<PAGE>
                                                                     EXHIBIT 4.4



                   CERTIFICATE OF DESIGNATIONS, PREFERENCES
            AND RIGHTS OF THE SERIES E CONVERTIBLE PREFERRED STOCK
                                      OF
                          MICROSTRATEGY INCORPORATED

     MicroStrategy Incorporated (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions (i) authorizing a series of the Company's previously authorized
preferred stock, par value $0.001 per share, and (ii) providing for the
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of Six Hundred
Thirty (630) shares of Series E Convertible Preferred Stock of the Company, as
follows:

          RESOLVED, that the Company is authorized to issue 630 shares of Series
     E Convertible Preferred Stock (the "Preferred Shares"), par value $0.001
     per share, which shall have the following powers, designations, preferences
     and other special rights:

     (1)  Dividends.  The holders of the Preferred Shares shall be entitled to
          ---------
receive dividends ("Dividends") at the Dividend Rate (as defined below) then in
effect, which shall be cumulative, accrue daily from the Issuance Date (as
defined below) and be due and payable with respect to a Preferred Share on each
Dividend Date (as defined below) after the Issuance Date. If a Dividend Date is
not a Business Day, then the Dividend shall be due and payable on the Business
Day immediately following such Dividend Date. Dividends shall be payable in
cash. Notwithstanding the foregoing, if on, or during the five (5) Business Days
prior to, a Dividend Date the Company is in default (or an event of default has
occurred and is continuing) under the Loan and Security Agreement (a "Loan
Default") and the Company or the lender under the Loan and Security Agreement
delivers written notice of such Loan Default to each holder of Preferred Shares
on, or on any date during the five (5) Business Days prior to, such Dividend
Date (a "Dividend Accrual Notice"), then Dividends due on such Dividend Date
("Default Dividends"), in lieu of being paid on each Dividend Date, shall be
payable by inclusion of the Dividend in the Additional Amount as set forth in
Section 2(a)(i). The Company shall be bound by the effect of the delivery of a
Dividend Accrual Notice by the lender under the Loan and Security Agreement
pursuant to the immediately preceding sentence, as if it were the Company
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which had delivered such Dividend Accrual Notice. Any accrued and unpaid
Dividends which are not paid within five (5) Business Days of such accrued and
unpaid Dividends' Dividend Date shall bear interest at the rate of 18.0% per
annum from such Dividend Date until the same is paid in full (whether in cash or
pursuant to a conversion or redemption under this Certificate of Designations of
a Conversion Amount which includes such accrued and unpaid dividends and such
interest thereon) (the "Default Interest").

     (2)  Conversion of Preferred Shares.  Preferred Shares shall be convertible
          ------------------------------
into shares of the Company's Class A Common Stock, par value $0.001 per share
(the "Common Stock"), on the terms and conditions set forth in this Section 2.

          (a)  Certain Defined Terms.  For purposes of this Certificate of
               ---------------------
Designations, the following terms shall have the following meanings:

               (i)   "Additional Amount" means, on a per Preferred Share basis,
the sum of (A) unpaid Default Interest through the date of determination, (B)
the aggregate Default Dividends, plus (C) the result of the following formula:
(Dividend Rate)(N/365)($10,000).

               (ii)  "Amended and Restated Redemption and Exchange Agreement"
means, with respect to any Preferred Share, that certain amended and restated
redemption and exchange agreement between the Company and the initial holder of
such Preferred Share, as such agreement may be amended from time to time as
provided in such agreement.

               (iii) "Amended and Restated Registration Rights Agreement" means,
with respect to any Preferred Share, that certain amended and restated
registration rights agreement between the Company and the initial holder of such
Preferred Share relating to the filing of a registration statement covering the
resale of the shares of Common Stock issuable upon conversion of, or as payment
of Dividends on, such Preferred Share, as such agreement may be amended from
time to time as provided in such agreement.

               (iv)  "Approved Stock Plan" means any employee benefit plan which
has been approved by the Board of Directors of the Company, pursuant to which
the Company's securities may be issued to any employee, officer or director for
services provided to the Company.

               (v)   "Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.

               (vi)  "Calendar Quarter" means, each of the period beginning on
and including January 1 and ending on and including March 31, the period
beginning on and including April 1 and ending on and including June 30, the
period beginning on and including July 1 and ending on and including September
30, and the period beginning on and including October 1 and ending on and
including December 31.

                                      -2-
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               (vii)  "Closing Sale Price" means, for any security as of any
date, the last closing trade price for such security on the Principal Market as
reported by Bloomberg, or if the Principal Market begins to operate on an
extended hours basis, and does not designate the closing trade price, then the
last trade price at 4:00 p.m., Eastern Time, as reported by Bloomberg, or if the
foregoing do not apply, the last closing trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the last closing ask price of such security as reported
by Bloomberg, or, if no last closing ask price is reported for such security by
Bloomberg, the average of the highest bid price and the lowest ask price of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Sale Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Sale Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of Preferred Shares. If the Company and the
holders of Preferred Shares are unable to agree upon the fair market value of
the Common Stock, then such dispute shall be resolved pursuant to Section
2(d)(iii) below. All such determinations to be appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period.

               (viii) "Common Stock Deemed Outstanding" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 2(f)(i)(A) and 2(f)(i)(B) hereof regardless of whether the Options or
Convertible Securities are actually exercisable at such time, but excluding any
shares of Common Stock owned or held by or for the account of the Company or
issuable upon conversion of the Preferred Shares, the Series A Preferred Shares,
the Series B Preferred Shares, the Series C Preferred Shares or the Series D
Preferred Shares.

               (ix)   "Conversion Amount" means the sum of (1) the Additional
Amount, and (2) $10,000.

               (x)    "Conversion Price" means the average of the Weighted
Average Prices of the Common Stock on each of the 10 consecutive trading days
immediately preceding the date which is 180 days after the Issuance Date,
subject to adjustment as provided herein.

               (xi)   "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable or
exercisable for Common Stock.

               (xii)  "Dividend Date" means the first day of each Calendar
Quarter.

               (xiii) "Dividend Rate" means (A) during the period beginning on
and including the first day after the Issuance Date and ending on and including
the date which is 90 days after the Issuance Date, 12.5% per annum, (B) during
the period beginning on and including the date which is 91 days after the
Issuance Date and ending on and including the date which is 180 days after the
Issuance Date, 15.0% per annum and (C) at any time after the date which is 181
days after the Issuance Date, 17.5% per annum.

                                      -3-
<PAGE>

               (xiv)   "Issuance Date" means, with respect to each Preferred
Share, the first date on which any Preferred Shares are issued by the Company.

               (xv)    "Loan and Security Agreement" means that certain Loan and
Security Agreement by and among Foothill Capital Corporation, the Company and
MicroStrategy Services Corporation, dated as of February 9, 2001.

               (xvi)   "Mandatory Redemption Date" means, with respect to a
Preferred Share, the date which is three (3) years after the Issuance Date.

               (xvii)  "Market Price" means, with respect to any security for
any date of determination, that price which is equal to the arithmetic average
of the Weighted Average Prices of such security on each trading day during the
10 consecutive trading days immediately preceding such date of determination.
All such determinations to be appropriately adjusted for any stock dividend,
stock split stock combination or other similar transaction.

               (xviii) "Maturity Date" means the Mandatory Redemption Date,
unless extended pursuant to Section 2(d)(vii).

               (xix)   "N" means the number of days from, but excluding, the
last Dividend Date with respect to which dividends, along with any Default
Interest, have been paid by the Company on the applicable Preferred Share, or
the Issuance Date if no Dividend Date has occurred, through and including the
Conversion Date, the Maturity Date or other date of determination for such
Preferred Share, as the case may be, for which such determination is being made;
provided, however, that "N" shall not include those days during a Calendar
Quarter with respect to which the Company delivered a Dividend Default Notice
relating to the Default Dividends which accrued during such Calendar Quarter and
which Default Dividends are included in clause (B) of the definition of
"Additional Amount."

               (xx)    "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

               (xxi)   "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

               (xxii)  "Principal Market" means the Nasdaq National Market, or
if the Common Stock is not traded on the Nasdaq National Market, then the
principal securities exchange or trading market for the Common Stock.

               (xxiii) "Redemption Percentage" means (A) during the period
beginning on and including the first day after the Issuance Date and ending on
and including the date which is 135 days after the Issuance Date, 105%, (B)
during the period beginning on and including the date which is 136 days after
the Issuance Date and ending on and including the date which is 180

                                      -4-
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days after the Issuance Date, 110% and (C) after the date which is 180 days
after the Issuance Date, 120%.

               (xxiv)   "Series A Preferred Shares" means the shares of the
Company's Series A Convertible Preferred Stock issued prior to the Issuance Date
pursuant to the Company's Certificate of Designations, Preferences and Rights of
the Series A Convertible Preferred Stock filed with the Secretary of State of
the State of Delaware on June 19, 2000.

               (xxv)    "Series B Preferred Shares" means the shares of the
Company's Series B Convertible Preferred Stock issued pursuant to an Amended and
Restated Redemption and Exchange Agreement in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Series B
Convertible Preferred Stock filed with the Secretary of State of the State of
Delaware on or prior to the Issuance Date.

               (xxvi)   "Series C Preferred Shares" means the shares of the
Company's Series C Convertible Preferred Stock issued pursuant to an Amended and
Restated Redemption and Exchange Agreement in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock filed with the Secretary of State of the State of
Delaware on or prior to the Issuance Date.

               (xxvii)  "Series D Preferred Shares" means the shares of the
Company's Series D Convertible Preferred Stock issued pursuant to an Amended and
Restated Redemption and Exchange Agreement in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Series D
Convertible Preferred Stock filed with the Secretary of State of the State of
Delaware on or prior to the Issuance Date.

               (xxviii) "Weighted Average Price" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York City Time,
and ending at 4:00 p.m., New York City Time, as reported by Bloomberg through
its "Volume at Price" functions or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30 a.m., New York City Time, and ending at 4:00 p.m., New York City Time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for
such security on such date on any of the foregoing bases, the Weighted Average
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holders of the Preferred Shares. If the
Company and the holders of the Preferred Shares are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(d)(iii) below with the term "Weighted Average Price" being
substituted for the term "Closing Sale Price." All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.

                                      -5-
<PAGE>

          (b)  Holder's Conversion Right; Mandatory Redemption. During the
               -----------------------------------------------
period beginning on the Issuance Date and ending on and including the date which
is 180 days after the Issuance Date, no holder of Preferred Shares shall have
any right to convert such Preferred Shares pursuant to this Certificate of
Designations. Subject to the provisions of Section 5, at any time or times on or
after the date which is 181 days after the Issuance Date, any holder of
Preferred Shares shall be entitled to convert any whole or fractional number of
Preferred Shares into fully paid and nonassessable shares of Common Stock in
accordance with Section 2(d) at the Conversion Rate (as defined below). If any
Preferred Shares remain outstanding on the Mandatory Redemption Date, then,
pursuant and subject to Section 2(d)(vii), all such Preferred Shares shall be
redeemed by the Company in accordance with Section 2(d)(vii). The Company shall
not issue any fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
more than one Preferred Share by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned aggregation,
the issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole share.

          (c)  Conversion. The number of shares of Common Stock issuable upon
               ----------
conversion of each Preferred Share pursuant to Section 2(b) shall be determined
according to the following formula (the "Conversion Rate"):

                               Conversion Amount
                               -----------------
                               Conversion Price

          (d)  Mechanics of Conversion. The conversion of Preferred Shares shall
               -----------------------
be conducted in the following manner:

               (i)  Holder's Delivery Requirements. To convert Preferred Shares
                    ------------------------------
into shares of Common Stock on any date (the "Conversion Date") after the date
which is 180 days after the Issuance Date, the holder thereof shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m.,
Eastern Time, on such date, a copy of an executed notice of conversion in the
form attached hereto as Exhibit I (the "Conversion Notice") to the Company and
                        ---------
the Company's designated transfer agent (the "Transfer Agent") and (B) if
required by Section 2(d)(viii), surrender to a common carrier for delivery to
the Company as soon as practicable following such date the original certificates
representing the Preferred Shares being converted (or an indemnification
undertaking with respect to such shares in the case of their loss, theft or
destruction) (the "Preferred Stock Certificates").

               (ii) Company's Response. Upon receipt by the Company of a copy of
a Conversion Notice, the Company shall (I) as soon as practicable, but in no
event later than within one (1) Business Day, send, via facsimile, a
confirmation of receipt of such Conversion Notice to such holder and the
Transfer Agent, which confirmation shall constitute an instruction to the
Transfer Agent to process such Conversion Notice in accordance with the terms
herein and (II) on or before the second (2nd) Business Day following the date of
receipt by the Company of such Conversion Notice (the "Share Delivery Date"),
(A) issue and deliver to the address as

                                      -6-
<PAGE>

specified in the Conversion Notice, a certificate, registered in the name of the
holder or its designee, for the number of shares of Common Stock to which the
holder shall be entitled, or (B) provided the Transfer Agent is participating in
The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program,
upon the request of the holder, credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system.
If the number of Preferred Shares represented by the Preferred Stock
Certificate(s) submitted for conversion, as may be required pursuant to Section
2(d)(viii), is greater than the number of Preferred Shares being converted, then
the Company shall, as soon as practicable and in no event later than three (3)
Business Days after receipt of the Preferred Stock Certificate(s) (the
"Preferred Stock Delivery Date") and at its own expense, issue and deliver to
the holder a new Preferred Stock Certificate representing the number of
Preferred Shares not converted.

               (iii) Dispute Resolution. In the case of a dispute as to the
                     ------------------
determination of the Closing Sale Price or the arithmetic calculation of the
Conversion Rate, the Company shall instruct the Transfer Agent to issue to the
holder the number of shares of Common Stock that is not disputed and shall
transmit an explanation of the disputed determinations or arithmetic
calculations to the holder via facsimile within one (1) Business Day of receipt
of such holder's Conversion Notice or other date of determination. If such
holder and the Company are unable to agree upon the determination of the Closing
Sale Price or arithmetic calculation of the Conversion Rate within two (2)
Business Days of such disputed determination or arithmetic calculation being
transmitted to the holder, then the Company shall within one (1) Business Day
submit via facsimile (A) the disputed determination of the Closing Sale Price to
an independent, reputable investment bank selected by the Company and approved
by the holders of at least two-thirds (2/3) of the Preferred Shares then
outstanding or (B) the disputed arithmetic calculation of the Conversion Rate to
the Company's independent, outside accountant. The Company shall cause the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than two (2) Business Days from the time it receives the
disputed determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent error.

               (iv)  Record Holder. The person or persons entitled to receive
                     -------------
the shares of Common Stock issuable upon a conversion of Preferred Shares shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.

               (v)   Company's Failure to Timely Convert.
                     -----------------------------------

                     (A) Cash Damages. If (I) within five (5) Business Days
after the Company's receipt of the facsimile copy of a Conversion Notice the
Company shall fail to issue and deliver a certificate to a holder or credit such
holder's balance account with DTC for the number of shares of Common Stock to
which such holder is entitled upon such holder's conversion of Preferred Shares
or (II) within five (5) Business Days of the Company's receipt of a Preferred
Stock Certificate the Company shall fail to issue and deliver a new Preferred
Stock Certificate representing the number of Preferred Shares to which such
holder is entitled pursuant

                                      -7-
<PAGE>

to Section 2(d)(ii), then in addition to all other available remedies which such
holder may pursue hereunder and under the Amended and Restated Redemption and
Exchange Agreement (including indemnification pursuant to Section 8 thereof),
the Company shall pay additional damages to such holder for each day after the
Share Delivery Date such conversion is not timely effected and/or each day after
the Preferred Stock Delivery Date such Preferred Stock Certificate is not
delivered in an amount equal to 0.5% of the product of (I) the sum of the number
of shares of Common Stock not issued to the holder on or prior to the Share
Delivery Date and to which such holder is entitled as set forth in the
applicable Conversion Notice and, in the event the Company has failed to deliver
a Preferred Stock Certificate to the holder on or prior to the Preferred Stock
Delivery Date, the number of shares of Common Stock issuable upon conversion of
the Preferred Shares represented by such Preferred Stock Certificate as of the
Preferred Stock Delivery Date and (II) the Closing Sale Price of the Common
Stock on the Share Delivery Date, in the case of the failure to deliver Common
Stock, or the Preferred Stock Delivery Date, in the case of failure to deliver a
Preferred Stock Certificate. If the Company fails to pay the additional damages
set forth in this Section 2(d)(v) within five Business Days of the date
incurred, then the holder entitled to such payments shall have the right at any
time, so long as the Company continues to fail to make such payments, to require
the Company, upon written notice, to immediately issue, in lieu of such cash
damages, the number of shares of Common Stock equal to the quotient of (X) the
aggregate amount of the damages payments described herein divided by (Y) the
Conversion Price in effect on such Conversion Date as specified by the holder in
the Conversion Notice.

                    (B)  Void Conversion Notice; Adjustment of Conversion Price.
                         ------------------------------------------------------
If for any reason a holder has not received all of the shares of Common Stock
prior to the tenth (10th) Business Day after the Share Delivery Date with
respect to a conversion of Preferred Shares, then the holder, upon written
notice to the Company, with a copy to the Transfer Agent, may void its
Conversion Notice with respect to, and retain or have returned, as the case may
be, any Preferred Shares that have not been converted pursuant to such holder's
Conversion Notice; provided that the voiding of a holder's Conversion Notice
shall not effect the Company's obligations to make any payments which have
accrued prior to the date of such notice pursuant to Section 2(d)(v)(A) or
otherwise. Thereafter, the Conversion Price of any Preferred Shares returned or
retained by the holder for failure to timely convert shall be adjusted to the
lesser of (I) the Conversion Price as in effect on the date on which the holder
voided the Conversion Notice and (II) the lowest Weighted Average Price of the
Common Stock during the period beginning on the Conversion Date and ending on
the date such holder voided the Conversion Notice, subject to further adjustment
as provided in this Certificate of Designations.

                    (C)  Conversion Failure. If for any reason a holder has not
                         ------------------
received all of the shares of Common Stock prior to the tenth (10th) Business
Day after the Share Delivery Date with respect to a conversion of Preferred
Shares (a "Conversion Failure"), then the holder, upon written notice to the
Company, may require that the Company redeem all Preferred Shares held by such
holder, including the Preferred Shares previously submitted for conversion and
with respect to which the Company has not delivered shares of Common Stock, in
accordance with Section 3.

                                      -8-
<PAGE>

               (vi)  Pro Rata Conversion. Subject to Section 15, in the event
                     -------------------
the Company receives a Conversion Notice from more than one holder of Preferred
Shares for the same Conversion Date and the Company can convert some, but not
all, of such Preferred Shares, the Company shall convert from each holder of
Preferred Shares electing to have Preferred Shares converted at such time a pro
rata amount of such holder's Preferred Shares submitted for conversion based on
the number of Preferred Shares submitted for conversion on such date by such
holder relative to the number of Preferred Shares submitted for conversion on
such date.

               (vii) Mandatory Redemption at Maturity. If any Preferred Share
                     --------------------------------
remains outstanding on the Mandatory Redemption Date the Company shall redeem
such Preferred Share on the Mandatory Redemption Date for an amount in cash per
Preferred Share (the "Maturity Date Redemption Price") equal to the Conversion
Amount (a "Maturity Date Mandatory Redemption"). On the Mandatory Redemption
Date, the Company shall pay to each holder of Preferred Shares, by wire transfer
of immediately available funds, the Maturity Date Redemption Price. If the
Company fails to redeem any Preferred Share which is outstanding on the
Mandatory Redemption Date by payment of the Maturity Date Redemption Price, then
in addition to any remedy such holder may have under this Certificate of
Designations, the Amended and Restated Redemption and Exchange Agreement and the
Amended and Restated Registration Rights Agreement, (X) the applicable Maturity
Date Redemption Price payable in respect of such unredeemed Preferred Shares
shall bear interest at the rate of 1.5% per month, prorated for partial months,
until paid in full, and (Y) any holder of such Preferred Shares shall have the
option to require the Company to convert any or all of such holder's Preferred
Shares for which the Maturity Date Redemption Price (together with any interest
thereon ) has not been paid into (on a per Preferred Share basis) shares of
Common Stock equal to the number which results from dividing the applicable
Maturity Date Redemption Price (together with any interest thereon) by the
lesser of the Conversion Price and the Market Price of the Common Stock then in
effect. Promptly following the Maturity Date, all holders of Preferred Shares
shall surrender all Preferred Stock Certificates representing such Preferred
Shares, duly endorsed for cancellation, to the Company or the Transfer Agent. If
the Company has failed to pay the Maturity Date Redemption Price in a timely
manner as described above, then the Maturity Date shall be extended for any
Preferred Shares for as long as (A) a Triggering Event shall have occurred and
be continuing, or (B) an event shall have occurred and be continuing which with
the passage of time and the failure to cure would result in a Triggering Event.
Notwithstanding anything to the contrary in this Section 2(d)(vii), any holder
of Preferred Shares may convert such Preferred Shares, but subject to Section 5
and Section 15, into shares of Common Stock pursuant to Section 2(b) on or prior
to the date immediately preceding the Maturity Date.

                                      -9-
<PAGE>

               (viii) Book-Entry. Notwithstanding anything to the contrary set
                      ----------
forth herein, upon conversion or redemption of Preferred Shares in accordance
with the terms hereof, the holder thereof shall not be required to physically
surrender the certificate representing the Preferred Shares to the Company
unless the full number of Preferred Shares represented by the certificate are
being converted or redeemed. The holder and the Company shall maintain records
showing the number of Preferred Shares so converted or redeemed and the dates of
such conversions or redemptions or shall use such other method, reasonably
satisfactory to the holder and the Company, so as not to require physical
surrender of the certificate representing the Preferred Shares upon each such
conversion or redemption. In the event of any dispute or discrepancy, such
records of the Company establishing the number of Preferred Shares to which the
record holder is entitled shall be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if Preferred Shares
represented by a certificate are converted or redeemed as aforesaid, the holder
may not transfer the certificate representing the Preferred Shares unless the
holder first physically surrenders the certificate representing the Preferred
Shares to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the holder a new certificate of like tenor, registered as the
holder may request, representing in the aggregate the remaining number of
Preferred Shares represented by such certificate. The holder and any assignee,
by acceptance of a certificate, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion or redemption of any
Preferred Shares, the number of Preferred Shares represented by such certificate
may be less than the number of Preferred Shares stated on the face thereof. Each
certificate for Preferred Shares shall bear the following legend:

          ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW
          THE TERMS OF THE COMPANY'S CERTIFICATE OF DESIGNATIONS
          RELATING TO THE PREFERRED SHARES REPRESENTED BY THIS
          CERTIFICATE, INCLUDING SECTION 2(d)(viii) THEREOF. THE
          NUMBER OF PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE
          MAY BE LESS THAN THE NUMBER OF PREFERRED SHARES STATED ON
          THE FACE HEREOF PURSUANT TO SECTION 2(d)(viii) OF THE
          CERTIFICATE OF DESIGNATIONS RELATING TO THE PREFERRED
          SHARES REPRESENTED BY THIS CERTIFICATE.

          (e)  Taxes. The Company shall pay any and all documentary, stamp,
               -----
transfer and other similar taxes that may be payable with respect to the
issuance and delivery of Common Stock upon the conversion of Preferred Shares.

          (f)  Adjustments to Conversion Price. The Conversion Price will be
               -------------------------------
subject to adjustment from time to time as provided in this Section 2(f).

               (i)    Adjustment of Conversion Price upon Issuance of Common
                      ------------------------------------------------------
Stock. If and whenever on or after the Issuance Date, the Company issues or
-----
sells, or in accordance with this Section 2(f) is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the

                                      -10-
<PAGE>

Company, but excluding shares of Common Stock: (i) deemed to have been issued by
the Company in connection with an Approved Stock Plan; (ii) issued or deemed
issued in connection with the settlement or other resolution of the class action
lawsuit filed in the United States District Court for the Eastern District of
Virginia, captioned In re MicroStrategy Inc. Securities Litigation, Civ. No. 00-
                    ----------------------------------------------
473-A, which was pending as of the Issuance Date; (iii) upon conversion of the
Preferred Shares, the Series A Preferred Shares, the Series B Preferred Shares,
the Series C Preferred Shares or the Series D Preferred Shares; (iv) as
consideration for mergers or consolidations or the acquisition of businesses or
their assets, provided that such issuance or deemed issuance will not exceed
4,000,000 shares of Common Stock (subject to adjustment for stock splits, stock
dividends, stock combination or other similar transactions) per calendar year
beginning with the calendar year which began on January 1, 2000, provided that
the Company shall be permitted to carry forward any such shares not used
pursuant to this subclause (iv) during the prior calendar year (including the
calendar year which began on January 1, 2000) in subsequent calendar years; (v)
issued upon conversion of shares of the Company's Class B common stock, provided
such shares of Class B common stock were issued and outstanding on the date
immediately preceding June 19, 2000; (vi) issued upon exercise of warrants to
purchase shares of Common Stock which were outstanding on the date immediately
preceding April 3, 2001, provided that such issuance of shares of Common Stock
upon exercise of such warrants is made pursuant to the terms of such warrants in
effect on the date immediately preceding April 3, 2001 and such warrants are not
amended after the date immediately preceding April 3, 2001; (vii) the issuance
of Common Stock or warrants to purchase Common Stock at a purchase price or an
exercise price, as the case may be, that is not less than the market price of
the Common Stock on the date of issuance of such Common Stock or warrant, in
connection with any strategic investor, lender, vendor, lease or similar
arrangement (the primary purpose of which is not to raise equity capital),
provided that the aggregate number of shares of Common Stock subject to warrants
and shares of Common Stock which the Company may issue pursuant to this
subclause (vii) shall not exceed 500,000 (subject to adjustment for stock
splits, stock dividends, stock combinations and other similar transactions);
(viii) issued or deemed issued upon conversion of the notes (the "Settlement
Notes") on the terms and conditions set forth in the Memorandum of
Understanding, dated October 23, 2000 (the "Memorandum of Understanding"),
relating to the settlement of the class action lawsuit filed in the United
States District Court for the Eastern District of Virginia, captioned In re
                                                                      -----
MicroStrategy Inc. Securities Litigation, Civil Action No. 00-473-A pursuant to
----------------------------------------
the Memorandum of Understanding dated October 23, 2000 (the "Memorandum of
Understanding") by lead plaintiffs Akiko Minami, Atsukuni Minami and Local 133
Pension Fund, on behalf of themselves and the Certified Class and Settlement
Subclass (as defined in such Memorandum of Understanding) and defendants the
Company, Michael J. Saylor, Sanju K. Bansal, Mark S. Lynch, Stephen S. Trundle,
Ralph S. Terkowitz and Frank A. Ingari; and (ix) issued or deemed issued
(including by way of the issuance of Convertible Securities or Options), other
than as set forth in clauses (i) through (viii) above, provided that (A) the
amount of securities issued does not exceed (1) $25,000,000, if issued or deemed
issued on or prior to June 18, 2001 or (2) $20,000,000, if issued or deemed
issued during the period beginning on and including June 19, 2001 and ending on
and including December 31, 2001, (B) the proceeds from such issuance are first
used to redeem or repay Preferred Shares, to the extent Preferred Shares are
then outstanding, on or prior to the date which is 180 days after the Issuance
Date, and, after the date which is 180 days after the Issuance Date, and
provided that the Company complies with its obligations under Section 7, then
subject to the holders of

                                      -11-
<PAGE>

such Preferred Shares delivering a Notice of Holder Proceeds Redemption (as
defined in Section 7) in accordance with Section 7 the proceeds of such issuance
are first used to redeem the Preferred Shares for which a Notice of Holder
Proceeds Redemption has been given, (C) the number of shares of Common Stock
issued or deemed issued in such issuance is a fixed number of shares and (D) the
price per share at which such shares of Common Stock are issued or deemed issued
is not a Variable Price (as defined in Section 2(f)(iii)(A))) for a
consideration per share less than a price (the "Applicable Price") equal to the
Conversion Price in effect immediately prior to such time, then immediately
after such issue or sale, the Conversion Price then in effect shall be reduced
to an amount equal to the product of (x) the Conversion Price in effect
immediately prior to such issue or sale and (y) the quotient of (1) the sum of
(I) the product of the Applicable Price and the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale and (II) the
consideration, if any, received by the Company upon such issue or sale, divided
by (2) the product of (I) the Applicable Price multiplied by (II) the number of
shares of Common Stock Deemed Outstanding immediately after such issue or sale;
provided, however, that the Conversion Price shall not be reduced pursuant to
this Section 2(f)(i) at any time that the amount of such reduction would be an
amount less than 2% of the Conversion Price immediately preceding such
reduction, but any such amount shall be carried forward and a reduction in the
Conversion Price pursuant to this Section 2(f)(i) shall be made with respect to
such amount at the earlier of (a) such time as all such amounts which have been
carried forward pursuant to this proviso aggregate 2% or more of the Conversion
Price then in effect and (b) the next reduction of the Conversion Price pursuant
to this Section 2(f)(i). For purposes of determining the adjusted Conversion
Price under this Section 2(f)(i), the following shall be applicable:

                    (A)  Issuance of Options. If the Company in any manner
                         -------------------
grants or sells any Options and the lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of such Option is less than the Applicable Price, then such share of
Common Stock shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting or sale of such Option for such price
per share. For purposes of this Section 2(f)(i)(A), the "lowest price per share
for which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exchange or exercise of any Convertible Securities
issuable upon exercise of such Option" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon granting or sale of the Option,
upon exercise of the Option and upon conversion, exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion,
exchange or exercise of such Convertible Securities.

                    (B)  Issuance of Convertible Securities. If the Company in
                         ----------------------------------
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion,
exchange or exercise thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance of sale of such

                                      -12-
<PAGE>

Convertible Securities for such price per share. For the purposes of this
Section 2(f)(i)(B), the "lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise" shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the issuance
or sale of the Convertible Security and upon the conversion, exchange or
exercise of such Convertible Security, excluding for purposes of such
determination any price per share which is based on the market price of the
Common Stock at any time after the third anniversary of the Issuance Date. No
further adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock upon conversion, exchange or exercise of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 2(f)(i), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.

                    (C)  Change in Option Price or Rate of Conversion. If the
                         --------------------------------------------
purchase or exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange or exercise
of any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable or exercisable for Common Stock changes at
any time, the Conversion Price in effect at the time of such change shall be
adjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold. For purposes of this Section
2(f)(i)(C), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of the Preferred Shares are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment shall be made if such adjustment would result
in an increase of the Conversion Price then in effect.

                    (D)  Calculation of Consideration Received. In case any
                         -------------------------------------
Option is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the gross amount received by the Company therefor, less expenses in excess
of 5% of the gross amount received. If any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the arithmetic average of the Closing Sale Prices of such securities
during the 10 consecutive trading days ending on the date of receipt of such
securities. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of at least two-thirds
(2/3) of the Preferred Shares then outstanding. If such parties are unable to
reach agreement within 10 days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration will be

                                      -13-
<PAGE>

determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser selected by the
Company from a list of approved appraisers agreed to by the Company and the
holders of the Preferred Shares on or prior to the Issuance Date. The
determination of such appraiser shall be deemed binding upon all parties absent
manifest error and the fees and expenses of such appraiser shall be borne by the
Company.

                    (E)  Record Date. If the Company takes a record of the
                         -----------
holders of Common Stock for the purpose of entitling them (I) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (II) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

             (ii)   Adjustment of Conversion Price upon Subdivision or
                    --------------------------------------------------
Combination of Common Stock. If the Company at any time subdivides (by any stock
---------------------------
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

             (iii)  Holder's Right of Alternative Conversion Price Following
                    --------------------------------------------------------
Issuance of Convertible Securities; Settlement Note Conversions. (A) If the
---------------------------------------------------------------
Company in any manner issued or issues or sold or sells any Options or
Convertible Securities after June 19, 2000 that are convertible into or
exchangeable or exercisable for Common Stock at a price which varies or may vary
with the market price of the Common Stock, including by way of one or more
reset(s) to a fixed price (each of the formulations for such variable price
being herein referred to as, the "Variable Price"), the Company shall provide
written notice thereof via facsimile and overnight courier to each holder of
Preferred Shares ("Variable Notice") on the date of issuance of such Convertible
Securities or Options. From and after the date the Company issues any such
Convertible Securities or Options with a Variable Price, a holder of Preferred
Shares shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of any
Preferred Shares by designating in the Conversion Notice delivered upon
conversion of such Preferred Shares that solely for purposes of such conversion
the holder is relying on the Variable Price rather than the Conversion Price
then in effect. A holder's election to rely on a Variable Price for a particular
conversion of Preferred Shares shall not obligate the holder to rely on a
Variable Price for any future conversions of Preferred Shares. Notwithstanding
the foregoing, an issuance by the Company of a Convertible Security or Option
will not be subject to this Section 2(f)(iii)(A) if such Convertible Security or
Option is convertible into or exchangeable or exercisable for Common Stock at a
fixed price which may vary with the market price of the Common Stock only after
the Maturity Date and the issuance of the Settlement Notes (as defined in
Section 2(f)(i)) will not be subject to this Section 2(f)(iii)(A).

                                      -14-
<PAGE>

                    (B)  If the Company issues Common Stock upon conversion of,
or in exchange for, the Settlement Notes (as defined in Section 2(f)(i)) at a
price per share which is less than the Conversion Price in effect immediately
prior to such time, then immediately after such issuance, the Conversion Price
then in effect shall be reduced to the price per share at which such shares of
Common Stock were issued, subject to further adjustment as provided in this
Certificate of Designations.

             (iv)   Other Events. If any event occurs of the type contemplated
                    ------------
by the provisions of this Section 2(f) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of the Preferred
Shares; provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 2(f).

             (v)    Notices.
                    --------

                    (A)  Immediately upon any adjustment of the Conversion Price
pursuant to this Section 2(f), the Company will give written notice thereof to
each holder of Preferred Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment.

                    (B)  The Company will give written notice to each holder of
Preferred Shares at least ten (10) Business Days prior to the date on which the
Company closes its books or takes a record (I) with respect to any dividend or
distribution upon the Common Stock, (II) with respect to any pro rata
subscription offer to holders of Common Stock or (III) for determining rights to
vote with respect to any Organic Change (as defined in Section 4(a)),
dissolution or liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.

                    (C)  The Company will also give written notice to each
holder of Preferred Shares at least ten (10) Business Days prior to the date on
which any Organic Change, dissolution or liquidation will take place, provided
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to such holder.

                                      -15-
<PAGE>

     (3)  Redemption at Option of Holders.
          -------------------------------

          (a)  Redemption Option Upon Triggering Event. In addition to all other
               ---------------------------------------
rights of the holders of Preferred Shares contained herein, after a Triggering
Event (as defined below), each holder of Preferred Shares shall have the right,
at such holder's option, to require the Company to redeem all or a portion of
such holder's Preferred Shares at a price per Preferred Share equal to the
greater of (i) 125% of the Conversion Amount and (ii) the product of (A) the
Conversion Rate in effect at such time as such holder delivers a Notice of
Redemption at Option of Buyer (as defined below) and (B) the Closing Sale Price
of the Common Stock on the trading day immediately preceding such Triggering
Event on which the Principal Market is open for trading or if no Closing Sale
Price is reported by the Principal Market on such trading day, then the most
recently reported Closing Sale Price (the "Redemption Price").

          (b)  "Triggering Event". A "Triggering Event" shall be deemed to have
               ------------------
occurred at such time as any of the following events:

               (i)    the failure of the applicable Registration Statement to be
declared effective by the Securities and Exchange Commission (the "SEC") on or
prior to the date that is 335 days after the Issuance Date;

               (ii)   the suspension from trading or failure of the Common Stock
to be listed on the Nasdaq National Market, The New York Stock Exchange, Inc. or
the Nasdaq SmallCap Market for a period of five (5) consecutive trading days or
for more than an aggregate of 10 trading days in any 365-day period;

               (iii)  the Company's notice or the Transfer Agent's notice, at
the Company's direction, to any holder of Preferred Shares, including by way of
public announcement, at any time, of its intention not to comply with a request
for conversion of any Preferred Shares into shares of Common Stock that is
tendered in accordance with the provisions of this Certificate of Designations;

               (iv)   a Conversion Failure (as defined in Section 2(d)(v)(C));

               (v)    upon the Company's receipt of a Conversion Notice after
the earlier of July 31, 2001 and the next annual meeting of stockholders of the
Company, the Company shall not be obligated to issue shares of Common Stock upon
such Conversion due to the provisions of Section 15; or

               (vi)   unless otherwise provided under Sections 3(b)(i) through
3(b)(v), above, the Company breaches any representation, warranty, covenant or
other term or condition of the applicable Amended and Restated Redemption and
Exchange Agreement (except for a breach of Sections 4(c) or 9(j) or the last
sentence of Section 4(f) of the applicable Amended and Restated Redemption and
Exchange Agreement), the applicable Amended and Restated Registration Rights
Agreement (except for a breach of Sections 3(d), 3(q) or 11(i) of the applicable
Amended and Restated Registration Rights Agreement), this Certificate of
Designations or any other agreement, document, certificate or other instrument
delivered in

                                      -16-
<PAGE>

connection with the transactions contemplated thereby and hereby, except to the
extent that such breach would not have a Material Adverse Effect (as defined in
Section 3(a) of the applicable Amended and Restated Redemption and Exchange
Agreement) and except, in the case of a breach of a covenant which is curable,
only if such breach continues for a period of at least 10 Business Days.

          (c)  Mechanics of Redemption at Option of Buyer. Within one (1)
               ------------------------------------------
Business Day after the occurrence of a Triggering Event, the Company shall
deliver written notice thereof via facsimile and overnight courier ("Notice of
Triggering Event") to each holder of Preferred Shares. At any time after the
earlier of a holder's receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any holder of Preferred Shares then
outstanding may require the Company to redeem up to all of such holder's
Preferred Shares by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option of Buyer") to the Company,
which Notice of Redemption at Option of Buyer shall indicate the number of
Preferred Shares that such holder is electing to redeem.

          (d)  Payment of Redemption Price. Upon the Company's receipt of a
               ---------------------------
Notice(s) of Redemption at Option of Buyer from any holder of Preferred Shares,
the Company shall immediately notify each holder of Preferred Shares by
facsimile of the Company's receipt of such notice(s). The Company shall deliver
the applicable Redemption Price to a holder which delivers a Notice of
Redemption at Option of Buyer within five Business Days after the Company's
receipt of a Notice of Redemption at Option of Buyer; provided that, if required
by Section 2(d)(viii), a holder's Preferred Stock Certificates shall have been
delivered to the Transfer Agent. If the Company is unable to redeem all of the
Preferred Shares submitted for redemption, the Company shall (i) redeem a pro
rata amount from each holder of Preferred Shares based on the number of
Preferred Shares submitted for redemption by such holder relative to the total
number of Preferred Shares submitted for redemption by all holders of Preferred
Shares and (ii) in addition to any remedy such holder of Preferred Shares may
have under this Certificate of Designations and the Amended and Restated
Redemption and Exchange Agreement, pay to each holder interest at the rate of
1.5% per month (prorated for partial months) in respect of each unredeemed
Preferred Share until paid in full.

                                      -17-
<PAGE>

          (e)  Void Redemption.  In the event that the Company does not pay the
               ---------------
Redemption Price within the time period set forth in Section 3(d), at any time
thereafter and until the Company pays such unpaid applicable Redemption Price in
full, a holder of Preferred Shares shall have the option (the "Void Optional
Redemption Option") to, in lieu of redemption, require the Company to promptly
return to such holder any or all of the Preferred Shares that were submitted for
redemption by such holder under this Section 3 and for which the Redemption
Price (together with any interest thereon) has not been paid, by sending written
notice thereof to the Company via facsimile (the "Void Optional Redemption
Notice").  Upon the Company's receipt of such Void Optional Redemption Notice,
(i) the Notice of Redemption at Option of Buyer shall be null and void with
respect to those Preferred Shares subject to the Void Optional Redemption
Notice, (ii) the Company shall immediately return any Preferred Shares subject
to the Void Optional Redemption Notice, and (iii) the Conversion Price of such
returned Preferred Shares shall be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Void Optional Redemption Notice is
delivered to the Company and (B) the lowest Weighted Average Price of the Common
Stock during the period beginning on the date on which the Notice of Redemption
at Option of Buyer is delivered to the Company and ending on the date on which
the Void Optional Redemption Notice is delivered to the Company.

          (f)  Disputes; Miscellaneous.  In the event of a dispute as to the
               -----------------------
determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(d)(iii) above with the term
"Redemption Price" being substituted for the term "Conversion Rate".  A holder's
delivery of a Void Optional Redemption Notice and exercise of its rights
following such notice shall not effect the Company's obligations to make any
payments which have accrued prior to the date of such notice.  In the event of a
redemption pursuant to this Section 3 of less than all of the Preferred Shares
represented by a particular Preferred Stock Certificate, the Company shall
promptly cause to be issued and delivered to the holder of such Preferred Shares
a Preferred Stock Certificate representing the remaining Preferred Shares which
have not been redeemed, if necessary.

          (g)  Registration Failure Conversion Price Reset and Redemption.
               ----------------------------------------------------------

               (i)  In addition to any other adjustment to the Conversion Price
provided for in this Certificate of Designations, in the event that the
applicable Registration Statement has not been declared effective by the SEC on
or prior to the date that is 180 days after the Issuance Date and the Market
Price of the Common Stock on the date which is 11 trading days after such 180th
day (such 11th trading day is referred to herein as the "First Registration
Adjustment Date") is less than the Conversion Price in effect immediately prior
to such First Registration Adjustment Date, then from and after such First
Registration Adjustment Date the Conversion Price shall be equal to the Market
Price of the Common Stock on such First Registration Adjustment Date, subject to
further adjustment as provided in this Certificate of Designations. In the event
that the applicable Registration Statement has not been declared effective by
the SEC on or prior to the last day of any succeeding 90-day period after the
date that is 180 days after the Issuance Date and the Market Price of the Common
Stock on the date which is exactly 11 trading days after the last day of any
succeeding 90-day period after such 180th day (each, such 11th trading day is
referred to herein as an "Additional Registration Adjustment Date") is less than
the Conversion Price in effect immediately prior to such

                                      -18-
<PAGE>

Additional Registration Adjustment Date, then from and after such Additional
Registration Adjustment Date the Conversion Price shall be equal to the Market
Price of the Common Stock on such Additional Registration Adjustment Date,
subject to further adjustment as provided in this Certificate of Designations.

               (ii)   In addition to any other adjustment to the Conversion
Price provided for in this Certificate of Designations, in the event that a
Registration Failure (as defined below) occurs and the Market Price of the
Common Stock on the date which is 11 trading days after the first date of the
occurrence of such Registration Failure (such 11/th/ trading day is referred to
herein as the "First Registration Failure Adjustment Date") is less than the
Conversion Price in effect immediately prior to such First Registration Failure
Adjustment Date, then from and after such First Registration Failure Adjustment
Date the Conversion Price shall be equal to the Market Price of the Common Stock
on such First Registration Failure Adjustment Date, subject to further
adjustment as provided in this Certificate of Designations. In the event that a
Registration Failure continues on the last day of any succeeding 90-day period
after the first day of such Registration Failure and the Market Price of the
Common Stock on the date which is exactly 11 trading days after the last day of
any succeeding 90-day period after the first date of such Registration Failure
(each such 11/th/ trading day is referred to herein as an "Additional
Registration Failure Adjustment Date") is less than the Conversion Price in
effect immediately prior to such Additional Registration Failure Adjustment
Date, then from and after such Additional Registration Failure Adjustment Date
the Conversion Price shall be equal to the Market Price of the Common Stock on
such Additional Registration Failure Adjustment Date, subject to further
adjustment as provided in this Certificate of Designations. A "Registration
Failure" means while the Registration Statement is required to be maintained
effective pursuant to the terms of the applicable Amended and Restated
Registration Rights Agreement, except for days during any Allowable Grace
Period, the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the holder of the Preferred Shares for sale of all of the Registrable
Securities in accordance with the terms of the Amended and Restated Registration
Rights Agreement, and such lapse or unavailability continues for a period of 10
consecutive trading days or for more than an aggregate of 20 trading days in any
365-day period (other than days during an Allowable Grace Period).

               (iii)  Upon each Additional Registration Failure Adjustment Date
on which a Registration Failure is continuing, each holder of Preferred Shares
shall have the option to elect to adjust the Conversion Price pursuant to
Section 3(g)(ii) or to require the Company to redeem all or a portion of such
holder's Preferred Shares as if a Triggering Event described in Section 3(b) had
occurred on such Additional Registration Failure Adjustment Date. Each holder of
Preferred Shares shall be deemed to have elected to have the Conversion Price
adjusted pursuant to the terms of Section 2(g)(ii) unless within one (1)
Business Day after the applicable Additional Registration Failure Adjustment
Date such holder delivers written notice to the Company stating that such holder
elects to require the Company to redeem some or all of such holders Preferred
Shares in compliance and pursuant to the provisions of this Section 3. If a
holder of Preferred Shares elects to require the Company to redeem some but not
all of such holders outstanding Preferred Shares, those Preferred Shares which
such holder has not elected

                                      -19-
<PAGE>

to redeem shall be subject to the adjustment to the Conversion Price provided
for in Section 2(g)(ii), subject to further adjustment as provided in this
Certificate of Designations.

     (4)  Other Rights of Holders.
          -----------------------

          (a)  Reorganization, Reclassification, Consolidation, Merger or Sale.
               ---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any (i) sale of all
or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance reasonably satisfactory to the holders
of at least two-thirds (2/3) of the Preferred Shares then outstanding) to
deliver to each holder of Preferred Shares in exchange for such shares, a
security of the Acquiring Entity evidenced by a written instrument substantially
similar in form and substance to the Preferred Shares, including, without
limitation, having a stated value and liquidation preference equal to the Stated
Value and the Liquidation Preference of the Preferred Shares held by such
holder, and reasonably satisfactory to the holders of at least two-thirds (2/3)
of the Preferred Shares then outstanding. Prior to the consummation of any other
Organic Change, the Company shall make appropriate provision (in form and
substance reasonably satisfactory to the holders of at least two-thirds (2/3) of
the Preferred Shares then outstanding) to insure that each of the holders of the
Preferred Shares will thereafter have the right to acquire and receive in lieu
of or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Preferred Shares such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and receivable
upon the conversion of such holder's Preferred Shares as of the date of such
Organic Change (without taking into account any limitations or restrictions on
the convertibility of the Preferred Shares).

          (b)  Optional Redemption Upon Change of Control. In addition to the
               ------------------------------------------
rights of the holders of Preferred Shares under Section 4(a), upon a Change of
Control (as defined below) of the Company each holder of Preferred Shares shall
have the right, at such holder's option, to require the Company to redeem all or
a portion of such holder's Preferred Shares at a price per Preferred Share equal
to 125% of the Conversion Amount ("Change of Control Redemption Price"). No
sooner than 20 Business Days nor later than 10 Business Days prior to the
consummation of a Change of Control, but not prior to the public announcement of
such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "Notice of Change of Control") to each holder
of Preferred Shares. At any time during the period beginning after receipt of a
Notice of Change of Control (or, in the event a Notice of Change of Control is
not delivered at least 10 Business Days prior to a Change of Control, at any
time on or after the date which is 10 Business Days prior to a Change of
Control) and ending on the date of such Change of Control, any holder of the
Preferred Shares then

                                      -20-
<PAGE>

outstanding may require the Company to redeem all or a portion of the holder's
Preferred Shares then outstanding by delivering written notice thereof via
facsimile and overnight courier (a "Notice of Redemption Upon Change of
Control") to the Company, which Notice of Redemption Upon Change of Control
shall indicate (i) the number of Preferred Shares that such holder is submitting
for redemption, and (ii) the applicable Change of Control Redemption Price, as
calculated pursuant to this Section 4(b). Upon the Company's receipt of a
Notice(s) of Redemption Upon Change of Control from any holder of Preferred
Shares, the Company shall promptly, but in no event later than one (1) Business
Day following such receipt, notify each holder of Preferred Shares by facsimile
of the Company's receipt of such Notice(s) of Redemption Upon Change of Control.
The Company shall deliver the applicable Change of Control Redemption Price
simultaneously with the consummation of the Change of Control; provided that, if
required by Section 2(d)(viii), a holder's Preferred Stock Certificates shall
have been so delivered to the Company. Payments provided for in this Section
4(b) shall have priority to payments to other stockholders in connection with a
Change of Control, subject to payment to such stockholders solely in their
capacities as creditors of the Company. For purposes of this Section 4(b),
"Change of Control" means (i) the consolidation, merger or other business
combination of the Company with or into another Person (other than (A) a
consolidation, merger or other business combination in which holders of the
Company's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company), (ii) the sale or
transfer of all or substantially all of the Company's assets, or (iii) a
purchase, tender or exchange offer made to and accepted by the holders of more
than 50% of the aggregate voting power of the outstanding Common Stock and the
Company's outstanding Class B common stock considered as a single class.

          (c)  Purchase Rights. If at any time the Company grants, issues or
               ---------------
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the holders of Preferred Shares will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Preferred Shares (without taking into account any limitations
or restrictions on the convertibility of the Preferred Shares and assuming for
purposes of this determination that the holder of such Preferred Shares has the
right to convert such Preferred Shares during the 180 days following the
Issuance Date at a Conversion Price equal to $3.50 (subject to adjustment for
stock splits, stock dividends, stock combinations and other similar transactions
after the Issuance Date) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

     (5)  Limitation on Beneficial Ownership. The Company shall not effect and
          ----------------------------------
shall have no obligation to effect any conversion of Preferred Shares, and no
holder of Preferred Shares shall have the right to convert any Preferred Shares,
to the extent that after giving effect to such conversion, the beneficial owner
of such shares (together with such Person's affiliates) would

                                      -21-
<PAGE>

have acquired, through conversion of Preferred Shares or otherwise, beneficial
ownership of a number of shares of Common Stock during the 60-day period ending
on and including the Conversion Date of such conversion (the "60 Day Period"),
that, when added to the number of shares of Common Stock beneficially owned by
such Person (together with such Person's affiliates) at the beginning of the 60
Day Period, exceeds 9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to such conversion. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by a
Person and its affiliates shall include the number of shares of Common Stock
issuable upon conversion of the Preferred Shares with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) conversion of the
remaining, nonconverted Preferred Shares beneficially owned by such Person or
any of its affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including, without
limitation, any warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by such Person
or any of its affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 5, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Section 5, in determining the number of
outstanding shares of Common Stock a holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-Q, Form 10-K or other public filing with the SEC, as the case may be,
(2) a more recent public announcement by the Company, or (3) any other notice by
the Company or its transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written request of any holder, the Company shall
promptly, but in no event later than one (1) Business Day following the receipt
of such notice, confirm in writing to any such holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to conversions of Preferred
Shares, Series B Preferred Shares, Series C Preferred Shares and Series D
Preferred Shares by such holder and its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported.

                                     -23-
<PAGE>

          (6)  Holder Elective Redemption. At any time after the date which is
               --------------------------
395 days after the Issuance Date, any holder of Preferred Shares shall have the
right, in its sole discretion and on one or more occasions, to require that the
Company redeem some or all of such holder's Preferred Shares (a "Holder Elective
Redemption") on the Holder Elective Redemption Date (as defined below), for an
amount in cash per each Preferred Share equal to the sum of (a) $12,000, plus
(b) the Additional Amount (collectively, the "Holder Elective Redemption
Price"). A holder of Preferred Shares may exercise its right to Holder Elective
Redemption by providing the Company written notice ("Holder Elective Redemption
Notice") at least 15 Business Days prior to the date selected by such holder for
the Holder Elective Redemption (the "Holder Elective Redemption Date"). The
Holder Elective Redemption Notice (i) shall set forth the Holder Elective
Redemption Date and (ii) shall state the number of Preferred Shares which such
holder has elected to have redeemed pursuant to a Holder Elective Redemption
(the "Holder Elective Redemption Shares"). If a holder of Preferred Shares
delivers a Holder Elective Redemption Notice in accordance with this Section 6,
then (unless a Loan Default has occurred and is continuing on the Holder
Elective Redemption Date or would result from the Company's payment of such
Holder Elective Redemption Price, and the Company has delivered written notice
of such Loan Default or resulting Loan Default to such holder after the
Company's receipt of such Holder Elective Redemption Notice and before the
Holder Elective Redemption Date (an "Elective Default Notice")) the Holder
Elective Redemption Shares, if any, which remain outstanding on the applicable
Holder Elective Redemption Date shall be redeemed by the Company on such Holder
Elective Redemption Date, and the Company shall pay to the holder of such Holder
Elective Redemption Shares on the Holder Elective Redemption Date, by wire
transfer of immediately available funds, an amount equal to the Holder Elective
Redemption Price with respect to such Holder Elective Redemption Shares. If the
Company fails to redeem any Holder Elective Redemption Shares which is
outstanding on the applicable Holder Elective Redemption Date by payment to such
holder of the applicable Holder Elective Redemption Price or the Company has
delivered an Elective Default Notice in accordance with this Section 6, then in
addition to any remedy such holder may have under this Certificate of
Designations, the Amended and Restated Redemption and Exchange Agreement and the
Amended and Restated Registration Rights Agreement, the Holder Elective
Redemption Price payable in respect of such unredeemed Holder Elective
Redemption Shares shall bear interest at the rate of 1.5% per month, prorated
for partial months, until paid in full. At any time after the Holder Elective
Redemption Date and until the Holder Elective Redemption Price is paid in full
(including in situations where the Company has delivered an Elective Default
Notice), the holder of such Holder Elective Redemption Shares shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder any or all of the Preferred Shares submitted for redemption by such
holder under this Section 6 and for which the Holder Elective Redemption Price
(together with any interest thereon) has not been paid, by sending written
notice thereof to the Company via facsimile (the "Void Elective Redemption
Notice"). Upon the Company's receipt of such Void Elective Redemption Notice,
(i) the Holder Elective Redemption Notice shall be null and void with respect to
the Holder Elective Redemption Shares subject to the Void Elective Redemption
Notice, (ii) the Company shall immediately return the Preferred Shares subject
to the Void

                                     -24-
<PAGE>

Elective Redemption Notice, and (iii) the Conversion Price of such Preferred
Shares subject to such Void Elective Redemption Notice shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Void
Elective Redemption Notice is delivered to the Company and (B) the lowest
Weighted Average Price of the Common Stock during the period beginning on the
date on which the Holder Elective Redemption Notice is delivered to the Company
and ending on the date on which the Void Elective Redemption Notice is delivered
to the Company. Notwithstanding anything to the contrary in this Section 6, but
subject to Section 5 and Section 15, until the Holder Elective Redemption Price
(together with any interest thereon) is paid in full, the Holder Elective
Redemption Shares (together with any interest thereon) may be converted by such
holder into shares of Common Stock pursuant to Section 2(b).

          (7)  Holder Proceeds Redemption. Upon the Company's receipt of
               --------------------------
Proceeds (as defined below) at any time after the Issuance Date, a holder of
Preferred Shares shall have the right, in its sole discretion and on one or more
occasions, to require that the Company redeem some or all of such holder's
Preferred Shares up to the number of shares representing Conversion Amounts with
a Holder Proceeds Redemption Price (as defined below) equal to the Holder's Pro
Rata Redemption Amount (as defined in Section 8) of the Proceeds, the receipt of
which resulted in the redemption right set forth in this Section 7 (a "Holder
Proceeds Redemption") on the Holder Proceeds Redemption Date (as defined below),
for an amount in cash equal to the sum of (a) the product of (i) the Redemption
Percentage as of the Holder Proceeds Redemption Date (as defined below) and (ii)
$10,000, plus (b) the Additional Amount as of the Holder Proceeds Redemption
Date, relating to the Preferred Shares being redeemed ("Holder Proceeds
Redemption Price"). Within one (1) Business Day after the Company's receipt of
Proceeds, the Company shall deliver written notice thereof via facsimile and
overnight courier ("Notice of Proceeds Event") to each holder of Preferred
Shares. Prior to or concurrent with the Company's delivery of a Notice of
Proceeds Event, the Company must publicly disclose that it has received the
Proceeds with respect to which the Notice of Proceeds Event was delivered. At
any time after the earlier of a holder of Preferred Shares becoming aware of the
Company's receipt of proceeds and such holder's receipt of the Notice of
Proceeds Event, such holder may require the Company to redeem some or all of
such holder's Preferred Shares up to the number of shares representing
Conversion Amounts with a Holder Proceeds Redemption Price equal to the Holder's
Pro Rata Redemption Amount of the Proceeds by delivering written notice thereof
via facsimile and overnight courier to the Company ("Holder Proceeds Redemption
Notice") at least three (3) Business Days prior to the date selected by the such
holder for the Holder Proceeds Redemption (the "Holder Proceeds Redemption
Date"); provided that a holder shall not be entitled to deliver a Holder
Proceeds Redemption Notice with respect to certain Proceeds after the date which
is five (5) Business Days after the date such holder receives the Notice of
Proceeds Event from the Company with respect to such Proceeds. The Holder
Proceeds Redemption Notice (i) shall set forth the Holder Proceeds Redemption
Date and (ii) shall state the number of Preferred Shares (and the Conversion
Amount represented by such Preferred Shares) such holder has elected to have
redeemed pursuant to a Holder Proceeds Redemption (which number of Preferred
Shares shall not represent Conversion Amounts with a Holder Proceeds Redemption
Price which

                                     -25-
<PAGE>

would exceed the Holder's Pro Rata Redemption Amount of the Proceeds) (the
"Holder Proceeds Redemption Shares"). If a holder delivers a Holder Proceeds
Redemption Notice in accordance with this Section 7, then (unless a Loan Default
has occurred and is continuing on the Holder Proceeds Redemption Date or would
result from the Company's payment of such Holder Proceeds Redemption Price, and
the Company has delivered written notice of such Loan Default or resulting Loan
Default to such holder after the Company's receipt of such Holder Proceeds
Redemption Notice and before the Holder Proceeds Redemption Date (a "Proceeds
Default Notice")) the Holder Proceeds Redemption Shares, if any, which remain
outstanding on the applicable Holder Proceeds Redemption Date shall be redeemed
by the Company on such Holder Proceeds Redemption Date, and the Company shall
pay to such holder on the Holder Proceeds Redemption Date, by wire transfer of
immediately available funds, an amount equal to the Holder Proceeds Redemption
Price with respect to such Holder Proceeds Redemption Shares. If the Company
fails to redeem any Holder Proceeds Redemption Shares which are outstanding on
the applicable Holder Proceeds Redemption Date by payment to the holder thereof
of the applicable Holder Proceeds Redemption Price or the Company has delivered
a Proceeds Default Notice in accordance with this Section 7, then in addition to
any remedy such holder may have under this Certificate of Designations, the
Amended and Restated Redemption and Exchange Agreement and the Amended and
Restated Registration Rights Agreement, the Holder Proceeds Redemption Price
payable in respect of such unredeemed Holder Proceeds Redemption Amount shall
bear interest at the rate of 1.5% per month, prorated for partial months, until
paid in full. At any time after the Holder Proceeds Redemption Date and until
the Holder Proceeds Redemption Price is paid in full (including in situations
where the Company has delivered a Proceeds Default Notice), such holder shall
have the option to, in lieu of redemption, require the Company to promptly
return to such holder any or all of the such holder's Holder Proceeds Redemption
Shares submitted for redemption by such holder under this Section 7 and for
which the Holder Proceeds Redemption Price (together with any interest thereon)
has not been paid, by sending written notice thereof to the Company via
facsimile (the "Void Proceeds Redemption Notice"). Upon the Company's receipt of
such Void Proceeds Redemption Notice, (i) the Holder Proceeds Redemption Notice
shall be null and void with respect to the Holder Proceeds Redemption Shares
subject to the Void Proceeds Redemption Notice, (ii) the Company shall
immediately return the Holder Proceeds Redemption Shares subject to the Void
Proceeds Redemption Notice, and (iii) the Conversion Price of such Holder
Proceeds Redemption Shares shall be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Void Proceeds Redemption Notice is
delivered to the Company and (B) the lowest Weighted Average Price of the Common
Stock during the period beginning on the date on which the Holder Proceeds
Redemption Notice is delivered to the Company and ending on the date on which
the Void Proceeds Redemption Notice is delivered to the Company. Notwithstanding
anything to the contrary in this Section 7, but subject to Section 5 and Section
15, until the Holder Proceeds Redemption Price (together with any interest
thereon) is paid in full, the Holder Proceeds Redemption Shares (together with
any interest thereon) may be converted by such holder into shares of Common
Stock pursuant to Section 2(b). For purposes of this Section 7, "Proceeds" means
(a) money received by the Company, or its designee, from the sale or issuance
(or multiple sales or issuances) of any debt or equity security (other than

                                     -26-
<PAGE>

pursuant to the exercise of Options which were outstanding as of the Issuance
Date or which are issued by the Company pursuant to an Approved Stock Plan) by
the Company or any of its subsidiaries (other than Strategy.com) with proceeds
to the Company or any of its subsidiaries (other than Strategy.com) in excess
of, either individually or in the aggregate from multiple sales or issuances,
$500,000, (b) money received by the Company, or its designee, from the sale (or
multiple sales) of assets by the Company or any of its subsidiaries, which
amount of money exceeds, either individually or in the aggregate from multiple
sales, $500,000 and (c) any cash available for distribution from an entity
acquired by the Company, including, without limitation, the acquisition by the
Company, including by way or merger or consolidation, of businesses or their
tangible or intangible assets in which at least $500,000 of cash or cash
equivalents is included in the assets acquired, (d) the Company's purchase of
the remaining shares of Strategy.com which were not previously owned by the
Company, in which case the "Proceeds" will be deemed to be equal to the
aggregate Holder Proceeds Redemption Price of all the Preferred Shares then
outstanding, and (e) the elimination, in whole or in part, of Strategy.com's
restrictions on use of cash and/or on the Company's restrictions on the use of
cash held by Strategy.com or held by the Company that is designated for use by
or for the benefit of Strategy.com and the elimination or waiver of the
liquidation preference of the series A preferred stock of Strategy.com, in which
case the "Proceeds" will be deemed to be equal to the aggregate Holder Proceeds
Redemption Price of all the Preferred Shares then outstanding. For example, and
without limitation, if the Company were able to, or did, distribute, dividend or
lend cash to itself from Strategy.com, then such cash would be deemed Proceeds
sufficient to support the redemption of the outstanding Preferred Shares
pursuant to this Section 7.

          (8)  Redemption at the Company's Election. At any time or times during
               ------------------------------------
the period beginning on the Issuance Date and ending on and including the date
which is 180 days after the Issuance Date, the Company shall have the right, in
its sole discretion, to require that some or all of the outstanding Preferred
Shares be redeemed ("Redemption at Company's Election") for consideration per
Preferred Share equal to the sum of (a) the product of (i) the Redemption
Percentage as of the Company's Election Redemption Date (as defined below) and
(ii) $10,000, plus (b) the Additional Amount as of the Company's Election
Redemption Date, relating to the Preferred Shares which the Company has elected
to redeem pursuant to this Section 8 (the "Company's Election Redemption
Price"). The Company shall exercise its right to Redemption at Company's
Election by providing each holder of Preferred Shares written notice ("Notice of
Redemption at Company's Election") at least 15 Business Days prior to the date
of consummation of such redemption ("Company's Election Redemption Date"). If
the Company elects to require redemption of some, but not all, of the Preferred
Shares then outstanding, the Company shall require redemption of the pro rata
amount from each holder of Preferred Shares based on the Preferred Shares
acquired by such holder relative to the aggregate number of Preferred Shares
acquired on the Issuance Date (such amount with respect to each holder of
Preferred Shares being referred to herein as its "Pro Rata Redemption Amount").
The Notice of Redemption at Company's Election shall indicate (x) the number of
each holder's Preferred Shares the Company has elected to redeem (the "Company's
Election Redemption Shares"), (y) the Company's Election Redemption Date, which
date shall not be after the date which is 180 days after the Issuance Date, and
(z) each

                                     -27-
<PAGE>

Holder's Pro Rata Redemption Amount. If the Company has exercised its right of
Redemption at Company's Election and the conditions of this Section 8 have been
satisfied, then the Holder's Pro Rata Redemption Amount of each holder of
Preferred Shares outstanding on the Company's Election Redemption Date shall be
redeemed as of the Company's Election Redemption Date by payment by the Company
to each holder of Preferred Shares of the Company's Election Redemption Price
for the Preferred Shares being redeemed. If required by Section 2(d)(viii), each
holder shall thereupon surrender certificates representing the Preferred Shares
redeemed to the Company. If the Company fails to pay the full Company's Election
Redemption Price on the Company's Election Redemption Date for each Preferred
Share selected by the Company for redemption pursuant to this Section 8, then,
at any time thereafter and until the Company pays such unpaid applicable
Company's Election Redemption Price in full, a holder of such Preferred Shares
shall have the option (the "Void Company Redemption Option") to, in lieu of
redemption, require the Company to promptly return to such holder any or all of
such Preferred Shares that were submitted for redemption by the Holder under
this Section 8 and for which the Company's Election Redemption Price (together
with any interest thereon) has not been paid, by sending written notice thereof
to the Company via facsimile (the "Void Company Redemption Notice"). Upon the
Company's receipt of such Void Company Redemption Notice, (i) the Notice of
Redemption at Company's Election shall be null and void with respect to the
Company's Election Redemption Shares subject to the Void Company Redemption
Notice and such holder shall be entitled to all of the rights under this
Certificate of Designations and (ii) the Company shall immediately return the
Preferred Shares subject to the Void Company Redemption Notice. If the Company
fails to timely pay any Company's Election Redemption Price in accordance with
this Section 8, then the Company shall not be permitted to submit another Notice
of Redemption at Company's Election without the prior written consent of the
holders of at least two-thirds (2/3) of the Preferred Shares then outstanding.

          (9)  Reservation of Shares. The Company shall, so long as any of the
               ---------------------
Preferred Shares are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding; provided that the
number of shares of Common Stock so reserved shall at no time be less than 125%
of the number of shares of Common Stock for which the Preferred Shares are at
any time convertible (without regard to any limitations on conversions). The
initial number of shares of Common Stock reserved for conversions of the
Preferred Shares and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Preferred Shares based on the number
of Preferred Shares held by each holder at the time of issuance of the Preferred
Shares or increase in the number of reserved shares, as the case may be. In the
event a holder shall sell or otherwise transfer any of such holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any
Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holders.

                                     -28-
<PAGE>

          (10) Voting Rights. Holders of Preferred Shares shall have no
               -------------
voting rights, except as required by law, including but not limited to the
Delaware General Corporation Law, and as expressly provided in this Certificate
of Designations.

          (11) Liquidation, Dissolution, Winding-Up. In the event of any
               ------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "Liquidation Funds"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the sum of (i) the Stated Value
and (ii) the Additional Amount for such Preferred Share; provided that, if the
Liquidation Funds are insufficient to pay the full amount due to the holders of
Preferred Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares (including
the Series A Preferred Shares outstanding on the Issuance Date, the Series B
Preferred Shares, the Series C Preferred Shares and the Series D Preferred
Shares) as to payments of Liquidation Funds (the "Pari Passu Shares"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a percentage of
the Liquidation Funds equal to the full amount of Liquidation Funds payable to
such holder as a liquidation preference, in accordance with their respective
Certificate of Designations, Preferences and Rights, as a percentage of the full
amount of Liquidation Funds payable to all holders of Preferred Shares and Pari
Passu Shares. The purchase or redemption by the Company of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person, nor the
sale or transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company.

          (12) Preferred Rank. All shares of Common Stock shall be of
               --------------
junior rank to all Preferred Shares with respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of
the Company. The rights of the shares of Common Stock shall be subject to the
preferences and relative rights of the Preferred Shares. The Preferred Shares
shall rank pari passu with the Series A Preferred Shares outstanding on the
Issuance Date, the Series B Preferred Shares, the Series C Preferred Shares and
the Series D Preferred Shares in respect the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Company.
Without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, the Company shall not
hereafter authorize or issue additional or other capital stock that is of senior
rank to the Preferred Shares in respect of the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the Company.
Without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, the Company shall not
hereafter authorize or make any amendment to the

                                     -29-
<PAGE>

Company's Certificate of Incorporation or bylaws, or file any resolution of the
board of directors of the Company with the Secretary of State of the State of
Delaware or enter into any agreement containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of the
holders of the Preferred Shares relative to the holders of the Common Stock or
the holders of any other class of capital stock. In the event of the merger or
consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative powers, designations and preferences
provided for herein and no merger shall result inconsistent therewith.

     (13)  Participation. Subject to the rights of the holders, if any, of the
           -------------
Pari Passu Shares, the holders of the Preferred Shares shall, as holders of
Preferred Stock, be entitled to such dividends paid and distributions made to
the holders of Common Stock to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversion herein or elsewhere and assuming for purposes of
this determination that the holder of such Preferred Shares has the right to
convert such Preferred Shares during the 180 days following the Issuance Date at
a Conversion Price equal to $3.50 (subject to adjustment for stock splits, stock
dividends, stock combinations and other similar transactions after the Issuance
Date)) and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.

     (14)  Restriction on Redemption and Cash Dividends. On any date on or prior
           --------------------------------------------
to June 19, 2001, unless all of the Preferred Shares have been converted or
redeemed as provided herein, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, its capital
stock (other than the Preferred Shares and the Series A Preferred Shares
outstanding on the Issuance Date, the Series B Preferred Shares, the Series C
Preferred Shares and the Series D Preferred Shares and other than the redemption
or repurchase by the Company of shares of Common Stock upon the termination of
an employee's employment with the Company pursuant to the terms of written
employment agreements entered into after the Issuance Date whereby such employee
purchased such shares at a price which was paid to the Company after the
Issuance Date or award made after the Issuance Date under any employee equity
incentive plan adopted by a majority of the members of the Company's Board of
Directors, and which initial purchase price is greater than or equal to the
redemption or repurchase price paid to such employee) without the prior express
written consent of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares. On any date after June 19, 2001, unless all of the
Preferred Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, its capital stock (other than the Preferred Shares, the
Series A Preferred Shares outstanding on the Issuance Date, the Series B
Preferred Shares, the Series C Preferred Shares and the Series D Preferred
Shares and other than the redemption or repurchase by the Company of shares of
Common Stock) without the prior express written consent of the holders of not
less than two-thirds (2/3) of the then outstanding Preferred Shares.

                                     -30-
<PAGE>

     (15)  Limitation on Number of Conversion Shares. Notwithstanding anything
           -----------------------------------------
to the contrary contained herein, the Company shall not be obligated to issue
any shares of Common Stock upon conversion of the Preferred Shares if the
issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon conversion of the Preferred Shares
without breaching the Company's obligations under the rules or regulations of
the Principal Market, or the market or exchange where the Common Stock is then
traded (the "Exchange Cap"), except that such limitation shall not apply in the
event that the Company (a) obtains the approval of its stockholders as required
by the applicable rules of the Principal Market (or any successor rule or
regulation) for issuances of Common Stock in excess of such amount, or (b)
obtains a written opinion from outside counsel to the Company that such approval
is not required, which opinion shall be reasonably satisfactory to the holders
of at least two-thirds (2/3) of the Preferred Shares then outstanding. Until
such approval or written opinion is obtained, no purchaser of Preferred Shares
pursuant to an Amended and Restated Redemption and Exchange Agreement (the
"Purchasers") shall be issued, upon conversion of Preferred Shares, shares of
Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
Series A Preferred Shares issued to such Purchaser pursuant to the Securities
Purchase Agreement (as defined in the Amended and Restated Redemption and
Exchange Agreement) and the denominator of which is the aggregate amount of all
the Series A Preferred Shares issued pursuant to the Securities Purchase
Agreement (the "Cap Allocation Amount"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's Preferred Shares, the
transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any holder of Preferred Shares shall
convert all of such holder's Preferred Shares into a number of shares of Common
Stock which, in the aggregate, is less than such holder's Cap Allocation Amount,
then the difference between such holder's Cap Allocation Amount and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Cap Allocation Amounts of the remaining holders of Preferred
Shares on a pro rata basis in proportion to the number of Preferred Shares then
held by each such holder.

     (16)  Vote to Change the Terms of or Issue Additional Preferred Shares;
           -----------------------------------------------------------------
Waiver. The affirmative vote at a meeting duly called for such purpose or the
------
written consent without a meeting, of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares, shall be required for (a) any
change to this Certificate of Designations or the Company's Certificate of
Incorporation which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Preferred Shares or (b) the issuance
of Preferred Shares other than on the Issuance Date pursuant to an Amended and
Restated Redemption and Exchange Agreement which has substantially the same
terms as the Amended and Restated Redemption and Exchange Agreement pursuant to
which the other Preferred Shares were issued on the Issuance Date (as determined
in the sole discretion of the holders of the Preferred Shares representing at
least two-thirds (2/3) of the other Preferred Shares issued on the Issuance
Date). Any of the terms, conditions, requirements or obligations set forth in
this Certificate of Designations may be waived by the affirmative vote at a
meeting duly called

                                     -31-
<PAGE>

for such purpose or the written consent without a meeting, of the holders of not
less than two-thirds (2/3) of the then outstanding Preferred Shares.

     (17)  Lost or Stolen Certificates. Upon receipt by the Company of evidence
           ---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.

     (18)  Remedies, Characterizations, Other Obligations, Breaches and
           ------------------------------------------------------------
Injunctive Relief. The remedies provided in this Certificate of Designations
-----------------
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief). No remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy.
Nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the
Preferred Shares and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

     (19)  Specific Shall Not Limit General; Construction. No specific provision
           ----------------------------------------------
contained in this Certificate of Designations shall limit or modify any more
general provision contained herein. This Certificate of Designations shall be
deemed to be jointly drafted by the Company and all Buyers and shall not be
construed against any person as the drafter hereof.

     (20)  Failure or Indulgence Not Waiver. No failure or delay on the part of
           --------------------------------
a holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

                                     -32-
<PAGE>

     (21)  Notice. Whenever notice is required to be given under this
           ------
Certificate of Designations, unless otherwise provided herein, such notice shall
be given in accordance with Section 9(f) of the applicable Amended and Restated
Redemption and Exchange Agreement.

     (22)  Transfer of Preferred Shares. A holder of Preferred Shares may assign
           ----------------------------
some or all of its rights hereunder or the Preferred Shares held by such holder
without the consent of the Company.

                                   * * * * *

                                     -33-
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by Eric F. Brown, its President and Chief Financial Officer, as of
the 14/th/ day of June, 2001.

                                      MICROSTRATEGY INCORPORATED


                                      By: /s/ Eric F. Brown
                                         ---------------------------------------
                                      Name: Eric F. Brown
                                      Its: President and Chief Financial Officer

                                     -34-
<PAGE>

                                   EXHIBIT I

                          MICROSTRATEGY INCORPORATED
                               CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of
MicroStrategy Incorporated for its Series E Convertible Preferred Stock (the
"Certificate of Designations"). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series E Convertible Preferred Stock, par value $0.001 per share
(the "Preferred Shares"), of MicroStrategy Incorporated, a Delaware corporation
(the "Company"), indicated below into shares of Class A Common Stock, par value
$0.001 per share (the "Common Stock"), of the Company, as of the date specified
below.

     Date of Conversion:____

     Number of Preferred Shares to be converted:___

     Stock certificate no(s). of Preferred Shares to be converted:___

Please confirm the following information:

     Conversion Price:____

     Number of shares of Common Stock to be issued:  ____

     Is the Variable Price being relied on pursuant to Section 2(f)(iii)(A) of
the Certificate of Designations? (check one) YES ____ No ____

Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:

     Issue to:___________________________
              ___________________________

     Facsimile Number:___________________

     Authorization:______________________
                   By:___________________
                   Title:________________

     Dated:______________________________

     Account Number (if electronic book entry transfer):________________
<PAGE>

     Transaction Code Number (if electronic book entry transfer):_________
   [NOTE TO HOLDER -- THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
<PAGE>

                                 ACKNOWLEDGMENT
                                 --------------

     The Company hereby acknowledges this Conversion Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _________ __, 2001 from
the Company and acknowledged and agreed to by [TRANSFER AGENT].


                                      MICROSTRATEGY INCORPORATED


                                      By:_________________________________
                                      Name:___________________________________
                                      Title:__________________________________