

                           CERTIFICATE OF DESIGNATIONS
                                       OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                       AND
                      SERIES B EXCHANGEABLE PREFERRED STOCK
                                       OF
                             AMC ENTERTAINMENT INC.

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

          AMC  ENTERTAINMENT  INC.,  a Delaware  corporation  (hereinafter,  the
"Company"),  pursuant to Section 151 of the General Corporation Law of the State
 -------
of Delaware (the "GCL") does hereby make this  Certificate of  Designations  and
                  ---
does hereby state and certify that,  pursuant to the authority  expressly vested
in the Board of  Directors  of the  Company  (the "Board of  Directors")  by the
                                                   -------------------
Certificate  of  Incorporation,  and  pursuant to Section  141(c) of the GCL the
following resolutions have been duly adopted:

          RESOLVED,  that  pursuant  to  Article  Fourth of the  Certificate  of
Incorporation (which authorizes  10,000,000 shares of preferred stock, $0.66 2/3
par  value),  the  designations,   powers  and  preferences,  and  the  relative
participating,  optional  and  other  special  rights,  and the  qualifications,
limitations  and  restrictions  thereof,  of a series  of  Series A  Convertible
Preferred Stock and a series of Series B Exchangeable  Preferred Stock are fixed
as stated herein.

          RESOLVED,  that each share of the Series A Convertible Preferred Stock
and each share of Series B  Exchangeable  Preferred  Stock shall rank equally in
all respects and that each series shall be subject to the following provisions:

          Section 1.  Designation;  Rank.  The first series of  preferred  stock
                      ------------------
shall be designated  Series A Convertible  Preferred  Stock, par value $0.66 2/3
per share (the  "Series A  Preferred  Stock")  and shall  consist  of  2,000,000
                 --------------------------
shares.  The second  series of  preferred  stock  shall be  designated  Series B
Exchangeable  Preferred  Stock,  par value  $0.66 2/3 per share  (the  "Series B
                                                                        --------
Preferred Stock" and, together with the Series A Preferred Stock, the "Preferred
---------------                                                        ---------
Stock") and shall consist of 2,000,000  shares.  The Preferred  Stock will rank,
-----
with  respect to  dividend  rights and rights upon  liquidation,  winding up and
dissolution (a "Liquidation"):  (a) senior to all classes of common stock of the
                -----------
Company (including,  without limitation, the Common Stock and the Class B Stock)
and each other class of capital  stock or series of  preferred  stock  hereafter
established  after the offering of the Preferred Stock by the Board of Directors
that does not  expressly  provide  that it ranks senior to or on parity with the
Preferred  Stock as to dividend  rights and rights on Liquidation  (collectively
referred  to with the Common  Stock of the  Company as "Junior  Stock");  (b) on
                                                        -------------
parity  with any class of capital  stock of the  Company or series of  preferred
stock of the Company hereafter established, the terms of which expressly provide
that such class or series  will rank on parity  with the  Preferred  Stock as to
dividends and other  distributions,  including  distributions upon a Liquidation
("Parity Stock"); and (c) junior to any class of capital stock of the Company or
  ------------
any series of preferred stock of the Company hereafter established, the terms of
which  expressly  provide  that  such  class or series  will rank  senior to the
Preferred Stock as to dividends and other distributions, including distributions
upon a Liquidation ("Senior Stock").
<PAGE>

          Section 2.          Dividends.
                              ---------

                  (a)         Series A Preferred Stock.
                              ------------------------

                              (1) The holders of the then outstanding  shares of
Series A Preferred  Stock  (including  any  Additional  Series A Securities  (as
hereinafter  defined)) will be entitled to receive,  when, as and if declared by
the Board of Directors out of funds of the Company legally  available  therefor,
cumulative dividends,  from the Original Issuance Date through and including the
date on which such dividends are paid at the annual rate of 6.75% (the "Series A
                                                                        --------
Applicable  Rate")  of the  Series  A  Liquidation  Preference  (as  hereinafter
----------------
defined)  per share of the Series A Preferred  Stock,  payable in arrears on the
last day of each of June,  September,  December and March (the "Dividend Payment
                                                                ----------------
Date"),  commencing on June 30, 2001;  provided  that:  (i) if any such Dividend
----
Payment  Date is not a Business Day then such  dividend  shall be payable on the
next  Business  Day, and (ii)  accumulated  and unpaid  dividends  for any prior
quarterly  period  may be paid at any time.  Such  dividends  shall be deemed to
accrue on the Series A Preferred  Stock from the Original  Issuance  Date and be
cumulative  whether  or not  earned or  declared  and  whether  or not there are
profits, surplus or other funds of the Company legally available for the payment
of  dividends.  The term  "Business  Day" means any day other  than a  Saturday,
                           -------------
Sunday  or day on which  banking  institutions  in New York  are  authorized  or
required to remain closed. The term "Original Issuance Date" means, with respect
                                     ----------------------
to the Preferred  Stock,  the Initial  Issuance  Date,  and, with respect to the
Additional  Securities (as  hereinafter  defined),  the date upon which they are
issued or, if not issued,  the  applicable  dividend  payment  date on which the
Additional Securities were to have been issued.

                              (2)  During  the  PIK  Period,  dividends  on such
Series A Preferred Stock shall be paid through the issuance of additional shares
of Series A Preferred Stock to holders of Series A Preferred Stock  ("Additional
                                                                      ----------
Series A  Securities").  The number of Additional  Series A Securities  that are
--------------------
issued to the holders of the Series A Preferred Stock under  paragraphs  2(a)(2)
and 2(a)(3) hereof on any Dividend  Payment Date will be the number  obtained by
dividing (i) the total dollar amount of cumulative  dividends due and payable on
--------
the applicable Dividend Payment Date by (ii) the Series A Liquidation Preference
(which, for the purposes of this calculation,  shall not include any accrued and
unpaid  dividends),  provided,  that the Company  shall not be required to issue
fractional  shares of Series A Preferred Stock, but in lieu thereof may elect to
pay in cash the portion of any dividend  payable in shares of Series A Preferred
Stock that would otherwise require the issuance of a fractional share.

                              (3) After  the PIK  Period  and until the  seventh
anniversary of the Initial  Issuance  Date,  dividends on the Series A Preferred
Stock  shall be payable in cash or in  Additional  Series A  Securities,  at the
Company's  option.  After the seventh  anniversary of the Initial Issuance Date,
dividends on the Series A Preferred Stock shall be payable in cash,  unless such
cash payment is  prohibited  by the terms of the  indentures  for the  Company's
Existing High Yield Indebtedness,  in which case such dividends shall be payable
in Additional Series A Securities.

                                       2
<PAGE>

                              (4) If at any time when the  Company  is unable to
pay cash dividends on the Series A Preferred  Stock (whether by the terms of the
Series A Preferred Stock, by the terms of the Company's  indebtedness or by law)
and the accrual,  declaration or payment of Additional Series A Securities would
either (i) result in a "change of control" (as defined  pursuant to the terms of
the indentures governing the Company's Existing High Yield Indebtedness) or (ii)
require the Company to reserve for issuance underlying shares of Common Stock in
excess of the number of  authorized  shares  available  for  issuance  under the
Company's Certificate of Incorporation,  then the Additional Series A Securities
shall instead be accrued, declared or paid in Additional Series B Securities (as
hereinafter  defined). If for any reason, the holders of Preferred Stock receive
Additional Series B Securities  pursuant to this paragraph 2(a)(4),  as soon as,
and to the extent  that,  additional  shares of Series A Preferred  Stock can be
issued at any time in the future without  resulting in a "change of control" (as
defined pursuant to the terms of indenture  governing the terms of the Company's
Existing High Yield  Indebtedness),  the Additional  Series B Securities  issued
pursuant to this paragraph 2(a)(4) (including any Additional Series B Securities
issued as a dividend thereon) shall be automatically  and immediately  exchanged
for an equal number of shares of Series A Preferred  Stock. The number of shares
of Additional Series B Securities that are issued to the holders of the Series A
Preferred  Stock  pursuant  to this  paragraph  shall  equal the  amount of such
dividend as calculated  pursuant to paragraph 2(a)(2) or 2(a)(3), as applicable,
divided by the Series B  Liquidation  Preference  (which,  for  purposes of this
----------
calculation, shall not include any accrued and unpaid dividends).

                              (5) Upon the  occurrence of a Change of Control on
or before the fifth  anniversary of the Initial  Issuance Date (or, in the event
of such a Change of Control  which has been  approved by the Board of Directors,
on the Business Day immediately preceding the date of consummation of the Change
of Control),  the holders of Series A Preferred  Stock shall  receive a one-time
dividend of  Additional  Series A Securities on each share of Series A Preferred
Stock. The amount of such dividend of Additional Series A Securities pursuant to
this  paragraph  2(a)(5) shall equal (x) the total value of the  dividends  that
would have been  payable on such share of Series A Preferred  Stock  between the
Initial Issuance Date and the fifth anniversary  thereof (assuming  compounding)
less (y) the sum of (I) the  Additional  Series A  Securities  paid  pursuant to
paragraphs 2(a)(2) and 2(a)(3) on such share of Series A Preferred Stock through
such date and (II) any cash  dividends  paid on such  Series A  Preferred  Stock
through such date (the "Series A No-Call Period Dividend"). The number of shares
                        --------------------------------
of  Additional  Series A  Securities  constituting  the Series A No-Call  Period
Dividend  shall equal the amount of such dividend as calculated  pursuant to the
previous sentence divided by the Series A Liquidation Preference (which, for the
                  ------- --
purposes  of  this  calculation,  shall  not  include  any  accrued  and  unpaid
dividends).  To the  extent  that  shares of  Series A  Preferred  Stock  remain
outstanding  subsequent to a Change of Control,  no dividends will be paid under
paragraphs  2(a)(2) or 2(a)(3) during the period  commencing on the closing date
of the transaction  giving rise to the Change of Control and ending on the fifth
anniversary  of the  Initial  Issuance  Date,  if the  Series A  No-Call  Period
Dividend has been paid under this paragraph  2(a)(5) with respect to such shares
of Series A Preferred Stock.

                                       3
<PAGE>

                  (b)         Series B Preferred Stock.
                              ------------------------

                              (1) The holders of the then outstanding  shares of
Series B Preferred  Stock  (including  any  Additional  Series B Securities  (as
hereinafter  defined)) will be entitled to receive,  when, as and if declared by
the Board of Directors out of funds of the Company legally  available  therefor,
cumulative dividends,  from the Original Issuance Date through and including the
date on which such  dividends are paid at the annual rate of 12.00%,  subject to
retroactive  adjustment  as set forth below (the "Series B Applicable  Rate" and
                                                  -------------------------
together with the Series A Applicable Rate, the "Applicable Rate") of the Series
                                                 ---------------
B Liquidation  Preference per share of the Series B Preferred Stock,  payable in
arrears on the Dividend  Payment  Date,  commencing  on June 30, 2001;  provided
that:  (i) if any such  Dividend  Payment  Date is not a Business  Day then such
dividend  shall be payable on the next  Business Day, and (ii)  accumulated  and
unpaid  dividends for any prior  quarterly  period may be paid at any time. Such
dividends  shall be deemed to accrue on the  Series B  Preferred  Stock from the
Original  Issuance Date and be cumulative  whether or not earned or declared and
whether or not there are profits,  surplus or other funds of the Company legally
available  for the  payment of  dividends.  If the Company  obtains  Shareholder
Approval as a result of the Initial Solicitation and all of the then outstanding
shares of Series B Preferred Stock are exchangeable  immediately  following such
Shareholder  Approval (or would otherwise be eligible for exchange into Series A
Preferred  Stock  except for the failure to obtain HSR  Approval,  to the extent
such HSR Approval is required) for Series A Preferred  Stock pursuant to section
7 hereof (the "Initial Solicitation Conversion"),  the Series B Applicable Rate,
               -------------------------------
as to the then  outstanding  shares of Series B Preferred Stock only (or, in the
case of the failure to obtain HSR  Approval,  to the extent such HSR Approval is
required,  as to the then outstanding  shares of Series B Preferred Stock at the
time  Shareholder  Approval is  obtained,  plus any shares of Series B Preferred
Stock issued between the time Shareholder  Approval is obtained and the time HSR
Approval is obtained),  shall be reduced,  retroactively to the Initial Issuance
Date, from 12.00% to 6.75%. To the extent  necessary to effect such  retroactive
adjustment  of the Series B  Applicable  Rate,  the Company may cancel  (without
consideration  paid to the holder  thereof) any  Additional  Series B Securities
(including  dividends  paid thereon)  that have been issued  between the Initial
Issuance Date and the date of the Initial Solicitation Conversation.

                              (2)  During  the  PIK  Period,  dividends  on such
Series B Preferred Stock shall be paid through the issuance of additional shares
of Series B Preferred Stock to holders of Series B Preferred Stock  ("Additional
                                                                      ----------
Series B Securities" and together with the Additional  Series A Securities,  the
-------------------
"Additional Securities").  The number of Additional Series B Securities that are
 --------------------
issued to the holders of the Series B Preferred Stock under  paragraphs  2(b)(2)
and  2(b)(3)  hereof or to holders of Series A Preferred  Stock under  paragraph
2(a)(4)  hereof on any  Dividend  Payment  Date will be the number  obtained  by
dividing (i) the total dollar amount of cumulative  dividends due and payable on
--------
the applicable Dividend Payment Date by (ii) the Series B Liquidation Preference
(which,  for the  purposes of this  calculation,  shall not include  accrued and
unpaid  dividends),  provided,  that the Company  shall not be required to issue
fractional  shares of Series B Preferred Stock, but in lieu thereof may elect to
pay in cash the portion of any dividend  payable in shares of Series B Preferred
Stock that would otherwise require the issuance of a fractional share.

                                       4
<PAGE>
                              (3)  After  the PIK  Period  and  until  the fifth
anniversary of the Initial  Issuance  Date,  dividends on the Series B Preferred
Stock  shall be payable in cash or in  Additional  Series B  Securities,  at the
Company's  option.  After the fifth  anniversary  of the Initial  Issuance Date,
dividends on the Series B Preferred Stock shall be payable in cash,  unless such
payment is prohibited by the terms of the indentures for the Company's  Existing
High Yield  Indebtedness  in which case  dividends  shall be paid in  Additional
Series B Securities.

                              (4) Upon the  occurrence of a Change of Control on
or before the fifth  anniversary of the Initial  Issuance Date (or, in the event
of such a Change of Control  which has been  approved by the Board of Directors,
on the Business Day immediately preceding the date of consummation of the Change
of Control),  the holders of Series B Preferred  Stock shall  receive a one-time
dividend of  Additional  Series B Securities on each share of Series B Preferred
Stock. The amount of such dividend of Additional Series B Securities pursuant to
this  paragraph  2(b)(4) shall equal (x) the total value of the  dividends  that
would have been  payable on such share of Series B Preferred  Stock  between the
Initial Issuance Date and the fifth anniversary  thereof (assuming  compounding)
minus (y) the sum of (I) the  Additional  Series B Securities  paid  pursuant to
-----
paragraphs 2(b)(2) and 2(b)(3) on such share of Series B Preferred Stock through
such date and (II) any cash dividends paid pursuant to paragraph 2(b)(3) on such
share of Series B  Preferred  Stock  through  such  date (the  "Series B No-Call
                                                                ----------------
Period  Dividend").  The  number  of shares of  Additional  Series B  Securities
----------------
constituting the Series B No-Call Period Dividend shall equal the amount of such
dividend as calculated pursuant to the previous sentence divided by the Series B
                                                         ----------
Liquidation  Preference (which, for the purposes of this calculation,  shall not
include  accrued  and unpaid  dividends).  To the extent that shares of Series B
Preferred  Stock  remain  outstanding  subsequent  to a Change  of  Control,  no
dividends  will be paid under  paragraphs  2(b)(2) or 2(b)(3)  during the period
commencing on the closing date of the  transaction  giving rise to the Change of
Control and ending on the fifth anniversary of the Initial Issuance Date, if the
Series B No-Call Period Dividend has been paid under this paragraph 2(b)(4) with
respect to such shares of Series B Preferred Stock.

                              (5) Upon the occurrence of:

                                (A) the  Company  delivering  to the  holders of
          Preferred  Stock a notice  of  redemption  pursuant  to  section  4(b)
          hereof,  each  outstanding  share of Series B  Preferred  Stock  shall
          receive a one-time  dividend of Additional  Series B  Securities,  the
          number of shares of which  shall be equal to (i) the  quotient  of (x)
          the difference (if positive)  between the average of the closing price
          of the Company's  Common Stock on the American Stock Exchange or other
          principal  national  securities  exchange on which the Common Stock is
          listed or to which the  shares are  admitted  for  trading  for the 20
          trading days prior to  determination  and the Conversion Price divided
                                                                         -------
          by (y) the  Conversion  Price,  minus (ii) any  dividend  paid on such
          --                              -----
          share of Series B Preferred  Stock to date  pursuant to  subparagraphs
          2(b)(5)(C) or 2(b)(5)(D) hereof.

                                (B)  the  tenth   anniversary   of  the  Initial
          Issuance  Date,  each  outstanding  share of Series B Preferred  Stock
          shall receive a one-time  dividend of Additional  Series B Securities,
          the number of shares of which  shall be equal to the  quotient  of (i)
          the difference (if positive)  between the average of the closing price
          of the Company's  Common Stock on the American Stock Exchange or other
          principal  national  securities  exchange on which the Common Stock is
          listed or to which the  shares are  admitted  for  trading  for the 20
          trading days prior to  determination  and the Conversion Price divided
                                                                         -------
          by (ii) the Conversion Price.
          --

                                       5
<PAGE>

                                (C) a Change  of  Control  (or,  in the event of
          such a Change  of  Control  which  has been  approved  by the Board of
          Directors,  on the  Business  Day  immediately  preceding  the date of
          consummation  of the Change of  Control),  each  outstanding  share of
          Series  B  Preferred  Stock  shall  receive  a  one-time  dividend  of
          Additional Series B Securities, the number of shares of which shall be
          equal to (i) the quotient of (x) the difference (if positive)  between
          the value per share of the  consideration  received  by the holders of
          Common  Stock as a result of the Change of Control and the  Conversion
          Price  divided by (y) the  Conversion  Price,  minus (ii) any dividend
                 ----------
          paid on such share of Series B  Preferred  Stock to date  pursuant  to
          subparagraph 2(b)(5)(D) hereof.

                                (D)  at any  time  after  18  months  after  the
          Initial  Issuance  Date,  a sale of any  shares of Series A  Preferred
          Stock or the Conversion  Shares,  each  outstanding  share of Series B
          Preferred  Stock  shall  receive a  dividend  of  Additional  Series B
          Securities,  the amount of which  shall be equal to the product of (i)
          the  percentage  of the Series A  Preferred  Stock  and/or  Conversion
          Shares sold in such  transaction  (which  shall be the quotient of (x)
          the Underlying  Sold Shares plus the number of Conversion  Shares sold
          in such transaction  divided by (y) the Total Unconverted  Shares plus
                               ----------
          the number of Conversion Shares issued to date) multiplied by (ii) the
                                                          -------------
          quotient of (x) the  difference,  if positive,  between the  Effective
          Sale Price (in the case of a sale of Series A Preferred  Stock) or the
          sale price per share (in the case of a sale of Conversion  Shares) and
          the   Conversion   Price   divided  by  (y)  the   Conversion   Price.
                                     -----------
          Notwithstanding  the foregoing,  no dividend shall be payable pursuant
          to this subparagraph 2(b)(5)(D) unless (I) the transaction giving rise
          to the right to receive such dividend shall have been the initial sale
          of the Series A Preferred Stock or Conversion  Shares to a Person that
          is not an  Affiliate  of  Apollo,  an  Apollo  Purchaser  or any other
          Purchaser;  (II) the  holder of Series A  Preferred  Stock sold in the
          transaction  giving rise to the right to receive  such  dividend  also
          owned Series B Preferred  Stock at the time of such  transaction;  and
          (III) the  holder  of the  Series B  Preferred  Stock  receiving  such
          dividend  also  owned  Series  A  Preferred  Stock  at the time of the
          transaction  giving  rise  to the  right  to  receive  such  dividend.
          Notwithstanding  the  foregoing,  the Company shall not be required to
          deliver stock certificates  representing any dividend payable pursuant
          to this  subparagraph  2(b)(5)(D)  until  the  percentage  of Series A
          Preferred  Stock  (including the Conversion  Shares) sold, in a single
          transaction  or in any number of  transactions  over time,  aggregated
          together  for all  selling  holders  who  would  have  otherwise  been
          eligible for the dividend  provided in this  subparagraph  2(b)(5)(D),
          shall be at least equal to 10% of the total number of shares of Series
          A Preferred  Stock issued to date (for purposes of the  calculation in
          this sentence,  with respect to the Conversion  Shares,  the number of
          shares of Series A Preferred  Stock from which the  Conversion  Shares
          were converted shall be used (the "Threshold Amount")).  To the extent
                                             ----------------
          that such  dividends are not made solely because the sales of Series A
          Preferred  Stock  did not  meet  the  Threshold  Amount,  such  unpaid
          dividends shall accrue. Any Additional Series B Securities received as
          dividends on the Series B Preferred  Stock  pursuant to  subparagraphs
          2(b)(5)(A), 2(b)(5)(B) and 2(b)(5)(C) shall not be eligible to receive
          any of the dividends described in subparagraph  2(b)(5)(D) hereof. Any
          Additional  Series B Securities  received as dividends on the Series B
          Preferred Stock to this subparagraph  2(b)(5)(D) shall not be eligible
          to receive any of the dividends described in section 2(b)(5) hereof.

                                       6
<PAGE>

                  (c)         In the  event  that,  in any  fiscal  period,  the
Company  shall declare and pay, out of funds legally  available  therefor,  cash
dividends  (or  dividends  payable in  evidences of  indebtedness  issued by the
Company) on shares of the Common Stock,  holders of Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive,  in addition to dividends
received  pursuant to Sections 2(a) and 2(b) hereof, a cash dividend (or, if the
dividend  on  the  Common  Stock  was  paid  in the  form  of an  instrument  of
indebtedness,  a dividend paid in such instrument)  equal to the excess, if any,
of: (i) the amount of dividends  that such holder of Preferred  Stock would have
received had such share of Preferred Stock been converted into Common Stock (or,
in the case of Series B Preferred Stock, had such Series B Preferred Stock first
been  exchanged  for Series A  Preferred  Stock and then  converted  into Common
Stock) immediately  before payment of such dividend;  minus (ii) the face amount
of any dividend  payable in such fiscal period in Additional  Securities (or the
cash  amount of any cash  dividend  payable)  on such share of  Preferred  Stock
(pursuant to paragraphs 2(a)(2), 2(a)(3), 2(b)(2) or 2(b)(3) hereof).

                  (d)         Holders of shares of the Preferred  Stock shall be
entitled to full  cumulative  dividends,  as herein  provided,  on the Preferred
Stock and no additional  amounts.  Except as set forth in section 2(e) below, no
interest,  or sum of money in lieu of  interest,  shall be payable in respect of
any dividend payment or payments on the Preferred Stock that may be in arrears.

                  (e)         If dividends  are not paid in full, or declared in
full and sums set apart for the payment  thereof,  upon the shares of  Preferred
Stock and the shares of Parity  Stock,  all  dividends  declared  upon shares of
Preferred  Stock and upon all Parity Stock shall be paid or declared pro rata so
that in all cases the  amount of  dividends  paid or  declared  per share on the
Preferred  Stock and such  Parity  Stock shall bear to each other the same ratio
that unpaid accumulated  dividends per share,  including dividends accrued or in
arrears,  if any,  on the shares of  Preferred  Stock and such  other  shares of
Parity Stock, bear to each other. Unless and until full cumulative  dividends on
the shares of Preferred Stock in respect of all past quarterly  dividend periods
have been paid,  and the full  amount of  dividends  on the shares of  Preferred
Stock in respect of the then current  quarterly  dividend period shall have been
or are  contemporaneously  declared  in full and sums set aside for the  payment
thereof,  no shares of Junior Stock or Parity Stock shall be redeemed,  retired,
purchased or otherwise acquired for any consideration (or any payment made to or
available  for a sinking  fund for the  redemption  of any such  shares)  by the
Company or any Subsidiary of the Company  (except by conversion into or exchange
for shares of Junior Stock).  Unless and until full cumulative  dividends on the
shares of Preferred Stock in respect of all past quarterly dividend periods have
been  paid or are  contemporaneously  declared  in full and sums set  aside  for
payment thereof, no dividends shall be paid or declared or set aside for payment
or other  distribution  upon the  Junior  Stock,  other  than in  shares  of, or
warrants  or rights  to  acquire,  Junior  Stock.  For the  purposes  hereof,  a
"Subsidiary"  shall mean any  corporation,  association or other business entity
 ----------
(i) at least 50% of the outstanding  voting  securities of which are at the time
owned or  controlled  by the Company;  or (ii) with respect to which the Company
possesses, directly or indirectly, the power to direct or cause the direction of
the affairs or management of such person.

                                       7
<PAGE>

          The terms "accrued  dividends,"  "dividends accrued" and "dividends in
                     ------------------     -----------------       ------------
arrears," whenever used herein with reference to shares of Preferred Stock shall
-------
be deemed to mean an amount  which  shall be equal to  dividends  thereon at the
Applicable  Rate per share for the  respective  series from the date or dates on
which such dividends commence to accrue to the end of the then current quarterly
dividend period for such Preferred Stock (or, in the case of redemption,  to the
date of redemption), whether or not earned or declared and whether or not assets
for the Company are legally  available  therefor,  and if full dividends are not
declared  or paid  (whether  in cash or in  Additional  Securities),  then  such
dividends  shall  cumulate,   with  additional  dividends  thereon,   compounded
quarterly,  at the Applicable  Rate, for each quarterly period during which such
dividends remain unpaid, less the amount of all such dividends paid, or declared
in full and sums  set  aside  for the  payment  thereof,  upon  such  shares  of
Preferred Stock.

                  (f)         The amount of any dividends per share of Preferred
Stock  for any full  quarterly  period  shall be  computed  by  multiplying  the
Applicable Rate for such quarterly dividend period by the Liquidation Preference
per share and  dividing the result by four.  Dividends  payable on the shares of
Preferred Stock for any period less than a full quarterly  dividend period shall
be  computed  on the basis of a 360-day  year of twelve  30-day  months  and the
actual number of days elapsed for any period less than one month.

          Section 3.          Liquidation Preference.
                              ----------------------

                  (a)         Series A Preferred Stock.
                              ------------------------

                              (1)  In  the  event  of  a  Liquidation,   whether
voluntary  or  involuntary,  the  holders  of  Series  A  Preferred  Stock  then
outstanding  shall be  entitled to receive  out of the  available  assets of the
Company,  whether  such assets are stated  capital or surplus of any nature,  an
amount on such date equal to the greater of (i) $1000.00 (the "Issue Price") per
                                                               -----------
share  of  Series A  Preferred  Stock  plus all  accrued  and  unpaid  dividends
(including any dividends  payable in respect of the elapsed  portion of the then
current quarter in accordance with section 2(f)) per share of Series A Preferred
Stock as of such date,  calculated  pursuant to section  2(a)  hereinabove  (the
"Series A  Liquidation  Preference")  and (ii) such amount per share of Series A
 ---------------------------------
Preferred  Stock,  as would have been payable had each share been converted into
Common  Stock  immediately  prior  to  such  Liquidation  (with  respect  to the
calculations set forth above, the "Series A Liquidation Payment").  The Series A
                                   ----------------------------
Liquidation Payment shall be made before any payment shall be made or any assets
distributed  to the  holders of any class or series of the  Common  Stock or any
other  class or series  of the  Company's  capital  stock  ranking  junior as to
liquidation  rights to the Preferred Stock.  Following payment to the holders of
the  Series A  Preferred  Stock and  Series B  Preferred  Stock (as set forth in
section  3(b) below) of the full  preferential  amounts  described  in the first
sentence  of this  section  3, the  remaining  assets  (if  any) of the  Company
available for  distribution to stockholders of the Company shall be distributed,
subject to the rights of the holders of shares of any other  series of preferred
stock ranking senior to the Common Stock as to  distributions,  upon Liquidation
pro rata among the holders of the Common  Stock and any other  shares of capital
stock  of  the  Company  ranking  on a  parity  with  the  Common  Stock  as  to
distributions  upon  Liquidation.  If  upon  any  such  Liquidation  the  assets
available for payment of the Series A Liquidation  Payment are  insufficient  to
permit  the  payment  to  the  holders  of  the  Preferred  Stock  of  the  full
preferential  amounts  described  in this  paragraph,  then  all  the  remaining
available assets shall be distributed  among the holders of the then outstanding
Preferred Stock and any other then  outstanding  Parity Stock pro rata according
to the number of then  outstanding  shares of  Preferred  Stock and Parity Stock
held by each holder thereof.

                                       8
<PAGE>

                              (2) The Series A Liquidation  Preference  shall be
proportionately  adjusted in the event of any stock split,  reverse stock split,
stock  combination,  reclassification  or pursuant to any other  adjustment with
respect to the Series A Preferred Stock.

                  (b)         Series B Preferred Stock.
                              ------------------------

                              (1)  In  the  event  of  a  Liquidation,   whether
voluntary  or  involuntary,  the  holders  of  Series  B  Preferred  Stock  then
outstanding  shall be  entitled to receive  out of the  available  assets of the
Company,  whether  such assets are stated  capital or surplus of any nature,  an
amount on such date equal to the greater of (i) the Issue Price plus all accrued
and unpaid dividends  (including any dividends payable in respect of the elapsed
portion of the then current  quarter in accordance  with section 2(f)) per share
of Series B Preferred Stock as of such date, calculated pursuant to section 2(b)
hereinabove  (with  respect to the  calculation  set forth above,  the "Series B
                                                                        --------
Liquidation  Preference"  and together with the Series A Liquidation  Preference
-----------------------
the  "Liquidation  Preference")  and (ii)  such  amount  per  share of  Series B
      -----------------------
Preferred  Stock, as would have been payable had each share first been exchanged
for Series A Preferred Stock (assuming for this provision that all conditions to
conversion  had occurred) and then such shares of Series A Preferred  Stock were
converted  into Common  Stock  pursuant to section 6  immediately  prior to such
Liquidation  (the "Series B Liquidation  Payment" and together with the Series A
                   -----------------------------
Liquidation  Payment,  the  "Liquidation  Payment").  The  Series B  Liquidation
                             --------------------
Payment shall be made before any payment shall be made or any assets distributed
to the holders of any class or series of the Common  Stock or any other class or
series of the Company's capital stock ranking junior as to liquidation rights to
the Preferred Stock.  Following payment to the holders of the Series A Preferred
Stock (as set forth in section  3(a) above) and Series B Preferred  Stock of the
full  preferential  amounts  described in this section  3(b)(1),  the  remaining
assets (if any) of the Company available for distribution to stockholders of the
Company shall be distributed,  subject to the rights of the holders of shares of
any other series of  preferred  stock  ranking  senior to the Common Stock as to
distributions,  upon  Liquidation pro rata among the holders of the Common Stock
and any other  shares of capital  stock of the Company  ranking on a parity with
the  Common  Stock  as to  distributions  upon  Liquidation.  If upon  any  such
Liquidation  the assets  available  for payment of the  Liquidation  Payment are
insufficient  to permit the payment to the holders of the Preferred Stock of the
full preferential  amounts  described in this paragraph,  then all the remaining
available assets shall be distributed  among the holders of the then outstanding
Preferred Stock and any other then  outstanding  Parity Stock pro rata according
to the number of then  outstanding  shares of  Preferred  Stock and Parity Stock
held by each holder thereof.

                                       9
<PAGE>

                              (2) The Series B Liquidation  Preference  shall be
proportionately  adjusted in the event of any stock split,  reverse stock split,
stock  combination,  reclassification  or pursuant to any other  adjustment with
respect to the Series B Preferred Stock.

          Section 4.          Optional Redemption.
                              -------------------

                  (a)         Optional Redemption by Holders of Preferred Stock.
                              -------------------------------------------------
At any time after the tenth  anniversary of the Initial  Issuance Date, a holder
of Series A Preferred  Stock may,  upon 15 Business  Days written  notice to the
Company, require the Company to redeem in whole or in part, the shares of Series
A Preferred  Stock  (including  shares issuable in respect of accrued but unpaid
dividends)(the  "Holder Optional  Redemption") for either (x) cash or (y) Common
                 ---------------------------
Stock  (which  may  be  unregistered),  at  the  Company's  option,  at a  total
redemption  price  equal to the Series A  Liquidation  Preference,  subject to a
maximum  redemption  price of  $130,035,684.35  in the  event  that  Shareholder
Approval  is  not  obtained.  If the  Company  elects  to  settle  such  maximum
redemption  price in Common  Stock rather than in cash then the number of shares
of Common Stock shall be  determined  as set forth  below,  subject to a maximum
number of shares of Common  Stock of  18,186,809  in the event that  Shareholder
Approval is not obtained  (the  "Holder  Redemption  Price").  Such notice shall
                                 -------------------------
specify the date of the Holder Optional Redemption (which date shall be at least
15 Business Days after such notice (the "Holder Redemption Date")). Common Stock
                                         ----------------------
used as  consideration  for the redemption price pursuant to clause (y) shall be
valued at its market  value  (based on the average of the  closing  price of the
Company's  Common  Stock on the  American  Stock  Exchange  or  other  principal
national securities exchange on which the Common Stock is listed or to which the
shares are admitted  for trading for the 20 trading days prior to  determination
or, if no such trading market exists,  as determined by a nationally  recognized
investment  bank (which  shall  consider  the  liquidity  of the Common Stock in
making its valuation)); provided, that in no event shall the value attributed to
the Common Stock pursuant to clause (y) be less than the then  Conversion  Price
and in the event that  Shareholder  Approval is not  obtained be less than $7.15
per share of Common Stock (the price determined pursuant to clause (y) being the
"Common Stock Redemption Value").
 -----------------------------

                  (b)         Optional Redemption by Company.
                              ------------------------------

                              (1) At any time after April 19, 2006,  the Company
may, upon 45 days written notice to the holders of the Preferred  Stock,  redeem
all, but not less than all, of the then  outstanding  shares of Preferred  Stock
(including  shares  issuable  in respect of  accrued  but unpaid  dividends)(the
"Company Optional Redemption") for cash at a redemption price per share equal to
 ---------------------------
the Liquidation Preference (the "Company Redemption Price"); provided,  however,
                                 ------------------------    --------   -------
that the average of the closing price of the Common Stock on the American  Stock
Exchange or other national  securities exchange where the Common Stock is listed
or to which the shares are admitted for trading for the 20 trading days prior to
the  delivery by the  Company of the notice of  redemption  exceeds  150% of the
Conversion  Price.  Such notice shall  specify the date of the Company  Optional
Redemption  (which  shall be at least 45 days after such  notice  (the  "Company
                                                                         -------
Redemption  Date")).  The shares of Preferred  Stock will remain  convertible or
----------------
exchangeable until the redemption price is paid.

                                       10
<PAGE>
                              (2) Upon the  occurrence  of a Change of  Control,
the Company  may,  upon 10 days notice to the  holders of the  Preferred  Stock,
redeem all, but not less than all, of the then  outstanding  shares of Preferred
Stock (the "Change of Control  Redemption")  for cash at the Company  Redemption
            -----------------------------
Price; provided, however, that if such Change of Control occurs before the fifth
       --------  -------
anniversary of the Initial Issuance Date, the Company shall pay to the holder of
each share of Preferred Stock the Series A No-Call Period Dividend or the Series
B No-Call  Period  Dividend,  as the case may be, at least five days  before the
Change of Control  Redemption.  The shares of  Preferred  Stock,  including  the
shares issued  pursuant to the Series A No-Call Period  Dividend or the Series B
No-Call Period Dividend,  will remain  convertible or exchangeable,  as the case
may be, until the redemption price is paid.  Notwithstanding the foregoing,  the
Company may not redeem the Series B Preferred  Stock  pursuant to this paragraph
4(b)(2)  unless the Change of Control giving rise to such right of redemption is
also a Reorganization Event, subject to section 5 below.

                              (c) Payment of Redemption  Price.  All accrued and
                                  ----------------------------
unpaid  dividends on Preferred  Stock through the date of the Holder  Redemption
Date or Company Redemption Date, as the case may be, shall be payable in full at
the time of redemption.  Payment of the Holder  Redemption  Price and payment of
accrued and unpaid dividends in connection with a Holder Optional Redemption may
be made in cash or, to the extent that a  sufficient  number of  authorized  but
unissued  shares of Common  Stock  (which may be  unregistered)  are  available,
Common Stock at the Common Stock Redemption  Value, or any combination  thereof.
Payment of accrued and unpaid  dividends in connection  with a Company  Optional
Redemption shall be made in cash.

                              (d)  Status  of  Redeemed  Shares.  Any  shares of
                                   ----------------------------
Preferred Stock that shall at any time have been redeemed  pursuant to section 4
hereof shall, after such redemption,  have the status of authorized but unissued
shares of Preferred Stock, without designation as to series.

          Section 5.          Consideration   Received  upon  a  Reorganization,
                              --------------------------------------------------
Merger,   etc.  In  the  event  of  any  reorganization  of  the  Company,   any
-------------
reclassification of the stock of the Company, any consolidation or merger of the
Company, any sale or conveyance of all or substantially all of the assets of the
Company,  or any other event that results in the Common Stock being changed into
the same or a different number of other securities of another entity (other than
events described in section 6(e) below) or exchanged for assets (including cash)
from another entity (any such event, a "Reorganization Event") shall be effected
                                        --------------------
in such a way that the  holders of Common  Stock  shall be  entitled  to receive
stock, securities or assets (including cash) from another entity with respect to
or in  exchange  for  their  shares  of Common  Stock,  then,  prior to and as a
condition of such reorganization, reclassification,  consolidation, merger, sale
or conveyance,  lawful and adequate  provision shall be made whereby the holders
of Series B  Preferred  Stock may  thereafter  elect to receive  such  shares of
stock,  securities or assets  (including  cash) as may be issued or payable with
respect to or in exchange  for a number of  outstanding  shares of Common  Stock
equal to the number of shares of Common Stock  issuable upon  conversion of such
shares of Series B Preferred  Stock  (assuming such Series B Preferred Stock had
been first  exchanged  for Series A Preferred  Stock),  had such  Reorganization
Event not taken place.  In any such case,  appropriate  provision  shall be made
with  respect to the rights and  interests  of the holders of Series B Preferred
Stock to the end that the provisions  hereof shall thereafter be applicable,  as
nearly as may be, in  relation  to any stock,  securities  or assets  thereafter
deliverable  upon the exchange of the Series B Preferred  Stock  (assuming  such

                                      11
<PAGE>

Series B Preferred  Stock had been  exchanged  for Series A Preferred  Stock and
then the Series A Preferred  Stock was converted to Common  Stock).  The Company
shall  not  effect  any  such  Reorganization  Event  (i)  unless  prior  to  or
simultaneously   with  the  consummation   thereof  the  survivor  or  successor
corporation  (if other than the Company)  resulting from such  consolidation  or
merger or the  corporation  purchasing  such  assets  shall  assume  by  written
instrument  executed  and sent to each holder of Series B Preferred  Stock,  the
obligation to deliver to such holder of Series B Preferred  Stock such shares of
stock,  securities  or  assets  (including  cash)  as,  in  accordance  with the
foregoing provisions, such holder of Series B Preferred Stock may be entitled to
receive, and containing the express assumption by such successor  corporation of
the due and punctual  performance and observance of every provision herein to be
performed and observed by the Company and of all  liabilities and obligations of
the  Company  hereunder,  and (ii) in which the  Company,  as opposed to another
party to the Reorganization  Event, shall be required under any circumstances to
make a cash payment at any time to the holders of the Series B Preferred Stock.

          Section 6.          Conversion  Rights.  The  holders  of the Series A
                              -------------------
Preferred Stock shall have conversion rights as follows:

                  (a)         Generally. At any time after the Conversion Shares
                              ----------
issuable upon  conversion of the shares of Series A Preferred  Stock sold on the
Initial  Issuance Date are approved for listing on the American Stock  Exchange,
the shares of Series A Preferred  Stock  shall be  convertible  at any time,  in
whole or in part, into fully paid and  non-assessable  shares  (calculated as to
each  conversion  to the  nearest  1/100 of a share)  of  Common  Stock,  at the
conversion price,  determined as hereinafter  provided, in effect at the time of
conversion,  with each share of Series A Preferred Stock having a value equal to
the Series A Liquidation  Preference.  The price at which shares of Common Stock
shall be issued upon conversion (herein called the "Conversion  Price") shall be
                                                    ------------------
initially $7.15 per share of Common Stock.  The Conversion  Price and the number
of shares of Common Stock into which the Series A Preferred Stock is convertible
shall be adjusted in certain instances as provided below.

                  (b)         Mechanics of Conversion. All or any portion of the
                              -----------------------
shares of Series A Preferred  Stock held by any holder shall  convert  effective
immediately  prior to the close of  business  on the date that the  Company  has
received from such holder of Series A Preferred Stock (i) a notice of conversion
to the  Company,  setting  forth the number of shares to be  converted,  (ii) an
executed  stock  power  assigning  and  transferring  such  shares  of  Series A
Preferred Stock to the Company,  (iii)  certificates  representing the shares of
Series A  Preferred  Stock to be  converted  and (iv) a  written  notice  to the
Company  stating  therein its name or the name or names of its nominees in which
it wishes the Common  Stock to be issued.  The shares of Common  Stock  shall be
deemed issued upon compliance with the forgoing  requirements  and the holder of
Series A Preferred  Stock  thereof  shall be entitled to exercise  and enjoy all
rights with respect to such shares of Common Stock.  The Company shall,  as soon
as practicable thereafter,  but in any event, within 10 Business Days, issue and
deliver certificates  representing Common Stock at such office to such holder of
Series  A  Preferred  Stock,  or to his  or  her  nominee  or  nominees.  If the
conversion  is  in  connection  with  an  underwritten  offering  of  securities
registered  pursuant to the Securities Act, the conversion  shall be conditioned
upon the closing with the  underwriters  of the sale of  securities  pursuant to
such offering, in which event the person(s) entitled to receive the Common Stock
upon  conversion  of the Series A  Preferred  Stock  shall not be deemed to have
converted such Series A Preferred Stock until  immediately  prior to the closing
of such sale of securities.

                                       12
<PAGE>


                  (c)         Reservation  of Shares.  The Company  shall at all
                              ----------------------
times reserve and keep available out of its  authorized  but unissued  shares of
Common Stock for the purpose of issuance  upon  conversion of shares of Series A
Preferred  Stock  sufficient  shares of Common Stock,  and shall take all action
necessary so that shares of Common Stock so issued will be validly issued, fully
paid and nonassessable.

                  (d)         Adjustment     to     Conversion     Price    Upon
                              --------------------------------------------------
Reclassifications,  Reorganizations,  Consolidations or Mergers. In the event of
---------------------------------------------------------------
any  reorganization  of the Company,  any  reclassification  of the stock of the
Company  (other  than a change in par value or from par value to no par value or
from no par value to par value),  any  consolidation or merger of the Company or
any other event that results in the Common Stock being  changed into the same or
a different number of other  securities,  each share of Series A Preferred Stock
shall   concurrently   with   the   effectiveness   of   such    reorganization,
reclassification,  consolidation,  merger or other event be convertible into the
kind and  number of  shares  of stock or other  securities  or  property  of the
Company or of the successor  corporation  resulting from such  consolidation  or
surviving  such  merger,  if any, to which the holder of the number of shares of
Common Stock deliverable  (immediately prior to the time of such reorganization,
reclassification,  consolidation, merger or other event) upon conversion of such
Series A Preferred  Stock  would have been  entitled  upon such  reorganization,
reclassification,  consolidation,  merger or other event. The provisions of this
clause shall similarly apply to successive  reorganizations,  reclassifications,
consolidations, mergers or similar events.

                  (e)         Adjustment   to   Conversion   Price   Upon  Stock
                              --------------------------------------------------
Dividends,  Splits and  Reclassifications.  In case the Company  shall (i) pay a
-----------------------------------------
dividend in Common Stock or (ii)  subdivide or split-up its  outstanding  Common
Stock,  then,  following  the record  date for the  determination  of holders of
Common Stock entitled to receive such stock dividend,  or to be affected by such
subdivision or split-up,  the Conversion Price shall be appropriately  decreased
so that the number of shares of Common Stock  issuable on conversion of Series A
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.

                  (f)         Adjustment to Conversion Price Upon  Combinations.
                              -------------------------------------------------
If  the  number  of  shares  of  Common  Stock  outstanding  is  decreased  by a
combination of the  outstanding  shares of Common Stock into a smaller number of
shares of Common  Stock,  then,  following  the record date to determine  shares
affected  by such  combination,  the  Conversion  Price  shall be  appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred  Stock shall be decreased in proportion to such
decrease in outstanding shares.

                  (g)         Conversion Price Adjustment.
                              ---------------------------

                              (1)  Whenever the number of shares of Common Stock
into which the Series A Preferred  Stock is  convertible is adjusted as provided
under  section 6, the  Conversion  Price shall be adjusted by  multiplying  such
Conversion Price immediately prior to such adjustment by a fraction:

                                       13
<PAGE>


                                (A) the  numerator  of which shall be the number
          of shares of Common  Stock into which the Series A Preferred  Stock is
          convertible immediately prior to such adjustment; and

                                (B) the denominator of which shall be the number
          of shares of Common  Stock into which the Series A Preferred  Stock is
          convertible immediately thereafter.

                              (2) Notwithstanding  the foregoing,  no adjustment
of the  Conversion  Price  shall be made in an amount less than $0.01 per share,
but any such lesser adjustment shall be carried forward and shall be made at the
time of and together with the next subsequent  adjustment  which,  together with
any adjustments so carried forward, shall amount to $0.01 per share or more.

                  (h)         Notices.  Whenever  the number of shares of Common
                              -------
Stock into which the Series A  Preferred  Stock is  convertible  is  adjusted as
herein provided, the Company shall cause to be promptly delivered to each holder
of shares of Series A Preferred  Stock at its last address as it shall appear on
the  books  of  the  Company  by  telecopier  transmission  or  by a  nationally
recognized overnight delivery service,  notice of such adjustment or adjustments
setting  forth the  number of shares of Common  Stock  into  which the  Series A
Preferred Stock is convertible and the Conversion Price after such adjustment, a
brief  statement of the facts  requiring such  adjustment and the computation by
which such  adjustment was made. The Company shall give notice to each holder of
shares of Series A Preferred  Stock of any  transaction  contemplated by section
6(d) not later than 10 days  following  the  consummation  of such  transaction,
setting  forth the  estimated  date of  consummation.  Any such notice  shall be
treated as effective or having been given (i) if transmitted  by telecopier,  on
the Business  Day of confirmed  receipt by the  addressee  thereof,  and (ii) if
delivered by overnight courier, on the Business Day delivered.

          The  failure  to give the notice  required  in this  paragraph  or any
defect  therein  shall not affect the legality or validity of the event  causing
the adjustment of the  Conversion  Price or any other action taken in connection
therewith.

In case:

                              (1) the  Company  shall  declare a dividend on its
Common Stock Equivalents payable otherwise than in cash;

                              (2) the Company  shall  authorize  the granting to
the holders of its Common Stock  Equivalents  of rights or warrants to subscribe
for  or  purchase  any  shares  of  Common  Stock   Equivalents  (or  securities
convertible into shares of Common Stock Equivalents);

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

                                       14
<PAGE>


                              (4)  the   Company   shall  be   (voluntarily   or
involuntarily) dissolved, liquidated or wound up;

then the  Company  shall  cause to be  mailed  to the  holders  of the  Series A
Preferred  Stock,  at  least  10  days  prior  (or in the  case  of  involuntary
dissolution  or  liquidation  as  soon  thereafter  as is  practicable)  to  the
applicable record or effective date hereinafter  specified, a notice stating (x)
the date on which a record  is to be taken  for the  purpose  of such  dividend,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock  Equivalents  of record to be entitled to such dividend,
rights  or  warrants  are to be  determined,  or (y)  the  date  on  which  such
reclassification,    consolidation,   merger,   sale,   transfer,   dissolution,
liquidation  or winding up is expected to become  effective,  and the date as of
which it is expected that holders of Common Stock Equivalents of record shall be
entitled to exchange their shares of Common Stock  Equivalents  for  securities,
cash or other property  deliverable upon such  reclassification,  consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.

                  (i)         Common Stock; Other Securities. For the purpose of
                              ------------------------------
this  section  6, the term  "Common  Stock"  shall  mean (i) the  class of stock
designated as the Common Stock of the Company at the date of this Certificate of
Designations and (ii) any other class of stock resulting from successive changes
or  reclassification  of such Common Stock  consisting  solely of changes in par
value,  or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an  adjustment  made pursuant to this
section 6, the holder of Series A  Preferred  Stock  shall  become  entitled  to
convert  its shares of Series A  Preferred  Stock into any shares of the Company
other than Common Stock,  thereafter  the number of such other shares into which
the Series A Preferred  Stock is convertible  and the  Conversion  Price of such
shares shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the shares
contained in this section 6.

          Section 7.          Automatic  Exchange of Series B  Preferred  Stock.
                              -------------------------------------------------
Each share of Series B Preferred Stock shall  automatically  be exchanged for an
equal  number of shares of Series A  Preferred  Stock  upon the  receipt  by the
Company of Shareholder Approval and receipt of HSR Approval,  to the extent such
HSR Approval is required,  so long as such exchange will not result in a "change
of control" under the terms of the indentures  governing the Existing High Yield
Indebtedness.  Immediately  before the exchange of the Series B Preferred Stock,
the  Company  shall pay to the  holders of the  Series B  Preferred  Stock,  all
accrued and unpaid dividends on the Series B Preferred Stock. If for any reason,
the exchange of all outstanding  shares of Series B Preferred Stock would result
in a  "change  of  control"  under  the terms of the  indentures  governing  the
Existing  High  Yield  Indebtedness,  only  such  number  of  shares of Series B
Preferred  Stock as would not cause such "change of control"  shall be exchanged
for  shares of Series A  Preferred  Stock and the  remaining  shares of Series B
Preferred  Stock  will  be  exchanged  as soon as and to the  extent  that  such
exchange would not result in a "change of control" under the terms of indentures
governing the Existing High Yield Indebtedness.

                                       15
<PAGE>


          Section 8.          Voting Rights.
                              -------------

                  (a)         Subject to section  8(b) below,  upon the transfer
of any shares of Series A Preferred Stock, other than a transfer to an Affiliate
of an Apollo Purchaser, consistent with the Standstill Agreement, the transferee
of such  shares of Series A  Preferred  Stock  shall be  entitled  to vote on an
as-converted  basis upon all matters to be voted upon by the stockholders of the
Company,  voting together with the holders of Common Stock and the Class B Stock
as a single  class;  provided  that such  as-converted  voting  rights shall not
extend (i) to the election of directors or (ii) any matter which is reserved for
consideration (by law or by the Certificate of Incorporation) exclusively by the
holders of Common Stock or the Class B Stock.

                  (b)         Except as otherwise provided by applicable law and
in addition to any voting  rights  provided  by section  9(a) below,  the Apollo
Purchasers  (which term,  for the purposes of this  section  8(b),  includes any
Affiliates  of the  Apollo  Purchasers)  shall not have any voting  rights  with
respect  to any  Preferred  Stock  held by  such  Apollo  Purchasers;  provided,
however, if an Event of Default exists and such Event of Default is not cured or
waived  within 45 days,  the holders of Preferred  Stock shall have the right to
elect that number of directors which, when added to any  representatives  of the
holders of the Preferred  Stock  (including the Apollo  Purchasers)  then on the
Board of Directors,  will  constitute a majority of the Board of Directors.  The
Board of Directors  shall be expanded as necessary to accomplish the purposes of
this section  8(b).  Upon the cure of such Event of Default,  the Board shall be
reduced to the size immediately  before such Event of Default took place and the
holders of the  Preferred  Stock  shall have such rights to elect such number of
directors as before the Event of Default.

          Section 9.          Protective and Other Provisions.
                              --------------------------------

                  (a)         So long as the Apollo Purchasers  continue to have
Preferred Stock Approval Rights as granted under the Investment  Agreement,  (i)
the  Apollo  Purchasers  that are  holders of Series A  Preferred  Stock and the
Apollo V Purchasers who hold Series B Preferred  Stock,  prior to receipt of HSR
Approval,  to the extent  such HSR  Approval  is  required,  and (ii) the Apollo
Purchasers  that are holders of Series A Preferred  Stock and Series B Preferred
Stock, acting together as a single class, after HSR Approval, to the extent such
HSR Approval is required,  shall have the right to elect three  directors to the
Board of  Directors.  If for any reason,  any  director  appointed by the Apollo
Purchasers  ceases to be a director before the expiration of his or her term and
the Apollo  Purchasers  have Preferred  Stock Approval  Rights at such time, the
Apollo  Purchaser  who elected such  director  shall have the right to appoint a
director to fill such vacancy.

                  (b)         So long as any of the  shares of  Preferred  Stock
remain  outstanding,  the  Company  shall  not  enter  into  or  incur  any  new
indebtedness  that would restrict the ability of the Company to pay dividends on
the  Preferred  Stock in the  manner  required  pursuant  to  section  2 hereof.
Notwithstanding the foregoing,  the Company may make amendments to the Company's
Senior Facility which would restrict the ability of the Company to pay dividends
on the Preferred  Stock so long as such  restriction  does not extend beyond the
PIK Period.

                                       16
<PAGE>


          Section 10.         Limitations.  In  addition  to  any  other  rights
                              -----------
provided by  applicable  law, so long as any shares of Series A Preferred  Stock
are  outstanding,  the Company shall not,  without the affirmative  vote, or the
written consent as provided by law, of the Requisite  Holders,  at a vote of the
holders of Series A Preferred Stock, voting separately as a class,

                  (a)         create,  authorize  or issue any class,  series or
shares of (i) Senior Stock,  (ii) Parity Stock,  or (iii) Junior Stock,  if such
Junior Stock may be redeemed,  at the option of the holder thereof,  on or prior
to the Holder Redemption Date; or

                  (b)         change  the  preferences,  rights or  powers  with
respect to the Preferred Stock so as to affect the Preferred Stock adversely.

          Section 11.         Dividend  Received  Deduction.  For federal income
                              -----------------------------
tax purposes, the Company shall report distributions of cash and property (other
than the Additional Securities) on the Series A Preferred Stock as dividends, to
the extent of the  Company's  current and  accumulated  earnings and profits (as
determined for federal income tax purposes).

          Section 12.         Definitions.  For purposes of this  Certificate of
                              ------------
Designations, the following definitions shall apply:

          "Additional Securities" has the meaning set forth in paragraph 2(b)(2)
           ---------------------
hereof.

          "Additional  Series  A  Securities"  has  the  meaning  set  forth  in
           ---------------------------------
paragraph 2(a)(2) hereof.  "Additional  Series B Securities" has the meaning set
forth in paragraph 2(b)(2) hereof.

          "Affiliate"  means,  with respect to any Person,  (i) any other Person
           ---------
directly or indirectly controlling or controlled by, or under direct or indirect
common  control with,  such specified  Person;  (ii) any other Person that owns,
directly or  indirectly,  ten percent or more of such Person's  capital stock or
other  equity  interests  or any officer or director of any such Person or other
Person;  or (iii)  with  respect to any  natural  Person,  any  person  having a
relationship  with such Person by blood,  marriage  or adoption  not more remote
than first cousin; provided,  however, that with respect to Apollo or the Apollo
Purchasers,  the term  "Affiliate"  shall not include any limited partner of the
Apollo Purchasers or their Affiliates nor any portfolio or investee companies of
the Apollo Purchasers or their Affiliates so long as, in either case, (x) Apollo
does not  control or have  investment  authority  over such  limited  partner or
portfolio or investee company; (y) such limited partner or portfolio or investee
company  does not  operate in the  domestic  theatrical  exhibition  industry or
otherwise compete with the Company;  and (z) Apollo, the Apollo Purchaser or its
Affiliates do not own, directly or indirectly,  33% or more of such portfolio or
investee company's capital stock or other equity interests. For purposes of this
definition,  "control" when used with respect to any specified  Person means the
power to  direct  the  management  and  policies  of such  Person,  directly  or
indirectly,  whether through the ownership of voting securities,  by contract or
otherwise;  and the terms  "controlling" and "controlled" shall have correlative
meanings.

                                       17
<PAGE>


          "AIF V" means the Apollo Investment Fund V, L.P.
           -----

          "AOP V" means the Apollo Overseas Partners V, L.P.
           -----

          "Apollo V Purchasers" means AIF V and AOP V, and any other partnership
           -------------------
or entity  affiliated  with and  managed by Apollo over which  Apollo  exercises
investment  authority,  including  voting  and  dispositive  rights and to which
either AIF V or AOP V assigns any of their respective interests hereunder.

          "Apollo" means Apollo  Management IV, L.P.,  Apollo Management V, L.P.
           ------
and their Affiliates.

          "Apollo  Purchasers"  has the  meaning  set  forth  in the  Investment
           ------------------
Agreement.

          "Applicable Rate" has the meaning set forth in section 2(b) hereof.
           ---------------

          "Board of Directors" means the Board of Directors of the Company.
           ------------------

          "Business Day" has the meaning set forth in section 2(a) hereof.
           ------------

          "Certificate of Incorporation"  means the Certificate of Incorporation
           ----------------------------
of the Company, as amended from time to time, and as filed with the Secretary of
State of the State of Delaware.

          "Change  of  Control"  means (i) a merger,  consolidation  or  similar
           --------------------
transaction  involving the Company  after which  holders of the Company's  stock
before such  transaction do not own at least 50% of the combined voting power of
all shares  generally  entitled  to vote in the  election  of the members of the
Board of Directors of the surviving  entity,  (ii) the acquisition by any person
or group  (other than Apollo or the holders of Class B Stock (so long as each is
not a part of a  group  (as  such  term  is  defined  in  Section  13(d)  of the
Securities  Exchange  Act of 1934,  as amended and the  regulations  promulgated
thereunder) on the Initial  Issuance  Date) of beneficial  ownership of at least
50% of the combined voting power of all shares generally entitled to vote in the
election of the members of the Board of Directors  of the Company,  or (iii) the
sale  of all or  substantially  all of the  assets  of the  Company  or  similar
transaction  (the  determination of aggregate voting power to recognize that the
Company's  Class B Stock has ten votes per share and the Company's  Common Stock
has one vote per share).

          "Class B Stock"  means  the  Class B Stock,  par  value  $0.66 2/3 per
            ------------
share, of the Company.

          "Common Stock" means the Common Stock,  par value $0.66 2/3 per share,
           ------------
of the Company.


          "Common Stock  Equivalents"  means all Common Stock and any securities
           -------------------------
(whether  voting  common  stock or nonvoting  common  stock) of any class of the
Company which have no  preference in respect of amounts  payable in the event of
any  voluntary  or  involuntary  liquidation  dissolution  or  winding up of the
Company.

                                       18
<PAGE>

          "Common Stock  Redemption  Value" has the meaning set forth in section
           -------------------------------
4(a) hereof.

          "Company"  means  AMC  Entertainment  Inc.,  a  Delaware  corporation.
           -------

          "Company  Optional  Redemption"  has the  meaning set forth in section
           -----------------------------
4(b) hereof.

          "Company  Redemption  Date" has the meaning set forth in section  4(b)
           -------------------------
hereof.

          "Company  Redemption  Price" has the meaning set forth in section 4(b)
           --------------------------
hereof.

          "Conversion  Factor"  shall mean,  on any date of  determination,  the
           ------------------
quotient of (x) the Liquidation  Preference of the Series A Preferred divided by
                                                                      ----------
(y) the Conversion Price.

          "Conversion Price" has the meaning set forth in section 6(a) hereof.
           ----------------

          "Conversion  Shares"  means the  shares of Common  Stock  issued  upon
           ------------------
conversion  of the Series A Preferred  Stock,  including  the shares of Series A
Preferred Stock issued upon conversion of the Series B Preferred Stock.

          "Dividend  Payment  Date" has the  meaning  set forth in section  2(a)
           -----------------------
hereof.

          "Effective  Sale Price" shall mean,  in the case of a sale of Series A
           ---------------------
Preferred  Stock,  the quotient of (x) the sale price per share of such Series A
Preferred stock divided by (y) the Conversion Factor.
                ----------

          "Event of  Default"  means (i) an event of default as set forth  under
           -----------------
the Company's Senior Indebtedness, Existing High Yield Indebtedness or any other
indebtedness of the Company in principal  amount in excess of $10.0 million;  or
(ii) failure of the Company to pay cash  dividends on the  Preferred  Stock when
required  pursuant to the terms of this  Certificate  of  Designations,  without
regard to any prohibition by applicable law or otherwise  against  payment;  and
(iii) a  violation  by the  Company of the terms of section 8 of the  Investment
Agreement,  provided, however, that no Event of Default pursuant to (iii) above,
            -----------------
shall be  deemed  to have  occurred  unless  Apollo,  on  behalf  of the  Apollo
Purchasers,  provides written notice in advance of such violation to the Company
describing  such  violation  and such  notice is  accompanied  by an  opinion of
counsel confirming such violation.

          "Existing  High  Yield  Indebtedness"  means  the  currently  existing
           -----------------------------------
indebtedness of the Company  pursuant to (i) the Indenture dated March 19, 1997,
by and between the Company and Bank of New York,  as Trustee,  in respect of AMC
Entertainment   Inc.'s  9  1/2%  Senior  Subordinated  Notes  due  2009  and  as
supplemented  by the First  Supplemental  Indenture dated June 9, 1997 and as it
may be amended or  supplemented  from time to time and (ii) the Indenture  dated
January 27, 1999,  by and between the Company and Bank of New York,  as Trustee,
in respect of AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2011
and as it may be amended or supplemented from time to time.

                                       19
<PAGE>

          "GCL" shall have the meaning set forth in the first  paragraph of this
           ---
Certificate of Designations.  "Holder  Optional  Redemption" has the meaning set
forth in section 4(a) hereof.

          "Holder  Redemption  Date" has the meaning  set forth in section  4(a)
           ------------------------
hereof.

          "Holder  Redemption  Price" has the meaning set forth in section  4(a)
           -------------------------
hereof.

          "HSR  Approval"  means  the  expiration  or early  termination  of any
           -------------
applicable  waiting  period after any filing  required by the  Hart-Scott-Rodino
Antitrust Improvements Act of 1976 with respect to the acquisition of the Series
A  Preferred  Stock and Series B  Preferred  Stock and the  exchange of Series B
Preferred Stock for Series A Preferred Stock contemplated by this Certificate of
Designations.

          "Initial  Issuance  Date"  means  April 19,  2001,  the first  date of
           -----------------------
issuance  of the  Preferred  Stock  pursuant  to the  closing of the  Investment
Agreement.

          "Initial   Solicitation"   means  shall  mean  the   solicitation   of
           ----------------------
Shareholder  Approval at the Company's next regularly  scheduled  annual meeting
after the Closing Date,  which shall take place no later than 270 days after the
Initial Issuance Date.

          "Investment Agreement" means the Investment Agreement entered in as of
           --------------------
April 19, 2001 among the Company and certain investors named therein.

          "Issue Price" has the meaning set forth in section 3 hereof.
           -----------

          "Junior Stock" has the meaning set forth in section 1 hereof.
           ------------

          "Liquidation" has the meaning set forth in section 1 hereof.
           -----------

          "Liquidation  Payment"  has the  meaning  set  forth in  section  3(b)
           --------------------
hereof.

          "Liquidation  Preference"  has the  meaning set forth in section 3 (b)
           -----------------------
hereof.

          "Original  Issuance  Date" has the meaning  set forth in section  2(a)
           ------------------------
hereof.

          "Parity Stock" has the meaning set forth in section 1 hereof.
           ------------

          "Person" means all natural  persons,  corporations,  business  trusts,
           ------
associations,  companies,  partnerships,  joint ventures, and other entities and
governments and agencies or political subdivisions thereof.

                                       20
<PAGE>

          "PIK Period"  means the period  between the Initial  Issuance Date and
           ----------
the third anniversary thereof.

          "Preferred  Stock" means the Series A Preferred Stock and the Series B
           ----------------
Preferred Stock.

          "Preferred  Stock  Approval  Rights"  has the meaning set forth in the
           ----------------------------------
Investment Agreement.

          "Purchasers"  shall mean the Apollo  Purchasers and any partnership or
           ----------
other  entity  to  which  any  of the  foregoing  assigns  any of its  interests
hereunder, consistent with the provisions of the Investment Agreement.

          "Reorganization  Event"  shall have the meaning set forth in section 5
           ---------------------
hereof.

          "Requisite  Holders"  means  holders of a majority of Preferred  Stock
           ------------------
currently outstanding.

          "Senior  Facility"  shall  mean the U.S.  $  425,000,000  Amended  and
           ----------------
Restated Credit  Agreement,  dated as of April 10, 1997, among AMC Entertainment
Inc, as the Borrower;  and The Bank of Nova Scotia, as Administrative Agent; and
Bank of America National Trust and Savings Association,  as Documentation Agent;
and  Various  Financial  Institutions  as  Lenders,  as  amended  by the  Second
Amendment,  dated as of  January  16,  1998,  as  further  amended  by the Third
Amendment,  dated as of March 15,  1999 and as  further  amended  by the  Fourth
Amendment, dated as of March 29, 2000.

          "Senior  Indebtedness"  shall  mean  the  Company's  current  existing
           --------------------
indebtedness pursuant to the Senior Facility.

          "Senior Stock" has the meaning set forth in section 1 hereof.
           ------------

          "Series A  Applicable  Rate" has the meaning set forth in section 2(a)
           --------------------------
hereof.

          "Series A  Liquidation  Payment"  has the meaning set forth in section
           ------------------------------
3(a) hereof.

          "Series A Liquidation Preference" has the meaning set forth in section
           -------------------------------
3(a) hereof.

          "Series  A  No-Call  Period  Dividend"  has the  meaning  set forth in
           ------------------------------------
section 2(a)(5) hereof.

          "Series A  Preferred  Stock"  has the  meaning  set forth in section 1
           --------------------------
hereof.

          "Series B  Applicable  Rate" has the meaning set forth in section 2(b)
           --------------------------
hereof.

          "Series B  Liquidation  Payment"  has the meaning set forth in section
           ------------------------------
3(b) hereof.

                                       21
<PAGE>

          "Series B Liquidation Preference" has the meaning set forth in section
           -------------------------------
3(b) hereof.

          "Series  B  No-Call  Period  Dividend"  has the  meaning  set forth in
           -------------------------------------
section 2(b)(4) hereof.

          "Series B  Preferred  Stock"  has the  meaning  set forth in section 1
           --------------------------
hereof.

          "Shareholder  Approval"  shall mean  approval  by (i) the holders of a
           ---------------------
majority of the Common Stock,  voting  separately as a class and (ii) a majority
of the votes cast by the  Company's  stockholders  voting  together  as a single
class, of an amendment to the Company's Certificate of Incorporation  increasing
the number of authorized shares of Common Stock (so as to permit the issuance of
additional  shares of Series A Preferred  Stock and the underlying  Common Stock
and until  there are  enough  shares  that  would  allow all  shares of Series A
Preferred  Stock to  convert  into  Common  Stock  and all  shares  of  Series B
Preferred Stock to be exchanged for Series A Preferred Stock, as contemplated by
this Certificate of Designations).

          "Standstill  Agreement" means the Standstill Agreement entered into as
           ---------------------
of April 19, 2001 among the Company and certain investors named therein.

          "Subsidiary" has the meaning set forth in section 2(e) hereof.
           ----------

          "Threshold  Amount" has the  meaning  set forth in section  2(b)(5)(D)
           -----------------
hereof.

          "Total  Unconverted  Shares" shall mean, on any date of determination,
           --------------------------
the  product of (x) the number of shares of Series A Preferred  Stock  issued to
date multiplied by (y) the Conversion Factor.

          "Underlying Shares Sold" shall mean, in the case of a sale of Series A
           ----------------------
Preferred  Stock,  the product of (x) the number of shares of Series A Preferred
Stock sold in such sale transaction multiplied by (y) the Conversion Factor.
                                    -------------

                                       22

<PAGE>


          IN WITNESS  WHEREOF,  the  Company  has  caused  this  Certificate  of
Designation to be signed by __________________,  its _________,  and attested by
________________, its Secretary, this 19th day of April, 2001.



                                    By:_____________________________________
                                       Name:
                                       Title:

Attested:


By:_________________________
       Secretary


                                       23

