EXHIBIT 4.1
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                           CERTIFICATE OF DESIGNATION
                                       OF
                           EXCHANGE APPLICATIONS, INC.


                  The undersigned officer of Exchange Applications, Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "General Corporation Law"), does
hereby certify that, pursuant to authority conferred by the Certificate of
Incorporation and By-laws of the Corporation, each as amended to date, and
pursuant to the provisions of Section 151 of the General Corporation Law, the
Board of Directors (the "Board") of the Corporation, at a meeting duly called
and held on January 9, 2001, duly adopted the following resolution providing for
certain powers, designations, preferences and relative, participating, optional
or other rights, and the qualifications, limitations and restrictions thereof,
of certain shares of Series A Convertible Redeemable Preferred Stock, $.001 par
value:

                  "RESOLVED, that pursuant to the authority vested in the Board
                  of Directors of the Corporation and in accordance with the
                  General Corporation Law of the State of Delaware and the
                  provisions of the Corporation's Certificate of Incorporation
                  and By-laws, a series of the preferred stock, par value $.001
                  per share, of the Corporation is hereby created as the Series
                  A Convertible Redeemable Preferred Stock (the "Series A
                  Preferred Stock"), and the designation and number of shares
                  thereof and the voting powers, preferences and relative,
                  participating, optional and other special rights of the shares
                  of such series, and the qualifications, limitations and
                  restrictions thereof, are as follows:

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                 DESIGNATION OF SERIES A CONVERTIBLE REDEEMABLE
                                 PREFERRED STOCK

1.       DESIGNATION OF AMOUNT; RANKING.

                  The issuance of five million three hundred and thirty thousand
(5,330,000) shares of the Series A Preferred Stock is hereby authorized. The
Series A Preferred Stock shall rank senior to all other classes and series of
equity securities of the Corporation (the "Junior Stock") with respect to
dividend rights, rights of redemption, rights of conversion and rights of
Liquidation.

2.       DEFINITIONS.

                  Capitalized terms used in this Certificate of Designation and
not defined herein shall have the meanings ascribed to them in the Securities
Purchase Agreement. The following capitalized terms have the following meanings:

                  "Affiliate" means, with respect to any specified Person, any
other Person that, directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person. As used herein, the term "control" (including, with correlative meaning,
the terms "controlling," "controlled by" and "under common control with") as
used with respect to any Person, means the possession, of the power to direct
the management and policies of a Person, whether through the ownership of voting
Securities, by contract or otherwise.

                  "Board" and "Board of Directors," unless otherwise specified,
means the Board of Directors of the Corporation.

                  "Business" has the meaning given to such term in the
Securities Purchase Agreement.

                  "Business Day" means each day, except for Saturday, Sunday,
Federal holidays and any other state-recognized holidays in the States of New
York and Massachusetts.

                  "By-laws" means the By-laws of the Corporation, as amended,
modified, supplemented or restated and in effect from time to time.

                  "Certificate of Designation" means this certificate of
designation designating the Series A Preferred Stock, as filed with the
Secretary of State of the State of Delaware.

                  "Certificate of Incorporation" means the certificate of
incorporation of the Corporation, as amended and in effect at the time in
question, including any certificates of designation filed with the Secretary of
State of the State of Delaware pursuant to the terms thereof.

                  "Change of Control" means (i) the sale or transfer (in one
transaction or a series of related transactions) of all or substantially all of
the Corporation's assets to a Person or a group of

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Persons acting in concert or (ii) the acquisition (whether by merger,
recapitalization, stock purchase or otherwise) by any Person, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% of either (A) the then outstanding Common Stock Equivalents of
the Corporation (the "Outstanding Corporation Capital Stock") or (B) the
combined voting power of the then outstanding voting Securities of the
Corporation entitled to vote generally in the election of directors (the
"Corporation Voting Securities"); provided, however, that (w) any acquisition by
the Corporation or any of its Subsidiaries, (x) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
any of its Subsidiaries, (y) any acquisition by any Person with respect to
which, following such acquisition, more than 50% of the then outstanding shares
of capital stock of such Person and/or the combined voting power of the then
outstanding voting securities of such Person entitled to vote generally in the
election of directors, respectively, is then beneficially owned, directly or
indirectly, by individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Capital Stock and/or Corporation
Voting Securities immediately prior to such acquisition, as the case may be, or
(z) any acquisition by an Investor or any Affiliate thereof, shall not
constitute a Change in Control.

                  "Closing Date" has the meaning ascribed to it in the
Securities Purchase Agreement.

                  "Commission" means the Securities and Exchange Commission or
any other Governmental Entity at the time administering the Securities Act.

                  "Common Stock" means the common stock, $.001 par value per
share, of the Corporation.

                  "Common Stock Equivalents" means all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all Securities of the Corporation that are convertible, exchangeable or
exercisable for shares of Common Stock.

                  "Compensation Committee" means the committee of the Board
which shall oversee all compensation activities of the Corporation and shall
perform such other functions as is customary for companies similar to the
Corporation.

                  "Conversion Payment Date" has the meaning ascribed to it in
Section 5(d).

                  "Conversion Price" means, initially, with respect to each
share of Series A Preferred Stock, the price per share paid by a Series A
Preferred Holder for such share of Series A Preferred Stock issued by the
Corporation pursuant to the terms of the Securities Purchase Agreement, as such
amount shall be adjusted pursuant to the terms of this Certificate of
Designation.

                  "Converted Shares" has the meaning ascribed to it in Section
5(d)(i).

                  "Converting Shares" has the meaning ascribed to it in Section
5(d)(i).

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                  "Corporation" means Exchange Applications, Inc., a Delaware
corporation.

                  "Corporation Voting Securities" has the meaning ascribed to it
in the definition of "Change of Control".

                  "Equity Incentive Plans" means the Corporation's (i) 2000
Customer Analytics Holdings, Inc. Equity Incentive Plan, (ii) 1999 Customer
Analytics, Inc. Stock Option and Purchase Plan, (iii) 1999 GBI Stock Acquisition
Plan, (iv) 1999 Knowledge Stream Partners, Inc. Stock Option Plan, (v) 1998
Stock Incentive Plan, (vi) 1998 Director Stock Option Plan, (vii) 1998 Employee
Stock Purchase Plan and (viii) 1996 Stock Incentive Plan, each as amended, and
any stock option, issuance, appreciation rights or other equity incentive plan
for the independent directors, officers, and full time employees of, and
consultants to, the Corporation which plan has been approved by the Compensation
Committee.

                  "Event of Non-Compliance" means:

                  (i) the Corporation or any of its Subsidiaries shall (A)
         voluntarily commence any proceeding or file any petition seeking relief
         under Title 11 of the United States Code or any other Federal, state or
         foreign bankruptcy, insolvency or similar law, (B) consent to the
         institution of, or fail to controvert in a timely and appropriate
         manner, any such proceeding or the filing of any such petition, (C)
         apply for or consent to the appointment of a receiver, trustee,
         custodian, sequestrator or similar official for any such Person or for
         any substantial part of its property or assets, (D) file an answer
         admitting the material allegations of a petition filed against it in
         any such proceeding, (E) make a general assignment for the benefit of
         creditors, (F) fail generally to pay its debts as they become due or
         (G) take any corporate or stockholder action in furtherance of any of
         the foregoing;

                  (ii) an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed in a court of competent
         jurisdiction seeking (A) relief in respect of the Corporation or any of
         its Subsidiaries, or of any substantial part of their respective
         property or assets, under Title 11 of the United States Code or any
         other Federal, state or foreign bankruptcy, insolvency or similar law,
         (B) the appointment of a receiver, trustee, custodian, sequestrator or
         similar official for any such Person or for any substantial part of its
         property or (C) the winding-up or liquidation of any such Person, and
         such proceeding, petition or order shall continue unstayed and in
         effect for a period of 60 consecutive days;

                  (iii) a final judgment for the payment of money in an amount
         in excess of $10,000,000 shall be rendered by a court or other tribunal
         against the Corporation or any of its Subsidiaries and shall remain
         undischarged for a period of 60 consecutive days during which such
         judgment and any levy or execution thereof shall not have been
         effectively stayed or vacated; or

                  (iv) any event shall occur or condition shall exist or fail to
         occur or exist if the effect of such occurrence or failure is to
         accelerate the maturity of any Indebtedness

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         of the Corporation or any of its Subsidiaries in a principal amount in
         excess of $5,000,000 or the holder or holders thereof (or a trustee or
         other representative on behalf of such holder or holders) exercises its
         right to cause such Indebtedness to become due prior to the stated
         maturity thereof and such occurrence or failure shall not have been
         remedied within any applicable period of grace, or any such
         Indebtedness shall not be paid when due, whether by acceleration or
         otherwise, and such nonpayment shall not have been remedied within any
         applicable period of grace, or the holder of any Lien upon property of
         the Corporation or any of its Subsidiaries for Indebtedness in an
         amount in excess of $5,000,000 shall commence foreclosure of such Lien.

                  "Exchange Act" means the Securities Exchange Act of 1934 or
any successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time

                  "Excluded Securities" means (i) Securities issued or granted
to eligible officers, employees or directors of, or consultants to, the
Corporation pursuant to the Equity Incentive Plans and any Securities issued
upon exercise of such Securities; (ii) Securities issued upon the exercise,
conversion or exchange of any Common Stock Equivalents outstanding on the
Original Issuance Date or pursuant to the MicroStrategy Agreement; (iii) Series
A Preferred Stock issued by the Corporation pursuant to the Securities Purchase
Agreement, or Common Stock issued upon conversion thereof; (iv) Securities
issued as a stock dividend or upon any stock split, recapitalization or other
subdivision or combination of Common Stock; (v) Securities issued pursuant to
acquisitions, strategic alliances and joint ventures; and (vi) Securities deemed
Excluded Securities by the Requisite Preferred Holders.

                  "5% Owner" has the meaning ascribed to it in the definition of
"Independent Third Party."

                  "GAAP" means generally accepted accounting principles in the
United States, consistently applied.

                  "Governmental Entity" means any Federal, state, municipal, or
other government, governmental department, commission, board, bureau, agency or
instrumentality, or any court or tribunal.

                  "Guaranty" means any obligation, contingent or otherwise, or
any Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials supplies, services or other property under an arrangement
which provides that payment for such merchandise, materials, supplies, services
or other property shall be made regardless of whether delivery of such
merchandise, materials, supplies, services or other

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property is ever made or tendered, or (iv) to maintain the working capital,
equity capital or other financial statement condition of any primary obligor,
provided, however, that the term Guaranty shall not include endorsement of
instruments for deposit and collection in the ordinary course of business.

                  "Indebtedness" of a Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by (or which customarily would be evidenced by) bonds
debentures, notes or similar instruments, (iii) all reimbursement obligations of
such Person with respect to letters of credit and similar instruments, (iv) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (v) all
obligations of such Person incurred, issued or assumed as the deferred purchase
price of property or services other than accounts payable incurred and paid on
terms customary in the business of such Person (it being understood that
"deferred purchase price" in connection with any purchase of property or assets
shall include only that portion of the purchase price which shall be deferred
beyond the date on which the purchase is actually consummated), (vi) all
obligations secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (vii) all obligations of such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (viii) all Guaranties by such Person of
obligations of others, (x) all capitalized lease obligations of such Person and
(ix) the Indebtedness of any partnership or joint venture in which such Person
is a general partner or a joint venturer, but only to the extent to which there
is recourse to such Person for payment of such Indebtedness.

                  "Independent Third Party" means any Person or group of Persons
who, immediately prior to the contemplated transaction, does not own in excess
of 5% of Common Stock Equivalents of the Corporation (a "5% Owner"), who is not
controlling, controlled by or under common control with any such 5% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 5% Owner
or a trust for the benefit of such 5% Owner and/or such other Persons.

                  "InSight" means, collectively, InSight Capital Partners IV,
L.P., InSight Capital Partners (Cayman) IV, L.P., InSight Capital Partners IV
(Fund B), L.P. and InSight Capital Partners IV (Co-investors), L.P.

                  "Junior Stock" has the meaning ascribed to it in Section 1.

                  "Lien" means any security interest, lien, pledge, claim,
charge, escrow, encumbrance, option, right of first offer, right of first
refusal, preemptive right, mortgage, indenture, security agreement or other
similar agreement, arrangement, contract, commitment, understanding or
obligation, whether written or oral and whether or not relating in any way to
credit or the borrowing of money.

                  "Liquidation" means any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.

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                  "Liquidity Event" means a Liquidation or a Sale of the
Corporation.

                  "Market Price" means, as to any Marketable Security, the
average of the closing prices of such Marketable Security's sales on all United
States securities exchanges on which such Security may at the time be listed,
or, if there have been no sales on any such exchange on any day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such Security is not so listed, the average of the
representative bid and asked prices quoted on NASDAQ as of 4:00 P.M., New York
time, on such day, or, if on any day such security is not quoted on NASDAQ, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization, in each such case
averaged over a period of 5 Business Days ending immediately prior to the day as
of which "Market Price" is being determined.

                  "Marketable Securities" means Securities that are traded on an
established United States securities exchange or reported through the NASDAQ, or
otherwise traded over-the-counter or traded on PORTAL (in the case of Securities
eligible for trading pursuant to Rule 144A under the Securities Act).

                  "MicroStrategy Agreement" means the Payment and Registration
Rights Agreement, dated as of December 28, 1999, between the Corporation and
MicroStrategy Incorporated in effect on the Closing Date or as amended from time
to time.

                  "NASD" means the National Association of Securities Dealers,
Inc.

                  "NASDAQ" means the NASD Automated Quotation System.

                  "NASD Rules Violation" means the Corporation issuing voting
Securities of the Corporation in violation of NASD Rules 4310, 4350(i)(1)(D),
4351 or any similar rule promulgated by the NASD and applicable to the
Corporation, whether or not the shares of Common Stock are then listed with
NASDAQ or quoted on the Nasdaq National Market System or traded in the
over-the-counter market. A violation of NASD Rule 4350(i)(1)(D) will result if,
pursuant to any provision of this Certificate of Designation, the Corporation
issues more than 6,488,781 shares of Common Stock (such number representing
approximately 19.9% of the shares of Common Stock issued and outstanding
immediately prior to the Closing).

                  "Notice of Election" has the meaning ascribed to it in Section
6(a).

                  "Option End Date" has the meaning ascribed to it in Section
4(a)(ii).

                  "Option Start Date" has the meaning ascribed to it in Section
4(a)(ii).

                  "Original Issuance Date" means, with respect to each share of
Series A Preferred Stock, the date of issuance thereof by the Corporation.

                  "Original Issuance Price" means, with respect to each share of
Series A Preferred Stock, the price per share paid by a Series A Preferred
Holder for such share of Series A

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Preferred Stock issued by the Corporation pursuant to the terms of the
Securities Purchase Agreement plus any amount of accrued and unpaid dividends
that is added to the Original Issuance Price pursuant to Section 4 hereof, as
the case may be. In the event of any change (by way of any recapitalization,
subdivision or recombination) in the number or kind of shares of Series A
Preferred Stock, the Original Issuance Price of the shares of Series A Preferred
Stock immediately prior to such change shall be ratably adjusted among such
shares of Series A Preferred Stock immediately after such change.

                  "Outstanding Corporation Capital Stock" has the meaning
ascribed to it in the definition of "Change of Control".

                  "Person" shall be construed as broadly as possible and shall
include an individual or natural person, a partnership (including a limited
liability partnership), a corporation, an association, a joint stock
corporation, a limited liability company, a trust, a joint venture, an
unincorporated organization and a Governmental Entity.

                  "Purchase Rights" has the meaning ascribed to it in Section
5(c)(xiv).

                  "Redemption Date" has the meaning ascribed to it in Section
6(a).

                  "Redemption Notice" has the meaning ascribed to it in Section
6(a).

                  "Redemption Price" has the meaning ascribed to it in Section
6(a).

                  "Redemption Shares" has the meaning ascribed to it in Section
6(a).

                  "Related Documents" means this Certificate of Designation, the
Securities Purchase Agreement and all the documents, certificates or instruments
executed in connection with the transactions contemplated hereby and thereby.

                  "Requisite Preferred Holders" means the holders of a majority
of the outstanding shares of Series A Preferred Stock at the time in question.

                  "Sale of the Corporation" means the sale of the Corporation to
an Independent Third Party or group of Independent Third Parties pursuant to
which such party or parties acquire (i) all or substantially all of the issued
and outstanding capital stock of the Corporation (whether by merger,
recapitalization, stock purchase or otherwise) or (ii) all or substantially all
of the Corporation's assets determined on a consolidated basis. A sale (or
multiple related sales) of one or more Subsidiaries of the Corporation (whether
by way of merger, consolidation, reorganization or sale of all or substantially
all assets or Securities) which constitutes all or substantially all of the
consolidated assets of the Corporation shall be deemed a Sale of the
Corporation.

                  "Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity or

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equity-linked interests, including phantom stock and stock appreciation rights.
Whenever a reference herein to Securities is referring to any derivative
Securities, the rights of a Stockholder shall apply to such derivative
Securities and all underlying Securities directly or indirectly issuable upon
conversion, exchange or exercise of such derivative securities.

                  "Securities Act" means the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

                  "Securities Purchase Agreement" means the Securities Purchase
Agreement, dated the date hereof, among the Corporation and InSight, as such
agreement may be amended from time to time.

                  "Senior Financing" means the Corporation's proposed credit
line of up to $20,000,000.

                  "Series A Dividend Date" shall mean each March 31, June 30,
September 30 and December 31.

                  "Series A Dividend Period" shall mean the period commencing on
the day after any Series A Dividend Date and ending on and including the next
Series A Dividend Date; provided, that for any share of Series A Preferred Stock
issued on a date other than a Series A Dividend Date, the first Series A
Dividend Period for such share shall commence on the date of issuance of such
share.

                  "Series A Dividend Rate" means 10% per annum (calculated on
the basis of a year of 360 days consisting of 12 30-day months). In the event
that Corporation fails to redeem, for any reason, the number of Redemption
Shares set forth in a Notice of Election delivered by the Requisite Preferred
Holders to the Corporation pursuant to Section 6(a) by the 61st day after the
date of delivery of such Notice of Election (a "Dividend Adjustment Start
Date"), the Series A Dividend Rate then in effect shall increase by a rate of 1%
per annum on such Dividend Adjustment Start Date. The Series A Dividend Rate, as
adjusted on such Dividend Adjustment Start Date, shall increase by a rate of 1%
per annum on the date which is 30 days after such Dividend Adjustment Start Date
if the Corporation has not redeemed all of such Redemption Shares. The Series A
Dividend Rate, as adjusted, shall continue to increase by a rate of 1% per annum
on the last day of each 30-day period thereafter until the earlier of the date
upon which (i) the Corporation redeems all of such Redemption Shares, (ii) the
Series A Preferred Holders convert all of such Redemption Shares into shares of
Common Stock pursuant to Section 5, and (iii) the Series A Dividend Rate, as
adjusted, equals 15% per annum.

                  "Series A Liquidation Preference" has the meaning ascribed to
it in Section 4(b).

                  "Series A Preferred Holder" means a holder of outstanding
shares of Series A Preferred Stock.

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                  "Series A Preferred Representative" means Insight Venture
Associates IV, L.L.C., or any successor thereto approved by the Corporation
(which approval shall not be unreasonably withheld).

                  "Series A Record Date" has the meaning ascribed to it in
Section 4(a)(iv).

                  "Subsequent Redemption Date" has the meaning ascribed to it in
Section 6(b)(ii)

                  "Subsidiary" shall mean, at any time, with respect to any
Person (the "Subject Person"), (i) any Person of which either (x) more than 50%
of the shares of stock or other interests entitled to vote in the election of
directors or comparable Persons performing similar functions (excluding Shares
or other interests entitled to vote only upon the failure to pay dividends
thereon or other contingencies) or (y) more than a 50% interest in the profits
or capital of such Person, are at the time owned or controlled directly or
indirectly by the Subject Person or through one or more Subsidiaries of the
Subject Person or by such Person and one or more Subsidiaries of such Person or
(ii) any Person whose assets, or portions thereof, are consolidated with the net
earnings of the Subject Person and are recorded on the books of the Subject
Person for financial reporting purposes in accordance with GAAP.

                  "Surrender Date" has the meaning ascribed to it in Section
5(d).

3.       VOTING RIGHTS.

         (a) General. In addition to the rights provided by law and by
paragraphs (b) and (c) below, the Series A Preferred Holders shall be entitled
to vote on all matters as to which holders of Common Stock shall be entitled to
vote, in the same manner and with the same effect as the holders of Common
Stock, voting together with the holders of Common Stock, and any other capital
stock of the Corporation entitled to vote together with the Common Stock, all as
one class. Each share of Series A Preferred Stock shall entitle the holder
thereof to such number of votes as shall equal the number of shares of Common
Stock into which such share of Series A Preferred Stock is then convertible
pursuant to Section 5 below.

         (b) Covenants. For so long as at least 25% of the shares of the Series
A Preferred Stock issued pursuant to the Securities Purchase Agreement remain
outstanding, the Corporation shall not, and shall not permit its Subsidiaries
to, without the affirmative consent or approval of the Requisite Preferred
Holders, voting together as one class, except to the extent that any of the
foregoing are (i) included in, or specifically contemplated by, the
Corporation's annual periodic operating budget and work plan approved by the
Requisite Preferred Holders from time to time or (ii) specifically scheduled in
the Securities Purchase Agreement:

                  (i) in any manner authorize, create, designate, issue or sell
         any class or series of capital stock of the Corporation or any
         Subsidiary (including any shares of treasury stock), or rights,
         options, warrants or other Securities convertible into or exercisable
         or exchangeable for any such capital stock (other than Common Stock
         Equivalents granted or issued pursuant to the Equity Incentive Plans),
         including, without limitation, pursuant to acquisitions, strategic
         alliances or joint ventures, or the repricing

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         or adjustment of the exercise, conversion or exchange price of any
         rights, options (whether granted or issued pursuant to the Equity
         Incentive Plans or otherwise), warrants or convertible Securities
         (other than pursuant to required adjustments provided for in the terms
         of such Securities), which provide the holder thereof with the right to
         receive consideration as if such holder held an equity Security of the
         Corporation or any Subsidiary or any debt Security which by its terms
         is convertible into or exchangeable for any equity Security or has any
         other equity participation feature or any Security that is a
         combination of debt and equity;

                  (ii) reclassify any Securities of the Corporation into shares
         of any class or series of capital stock of the Corporation (A) ranking,
         either as to payment of dividends, distributions of assets or
         redemptions, including, without limitation, distributions to be made
         upon a Liquidity Event or a Change of Control, senior to or pari passu
         with the Series A Preferred Stock or (B) which in any manner adversely
         affects the rights of the of Series A Preferred Holders in their
         capacity as such;

                  (iii) reclassify, cancel or in any manner alter, amend or
         change the terms, designations, powers, preferences or relative,
         participating, optional or other special rights, or the qualifications,
         limitations or restrictions thereof, of the Series A Preferred Stock;

                  (iv) alter, change or amend the Certificate of Incorporation
         or any provision of the By-laws in a manner that would materially
         adversely affect any right, preference or privilege of the Series A
         Preferred Holders;

                  (v) declare or pay any dividends (other than dividends on the
         Series A Preferred Stock) or make any other distribution on or in
         respect of its capital stock or other ownership interests, whether in
         cash, property, securities or a combination thereof, or directly or
         indirectly redeem, repurchase, retire or otherwise acquire for
         consideration, any shares of any class of its capital stock or set
         apart any sum for the aforesaid purposes (other than in connection with
         (A) any redemption of Series A Preferred Stock in accordance with the
         terms of this Certificate of Designation, (B) any dividends or
         distributions to the Corporation from any of its Subsidiaries, (C) any
         repurchase rights existing on the Closing Date or (D) any contract or
         agreement entered into with any officer, director, stockholder or
         employee of the Corporation on an arms-length basis);

                  (vi) sell, lease or otherwise dispose of, or permit any
         Subsidiary to sell, lease or otherwise dispose of, the assets of the
         Corporation and its Subsidiaries for consideration in excess of
         $5,000,000;

                  (vii) enter into any transaction, including, without
         limitation, any purchase, sale, lease or exchange of property, the
         rendering of any service or the payment of any management, advisory or
         similar fees, with an Affiliate of the Corporation or any Subsidiary in
         excess of $25,000; provided, however, that all transactions with an
         Affiliate of the Corporation or any Subsidiary shall be disclosed in
         advance to the Board of the Corporation or any Subsidiary, as
         applicable;

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                  (viii) alter or change the strategic direction or lines of
         Business of the Corporation or any Subsidiary;

                  (ix) permit the number of members of the Board of the
         Corporation or any Subsidiary to exceed five;

                  (x) adopt or approve a periodic operating budget or work plan
         of the Corporation or any Subsidiary;

                  (xi) hire, terminate or amend the employment terms of the
         Chief Executive Officer, Chief Financial Officer or Chief Operating
         Officer or any employee with responsibilities similar or comparable to
         Persons with such titles;

                  (xii) acquire all or a substantial part of the business, in
         one transaction or a series of transactions, whether by asset purchase,
         recapitalization, stock purchase, merger, consolidation or otherwise,
         of any Person for consideration in excess of $5,000,000;

                  (xiii) make an investment in any Person (other than a
         Subsidiary) in any form;

                  (xiv) permit any individual capital expenditure or series of
         related expenditures, individually, or in the aggregate, exceeding
         $500,000 during any one fiscal year and not included in the annual
         operating budget of the Corporation or any Subsidiary approved by the
         Requisite Preferred Holders pursuant to this Section 3(b);

                  (xv) create any Subsidiaries;

                  (xvi) incur or refinance any Indebtedness of the Corporation
         or any Subsidiary, other than in connection with the Senior Financing
         or customary equipment lines of credit;

                  (xvii) intentionally discontinue the Corporation's status as a
         public company with disclosure and filing obligations under the
         Exchange Act or otherwise intentionally stop or impair the trading of
         the Corporation's Securities on NASDAQ or any other nationally
         recognized securities exchange;

                  (xviii) grant any exclusive license to any intellectual
         property of the Corporation or any Subsidiary;

                  (xix) grant any exclusive distribution rights;

                  (xx) sell, lease, transfer or otherwise dispose of any capital
         stock of any Subsidiary;

                  (xxi) agree to any agreement or provision of any agreement
         that would in any way restrict the Corporation's ability to perform its
         obligations under this Certificate

                                       12
<PAGE>

         of Designation or any other Equity Document (as defined in the
         Securities Purchase Agreement);

                  (xxii) take any action that would result in a Liquidity Event
         or a Change of Control;

                  (xxiii) amend or otherwise modify the Corporation's obligation
         to issue Securities of the Corporation under the MicroStrategy
         Agreement as in effect on the Closing Date; or

                  (xxiv) enter into any agreement or commitment or otherwise
         become bound or obligated to do or perform any of the foregoing
         actions.

4.       DIVIDENDS AND LIQUIDATIONS.

         (a)      Dividends.

                  (i) During the period commencing on the Closing Date and
         ending on December 31, 2002, dividends shall accrue on each share of
         Series A Preferred Stock at the Series A Dividend Rate on the Original
         Issuance Price, which dividends shall be cumulative from the Original
         Issuance Date. Dividends shall accrue daily and compound quarterly on
         each Series A Dividend Date regardless of whether they have been
         declared and whether there are profits, surplus or other funds of the
         Corporation legally available for the payment of dividends. All
         dividends on each share of Series A Preferred Stock that accrue during
         any Series A Dividend Period (and are not paid as provided in clause
         (ii) or (iii) below) shall cumulate and shall be added to the Original
         Issuance Price for such share as of the Series A Dividend Date on which
         such Series A Dividend Period ends.

                  (ii) During the period commencing on January 1, 2003 (the
         "Option Start Date") and ending on December 31, 2003 (the "Option End
         Date"), dividends on each share of the Series A Preferred Stock shall,
         at the option of the Corporation, (A) continue to accrue pursuant to
         Section 4(a)(i) if, and only if, the Corporation shall have obtained in
         advance of the Option Start Date the requisite approval of its
         stockholders such that the continued accrual of such dividends pursuant
         to Section 4(a)(i) will not result in a NASD Rules Violation, or (B)
         accrue daily at the Series A Dividend Rate on the Original Issuance
         Price during each Series A Dividend Period regardless of whether they
         have been declared and whether there are funds legally available
         therefor and (when, as and if declared by the Board, out of funds
         legally available therefor) be payable in cash (1) within 5 Business
         Days of each Series A Dividend Date or (2) in the case of the
         conversion of a share of Series A Preferred Stock pursuant to Section
         5, on the Conversion Payment Date of such share of Series A Preferred
         Stock, in an amount equal to the amount such Series A Preferred Holder
         would have received had (x) the dividend for the Series A Dividend
         Period ending on such Series A Dividend Date or, in the case of such
         conversion, the Surrender Date of such share of Series A Preferred
         Stock been paid in shares (or a fraction thereof) of Series A Preferred
         Stock at the Conversion Price,

                                       13
<PAGE>

         (y) such shares of Series A Preferred Stock been converted into shares
         of Common Stock pursuant to Section 5 and (z) such shares of Common
         Stock been sold at the Market Price for such shares of Common Stock on
         such Series A Dividend Date or such Surrender Date, as applicable;
         provided, however, that, notwithstanding the foregoing in (A) and (B)
         above, if less than 62.5% of the Series A Preferred Stock purchased on
         the Closing Date remain outstanding on the Option Start Date, such
         dividends shall be payable in cash from and after the Option Start Date
         pursuant to Section 4(a)(iii) below.

                  (iii) From and after the Option Start Date (only if the
         proviso of Section 4(a)(ii) is applicable) or the Option End Date, as
         applicable, dividends on each share of Series A Preferred Stock shall
         accrue daily at the Series A Dividend Rate on the Original Issuance
         Price during each Series A Dividend Period regardless of whether they
         have been declared or whether there are funds legally available
         therefor and (when, as and if declared by the Board, out of funds
         legally available therefore) shall be paid in cash (A) within 5
         Business Days of each Series A Dividend Date or (B) in the case of the
         conversion of a share of Series A Preferred Stock pursuant to Section
         5, on the Conversion Payment Date of such share of Series A Preferred
         Stock, in an amount equal to the Series A Dividend Rate on the Original
         Issuance Price.

                  (iv) Dividends payable pursuant to Section 4(a)(ii)(B) and
         Section 4(a)(iii) above shall be paid to the holders of record of the
         Series A Preferred Stock as their names shall appear on the share
         register of the Corporation on each Series A Dividend Date (the "Series
         A Record Date") and shall not precede the date upon which the
         resolution fixing such Series A Record Date is adopted. Any such
         dividends payable in any Series A Dividend Period that is less than a
         full Series A Dividend Period in length shall be computed on the basis
         of a 90 day-period and actual days lapsed in such Series A Dividend
         Period. Dividends in arrears for any past Series A Dividend Periods may
         be declared and paid at any time to holders of record on the record
         date for such payment.

                  (v) Except as otherwise provided herein, if at any time the
         Corporation pays less than the total amount of dividends on the Series
         A Preferred Stock accrued and unpaid since the Original Issuance Date,
         such payment shall be made ratably among the Series A Preferred Holders
         based upon the number of shares of Series A Preferred Stock then held
         by each Series A Preferred Holder.

         (b) Liquidation. In the event of any Liquidation, each Series A
Preferred Holder shall be entitled to receive, out of the assets of the
Corporation legally available for distribution to its stockholders, before any
payment shall be made to the holders of any Junior Stock, an amount per share
equal to the greater of (i) the Original Issuance Price of such share of Series
A Preferred Stock plus all accrued and unpaid dividends thereon up to the date
of such Liquidation and (ii) the amount that would otherwise be distributed to
such Series A Preferred Holder in a Liquidation if nothing was paid pursuant to
clause (i) and such holder converted such shares into shares of Common Stock
immediately prior to such Liquidation in accordance with the provisions of this
Certificate of Designation (the "Series A Liquidation Preference"). If, upon any
Liquidation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the Series A Preferred Holders the
full amounts to which they respectively

                                       14
<PAGE>

shall be entitled, the Series A Preferred Holders shall share ratably in any
distribution of assets according to the respective amounts which would be
payable with respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full. In the
event of any Liquidation, after payment shall have been made to the Series A
Preferred Holders in the full amount to which they are entitled pursuant to this
Section 4(b), the holders of shares of Junior Stock shall be entitled, to the
exclusion of the holders of the Series A Preferred Stock, to share, according to
their respective rights and preferences, in all remaining assets of the
Corporation available for distribution to its stockholders.

         (c) Sale of the Corporation. A Sale of the Corporation shall be deemed
to be a Liquidation for purposes of any distributions under this Section 4.

5.       CONVERSION.

         (a) Optional Conversion of Series A Preferred Stock into Common Stock.
Subject to and in compliance with the applicable provisions of this Section 5,
each Series A Preferred Holder shall have the right, at such holder's option, at
any time and from time to time, to convert any such share of Series A Preferred
Stock into that number of fully paid and nonassessable shares of Common Stock
equal to the quotient obtained by dividing (x) the Original Issuance Price of
such share of Series A Preferred Stock plus any accrued and unpaid dividends
thereon up to the date of such conversion by (y) the Conversion Price, as last
adjusted and then in effect. The Conversion Price shall be subject to adjustment
from time to time as set forth in paragraph (c) below. The Corporation shall
give the Series A Preferred Holders not less than 30 Business Days prior notice
of a Change of Control, including the price and material terms and conditions
thereof, in order to provide the Series A Preferred Holders reasonable
opportunity to consider whether to convert the Series A Preferred Stock into
Common Stock at or prior to such Change of Control. If the price or material
terms or conditions of such transaction thereafter change, the Corporation shall
promptly deliver written notice to the Series A Preferred Holders specifying
such changes. Upon conversion, the Corporation will issue cash in lieu of
fractional shares of Common Stock, determined at the Market Price of such shares
of Common Stock on the applicable Conversion Payment Date.

         (b) Mandatory Conversion of Series A Preferred Stock into Common Stock.
Upon the election by the Requisite Preferred Holders to convert their shares and
all other shares of Series A Preferred Stock into shares of Common Stock, all
shares of Series A Preferred Stock then outstanding shall, by virtue of, and
simultaneously with, the occurrence of such election and without any action on
the part of the holders thereof, be deemed automatically converted into that
number of fully paid and nonassessable shares of Common Stock into which such
shares would have been convertible in the event of optional conversion at such
time pursuant to subsection (a) above. Upon conversion, the Corporation will
issue fractional shares of its Common Stock, as applicable, and shall not
distribute cash in lieu of such fractional shares unless such cash distribution
is approved by the Requisite Preferred Holders.

                                       15
<PAGE>

         (c) Adjustment of Conversion Price.


         (i) No adjustment in the Conversion Price shall be made in respect of
the issuance of additional Securities, except as expressly provided below:

                    (A) If the Corporation shall, at any time or from time to
               time after the Original Issuance Date, issue any Securities
               (other than Excluded Securities) (including any shares of Common
               Stock deemed to have been issued pursuant to subdivision (3) of
               clause (B) of this clause (i) below) without consideration or for
               a consideration per share less than the Conversion Price in
               effect immediately prior to each such issuance, then such
               Conversion Price shall forthwith be lowered to a price
               (calculated to the nearest cent) equal to the product of the
               Conversion Price and a fraction:

                         (1) the numerator of which is an amount equal to (x)
                    the product of (i) the total number of shares of Common
                    Stock outstanding (including any shares of Common Stock
                    deemed to have been issued pursuant to subdivision (3) of
                    clause (B) of this clause (i) below) immediately prior to
                    such issuance, and (ii) the Conversion Price in effect
                    immediately prior to such issuance, less (y) the amount by
                    which the product of such Conversion Price and the number of
                    additional shares of Common Stock issued (or deemed issued)
                    exceeds the aggregate consideration received by the
                    Corporation upon such issuance; and

                         (2) the denominator of which is an amount equal to the
                    product of (x) the total number of shares of Common Stock
                    outstanding (including any shares of Common Stock deemed to
                    have been issued pursuant to subdivision (3) of clause (B)
                    of this clause (i) below) immediately prior to such issuance
                    and (y) the Conversion Price in effect immediately prior to
                    such issuance.

                    (B) For the purposes of any adjustment of the Conversion
               Price pursuant to clause (A) above, the following provisions
               shall be applicable:

                         (1) In the case of the issuance of Common Stock for
                    cash in a public offering or private placement, the
                    consideration shall be deemed to be the amount of cash paid
                    therefor after deducting therefrom any discounts,
                    commissions or placement fees payable by the Corporation to
                    any underwriter or placement agent in connection with the
                    issuance and sale thereof.

                         (2) In the case of the issuance of Common Stock for a
                    consideration in whole or in part other than cash, the
                    consideration other than cash shall, in the case of any
                    Marketable Security, be deemed to be the Market Price
                    thereof and in all other cases, the value of such

                                       16
<PAGE>

                    consideration shall be set by the Board acting reasonably
                    and in good faith.

                         (3) In the case of the issuance of options to purchase
                    or rights to subscribe for Common Stock, Securities by their
                    terms convertible into or exchangeable for Common Stock, or
                    options to purchase or rights to subscribe for such
                    convertible or exchangeable Securities:

                               (i) The aggregate maximum number of shares of
                          Common Stock deliverable upon exercise of such options
                          to purchase or rights to subscribe for Common Stock
                          shall be deemed to have been issued at the time such
                          options or rights were issued and for a consideration
                          equal to the consideration (determined in the manner
                          provided in subdivisions (1) and (2) above), if any,
                          received by the Corporation upon the issuance of such
                          options or rights plus the minimum purchase price
                          provided in such options or rights for the Common
                          Stock covered thereby.

                               (ii) The aggregate maximum number of shares of
                          Common Stock deliverable upon conversion of or in
                          exchange for any such convertible or exchangeable
                          Securities or upon the exercise of options to purchase
                          or rights to subscribe for such convertible or
                          exchangeable Securities and subsequent conversion or
                          exchange thereof shall be deemed to have been issued
                          at the time such Securities, options, or rights were
                          issued and for a consideration equal to the
                          consideration received by the Corporation for any such
                          Securities and related options or rights (excluding
                          any cash received on account of accrued interest or
                          accrued dividends), plus the additional consideration,
                          if any, to be received by the Corporation upon the
                          conversion or exchange of such Securities or the
                          exercise of any related options or rights (the
                          consideration in each case to be determined in the
                          manner provided in subdivisions (1) and (2) above).

                               (iii) On any change in the number of shares or
                          exercise price of Common Stock deliverable upon the
                          exercise of any such options or rights or the
                          conversion or exchange of such convertible or
                          exchangeable Securities, the Conversion Price shall
                          forthwith be readjusted to such Conversion Price as
                          would have been obtained had the adjustment made upon
                          the issuance of such options, rights or Securities not
                          converted prior to such change or options or rights
                          related to such Securities not converted prior to such
                          change been made upon the basis of such change.

                                       17
<PAGE>

                               (iv) On the expiration of any such options or
                          rights, the termination of any such rights to convert
                          or exchange or the expiration of any options or rights
                          related to such convertible or exchangeable
                          Securities, the Conversion Price shall forthwith be
                          readjusted to such Conversion Price as would have
                          obtained had the adjustment made upon the issuance of
                          such options, rights, Securities or options or rights
                          related to such Securities been made upon the basis of
                          the issuance of only the number of shares of Common
                          Stock actually issued upon the exercise of such
                          options or rights, upon the conversion or exchange of
                          such convertible or exchangeable Securities, or upon
                          the exercise of the options or rights related to such
                          convertible or exchangeable Securities and subsequent
                          conversion or exchange thereof.

                               (v) In any case in which shares of Common Stock
                          are deemed to have been issued pursuant to
                          subdivisions (i) and (ii) above, no further
                          adjustments in the Conversion Price shall be made upon
                          the subsequent issuance of such Common Stock upon
                          exercise, conversion or exchange.

         (ii) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up
(or if no record date is set, the date such stock dividend, subdivision of stock
split is consummated), the Conversion Price shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of Series A Preferred Stock shall be increased in proportion to such increase in
outstanding shares of Common Stock.

         (iii) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of Series
A Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.

         (iv) In the event of any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in par
value or from no par value to par value or from par value to no par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Corporation, each share of Series A
Preferred Stock shall after such reorganization, reclassification,
consolidation, or merger be convertible into the kind and number of shares of
stock or other Securities or property of the Corporation or of the corporation
resulting from such consolidation or surviving such merger to which the holder
of the number of shares of Common Stock deliverable (immediately prior to the
time of such reorganization, reclassification, consolidation or merger) upon
conversion of such share of Series A Preferred Stock would have

                                       18
<PAGE>

been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.

         (v) If any event occurs of the type contemplated by the provisions of
this Section 5(c) 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 Board shall make an
appropriate reduction in the Conversion Price so as to protect the rights of the
holders of the Series A Preferred Stock.

         (vi) All calculations under this paragraph shall be made to the nearest
one hundredth (1/100) of a cent.

         (vii) In any case in which the provisions of this paragraph (c) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(1) issuing to the holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event the shares of
capital stock issuable upon such conversion by reason of the adjustment required
by such event in addition to the shares of capital stock issuable upon such
conversion before giving effect to such adjustments, and (2) paying to such
holder any amount in cash in lieu of a fractional share of capital stock
pursuant to paragraph 5(a) or 5(b) above; provided, however, that the
Corporation shall deliver to such holder an appropriate instrument evidencing
such holder's right to receive such additional shares and such cash upon the
occurrence of such event. If after the determination of such record date the
event to which such record date relates does not occur, then the Conversion
Price shall be appropriately adjusted to eliminate any adjustment previously
made on account of such record date.

         (viii) Whenever the Conversion Price shall be adjusted as provided in
this paragraph (c), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its chief
executive officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to each holder of Series A
Preferred Stock at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of paragraph (x) below.

         (ix) If the Corporation shall propose to take any action of the types
described in clauses (ii), (iii) or (iv) of this paragraph (c), the Corporation
shall give notice to each holder of shares of Series A Preferred Stock, in the
manner set forth in paragraph (viii) above, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind or class of shares or other Securities
or property which shall be deliverable or purchasable upon the

                                       19
<PAGE>

occurrence of such action or deliverable upon conversion of shares of Series A
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 10
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.

         (x) In the event that the Requisite Preferred Holders consent in
writing to limit, or waive in its entirety, any anti-dilution adjustment to
which the holders of the Series A Preferred Stock would otherwise be entitled
hereunder, the Corporation shall not be required to make any adjustment
whatsoever with respect to any Series A Preferred Stock in excess of such limit
or at all, as the terms of such consent may dictate.

         (xi) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5(c)
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the Series A Preferred Holders against
impairment.

         (xii) The computations of all amounts under this Section 5(c) shall be
made assuming all other anti-dilution or similar adjustments to be made to the
terms of all other Securities resulting from the transaction causing an
adjustment pursuant to this Section 5(c) have previously been made so as to
maintain the relative economic interest of the Series A Preferred Stock vis a
vis all other securities issued by the Corporation.

         (xiii) The Corporation shall take or cause to be taken such steps as
shall be necessary to ensure that the par value per share of Common Stock is at
all time less than or equal to the Conversion Price.

         (xiv) In the event the Corporation 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 Series A Preferred Holders shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate number
or amount of such stock, warrants, securities or other property which such
holder could have acquired if such holder had held the Common Stock acquirable
upon complete conversion of their Series A Preferred Stock 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 the grant, issue
or sale of such Purchase Rights.

         (xv) Notwithstanding the foregoing, no adjustments shall be made to the
Conversion Price pursuant to this Section 5(c) to the extent, and only to the
extent, that the result of such adjustment would (A) constitute a Change of
Control as described in clause (ii) of the definition of such term (without
reference to the proviso following such clause) or (B) result in a NASD Rules
Violation.

                                       20
<PAGE>

(d)      Conversion Procedures.

         (i) Mechanics. Each conversion of shares of Series A Preferred Stock
into shares of another class of capital stock of the Corporation shall be
effected by the surrender of the certificate or certificates representing the
shares to be converted (the "Converting Shares") at the principal office of the
Corporation (or such other office or agency of the Corporation as the
Corporation may designate by written notice to the holders of such class of
capital stock) at any time during its usual business hours, together with
written notice by the holder of such Converting Shares, stating that such holder
desires to convert the Converting Shares, or a stated number of the shares
represented by such certificate or certificates, into the number of shares of
the class into which such shares may be converted (the "Converted Shares"). Such
notice shall also state the name or names (with addresses) and denominations in
which the certificate or certificates for Converted Shares are to be issued and
shall include instructions for the delivery thereof. A holder of Converting
Shares may make any such notice of conversion, whether such conversion is in
connection with a Change of Control or otherwise, conditional upon the happening
of any event or the passage of such time as is specified by such holder in such
conversion notice, and may rescind any notice of conversion prior to the
effective time thereof specified in any such notice. Not less than 5 Business
Days after such surrender and the receipt of such written notice of conversion
(each, a "Conversion Payment Date"), the Corporation will issue, deliver or pay
in accordance with the surrendering holder's instructions (A) the certificate or
certificates evidencing the Converted Shares issuable upon such conversion (B)
cash in lieu of fractional shares of Common Stock, as determined pursuant to
this Section 5, (C) in the case of a Conversion Payment Date occurring after
January 1, 2003, cash in the amount as determined pursuant to Section 4(a), and
(D) a certificate (which shall contain such legends as were set forth on the
surrendered certificate or certificates) representing any shares which were
represented by the certificate or certificates that were delivered to the
Corporation in connection with such conversion, but which were not converted.
Such conversion, to the extent permitted by law, shall be deemed to have been
effected as of the close of business on the date on which such certificate or
certificates shall have been surrendered and such notice shall have been
received by the Corporation and becomes effective by its terms (each, a
"Surrender Date") and at such time the rights of the holder of the Converting
Shares as such holder shall cease and the person or persons in whose name or
names the certificate or certificates for the Converted Shares are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the Converted Shares. Upon issuance of shares in accordance with this
Section, such Converted Shares shall be deemed to be duly authorized, validly
issued, fully paid and non-assessable, with no personal liability attaching to
the ownership thereof and free from all taxes, liens or charges with respect
thereto due to any action of the Corporation. The Corporation shall take all
such actions as may be necessary to assure that all such shares may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which such shares may be
listed (except for official notice of issuance which will be immediately
transmitted by the Corporation upon issuance). The Corporation shall not close
its books against the transfer of shares in

                                       21
<PAGE>

any manner which would interfere with the timely conversion of any shares. The
issuance of certificates for Converted Shares shall be made without charge to
the holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and/or the
issuance of such shares; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
holder of the Converted Shares. In the event the holder of shares converted
hereunder, in connection with the conversion of shares hereunder, shall be
required to file a notification pursuant to the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, the Corporation and the holder shall take all actions
necessary to comply with such notification requirement and the conversion
hereunder of the shares, or the accrued and unpaid dividends on such shares,
shall become effective upon the expiration of the applicable waiting period.
Subject to Sections 5(a) and (b), no fractional shares of Common Stock or scrip
shall be issued upon conversion of any shares. The number of full shares
issuable upon conversion shall be computed on the basis of the aggregate number
of shares to be converted by a holder. Instead of any fractional shares which
would otherwise be issuable upon conversion of the shares, the Corporation shall
pay a cash adjustment in respect of such fractional interest in an amount equal
to the product of (i) the Market Price of one share of such Common Stock and
(ii) such fractional interest. Subject to Sections 5(a) and 5(b), the holders of
fractional interests shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.

         (e) General. Notwithstanding the foregoing, if the conversion of shares
of Series A Preferred Stock plus any accrued and unpaid dividends thereon
pursuant to this Section 5 would result in a NASD Rules Violation, then, upon
such conversion, the amount, and only the amount, of any accrued and unpaid
dividends the conversion of which would result in such violation shall be deemed
to have accrued and be payable in cash pursuant to Section 4(a)(ii)(B).

6.       REDEMPTION.

         (a) Redemption at Option of the Holders. At any time following the
earlier of (i) the occurrence of an Event of Non-Compliance, (ii) the occurrence
of a Liquidity Event or (iii) the third anniversary of the Original Issuance
Date, the Requisite Preferred Holders may elect, at any time and from time to
time, to have the Corporation redeem all or any number of the outstanding shares
of Series A Preferred Stock ("Redemption Shares") at a price per share equal to
the product of (x) the Original Issuance Price plus all accrued and unpaid
dividends thereon to the date of such redemption (a "Redemption Date") and (y)
103% (the "Redemption Price"). The Requisite Preferred Holders shall give
written notice to the Corporation of such election (the "Notice of Election"),
whereupon the Corporation shall be obligated to repurchase such Redemption
Shares on such Redemption Date, which date shall be determined by the
Corporation, but in any event shall not be earlier than 10 days and not later
than 90 days after the date on which the Notice of Election is delivered to the
Corporation. Promptly (but in no event later than five Business Days) after the
delivery of the Notice of Election to the Corporation, the Corporation shall
send written notice (the "Redemption Notice") to each of the holders of the
Series A Preferred Stock. The Redemption Notice shall specify the Redemption
Date, the

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<PAGE>

applicable Redemption Price, the number of such Redemption Shares to be redeemed
and the location of the Corporation's principal executive office or place of
business where the closing will occur.

         (b) Closing.


                  (i) The closing of the Corporation's redemption of Redemption
         Shares pursuant to this Section 6 shall take place at 11:00 a.m. New
         York City time on the Redemption Date at the Corporation's principal
         executive office or place of business. At the closing, the Corporation
         shall pay to each of the holders of such Redemption Shares, against the
         Corporation's receipt from such holder of the certificate or
         certificates representing such Redemption Shares then held by such
         holder, an amount equal to the Redemption Price for all such Redemption
         Shares. All such payments shall be made by wire transfer of immediately
         available funds, or if such holder shall not have specified wire
         transfer instructions to the Corporation prior to the closing, by
         certified or official bank check made payable to the order of such
         holder.

                  (ii) If the funds of the Corporation legally available for
         redemption of Redemption Shares on any Redemption Date are insufficient
         to redeem the total number of such Redemption Shares to be redeemed on
         such date at the applicable Redemption Price, those funds which are
         legally available shall be used to redeem the maximum possible number
         of such Redemption Shares ratably among the holders of such Redemption
         Shares based upon the aggregate number of such Redemption Shares held
         by each such holder. At any time and from time to time thereafter when
         additional funds of the Corporation are legally available for the
         redemption of Redemption Shares (each a "Subsequent Redemption Date"),
         such funds shall immediately be used to redeem at the Redemption Price
         applicable to each Subsequent Redemption Date, to the extent possible,
         the balance of such Redemption Shares which the Corporation has become
         obligated to redeem on any Redemption Date but which it had not
         redeemed.

         (c)      General.

                  (i) No shares of Series A Preferred Stock are entitled to any
         dividends accruing after the date on which the full Redemption Price
         for such share is paid to the holder thereof. On such date all rights
         of the holder of such share shall cease, and such share shall not be
         deemed to be outstanding.

                  (ii) Anything contained in this Section 6 to the contrary
         notwithstanding, the outstanding shares of Series A Preferred Stock
         shall remain subject to optional or mandatory conversion pursuant to
         Section 5 hereof at all times up to date on which the full Redemption
         Price for such shares paid to the holder thereof.

                  (iii) Neither the Corporation nor any Subsidiaries shall offer
         to purchase, redeem or acquire any shares of Series A Preferred Stock
         other than pursuant to the terms of this Certificate of Designation or
         pursuant to a purchase offer made to all Series A

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<PAGE>

         Preferred Holders pro rata based upon the number of such shares owned
         by each such holder.

7.       SHARES ACQUIRED BY THE CORPORATION OR CONVERTED BY THE SERIES A
PREFERRED HOLDERS.

                  Any shares of Series A Preferred Stock which are redeemed,
converted or otherwise acquired by the Corporation shall be canceled and shall
not be reissued (as treasury shares), sold or transferred as Series A Preferred
Stock but such shares shall become unclassified Preferred Stock of the
Corporation.

8.       ACTIONS OF THE SERIES A PREFERRED REPRESENTATIVE.

                  A decision, act, consent or instruction of the Series A
Preferred Representative in respect of any action hereunder shall constitute a
decision of all Series A Preferred Holders and shall be final, binding and
conclusive upon each such Series A Preferred Holder and the Company may rely
upon any decision, act, consent or instruction of the Series A Preferred
Representative hereunder as being the decision, act, consent or instruction of
each and every such Series A Preferred Holder. Notice delivered to the Series A
Preferred Representative shall for all purposes constitute notice to all Series
A Preferred Holders. The foregoing shall be binding upon all Series A Preferred
Holders and all transferees and assignees thereof.



                                     * * * *



















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<PAGE>

                  IN WITNESS WHEREOF, Exchange Applications, Inc. has caused
this certificate to be duly executed this 10th day of January, 2001.


                                             EXCHANGE APPLICATIONS, INC.


                                             By:    /s/ Neil W. Townsend
                                                    ----------------------
                                             Name: Neil W. Townsend
                                             Title: Assistant Secretary

































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