such Sale/Leaseback Transaction (such fair market value
determined, in the event such property or assets have a fair market value in
excess of $500,000, no more than 30 days prior to the effective date of such
Sale/Leaseback Transaction, by the Board of Directors of the Corporation as
evidenced by a resolution of such Board of Directors) and (c) the Indebtedness
Incurred in connection with such Sale/Leaseback Transaction, together with
Indebtedness Incurred in accordance with (ii) of paragraph (B) of paragraph
(l)(i), does not exceed $5 million at any time outstanding.

                  (m) SEC Reports. The Corporation will provide to the holders
of the Senior Preferred Stock within 15 days, after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Corporation files
with the Commission pursuant to Section 13 or 15 (d) of the Exchange Act. In
the event that the Corporation is not required to file such reports with the
Commission pursuant to the Exchange Act, the Corporation will nevertheless
deliver such Exchange Act information to the holders of the Preferred Stock
within 15 days after it would have been required to file it with the
Commission.

                  (n) Conduct of Business. The Corporation will not permit IT
Network, Inc. to directly or indirectly engage in any business other than the
provision of voice information services, including the services described in
this Offering Memorandum. The Corporation will conduct all of its interactive
television business through Interactive Channel, Inc., Interactive
Technologies, Inc. and any of their Wholly-Owned Subsidiaries.

                  (o) Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:

                                      -19-
<PAGE>   20

                  "Acquisitions" means the October 1997 acquisitions by the
Corporation of certain of the electronic publishing assets of Brite Voice, Inc.
for $35.6 million and certain of the assets of Voice News Network, Inc. for
$9.0 million.

                  "Additional Dividends" has the meaning set forth in the
Registration Rights Agreement.

                  "Adjusted Consolidated Net Income" means, for any period,
Consolidated Net Income minus (plus) the net income (loss) of Interactive
Channel, Inc. for such period, plus an amount equal to the corporate overhead
allocated to Interactive Channel, Inc., on an after-tax basis, unless otherwise
included in the net income of Interactive Channel, Inc., for such period (as
determined in good faith by senior management of the Corporation), plus an
amount equal to the amortization of intangible assets relating to the
Acquisitions.

                  "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 correlative to the
foregoing.

                  "Affiliate Transaction" shall have the meaning ascribed to it
in paragraph l(iv) hereof.

                  "Asset Disposition" means any sale, lease, transfer, issuance
or other disposition (or series of related sales, leases, transfers, issuances
or dispositions that are part of a common plan) of shares of Capital Stock of
(or any other equity interests in) a Restricted Subsidiary (other than
directors' qualifying shares) or of any other property or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Corporation or any of its Restricted Subsidiaries (including any disposition by
means of a merger, consolidation or similar transaction) other than (i) a
disposition by a Restricted Subsidiary to the Corporation or by the Corporation
or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of
inventory in the ordinary course of business and for which adequate reserves
have been established in accordance with GAAP, (iii) a disposition of obsolete
or worn out equipment or equipment that is no longer useful in the conduct of
the business of the Corporation and its Restricted Subsidiaries and that is
disposed of in each case in the ordinary course of business, (iv) dispositions
of property for net proceeds which, when taken collectively with the net
proceeds of any other such dispositions under this clause (iv) that were
consummated since the beginning of the calendar year in which such disposition
is consummated, do not exceed $1 million, and (v) transactions permitted under
paragraph (g) hereof. Notwithstanding anything to the contrary contained above,
a Restricted Payment made in compliance with paragraph (l)(ii) shall not
constitute an Asset Disposition except for purposes of determinations of the
Consolidated Coverage Ratio.

                                      -20-
<PAGE>   21

                  "Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Notes, 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 determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the product of the numbers of years (rounded upwards to
the nearest month) 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 Preferred Stock multiplied by the amount of
such payment by (ii) the sum of all such payments.

                  "Bank Indebtedness" means loans made by banks, trust
companies and other institutions principally engaged in the business of lending
money to businesses to the Company or a Restricted Subsidiary under a credit
facility, loan agreement or similar agreement.

                  "Board of Directors" shall have the meaning ascribed to it in
the first paragraph of this Certificate of Designation.

                  "Business Day" means any day except a Saturday, a Sunday, or
any day on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.

                  "Capital Stock" of any Person means any and all shares,
interests, 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 such equity.

                  "Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized 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 such lease may be terminated without
penalty.

                  "Certificate of Designation" means this Certificate of
Designation creating the Senior Preferred Stock.

                  "Change of Control" means (i) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Corporation and its Subsidiaries; or
(ii) a majority of the Board of Directors of the Corporation or

                                      -21-
<PAGE>   22

of any direct or indirect holding company thereof shall consist of Persons who
are not Continuing Directors of the Corporation; or (iii) the acquisition by
any Person or group of related Persons for purposes of Section 13 (d) of the
Exchange Act, of the power, directly or indirectly, to vote or direct the
voting of securities having more than 50% of the ordinary voting power for the
election of directors of the Corporation or of any direct or indirect holding
company thereof.

                  "Change of Control Offer" shall have the meaning ascribed to
it in paragraph (h)(i) hereof.

                  "Change of Control Payment Date" shall have the meaning
ascribed to it in paragraph (h)(ii)(2) hereof.

                  "Change of Control Purchase Price" shall have the meaning
ascribed to it in paragraph (h)(i) hereof.

                  "Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.

                  "Consolidated Cash Flow" for any period means the
Consolidated Net Income for such period, plus the following to the extent
deducted in calculating such Consolidated Net Income: (i) income tax expense,
(ii) Consolidated Interest Expense, (iii) depreciation expense, (iv)
amortization expense, (v) exchange or translation losses on foreign currencies,
and (vi) all other non-cash items reducing Consolidated Net Income (excluding
any noncash item to the extent it represents an accrual of or reserve for cash
disbursements for any subsequent period prior to the Stated Maturity of the
Notes) and less, to the extent added in calculating Consolidated Net Income,
(x) exchange or translation gains on foreign currencies and (y) non-cash items
(excluding such non-cash items to the extent they represent an accrual for cash
receipts reasonably expected to be received prior to the Stated Maturity of the
Notes), in each case for such period. Notwithstanding the foregoing, the income
tax expense, depreciation expense and amortization expense of a Subsidiary of
the Corporation shall be included in Consolidated Cash Flow only to the extent
(and in the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income.

                  "Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of Consolidated Cash Flow for the
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination and as to which financial statements are available
to (ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (1) if the Corporation or any of its Restricted Subsidiaries has
Incurred any Indebtedness since the beginning of such period and through the
date of determination of the Consolidated Coverage Ratio that remains
outstanding or if the transaction giving rise to the need to calculate
Consolidated

                                      -22-
<PAGE>   23

Coverage Ratio is an Incurrence of Indebtedness, or both, Consolidated Cash
Flow and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to (A) such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (provided that
if such Indebtedness is Incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by the Board
of Directors of the Corporation) shall be deemed outstanding for purposes of
this calculation), and (B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period any Indebtedness of the Corporation
or any of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and the underlying commitment terminated and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(3) if since the beginning of such period the Corporation or any of its
Restricted Subsidiaries shall have made any Asset Disposition or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Asset Disposition, Consolidated Cash Flow for such period shall be
reduced by an amount equal to the Consolidated Cash Flow (if positive)
attributable to the assets which are the subject of such Asset Disposition for
such period or increased by an amount equal to the Consolidated Cash Flow (if
negative) attributable thereto for such period, and Consolidated Interest
Expense for such period shall be (i) reduced by an amount equal to the
Consolidated Interest Expense attributable to any Indebtedness of the
Corporation or any of its Restricted Subsidiaries repaid, repurchased, defeased
or otherwise discharged with respect to the Corporation and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary of the
Corporation is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
the Corporation and its continuing Restricted Subsidiaries are no longer liable
for such Indebtedness after such sale) and (ii) increased by interest income
attributable to the assets which are the subject of such Asset Disposition for
such period, (4) if since the beginning of such period the Corporation or any
of its Restricted Subsidiaries (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary of the Corporation (or any Person which
becomes a Restricted Subsidiary of the Corporation as a result thereof) or an
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder which constitutes all or substantially all of
an operating unit of a business, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (5) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Corporation or was merged with or into the
Corporation or any Restricted Subsidiary of the Corporation since the beginning
of such period) shall have made any Asset Disposition, Investment or
acquisition of assets that would have required an adjustment

                                      -23-
<PAGE>   24

pursuant to clause (3) or (4) above if made by the Corporation or a Restricted
Subsidiary of the Corporation during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Corporation. If
any Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).

                  "Consolidated Interest Expense" means, for any period, the
total interest expense of the Corporation and its Restricted Subsidiaries
determined in accordance with GAAP, plus, to the extent not included in such
interest expense (i) interest expense attributable to Capitalized Lease
Obligations, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expense, (v) commissions, discounts and other fees and
charges owned with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Corporation or any such
Restricted Subsidiary under any Guarantee of Indebtedness or other obligation
of any other Person, (vii) net payments (whether positive or negative) pursuant
to Interest Rate Agreements; (vii) 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
Corporation) in connection with Indebtedness Incurred by such plan or trust and
(ix) case and Disqualified Stock dividends in respect of all Preferred Stock of
Subsidiaries and Disqualified Stock of the Corporation held by Persons other
than the Corporation or a Wholly-Owned Subsidiary and less (a) to the extent
included in such interest expense, the amortization of capitalized debt
issuance costs and (b) interest income. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Corporation, that was not a Wholly-Owned Subsidiary, shall be included only to
the extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.

                  "Consolidated Net Income" means, for any period, the
consolidated net income (loss) of the Corporation and its consolidated
Subsidiaries determined in accordance with GAAP; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person acquired by the Corporation or any of its Restricted
Subsidiaries in a pooling of interests transaction for any period prior to the
date of such acquisition, (ii) any net income of any Restricted Subsidiary of
the Corporation 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
Corporation (other than restrictions in effect on the Issue Date with respect
to a Restricted Subsidiary of the Corporation and other than restrictions that
are created or exist in compliance with this certificate, (iii) any gain or
loss realized upon the

                                      -24-
<PAGE>   25

sale or other disposition of any assets of the Corporation or its consolidated
Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
which are not sold or otherwise disposed of in the ordinary course of business
and any gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person, (iv) any extraordinary gain or loss, (v) the cumulative
effect of a change in accounting principles, (vi) the net income of any Person,
other than a Restricted Subsidiary, except to the extent of the lesser of (A)
cash dividends or distributions actually paid to the Corporation or any of its
Restricted Subsidiaries by such Person and (B) the net income of such Person
(but in no event less than zero), and the net loss of such Person (other than
an Unrestricted Subsidiary) shall be included only to the extent of the
aggregate Investment of the Corporation or any of its Restricted Subsidiaries
in such Person and (vii) any non-cash expenses attributable to grants or
exercises of employee stock options. Notwithstanding the foregoing, for the
purpose of paragraph (l)(ii) only, there shall be excluded from Consolidated
Net Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Corporation or a Restricted
Subsidiary to the extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under paragraph (l)(ii) pursuant to
clause (A) (3) (D) thereof.

                  "Consolidated Net Worth" means, the total of the amounts
shown on the balance sheet of the Corporation and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of
the end of the most recent fiscal quarter of the Corporation ending prior to
the taking of any action for the purpose of which the determination is being
made and for which financial statements are available (but in no event ending
more than 135 days prior to the taking of such action), as (i) the par or
stated value of all outstanding Capital Stock of the Corporation plus (ii) paid
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B)
any amounts attributable to Disqualified Stock.

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

                  "Corresponding Amendment" shall have the meaning ascribed to
it in paragraph (f)(ii)(C) hereof.

                  "Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement to which
Person is a party or a beneficiary.

                  "Disqualified Stock" means 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 (other than an
event which would constitute a Change of Control), (i) matures

                                      -25-
<PAGE>   26

(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole or in
part, on or prior to the final stated maturity of the Notes, or (ii) is
convertible into or exchangeable (unless at the sole option of the issuer
thereof) for (a) debt securities or (b) any Capital Stock referred to in (i)
above, in each case at any time prior to the final stated maturity of the
Senior Preferred Stock.

                  "Dividend Period" means the Initial Dividend Period and,
thereafter, each quarterly dividend period.

                  "Equity Offerings" means an offering for cash by the
Corporation of its Common Stock or option warrants or rights with respect to
its Common Stock.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

                  "Exchange Notice" shall have the meaning ascribed to it in
paragraph (g) hereof.

                  "Exchange Offer" means a registered offer to exchange any and
all shares of the Senior Preferred Stock for a like number of shares (with a
liquidation preference equal to that of the surrendered shares) of another
series of the Corporation's senior exchangeable preferred stock that has terms
identical in all material respects to the Senior Preferred Stock except that
the Exchange Preferred Stock shall have been registered pursuant to an
effective registration statement under the Securities Act and the certificates
therefor shall contain no restrictive legends thereon.

                  "Exchange Preferred Stock" means the series of the
Corporation's senior exchangeable preferred stock publicly offered in exchange
for the Senior Preferred Stock as contemplated by the Registration Rights
Agreement and having terms identical in all material respects to the Senior
Preferred Stock.

                  "Existing Indebtedness" means Indebtedness of the Corporation
or its Restricted Subsidiaries in existence on the Issue Date, plus interest
accrued thereon, after application of the net proceeds of the sale of the Notes
and Units.

                  "GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of the Certificate of
Designation, including those set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession. All ratios and computations
based on GAAP contained in the Certificate of Designation shall be computed in
conformity with GAAP.

                                      -26-
<PAGE>   27

                  "Guarantees" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any Indebtedness of any other
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 other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes 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.

                  "Subsidiary Guarantor" means each Subsidiary of the
Corporation in existence on the Issue Date and each Subsidiary (other than
Unrestricted Subsidiaries) created or acquired by the Corporation after the
Issue Date.

                  "Holder" means a holder of shares of Senior Preferred Stock,
Exchange Preferred Stock or Private Exchange Preferred Stock, as the context
requires, as reflected in the stock books of the Corporation.

                  "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 Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.

                  "Indebtedness" means, with respect to any Person on any date
of determination (without duplication), (i) the principal of and premium (if
any) in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii) and (v)) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except trade payables and accrued
expenses Incurred in the ordinary course of business), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (v) all
Capitalized Lease Obligations and all Attributable Indebtedness of such Person,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of other Persons to the extent Guaranteed by such Person,

                                      -27-
<PAGE>   28

(viii) 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 Restricted Subsidiary of the Corporation, any Preferred Stock of
such Restricted Subsidiary to the extent such obligation arises on or before
the stated maturity of such Preferred Stock (but excluding, in each case,
accrued dividends) with the amount of Indebtedness represented by such
Disqualified Stock or Preferred Stock, as the case may be, being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price; provided that, for purposes hereof the "maximum fixed
repurchase price" of any Disqualified Stock or Preferred Stock, as the case may
be, which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock or Preferred Stock, as the
case may be, as if such Disqualified Stock or Preferred Stock, as the case may
be, were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Certificate of Designation, and if such price is
based on the fair market value of such Disqualified Stock or Preferred Stock,
as the case may be, such fair market value shall be determined in good faith by
the Board of Directors of the Corporation and (ix) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. Unless specifically set forth above, the amount of
Indebtedness of any Person at any date shall be the outstanding principal
amount of all unconditional obligations as described above, as such amount
would be reflected on a balance sheet prepared in accordance with GAAP, and the
maximum liability of such Person, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations described above at such
date.

                  "Indenture" means the Indenture dated as of October 30, 1997,
by, and among the Corporation and U.S. Trust Company of Texas as Trustee.

                  "Initial Dividend Period" means the dividend period
commencing on the Issue Date and ending on the first Regular Dividend Payment
Date to occur thereafter.

                  "Interest Rate Agreement" means with respect to any Person
any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.

                  "Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts payable on the balance sheet of such
Person) or other extension of credit (including by way of Guarantee or similar
arrangement, but excluding any debt or extension of credit represented by a
bank deposit other than a time deposit) or capital contribution to (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 others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such Person;
provided that any Investment in the interactive television business shall be
made by any Person, directly or indirectly, through Interactive Channel, Inc.,
Interactive Channel Technologies

                                      -28-

<PAGE>   29

Inc. and any of their Wholly-Owned Subsidiaries. For purposes of paragraph
(l)(ii), (i) "Investment" shall include the portion (proportionate to the
Corporation's equity interest in a Restricted Subsidiary to be designated as an
Unrestricted Subsidiary) of the fair market value of the net assets of such
Restricted Subsidiary of the Corporation at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Corporation shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the
Corporation's "Investment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to the Corporation's equity interest in
such Subsidiary) of the fair market value of the net assets of such Subsidiary
at the time that such Subsidiary is so redesignated a Restricted Subsidiary;
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 and evidenced by a
resolution of such Board of Directors certified in an Officers' Certificate to
the Trustee.

                  "Issue Date" means the date on which the Preferred Stock are
originally issued.

                  "Junior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.

                  "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).

                  "Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received
in the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the properties or assets subject to, such Asset
Disposition) therefrom in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all
Federal, state, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon such
assets, or which must by its terms, or in order to obtain a necessary consent
to such Asset Disposition or by applicable, law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets
subject to sale or minority interest holders in Subsidiaries or joint ventures
as a result of such Asset Disposition, (iv) the deduction of appropriate
amounts to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Disposition, provided however, that upon any reduction in such reserves (other
than to the extent resulting from payments of the respective reserved
liabilities), Net Available Cash shall be increased by the amount of such
reduction to reserves, and retained by the Corporation or any Restricted
Subsidiary of the Corporation after such Asset Disposition and (v) any

                                      -29-
<PAGE>   30

portion of the purchase price from an Asset Disposition placed in escrow
(whether as a reserve for adjustment of the purchase price, for satisfaction of
indemnities in respect of such Asset Disposition or otherwise in connection
with such Asset Disposition), provided, however, that upon the termination of
such escrow, Net Available Cash shall be increased by any portion of funds
therein released to the Corporation or any Restricted Subsidiary.

                  "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 of such issuance or sale.

                  "Net Income" means with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.

                  "Non-Recourse Debt" means Indebtedness (i) as to which
neither the Corporation nor any Restricted Subsidiary (a) provides any
guarantee or credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor, a general partner or
otherwise) and (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Corporation or any Restricted Subsidiary to declare a
default under such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.

                  "Note Indenture" means the Indenture governing the Notes.

                  "Notes" means the $100,000,000 aggregate principal amount of
12% Senior Secured Notes due 2004 issued by the Corporation on the Issue Date.

                  "Officers' Certificate" shall mean a certificate signed by
two Officers of the Corporation, at least one of whom shall be the principal
executive, financial or accounting officer of the Corporation.

                  "Opinion of Counsel" means a written opinion, in form and
substance acceptable to the Transfer Agent, from legal counsel who is
acceptable to the Transfer Agent.

                  "Parity Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.

                  "Permitted Businesses" means any business which is the same
as or related, ancillary or complementary to any of the businesses of the
Corporation and its Restricted Subsidiaries on the Issue Date, as reasonably
determined by the Corporation's Board of Directors; provided, that, an

                                      -30-
<PAGE>   31

entity which is not an operating entity and whose primary business is to hold
or maintain intellectual property or licenses shall not qualify as a "Permitted
Business".

                  "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 hereof 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.

                  "Private Exchange Preferred Stock" means a series of the
Corporation's senior exchangeable preferred stock contemplated by the
Registration Rights Agreement issued under the same certificate of designation
as the Exchange Preferred Stock and having terms identical in all material
respects to the Senior Preferred Stock.

                  A "Public Market" exists at any time with respect to the
common stock of Holding or the Corporation if (i) the common stock of Holding
or the Corporation is then registered with the Securities and Exchange
Commission pursuant to Section 12(b) or 12(g) of the Exchange Act and traded
either on a national securities exchange or in the National Association of
Securities Dealers Automated Quotation System and (ii) at least 15% of the
total issued and outstanding common stock of Holding or the Corporation, as
applicable, has been distributed prior to such time by means of an effective
registration statement under the Securities Act.

                  "Purchase Money Indebtedness" means any Indebtedness Incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.

                  "Redemption Date," with respect to any shares of Senior
Preferred Stock, means the date on which such shares of Senior Preferred Stock
are redeemed by the Corporation.

                  "Redemption Notice" shall have the meaning ascribed to it in
paragraph (e)(iii) hereof.

                  "Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of this
Certificate of Designation or Incurred in compliance with this Certificate of
Designation (including Indebtedness of the Corporation that refinances
Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness

                                      -31-
<PAGE>   32

of another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the earlier of (A) the first
anniversary of the Stated Maturity of the Notes and (B) Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the lesser of (A) the Average Life of the Notes and (B) the
Average Life of the Indebtedness being refinanced and (iii) the Refinancing
Indebtedness is in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to (or 101% of, in the
case of a refinancing of the Notes in connection with a Change of Control) or
less than the sum of the aggregate principal amount (or if issued with original
issue discount, the accreted value) then outstanding of the Indebtedness being
refinanced.

                  "Registration Rights Agreement" means the Preferred Stock
Registration Rights Agreement dated as of the Issue Date among the Corporation
and NatWest Capital Markets Limited and Prudential Securities, Incorporated.

                  "Regular Dividend Payment Date" means February 1, May 1,
August 1 and November 1 of each year.

                  "Regular Dividend Record Date" means January 15, April 15,
July 15 and October 15 of each year.

                  "Regular Dividends" shall have the meaning ascribed to it in
paragraph (c)(i) hereof.

                  "Restricted Payment" shall have the meaning ascribed to it in
paragraph (1)(ii) hereof.

                  "Restricted Subsidiary" means any Subsidiary of the
Corporation other than an Unrestricted Subsidiary.

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

                  "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

                  "Senior Indebtedness" means, whether outstanding on the Issue
Date or thereafter issued, as all Indebtedness of the Corporation, including
interest and fees thereon, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that the
obligations in respect of such Indebtedness are not superior in right of
payment to the Securities; provided, however, that Senior Indebtedness will not
include (1) any obligation of the Corporation to any Subsidiary, (2) any
liability for Federal, state, foreign, local or other taxes

                                      -32-
<PAGE>   33

owed or owing by the Corporation, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), or (4) any
Indebtedness, Guarantee or obligation of the Corporation that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Corporation, including any Subordinated Obligations.

                  "Senior Preferred Stock" shall have the meaning ascribed to
it in paragraph (a) hereof.

                  "Senior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.

                  "Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision.

                  "Subordinated Obligations" means any Indebtedness of the
corporation (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Notes pursuant to a
written agreement.

                  "Subsidiary" of any Person incorporated in the United States
means any corporation, association, partnership or other business entity
organized in the United States 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 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. Unless otherwise specified herein, each reference to a Subsidiary
shall refer to a Subsidiary of the corporation.

                  "Subsidiary Guarantees" means each Subsidiary of the
Corporation in existence on the Issue Date and each Subsidiary (other than
Unrestricted Subsidiaries) created or acquired by the Corporation after the
Issue Date.

                  "Successor Corporation" shall have the meaning ascribed to it
in paragraph (f)(iii) hereof.

                  "Transfer Agent" means ChaseMellon Shareholder Services,
L.L.C. or any successor or assignor thereto.

                  "Triggering Event" shall have the meaning ascribed to it in
paragraph(f)(iii) hereof.

                  "Units" means the 800 Units each consisting of (i) 1,000
shares of 13-1/2% of Senior PIK Preferred Stock with a liquidation preference
of $25 per share and (ii) Warrants to purchase

                                      -33-
<PAGE>   34

447,000 shares of Common Stock, representing 3% of the Company's Common Stock
on a fully diluted basis.

                  "Unrestricted Subsidiary" means (i) any Subsidiary of the
Corporation 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 Corporation (including any newly acquired
or newly formed Subsidiary of the Corporation) 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 on any property of, the Corporation
or any Restricted Subsidiary of the Corporation that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the Lender has recourse to any of the assets of the Corporation or any
of its Restricted Subsidiaries and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under "Limitation on Restricted Payments." 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 Corporation could Incur $1.00 of additional Indebtedness
under clause (l)(i)(a) and (y) no Triggering Event 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 Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

                  "Wholly-Owned Subsidiary" means a Restricted Subsidiary of
the Corporation, at least 99% of Capital Stock of which (other than directors'
qualifying shares) is owned by the Corporation or another Wholly-Owned
Subsidiary.

                                      -34-
<PAGE>   35

                  IN WITNESS WHEREOF, said Source Media, Inc. has caused this
Certificate of Designation to be signed by Timothy Peters, its Chief Executive
Officer, this 29th day of October, 1997.

                                          SOURCE MEDIA, INC.

                                          By /s/ TIMOTHY P. PETERS
                                             ----------------------------------
                                          Timothy P. Peters,
                                          Chief Executive Officer

                                      -35-
<PAGE>   36

                                  AMENDMENT TO
                   CERTIFICATE OF DESIGNATION OF THE POWERS,
                    PREFERENCES AND RELATIVE, PARTICIPATING,
                  OPTIONAL AND OTHER SPECIAL RIGHTS OF 13 1/2%
                  SENIOR PAYMENT-IN-KIND PREFERRED STOCK, AND
              QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

                         Pursuant to Section 242 of the
                General Corporation Law of the State of Delaware
                 and approved by a majority of the Stockholders

                  Source Media, Inc. (the "Corporation"), 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
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and pursuant to the provisions of Section 242 of the General Corporation Law of
the State of Delaware, said Board of Directors, duly approved and adopted the
following resolution:

                  RESOLVED, that, pursuant to the authority vested in the Board
         of Directors by the Certificate of Incorporation of the Corporation,
         the Board of Directors does hereby amend the Certificate of
         Designation of the Powers, Preferences and Relative, Participating,
         Optional and Other Special Rights of 13 1/2% Senior Payment-In-Kind
         Preferred Stock and Qualifications, Limitations and Restrictions
         Thereof (the "Certificate of Designation"), as filed with the Office
         of the Secretary of State of the State of Delaware on October 29,
         1997, as follows:

         1.       Paragraph (l)(iii) of the Certificate of Designation is
amended and restated in its entirety as follows:

                  (A) The Corporation will not, and will not permit any of its
         Restricted Subsidiaries to, directly or indirectly, enter into or
         conduct any transaction or series of related transactions (including
         the purchase, sale, lease or exchange of any property or the rendering
         of any service) with or for the benefit of any Affiliate of the
         Corporation, other than a Wholly-Owned Subsidiary (an "Affiliate
         Transaction") unless: (i) the terms of such Affiliate Transaction are
         no less favorable to the Corporation or such Restricted Subsidiary, as
         the case may be, than those that could be obtained at the time of such
         transaction in arm's length dealings

                                        1
<PAGE>   37

         with a Person who is not such an Affiliate; (ii) in the event such
         Affiliate Transaction involves an aggregate amount in excess of $1
         million, the terms of such transaction have been approved by a
         majority of members of the Board of Directors of the Corporation and
         by a majority of the disinterested members of such Board, if any (and
         such majority or majorities, as the case may be, determines that such
         Affiliate Transaction satisfies the criteria in (i) above); and (iii)
         in the event such Affiliate Transaction involves an aggregate amount
         in excess of $2 million, the Corporation has received a written
         opinion from an independent investment banking firm of nationally
         recognized standing that such Affiliate Transaction is fair to the
         Corporation or such Restricted Subsidiary, as the case may be, from a
         financial point of view; provided, however, that this clause (iii)
         shall not apply to any transaction between or among the Corporation
         and its Restricted Subsidiaries, on the one hand, and NewCo and its
         Affiliates, on the other hand.

                  (B) The foregoing paragraph (A) shall not apply to (i) any
         Restricted Payment permitted to be made pursuant to paragraph (l)(ii)
         hereof, (ii) any issuance of securities, or other payments, awards or
         grants in cash, securities or otherwise pursuant to, or the funding
         of, employment arrangements, or any stock options and stock ownership
         plans for the benefit of employees, officers and directors,
         consultants and advisors approved by the Board of Directors of the
         Corporation, (iii) loans or advances to employees in the ordinary
         course of business of the Corporation or any of its Restricted
         Subsidiaries in aggregate amount outstanding not to exceed $250,000 at
         any time, (iv) loans or advances to senior management of the
         Corporation which loans and advances are secured by shares of Common
         Stock of the Corporation owned by such senior management, in an
         aggregate amount outstanding not to exceed $750,000, (v) any
         transaction between Wholly-Owned Subsidiaries, (vi) indemnification
         agreements with, and the payment of fees and indemnities to,
         directors, officers and employees of the Corporation and its
         Restricted Subsidiaries, in each case in the ordinary course of
         business, (vii) transactions pursuant to agreements in existence on
         the Issue Date which are (x) described in the Corporations offering
         memorandum dated October 30, 1997 (the "Offering Memorandum") or (y)
         otherwise, in the aggregate, immaterial to the Corporation and its
         Restricted Subsidiaries taken as a whole, (viii) any employment,
         non-competition or confidentiality agreements entered into by the
         Corporation or any of its Restricted Subsidiaries with its employees
         in the ordinary course of business, (ix) the issuance of Capital Stock
         of the Corporation (other than Disqualified Stock), (x) Permitted
         Investments pursuant to clauses (xiii) and (xiv) of the definition
         thereof and (xi) any transaction or arrangement entered into pursuant
         to the Contribution Agreement or the Purchase Agreement.

         2.       Paragraph (n) of the Certificate of Designation is amended
and restated in its entirety as follows:

                                        2
<PAGE>   38

         The Corporation will not permit IT Network, Inc. to directly or
         indirectly engage in any business other than the provision of voice
         information services, including the services described in the Offering
         Memorandum.

         3.       Each of the following current terms contained in paragraph
(o) of the Certificate of Designation is amended and restated in its entirety
as follows:

                  "Asset Disposition" means any sale, lease, transfer, issuance
         or other disposition (or series of related sales, leases, transfers,
         issuances or dispositions that are part of a common plan) of shares of
         Capital Stock of (or any other equity interests in) a Restricted
         Subsidiary (other than directors' qualifying shares) or of any other
         property or other assets (each referred to for the purposes of this
         definition as a "disposition") by the Corporation or any of its
         Restricted Subsidiaries (including any disposition by means of a
         merger, consolidation or similar transaction) other than (i) a
         disposition by a Restricted Subsidiary to the Corporation or by the
         Corporation or a Restricted Subsidiary to a Wholly-Owned Subsidiary,
         (ii) a disposition of inventory in the ordinary course of business and
         for which adequate reserves have been established in accordance with
         GAAP, (iii) a disposition of obsolete or worn out equipment that is no
         longer useful in the conduct of the business of the Corporation and
         its Restricted Subsidiaries and that is disposed of in each case in
         the ordinary course of business, (iv) dispositions of property for net
         proceeds which, when taken collectively with the net proceeds of any
         other such dispositions under this clause (iv) that were consummated
         since the beginning of the calendar year in which such disposition is
         consummated, do not exceed $1 million, (v) transactions permitted
         under paragraph (g) hereof and (vi) Permitted Investments pursuant to
         clauses (xii) and (xiii) of the definition thereof. Notwithstanding
         anything to the contrary contained above, a Restricted Payment made in
         compliance with paragraph (l)(ii) shall not constitute an Asset
         Disposition except for purposes of determinations of the Consolidated
         Coverage Ratio.

                  "Investment" in any Person means any direct or indirect
         advance, loan (other than advances to customers in the ordinary course
         of business that are recorded as accounts payable on the balance sheet
         of such Person) or other extension of credit (including by way of
         Guarantee or similar arrangement, but excluding any debt or extension
         of credit represented by a bank deposit other than a time deposit) or
         capital contribution to (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 others), or any purchase or acquisition of Capital
         Stock, Indebtedness or other similar instruments issued by such
         Person. For purposes of paragraph (l)(ii), (i) "Investment" shall
         include the portion (proportionate to the Corporation's equity
         interest in a Restricted Subsidiary to be designated as an
         Unrestricted Subsidiary) of the fair market value of the net assets of
         such Restricted Subsidiary of the Corporation at the time that such

                                        3
<PAGE>   39

         Restricted Subsidiary is designated an Unrestricted Subsidiary;
         provided, however, that upon a redesignation of such Subsidiary as a
         Restricted Subsidiary, the Corporation shall be deemed to continue to
         have a permanent "Investment" in an Unrestricted Subsidiary in any
         amount (if positive) equal to (x) the Corporation's "Investment" in
         such Subsidiary at the time of such redesignation less (y) the portion
         (proportionate to the Corporation's equity interest in such
         Subsidiary) of the fair market value of the net assets of such
         Subsidiary at the time that such Subsidiary is so redesignated a
         Restricted Subsidiary; 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 and evidenced by a resolution of such Board of
         Directors certified in an Officers' Certificate to the Trustee.

               "Permitted Investments" means an Investment by the Corporation or
          any of its Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of
          the Corporation (other than Interactive Channel Technologies, Inc.,
          997758 Ontario, Inc., Cableshare (U.S.) Limited, Cableshare
          International Inc. and 1229501 Ontario, Inc.); provided, however, (A)
          that the primary business of such Wholly-Owned Subsidiary is a
          Permitted Business and (B) in the case of Investments by the
          Corporation or any of its Restricted Subsidiaries in Interactive
          Channel, Inc., in an amount not to exceed the amount set forth in
          clause (B) of paragraph (l)(ii); (ii) another Person if as a result of
          such Investment such other Person becomes a Wholly-Owned Subsidiary of
          the Corporation or is merged or consolidated with or into, or
          transfers or conveys all or substantially all its assets to, the
          Corporation or a Wholly-Owned Subsidiary of the Corporation, provided,
          however, that in each case such Person's primary business is a
          Permitted Business; (iii) Temporary Cash Investments; (iv) receivables
          owing to the Corporation or any of its Restricted Subsidiaries,
          created or acquired in the ordinary course of business and payable or
          dischargeable in accordance with customary trade terms; (v) payroll,
          travel 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 and advances to employees made in the ordinary
          course of business consistent with past practices of the Corporation
          or such Restricted Subsidiary in an aggregate amount outstanding at
          any one time not to exceed $250,000; (vii) loans or advances to senior
          management of the Corporation which loans or advances are fully
          secured on the date of such loans or advances by shares of Common
          Stock of the Corporation owned by such senior management in an
          aggregate amount outstanding not to exceed $750,000; (viii) stock,
          obligations or securities received in settlement of debts created in
          the ordinary course of business and owing to the Corporation or any of
          its Restricted Subsidiaries or in satisfaction of judgments or claims;
          (ix) a Person engaged in a Permitted Business or a loan or advance to
          the Corporation the proceeds of which are used solely to make an
          investment in a Person engaged in a

                                        4
<PAGE>   40

         Permitted Business or a Guarantee by the Corporation of Indebtedness
         of any Person in which such Investment has been made; provided,
         however, that no Permitted Investments may be made pursuant to this
         clause (ix) to the extent the amount thereof would, when taken
         together with all other Permitted Investments made pursuant to this
         clause (ix), exceed $3 million in the aggregate (plus, to the extent
         not previously reinvested, any return of capital realized on Permitted
         Investments made pursuant to this clause (ix), or any release or other
         cancellation of any Guarantee constituting such Permitted Investment);
         (x) prepayments and other credits to suppliers made in the ordinary
         course of business consistent with the past practices of the
         Corporation and its Restricted Subsidiaries; (xi) Investments in
         connection with pledges, deposits, payments or performance bonds made
         or given in the ordinary course of business in connection with or to
         secure statutory, regulatory or similar obligations, including
         obligations under health, safety or environmental obligations; (xii)
         the transfer, assignment, conveyance or licensing of the Source I/C
         Assets to NewCo as contemplated by the Contribution Agreement; and
         (xiii) the making of capital contributions by the Corporation to NewCo
         pursuant to the Operating Agreement in an amount not to exceed, in the
         aggregate, the sum of $10 million plus the net cash proceeds of one or
         more Equity Offerings by the Corporation to the extent the intended
         use of proceeds is for the making of such capital contribution to
         NewCo.

         4.       Paragraph (o) of the Certificate of Designation is amended by
adding the following new defined terms therein in their applicable alphabetical
order:

                  "Contribution Agreement" means the Contribution Agreement
         dated as of July 29, 1999 by and among Insight, the Corporation and
         NewCo.

                  "Insight" means Insight Interactive, LLC, a Delaware limited
         liability company, and its successors and assigns.

                  "Insight Communications" means Insight Communications
         Corporation, Inc., a Delaware corporation, and its successors and
         assigns.

                  "NewCo" means NewCo, L.L.C., a Delaware limited liability
         company, and its successors and assigns.

                  "NewCo License" means the exclusive, perpetual, royalty free,
         irrevocable, worldwide license, with the right to sublicense, to all
         of the intellectual property that has application in the VirtualModem
         and Interactive Channel businesses not freely assignable by the
         Corporation and the Source Subsidiaries (as defined in the
         Contribution Agreement) to the extent such intellectual property
         permits the grant of licenses.

                                        5
<PAGE>   41

                  "Operating Agreement" means the Limited Liability Corporation
         Agreement of NewCo, to be entered into by and between the Corporation
         and Insight as of the closing date as contemplated by the Contribution
         Agreement, as the same may be amended or modified from time to time in
         accordance with the terms thereof.

                  "Purchase Agreement" means the Common Stock and Warrants
         Purchase Agreement dated as of July 29, 1999 by and between the
         Corporation and Insight.

                  "Source I/C Assets" means the assets transferred, assigned
         and conveyed by the Corporation and the Source Subsidiaries (as
         defined in the Contribution Agreement) to NewCo pursuant to the
         Contribution Agreement and the NewCo License.

                                        6
<PAGE>   42

                  IN WITNESS WHEREOF, said Source Media, Inc. has caused this
Amendment to the Certificate of Designation to be signed by Stephen W. Palley,
its Chief Executive Officer, this 17th day of November, 1999.

                                            SOURCE MEDIA, INC.

                                            By: /s/ Stephen W. Palley
                                                -------------------------------
                                                  Stephen W. Palley,
                                                  Chief Executive Officer

                                        7
<PAGE>   43

                                  AMENDMENT TO
                   CERTIFICATE OF DESIGNATION OF THE POWERS,
                    PREFERENCES AND RELATIVE, PARTICIPATING,
                  OPTIONAL AND OTHER SPECIAL RIGHTS OF 13 1/2%
                  SENIOR PAYMENT-IN-KIND PREFERRED STOCK, AND
              QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

                         Pursuant to Section 242 of the
                General Corporation Law of the State of Delaware
                 and approved by a majority of the Stockholders

                  Source Media, Inc. (the "Corporation"), 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
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and pursuant to the provisions of Section 242 of the General Corporation Law of
the State of Delaware, said Board of Directors, duly approved and adopted the
following resolution:

                  RESOLVED, that, pursuant to the authority vested in the Board
         of Directors by the Certificate of Incorporation of the Corporation,
         the Board of Directors does hereby amend the Certificate of
         Designation of the Powers, Preferences and Relative, Participating,
         Optional and Other Special Rights of 13 1/2% Senior Payment-In-Kind
         Preferred Stock and Qualifications, Limitations and Restrictions
         Thereof (the "Certificate of Designation"), as filed with the Office
         of the Secretary of State of the State of Delaware on October 29,
         1997, and as amended on November 17, 1999, as follows:

         1.       Paragraph (l)(iii) of the Certificate of Designation is
amended and restated in its entirety as follows:

                  (A) The Corporation will not, and will not permit any of its
         Restricted Subsidiaries to, directly or indirectly, enter into or
         conduct any transaction or series of related transactions (including
         the purchase, sale, lease or exchange of any property or the rendering
         of any service) with or for the benefit of any Affiliate of the
         Corporation, other than a Wholly-Owned Subsidiary (an "Affiliate

                                        8
<PAGE>   44

         Transaction") unless: (i) the terms of such Affiliate Transaction are
         no less favorable to the Corporation or such Restricted Subsidiary, as
         the case may be, than those that could be obtained at the time of such
         transaction in arm's length dealings with a Person who is not such an
         Affiliate; (ii) in the event such Affiliate Transaction involves an
         aggregate amount in excess of $1 million, the terms of such
         transaction have been approved by a majority of members of the Board
         of Directors of the Corporation and by a majority of the disinterested
         members of such Board, if any (and such majority or majorities, as the
         case may be, determines that such Affiliate Transaction satisfies the
         criteria in (i) above); and (iii) in the event such Affiliate
         Transaction involves an aggregate amount in excess of $2 million, the
         Corporation has received a written opinion from an independent
         investment banking firm of nationally recognized standing that such
         Affiliate Transaction is fair to the Corporation or such Restricted
         Subsidiary, as the case may be, from a financial point of view;
         provided, however, that this clause (iii) shall not apply to (x) any
         transaction between or among the Corporation and its Restricted
         Subsidiaries, on the one hand, and NewCo and its Affiliates, on the
         other hand, (y) any transaction between or among the Company and its
         Restricted Subsidiaries, on the one hand, and SourceSuite Acquisition
         and its Affiliates, on the other hand and (z) the sale, exchange or
         other disposition of any Liberate Shares so long as the proceeds are
         used in the business of the Company.

                  (B) The foregoing paragraph (A) shall not apply to (i) any
         Restricted Payment permitted to be made pursuant to paragraph (l)(ii)
         hereof, (ii) any issuance of securities, or other payments, awards or
         grants in cash, securities or otherwise pursuant to, or the funding
         of, employment arrangements, or any stock options and stock ownership
         plans for the benefit of employees, officers and directors,
         consultants and advisors approved by the Board of Directors of the
         Corporation, (iii) loans or advances to employees in the ordinary
         course of business of the Corporation or any of its Restricted
         Subsidiaries in aggregate amount outstanding not to exceed $250,000 at
         any time, (iv) loans or advances to senior management of the
         Corporation which loans and advances are secured by shares of Common
         Stock of the Corporation owned by such senior management, in an
         aggregate amount outstanding not to exceed $750,000, (v) any
         transaction between Wholly-Owned Subsidiaries, (vi) indemnification
         agreements with, and the payment of fees and indemnities to,
         directors, officers and employees of the Corporation and its
         Restricted Subsidiaries, in each case in the ordinary course of
         business, (vii) transactions pursuant to agreements in existence on
         the Issue Date which are (x) described in the Corporations offering
         memorandum dated October 30, 1997 (the "Offering Memorandum") or (y)
         otherwise, in the aggregate, immaterial to the Corporation and its
         Restricted Subsidiaries taken as a whole, (viii) any employment,
         non-competition

                                        9
<PAGE>   45

         or confidentiality agreements entered into by the Corporation or any
         of its Restricted Subsidiaries with its employees in the ordinary
         course of business, (ix) the issuance of Capital Stock of the
         Corporation (other than Disqualified Stock), (x) Permitted Investments
         pursuant to clauses (xii), (xiii), (xiv), and (xv) of the definition
         thereof and (xi) any transaction or arrangement entered into pursuant
         to the Contribution Agreement or the Purchase Agreement.

         2.       Each of the following current terms contained in paragraph
(o) of the Certificate of Designation is amended and restated in its entirety
as follows:

                  "Asset Disposition" means any sale, lease, transfer, issuance
         or other disposition (or series of related sales, leases, transfers,
         issuances or dispositions that are part of a common plan) of shares of
         Capital Stock of (or any other equity interests in) a Restricted
         Subsidiary (other than directors' qualifying shares) or of any other
         property or other assets (each referred to for the purposes of this
         definition as a "disposition") by the Corporation or any of its
         Restricted Subsidiaries (including any disposition by means of a
         merger, consolidation or similar transaction) other than (i) a
         disposition by a Restricted Subsidiary to the Corporation or by the
         Corporation or a Restricted Subsidiary to a Wholly-Owned Subsidiary,
         (ii) a disposition of inventory in the ordinary course of business and
         for which adequate reserves have been established in accordance with
         GAAP, (iii) a disposition of obsolete or worn out equipment that is no
         longer useful in the conduct of the business of the Corporation and
         its Restricted Subsidiaries and that is disposed of in each case in
         the ordinary course of business, (iv) dispositions of property for net
         proceeds which, when taken collectively with the net proceeds of any
         other such dispositions under this clause (iv) that were consummated
         since the beginning of the calendar year in which such disposition is
         consummated, do not exceed $1 million, (v) transactions permitted
         under paragraph (g) hereof, (vi) Permitted Investments pursuant to
         clauses (xii), (xiii), (xiv) and (xv) of the definition thereof and
         (vii) the sale, transfer, exchange or other disposition of any
         Liberate Shares so long as the proceeds are used in the business of
         the Company. Notwithstanding anything to the contrary contained above,
         a Restricted Payment made in compliance with paragraph (l)(ii) shall
         not constitute an Asset Disposition except for purposes of
         determinations of the Consolidated Coverage Ratio.

                  "NewCo" means SourceSuite LLC, a Delaware limited liability
         company, and its successors and assigns.

                  "Permitted Investments" means an Investment by the
         Corporation or any of its Restricted Subsidiaries in (i) a
         Wholly-Owned Subsidiary of the Corporation

                                       10
<PAGE>   46

         (other than Interactive Channel Technologies, Inc., 997758 Ontario,
         Inc., Cableshare (U.S.) Limited, Cableshare International Inc. and
         1229501 Ontario, Inc.); provided, however, (A) that the primary
         business of such Wholly-Owned Subsidiary is a Permitted Business and
         (B) in the case of Investments by the Corporation or any of its
         Restricted Subsidiaries in Interactive Channel, Inc., in an amount not
         to exceed the amount set forth in clause (B) of paragraph (l)(ii);
         (ii) another Person if as a result of such Investment such other
         Person becomes a Wholly-Owned Subsidiary of the Corporation or is
         merged or consolidated with or into, or transfers or conveys all or
         substantially all its assets to, the Corporation or a Wholly-Owned
         Subsidiary of the Corporation, provided, however, that in each case
         such Person's primary business is a Permitted Business; (iii)
         Temporary Cash Investments; (iv) receivables owing to the Corporation
         or any of its Restricted Subsidiaries, created or acquired in the
         ordinary course of business and payable or dischargeable in accordance
         with customary trade terms; (v) payroll, travel 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 and advances
         to employees made in the ordinary course of business consistent with
         past practices of the Corporation or such Restricted Subsidiary in an
         aggregate amount outstanding at any one time not to exceed $250,000;
         (vii) loans or advances to senior management of the Corporation which
         loans or advances are fully secured on the date of such loans or
         advances by shares of Common Stock of the Corporation owned by such
         senior management in an aggregate amount outstanding not to exceed
         $750,000; (viii) stock, obligations or securities received in
         settlement of debts created in the ordinary course of business and
         owing to the Corporation or any of its Restricted Subsidiaries or in
         satisfaction of judgments or claims; (ix) a Person engaged in a
         Permitted Business or a loan or advance to the Corporation the
         proceeds of which are used solely to make an investment in a Person
         engaged in a Permitted Business or a Guarantee by the Corporation of
         Indebtedness of any Person in which such Investment has been made;
         provided, however, that no Permitted Investments may be made pursuant
         to this clause (ix) to the extent the amount thereof would, when taken
         together with all other Permitted Investments made pursuant to this
         clause (ix), exceed $3 million in the aggregate (plus, to the extent
         not previously reinvested, any return of capital realized on Permitted
         Investments made pursuant to this clause (ix), or any release or other
         cancellation of any Guarantee constituting such Permitted Investment);
         (x) prepayments and other credits to suppliers made in the ordinary
         course of business consistent with the past practices of the
         Corporation and its Restricted Subsidiaries; (xi) Investments in
         connection with pledges, deposits, payments or performance bonds made
         or given in the ordinary course of business in connection with or to
         secure statutory, regulatory or similar obligations, including
         obligations under health, safety or environmental obligations; (xii)
         the transfer,

                                       11
<PAGE>   47
         assignment, conveyance or licensing of the Source I/C Assets to NewCo
         as contemplated by the Contribution Agreement; (xiii) the making of
         capital contributions by the Corporation to NewCo pursuant to the
         Operating Agreement in an amount not to exceed, in the aggregate, the
         sum of $10 million plus the net cash proceeds of one or more Equity
         Offerings by the Corporation to the extent the intended use of proceeds
         is for the making of such capital contribution to NewCo; (xiv) the
         transfer, exchange or other disposition by the Company of its ownership
         interests in NewCo for the Merger Consideration as contemplated by the
         Merger Agreement and (xv) the making of capital contributions by the
         Company to SourceSuite Acquisition pursuant to the SourceSuite
         Acquisition Operating Agreement in an amount not to exceed, in the
         aggregate, the sum of $20 million, as well as such contributions to
         SourceSuite Acquisition in respect of the net cash proceeds of one or
         more equity offerings by the Company to the extent the intended use of
         proceeds, as set forth in the offering documents, is for the making of
         such capital contribution to SourceSuite Acquisition.

         3.       Paragraph (o) of the Certificate of Designation is amended by
adding the following new defined terms therein in their applicable alphabetical
order:

                  "Liberate" means Liberate Technologies, a Delaware
         corporation, and its successors and assigns.

                  "Liberate Acquisition" means Liberate Acquisition LLC, a
         Delaware limited liability company, and its successors and assigns.

                  "Liberate Shares" means the shares of common stock of
         Liberate to be received by the Company pursuant to the Merger
         Agreement.

                  "Merger" means the merger of Liberate Acquisition with and
         into NewCo as contemplated by the Merger Agreement.

                  "Merger Agreement" means the Merger Agreement and Plan of
         Reorganization dated as of January 12, 2000 by and among Liberate,
         Liberate Acquisition, NewCo, SourceSuite Acquisition, the Company,
         Insight and Insight Communications.

                  "Merger Consideration" means (a) either (i) 443,000 Liberate
         Shares or (ii) 378,536 Liberate Shares plus $15 million in cash and
         (b) as a working capital adjustment, cash equal to one-half of the
         cash and cash equivalents of NewCo at the

                                       12
<PAGE>   48

         time of the Merger, less any taxes payable by NewCo on the sale of the
         Retained Business to SourceSuite Acquisition.

                  "Retained Business" means the Interactive Channel business of
         NewCo including its server-side interactive programming guide and
         related content business but excluding assets and properties used in
         its VirtualModem business.

                  "SourceSuite Acquisition" means SourceSuite Acquisition LLC,
         a Delaware limited liability company, and its successors and assigns.

                  "SourceSuite Acquisition Operating Agreement" means the
         limited liability company operating agreement of SourceSuite
         Acquisition, to be entered into by and between the Company and Insight
         as of the closing date of the Merger, as the same may be amended or
         modified from time to time in accordance with the terms thereof.

                                       13
<PAGE>   49

                  IN WITNESS WHEREOF, said Source Media, Inc. has caused this
Amendment to the Certificate of Designation to be signed by Stephen W. Palley,
its President and Chief Executive Officer, this 2d day of March, 2000.

                                       SOURCE MEDIA, INC.

                                       By: /s/ Stephen W. Palley
                                           -------------------------------------
                                           Stephen W. Palley,
                                           President and Chief Executive Officer

                                       14

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