<PAGE>

                    CERTIFICATE OF DESIGNATION, PREFERENCES
                                 AND RIGHTS OF
                            SERIES A PREFERRED STOCK
                                      OF
                       APPLIED DATA COMMUNICATIONS, INC.,
                            a Delaware corporation


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



     Applied Data Communications, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that, pursuant to the authority contained in Article 4 of its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution creating a series of its
Preferred Stock designated as Series A Preferred Stock:

     RESOLVED, that a series of the class of authorized Preferred Stock of the
Corporation be, and hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, 
optional and other special rights of the shares of such series, and the 
qualifications, limitations or restrictions thereof, are as follows:

     BE IT RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock, $.01
par value per share, of the Corporation, to be designated "Series A Preferred
Stock" (hereinafter referred to as the "Series A Preferred Stock"), consisting 
of 500,000 shares, and to the extent that the voting powers, designations,
preferences, limitations, restrictions and relative rights of the Series A
Preferred Stock are not stated and expressed in the Certificate of
Incorporation, does hereby fix and herein state and express such voting powers, 
designations, preferences, limitations, restrictions and relative rights as
follows (all terms used herein which are defined in the Certificate of
Incorporation shall be deemed to have the meanings provided therein):

     1.   Designation and Amount.  The shares of such series shall be designated
as "Series A Preferred Stock" and the number of shares constituting such series
shall be 500,000.  Such number of shares may be decreased by resolution of the
Board of Directors; provided, that no decrease shall

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reduce the number of shares of Series A Preferred Stock to a number less than 
the number of shares of Series A Preferred Stock then outstanding or reserved 
for issuance.

     2.   Dividends.  The holders of Series A Preferred Stock shall be entitled
to receive, out of the assets of the Corporation legally available for
distribution to holders of the Corporation's Series A Preferred Stock, whether
such assets are capital, surplus, or earnings (hereinafter called the "Available
Funds"), as and when received by holders of the Common Stock of the Corporation
or any other class of stock of the Corporation ranking junior to the Series A
Preferred Stock or on a parity with the Series A Preferred Stock, dividends in
an amount equal to the amount of any dividends payable to holders of the Common
Stock of the Corporation or any other class of the Corporation ranking junior to
or on a parity with the Series A Preferred Stock, based on the largest number of
full shares of Common Stock into which a holder's shares of Series A Preferred
Stock could be converted immediately prior to the record date for the payment of
such dividend.  No dividend may be declared and paid upon shares of Common Stock
or any other class of stock of the Corporation ranking junior to Series A
Preferred Stock unless the Series A Preferred Stock was converted into Common
Stock before the record date of such dividend or the date the amount of such
dividend is simultaneously paid or deposited into trust for the payment or
retirement thereof.  Dividends, if any, on Series A Preferred Stock shall not be
cumulative, and no declared and unpaid dividend on Series A Preferred Stock 
shall bear interest.

     3.   Liquidation, Dissolution or Winding Up.

          (a)  Liquidation Preference.  In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
("Liquidation"), the holders of each share of Series A Preferred Stock shall be
entitled to receive out of the Available Funds, as and when any sums shall be
paid or any assets distributed among the holders of shares of Common Stock, an
amount or value (such amount or value as described immediately below is
hereinafter called the "Series A Preference Price") equal to the sums payable to
holders of Common Stock of the Corporation, based on the largest number of full
shares of Common Stock into which a holder's shares of  Series A Preferred Stock
could be converted immediately prior to the record date for such distribution
(subject to adjustment if the Series A Preferred Stock of the Corporation shall
be changed into a different number of shares, whether by recapitalization,
reclassification or otherwise, and then and in each such event the holder of
shares of Series A Preferred Stock shall have the right thereafter to receive
upon Liquidation such same amount aggregately receivable immediately prior to
reorganization, reclassification or other change of the number of shares of
Series A Preferred Stock apportioned among the number of shares into which such
shares of Series A Preferred Stock are changed) plus in each case, any and all
declared but unpaid dividends on such shares.  If the Available Funds shall be
insufficient to permit the payment in full to all holders of the Series A
Preferred Stock and all shares on a parity with the Series A Preferred Stock the
full amounts (including all dividends accrued and unpaid) to which they shall be
entitled by reason of such Liquidation of the Corporation, then there shall be
paid to the holders of the Series A Preferred Stock in connection with such
Liquidation of the Corporation, an amount equal to product derived by
multiplying the amount of Available Funds times a fraction, the numerator of
which shall be the full amount to which the holders of the Series A Preferred
Stock shall be entitled by reason of such Liquidation of the Corporation and the
denominator of which shall be the total amount which would have been distributed
by reason of such Liquidation of the Corporation with respect to all Preferred
Stock of any series and Common Stock then outstanding had the Corporation
possessed sufficient assets to pay the maximum amount which the holders of all
such stock would be entitled to receive in connection with such Liquidation of
the Corporation.

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<PAGE>

     The voluntary sale, conveyance, lease, exchange or transfer of all or 
substantially all the property or assets of the Corporation, or the merger or 
consolidation of the Corporation into or with any other corporation, or the 
merger of any other corporation into the Corporation, or any purchase of all 
or substantially all of the shares of any class or series of stock of the 
Corporation, shall not be deemed to be a Liquidation of the Corporation for 
the purposes of this Section, provided that so long as such transaction does 
not result in the issuance or creation of any shares of Preferred Stock of 
the Corporation, or of any successor, except any shares of Preferred Stock 
that rank junior (as defined elsewhere in these resolutions) to the shares of 
Series A Preferred Stock as to dividends and as to the distribution of assets 
upon dissolution, liquidation or winding up.  Provided, however, if more than 
50% (by value as determined in good faith by the Board of Directors) of the 
consideration received in such a transaction by holders of the Corporation's 
Common Stock consists of cash, notes payable in cash or Marketable Stock (as 
defined below), the transaction will be deemed to be a Liquidation for 
purposes of this Section.  The phrase "all or substantially all" as used in 
this definition in reference to a class of the Corporation's capital stock 
means 66y% or more of the aggregate outstanding amount.  The phrase "all or 
substantially all" as used in this definition in reference to the property, 
business or assets of the Corporation shall mean assets of a corporation as 
are quantitatively vital to the operations of the Corporation and 
substantially affects the existence and purpose of the Corporation.  As used 
herein, the term "Marketable Stock" means the Corporation's Common Stock or 
common stock of any corporation that is the successor to all or substantially 
all of the business or assets of the Corporation or of the ultimate parent of 
such successor, which is (or will, upon distribution thereof, be) listed or 
quoted on the New York Stock Exchange, the American Stock Exchange, or the 
Nasdaq National Market or the Nasdaq Small Cap Market.

     The holder of any shares of Series A Preferred Stock shall not be entitled
to receive any payment of the full balance owed for such shares under this
Section until such holder shall cause to be delivered to the Corporation (i) the
certificate(s) representing such shares of Series A Preferred Stock and
(ii) transfer instrument(s) satisfactory to the Corporation and sufficient to
transfer such shares of Series A Preferred Stock to the Corporation free of any
adverse interest.  No interest shall accrue on any payment upon Liquidation
after the due date thereof.

     After the Series A Preference Price shall have been paid in full to the
holders of the Series A Preferred Stock, or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account of holders
of the Series A Preferred Stock and available for such payment, the remaining
assets of the Corporation available for distribution to stockholders shall be
distributed among the holders of Common Stock and any other class of stock of
the Corporation ranking junior to the Series A Preferred Stock, and the holders
of shares of the Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation.

          (b)  Property.  Whenever the distribution provided for herein shall be
paid in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the Board of
Directors of the Corporation.

     4.   Series A Preferred Stock Voting Rights.  The holders of Series A
Preferred Stock shall not have any voting rights if, whether at or prior to the
effective time of the act with respect to which such vote would otherwise be
required, all outstanding shares of Series A Preferred Stock shall have

                                       3
<PAGE>

been converted into Common Stock.  Subject to the foregoing sentence, the 
Series A Preferred Stock shall have voting rights as follows:

          (a)  Voting in General.  Except to the extent that requirements of law
supersede the limitations on voting rights in the Certificate of Incorporation
or these resolutions and as otherwise set forth herein, the shares of Series A
Preferred Stock shall be entitled to voted equally with the shares of Common
Stock and all other voting shares of any class or series (based on the number of
votes that may be granted thereto by their governing documents).  Each holder of
Series A Preferred Stock shall be entitled, notwithstanding any provision 
hereof, to notice of any stockholders' meeting in accordance with the bylaws of 
this Corporation, and shall be entitled to vote, together with holders of Common
Stock and all other shares of stock with general voting rights, as a single
class, with respect to any questions upon which holders of Common Stock have the
right to vote.  Each holder of Series A Preferred Stock shall be entitled to 
that number of votes equal to the largest number of whole shares of Common 
Stock into which such holder's shares of Series A Preferred Stock could be 
converted, pursuant to the provisions of Section hereof, at the record date 
for the determination of stockholders entitled to vote on such matter or, 
if no such record date is established, at the date such vote is taken or any 
written consent of stockholders is solicited.

          (b)  Series A Class Voting Rights.  From the date on which any shares
of Series A Preferred Stock are first issued and so long as any shares of
Series A Preferred Stock remain outstanding, the vote or consent of the holders
of at least a majority of the shares of Series A Preferred Stock outstanding at
the time (voting separately as a class) given in person or by proxy, either in
writing or at any special or annual meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:

               (i)  The authorization, creation or issuance (whether by creation
or amendment of an existing class or series of Preferred Stock), or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) ranking prior (as that term is
hereinafter defined) to the Series A Preferred Stock; or

               (ii) The Amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Certificate of
Incorporation or of these resolutions which would alter or change the powers,
preferences, or special rights of the shares of the Series A Preferred Stock so
as to affect them adversely, in any material respect; provided, however, that
the creation and issuance of other series of Preferred Stock ranking junior to
or on a parity with the Series A Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to adversely affect such powers, preferences, or
special rights, and provided, further, that the unanimous vote or consent of the
shares of the Series A Preferred Stock outstanding shall be necessary to effect
any amendment to these resolutions that would (A) except as otherwise permitted
by Section, increase the Conversion Price; or (B) reduce or eliminate the
entitlement to cash dividends, if any, payable on the shares of the Series A
Preferred Stock.

     For purposes of these resolutions, any class or classes of stock of the
Corporation shall be deemed to rank:

                    (A)  prior to the Series A Preferred Stock as to dividends 
or as to distribution of assets upon liquidation, dissolution or winding up if 
the holders of such class shall be

                                       4
<PAGE>

entitled to the receipt of dividends or amounts distributable upon 
liquidation, dissolution or winding up, as the case may be, in preference or 
priority to the holders of Series A Preferred Stock;

                    (B)  on a parity with the Series A Preferred Stock as to
dividends or as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates, or
liquidation prices per shares thereof be different from those of the Series A
Preferred Stock, if such stock or series shall be the Series A Preferred Stock 
or if the holders of such class of stock and the Series A Preferred Stock shall 
be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
their respective dividend rates or liquidation prices, without preference or
priority one over the other; and

                    (C)  junior to the Series A Preferred Stock as to dividends
or as to the distribution of assets upon liquidation, dissolution or winding up,
if such class shall be Common Stock or if holders of the Series A Preferred 
Stock shall be entitled to receipt of dividends or of amounts distributable 
upon liquidation, dissolution or winding up, as the case may be, in preference 
or priority to holders of stock of such class.

     5.   Conversion Rights.  The holders of the Series A Preferred Stock shall
have the following conversion rights:

          (a)  General.  Subject to and in compliance with the provisions of
this Section, any shares of the Series A Preferred Stock may, at the option of
the holder, be converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock provided, however, that such conversion shall be
conditioned upon and subject to the prior approval by the board and the
requisite vote of holders of voting stock of an amendment of the Corporation's
Certificate of Incorporation that provides for additional shares of authorized
and unissued Common Stock at least sufficient for conversion of the Preferred
Stock then outstanding or reserved for issuance.  The number of shares of 
Common Stock to which a holder of Series A Preferred Stock shall be entitled 
upon conversion, subject to the payment of cash in lieu of fractional shares as
provided in Section, shall be determined as provided in Section.

          (b)  Conversion Rate.  The conversion rate per share of Series A
Preferred Stock in effect at any time (the "Conversion Rate") shall be the
quotient obtained by dividing (a) $10 x (1 + (N/3650)) by (b) the Conversion
Price, as provided in Section, where N equals the number of days between (i) 
the date on which the shares of Series A Preferred Stock were purchased and 
(ii) the applicable date of conversion for the shares of Series A Preferred 
Stock for which conversion is being elected.

          (c)  Conversion Price.  The Conversion Price shall be initially Two
Dollars and 00 Cents ($2.00), subject to adjustment as provided elsewhere in
this Section 5.

          (d)  Mechanics of Conversion.  Each holder of Series A Preferred 
Stock, who desires to convert the same into shares of Common Stock, subject 
to the provisions of this Section, shall surrender the certificate or 
certificates therefor, duly endorsed, at the office of the Corporation or of 
any transfer agent for the Common Stock, and shall give written notice to the 
Corporation at its principal office that such holder elects to convert the 
same and shall state therein the number of shares

                                       5
<PAGE>

of Series A Preferred Stock being converted. Thereupon the Corporation shall 
promptly issue and deliver at such office to such holder a certificate or 
certificates for the number of shares of Common Stock to which such holder is 
entitled and shall promptly pay in cash all declared but unpaid dividends on 
the shares of Series A Preferred Stock being converted or, if the Corporation 
is legally or financially unable to pay such dividends in cash, pay in Common 
Stock (valued at the Common Stock's fair market value at the time of 
surrender as determined in good faith by the Board) all declared but unpaid 
dividends on the shares being converted.  Such conversion shall be deemed to 
have been made immediately prior to the close of business on the date of such 
surrender of the certificate representing the shares to be converted, and the 
person entitled to receive the shares of Common Stock issuable upon such 
conversion shall be treated for all purposes as the record holder of such 
shares of Common Stock on such date (the "Conversion Date").  The Series A 
Preferred Stock may be converted in any whole number multiple of one (1) 
share.

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

          (f)  Adjustments in Certain Customary Events.

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

               (ii) Recapitalization or Reclassification.  If the Common Stock
of the Corporation shall be changed into the same or different number of shares
of any class or classes of stock of the Corporation, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for elsewhere in the
Certificate of Incorporation or these resolutions, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in the Certificate of
Incorporation or these resolutions), then and in each such event the holder of
shares of Series A Preferred Stock shall have the right thereafter to convert
such shares into

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the kind and amount of shares of stock and other securities and property 
receivable upon such reorganization, reclassification or other change by 
holders of the number of shares of Common Stock into which such shares of 
Series A Preferred Stock would have been converted (taking into account all 
accrued and unpaid dividends and interest with respect to such Series A 
Preferred Stock) immediately prior to such reorganization, reclassification 
or change, all subject to further adjustment as provided herein.

               (iii) Merger or Sale of Assets.  If at any time or from time
to time there shall be a merger or consolidation of the Corporation with or into
another corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares or
Common Stock of the Corporation), or the sale of all or substantially all of the
Corporation's properties and assets to any other person followed by a
liquidation of the Corporation, then, as a part of such transaction, provision
shall be made so that each holder of a share of Series A Preferred Stock then
outstanding shall have the right thereafter to convert such share only into the 
kind and amount of securities, cash and other property of the Corporation, or of
the successor corporation resulting from such merger or consolidation,
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Corporation into which such share of
Series A Preferred Stock might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock of
the Corporation is not an entity with which the Corporation consolidated or into
which the Corporation merged or which merged into the Corporation or to which
such sale or transfer was made, as the case may be (a "constituent entity"), or
an affiliate of a constituent entity.  If necessary in any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the rights of the holders of the Series A Preferred
Stock after such transaction to the end that the provisions of this Section
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series A Preferred Stock) shall be
applicable after that event in a manner corresponding as nearly as may be
practicable in relation to any shares of stock or other securities or property
thereafter deliverable on the conversion of the shares.  The above provisions
shall similarly apply to successive consolidations, mergers, sales or transfers.

               (iv) Sale of Shares below Conversion Price.

                    (A)  General.  If the Corporation issues or sells, or is
deemed by the express provisions of Section to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as provided
elsewhere in Section or upon a subdivision or combination of shares of Common
Stock as provided in Section, for an Effective Price (as hereinafter defined)
less than the then existing Conversion Price for the Series A Preferred Stock
then and in each such case the then existing Conversion Price for the Series A
Preferred Stock shall be reduced, as of the opening of business on the date of
such issue or sale, by the Corporation to the Effective Price for each such
Additional Share of Common Stock so issued.

                    (B)  Amount and Kind of Consideration.  For the purpose of
making any adjustment required under this Section, the consideration received by
the Corporation for any issue or sale of securities shall (A) to the extent it
consists of cash be computed at the net amount of cash received by the
Corporation after the deduction of any expenses payable by the Corporation and
any underwriting or similar commissions, compensation, or concessions paid or
allowed by the Corporation in connection with such issue or sale, (B) to the
extent it consists of property other than cash, be

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computed at the fair value of that property as determined in good faith by 
the Board, and (C) if Additional Shares of Common Stock, Convertible 
Securities (as hereinafter defined) or rights or options to purchase either 
Additional Shares of Common Stock or Convertible Securities are issued or 
sold together with other stock or securities or other assets of the 
Corporation for a consideration which covers both, be computed as the portion 
of the consideration so received that may be reasonably determined in good 
faith by the Board to be allocable to such Additional Shares of Common Stock, 
Convertible Securities or rights or options.

                    (C)  Convertible Securities.  For the purpose of the
adjustment required under this Section, if the Corporation issues or sells any
rights or options for the purchase of, or stock or other securities convertible
into, Additional Shares of Common Stock (such convertible stock or securities
being hereinafter referred to as "Convertible Securities") and if the Effective
Price of such Additional Shares of Common Stock is less than the Conversion
Price then in effect for the Series A Preferred Stock, then in each case the
Corporation shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof.  No further adjustment of the Conversion Price for the Series A
Preferred Stock shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such rights or options or the
conversion of any such Convertible Securities.  If any such rights or options or
the conversion privilege represented by any such Convertible Securities shall
expire or otherwise terminate without having been exercised, the Conversion
Price for the Series A Preferred Stock adjusted upon the issuance of such 
rights, options or Convertible Securities shall be readjusted to the Conversion 
Price for the Series A Preferred Stock which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the
Corporation upon such exercise, plus the consideration, if any, actually
received by the Corporation for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration if any,
actually received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities.

                    (D)  Options and Rights to Purchase.  For the purpose of the
adjustment required under this Section, if the Corporation issues or sells any
rights or options for the purchase of Convertible Securities and if the
Effective Price of the Additional Shares of Common Stock underlying such
Convertible Securities is less than the Conversion Price then in effect for the 
Series A Preferred Stock, then in each such case the Corporation shall be deemed
to have issued at the time of the issuance of such rights or options the maximum
number of Additional Shares of Common

                                       8
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Stock issuable upon conversion of the total amount of Convertible Securities 
covered by such rights or options and to have received as consideration for 
the issuance of such Additional Shares of Common Stock an amount equal to the 
amount of consideration, if any, received by the Corporation for the issuance 
of such rights or options, plus the minimum amounts of consideration, if any, 
payable to the Corporation upon the exercise of such rights or options and 
plus the minimum amount of consideration, if any, payable to the Corporation 
(other than by cancellation of liabilities or obligations evidenced by such 
Convertible Securities) upon the conversion of such Convertible Securities.  
No further adjustment of the Conversion Price shall be made as a result of 
the actual issuance of the Convertible Securities upon the exercise of such 
rights or options or upon the actual issuance of Additional Shares of Common 
Stock upon the conversion of such Convertible Securities.  The provisions of 
Section above for the readjustment of the Conversion Price for the Series A 
Preferred Stock upon the expiration of rights or options or the rights of 
conversion represented by Convertible Securities shall apply mutatis mutandis 
to the rights, options and Convertible Securities referred to in this Section.

                    (E)  Certain Definitions.  "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued by the Corporation after the
issuance date of the Series A Preferred Stock, whether or not subsequently
reacquired or retired by the Corporation, other than (A) up to 2,500,000 shares
of Common Stock issued or deemed issued to employees or directors of or
consultants and advisers to the Corporation or any Subsidiary pursuant to any
stock purchase or stock option plans or other arrangements approved by the Board
prior to the date hereof  plus (B) up to an additional 250,000 options, purchase
rights or grants of shares of Common Stock per fiscal year, cumulatively, after
the issuance date of the Series A Preferred Stock; provided, however, if at any
time or from time to time after the issuance date of the Series A Preferred 
Stock the Corporation effects a subdivision or combination of the outstanding 
Common Stock or makes a dividend or other distribution payable in additional 
shares of Common Stock, then the aggregate number of shares specifically 
excluded from the definition of Additional Shares of Common Stock shall be 
increased or decreased appropriately to reflect such subdivision, combination, 
dividend, or other distribution.  The "Effective Price" of Additional Shares 
of Common Stock shall mean the quotient determined by dividing the total of 
(a) the number of shares of Common Stock outstanding prior to the issuance or 
deemed issuance or sale plus the number of Additional Shares of Common Stock 
issued or sold, or deemed to have been issued or sold by the Corporation under 
Section, into (b) the consideration received, or deemed to have been received 
by the Corporation, for such issue and all previous issues under Section, for 
such and all previous Additional Shares of Common Stock following the original 
issue date of the Series A Preferred Stock.  

               (v)  Certificate as to Adjustments.  In each case of an
adjustment or readjustment of the Conversion Rate or Conversion Price, the
Corporation will furnish each holder of Series A Preferred Stock with a
certificate, executed by its chief executive officer and its chief financial
officer showing such adjustment or readjustment, and stating in detail the facts
upon which such adjustment or readjustment is based.  The Corporation in any
such instance may, and in every instance upon the request of the holders of a
majority of the Series A Preferred Stock the Corporation will, cause its
independent public accountants to confirm the accuracy of such adjustment or
readjustment.  Any adjustment so confirmed shall be for all purposes hereof
conclusively be deemed to be an appropriate adjustment.

          (g)  Transfer Taxes.  The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on conversions of shares of Series A 
Preferred Stock pursuant hereto; provided, however, that the Corporation shall 
not be required to pay any tax which may be payable in respect of any transfer

                                       9
<PAGE>

involved in the issue or delivery of shares of Common Stock in a name other 
than that of the holder of the shares of Series A Preferred Stock to be 
converted and no such issue or delivery shall be made unless and until the 
person requesting such issue or delivery has paid to the Corporation the 
amount of any such tax or has established, to the satisfaction of the 
Corporation, that such tax has been paid.

          (h)  Shares To Be Validly Issued, etc.  The Corporation covenants that
all shares of Common Stock which may be issued upon conversions of shares of
Series A Preferred Stock will upon issue be duly and validly issued, fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.

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

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

     6.   Automatic Conversion.

          (a)  Public Offering.  Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock based on the then
effective Conversion Rate for the Series A Preferred Stock immediately upon the
closing of a public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offering and sale of 
Common Stock for the account of the Corporation in which the Common Stock  is
approved for listing, upon notice of issuance, on the New York Stock, Exchange,
American Stock Exchange, Nasdaq National Market or Nasdaq Small Cap Market;
provided, however, that such conversion shall be conditioned upon and subject to
the prior approval by the board and the requisite vote of holders of voting
stock of an amendment of the Corporation's Certificate of Incorporation that
provides for additional shares of authorized and unissued Common Stock at least
sufficient for conversion of the Preferred Stock then outstanding or reserved
for issuance, and payment, or declaration and setting aside of a sum sufficient
for payment, by the Corporation of all declared but unpaid dividends, if any, on
the outstanding Series A Preferred Stock payable in cash or Common Stock (valued
at the Common Stock's fair market value), or both.

          (b)  Mechanics of Conversion.  Upon the occurrence of an event
specified in Section above, the outstanding shares of Series A Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the

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<PAGE>

Corporation shall not be obligated to issue certificates evidencing the 
shares of Common Stock issuable upon such conversion unless the certificates 
evidencing such shares of Series A Preferred Stock are either delivered to the 
Corporation or its transfer agent as provided below, or the holder notifies 
the Corporation or its transfer agent that such certificates have been lost, 
stolen or destroyed and executes an agreement satisfactory to the Corporation 
to indemnify the Corporation from any loss incurred by it in connection with 
the certificates.  Upon the occurrence of such automatic conversion of 
Series A Preferred Stock, the holders of Series A Preferred Stock shall 
surrender the certificates representing such shares at the office of the 
Corporation or any transfer agent for the Common Stock.  Thereupon, there 
shall be issued and delivered to such holder promptly at such office and in 
its name as shown on such surrendered certificate or certificates, a 
certificate or certificates for the number of whole shares of Common Stock 
into which the shares surrendered were convertible on the date on which such 
automatic conversion occurred, and the Corporation shall promptly pay the 
holder in cash in lieu of any fractional share of Common Stock (calculated at 
the Common Stock's Market Price, as defined in Section 5(f)(iv)(E) above, as 
of the date of such conversion).  Upon conversion of any holder after the 
record date but before the payment date for any dividend, the Corporation 
shall pay the holder on account of such dividend payment on the payment date 
notwithstanding prior conversion.

     7.   Redemption.  The shares of Series A Preferred Stock are not redeemable
as a matter of right of the Corporation or the holder.

     8.   No Reissuance of the Series A Preferred Stock.  No share or shares of
the Series A Preferred Stock acquired by the Corporation by reason of 
redemption, purchase, conversion or otherwise shall be reissued.  The 
Corporation may from time to time take such appropriate corporate action as 
may be necessary to reduce the authorized number of shares of the Series A 
Preferred Stock accordingly.

     9.   Notices of Record Dates.  In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or to receive any other right, or any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation, or any transfer of all or substantially all of the assets of the
Corporation to any other corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, then and in each such event the Corporation shall mail or cause to
be mailed to each holder of Series A Preferred Stock a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, (iii) the time, if any, that is to 
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up.  Such notice shall be mailed at least 30
days prior to the date specified in such notice on which such action is to be
taken.

     10.  Common Stock.  All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein shall be vested 
in the Common Stock. 

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     IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Designation, Preferences and Rights of Series A Preferred Stock to be duly
executed by its Chairman of the Board, President, Chief Executive Officer and
Secretary and who has duly attested and has caused its corporate seal to be
affixed hereto this 11th day of September, 1996.


                                       APPLIED DATA COMMUNICATIONS, INC.



                                       By: /s/ Walter J. ("Pat") Kane    
                                           -----------------------------------
                                           Walter J. ("Pat") Kane, Chairman of 
                                           the Board, President, Chief Executive
                                           Officer and Secretary


(Corporate Seal)























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