Document:

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                                                                     Exhibit 4.4

                       NUEVO GRUPO IUSACELL, S.A. de C.V.

                                  $350,000,000

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT (this "SECURITY AGREEMENT") is made and entered
into as of December 16, 1999 by Nuevo Grupo Iusacell, S.A. de C.V., a limited
liability stock corporation (sociedad anonima de capital variable) organized
under the laws of Mexico (the "PLEDGOR"), The Bank of New York, a New York
banking corporation, having an office at 101 Barclay Street, Floor 21 West, New
York, New York 10286, as trustee (in such capacity, the "TRUSTEE") for the
holders from time to time (the "HOLDERS") of the Securities (as defined herein)
issued by the Pledgor under the Indenture referred to below and The Bank of New
York, as securities intermediary (the "SECURITIES INTERMEDIARY").

                                   WITNESSETH

         WHEREAS, the Pledgor and the Trustee have entered into that certain
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "INDENTURE"), pursuant to which the
Pledgor is issuing on the date hereof $350,000,000 in aggregate principal amount
of 14 1/4% Senior Notes due 2006 (and along with such notes that may from time
to time be issued in substitution therefor, the "SECURITIES"); and

         WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to (i)
purchase or cause the purchase of Pledged Securities (as defined herein) in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments in respect thereof to provide for the payment of the first six
scheduled interest payments due on the Securities and (ii) place such Pledged
Securities (or cause them to be replaced) in an account maintained by the
Trustee with the Securities Intermediary for the benefit of Holders of the
Securities; and
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         WHEREAS, the Pledgor has agreed to purchase and deliver to the Trustee
United States Treasury securities in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Pledgor and delivered to the Trustee, upon receipt of scheduled interest and
principal payments of such securities, to provide for payment in full of each of
the first six scheduled interest payments that become due on the Securities and
principal on the Securities in the event that the Securities become due and
payable prior to such time as the first six scheduled interest payments thereon
shall have been paid in full ("OBLIGATIONS"); and

         WHEREAS, the Pledgor has agreed to (i) grant to the Trustee for its
benefit and the ratable benefit of the Holders of the Securities a security
interest in the Pledged Securities and related collateral and (ii) execute and
deliver this Security Agreement in order to secure the payment and performance
by the Pledgor of all the Obligations; and

         WHEREAS, the Trustee has opened an account (the "SECURITY ACCOUNT")
with the Securities Intermediary, at its office at 101 Barclay Street, Floor 21
West, New York, New York 10286, Account No. 016843, in the name of the Trustee,
with respect to which the Trustee is the owner and sole entitlement holder and
which is under the sole dominion and control of the Trustee but subject to the
terms of this Security Agreement. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such terms in the
Indenture.

         NOW, THEREFORE, in consideration of the mutual promises herein
contained and in order to induce the Holders of the Securities to purchase the
Securities, the Pledgor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Securities, as
follows:

         SECTION 1. Pledge and Grant of Security Interest. As security for the
prompt and complete payment and performance when due of the Obligations (whether
at the stated maturity or otherwise), the Pledgor hereby pledges to the Trustee
for its benefit and for the ratable benefit of the Holders of the Securities,
and grants to the Trustee for its benefit and for the ratable benefit of the
Holders of the Securities, a continuing first priority security interest in and
to all of the Pledgor's right, title and interest in, to and under the following
(wherever located), whether investment property, general intangibles, other
rights, interests, claims and remedies or proceeds or otherwise (collectively,
the "PLEDGED COLLATERAL"): (a) the United States Treasury securities identified
by CUSIP Number in Exhibit A to this Security Agreement and any additional
securities substituted therefore (the "PLEDGED SECURITIES"), (b) any and all
applicable "SECURITY ENTITLEMENTS" (as defined in Section 8-102(a)(17) of the
Uniform Commercial Code in effect in the State of New York (the "UCC")) to the
Pledged

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Securities, (c) the Security Account and all "financial assets" (as defined in
UCC Section 8-102(a)(9), "FINANCIAL Assets"), funds, certificates, instruments,
assets and properties, if any, from time to time carried therein or representing
or evidencing the Security Account, (d) any and all related accounts in which
Security Entitlements to the Pledged Securities are carried, and (e) all
proceeds of any and all of the Pledged Collateral (including, without
limitation, proceeds that constitute property of the types described in clauses
(a) - (d) of this Section 1).

         SECTION 2. Security for Obligation. This Security Agreement secures the
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Obligations.

         SECTION 3. Delivery of Pledged Securities; Security Agreement;
Interest. (a) The Pledged Securities shall be pledged and transferred to the
Trustee and the Trustee shall become the holder of a Security Entitlement to the
Pledged Securities through action by the Securities Intermediary, as confirmed
(in writing or electronically or otherwise in accordance with standard industry
practice) to the Trustee by the Securities Intermediary either (i) indicating by
book-entry that the Pledged Securities and all Security Entitlements thereto
have been credited to the Security Account, or (ii) acquiring the Pledged
Securities or a Security Entitlement thereto for the Trustee and accepting the
same for credit to the Security Account.

          (b) Prior to or concurrently with the execution and delivery hereof
and prior to the transfer to the Trustee of the Pledged Securities (or
acquisition by the Trustee of any Security Entitlement thereto) as provided in
subsection (a) of this Section 3, the Trustee shall establish with the
Securities Intermediary the Security Account on the books of the Securities
Intermediary as a "securities account" within the meaning of UCC Section 8-501
(A "SECURITIES Account"), owned by and in the name of the Trustee, segregated
from all other custodial or collateral accounts, such Security Account to be
maintained at the offices of the Securities Intermediary at 101 Barclay Street,
Floor 21 West, New York, New York 10286, and the Securities Intermediary shall
maintain a Securities Account at the Federal Reserve Bank of New York ("FRBNY").
Upon transfer of the Pledged Securities to the Securities Intermediary (or the
Securities Intermediary's acquisition of the Security Entitlements thereto), as
confirmed to the Securities Intermediary by FRBNY or another securities
intermediary, the Securities Intermediary shall make appropriate book entries
indicating that the Pledged Securities and/or such Security Entitlements have
been credited to the Trustee and the Security Account. Subject to the other
terms and conditions of this Security Agreement, all Financial Assets, funds or
other property held by the Trustee pursuant to this Security Agreement shall be
held in the Security Account subject (except as expressly provided in Section
4(a), (b) and (c) hereof) to the exclusive dominion and control

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(including "control" as defined in UCC Section 9-115(1)(e)) of the Trustee and
exclusively for the benefit of the Trustee and for the ratable benefit of the
Holders of the Securities, and segregated from all other funds or other property
otherwise held by the Trustee.

          (c) The Trustee shall, in accordance with all applicable laws, have
sole dominion and control (including "control" as defined in UCC Section
9-115(l)(e)) over the Security Account, and it shall be a term and condition of
the Security Account, and the Pledgor irrevocably agrees with the Trustee and
the Securities Intermediary, notwithstanding any other term or condition to the
contrary in any other agreement, that no Pledged Collateral shall be released to
or for the account of, or withdrawn by or for the account of, the Pledgor or any
other Person except as expressly provided in this Security Agreement.

          (d) The Trustee shall, in accordance with and subject to all
applicable laws, be the sole entitlement holder of, and have the sole power to
originate "ENTITLEMENT ORDERS" (as defined in UCC Section 8-102(a)(8)) with
respect to, the Security Account and all United States Treasury securities and
other Financial Assets held therein, and the Securities Intermediary does hereby
agree that it will comply with Entitlement Orders issued by the Trustee with
respect to the Security Account and all assets and properties from time to time
carried in the Security Account, including such securities, Security
Entitlements and other Financial Assets, without further consent of the Pledgor
or any other Person (except, to the extent required under the Indenture, of the
Holders), and that no Pledged Collateral shall be released to or for the account
of, or withdrawn by or for the account of, the Pledgor or any other Person
except as expressly provided in this Security Agreement.

          (e) All Pledged Collateral shall be retained in the Security Account
pending disbursement pursuant to the terms hereof.

          (f) Concurrently with the execution and delivery of this Security
Agreement, the Trustee and the Securities Intermediary are delivering to the
Pledgor and to Chase Securities Inc., Salomon Smith Barney Inc. and J.P. Morgan
Securities Inc. as the initial purchasers of the Securities, a duly executed
certificate, in the form of Exhibit B hereto, of each of an officer of the
Trustee and the Securities Intermediary, confirming the Trustee's establishment
and maintenance of the Security Account and the Security Intermediary's receipt
and holding of the Pledged Securities or a Security Entitlement thereto and the
crediting of the Pledged Securities or such Security Entitlement to the Security
Account, all in accordance with this Security Agreement.

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          (g) Concurrently with the execution and delivery of this Security
Agreement, if required by the Trustee the Pledgor shall deliver to the Trustee
executed copies of proper financing statements, duly filed under the UCC of the
State of New York, covering the Pledged Collateral described in this Security
Agreement.

          (h) Subsequent to the execution and delivery of this Security
Agreement, the Pledgor shall deliver to the Trustee an opinion of a nationally
recognized firm of independent public accountants, selected by the Pledgor, to
the effect that the scheduled interest and principal payments of the Pledged
Securities would be sufficient to provide for the payment in full of each of the
first six scheduled interest payments that become due on the Securities.

          (i) The Security Account shall be governed by the law of the State of
New York.

         SECTION 4. Disbursements. (a) At least three Business Days prior to the
due date of any of the first six scheduled interest payments on the Securities,
the Pledgor may, pursuant to written instructions given by the Pledgor to the
Trustee (a "COMPANY ORDER"), direct the Trustee to release from the Security
Account and pay to the Holders of the Securities on behalf of the Pledgor
proceeds sufficient to provide for payment in full of such interest then due on
the Securities. Upon receipt of a Company Order, if no Default or Event of
Default under the Indenture shall have occurred and be continuing, the Trustee
will release such proceeds in accordance with the Company Order and the payment
provisions of the Indenture to the Holders of the Securities from (and to the
extent of) proceeds of the Pledged Securities in the Security Account. Nothing
in this Section 4 shall affect the Trustee's rights to apply the Pledged
Collateral to the payment of amounts due on the Securities upon acceleration
thereof.

          (b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Pledged Collateral is security from a source of
funds other than the Security Account ("OTHER FUNDS"), the Pledgor may, after
payment in full of such interest payment, direct the Trustee pursuant to a
Company Order to release to the Pledgor or to another party at the direction of
the Pledgor (the "PLEDGOR'S DESIGNEE") proceeds from the Security Account in an
amount less than or equal to the amount of Other Funds applied to such interest
payment. Upon receipt by the Trustee of such Company Order and provided the
Holders of the Securities have received such interest payment, if no Default or
Event of Default (as defined in the Indenture) shall have occurred and be
continuing, the Trustee shall pay over to the Pledgor or the Pledgor's Designee,
as the case may be, the requested amount from proceeds in the Security Account
as soon as practicable (on the same Business Day if practicable). As a condition
to any

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release of funds to the Pledgor pursuant to this Section 4(b), the Pledgor shall
deliver to the Trustee a certificate signed by an officer of the Pledgor stating
that the Pledgor has made the interest payment from a source of funds other than
the Security Account, and that such release has been duly authorized by the
Pledgor and will not contravene any provision of applicable law or the by-laws
(estatutos sociales) of the Pledgor or any material agreement or other material
instrument binding upon the Pledgor or any of its subsidiaries or any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the Pledgor or any of its subsidiaries or result in the creation or
imposition of any Lien on any assets of the Pledgor, except for the security
interest granted under the Security Agreement.

          (c) If at any time the principal of and interest on the Pledged
Securities exceeds 100% of the amount sufficient, in the written opinion of a
nationally recognized firm of independent accountants selected by the Pledgor
and delivered to the Trustee, to provide for payment in full of the Obligations,
the Pledgor may direct the Trustee to release any such excess amount to the
Pledgor or to any Pledgor's Designee. Upon receipt of a Company Order (which
shall include a certificate from such nationally recognized firm of independent
accountants stating the amount by which the Pledged Securities exceed the amount
required to be held in the Security Account), if no Default or Event of Default
(as defined in the Indenture) shall have occurred and be continuing, the Trustee
shall pay over to the Pledgor or the Pledgor's Designee, as the case may be, any
such excess amount.

          (d) Upon payment in full of the Obligations, or if the Company shall
become obligated under the Indenture to redeem all of the outstanding Securities
and such Securities shall have been redeemed, then, if no Default or Event of
Default (as defined in the Indenture) shall have occurred and be continuing, the
security interest in the Pledged Collateral evidenced by this Security Agreement
will automatically terminate and be of no further force and effect and the
Pledged Collateral shall promptly (on the same Business Day if practicable) be
paid over and transferred to the Pledgor as directed in writing by the Pledgor.
Furthermore, upon the release of any Pledged Collateral from the Security
Account in accordance with the terms of this Security Agreement, whether upon
release of Pledged Collateral to Holders as payment of interest or otherwise,
the security interest evidenced by this Security Agreement in such released
Pledged Collateral will automatically terminate and be of no further force and
effect.

          (e) At least three Business Days prior to the due date of each of the
first six scheduled interest payments on the Securities, the Pledgor shall give
the Trustee notice (by Company Order) as to whether such interest payment will
be made pursuant to Section 4(a) or 4(b) and the respective amounts of interest
that

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will be paid from the Security Account and from Other Funds. Any Other Funds to
be used to make any interest payment shall be delivered to the Trustee, in
immediately available funds, prior to 10:00 a.m. (New York City time) on such
interest payment date. If no such notice is given or such Other Funds have not
been so delivered, the Trustee is hereby directed to act pursuant to Section
4(a) as if it had received a Company Order pursuant thereto for the payment in
full of the interest then due from the Security Account.

          (f) The Trustee shall sell the Pledged Collateral in the Security
Account (pursuant to written instructions from Pledgor) in order to make any
scheduled payment of interest unless there are sufficient funds in the Security
Account on such interest payment date.

          (g) Nothing contained in Section 1, Section 3, this Section 4, Section
11 or any other provision of this Security Agreement shall (i) afford the
Pledgor any right to issue Entitlement Orders with respect to any Security
Entitlement to the Pledged Securities or any Securities Account in which any
such Security Entitlement may be carried, or otherwise afford the Pledgor rights
to any such Security Entitlement or (ii) except as otherwise specified under
this Security Agreement (or required by applicable law), give rise to any other
rights of the Pledgor with respect to the Pledged Securities, any Security
Entitlement thereto or any Securities Account in which any such Security
Entitlement may be carried (except as expressly provided in Sections 4(a), (b)
and (c) hereof).

         SECTION 5.  Representations and Warranties.  The Pledgor hereby
represents and warrants that, as of the date hereof:

                  (a) The execution and delivery by the Pledgor of, and the
         performance by the Pledgor of its obligations under, this Security
         Agreement will not contravene any provision of applicable law or
         statute or the by-laws (estatutos sociales) of the Pledgor or any
         material agreement or other material instrument binding upon the
         Pledgor or any of its subsidiaries or any judgment, order or decree of
         any governmental body, agency or court having jurisdiction over the
         Pledgor or any of its subsidiaries, or result in the creation or
         imposition of any Lien on any assets of the Pledgor, except for the
         security interests granted under this Security Agreement; no consent,
         approval, authorization or order of, or qualification with, or other
         action by, any governmental or regulatory body or agency or any third
         party is required (i) for the execution, delivery or performance by the
         Pledgor of this Security Agreement, (ii) for the grant by the Pledgor
         of the security interest granted hereby, (iii) except for the actions
         required pursuant to Section 3(b), for the perfection and maintenance
         of the pledge and security interest created hereby (including

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         the first priority nature of such pledge and security interest,
         assuming compliance by the Securities Intermediary with all obligations
         contained in this Security Agreement), or (iv) except for any such
         consents, approvals, authorizations or orders required to be obtained
         by the Trustee (or the Holders) for reasons other than the consummation
         of this transaction, for the exercise by the Trustee of the rights
         provided for in this Security Agreement or the remedies in respect of
         the Pledged Collateral pursuant to this Security Agreement.

                  (b) Immediately before depositing the Pledged Securities into
         the Security Account, the Pledgor is the legal and beneficial owner of
         the Pledged Collateral free and clear of any Lien or claims of any
         person or entity (except for the security interests granted under this
         Security Agreement). No financing statement or other instrument similar
         in effect covering the Pledgor's interest in the Pledged Securities is
         on file in any public office, other than any financing statements filed
         pursuant to this Security Agreement.

                  (c) This Security Agreement has been duly authorized, validly
         executed and delivered by the Pledgor and assuming the due
         authorization, execution and delivery hereof by the Trustee,
         constitutes a valid and binding agreement of the Pledgor, enforceable
         against the Pledgor in accordance with its terms, except to the extent
         that such enforceability may be limited by applicable bankruptcy,
         insolvency, fraudulent conveyance, reorganization, moratorium and other
         similar laws affecting creditors' rights generally and by general
         equitable principles (whether considered in a proceeding in equity or
         at law).

                  (d) Upon the transfer to the Trustee of the Pledged Securities
         and the acquisition by the Trustee of a Security Entitlement thereto in
         accordance with Section 3, and the compliance by the Securities
         Intermediary with the provisions of this Security Agreement, the pledge
         of and grant of a security interest in the Pledged Collateral securing
         the payment of the Obligations for the benefit of the Trustee and the
         Holders of the Securities will constitute a valid first priority
         perfected security interest in such Pledged Collateral, enforceable as
         such against all creditors of the Pledgor (and any persons purporting
         to purchase any of the Pledged Collateral from the Pledgor), and all
         filings and actions (other than such transfer to the Trustee of the
         Pledged Securities) necessary or desirable to perfect and protect such
         security interest have been duly taken.

                  (e) There are no legal or governmental proceedings pending or,
         to the best of the Pledgor's knowledge, threatened to which the Pledgor
         or

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         any of its subsidiaries is a party or to which any property or assets
         of the Pledgor or any of its subsidiaries is subject that would
         materially adversely affect the power or ability of the Pledgor to
         perform its obligations under this Security Agreement or to consummate
         the transactions contemplated hereby.

                  (f) The pledge of the Pledged Collateral pursuant to this
         Security Agreement is not prohibited by law or governmental regulation
         (including, without limitation, Regulations T, U and X of the Board of
         Governors of the Federal Reserve System) applicable to the Pledgor.

                  (g) No Event of Default (as defined herein) exists.

                  (h) The Pledged Securities have been pledged and transferred
         to the Trustee.

         SECTION 6. Further Assurances. The Pledgor will, promptly upon request
by the Trustee, execute and deliver or cause to be executed and delivered, or
use its commercially reasonable efforts to procure, all assignments, instruments
and other documents, all in form and substance reasonably satisfactory to the
Trustee, any instruments to the Trustee and take any other actions that are
necessary or desirable, to perfect, continue the perfection of, or protect the
first priority of the Trustee's security interest in and to the Pledged
Collateral, to protect the Pledged Collateral against the rights, claims, or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee), to enable the Trustee to enforce its
rights and remedies hereunder, or to effect the purposes of this Security
Agreement. A photocopy or other reproduction of this Security Agreement or any
financing statement covering the Pledged Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. The Pledgor will
promptly pay all reasonable costs incurred in connection with any of the
foregoing. The Pledgor also agrees to take all actions that are necessary to
perfect or continue the perfection of, or to protect the first priority of, the
Trustee's security interest in and to the Pledged Collateral, including the
filing of all necessary financing and continuation statements, and to protect
the Pledged Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Trustee).

         SECTION 7. Covenants. The Pledgor covenants and agrees with the Trustee
for the benefit of the Holders of the Securities that from and after the date of
this Security Agreement until the payment in full in cash of the Obligations:

                  (a) that (i) it will not (and will not purport to) sell or
         otherwise dispose of, or grant any option or warrant with respect to,
         any of the

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         Pledged Collateral or its beneficial interest therein, and (ii) it will
         not create or permit to exist any Lien or other adverse interest in or
         with respect to its beneficial interest in any of the Pledged
         Collateral (except for the security interests granted under this
         Security Agreement) and at all times will be the sole beneficial owner
         of the Pledged Collateral; and

                  (b) that it will not (i) enter into any agreement or
         understanding that restricts or inhibits or purports to restrict or
         inhibit the Trustee's rights or remedies hereunder, including, without
         limitation, the Trustee's right to sell or otherwise dispose of the
         Pledged Collateral or (ii) fail to pay or discharge any tax, assessment
         or levy of any nature with respect to its beneficial interest in the
         Pledged Collateral not later than five days prior to the date of any
         proposed sale under any judgment, writ or warrant of attachment with
         respect to such beneficial interest.

         SECTION 8. Power of Attorney. Upon the occurrence and continuation of
an Event of Default, in addition to all of the powers granted to the Trustee
pursuant to the Indenture, the Pledgor hereby appoints and constitutes the
Trustee as the Pledgor attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Trustee's discretion, to take any action and to execute any
instrument that the Trustee may deem necessary or advisable to accomplish the
purposes of this Security Agreement including, without limitation, the following
powers: (a) collection of proceeds of any Pledged Collateral; (b) conveyance of
any item of Pledged Collateral to any purchaser thereof; (c) giving of any
notices or recording of any Liens under Section 6 hereof; and (d) paying or
discharging taxes or Liens levied or placed upon the Pledged Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by the Trustee in its reasonable discretion, and such payments
made by the Trustee to become part of the Obligations of the Pledgor to the
Trustee, due and payable immediately upon demand. The Trustee's authority under
this Section 8 shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Pledged Collateral
in the name of the Pledgor, execute and give receipt for any certificate of
ownership or any document constituting Pledged Collateral, transfer title to any
item of Pledged Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, protect or perfect the
security interest in the Pledged Collateral and to file the same, prepare, file
and sign the Pledgor's name on any notice of Lien, and to take any other actions
arising from or incident to the powers granted to the Trustee in this Security
Agreement. This power of attorney is coupled with an interest and is irrevocable
by the Pledgor. Notwithstanding

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anything to the contrary stated herein, the Trustee has no duty or obligation to
exercise any of the powers stated in this Section 8.

         SECTION 9. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the security interest of the Trustee and the Holders of the
Securities in and to the Pledged Collateral granted hereby and shall not be
interpreted to, and shall not impose any duties on the Trustee or the Securities
Intermediary in connection therewith, other than those expressly provided herein
or imposed under applicable law. Except as provided by applicable law or by the
Indenture, the Trustee shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Trustee accords similar property held by the Trustee for similar accounts, it
being understood that the Trustee in its capacity as such shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities or other matters relative to any Pledged
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters or (b) investing or reinvesting any of the Pledged Collateral or
any loss on any investment.

         SECTION 10. Indemnity. The Pledgor shall indemnify, hold harmless and
defend each of the Trustee and the Securities Intermediary and their respective
directors, officers, agents and employees from and against any and all claims,
actions, obligations, liabilities and expenses, including reasonable defense
costs, reasonable investigative fees and costs and reasonable legal fees and
expenses and damages arising from the Trustee's performance as Trustee under
this Security Agreement or from the Securities Intermediary's performance as
Securities Intermediary under this Security Agreement, except to the extent that
such claim, action, obligation, liability or expense is directly attributable to
the gross negligence or willful misconduct of such indemnified person.

         SECTION 11. Remedies upon Event of Default. If any Event of Default as
defined in the Indenture (any such Event of Default being referred to in this
Security Agreement as an "EVENT OF DEFAULT") shall have occurred and be
continuing:

                  (a) The Trustee and the Holders of the Securities shall have,
         in addition to all other rights given by law or by this Security
         Agreement or the Indenture, all of the rights and remedies with respect
         to the Pledged Collateral of a secured party under the UCC. In
         addition, with respect to any Pledged Collateral that shall then be in
         or shall thereafter come into the possession or custody of the Trustee,
         the Trustee may, upon the direction of a majority in aggregate
         principal amount of the Holders of the

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         Securities sell or cause the same to be sold at any broker's board or
         at public or private sale, in one or more sales or lots, for cash or on
         credit or for future delivery, without assumption of any credit risk.
         The purchaser of any or all Pledged Collateral so sold shall thereafter
         hold the same absolutely, free from any claim, encumbrance or right of
         any kind whatsoever created by or through the Pledgor. Unless any of
         the Pledged Collateral threatens, in the reasonable judgment of the
         Trustee, to decline speedily in value or is or becomes of a type sold
         on a recognized market, the Trustee will give the Pledgor reasonable
         notice of the time and place of any public sale thereof, or of the time
         after which any private sale or other intended disposition is to be
         made. To the extent permitted by applicable law, any sale of the
         Pledged Collateral conducted in conformity with reasonable commercial
         practices of banks, insurance companies, commercial finance companies,
         or other financial institutions disposing of property similar to the
         Pledged Collateral shall be deemed to be commercially reasonable. Any
         requirements of reasonable notice shall be met if such notice is mailed
         to the Pledgor as provided in Section 15.1 hereof at least 10 days
         before the time of the sale or disposition. The Trustee or any Holder
         of Securities may, in its own name or in the name of a designee or
         nominee, buy any of the Pledged Collateral at any public sale and, if
         permitted by applicable law, at any private sale. All expenses
         (including court costs and reasonable attorneys' fees, expenses and
         disbursements) of, or incident to, the enforcement of any of the
         provisions hereof shall be recoverable from the proceeds of the sale or
         other disposition of the Pledged Collateral.

                  (b) The Pledgor further agrees to use its reasonable best
         efforts to do or cause to be done all such other acts as may be
         necessary to make such sale or sales of all or any portion of the
         Pledged Collateral pursuant to this Section 11 valid and binding and in
         compliance with any and all other applicable requirements of law. The
         Pledgor further agrees that a breach of any of the covenants contained
         in this Section 11 will cause irreparable injury to the Trustee and the
         Holders of the Securities, that the Trustee and the Holders of the
         Securities have no adequate remedy at law in respect of such breach
         and, as a consequence, that each and every covenant contained in this
         Section 11 shall be specifically enforceable against the Pledgor, and
         the Pledgor hereby waives and agrees not to assert any defenses against
         an action for specific performance of such covenants except for a
         defense that no Event of Default has occurred.

                  (c) The Trustee may, without notice to the Pledgor except as
         required by law and at any time or from time to time, charge, set-off
         and

                                       12
<PAGE>   13
         otherwise apply all or any part of the Obligations against the Security
         Account or any part thereof.

         SECTION 12. Expenses. The Pledgor will upon demand pay to each of the
Trustee and the Securities Intermediary the amount of any and all reasonable and
documented expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents retained by the
Trustee or the Securities Intermediary that the Trustee or the Securities
Intermediary may incur in connection with (a) the review, negotiation and
administration of this Security Agreement (b) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Pledged
Collateral, (c) the exercise or enforcement of any of the rights of the Trustee
and the Holders of the Securities hereunder or (d) the failure by the Pledgor to
perform or observe any of the provisions hereof.

         SECTION 13. Security Interest Absolute. All rights of the Trustee and
the Holders of the Securities and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional under
all circumstances including but not limited to:

                  (a) any lack of validity or enforceability of the Indenture or
         any other agreement or instrument relating thereto;

                  (b) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the Obligations, or any other
         amendment or waiver of or any consent to any departure from the
         Indenture;

                  (c) any taking, exchange, surrender, release or non-perfection
         of any other collateral or any taking, release or amendment or waiver
         from any guaranty for all or any of the Obligations;

                  (d) any change, restructuring or termination of the corporate
         structure or the existence of the Pledgor, or any of its subsidiaries;
         or

                  (e) to the extent permitted by applicable law, any other
         circumstance which might otherwise constitute a defense available to,
         or a discharge of, the Pledgor in respect of the Obligations or of this
         Security Agreement.

         SECTION 14. Securities Intermediary's Representations, Warranties and
Covenants. The Securities Intermediary represents and warrants that it is as of
the date hereof, and it agrees that for so long as it maintains the Security
Account and acts as securities intermediary pursuant to this Security Agreement
it shall be a

                                       13
<PAGE>   14
"Securities Intermediary" (as defined in the UCC and in 31 C.F.R. Section 357.2)
and shall be eligible to maintain, and does maintain, a Participant's Securities
Account (as defined in 31 C.F.R. Section 357.2) in the name of the Securities
Intermediary with the FRBNY (a "FRBNY MEMBER SECURITIES ACCOUNT"). In
furtherance of the foregoing, the Securities Intermediary hereby:

                  (a) represents and warrants that it is a corporation that in
         the ordinary course of its business maintains Securities Accounts for
         others and is acting in that capacity hereunder and with respect to the
         Security Account;

                  (b) represents and warrants that it maintains the FRBNY Member
         Securities Account with the FRBNY and that the United Stated Treasury
         securities constituting the Pledged Securities transferred to the
         Securities Intermediary pursuant to Section 3(b) have been credited to
         the FRBNY Member Securities Account;

                  (c) agrees that the Security Account shall be an account to
         which Financial Assets may be credited, and the Securities Intermediary
         undertakes to treat the Trustee as the sole person entitled to exercise
         rights that comprise (and entitled to the benefits of) such Financial
         Assets, and entitled to exercise the rights of an Entitlement Holder
         and control in the manner contemplated by the UCC, and further agrees
         to identify the Trustee in the records of the Securities Intermediary
         as the sole person having a Securities Entitlement against the
         Securities Intermediary with respect to the Security Account and all
         Financial Assets credited thereto;

                  (d) hereby represents that it has not granted, and covenants
         that so long as it acts as Securities Intermediary hereunder it shall
         not grant, control (including without limitation, "control" as defined
         in UCC Sections 8- 106 and 9-115(1)(e)) over or with respect to
         any Pledged Collateral credited to the Security Account from time to
         time to time to any other Person other than the Trustee;

                  (e) covenants that in its capacity as Securities Intermediary
         hereunder and with respect to the Security Account, it shall not take
         any action inconsistent with, and represents and covenants that it is
         not and so long as this Security Agreement remains in effect will not
         become party to any agreement, the terms of which are inconsistent with
         the provisions of this Security Agreement;

                                       14
<PAGE>   15
                  (f) agrees, with the other parties to this Security Agreement,
         that any item of property credited to the Security Account shall be
         treated as a Financial Asset;

                  (g) agrees, with the other parties to this Security Agreement,
         so long as it serves as Securities Intermediary pursuant to this
         Security Agreement, to maintain the Security Account as a Securities
         Account and maintain appropriate books and records in respect thereof
         in accordance with its usual procedures and subject to the terms of
         this Security Agreement;

                  (h) agrees, with the other parties to this Security Agreement,
         that the Securities Intermediary's jurisdiction, for purposes of UCC
         Section 8-110(e) and 31 C.F.R. 357.11(b) as it pertains to this
         Security Agreement, the Security Account and Security Entitlements
         relating thereto, shall be the State of New York.

         SECTION 15.  Miscellaneous Provisions.

         Section 15.1  Notices.  Any notice or communication given hereunder
shall be in writing, and:

                  (a) if to the Pledgor, shall be delivered or sent by mail or
         telecopy transmission (with a copy by mail to follow) to the address of
         the Company set forth in the Offering Memorandum, Attention: William S.
         Roberts (telecopier no.: 011-525-109-5752), with a copy to Ruben G.
         Perlmutter at the same address (telecopier no.: 011-525-109-5772);

                  (b) if to the Trustee, shall be delivered or sent by mail or
         telecopy transmission (with a copy by mail to follow) to The Bank of
         New York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
         Attention: Corporate Trust Trustee Administration [(telecopier no.:
         (212) 815-5915)]; or

                  (c) if to the Securities Intermediary, shall be delivered or
         sent by mail or telecopy transmission (with a copy by mail to follow)
         to The Bank of New York, 101 Barclay Street, Floor 21 West, New York,
         New York 10286, Attention: Corporate Trust Trustee Administration
         [(telecopier no.: (212) 815-5915)].

                                       15

<PAGE>   16
         Section 15.2  No Adverse Interpretation of Other Agreements.  This
Security Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof.  No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Security
Agreement.

         Section 15.3 Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Security Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable best efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

         Section 15.4 Headings. The headings in this Security Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

         Section 15.5 Counterparts. This Security Agreement may be executed in
any number of counterparts (which may be delivered in original form or by
telecopier) and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                                       16
<PAGE>   17
         Section 15.6 Benefits of Security Agreement. Nothing in this Security
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Securities, any
benefit or any legal or equitable right, remedy or claim under this Security
Agreement.

         Section 15.7 Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Security Agreement and any consent to any departure by
the Pledgor from any provision of this Security Agreement shall be effective
only if made or duly given in compliance with all of the terms and provisions of
the Indenture, and neither the Trustee nor any Holder of Securities shall be
deemed, by any act, delay, indulgence, omission or otherwise, to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default (as defined herein) or in any breach of any of the terms and conditions
hereof. Consistent with the foregoing, this Security Agreement may be amended,
its provisions may be waived and departures from its provisions may be consented
to by action of the Pledgor and the Trustee, and (if applicable) the Holders of
the Securities, as provided in the Indenture, and no such amendment, waiver or
consent shall require any action or approval by the Initial Purchasers. Failure
of the Trustee or any Holder of Securities to exercise, or delay in exercising,
any right, power or privilege hereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Holder of Securities of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Trustee or such Holder of Securities would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.

         Section 15.8 Interpretation of Agreement. All terms not defined herein
or in the Indenture shall have the meaning set forth in the UCC, except where
the context otherwise requires. Acceptance of or acquiescence in a course of
performance rendered under this Security Agreement shall not be relevant to
determine the meaning of this Security Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.

         Section 15.9 Continuing Security Interest; Termination. (a) This
Security Agreement shall create a continuing security interest in and to the
Pledged Collateral and shall, unless otherwise provided in this Security
Agreement, remain in full force and effect until the payment in full in cash of
the Obligations. This Security Agreement shall be binding upon the Pledgor, its
transferees, successors and assigns, and shall inure, together with the rights
and remedies of the Trustee

                                       17
<PAGE>   18
hereunder, to the benefit of the Trustee, the Securities Intermediary, the
Holders of the Securities and their respective successors, transferees and
assigns.

          (b) This Security Agreement (other than the Pledgor's obligations
under Sections 10 and 12) shall terminate upon the payment in full in cash of
the Obligations or if the Company shall become obligated under the Indenture to
redeem all of the outstanding Securities and such Securities shall have been
redeemed, and if no Default or Event of Default (as defined in the Indenture)
shall have occurred and be continuing. At such time, the Trustee shall, pursuant
to a Company Order, and at the expense of the Pledgor, reassign and redeliver to
the Pledgor all of the Pledged Collateral hereunder that has not been sold,
disposed of, retained or applied by the Trustee in accordance with the terms of
this Security Agreement as directed in writing by the Pledgor and the Indenture
and take all actions that are necessary to release the security interest created
by this Security Agreement in and to the Pledged Collateral, including the
execution and delivery of all termination statements necessary to terminate any
financing or continuation statements filed with respect to the Pledged
Collateral prepared and delivered to it by the Pledgor. Such reassignment and
redelivery shall be without warranty by or recourse to the Trustee in its
capacity as such, except as to the absence of any Liens on the Pledged
Collateral created by or arising through the Trustee, and shall be at the
reasonable expense of the Pledgor.

         Section 15.10 Survival of Representations and Covenants. All
representations, warranties and covenants of the Pledgor contained herein shall
survive execution and delivery of this Security Agreement and shall terminate
only upon the termination of this Security Agreement.

         Section 15.11 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.

         Section 15.12 Authority of the Trustee and Securities Intermediary. (a)
Each of the Trustee and Securities Intermediary shall have the right to exercise
all powers hereunder that are specifically granted to the Trustee or the
Securities Intermediary by the terms hereof, together with such powers as are
reasonably incident hereto. The Trustee and the Securities Intermediary may
perform any of their respective duties hereunder or in connection with the
Pledged Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Except as otherwise expressly provided in this Security Agreement
or the Indenture, neither the Trustee, the Securities Intermediary, nor any
director, officer, employee,

                                       18
<PAGE>   19
attorney or agent of the Trustee shall be liable to the Pledgor for any action
taken or omitted to be taken by the Trustee, in its capacity as Trustee or
Securities Intermediary, hereunder, except for its own gross negligence or
willful misconduct, and the Trustee and the Securities Intermediary shall not be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Trustee, the Securities
Intermediary and their respective directors, officers, employees, attorneys and
agents may conclusively rely on any communication, instrument or document
believed by it or them to be genuine and correct and to have been signed or sent
by the proper person or persons.

          (b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Security Agreement with respect to any action taken by
the Trustee or the exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the Trustee and the
Holders of the Securities, be governed by the Indenture and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Trustee and the Pledgor, the Trustee shall be conclusively
presumed to be acting as agent for the Holders of the Securities with full and
valid authority so to act or refrain from acting, and the Pledgor shall not be
obligated or entitled to make any inquiry respecting such authority.

          (c) Each of the Trustee and the Securities Intermediary undertakes to
perform such duties and only such duties as are specifically set forth in this
Security Agreement, and no implied covenants or obligations shall be read into
this Security Agreement against the Trustee or the Securities Intermediary.

          (d) No provision of this Security Agreement shall require the Trustee
or the Securities Intermediary to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights and powers.

          (e) The Trustee and the Securities Intermediary may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

          (f) The Trustee and the Securities Intermediary may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee and the Securities Intermediary
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.

                                       19
<PAGE>   20
          (g) The Trustee shall have no duty (i) to see to any recording, filing
or depositing of this Security Agreement or any financing statements evidencing
a security interest in the Pledged Collateral, or to see to the maintenance of
any such recording or filing, or (ii) to inspect the Pledged Collateral at any
time or to inquire as to the performance or observance of any of the Pledgor's
representations, warranties or covenants contained herein.

         Section 15.13 Removal or Resignation of the Securities Intermediary.
The Securities Intermediary may resign by written notice to, or be removed by
written notice from, the Trustee at any time; provided, however, that such
resignation shall not be effective until, and in the case of removal the
Securities Intermediary's duties hereunder shall not terminate until, a
successor Securities Intermediary shall have been appointed by the Trustee and
accepted such appointment (by delivery of an agreement substantially in the form
hereof) and any and all assets held by the retiring Securities Intermediary
hereunder shall have been transferred to such successor Securities Intermediary
in accordance with the Trustee's instruction.

         Section 15.14 Fees and Expenses. The Securities Intermediary shall be
entitled to charge such fees and charges, including but not limited to
transaction fees and reimbursement for costs, as from time to time may be in
accordance with its usual practice for maintenance and administration of
accounts of the type contemplated hereby (which charges and fees shall be paid
by the Trustee and shall be reimbursable to it pursuant to Section 7.07 of the
Indenture).

         Section 15.15 Final Expression. This Security Agreement, together with
the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Security Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.

         Section 15.16 Rights of Holders of the Securities. No Holder of
Securities shall have any independent rights hereunder other than those rights
granted to individual Holders of the Securities pursuant to the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Securities or the Indenture.

         Section 15.17 Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. NOTWITHSTANDING THE FOREGOING, THE
MATTERS

                                       20
<PAGE>   21
IDENTIFIED IN 31 C.F.R. PART 357, 61 FED. REG. 43626 (AUG. 23,1996) SHALL BE
GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.

         Section 15.18 Waiver of Immunities. To the extent that the Pledgor or
any of its properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to it, any right of immunity, on the grounds of
sovereignty or otherwise, from any legal action, suit or proceeding, from the
giving of any relief in any such legal action, suit or proceeding, from setoff
or counterclaim, from the competent jurisdiction of any court, from service of
process, from attachment upon or prior to judgment, from attachment in aid of
execution of judgment, or from execution of judgment, or other legal process or
proceeding for the giving of any relief or for the enforcement of any judgment,
in any competent jurisdiction in which proceedings may at any time be commenced,
with respect to its obligations, liabilities or any other matter under or
arising out of or in connection with this Security Agreement and the
transactions contemplated hereby, the Pledgor hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity and
consent to such relief and enforcement.

         Section 15.19. Consent to Jurisdiction; Appointment of Agent for
Service of Process; Judgment Currency. (a) The Pledgor, by the execution and
delivery of this Security Agreement, irrevocably agrees that service of process
may be made upon CT Corporation Services ("CT Corporation"), with offices at 111
Eighth Avenue, New York, New York 10011 (or its successors as agent for service
of process), in the County, City and State of New York, United States of
America, in any suit or proceeding against the Pledgor instituted by the Trustee
or the Securities Intermediary, based on or arising under this Security
Agreement and the transactions contemplated hereby in any federal or state court
in the State of New York, County of New York, and each of the Pledgor, the
Trustee and the Securities Intermediary hereby irrevocably consents and submits
to the jurisdiction of any such court and to the courts of its own corporate
domicile in respect of actions brought against it as a defendant generally and
unconditionally in respect of any such suit or proceeding.

          (b) The Pledgor further, by the execution and delivery of this
Security Agreement, irrevocably designates, appoints and empowers CT
Corporation, with offices at 111 Eighth Avenue, New York, New York, 10011, as
its designee, appointee and authorized agent to receive for and on its behalf
service (i) of any and all legal process, summons, notices and documents that
may be served in any action, suit or proceeding brought against the Pledgor with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Security Agreement and the transactions contemplated hereby
and (ii) that may be made on such designee, appointee and authorized agent in
accordance with legal

                                       21
<PAGE>   22
procedures prescribed for such courts, and it being understood that the
designation and appointment of CT Corporation as such authorized agent shall
become effective immediately without any further action on the part of the
Pledgor. The Pledgor represents to the Trustee and the Securities Intermediary
that it has notified CT Corporation of such designation and appointment and that
CT Corporation has accepted the same, and that CT Corporation has been paid its
full fee for such designation, appointment and related services through the date
that is three years from the date of this Security Agreement. The Pledgor
further agrees that, to the extent permitted by law, service of process upon CT
Corporation (or its successors as agent for service of process) and written
notice of said service to the Pledgor pursuant to Section 15.1 of this Security
Agreement, shall be deemed in every respect effective service of process upon
the Pledgor in any such suit or proceeding. If for any reason such designee,
appointee and agent hereunder shall cease to be available to act as such, the
Pledgor agrees to designate a new designee, appointee and agent in The City of
New York, New York on the terms and for the purposes of this Section reasonably
satisfactory to the Trustee and the Securities Intermediary. The Pledgor further
hereby irrevocably consents and agrees to the service of any and all legal
process, summons, notices and documents in any such action, suit or proceeding
against the Pledgor by serving a copy thereof upon the relevant agent for
service of process referred to in this Section (whether or not the appointment
of such agent shall for any reason prove to be ineffective or such agent shall
accept or acknowledge such service) and by mailing copies thereof by registered
or certified air mail, postage prepaid, to the Pledgor at its address specified
in or designated pursuant to this Security Agreement. The Pledgor agrees that
the failure of any such designee, appointee and agent to give any notice of such
service to it shall not impair or affect in any way the validity of such service
or any judgment rendered in any action or proceeding based thereon. Nothing
herein shall in any way be deemed to limit the ability of the Trustee or the
Securities Intermediary to serve any such legal process, summons, notices and
documents in any other manner permitted by applicable law. The Pledgor hereby
irrevocably and unconditionally waives, to the fullest extent permitted by law,
any objection that it may now or hereafter have to the laying of venue of any of
the aforesaid actions, suits or proceedings arising out of or in connection with
this Security Agreement brought in federal or state court in the State of New
York, County of New York, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum and further irrevocably waives any right to which it may be entitled on
account of place of residence or domicile.

          (c) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than United
States dollars, the parties hereto agree, to the fullest extent that they may
effectively do so, that

                                       22
<PAGE>   23
the rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase United States dollars with the
other currency in New York City on the business day preceding that on which
final judgment is given. The obligation of the Pledgor in respect of any sum due
from the Pledgor to the Trustee or the Securities Intermediary shall,
notwithstanding any judgment in a currency other than United States dollars, not
be discharged until the first business day, following receipt by the Trustee or
the Securities Intermediary, as applicable, of any sum adjudged to be so due in
the other currency, on which (and only to the extent that) the Trustee or the
Securities Intermediary may in accordance with normal banking procedures
purchase United States dollars with the other currency; if the United States
dollars so purchased are less than the sum originally due to the Trustee or the
Securities Intermediary hereunder, the Pledgor agrees, as a separate obligation
and notwithstanding any such judgment, to indemnify the Trustee or the
Securities Intermediary, as the case may be, against the loss. If the United
States dollars so purchased are greater than the sum originally due to the
Trustee or the Securities Intermediary hereunder, each of the Trustee and the
Securities Intermediary agrees to pay to the Pledgor an amount equal to the
excess of the dollars so purchased over the sum originally due to the Trustee or
the Securities Intermediary hereunder.

          (d) The provisions of this Section 15.19 shall survive any
termination of this Security Agreement, in whole or in part.

          (e) To the extent permitted by applicable law, the Pledgor waives the
posting of any bond otherwise required of the Trustee or any Holder of
Securities in connection with any judicial process or proceeding to enforce any
judgement or other court order pertaining to this Security Agreement or any
related agreement or document entered in favor of the Trustee or any Holder of
Securities, or to enforce by specific performance, temporary restraining order
or preliminary or permanent injunction the Security Agreement or any related
agreement or document between the Pledgor on the one hand and the Trustee and/or
the Holders of the Securities on the other hand.

                                       23
<PAGE>   24
         IN WITNESS WHEREOF, the Pledgor, the Trustee and the Securities
Intermediary have each caused this Security Agreement to be duly executed and
delivered as of the date first above written.

                                      Pledgor:

                                 NUEVO GRUPO IUSACELL,
                                          S.A. de C.V.

                                 By:
                                      ---------------------------------------

                                          Name: Howard F. Zuckerman
                                          Title: Executive Vice President,
                                                 Finance

                                 By:
                                      ---------------------------------------

                                          Name: William S. Roberts
                                          Title: Executive Vice President
                                                 and Chief Financial Officer

                                 Trustee:

                                 THE BANK OF NEW YORK,
                                          as Trustee

                                 By:
                                      ---------------------------------------

                                          Name:
                                          Title:

                                 THE BANK OF NEW YORK,
                                          as Securities Intermediary

                                 By:
                                      ---------------------------------------

                                          Name:
                                          Title:
<PAGE>   25
                                    EXHIBIT A

The United States Treasury securities identified by the following maturities and
coupon rates.
<PAGE>   26
                                    EXHIBIT B

                                   CERTIFICATE

         Pursuant to Section 3(f) of the Security Agreement (the "SECURITY
AGREEMENT") dated as of December 16, 1999 by and among Nuevo Grupo Iusacell,
S.A. de C.V. (the "PLEDGOR"), The Bank of New York, as trustee (the "TRUSTEE")
for the holders of the 14 1/4% Senior Notes due 2006 (the "SECURITIES") of the
Pledgor, and The Bank of New York, as securities intermediary (the "SECURITIES
INTERMEDIARY"), the undersigned officer of the Trustee, on behalf of the
Trustee, and the undersigned officer of the Securities Intermediary, on behalf
of the Securities Intermediary, make the following certifications to the Pledgor
and the initial purchasers of the Securities. Capitalized terms used and not
defined in this Certificate have the meanings set forth or referred to in the
Security Agreement.

         1. Substantially contemporaneously with the execution and delivery of
this Certificate, the Trustee has established with the Securities Intermediary,
in its capacity as Securities Intermediary, the Security Account. The Securities
Intermediary has acquired from the FRBNY a Security Entitlement to the United
States Treasury securities identified in ANNEX I to this Certificate (the
"PLEDGED SECURITIES") and is the entitlement holder (as defined in UCC Section
8-102(a)(7)) with respect to such Security Entitlement in the FRBNY's Security
Account. The Securities Intermediary has made appropriate book entries in its
records establishing that the Pledged Securities and all Security Entitlements
thereto have been credited to and are held in the Security Account.

         2. The Trustee has established and maintained and will maintain the
Security Account and all Security Entitlements and other positions carried in
the Security Account solely in its capacity as Trustee and has not asserted and
will not assert any claim to or interest in the Security Account or any such
Securities Entitlements or other positions except in such capacity.

         3. The Trustee and the Securities Intermediary have acquired their
Security Entitlements to the Pledged Securities for value and without notice of
any adverse claim thereto. Without limiting the generality of the foregoing, the
Pledged Securities are not and the Securities Intermediary's and the Trustee's
Security Entitlements to the Pledged Securities are not, to their knowledge,
subject to any Lien granted by either of them in favor of any securities
intermediary, as defined in UCC Section 8-102(a)(14) (including, without
limitation, the FRBNY) through which the Trustee derives its Security
Entitlement to the Pledged Securities.
<PAGE>   27
         4. Neither the Securities Intermediary nor the Trustee has caused or
permitted the Pledged Securities or any Security Entitlement thereto to become
subject to any Lien created by or arising through either of the Trustee or the
Securities Intermediary.

         IN WITNESS WHEREOF, the undersigned officers have executed this
Certificate on behalf of the Trustee, and on behalf of the Securities
Intermediary, respectively, this 16th day of December, 1999.

                                      THE BANK OF NEW YORK,
                                           As Trustee

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

                                      Name:
                                      Title:

                                      THE BANK OF NEW YORK,
                                           As Securities Intermediary

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

                                      Name:
                                      Title:

                                       2<PAGE>   1
                                                                   Exhibit 4.1

                  CERTIFICATE OF DESIGNATION OF VOTING POWER,
                            DESIGNATION PREFERENCES
                   AND RELATIVE, PARTICIPATING, OPTIONAL AND
                              OTHER SPECIAL RIGHTS
                        AND QUALIFICATIONS, LIMITATIONS
                                AND RESTRICTIONS

                                       OF

          7% SERIES G JUNIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK

                                       OF

                         INTERMEDIA COMMUNICATIONS INC.

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

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

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

         Intermedia Communications Inc., a Delaware corporation (the
"Company"), certifies that pursuant to the authority contained in ARTICLE
FOURTH of its Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware (the
"DGCL"), the Board of Directors of the Company (the "Board") at a special
meeting duly called and held on December 30, 1999, duly approved and adopted
the following resolution which resolution remains in full force and effect on
the date hereof:

         RESOLVED, that pursuant to the authority vested in the Board by the
Certificate of Incorporation, the Board does hereby designate, create,
authorize and provide for the issue of a series of preferred stock having a par
value of $1.00 per share, with a liquidation preference of $1,000 per share
(the "Liquidation Preference") which shall be designated as Series G Junior
Convertible Participating Preferred Stock (the "Preferred Stock") consisting of
200,000 shares (which shares of preferred stock were authorized to be issued by
the Company by resolution of the Board of Directors of the Company dated as of
March 17, 1997, and by vote of the stockholders of the Company dated as of May
22, 1997), having the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof as follows:

    1.   Ranking. The Preferred Stock shall rank, with respect to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of the Company, (i) senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
issued by the Company established after the Preferred Stock Issue Date by the
Board, the terms of which do not expressly provide that it ranks senior to or
on a parity with the Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to with the common stock of the Company as "Junior
Securities"); (ii) on a parity with the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock and any additional shares of
Preferred Stock issued by the Company in the future and any other class of
capital stock or series of preferred stock issued

<PAGE>   2

by the Company established after the Preferred Stock Issue Date by the Board,
the terms of which expressly provide that such class or series will rank on a
parity with the Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Parity Securities"); and (iii) junior to the Series B Preferred
Stock and to each class of capital stock or series of preferred stock issued by
the Company established after the Preferred Stock Issue Date by the Board, the
terms of which expressly provide that such class or series will rank senior to
the Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Securities").

         No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Preferred
Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Senior Securities.

         2.       Dividends.

         (i)      The holders of shares of the Preferred Stock shall be
entitled to receive, when, as and if dividends are declared by the Board out of
funds of the Company legally available therefor, cumulative dividends from the
Preferred Stock Issue Date accruing at the rate per annum of 7% of the sum of
(i) the Liquidation Preference per share and (ii) all compounded accumulated
and unpaid dividends on such shares of Preferred Stock from the Preferred Stock
Issue Date, payable and compounded quarterly in arrears on each January 15,
April 15, July 15 and October 15, commencing on July 15, 2000 (each a "Dividend
Payment Date"). If any such date is not a Business Day, such payment shall be
made on the next succeeding Business Day, to the holders of record as of the
next preceding January 1, April 1, July 1 and October 1 (each, a "Record
Date"). Dividends will be payable, at the option of the Company, (i) in cash,
(ii) by delivery of shares of Common Stock to holders (based upon the Average
Stock Price (as defined below)), or (iii) through any combination of the
foregoing. If the dividends are paid in shares of Common Stock, the number of
shares of Common Stock to be issued on each Dividend Payment Date will be
determined by dividing the total dividend to be paid on all outstanding shares
of Preferred Stock held by each holder by the average of the high and low sales
prices of the Common Stock as reported by the Nasdaq National Market or any
national securities exchange upon which the Common Stock is then listed, for
each of the ten consecutive Trading Days immediately preceding the fifth
Trading Day preceding the Record Date (the "Average Stock Price"). In the event
of a Sale of the Company, Significant Event or Change of Control where the
Preferred Stock remains outstanding, the term Common Stock, as used solely in
this paragraph 2(i), paragraph 2(v) and paragraph 2(vi), shall mean securities
issuable to the holders of Common Stock in connection with such Sale of the
Company, Significant Event or Change of Control, as the case may be. The
Transfer Agent shall not issue any fractional shares of Common Stock as a
dividend payment. Instead the Transfer Agent shall round the number of shares
of Common Stock payable as a dividend hereunder up to the nearest full share of
Common Stock. Dividends payable on the Preferred Stock will be computed on the
basis of a 360-day year consisting of twelve 30-day months and will be deemed
to accumulate on a daily basis.

         (ii)     Dividends on the Preferred Stock shall accumulate and
compound quarterly whether or not the Company has earnings or profits, whether
or not there are funds legally available for the payment of such dividends and
whether or not dividends are declared. Dividends will accumulate and compound
quarterly to the extent they are not paid on the Dividend Payment Date for the
period to which they relate. The Company shall take all actions required or
permitted under the DGCL (x) to permit the payment of dividends on the
Preferred Stock, including, without limitation, through the revaluation of its
assets in accordance with the DGCL, to make or keep funds legally available for
the payment of dividends and (y) to declare and pay such dividends to the
extent there are funds legally available therefor.

                                       2

<PAGE>   3

         (iii)    No dividend whatsoever shall be declared or paid upon, or any
sum set apart for the payment of dividends upon, any outstanding share of the
Preferred Stock with respect to any dividend period unless all dividends for
all preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all outstanding
shares of Preferred Stock. Unless full cumulative dividends on all outstanding
shares of Preferred Stock for all past dividend periods shall have been
declared and paid in full, or declared and a sufficient sum for the payment
thereof set apart, then: (A) no dividend (other than a dividend payable solely
in shares of any Junior Securities) shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any shares of Junior Securities;
(B) no other distribution shall be declared or made upon, or any sum set apart
for the payment of any distribution upon, any shares of Junior Securities,
other than a distribution consisting solely of Junior Securities; (C) no shares
of Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for shares of other Junior Securities)
by the Company or any of its Subsidiaries; and (D) no monies shall be paid into
or set apart or made available for a sinking or other like fund for the
purchase, redemption or other acquisition or retirement for value of any shares
of Junior Securities by the Company or any of its Subsidiaries.

         (iv)    Unless full cumulative dividends on all outstanding shares of
Preferred Stock for all past dividend periods shall have been declared and paid
in full or declared and a sum sufficient for the payment thereof set apart,
then: (A) no dividend (other than a dividend payably solely in shares of any
Parity Securities or Junior Securities) shall be declared or paid upon, or any
sum set apart for the payment of dividends upon, any shares of Parity
Securities; (B) no other distribution shall be declared or made upon, or any
sum set apart for the payment of any distribution upon, any shares of Parity
Securities, other than a distribution consisting solely of Parity Securities;
(C) no shares of Parity Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for shares of Junior
Securities) by the Company or any of its Subsidiaries; and (D) no monies shall
be paid into or set apart or made available for a sinking or other like fund
for the purchase, redemption or other acquisition or retirement for value of
any shares of Parity Securities by the Company or any of its Subsidiaries. If
at any time the Company pays less than the total amount of dividends then
accrued with respect to the Preferred Stock, such payment shall be distributed
ratably among the holders of Preferred Stock based upon the aggregate
accumulated but unpaid dividends on the Preferred Stock held by each holder.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart as aforesaid, all dividends declared upon any other class or series
of Parity Securities shall be declared ratably in proportion to the respective
amounts of dividends accumulated and unpaid on the Preferred Stock and
accumulated and unpaid on such Parity Securities.

         (v)    Holders of the Preferred Stock shall also be entitled to
receive, when, as and if dividends are declared or other distributions made by
the Board out of funds of the Company legally available therefor, any dividends
or other distributions, whether payable in cash, property or stock, payable to
all holders of the Common Stock as if such holder of Preferred Stock held the
number of shares of Common Stock into which such shares of Preferred Stock
might have been converted pursuant to the terms of Section 3 hereof on the date
fixed for the determination of holders of Common Stock entitled to receive such
distribution. Any such declared and unpaid dividends will be payable upon a
liquidation, dissolution or winding-up, first to the holders of the Preferred
Stock and then to the holders of the Common Stock. Notwithstanding anything to
the contrary contained herein, no adjustment in the Conversion Price shall be
made pursuant to Section 3 below if the Company distributes to each holder of
Preferred Stock any dividends or other distribution payable on the Common Stock
pursuant to this paragraph 2(v).

         (vi)    When dividends are declared by the Board, the Company shall
issue a press release within 3 Business Days of the Record Date setting forth
(A) the method of payment for such dividends (cash, Common Stock or a
combination thereof) and (B) the Average Stock Price.

                                       3

<PAGE>   4

         (vii)    The Company has reserved and shall continue to reserve, out
of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the payment of dividends on
the Preferred Stock pursuant to this Section 2. All shares of Common Stock that
may be issued in payment of dividends on the Preferred Stock shall be fully
paid and nonassessable. The Company shall endeavor to comply with all
securities laws regulating the offer and delivery of shares of Common Stock in
payment of dividends and shall endeavor to list such shares of Common Stock on
each national securities exchange or automated quotation system on which the
Common Stock is listed. In the event that dividends are payable in securities
other than Common Stock pursuant to paragraph 2(i), the Company shall use its
reasonable efforts to cause the issuer of such other securities to comply with
this paragraph 2(vii).

         3.       Conversion.

         (i)      A holder of shares of Preferred Stock may convert such shares
into Common Stock at any time after the Preferred Stock Issue Date, but only in
lots of 100 shares of Preferred Stock or integral multiples thereof if less
than all of the shares of Preferred Stock then held by such holder are being
converted. For the purposes of conversion, each share of Preferred Stock shall
be valued at the Liquidation Preference plus all accumulated, compounded and
unpaid dividends on such share (which shall include any dividends described in
the last sentence of paragraph 3(ii) below), which shall be divided by the
Conversion Price in effect on the Conversion Date (as defined below) to
determine the number of shares of Common Stock issuable upon conversion.
Immediately following such conversion, the rights of the holders of converted
Preferred Stock shall cease and the persons entitled to receive the Common
Stock upon the conversion of Preferred Stock shall be treated for all purposes
as having become the owners of such Common Stock.

         (ii)     To convert Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form reasonably satisfactory to the Company, at
the principal office of the Company or transfer agent for the Preferred Stock,
(B) notify the Company at such office that he elects to convert Preferred Stock
and the number of shares he wishes to convert, (C) state in writing the name or
names in which he wishes the certificate or certificates for shares of Common
Stock to be issued, and (D) pay any transfer or similar tax if required (other
than any such tax required to be paid by the Company pursuant to paragraph
3(iv)). In the event that a holder fails to notify the Company of the number of
shares of Preferred Stock which he wishes to convert, he shall be deemed to
have elected to convert all shares represented by the certificate or
certificates surrendered for conversion. The date on which the holder satisfies
all those requirements is the "Conversion Date." As soon as practical after the
Conversion Date, the Company shall deliver a certificate for the number of full
shares of Common Stock issuable upon the conversion, and a new certificate
representing the unconverted portion, if any, of the shares of Preferred Stock
represented by the certificate or certificates surrendered for conversion. The
person in whose name the Common Stock certificate is registered shall be
treated as the stockholder of record on and after the Conversion Date. If a
holder of Preferred Stock converts more than one share at a time, the number of
full shares of Common Stock issuable upon conversion shall be based on the
total liquidation preference plus the aggregate of accumulated and unpaid
dividends of all shares of Preferred Stock converted. If the last day on which
Preferred Stock may be converted is not a Business Day, Preferred Stock may be
surrendered for conversion on the next succeeding Business Day. If a Conversion
Date occurs during the period from the close of business on any Record Date to
the opening of business of the corresponding Dividend Payment Date, the
registered holder of Preferred Stock so surrendered for conversion shall not be
entitled to any dividend payment with respect to the shares of Preferred Stock
surrendered for conversion on such Dividend Payment Date.

                                       4

<PAGE>   5

         (iii)    The Company shall not issue any fractional shares of Common
Stock upon conversion of Preferred Stock. Instead the Company shall round the
results of a conversion up to the nearest full share of Common Stock.

         (iv)     If a holder converts shares of Preferred Stock, the Company
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion. However, the holder shall
pay any such tax that is due because the shares are issued in a name other than
the holder's name.

         (v)      The Company has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Preferred Stock
in full. All shares of Common Stock that may be issued upon conversion of
Preferred Stock shall be fully paid and nonassessable. The Company shall
endeavor to comply with all securities laws regulating the offer and delivery
of shares of Common Stock upon conversion of Preferred Stock and shall endeavor
to list such shares of Common Stock on each national securities exchange or
automated quotation system on which the Common Stock is listed.

         (vi)     If the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock other
than the payment of dividends in Common Stock on the Preferred Stock or any
other regularly scheduled dividend on any other preferred stock, the Conversion
Price in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such Conversion Price by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
and the denominator of which shall be the sum of such number of shares and the
total number shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such determination of the holders entitled to
such dividends and distributions. For the purposes of this paragraph 3(vi), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company. Without in any way limiting the requirements of
paragraph 2(v), this paragraph 3(vi) shall only apply if the Company has not
made an appropriate distribution to the holders of the Preferred Stock pursuant
to paragraph 2(v) above.

         (vii)    In case the Company shall issue rights, options or warrants
to all holders of its Common Stock entitling them to subscribe for, purchase or
acquire shares of Common Stock at a price per share less than the current
market price per share (determined as provided in paragraph 3(xiii) below) of
the Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights, options or warrants, the Conversion Price in
effect at the opening of business on the day following the date fixed for such
determination shall be reduced by multiplying such Conversion Price by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate offering price
for the total number of shares of Common Stock so offered for subscription,
purchase or acquisition would purchase at such current market price per share
and the denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for subscription, purchase
or acquisition, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such determination
of the holders entitled to such rights, options or warrants. However, upon the
expiration of any right, option or warrant to purchase Common Stock, the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this paragraph 3(vii), if any such right, option or warrant shall expire and

                                       5

<PAGE>   6

shall not have been exercised, the Conversion Price shall be recomputed
immediately upon such expiration and effective immediately upon such expiration
shall be increased to the price it would have been (but reflecting any other
adjustments to the Conversion Price made pursuant to the provisions of this
Section 3 after the issuance of such rights, options or warrants) had the
adjustment of the Conversion Price made upon the issuance of such rights,
options or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such rights, options or warrants. No further adjustment shall be
made upon exercise of any right, option or warrant if any adjustment shall have
been made upon the issuance of such security. For the purposes of this
paragraph 3(vii), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company will
not issue any rights, options or warrants in respect of shares of Common Stock
held in the treasury of the Company. Without in any way limiting the
requirements of paragraph 2(v), this paragraph 3(vii) shall only apply if the
Company has not made an appropriate distribution to the holders of the
Preferred Stock pursuant to paragraph 2(v) above.

         (viii)   In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be reduced, and, conversely, in
case the outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be increased to equal the product of the Conversion
Price in effect on such date and a fraction the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
subdivision or combination, as the case may be, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after
such subdivision or combination, as the case may be. Such reduction or
increase, as the case may be, shall become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.

         (ix)     In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock (A) evidences of its indebtedness
or (B) shares of any class of capital stock, cash or other property or assets
(including securities, but excluding (x) any rights, options or warrants
referred to in paragraph 3(vii) above and (y) any dividend or distribution
referred to in paragraph 3(vi) above), unless with respect to cash dividends,
cash distributions and cash repurchases, the sum of (1) all such cash dividends
and cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (2) any cash consideration paid in respect of
any repurchases of Common Stock by the Company or any of its subsidiaries
within the preceding 12 months in respect of which no adjustment has been made,
does not exceed 20% of the Company's market capitalization (being the product
of the then current market price per share (determined as provided in paragraph
3(xiii) below) of the Common Stock times the aggregate number of shares of
Common Stock then outstanding on the date fixed for the determination of the
holders of Common Stock entitled to receive such distribution), then in each
case, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of holders of Common Stock
entitled to receive such distribution shall be adjusted by multiplying such
Conversion Price by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph 3(xiii) below) of
the Common Stock on such date of determination less the then fair market value
as determined by the Board (whose determination shall be conclusive) of the
portion of the capital stock, cash or other assets or evidences of indebtedness
so distributed (and for which an adjustment to the Conversion Price has not
previously been made pursuant to the terms of this Section 3) applicable to one
share of Common Stock, and the denominator shall be such current market price
per share of the Common Stock, such adjustment to become effective immediately
after the opening of business on the day following such date of determination

                                       6

<PAGE>   7

of the holders entitled to such distribution. Repurchases of Common Stock
issued under the Company's stock incentive programs, to the extent permitted by
the Company's then existing indentures, shall be excluded from the foregoing
clauses (1) and (2). Without in any way limiting the requirements of paragraph
2(v), this paragraph 3(ix) shall only apply if the Company has not made an
appropriate distribution to the holders of the Preferred Stock pursuant to
paragraph 2(v) above.

         (x)      The reclassification or change of Common Stock into
securities, including securities other than Common Stock, (other than any
reclassification upon a consolidation or merger to which paragraph 3(xxi) below
shall apply) shall be deemed to involve (A) a distribution of such securities
other than Common Stock to all holders of Common Stock (and the effective date
of such reclassification shall be deemed to be "the date fixed for the
determination of holders of Common Stock entitled to receive such distribution"
within the meaning of paragraph 2(v) or 3(ix) above), and (B) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and the effective
date of such reclassification shall be deemed to be "the day upon which such
subdivision or combination becomes effective" within the meaning of paragraph
3(viii) above). If the Common Stock shall be reclassified or changed into
securities or property other than Common Stock (other than any reclassification
upon a consolidation or merger to which paragraph 3(xxi) below shall apply),
then and in each such event the holder of each share of Preferred Stock shall
have the right thereafter to convert such share into the kind and amount of
securities and property receivable upon such reclassification by the holders of
the number of shares of Common Stock into which such share of Preferred Stock
could have been converted immediately prior to such reclassification, all
subject to further adjustment as provided herein or with respect to such other
securities or property by the terms thereof.

         (xi)     In case the Company shall issue shares of its Common Stock
(excluding shares issued (i) in any of the transactions described in paragraphs
2(v) (only to the extent the holders of the Preferred Stock actually receive
such shares of Common Stock), 3(vi), 3(vii), 3(viii) or 3(ix) above, (ii) upon
exercise of options or other awards issued pursuant to the Company's employee
incentive plans, (iii) upon exercise of options and warrants of the Company
outstanding as of the date hereof, (iv) to shareholders of any corporation
(which is not an affiliate of the Company) which merges into the Company or a
subsidiary of the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, (v) as
regularly scheduled dividend payments on shares of preferred stock of the
Company, (vi) upon conversion or exchange of any preferred stock or convertible
debt of the Company, (vii) in a bona fide offering pursuant to a firm
commitment underwriting or distribution pursuant to Rule 144A under the
Securities Act, or (viii) pursuant to the Company's Incentivized Conversion
Program) for a consideration per share less than the current market price per
share of Common Stock (as defined in paragraph 3 (xiii) below) in effect
immediately prior to the earlier of (x) issuance of such securities, or (y) the
date the Company has a contractual obligation to issue such securities (whether
or not such obligation is contingent upon the passage of time, the occurrence
of certain events or both), then the Conversion Price in effect at the opening
of business on the day following the date of issuance of such shares of Common
Stock shall be reduced by multiplying such Conversion Price by a fraction (A)
the numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding (on a fully diluted basis) immediately prior to such
issuance, and (2) the number of shares of Common Stock which the aggregate
consideration received by the Company (determined as provided in paragraph
3(xiv) below) for the total number of shares of Common Stock issued would
purchase at the current market price per share (as defined in paragraph
3(xiii)), and (B) the denominator of which is the total number of shares of
Common Stock outstanding (on a fully diluted basis) immediately after such
issuance.

                                       7

<PAGE>   8

         (xii)    In case the Company shall issue any securities (including
rights, warrants and options) convertible into, exercisable for or exchangeable
for its Common Stock (excluding securities issued (i) as a dividend or
distribution to all holders of the Common Stock, (ii) upon exercise of options
or other awards issued pursuant to the Company's employee incentive plans,
(iii) upon exercise of options and warrants of the Company outstanding as of
the date hereof, (iv) to shareholders of any corporation (which is not an
affiliate of the Company) which merges into the Company or a subsidiary of the
Company in proportion to their stock holdings of such corporation immediately
prior to such merger, upon such merger, (v) as regularly scheduled dividend
payments on shares of preferred stock of the Company, (vi) upon conversion or
exchange of any preferred stock or convertible debt of the Company, (vii) in a
bona fide offering pursuant to a firm commitment underwriting or distribution
pursuant to Rule 144A under the Securities Act, or (viii) pursuant to the
Company's Incentivized Conversion Program) for a consideration per share of
Common Stock initially deliverable upon conversion, exercise or exchange of
such securities (determined as provided in paragraph 3(xiv) below) less than
the current market price per share of Common Stock (as defined in paragraph
3(xiii) below) in effect immediately prior to the earlier of (x) issuance of
such securities, or (y) the date the Company has a contractual obligation to
issue such securities (whether or not such obligation is contingent upon the
passage of time, the occurrence of certain events or both), then the Conversion
Price in effect at the opening of business on the day following the date of
issuance of such securities shall be reduced by multiplying such Conversion
Price by a fraction, (A) the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding (on a fully diluted basis)
immediately prior to the issuance of such securities, and (2) the number of
shares of Common Stock which the aggregate consideration received by the
Company (determined as provided in paragraph 3(xiv) below) for such securities
would purchase at such current market price per share of Common Stock, and (B)
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to such issuance and the maximum number of
shares of Common Stock of the Company deliverable upon conversion, exercise or
exchange of such securities at the initial conversion, exercise or exchange
price or rate. However, upon the expiration of any security convertible into,
exercisable for or exchangeable into Common Stock, the issuance of which
resulted in an adjustment in the Conversion Price pursuant to this paragraph
3(xii), if any such security shall expire and shall not have been converted,
exercised or exchanged, the Conversion Price shall be recomputed immediately
upon such expiration and effective immediately upon such expiration shall be
increased to the price it would have been (but reflecting any other adjustments
to the Conversion Price made pursuant to the provisions of this Section 3 after
the issuance of such security) had the adjustment of the Conversion Price made
upon the issuance of such security been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the conversion, exercise or exchange of such security. No
further adjustment shall be made upon the conversion, exercise or exchange of
such security if any adjustment shall have been made upon the issuance of such
security.

         (xiii)   For the purpose of any computation under this Section 3, the
current market price per share of Common Stock on any day shall be deemed to be
the average of the Closing Prices of the Common Stock for the 10 consecutive
Trading Days immediately preceding the Trading Day before the day before the
day in question. For the purpose of any computation under paragraphs 4(ii),
5(i) or 6(v) only, if applicable, the term Common Stock as used in the
preceding sentence shall include securities issuable to the holders of Common
Stock in connection with a Sale of the Company, Significant Event or Change of
Control, as the case may be.

         (xiv)    For purposes of any computation respecting consideration
received pursuant to paragraphs 3(xi) and 3(xii) above, the following shall
apply:

                                       8

<PAGE>   9

                                    (A) in the case of the issuance of shares
                           of Common Stock for cash, the consideration shall be
                           the gross proceeds to the Company from such
                           issuance, which shall not include any deductions for
                           any customary commissions, discounts or other
                           expenses incurred by the Company in connection
                           therewith;

                                    (B) in the case of the issuance of shares
                           of Common Stock for a consideration in whole or in
                           part other than cash, the consideration other than
                           cash (subject to clause (C) below) shall be deemed
                           to be the fair market value thereof as determined in
                           good faith by the Board (irrespective of the
                           accounting treatment thereof), whose determination
                           shall be conclusive;

                                    (C) in the case of the issuance of shares
                           of Common Stock for a consideration in whole or in
                           part consisting of securities, the value of any
                           securities shall be deemed to be: (x) if traded on a
                           securities exchange or through the Nasdaq National
                           Market, the average of the closing prices of the
                           securities on such exchange or quotation system over
                           the 10 trading day period ending on the trading day
                           immediately preceding the day in question, (y) if
                           actively traded over-the-counter, the average of the
                           closing bid or sale prices (whichever is applicable)
                           over the 10 trading day period ending on the trading
                           day immediately preceding the day in question and
                           (z) if there is no active public market, fair market
                           value thereof, determined as provided in clause (B)
                           above; and

                                    (D) in the case of the issuance of
                           securities convertible into, exercisable for or
                           exchangeable for shares of Common Stock, the
                           aggregate consideration received therefor shall be
                           deemed to be the consideration received by the
                           Company for the issuance of such securities plus the
                           minimum additional consideration, if any, to be
                           received by the Company upon the conversion,
                           exercise or exchange thereof (the consideration in
                           each case to be determined in the same manner as
                           provided in clauses (A) through (C) of this
                           paragraph 3(xiv)).

         (xv) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
3 shall be made to the nearest 1/1,000th of a cent or to the nearest 1/1,000th
of a share, as the case may be.

         (xvi) For purposes of this Section 3, "Common Stock" includes any
stock of any class of the Company which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which is not subject
to redemption by the Company. However, subject to the provisions of paragraph
3(xxi) below, shares issuable on conversion of shares of Preferred Stock shall
include only shares of the class designated as Common Stock of the Company on
the Preferred Stock Issue Date or shares of any class or classes resulting from
any reclassification thereof and which have no preferences in respect of
dividends or amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which are not subject
to redemption by the Company; provided that, if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.

                                       9

<PAGE>   10

         (xvii)  No adjustment in the Conversion Price shall reduce the
Conversion Price below the then par value of the Common Stock. The Company
hereby agrees with each holder of Preferred Stock that it shall not increase
the par value of the Common Stock above its current par value of $.01 per
share.

         (xviii) Whenever the Conversion Price is adjusted, the Company shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment together with a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.

         (xix)   The Company from time to time may reduce the Conversion Price
if it considers such reductions to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the holders of Common Stock by any amount, but in no event may the
Conversion Price be less than the par value of a share of Common Stock. Whenever
the Conversion Price is reduced pursuant to this paragraph 3(xix), the Company
shall mail to holders of Preferred Stock a notice of the reduction. The Company
shall mail, first class, postage prepaid, the notice at least 5 days before the
date the reduced Conversion Price takes effect pursuant to this paragraph
3(xix). The notice shall state the reduced Conversion Price and the period it
will be in effect. A reduction of the Conversion Price does not change or adjust
the Conversion Price otherwise in effect for purposes of paragraphs 3(vi) or
3(viii) above.

         (xx)    If:

                 (A) the Company takes any action which would require an
adjustment in the Conversion Price pursuant to paragraphs 3(vi) through 3(xii)
above;

                 (B) the Company consolidates or merges with, or transfers all
or substantially all of its assets to, another corporation, and stockholders of
the Company must approve the transaction; or

                 (C) there is a dissolution or liquidation of the Company;

the Company shall mail to holders of the Preferred Stock, first class, postage
prepaid, a notice stating the proposed record or effective date, as the case may
be. The Company shall mail the notice at least 5 days before such proposed
record or effective date. However, failure to mail the notice or any defect in
it shall not affect the validity of any transaction referred to in clause (A),
(B) or (C) of this paragraph 3(xx).

         (xxi)   In the case of any consolidation of the Company or the merger
of the Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Company's
Common Stock is converted into other securities, cash or assets, upon
consummation of such transaction, each share of Preferred Stock shall, unless
the election in paragraph 4(ii) has been timely exercised, automatically become
convertible into the kind and amount of securities, cash or other assets
receivable upon the consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such share of Preferred Stock might
have been converted immediately prior to such consolidation, merger, transfer
or sale (assuming such holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount of consideration receivable
per share by a plurality of non-electing shares). Appropriate adjustment (as
determined by the Board) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustment of the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other securities or property
thereafter deliverable

                                       10

<PAGE>   11

upon the conversion of Preferred Stock. If this paragraph 3(xxi) applies to a
transaction, paragraphs 3(vi), 3(viii) and 3(x) do not apply to such
transaction.

         (xxii)   In any case in which this Section 3 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
the issuance to the holder of any shares of Preferred Stock converted after
such record date and before the occurrence of such event of the additional
shares of Common Stock issuable upon such conversion over and above the shares
issuable on the basis of the Conversion Price in effect immediately prior to
adjustment; provided, however, that if such event shall not have occurred and
authorization of such event shall be rescinded by the Company, the Conversion
Price shall be recomputed immediately upon such recission to the price that
would have been in effect had such event not been authorized, provided that
such recission is permitted by and effective under applicable laws.

         (xxiii)  The Company will not by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 3 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Preferred Stock against
impairment to the extent required hereunder. Nothing in this Section 3 shall
affect the continued accumulation of dividends on the Preferred Stock in
accordance with the terms of this Certificate of Designation.

         (xxiv)   Upon delivery to the Company of the notice referred to in
paragraph 3(ii)(B), the right of the Company to redeem the shares of Preferred
Stock referred to in such notice shall terminate regardless of whether a notice
of redemption pursuant to paragraph 5(ii) has been made by the Company.

         4.       Liquidation Rights.  Upon any liquidation, dissolution or
winding up of the Company, voluntary or involuntary:

         (i) The holders of the Preferred Stock will be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Company to the holders of the Junior Securities by reason of their
ownership thereof, but subsequent to the repurchase or payment in full or other
satisfaction of the Company's outstanding indebtedness and Senior Securities,
an amount per share of Preferred Stock equal to the greater of (A) the
Liquidation Preference plus all compounded accumulated but unpaid dividends, if
any, to the date fixed for liquidation, dissolution or winding-up (whether or
not declared and whether or not funds of the Company are legally available for
the payment of dividends), and (B) the amount the holder of one share of
Preferred Stock would have received in such liquidation, dissolution or winding
up if such share of Preferred Stock had been converted to Common Stock pursuant
to Section 3 immediately prior to such event (such greater amount, the
"Liquidation Amount"). After payment in full of the Liquidation Amount, such
holders will not be entitled to any further participation in any distribution
of assets of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the assets of the Company shall be
insufficient to pay the full Liquidation Amount with respect to the Preferred
Stock and the full liquidation preference plus accumulated and unpaid dividends
with respect to all other Parity Securities, the holders of the Preferred Stock
and the Parity Securities will share equally and ratably in any distribution of
assets of the Company in proportion to the full Liquidation Amount in the case
of the Preferred Stock and the full liquidation preference plus accumulated and
unpaid dividends in the case of any Parity Securities to which each is
entitled.

                                       11

<PAGE>   12

         (ii) At the written election of the holders of a majority of the then
outstanding shares of Preferred Stock (exercised by written notice (the
"Liquidation Notice") to the Company within ten Business Days after receipt of
notice from the Company (which will be deemed received on the same day the
Company delivers such notice by confirmed facsimile), a Sale of the Company
shall be deemed to be a liquidation, dissolution or winding up of the Company.
If the Liquidation Notice is not timely received by the Company, the holders of
the Preferred Stock shall have forfeited this right of election. Within four
Business Days of receipt of a Liquidation Notice, the Company shall deliver to
the holders of the outstanding shares of Preferred Stock a certificate (a
"Liquidation Certificate") certifying whether the Company can then pay the
Liquidation Amount in cash pursuant to the terms of its outstanding
indebtedness, and if the entire Liquidation Amount cannot be paid in cash,
specifying the portion of such amount that can be paid in cash. Within four
Business Days of delivery of a Liquidation Certificate providing that the
entire Liquidation Amount cannot be paid in cash, the holders of a majority of
the then outstanding shares of Preferred Stock may send a written notice to the
Company withdrawing the Liquidation Notice. If such holders of the Preferred
Stock do not timely deliver such withdrawal notice to the Company, then, if the
terms of the Company's outstanding indebtedness do not permit payment of all or
any portion of the Liquidation Amount payable pursuant to this paragraph 4(ii)
in cash (any such portion of the Liquidation Amount, the "Non-Cash Liquidation
Amount"), any such portion of the Liquidation Amount that may be paid in cash
shall be paid in cash and, the remainder of the outstanding shares of Preferred
Stock shall (not be redeemed or repurchased but instead shall) automatically be
converted into the number of shares of Common Stock (or, if applicable,
securities issuable to the holders of Common Stock in connection with a Sale of
the Company) equal to the Non-Cash Liquidation Amount divided by the current
market price per share of Common Stock (as defined in paragraph 3(xiii)).

         5.       Redemption.

         (i)      If permitted by the terms of the Company's outstanding
indebtedness at the time of receipt of the Redemption Notice (as defined
below), at any time (i) after the fifth anniversary of the Preferred Stock
Issue Date, (ii) within 45 days after the consummation of a Significant Event,
or (iii) after an Event of Default (as defined in paragraph 7(vi)) for so long
as such Event of Default has not been cured, registered holders of a majority
of the shares of outstanding Preferred Stock may require the Company to redeem
all, but not less than all, of the outstanding shares of Preferred Stock (an
"Optional Redemption") by notifying the Company in writing (the "Redemption
Notice") of their intent to exercise the rights afforded by this paragraph 5(i)
and specifying a date not less than 30 nor more than 60 days from the date of
such notice on which the outstanding shares of Preferred Stock shall be
redeemed (the "Optional Redemption Date"). Upon receipt of such notice, the
Company shall promptly deliver to the holders of the outstanding shares of
Preferred Stock a certificate (a "Redemption Certificate") certifying whether
the Company can then pay the Optional Redemption Price (as defined below) in
cash pursuant to the terms of its outstanding indebtedness, and if the entire
Optional Redemption Price cannot be paid in cash, specifying the portion of
such amount that can be paid in cash and specifying the Optional Redemption
Date. All recipients of such Redemption Certificate shall be required to
participate in the Optional Redemption. Within five Business Days of delivery
of a Redemption Certificate providing that the entire Optional Redemption Price
cannot be paid in cash, the holders of a majority of the then outstanding
shares of Preferred Stock may send a written notice to the Company withdrawing
the Redemption Notice (without prejudice to the rights of the holders of
Preferred Stock to timely exercise such rights pursuant to this paragraph 5(i)
at any time in the future to the extent permitted hereby). If such holders of
Preferred Stock do not timely deliver such withdrawal notice to the Company,
then, subject to the last sentence of this paragraph 5(i), the Company shall
redeem on the Optional Redemption Date all the outstanding shares of Preferred
Stock. Each share of Preferred Stock to

                                       12

<PAGE>   13

be redeemed shall be redeemed for an amount in cash equal to the sum of the
Liquidation Preference plus all compounded, accumulated but unpaid dividends
(the "Optional Redemption Price"). If the terms of the Company's outstanding
indebtedness do not permit payment of all or any portion of the aggregate
Optional Redemption Price in cash (any such portion of the aggregate Optional
Redemption Price, the "Non-Cash Redemption Price"), then if the holders of the
Preferred Stock do not timely withdraw their Redemption Notice as provided
above, on the Optional Redemption Date, any shares of Preferred Stock which may
be redeemed for cash shall be redeemed for an amount in cash equal to the
Optional Redemption Price and the remainder of the outstanding shares of
Preferred Stock shall (not be redeemed or repurchased but instead shall) be
automatically converted into the number of shares of Common Stock (or, if
applicable, securities issuable to holders of the Common Stock in connection
with a Significant Event) equal to the Non-Cash Redemption Price divided by the
current market price per share of Common Stock (as defined in paragraph
3(xiii)).

         (ii) Until the fifth anniversary of the Preferred Stock Issue Date,
the shares of Preferred Stock shall not be redeemed by the Company at its
option. After the fifth anniversary of the Preferred Stock Issue Date, all, but
not less than all, of the outstanding shares of Preferred Stock may be
redeemed, at the Company's option, (i) for cash, or (ii) by delivery of the
number of shares of Common Stock having a current market price per share (as
defined in paragraph 3(xiii)), in each case equal to the redemption prices
specified below (expressed as percentages of the Liquidation Preference
thereof), together with accumulated, compounded and unpaid dividends (including
an amount equal to a prorated dividend for any partial dividend period) to the
date of redemption (the "Applicable Redemption Price"), upon not less than 30
nor more than 60 days' prior written notice, if redeemed during the 12-month
period commencing on the day and month of the Preferred Stock Issue Date of
each of the years set forth below:

<TABLE>
<CAPTION>
          Year                                                                  Percentage
          ----                                                                  ----------
<S>                                                                             <C>
          2005..........................................................        103.50%
          2006..........................................................        102.34%
          2007..........................................................        101.17%
          2008 and thereafter...........................................        100.00%
</TABLE>

         No optional redemption pursuant to this paragraph 5(ii) shall be
authorized or made unless, prior to giving the applicable redemption notice,
all accumulated, compounded and unpaid dividends for periods ended prior to the
date of such redemption notice shall have been paid in cash, Common Stock or a
combination thereof.

         (iii)    Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified for
redemption in such notice (the "Redemption Date"), by first class mail, postage
prepaid, to all holders of record of the Preferred Stock at their last
addresses as they shall appear on the books of the Company; provided, however,
that no failure to give such notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of Preferred Stock except as to the holder to whom the Company has
failed to give notice or except as to the holder to whom notice was defective.
In addition to any information required by law or by the applicable rules of
any exchange upon which Preferred Stock may be listed or admitted to trading,
such notice shall state: (i) that such redemption is being made pursuant to the
optional redemption provisions hereof; (ii) the Redemption Date; (iii) the
Applicable Redemption Price and whether payable

                                       13

<PAGE>   14

in cash or Common Stock; (iv) that all the outstanding shares of Preferred
Stock are to be redeemed; (v) the place or places where certificates for such
shares are to be surrendered for payment of the Applicable Redemption Price;
and (vi) that dividends on the shares of Preferred Stock will cease to
accumulate on the Redemption Date. Upon the mailing of any such notice of
redemption, the Company shall become obligated to redeem at the time of
redemption specified thereon all shares called for redemption.

         (iv)     If notice has been mailed in accordance with Section 5(iii)
above and if the Applicable Redemption Price is to be paid (x) in cash, on or
before the Redemption Date specified in such notice, all funds necessary for
such redemption shall have been set aside by the Company, separate and apart
from its other funds in trust for the benefit of the holders of the outstanding
shares of Preferred Stock, so as to be, and to continue to be available
therefor or (y) in shares of Common Stock, on or before the Redemption Date
specified in such notice, shares of Common Stock necessary for such redemption
shall have been set aside by the Company in trust for the benefit of the
holders of the outstanding shares of Preferred Stock, so as to be, and continue
to be available therefor, then, from and after the Redemption Date, dividends
on the shares of the Preferred Stock so called for redemption shall cease to
accumulate, and said shares shall no longer be deemed to be outstanding and
shall not have the status of shares of Preferred Stock, and all rights of the
holders thereof as stockholders of the Company (except the right to receive
from the Company the Applicable Redemption Price) shall cease. Upon surrender,
in accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require
and the notice shall so state), such shares shall be redeemed by the Company at
the Applicable Redemption Price.

         (v)      The Company shall take all actions required or permitted
under the DGCL to permit any such redemption.

         (vi)     Notwithstanding the delivery by the Company of a notice of
redemption described in paragraph 5(iii), the holders of the Preferred Stock
shall continue to have the rights set forth in paragraph 3(i) to convert the
Preferred Stock into Common Stock until the close of business on the day prior
to the Redemption Date.

         6.       Change of Control.

         (i)      Subject to paragraph (6)(v) hereof, upon the occurrence of a
Change of Control, the Company shall be required to make an offer (a "Preferred
Stock Change of Control Offer") to each holder of shares of Preferred Stock to
repurchase all or any part of such holder's shares of Preferred Stock at an
offer price in cash equal to 100% of the aggregate Liquidation Preference
thereof, plus compounded accumulated and unpaid dividends to the date of
repurchase (the "Change of Control Payment").

         (ii)     Within 30 days following any Change of Control, the Company
shall (a) publish a notice of the Change of Control in The Wall Street Journal
or a similar daily business publication of national distribution and (b) mail a
notice to each holder of Preferred Stock describing the transaction that
constitutes the Change of Control, together with such other information as may
be required pursuant to the securities laws, and stating: (A) that the
Preferred Stock Change of Control Offer is being made pursuant to this
Certificate of Designation and that, to the extent lawful, all shares of
Preferred Stock validly tendered will be accepted for payment; (B) the purchase
price and the purchase date, which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (C) that any shares of Preferred Stock not tendered will
continue to accumulate dividends in accordance with the terms of this
Certificate of Designation; (D) that, unless the Company defaults in the
payment of the Change of Control Payment, all shares of Preferred Stock
accepted for payment pursuant to the Change of Control Offer shall cease to
accumulate dividends on the Change of Control Payment Date; (E) a description
of the

                                       14

<PAGE>   15

procedures to be followed by such holder in order to have its shares of
Preferred Stock repurchased, and (F) whether the Company can then pay the
Change of Control Payment in cash pursuant to the terms of its outstanding
indebtedness, and if the entire Change of Control Payment cannot be paid in
cash, specifying the portion of such amount that can be paid in cash.

         (iii)    On the Change of Control Payment Date, the Company shall, to
the extent lawful, (A) accept for payment shares of Preferred Stock validly
tendered pursuant to the Preferred Stock Change of Control Offer and (B)
promptly mail to each holder of shares of Preferred Stock so accepted payment
in an amount equal to the purchase price for such shares and (C) unless the
Company defaults in the payment for the shares of Preferred Stock tendered
pursuant to the Preferred Stock Change of Control Offer, dividends will cease
to accumulate with respect to the shares of Preferred Stock tendered and all
rights of holders of such tendered shares will terminate, except for the right
to receive payment therefor, on the Change of Control Payment Date. The Company
shall publicly announce the results of the Preferred Stock Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.

         (iv)     The Company shall comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of shares of the Preferred Stock in connection with a Change of
Control.

         (v)      If the holders of the Preferred Stock timely tender their
shares of Preferred Stock pursuant to the Preferred Stock Change of Control
Offer and if the terms of the Company's outstanding indebtedness do not permit
payment of all or any portion of the Change of Control Payment in cash (any
such portion of the Change of Control Payment, the "Non-Cash Change of Control
Payment"), any such portion of the Change of Control Payment that may be paid
in cash shall be paid in cash and, the remainder of the outstanding shares of
Preferred Stock shall (not be redeemed or repurchased but instead shall)
automatically be converted into the number of shares of Common Stock (or, if
applicable, securities issuable to holders of the Common Stock in connection
with such Change of Control) equal to the Non-Cash Change of Control Payment
divided by the current market price per share of Common Stock (as defined in
paragraph 3(xiii)). The Company shall not make a Change of Control Payment in
cash until all similar change of control payments required under the Company's
outstanding indebtedness and Senior Securities are made in full.

         (vi)     The Company will not repurchase or redeem any Preferred Stock
pursuant to this Change of Control provision prior to the Company's repurchase
of the Series B Preferred Stock pursuant to the Change of Control covenants in
the Series B Preferred Stock and the Company's repurchase or redemption
obligation may be concurrent with analogous obligations under Parity
Securities.

         (vii)    Notwithstanding the foregoing, the Company shall not be
required to make a Preferred Stock Change of Control Offer following a Change
of Control if a third party makes the Preferred Stock Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
set forth in this Certificate of Designation applicable to a Preferred Stock
Change of Control Offer made by the Company and purchases all of the Preferred
Stock validly tendered and not withdrawn under such Preferred Stock Change of
Control Offer.

         7.       Voting Rights.

         (i)      The holders of record of outstanding shares of the Preferred
Stock shall be entitled to vote, together with all the outstanding shares of
Common Stock, and not by classes, except as otherwise required by Delaware law,
on all matters on which holders of Common Stock are entitled to vote. Each
outstanding share of Preferred Stock shall be entitled to the number of votes
per share equal to the number of shares of

                                       15

<PAGE>   16

Common Stock issuable upon conversion of such share of Preferred Stock in
accordance with Section 3 hereof as of the date fixed for the determination of
holders of Common Stock entitled to vote on such proposal.

         (ii)     The holders of a majority of the outstanding shares of
Preferred Stock, voting as a separate single class, shall be entitled to elect
two members to the Board, which on the Preferred Stock Issue Date shall be
comprised of no more than eight members (not including the two Board members to
be elected pursuant to this Section 7). For so long as more than 100,000 shares
of Preferred Stock remain outstanding, the Board shall not consist of more than
10 members plus any directors elected pursuant to paragraph 7(vi). Such rights
and, if vested, the rights contained in paragraph 7(vi) may be exercised
initially (if such two Board members described in the first sentence of this
paragraph 7(ii) have not already been appointed by the Board on or prior to the
Preferred Stock Issue Date) by the written consent of the holders of Preferred
Stock, at a special meeting of the holders of Preferred Stock, called as
hereinafter provided, or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at such annual meetings or by the
written consent of the holders of Preferred Stock. The rights contained in this
paragraph 7(ii) may be exercised until such time as less than 100,000 shares of
Preferred Stock remain outstanding, at which time (upon receipt of written
notice by the Chairman of the Board) the term of any such director previously
elected pursuant to this Section 7 shall thereupon terminate, and such director
shall be deemed to have resigned.

                  If the right set forth in this paragraph 7(ii) and in
paragraph 7(vi) shall not have been initially exercised or if any director so
elected by the holders of Preferred Stock shall cease to serve as a director
before his term shall expire, the holders of Preferred Stock then outstanding,
at a special meeting of the holders of Preferred Stock, may elect the initial
director or a successor, as the case may be, to hold such office. Upon the
written request of holders of record of at least 10% of the Preferred Stock
then outstanding, addressed to the Secretary of the Company, a proper officer
of the Company shall call a special meeting of holders of Preferred Stock. Such
meeting shall be held at the earliest practicable date upon the notice required
for annual meetings of stockholders at the place for holding annual meetings of
stockholders of the Company or, if none, at a place designated by the Secretary
of the Company. If such meeting shall not be called by the proper officers of
the Company within 30 days after the personal service of such written request
upon the Secretary of the Company, or within 30 days after mailing the same
within the United States, by registered mail, addressed to the Secretary of the
Company at its principal office (such mailing to be evidenced by the registry
receipt issued by the postal authorities), then the holders of record of at
least 10% of the shares of Preferred Stock then outstanding may designate in
writing a holder of Preferred Stock to call such meeting at the expense of the
Company, and such meeting may be called by such person so designated upon the
notice required for annual meetings of stockholders and shall be held at the
place for holding annual meetings of the Company or, if none, at a place
designated by such holder. Any holder of Preferred Stock that would be entitled
to vote at such meeting shall have access to the stock books of the Company for
the purpose of causing a meeting of stockholders to be called pursuant to the
provisions of this paragraph 7(ii). Notwithstanding the provisions of this
paragraph, however, no such special meeting shall be called if any such request
is received less than 90 days before the date fixed for the next ensuing annual
or special meeting of stockholders.

         The Company will deliver, or will cause to be delivered, to each
designee of the holders of the Preferred Stock to the Board:

                  (1)   as soon as practical after the end of each month and in
         any event within thirty (30) days thereafter, a consolidated balance
         sheet of the Company and its subsidiaries as of the end of such month
         and consolidated statements of income and cash flows of the Company and
         its

                                       16

<PAGE>   17

         Subsidiaries, for each month and for the current fiscal year of the
         Company to date, all subject to normal year-end audit adjustments,
         prepared in accordance with generally accepted accounting principles,
         together with a comparison of such statements to the corresponding
         periods of the prior fiscal year and to the Company's business plan
         then in effect and approved by the Board; and

                  (2)  an annual budget, a business plan and financial
         forecasts for the Company for the next fiscal year of the Company, no
         later than thirty (30) days before the beginning of the Company's next
         fiscal year, in such manner and form as approved by the Board, which
         shall include at least a projection of income and a projected cash
         flow statement for each fiscal quarter in such fiscal year and a
         projected balance sheet as of the end of each fiscal quarter in such
         fiscal year. Any material changes in such business plan shall be
         delivered to each designee of the holders of the Preferred Stock to
         the Board as promptly as practicable after such changes have been
         approved by the Board.

         The Company shall, and shall cause its subsidiaries, officers,
directors, employees, auditors and other agents to, (a) afford the officers,
employees, auditors and other agents of each designee of the holders of the
Preferred Stock to the Board, during normal business hours reasonable access at
all reasonable times to its officers, employees, auditors, legal counsel,
properties, offices, plants and other facilities and to all books and records,
(b) furnish each designee of the holders of the Preferred Stock to the Board
with all financial, operating and other data and information as such designee
directly or through his agents or representatives, may from time to time
reasonably request and (c) afford each designee of the holders of the Preferred
Stock to the Board the opportunity to discuss the Company's affairs, finances
and accounts with the Company's officers from time to time as each such
designee may reasonably request.

         (iii)    For so long as at least 100,000 shares of Preferred Stock are
outstanding (or any shares of Preferred Stock are outstanding in the case of
paragraphs (A), (B), (F), (G) and (H)), the Company shall not, without the
affirmative vote or consent of the holders of at least a majority of the shares
of Preferred Stock then outstanding (with shares held by the Company or any of
its affiliates not being considered to be outstanding for this purpose) voting
or consenting as the case may be, as one class:

                  (A) amend or otherwise alter this Certificate of Designation
         in any manner that adversely affects the specified rights,
         preferences, privileges or voting rights of holders of Preferred
         Stock;

                  (B) authorize, create (by way of reclassification or
         otherwise) or issue any additional shares of Preferred Stock or
         decrease the total authorized or outstanding number of shares of
         Preferred Stock;

                  (C) authorize, create (by way of reclassification or
         otherwise) or issue any Senior Securities or any obligation or
         security convertible into or evidencing the right to purchase, shares
         of any class or series of Senior Securities (except as dividends on
         the Series B Preferred Stock);

                  (D) consummate the Sale of the Company;

                  (E) redeem, acquire or otherwise purchase (except for
         repurchases of Common Stock issued under the Company's stock incentive
         programs to the extent permitted by the terms of all indentures
         governing the Company's then-outstanding indebtedness) any shares of
         Common Stock or preferred stock of the Company, unless, in the case of
         preferred stock, such action is required by the terms of such
         preferred stock;

                                       17

<PAGE>   18

                  (F) amend or otherwise alter the Certificate of Incorporation
         or by-laws of the Company in any manner that adversely affects the
         specified rights, preferences, privileges or voting rights of holders
         of Preferred Stock;

                  (G) consummate the liquidation, dissolution or winding up of
         the Company other than in connection with a sale of substantially all
         the assets or other Sale of the Company; or

                  (H) take any other actions that require a vote of the holders
         of the Preferred Stock under Delaware law.

         (iv)     Without the consent of each holder affected, an amendment or
waiver of the Company's Certificate of Incorporation or of this Certificate of
Designation may not (with respect to any shares of Preferred Stock held by a
non-consenting holder):

                  (A) alter the voting rights with respect to the Preferred
         Stock or reduce the percentage of shares of Preferred Stock whose
         holders must consent to an amendment, supplement or waiver;

                  (B) reduce the Liquidation Preference or Liquidation Amount
         of the Preferred Stock;

                  (C) reduce the rate of or change the time for payment of
         dividends on any share of Preferred Stock;

                  (D) make any conversion of shares of Preferred Stock payable
         in any form other than that stated in this Certificate of Designation;
         or

                  (E) make any change in the provisions of this Certificate of
         Designation relating to waivers of the rights of holders of Preferred
         Stock to receive the Liquidation Preference, Liquidation Amount and
         dividends on the Preferred Stock.

         (v)      The Company in its sole discretion may without the vote or
consent of any holders of the Preferred Stock amend or supplement this
Certificate of Designation:

                  (a) to cure any ambiguity, defect or inconsistency, except if
         such amendment or supplement adversely affects the specified rights,
         preferences, privileges or voting rights of the holders of the
         Preferred Stock;

                  (b) to provide for uncertificated Preferred Stock in addition
         to or in place of certificated Preferred Stock; or

                  (c) to make any change that would provide any additional
         rights or benefits to the holders of the Preferred Stock or that does
         not adversely affect the legal rights under this Certificate of
         Designation of any such holder.

Except as set forth above, (x) the creation, authorization or issuance of any
shares of Junior Securities, Parity Securities or Senior Securities or (y) the
increase or decrease in the amount of authorized capital stock of any class,
including any preferred stock, shall not require the consent of the holders of
the Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges, special rights or voting rights of holders of shares
of Preferred Stock.

                                       18

<PAGE>   19

         (vi)     Upon:

                  (A) the failure by the Company to pay any dividend on the
         Preferred Stock when due and the continuation of such failure for a
         period of 5 Business Days;

                  (B) the failure of the Company to satisfy any liquidation
         payment obligation or mandatory or optional redemption or repurchase
         obligation (including, without limitation, pursuant to any required
         Change of Control Offer) with respect to the Preferred Stock;

                  (C) the failure of the Company to comply in all material
         respects with the covenants or agreements set forth in Sections
         3.I(e), (f), (h), (i) and (l), and 6 of the Purchase Agreement and
         Sections 2, 3, 4 and 5 of the Registration Rights Agreement, each
         between the Company and the initial holder of the Preferred Stock, and
         the continuance of such failure for 45 consecutive days or more after
         notice;

                  (D) default under any mortgage, indenture or instrument under
         which there may be issued or by which there may be secured or
         evidenced any indebtedness for money borrowed by the Company (or the
         payment of which is guaranteed by the Company) whether such
         indebtedness or guarantee now exists, or is created after the
         Preferred Stock Issue Date, which default (1) is caused by a failure
         to pay principal of or premium, if any, or interest on such
         indebtedness prior to the expiration of the grace period provided in
         such indebtedness on the date of such default (a "Payment Default")
         and (2) results in the acceleration of such indebtedness prior to its
         express maturity and, in each case, the principal amount of any such
         indebtedness, together with the principal amount of any other such
         indebtedness under which there has been a Payment Default and the
         maturity of which has been so accelerated, aggregates $5.0 million or
         more;

                  (E) (1) the Company's voluntary or involuntary bankruptcy,
         receivership, assignment for the benefit of creditors, or liquidation,
         or (2) acceleration of third party obligations or unsatisfied final
         and non-appealable judgments (or judgments which the Company has not
         taken reasonable steps to appeal) in excess of $1 million which remain
         unsatisfied, are not discharged or remain unstayed for at least 30
         consecutive days (each of the events described in clauses (A), (B),
         (C), (D) and (E) being referred to herein as an "Event of Default");

then the holders of a majority of the outstanding shares of Preferred Stock,
voting as a separate single class, shall be entitled to two additional members
to the Board and the number of members of the Board shall be immediately and
automatically increased by two. The voting rights provided for in this
paragraph 7(vi) shall be in addition to the optional redemption rights provided
in Section 5, and together, such voting rights and optional redemption rights
shall be the exclusive remedies for the holders of the Preferred Stock for any
violation by the Company of its obligations under this Certificate of
Designation that constitutes an Event of Default. The rights of the holders of
Preferred Stock to elect directors to the Board pursuant to this paragraph
7(vi) may be exercised until (i) all dividends in arrears shall have been paid
in full, and (ii) all other Events of Default have been cured or waived, at
which time the term of such directors previously elected shall thereupon
terminate and such directors shall be deemed to have resigned.

         8.       Reports. The Company shall file within 15 days after it files
them with the Commission copies of the annual and quarterly reports and the
information, documents, and other reports that the Company is required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
("SEC Reports") with the Transfer Agent. In the event the Company is not
required or shall cease to be required to file SEC Reports, pursuant to the
Exchange Act, the Company shall nevertheless continue to file

                                       19

<PAGE>   20

such reports with the Commission (unless the Commission shall not accept such a
filing) and the Transfer Agent. Whether or not required by the Exchange Act to
file SEC Reports with the Commission, so long as any shares of Preferred Stock
are outstanding, the Company shall furnish copies of the SEC Reports to the
holders of Preferred Stock at the time the Company is required to make such
information available to the Transfer Agent and any investors who request it in
writing.

         9.       Amendment. This Certificate of Designation shall not be
amended, either directly or indirectly, or through merger or consolidation with
another entity, in any manner that would alter or change the powers,
preferences or special rights of the Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the outstanding Preferred Stock, voting separately as a class.

         10.      Exclusion of Other Rights. Except as may otherwise be
required by law, the shares of Preferred Stock shall not have any voting
powers, preferences and relative, participating, optional or other special
rights, other than those specifically set forth in this resolution (as such
resolution may be amended from time to time) and in the Certificate of
Incorporation. The shares of Preferred Stock shall have no preemptive or
subscription rights.

         11.      Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.

         12.      Severability of Provisions. If any voting powers, preferences
and relative, participating, optional and other special rights of the Preferred
Stock and qualifications, limitations and restrictions thereof set forth in
this resolution (as such resolution may be amended from time to time) is
invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless,
remain in full force and effect, and no voting powers, preferences and
relative, participating, optional or other special rights of Preferred Stock
and qualifications, limitations and restrictions thereof herein set forth shall
be deemed dependent upon any other such voting powers, preferences and
relative, participating, optional or other special rights of Preferred Stock
and qualifications, limitations and restrictions thereof unless so expressed
herein.

         13.      Reissuance of Preferred Stock. Shares of Preferred Stock that
have been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged or converted, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized but unissued
shares of preferred stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Company, provided that any issuance of
such shares as Preferred Stock must be in compliance with the terms hereof.

         14.      Mutilated or Missing Preferred Stock Certificates. If any of
the Preferred Stock certificates shall be mutilated, lost, stolen or destroyed,
the Company shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Preferred Stock certificate, or in lieu of and
substitution for the Preferred Stock certificate lost, stolen or destroyed, a
new Preferred Stock certificate of like tenor and representing an equivalent
amount of shares of Preferred Stock, but only upon receipt of evidence of such
loss, theft or

                                       20

<PAGE>   21

destruction of such Preferred Stock certificate and indemnity, if requested,
reasonably satisfactory to the Company and the transfer agent (if other than
the Company).

         15.      Certain 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:

         "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.

         "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its subsidiaries, taken
as a whole, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" or "group" (as such terms are used in Section
13(d)(3) of the Exchange Act) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of more than 50% of the voting
power of the outstanding voting stock of the Company, unless (A) the closing
price per share of Common Stock for any five Trading Days within the period of
ten consecutive Trading Days ending immediately after the announcement of such
Change of Control equals or exceeds 105% of the Conversion Price then in effect
or (B) at least 90% of the consideration in the transaction or transactions
constituting a Change of Control pursuant to clause (iii) consists of shares of
common stock traded or to be traded immediately following such Change of
Control on a national securities exchange or the Nasdaq National Market and, as
a result of such transaction or transactions, the Preferred Stock becomes
convertible solely into such common stock (and any rights attached thereto) or
(iv) the first day on which more than a majority of the Board are not
Continuing Directors; provided, however, that a transaction in which the
Company becomes a subsidiary of another entity shall not constitute a Change of
Control if (A) the stockholders of the Company immediately prior to such
transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly through one or more
intermediaries, at least a majority of the voting power of the outstanding
voting stock of the Company immediately following the consummation of such
transaction and (B) immediately following the consummation of such transaction,
no "person" or "group" (as such terms are defined above), other than such other
entity (but including holders of equity interests of such other entity),
"beneficially owns" (as such term is defined above), directly or indirectly
through one or more intermediaries, more than 50% of the voting power of the
outstanding voting stock of the Company.

         "Closing Price" means, for each Trading Day, the last reported sale
price regular way on the Nasdaq National Market or, if the Common Stock is not
quoted on the Nasdaq National Market, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that
purpose.

         "Commission" means the Securities and Exchange Commission.

         "Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.

         "Continuing Directors" means, as of any date of determination, any
member of the Board who (a) was a member of the Board on the Preferred Stock
Issue Date (including, irrespective of the date that they are actually
nominated, the two designees to the Board of the holders of the Preferred Stock
pursuant to

                                       21

<PAGE>   22

paragraph 7(ii)), or (b) was nominated for election to the Board with the
approval of, or whose election was ratified by, at least two-thirds of the
Continuing Directors who were members of the Board at the time of such
nomination or election.

         "Conversion Price" shall initially mean $36.00 per share and
thereafter shall be subject to adjustment from time to time pursuant to the
terms of Section 3 hereof.

         "Event of Default" has the meaning set forth in paragraph 7(vi)
hereof.

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

         "Incentivized Conversion Program" means a program which may, from time
to time at the option of the Company, be instituted by the Company whereby the
Company offers cash and/or non-cash incentives (by way of reducing the
conversion price or otherwise) to holders of its outstanding convertible
securities to convert such securities into shares of Common Stock.

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

         "Preferred Stock Issue Date" means the date on which the Preferred
Stock is originally issued by the Company under this Certificate of
Designation.

         "Sale of the Company" means the sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Company or any merger or consolidation
of the Company unless (i) the Company is the surviving entity and no alteration
or change is made in the rights, powers, preferences or privileges of the
Preferred Stock, or (ii), if the Company is not the surviving entity, (A) the
entity formed by such consolidation or merger or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (in any such case, the "resulting entity") is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia, and (B) the Preferred Stock is converted into or
exchanged for and becomes shares of such resulting entity, having in respect of
such resulting entity the same (or more favorable) powers, preferences and
relative, participating, optional or other special rights thereof than the
Preferred Stock had immediately prior to such transaction. The resulting entity
of such transaction shall thereafter be deemed to be the "Company" for all
purposes of this Certificate of Designation.

         "Series B Preferred Stock" means the Company's outstanding 131/2%
Series B Redeemable Exchangeable Preferred Stock due 2009.

         "Series D Preferred Stock" means the Company's outstanding 7% Series D
Junior Convertible Preferred Stock.

         "Series E Preferred Stock" means the Company's outstanding 7% Series E
Junior Convertible Preferred Stock.

         "Series F Preferred Stock" means the Company's outstanding 7% Series F
Junior Convertible Preferred Stock.

                                       22

<PAGE>   23

         "Significant Event" means (i) during any period of two consecutive
years, individuals who at the beginning of such period constituted the
directors of the Company (together with any new directors whose election by
such directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office, (ii) any
merger or consolidation with or into any other entity or any other similar
transaction, whether in a single transaction or series of related transactions
where (A) the stockholders of the Company immediately prior to such transaction
in the aggregate cease to own at least 50% of the voting securities of the
entity surviving or resulting from such transaction (or the ultimate parent
thereof) or (B) any Person or "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) becomes the beneficial owner of more than 50% of
the voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent thereof), (iii) any transaction or series
of related transactions in which in excess of 50% of the Company's voting power
is transferred to any Person or group, (iv) the sale, transfer, lease,
conveyance or other disposition, in one or a series of related transactions, of
all or substantially all of the assets of the Company and its subsidiaries, or
(v) any liquidation, dissolution or winding-up of the Company.

         "Trading Day" means any day on which the Nasdaq National Market or
other applicable stock exchange or market is open for business.

         "Transfer Agent" shall be Continental Stock Transfer & Trust Co.
unless and until a successor is selected by the Company.

<PAGE>   24

                  IN WITNESS WHEREOF, the Company has caused this certificate
to be duly executed by Robert M. Manning, Senior Vice President and Chief
Financial Officer of the Company and attested by David C. Ruberg, Chairman of
the Board, President and Chief Executive Officer of the Company, this 2nd day
of February, 2000.

                                            INTERMEDIA COMMUNICATIONS INC.

                                            By: /s/ ROBERT M. MANNING
                                                ------------------------
                                            Name:    Robert M. Manning
                                            Title:   Senior Vice President and
                                                     Chief Financial Officer

ATTEST:

By: /s/ DAVID C. RUBERG
    --------------------
Name:    David C. Ruberg
Title:   Chairman of the Board, President
         and Chief Executive Officer

                                       24

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