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                           CERTIFICATE OF DESIGNATION
                                       OF
                             AM COMMUNICATIONS, INC.


TO:      THE SECRETARY OF STATE
         STATE OF DELAWARE


         It is hereby certified that:

                  1. The name of the corporation is AM COMMUNICATIONS, INC. (the
"Corporation").

                  2. The Certificate of Incorporation, as restated and then
further amended prior to the date hereof, authorizes the issuance of (a)
1,000,000 shares of Preferred Stock, with a par value of $0.10 per share each,
and expressly vests in the Board of Directors of the Corporation the authority
provided therein to issue any or all of such shares in one or more series and,
by resolution, to establish the designation, number, full or limited voting
powers, or the denial of voting powers, preferences and relative, participating,
optional and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of each series to be
issued, and (b) the issuance of 100,000,000 shares of Common Stock, with a par
value of $0.10 each.

         3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a series of the Preferred Stock to be known as the "Series A Preferred
Stock" and authorizing the issuance of 74,074 shares of such Series A Preferred
Stock:

         WHEREAS, the Corporation seeks immediately to obtain up to $2 Million
         in capital (the "Investment") to be used to finance working capital
         needs, business development activities, the pursuit of strategic growth
         objectives, including merger and acquisition activities, and other
         purposes arising in the ordinary course of the Corporation's business.

         WHEREAS, Investec PMG, as the Corporation's retained investment banker,
         has prepared a proposed structure for the Investment based on its
         analysis of valuations for comparable companies to the Corporation, a
         summary of the substantive terms of such proposed Investment is
         attached hereto as Exhibit A.

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         WHEREAS, given the time constraints and market conditions for obtaining
         the proposed Investment, it is believed that the only viable source of
         such Investment is a member of the Board or other insider of the
         Corporation.

         NOW, THEREFORE, BE IT HEREBY:

         RESOLVED: That the Corporation shall be authorized and directed to
         obtain the Investment from a member of the Board or other insider of
         the Corporation consistent with the terms as set forth in the Investec
         PMG proposal and summarized in Exhibit A.

         FURTHER RESOLVED: That the Corporation's Certificate of Incorporation
         shall be amended to set forth the following description of the
         Preferred Stock (herein designated to be the Corporation's Series A
         Preferred Stock) to be issued by the Corporation in conjunction with
         such proposed Investment:

         "10.  Description and Designation of Series A Preferred Stock.

                  (a)      Designation. A total of 74,074 shares of the
                           corporation's Preferred Stock shall be designated the
                           Series A Preferred Stock, having a par value of $0.10
                           per share..

                  (b)      Computation of Cumulative Dividends. The holders of
                           the outstanding shares of Series A Preferred Stock
                           shall be entitled to receive, out of any funds
                           legally available therefor, cumulative dividends at
                           the annual rate of ten percent (10%) of the original
                           issue price per share of Series A Preferred Stock.
                           Dividends on the Series A Preferred Stock shall
                           accrue from day to day on each share of Series A
                           Preferred Stock from the date of original issuance of
                           such share, whether or not earned or declared, and
                           shall accrue until paid. All numbers relating to the
                           calculation of cumulative dividends shall be subject
                           to equitable adjustment in the event of any stock
                           dividend, stock split, combination, reorganization,
                           reclassification, recapitalization, or other similar
                           event involving a change in the corporation's capital
                           structure.

                  (c)      Payment of Dividends. Subject to the following,
                           cumulative dividends on the Series A Preferred Stock
                           shall be payable if, as and when declared by the
                           Board of Directors of the corporation. If any accrued
                           cumulative dividends on the Series A Preferred Stock
                           in respect of any previous or current annual dividend
                           period shall not have been paid or declared and a sum
                           sufficient for the payment thereof set apart, the
                           deficiency shall first be fully paid before any
                           dividend or other distribution shall be paid or
                           declared and set apart for the Common Stock, or any
                           subsequently designated series of Preferred Stock
                           which is junior in right of dividends to the Series A
                           Preferred Stock. Upon any conversion of the Series A
                           Preferred Stock pursuant to Section 10(f) hereof, all
                           such accrued and unpaid cumulative dividends on the
                           Series A Preferred Stock to and until the date of
                           such conversion shall be immediately due and payable
                           in either cash or Common Stock at the election of the
                           corporation. For the purposes of the previous
                           sentence, the Common Stock shall be valued at the
                           market price in effect on the day immediately
                           preceding the effective date of the conversion, as
                           determined by the Board of Directors of the
                           corporation in its reasonable discretion.

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                  (d)      Treatment at Liquidation, Dissolution or Winding Up.

                           (i) In the event of any liquidation, dissolution or
                           winding up of the corporation, whether voluntary or
                           involuntary, or in the event of its insolvency,
                           before any distribution or payment is made to any
                           holders of Common Stock or any other class or series
                           of capital stock of the corporation designated to be
                           junior to the Series A Preferred Stock in liquidation
                           preference, and subject to the liquidation rights and
                           preferences of any other class or series of Preferred
                           Stock designated in the future to be senior to, or on
                           a parity with, the Series A Preferred Stock with
                           respect to liquidation rights and preferences, the
                           holders of each share of Series A Preferred Stock
                           shall be entitled to be paid first out of the assets
                           of the corporation available for distribution to
                           holders of the corporation's capital stock of all
                           classes, whether such assets are capital, surplus or
                           earnings ("Available Assets"), the greater of (A) an
                           amount equal to the original issue price per share of
                           the Series A Preferred Stock (subject to equitable
                           adjustment for any stock dividend, stock split,
                           combination, reorganization, recapitalization,
                           reclassification, or other similar event involving a
                           change in the capital structure of the Preferred
                           Stock) plus all declared but unpaid dividends on each
                           such share, or (B) such amount per share of Series A
                           Preferred Stock as would have been payable had each
                           share of Preferred Stock which is convertible into
                           shares of the Common Stock been so converted
                           immediately prior to such liquidation, dissolution or
                           winding up.

                           (ii) If, upon liquidation, dissolution or winding up
                           of the corporation, the Available Assets shall be
                           insufficient to pay to the holders of the Series A
                           Preferred Stock and any other series of Preferred
                           Stock on parity with the Series A Preferred Stock
                           with respect to liquidation rights and preferences,
                           the full amounts to which they otherwise would be
                           entitled, the holders of the Series A Preferred Stock
                           and such other series of Preferred Stock shall share
                           ratably in any distribution of Available Assets pro
                           rata in proportion to the respective liquidation
                           preference amounts which would otherwise be payable
                           upon liquidation with respect to the outstanding
                           shares of Series A Preferred Stock and such other
                           series of Preferred Stock if all liquidation
                           preference dollar amounts with respect to such shares
                           were paid in full.

                                       3
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                           (iii) After payment of all liquidation preferences to
                           all holders of Preferred Stock, the entire remaining
                           Available Assets, if any, shall be distributed among
                           the holders of the Common Stock and any other class
                           or series of Preferred Stock entitled to participate
                           with the Common Stock in a liquidating distribution,
                           in proportion to the shares of the Common Stock then
                           held by them and the shares of Common Stock which
                           they then have the right to acquire upon conversion
                           of such shares of Preferred Stock held by them.

                           (iv) Whenever any distribution provided for in this
                           Section 10(d) shall be payable in whole or in part in
                           property other than cash, the value of any property
                           distributed shall be the fair market value of such
                           property as reasonably determined in good faith by
                           the Board of Directors of the corporation. All
                           distributions of property other than cash made
                           hereunder shall be made, to the extent possible, pro
                           rata with respect to each series and class of
                           Preferred Stock and Common Stock in accordance with
                           the liquidation amounts payable with respect to each
                           such series and class.

                  (e)      Treatment of Reorganization, Consolidation, Merger or
                           Sale of Assets. Any merger, consolidation or other
                           corporate reorganization or combination to which the
                           corporation is a non-surviving party, and any sale of
                           all or substantially all of the assets of the
                           corporation, shall be regarded as a liquidation,
                           dissolution or winding up of the affairs of the
                           corporation for purposes of Section 10(d) hereof. The
                           provisions of this Section 10(e) shall not apply to
                           (i) any reorganization, merger, or consolidation
                           involving only a change in the state of incorporation
                           of the corporation, (ii) a merger of the corporation
                           with or into a wholly-owned subsidiary of the
                           corporation, or (iii) a merger, reorganization,
                           consolidation or other combination of which the
                           corporation is substantively the surviving
                           corporation and operates as a going concern, with
                           another corporation incorporated in the United States
                           of America and which does not involve a
                           recapitalization, reorganization, reclassification or
                           other similar change in the capital structure of the
                           corporation.

                  (f)      Conversion. The holders of the Series A Preferred
                           Stock shall have the following rights and be subject
                           to the following obligations with respect to the
                           conversion of such shares into shares of the Common
                           Stock.

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                           (i) Voluntary Conversion. Each holder of Series A
                           Preferred Stock shall have the right to convert, at
                           any time prior to redemption pursuant to Section
                           10(k) hereof, any share of the Series A Preferred
                           Stock owned by it into shares of the Common Stock.
                           For purposes of this Agreement, each share of Series
                           A Preferred Stock shall be deemed to be worth $27.00,
                           and the conversion price of the Common Stock shall be
                           $0.27 per share, or, in case an adjustment to such
                           price has taken place pursuant to the provisions of
                           Section 10(g) hereof, then at the price as last
                           adjusted and in effect on the date of conversion
                           (such price, as last adjusted, being referred to
                           herein as the "Exercise Price"). For example, if no
                           adjustment to the Exercise Price has occurred, each
                           outstanding share of Series A Preferred Stock would
                           be convertible into one hundred (100) shares of the
                           Common Stock. If the Exercise Price had been adjusted
                           and reduced to $0.18, each outstanding share of
                           Series A Preferred Stock would be convertible into
                           one hundred fifty (150) shares of the Common Stock

                           (ii) Automatic Conversion. Immediately prior to the
                           closing of a public offering basis pursuant to an
                           effective registration statement filed pursuant to
                           the Securities Act of 1933, as amended (other than on
                           Form S-4 or S-8 or any successor forms thereto),
                           covering the offer and sale of Common Stock for the
                           account of the corporation, but subject to the
                           closing of such public offering, all outstanding
                           shares of the Series A Preferred Stock shall be
                           converted automatically into the number of fully
                           paid, non-assessable shares of Common Stock into
                           which such shares of Series A Preferred Stock are
                           convertible pursuant to this Section 10(f) as of the
                           closing and consummation of such underwritten public
                           offering without any further action by the holders of
                           such shares and whether or not the certificates
                           representing such shares are surrendered to the
                           corporation or its transfer agent. Upon the
                           occurrence of the conversion event specified in this
                           section 10(f)(ii), the holders of the Series A
                           Preferred Stock shall, upon notice from the
                           corporation, surrender the certificates representing
                           such shares at the office of the corporation or its
                           transfer agent for the Common Stock. Thereupon, there
                           shall be issued and delivered to such holder a
                           certificate or certificates for the number of shares
                           of Common Stock into which the shares of Series A
                           Preferred Stock so surrendered were convertible on
                           the date on which the conversion occurred. The
                           corporation shall not be obligated to issue such
                           certificates unless certificates evidencing such
                           shares of Series A Preferred Stock being converted
                           are either delivered to the corporation or any such
                           transfer agent, or the holder notifies the
                           corporation that such certificates have been lost,
                           stolen or destroyed and executes an agreement
                           satisfactory to the corporation to indemnify the
                           corporation from any loss incurred by it in
                           connection therewith.

                                       5
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                           (iii) Exercise of Conversion Privilege. To exercise
                           its conversion privilege, a holder of Series A
                           Preferred Stock shall surrender the certificate or
                           certificates representing the shares being converted
                           to the corporation at its principal office, and shall
                           give written notice to the corporation at that office
                           that such holder elects to convert such shares. Such
                           notice shall also state the name or names (with
                           address or addresses) in which the certificate or
                           certificates for shares of Common Stock issuable upon
                           such conversion shall be issued. The certificate or
                           certificates for shares of Series A Preferred Stock
                           surrendered for conversion shall be accompanied by
                           proper assignment thereof to the corporation or in
                           blank. The date when such written notice is received
                           by the corporation, together with the certificate or
                           certificates representing the shares of Series A
                           Preferred Stock being converted, shall be the
                           "Conversion Date." As promptly as practicable after
                           the Conversion Date, the Corporation shall issue and
                           deliver to the holder of the shares of Series A
                           Preferred Stock being converted, or on its written
                           order, such certificate or certificates as it may
                           request for the number of whole shares of Common
                           Stock issuable upon the conversion of such shares of
                           Series A Preferred Stock in accordance with the
                           provisions of this Section 10(f), and cash, as
                           provided in Section 10(h), in respect of any fraction
                           of a share of Common Stock issuable upon such
                           conversion. Such conversion shall be deemed to have
                           been effected immediately prior to the close of
                           business on the Conversion Date, and at such time the
                           rights of the holder as holder of the converted
                           shares of Series A Preferred Stock shall cease and
                           the person(s) in whose name(s) any certificate(s) for
                           shares of Common Stock shall be issuable upon such
                           conversion shall be deemed to have become the holder
                           or holders of record of the shares of Common Stock
                           represented thereby.




                                       6

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                  (g)      Anti-Dilution Adjustments.

                           (i) If the corporation shall, while there are any
                           shares of Series A Preferred Stock outstanding, issue
                           or sell shares of its Common Stock or "Common Stock
                           Equivalents" (as defined in Section 10(g)(iii) below)
                           without consideration or at a price per share or "Net
                           Consideration Per Share" (as defined in Section
                           10(g)(v) below) less than the Exercise Price in
                           effect immediately prior to such issuance or sale,
                           then in each such case the Exercise Price, except as
                           hereinafter provided, shall be lowered so as to be
                           equal to an amount determined by multiplying such
                           Exercise Price by the following fraction:

                                     NO + N1
                                     -------
                                     NO + N2

                           Where:

                           NO = the number of shares of Common Stock outstanding
                           immediately prior to the issuance of such additional
                           shares of Common Stock or Common Stock Equivalents
                           (calculated on a fully-diluted basis assuming the
                           exercise or conversion of all then exercisable or
                           convertible options, warrants, purchase rights and
                           convertible securities).

                           N1 = the number of shares of Common Stock which the
                           aggregate consideration, if any (including the Net
                           Consideration Per Share with respect to the issuance
                           of Common Stock Equivalents) received or receivable
                           by the Corporation for the total number of such
                           additional shares of Common Stock so issued or deemed
                           to be issued would purchase at the Exercise Price in
                           effect immediately prior to such issuance.

                           N2 = the number of such additional shares of Common
                           Stock so issued or deemed to be issued.

                           The provisions of this Section 10(g) may be waived as
                           to all shares of Series A Preferred Stock in any
                           instance (without the necessity of convening any
                           meeting of stockholders of the Corporation) upon
                           written agreement of the holders of more than fifty
                           percent (50%) of the then outstanding shares of
                           Series A Preferred Stock.

                           (ii) For the purposes of this Section 10(g) only,
                           "additional shares of Common Stock" shall not include
                           the following: (A) any shares of the Common Stock
                           issuable under any stock option plan approved by the
                           corporation's shareholders; and (ii) any shares of
                           the Common Stock issuable pursuant to any warrants or
                           other convertible securities issued by the
                           corporation prior to January 17, 2002.

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                           (iii) For the purposes of this Section 10(g), the
                           issuance of any warrants, options, subscription or
                           purchase rights with respect to shares of Common
                           Stock, any securities convertible into or
                           exchangeable for shares of Common Stock and any
                           warrants, options, subscriptions or purchase rights
                           with respect to such convertible or exchangeable
                           securities (collectively, "Common Stock
                           Equivalents"), shall be deemed an issuance of Common
                           Stock. Any obligation, agreement or undertaking to
                           issue Common Stock Equivalents at any time in the
                           future shall be deemed to be an issuance at the time
                           such obligation, agreement or undertaking is made or
                           arises. No adjustment of the Exercise Price shall be
                           made under this Section 10(g) upon the issuance of
                           any shares of Common Stock which are issued pursuant
                           to the exercise, conversion or exchange of any Common
                           Stock Equivalents.

                           (iv) Should the Net Consideration Per Share of any
                           such Common Stock Equivalents be decreased from time
                           to time other than as a result of the application of
                           anti-dilution provisions substantially similar to the
                           provisions of this Section 10(g), then upon the
                           effectiveness of each such change, the Exercise Price
                           will be that which would have been obtained (A) had
                           the adjustments made pursuant to this Section 10(g)
                           upon the issuance of such Common Stock Equivalents
                           been made upon the basis of the new Net Consideration
                           Per Share of such securities, and (B) had the
                           adjustments made to the Exercise Price since the date
                           of issuance of such Common Stock Equivalents been
                           made to the Exercise Price as adjusted pursuant to
                           clause (A) above. Any adjustment of the Exercise
                           Price, which relates to any Common Stock Equivalent
                           shall be disregarded if, as and when such Common
                           Stock Equivalent expires or is canceled without being
                           exercised, or is repurchased by the corporation at a
                           price per share at or less than the original purchase
                           price, so that the Exercise Price effective
                           immediately upon such cancellation or expiration
                           shall be equal to the Exercise Price that would have
                           been in effect (1) had the expired or canceled Common
                           Stock Equivalent not been issued, and (2) had the
                           adjustments made to the Exercise Price since the date
                           of issuance of such Common Stock Equivalents been
                           made to the Exercise Price which would have been in
                           effect had the expired or canceled Common Stock
                           Equivalent not been issued.

                           (v) For purposes of this Section 10(g), the "Net
                           Consideration Per Share" which shall be receivable by
                           the Corporation for any Common Stock issued upon the
                           exercise or conversion of any Common Stock
                           Equivalents shall be determined as follows:

                                    (A) The "Net Consideration Per Share" shall
                                    mean the amount equal to the total amount of
                                    consideration, if any, received by the
                                    corporation for the issuance of such Common
                                    Stock Equivalents, plus the minimum amount
                                    of consideration, if any, payable to the
                                    corporation upon exercise, or conversion or
                                    exchange thereof, divided by the aggregate
                                    number of shares of Common Stock that would
                                    be issued if such Common Stock Equivalents
                                    were exercised, exchanged or converted.

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                                    (B) The "Net Consideration Per Share" which
                                    shall be receivable by the corporation shall
                                    be determined in each instance as of the
                                    date of issuance of Common Stock Equivalents
                                    without giving effect to any possible future
                                    upward price adjustments or rate adjustments
                                    which may be applicable with respect to such
                                    Common Stock Equivalents.

                           (vi) For purposes of this Section 10(g), if a part or
                           all of the consideration received by the corporation
                           in connection with the issuance of shares of Common
                           Stock or the issuance of any of the securities
                           described in this Section 10(g) consists of property
                           other than cash, such consideration shall be deemed
                           to have a fair market value as is reasonably
                           determined in good faith by the Board of Directors of
                           the corporation.

                           (vii) Upon the happening of an Extraordinary Common
                           Stock Event (as hereinafter defined), the Exercise
                           Price shall, simultaneously with the happening of
                           such Extraordinary Common Stock Event, be adjusted by
                           multiplying the Exercise Price by a fraction, the
                           numerator of which shall be the number of shares of
                           Common Stock outstanding immediately prior to such
                           Extraordinary Common Stock Event and the denominator
                           of which shall be the number of shares of Common
                           Stock outstanding immediately after such
                           Extraordinary Common Stock Event, and the product so
                           obtained shall thereafter be the Exercise Price,
                           which so adjusted, shall be readjusted in the same
                           manner upon the happening of any successive
                           Extraordinary Common Stock Event or Events.

                           An "Extraordinary Common Stock Event" shall mean (A)
                           the issuance of additional shares of Common Stock as
                           a dividend or other distribution on outstanding
                           shares of Common Stock, (B) a subdivision of
                           outstanding shares of Common Stock into a greater
                           number of shares of Common Stock, or (C) a
                           combination or reverse stock split or outstanding
                           shares of Common Stock into a smaller number of
                           shares of Common Stock.

                           (viii) In the event the corporation shall make or
                           issue, or shall fix a record date for the
                           determination of holders of Common Stock entitled to
                           receive, a dividend or other distribution (other than
                           a distribution in liquidation or other distribution
                           otherwise provided for herein) with respect to the
                           Common Stock payable in (A) securities of the
                           Corporation other than shares of Common Stock, or (B)
                           other assets (excluding cash dividends or
                           distributions), then and in each such event provision
                           shall be made so that the holders of the Series A
                           Preferred Stock shall receive upon conversion thereof
                           in addition to the number of shares of Common Stock
                           receivable thereupon, the number of securities or
                           such other assets of the corporation which they would
                           have received had their Series A Preferred Stock been
                           converted into Common Stock on the date of such event
                           and had they thereafter, during the period from the
                           date of such event to and including the Conversion
                           Date, retained such securities or such other assets
                           receivable by them, giving application to all other
                           adjustments called for during such period under this
                           Section 10(g).

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                           (ix) If the Common Stock shall be changed into the
                           same or different number of shares of any other class
                           or classes of capital stock, whether by capital
                           reorganization, recapitalization or otherwise, then
                           and in each such event the holder of each share of
                           Series A Preferred Stock shall have the right
                           thereafter to convert such share into, in lieu of the
                           number of shares of Common Stock which the holder
                           would otherwise have been entitled to receive, the
                           kind and amount of shares of capital stock and other
                           securities and property receivable upon such
                           reorganization, recapitalization, reclassification or
                           other changes by the holders of the number of shares
                           of Common Stock into which such shares of Series A
                           Preferred Stock could have been converted immediately
                           prior to such reorganization, recapitalization,
                           reclassification or change, all subject to further
                           adjustment as provided herein. The provision for such
                           conversion right shall be a condition precedent to
                           the consummation by the corporation of any such
                           transaction.

                           (x) In each case of an adjustment or readjustment of
                           the Exercise Price, the Corporation at its expense
                           will furnish each holder of Series A Preferred Stock
                           so affected, upon such holder's written request
                           therefor, with a certificate prepared by the
                           Treasurer or Chief Financial Officer of the
                           corporation, showing such adjustment or readjustment,
                           and stating in detail the facts upon which such
                           adjustment or readjustment is based.

                  (h)      Cash in Lieu of Fractional Shares. No fractional
                           shares of Common Stock or scrip representing
                           fractional shares shall be issued upon the conversion
                           of shares of Series A Preferred Stock. Instead of any
                           fractional shares of Common Stock which would
                           otherwise be issuable upon conversion of Series A
                           Preferred Stock, the corporation shall pay to the
                           holder of the shares of Series A Preferred Stock
                           which were converted a cash adjustment in respect of
                           such fractional shares in an amount equal to the same
                           fraction of the market price per share of the Common
                           Stock (as determined in a reasonable manner
                           prescribed by the Board of Directors) at the close of
                           business on the Conversion Date. The determination as
                           to whether or not any fractional shares are issuable
                           shall be based upon the aggregate number of shares of
                           Series A Preferred Stock being converted at any one
                           time by any holder thereof, not upon each share of
                           Series A Preferred Stock being converted.

                                       10
<PAGE>

                  (i)      Partial Conversion. In the event that some, but not
                           all, of the shares of Series A Preferred Stock
                           represented by a certificate(s) surrendered by a
                           holder are converted, the corporation shall execute
                           and deliver to or on the order of the holder, at the
                           expense of the corporation, a new certificate
                           representing the number of shares of Series A
                           Preferred Stock which were not converted.

                  (j)      Reservation of Common Stock. The corporation shall at
                           all times reserve and keep available out of its
                           authorized but unissued shares of Common Stock,
                           solely for the purpose of effecting the conversion of
                           the shares of the Series A Preferred Stock, such
                           number of its shares of Common Stock as shall from
                           time to time be sufficient to effect the conversion
                           of all outstanding shares of the Series A Preferred
                           Stock and, if at any time the number of authorized
                           but unissued shares of Common Stock shall not be
                           sufficient to effect the conversion of all of the
                           then outstanding shares of the Series A Preferred
                           Stock, the corporation shall take such action as may
                           be necessary to increase its authorized but unissued
                           shares of Common Stock to such number of shares as
                           shall be sufficient for such purpose.

                  (k)      Redemption.

                           (i) Commencing at anytime on or after the sixth (6th)
                           anniversary of the first date of issuance of any
                           share of Series A Preferred Stock, at the option and
                           written election of the corporation, the corporation
                           may redeem all or a part of the outstanding shares of
                           Series A Preferred Stock, at the price and terms
                           stated in this Section 10(k).

                           (ii) The redemption price for each share of Series A
                           Preferred Stock redeemed pursuant to this Section
                           10(k) shall be equal to the original issue price per
                           share of the Series A Preferred Stock, plus all
                           accrued and unpaid dividends thereon, if any, whether
                           or not earned or declared, up to and including the
                           date fixed for redemption (the "Series A Redemption
                           Price"). Each redemption of shares of the Series A
                           Preferred Stock shall be made so that the number of
                           shares of Series A Preferred Stock held by each
                           registered holder shall be reduced in an amount which
                           shall bear the same ratio to the total number of
                           shares of Series A Preferred Stock being so redeemed
                           as the number of shares of Series A Preferred Stock
                           then held by such registered holder bears to the
                           aggregate number of shares of Series A Preferred
                           Stock then outstanding.

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<PAGE>

                           (iii) The Series A Redemption Price set forth in this
                           Section 10(k) shall be subject to equitable
                           adjustment whenever there shall occur a stock split,
                           stock dividend, combination, reorganization,
                           recapitalization, reclassification or other similar
                           event involving a change in the Series A Preferred
                           Stock.

                           (iv) If the corporation elects to redeem all or any
                           part of the outstanding shares of the Series A
                           Preferred Stock as aforesaid, written notice to that
                           effect (the "Redemption Notice") shall be given by
                           the corporation to each holder at least forty-five
                           (45) days prior to the date fixed for redemption
                           pursuant to this Section 10(k) (the "Redemption
                           Date"). The Redemption Notice shall contain the
                           following information:

                                    (A) The number of shares of Series A
                                    Preferred Stock held by the holder which
                                    shall be redeemed by the corporation and the
                                    total number of shares of Series A Preferred
                                    Stock held by all holders to be so redeemed;

                                    (B) The Redemption Date and the applicable
                                    Series A Redemption Price; and

                                    (C) That the holder is to surrender to the
                                    corporation, at the place designated
                                    therein, its certificate(s) representing
                                    shares of the Series A Preferred Stock to be
                                    redeemed.

                           (v) The rights of the holders of the Series A
                           Preferred Stock to convert the Series A Preferred
                           Stock into Common Stock pursuant to Section 10(f)
                           hereof shall continue in full force and effect until
                           the Redemption Date, notwithstanding the giving of
                           the Redemption Notice.

                           (vi) Each holder of shares of Series A Preferred
                           Stock to be redeemed shall surrender the
                           certificate(s) representing such shares to the
                           corporation at the place designated in the Redemption
                           Notice, and thereupon shall the Series A Redemption
                           Price for such shares as set forth in the Redemption
                           Notice shall be paid to the order of the person whose
                           name appears on such certificate(s) and each such
                           surrendered certificate shall be canceled and
                           retired. In the event some but not all of the shares
                           of Series A Preferred Stock represented by a
                           certificate(s)


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<PAGE>
                           surrendered by a holder are being redeemed, the
                           corporation shall execute and deliver to or on the
                           order of the holder, at the expense of the
                           corporation, a new certificate representing the
                           number of shares of Series A Preferred Stock which
                           were not redeemed.

                           (vii) From and after the later of the Redemption Date
                           or forty-five days from the date the corporation
                           shall have given the Redemption Notice, no shares of
                           Series A Preferred Stock subject to such Redemption
                           Notice shall be entitled to any further dividends
                           hereunder.

                  (l)      Status of Converted or Redeemed Series A Preferred
                           Stock. Any share or shares of Series A Preferred
                           Stock acquired by the Corporation by reason of
                           redemption, purchase, conversion or otherwise shall
                           be returned to the status of authorized but unissued
                           shares of undesignated Preferred Stock. Upon the
                           cancellation of all outstanding shares of Series A
                           Preferred Stock, the provisions of this Section 10
                           regarding the description and designation of Series A
                           Preferred Stock shall terminate and have no further
                           force and effect."

         FURTHER RESOLVED: That each officer or director of the Corporation, or
         any of them, is authorized, directed and empowered on behalf of the
         Corporation and in its name to execute any agreement, certificate,
         instrument or document, or amendments or supplements thereto, or to do
         and to cause to be done any and all other acts and things as such
         officer may, in his or her discretion, deem necessary or appropriate to
         carry out the purposes of the foregoing resolution.

         4. The effective time and date of the series herein certified shall be
         the date and time of filing of this Certificate of Designation with the
         Secretary of State of the Sate of Delaware.

         Signed and Attested to on this 23rd day of January, 2002.

                                              AM COMMUNICATIONS, INC.

ATTEST:

/s/ Patricia A. Eynon                         By: /s/Javad K. Hassan
--------------------------------------            ------------------------------
Patricia A. Eynon, Corporate Secretary            Javad K. Hassan, President




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<PAGE>

                                    Exhibit A



                Proposal to the Board of AM Communications, Inc.

                                 January 3, 2002

                            Proposed Investment Terms


Security:   Convertible Preferred Stock

Amount:     $2,000,000

Term:       Six Years from date of funding

Dividend:   10% Annual Dividend  - payable annually (in cash or in kind at
            option of company)

Warrants:   Warrants for 1,851,852 shares of AM common stock exercisable at
            $0.27 per share

Conversion: Convertible into 7,407,407 shares of AM Common at $0.27 per share at
            the option of the holder

Funding to occur:  $1MM immediately and
$1MM on or before April 1, 2002.

Investors:  Board of Directors of AM as individuals or as a group or other
            qualified third party investors


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