Document:

CERTIFICATE OF DESIGNATION OF
                         VERTICAL COMPUTER SYSTEMS, INC.

      Pursuant  to Section 151 of the  General  Corporation  Law of the State of
Delaware, the undersigned duly authorized officers of Vertical Computer Systems,
Inc., a corporation  organized and existing under the General Corporation Law of
the State of Delaware,  DO HEREBY CERTIFY:

      FIRST:  That,  pursuant  to  authority  expressly  vested  in the Board of
Directors  of  said   corporation  by  the  provisions  of  its  Certificate  of
Incorporation  as amended,  said Board of Directors  duly adopted the  following
resolution:

      RESOLVED:  that the Board of  Directors,  pursuant to authority  expressly
vested  in it by the  provisions  of the  Certificate  of  lncorporation  of the
Corporation,  hereby  authorizes  the  issue  from  time to time of a series  of
Preferred Stock of the Corporation and hereby fixes the designation, preferences
and relative,  participating,  optional or other rights, and the qualifications,
limitations  or  restrictions  of the series  thereof,  in addition to those set
forth in said Certificate of lncorporation, to be in their entirety as follows:

              SERIES "A" 4% CUMULATIVE CONVERTIBLE PREFERRED STOCK

      Section I. Designation and Number.  The series of Preferred Stock shall be
designated and known as "Series "A" 4% Cumulative  Convertible Preferred Stock."
The number of shares constituting Series "A" 4% Cumulative Convertible Preferred
Stock (hereinafter referred to as the "Series "A" Preferred Stock") shall be Two
Hundred  Fifty  Thousand  (250,000).  For purposes of this  Section,  all equity
securities of the corporation ranking as to dividends or distributions of assets
on  liquidation,  dissolution  or winding up of the  corporation,  junior to the
Series  "A"  Preferred   Stock,   including  the  Common  Stock,  are  sometimes
hereinafter referred to as "Junior Securities."

      Section  2.  Liquidation   Rights.  In  the  event  of  any  voluntary  or
involuntary  liquidation,  dissolution  or  winding  up of  the  affairs  of the
corporation,  the holders of each share of the Series "A" Preferred  Stock shall
be entitled to receive, prior to and in preference to any distribution of any of
the  assets  or  surplus  funds of the  corporation  to the  holders  of  Junior
Securities, by reason of their ownership thereof, an amount equal to Two Hundred
Dollars  ($200.00)  per share (the  "Liquidation  Value")  plus any  accrued but
unpaid dividends on the Series "A" Preferred Stock.

      All of the  preferential  amounts to be paid to the  holders of the Series
"A" Preferred  Stock under this Section 2 shall be paid or set apart for payment
before the  payment  or setting  apart for  payment  of any amount  for,  or the
distribution  of any  assets  of the  corporation  to,  the  holders  of  Junior
Securities,  in connection  with such  liquidation,  dissolution  or winding up.
After the payment or the setting  apart for payment to the holders of the Series
"A" Preferred Stock of the preferential  amounts so payable to them, the holders
of Junior  Securities  shall be entitled to receive all remaining  assets of the
corporation  in  accordance  with  the  Certificate  of   Incorporation  of  the
corporation.  If the assets or surplus funds to be distributed to the holders of
the Series "A" Preferred  Stock are  insufficient  to permit the payment to such
holders of their full preferential  amount, the assets and surplus funds legally
available for distribution shall be distributed ratably among the holders of the
Series "A" Preferred  Stock in proportion to the full  preferential  amount each
such holder is otherwise entitled to receive.

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<PAGE>

      Section 3. Voting  Rights.  The holders of the Series "A" Preferred  Stock
shall have the following rights:

            (a) except as  otherwise  provided  herein or by law, the holders of
Series "A"  preferred  stock shall be  entitled  to notice of any  stockholder's
meeting and to vote, together with the holders of all other voting capital stock
of the Company,  including  the holders of Common  Stock,  as one class upon any
matter submitted to the stockholders for a vote on the basis that each holder of
Series "A"  Preferred  Stock shall have a number of votes equal to the number of
shares of Common  Stock into which the Series "A"  Preferred  Stock held by such
holder  is then  convertible.  For  matters  to be  voted on by the  Series  "A"
Preferred Stock, a quorum shall consist of a majority of the votes  attributable
to the Common Stock and Series "A" Preferred Stock.

            (b) in the event the  Corporation  has in excess of 25,000 shares of
Series "A" Preferred Stock outstanding,  the holders of the Series "A" Preferred
Stock of the  Corporation  shall have the right to elect one-half of the members
of the Board of Directors out of the number fixed by the bylaws, and the holders
of the Series " A " Preferred  Stock shall continue to have such right until the
earlier of (a) the total outstanding  shares of Series "A" Preferred Stock falls
to 25,000  shares or less or (b) one year from date of the  initial  issuance of
Series "A" Preferred Stock.

      Section 4. Dividend Rights.  The holders of the Series "A" Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors out
of the funds of the corporation  legally  available  therefore,  cumulative cash
dividends  at the annual rate of four  percent  (4%) of the  Liquidation  Value,
payable quarterly on the first day of April,  July,  October and January in each
year  beginning  April 1,  2000.  The  initial  dividend  paid after the date of
original  issuance of any shares of the Series "A" Preferred  Stock shall accrue
from such date of issuance on a pro rata basis. Dividends payable for any period
less than a full  quarter  shall be computed on the basis of a 360-day year with
12 equal months of 30 days.  Dividends shall be payable to holders of record, as
they appear on the stock books of the Corporation on such record dates as may be
declared by the Board of Directors,  not more than sixty (60) days nor less than
ten (10) days preceding the payment dates of such dividends.  If the dividend on
the Series "A" Preferred  Stock is not paid in full,  the  aggregate  deficiency
shall be cumulative  and shall be fully paid or set apart for payment before any
dividends  shall be paid or set apart for, or any other  distributions  paid, or
any payments  made on account of the  purchase,  redemption  or  retirement  of,
Junior  Securities  other  than,  in the  case of  dividends  or  distributions,
dividends or distributions paid in Junior Securities. No full dividends shall be
declared  by the Board of  Directors  or paid or set apart  for  payment  by the
corporation  on any Junior  Securities  for any period  unless  full  cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum set apart  sufficient for such payment on the Series "A" Preferred Stock for
all dividend  payment periods  terminating on or prior to the date of payment of
such full dividends on the Series "A" Preferred Stock shall not bear interest.

                                       2
<PAGE>

      Section  5.  Covenants.  So long as any of the  shares of the  Series  "A"
Preferred  Stock  authorized  hereby shall be  outstanding  (as adjusted for all
subdivision  and  combinations)  in  the  case  of (a)  through  (f)  below,  or
twenty-five percent (25%) of the shares of Series "A" Preferred Stock authorized
hereby shall be outstanding (as adjusted for all subdivisions and  combinations)
in the case of (g) below, the corporation shall not, without first obtaining the
affirmative vote or written consent of not less than fifty-one  percent (51%) of
such outstanding shares of the Series "A" Preferred Stock:

            (a) amend or repeal any  provision  of, or add any provision to, the
corporation's  Certificate of lncorporation or Bylaws if such action would alter
or change the preferences,  rights, privileges or powers of, or the restrictions
provided for the benefit of the Series "A" Preferred  Stock;  provided that, the
authorization  of Junior  Securities  shall not be deemed to alter or change the
preferences,  rights,  privileges or powers of, or the restriction  provided for
the benefit of the Series "A" Preferred Stock;

            (b) reclassify any Common Stock into shares having any preference or
priority of the Series "A" Preferred Stock;

            (c) pay or declare  any cash  dividend on any Junior  Securities  or
apply  any of its  assets  to the  redemption,  retirement,  purchase  or  other
acquisition directly or indirectly,  through  subsidiaries or otherwise,  of any
Junior Securities or any rights,  options,  warrants to purchase,  or securities
convertible  into,  Junior  Securities  except for the  acquisition of shares of
Common  Stock or options to  purchase  shares of Common  Stock from  officers or
employees of, or consultants  to, the  corporation in accordance  with any stock
option or other agreement entered into by the corporation;

            (d) create or issue any  securities  of the  corporation  which have
equity  features  and which  rank on a parity  with or senior to the  Series "A"
Preferred  Stock  upon  payment  of  dividends  or  upon  liquidation  or  other
distribution of assets or with terms more favorable than those of the Series "A"
Preferred Stock;

            (e)  increase  the  authorized  number of shares of the  Series  "A"
Preferred Stock;

            (f) merge,  consolidate,  sell, lease, exchange or otherwise dispose
of all or substantially  all its properties and assets unless the corporation is
the surviving corporation following such merger or consolidation; or

            (g) increase the  authorized  number of directors  constituting  the
Board of Directors of the corporation to a number greater than four (4).

      Section  6.  Conversion  into  Common  Stock.  The holder of any shares of
Series  "A"  Preferred  Stock  shall  have  conversion  rights as  follows  (the
"Conversion Rights"):

            (a) Right to Convert.  After February 25, 2001, each share of Series
"A" Preferred Stock shall be convertible,  without the payment of any additional
consideration  by the holder  thereof  and at the option of the holder  thereof,
into five hundred (500) fully paid and  nonassessable  shares of common stock of
the Company, subject to adjustment as outlined below.

                                       3
<PAGE>

      Each share of Series "A" Preferred Stock is convertible  into one share of
the Company's common stock. In the event the Company shall, at any time prior to
the expiration  date of this conversion and prior to the exercise  thereof:  (i)
declare or pay to the holders of the common stock a dividend payable in any kind
of  shares of stock of the  Company;  or (ii)  change  or  divide  or  otherwise
reclassify  its common stock into the same or a different  number of shares with
or  without  par  value,  or into  shares  of any  class  or  classes;  or (iii)
consolidate  or  merge  with,  or  transfer  its  property  as  an  entirety  or
substantially  as an entirety to, any other  corporation;  then, upon subsequent
exercise of this conversion, the holder thereof shall receive, in addition to or
in  substitution  for the shares of common stock to which he would  otherwise be
entitled upon such exercise,  such additional shares of stock of the Company, or
such  reclassified  shares  of  stock  of the  Company,  or such  shares  of the
securities  or property  of the Company  resulting  from such  consolidation  or
merger  or  transfer,  which he would  have  been  entitled  to  receive  had he
exercised this conversion prior to the happening of any of the foregoing events.

            (b) Mechanics of Conversion.  Holders of Series "A" Preferred  Stock
may exercise their conversion  rights after February 15, 2001. Before any holder
of Series "A"  Preferred  Stock  shall be entitled to convert the same into full
shares of common stock,  he shall  surrender  the  certificate  or  certificates
therefore,  duly endorsed,  at the office of the  corporation or of any transfer
agent for the Series "A" Preferred  Stock,  and shall give written notice to the
corporation  at such  office  that he elects to convert the same and shall state
therein  his name or the name or names of his  nominees  in which he wishes  the
certificate or certificates for shares of common stock to be issued.

            (c) The Corporation shall, as soon as practicable thereafter,  issue
and deliver at such office to such holder of Series "A" Preferred  Stock,  or to
his nominee or nominees,  a certificate or certificates for the number of shares
of common stock to which he shall be entitled as  aforesaid,  together with cash
in payment of any accrued unpaid dividends on the shares of Series "A" Preferred
Stock  converted   through  the  date  of  conversion,   and  a  certificate  or
certificates  for such Series "A"  Preferred  Stock as were  represented  by the
certificates  surrendered and not converted.  Such conversion shall be deemed to
have  been  immediately  prior  to the  close  of  business  on the date of such
surrender  of the  shares of Common  Stock  issuable  upon  conversion  shall be
treated  for all  purposes  as the record  holder or  holders of such  shares of
Common stock on such date.

            (d) No  Impairment.  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  6 and in the  taking  of  all  such  action  as  may  be  necessary  or
appropriate  in order to protect  the  conversion  rights of the  holders of the
Series "A" Preferred Stock against impairment.

            (e)  Notices  of  Record  Date.  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 (other than a cash dividend which is the same as cash dividends paid in
previous  quarters) or other  distribution,  the corporation  shall mail to each
holder of Series  "A"  Preferred  Stock at least ten (10) days prior to the date
specified herein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.

                                       4
<PAGE>

            (f) Common Stock Reserved.  The  corporation  shall reserve and keep
available out of its authorized but unissued  Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Series "A" Preferred Stock.

      IN WITNESS  WHEREOF,  the officers named below acting for and on behalf of
the corporation,  have subscribed their names to this Certificate of Designation
this day 4th of May, 2001.

VERTICAL COMPUTER SYSTEMS, INC.
a Delaware Corporation

By:
   -----------------------------------------
         Richard Wade, President

By:
   -----------------------------------------
         William Mills, Secretary

                                       5AMENDED
                          CERTIFICATE OF DESIGNATION OF
                       PREFERENCES, RIGHTS AND LIMITATIONS
                                       OF
         10% CUMULATIVE CONVERTIBLE REDEEMABLE SERIES B PREFERRED STOCK
                                       OF
                         VERTICAL COMPUTER SYSTEMS, INC.

      VERTICAL COMPUTER SYSTEMS,  INC. (the "Company"),  a corporation organized
and existing under the laws of the State of Delaware, does hereby certify:

      That,  pursuant to authority  conferred upon the Board of Directors by the
Certificate of Incorporation  of the Company,  and pursuant to the provisions of
Section 161, Delaware  Statutes,  said Board of Directors,  by unanimous written
consent  effective as of April 1, 1993 and as amended June 1, 1993, duly adopted
a resolution  providing  for the  issuance of a series of 375,000  shares of 10%
Cumulative  Convertible  Redeemable  Series B Preferred  Stock,  $.001 par value
("Preferred Stock"), which resolution is as follows:

      RESOLVED, that pursuant to the authority expressly granted and invested in
      the Board of Directors of this Company in accordance  with the  provisions
      of its Certifi-cate of  Incorporation,  a series of preferred stock of the
      Company  be and  hereby  is given  the  distinctive  designa-tion  of "10%
      Cumulative   Convertible   Redeemable   Series  B  Preferred  Stock"  (the
      "Preferred  Stock"),  said series to consist of 375,000  shares of the par
      value $.001 per share non-voting preferred stock, of which the preferences
      and relative,  participating,  optional or other special  rights,  and the
      qualifications, limitations or restrictions thereof shall be as follows:

<PAGE>

            1. Dividends on Preferred Stock.

            (a) Except as  hereinafter  provided,  the holders of the  Preferred
      Stock shall be  entitled to receive,  when and as declared by the Board of
      Directors out of funds for the Company legally available therefor, cash or
      common stock dividends at the annual rate of 10% per annum on March 15 and
      September  15 of each year.  Dividends  will  accrue  from the date of the
      issuance  of  the  Preferred  Stock  pursuant  to a  Confidential  Private
      Placement  Memorandum  (the  "Closing  Date").  If  the  dividend  on  the
      Preferred  stock for any  dividend  period shall not have been paid or set
      apart in full for such Preferred Stock, the aggregate  deficiency shall be
      cumulative  and shall be fully  paid or set apart for  payment  before any
      dividend  shall be paid or set  apart for  payment  of any class of common
      stock of the Company.  Accumulation  of dividends of the  Preferred  Stock
      shall not bear interest.

            (b) At the sole option of the Board of  Directors,  dividends may be
      paid in shares of common stock or the Preferred  Stock based upon the then
      current conversion ratio of such Convertible  Preferred Stock as described
      in paragraph 2 hereof.

            2. Conversion of Preferred Stock into Common Stock.

            (a) Subject to redemption by the Company as  hereinafter  described,
      the holder of record of any share or shares of Preferred  Stock shall have
      the  right,  at his  option,  to  convert  each  said  share or  shares of
      Preferred  Stock into 3.788  fully paid and  non-assessable  shares of the
      Company's common stock, par value $.001 per share ("Common Stock").

            (b) Any holder of a share or shares of Preferred  Stock  desiring to
      convert  such  Preferred  Stock into  Common  Stock  shall  surrender  the
      certificate or certificates  representing the share or shares of Preferred
      Stock to be so converted, duly endorsed to the Company or in blank, at the
      principal  office of the Company (or such other place a may be  designated
      by the  Company)  and shall  give  written  notice to the  Company at said
      office that the holder elects to convert  same,  setting forth the name or
      names (with the address or  addresses) in which the shares of Common Stock
      are to be issued.  Shares of the  Preferred  Stock shall be deemed to have
      been  converted as of the close of business on the date the Company  shall
      receive the written notice of conversion,  together with the duly executed
      certificate  and payment in full of transfer tax, if  applicable,  and the
      rights of the holders of su.ch  Preferred  Stock shall cease at such time,
      and the person or persons in whose name or names the certificates for such
      shares are to be issued shall be treated for all purposes as having become
      the record holder or holders of such Common Stock at such time;  provided,
      however, that any such surrender on any date when the stock transfer books
      of the Company shall be closed shall  constitute  the person or persons in
      whose name or names the  certificates  for such shares to be issued as the
      record holder or holders thereof for all purposes at the close of business
      on the next succeeding day on which such stock transfer books are open.

            (c)  Conversion  of the  Preferred  Stock  shall be  subject  to the
      following additional terms and provisions:

                  (i)  As  promptly  as  practicable  after  the  surrender  for
            conversion of any certificate or certifi-cate representing Preferred
            Stock,  the Company  shall  deliver or cause to be  delivered at the
            principal  office  of the  Company  (or such  other  place as may be
            designated  by the  Company)  to or upon  the  written  order of the
            holder of such Preferred Stock, certificates representing the shares
            of Common Stock issuable upon the conversion, issued in such name or
            names as such holder may direct.

                  (ii) The Company shall at the time of such  conversion  pay to
            the holder of record of any share or shares of such Preferred  Stock
            any  accrued  but  unpaid  dividends  on  such  Preferred  Stock  so
            surrendered  for  conversion,  except that no payment or  adjustment
            shall be made  for any  accrued  or  unpaid  dividends  for the then
            current quarterly dividend.

                  (iii) The Company shall not be required to issue any fractions
            of shares of Common Stock or script upon the conversion of Preferred
            Stock.   If  more  than  one  share  of  Preferred  Stock  shall  be
            surrendered for conversion at any time by the holder,  the number of
            full shares of Common Stock which shall be is5uable upon  conversion
            of such  Preferred  Stock  shall  be  computed  on the  basis of the
            aggregate number of shares of Preferred Stock so surrendered. If any
            interest in a fractional  share of Common  Stock would  otherwise be
            delivered  upon the conversion of any Preferred  Stock,  the Company
            shall make  adjustment  for such  fractional  share of  interest  by
            payment  of an  amount  in cash  equal to the same  fraction  of the
            market  value of a full share of Common  Stock of the  Company.  For
            such  purpose,  the market value of a share of Common Stock shall be
            the  prevailing  market value of the Common Stock on any  securities
            exchange or in the open market, as determined by the Company,  which
            determination shall be conclusive.

<PAGE>

                  (iv) in the event that the Company shall at any time subdivide
            or combine in a greater or lesser  number of  outstanding  shares of
            Common  Stock,  the number of shares of Common Stock  issuable  upon
            conversion of the Preferred Stock shall be proportionately increased
            in the case of subdivision or decreased in the case of  combination,
            effective  in either  case at the close of business on the date when
            such subdivision or combination shall become effective.

                  (v) In the  event  that the  Company  shall be  recapitalized,
            consolidated or merged into any other corporation,  or shall sell or
            convey to any corporation all or  substantially  all of its property
            as an entity,  provisions shall be made as part of the terms of such
            recapitalization, consolidation, merger, sale or convey-ance so that
            any  holder of  Preferred  Stock may  thereafter  receive in lieu of
            Common  Stock  otherwise  issuable  to him  upon his  conversion  of
            Preferred  Stock,  and at the same  conversion  ratio stated in this
            Paragraph 2, the same kind and amount of securities or assets as may
            be distributable upon such recapitalization,  consolidation, merger,
            sale or conveyance, with respect to the Common Stock of the Company.

                  (vi) Such  adjustments  shall be made  success-sively  if more
            than  one  event  listed  in  subdivision   (iv)  and  (v)  of  this
            subparagraph (C) of this Paragraph 2 shall occur.

                  (vii) No adjustment of the  conversion  ratio shall be made by
            reason of:

                        (A) the payment of any cash or Common Stock  dividend on
                  the Common Stock or any other  classes of capital stock of the
                  Company; or

                        (B) the purchase, acquisition,  redemption or retirement
                  by the  Company  of any  shares of  Common  Stock or any other
                  class of the capital stock of the Company,  except as provided
                  in subdivision (iv) of this subparagraph (c); or

<PAGE>

                        (C) the issuance  other than as provided in  subdivision
                  (iv) and (v) of this  subparagraph (c) of any shares of Common
                  Stock of the  Company or of any  securities  convertible  into
                  shares of Common Stock or other securities of the Company,  or
                  any rights,  warrants or options to subscribe  for or purchase
                  shares of the Common Stock or other securities of the Company,
                  or of any other  securities  of the Company,  provided that in
                  the event the  Company  offers  any of its  securities  or any
                  rights,  warrants or options to subscribe  for or purchase any
                  of its securities,  to holders of itS Common Stock pursuant to
                  any  preemptive or  preferential  rights granted to holders of
                  Common  Stock  by  the  Certificate  of  Incorporation  of the
                  Company,  as may be amended, or pursuant to any similar rights
                  that may be  granted to such  holders  of Common  Stock by the
                  Board of Directors of the Company, then the Company shall mail
                  written notice of such offer to holders of the preferred Stock
                  then of record at least 20 days prior to the  record  date set
                  for such determination of holders of the Common Stock entitled
                  to receive any such offer; or

                        (D) Any offer by the Company to redeem or acquire shares
                  of the Common Stock by paying or exchanging therefore stock of
                  another  corporation  the  carrying  out by the Company of the
                  transactions  contemplated  by such  offer,  provided  that at
                  leant  twenty  (20) days prior to the  expiration  of any such
                  offer the Company  shall mail written  notice of such offer to
                  the holders of the Preferred Stock then of record; or

            (d) The Company shall at all times reserve and keep available solely
      for the purpose of issue upon conversion of the Preferred Stock, as herein
      provided,  such number of shares of Common Stock as shall be issuable upon
      the conversion of all outstanding Preferred Stock.

            (e) The  issuance  of  certificate  for shares of Common  Stack upon
      conversion of the Preferred Stock shall be made without charge for any tax
      in respect to such issuance.  However,  if any certificate is to be issued
      in its name other than that of the holder of record of the Preferred Stock
      so converted,  the person or persons requesting the issuance thereof shall
      pay to the  Company  the  amount of tax which may be payable in respect of
      any  transfer   involved  in  such  issuance,   or  shall   establish  the
      satisfaction  of the Company that such tax has been paid or is not due and
      payable.

<PAGE>

            3. Redemption of Preferred Stock.

            (a) The Preferred Stock may be redeemed at the option of the Company
      on or after the second anniversary of the Closing Date at $6.25 per share.
      The  Company  may  redeem  the  Preferred  Stock at any time  prior to the
      two--year  period,  if all of the  following  are true:  (i) The Company's
      Common  Stock  trades at or above  $2.00 bid for thirty  (30)  consecutive
      trading days ending within fifteen (15) days of the date of the redemption
      notice,  (ii) The Company's Common Stock is listed on NASDAQ and there has
      been  reported  volume of at least  100,000  shares per week for the prior
      four calendar weeks, and (iii) A registration  statement is effective with
      respect to the Common Stock into which the Preferred Stock is convertible.
      The applicable  redemption price in the first two years is $6.875 (110% of
      the stated value of one (1) share of Preferred  Stock) plus all  dividends
      accrued  and  unpaid  on such  Preferred  Stock up to the date  fixed  for
      redemption.  In the event that the  Company  shall call all or part of the
      Preferred  Stock for  redemption,  the holder of the Preferred Stock shall
      have a period of not less than thirty  (30) days  within  which to convert
      the Preferred Stock to Common Stock before such redemption shall occur.

            (b) In the event that less than the entire amount of Preferred Stock
      outstanding  is redeemed at any one time,  the shares to be redeemed shall
      be selected by lot in a manner to be  determined by the Board of Directors
      of the  Company.  Not less than  thirty (30) nor more than sixty (60) days
      prior to the date fixed for redemption of the Preferred  Stock or any part
      thereof,  a notice specifying the time and place thereof shall be given by
      mail to the holders of record of the shares of  Preferred  Stock  selected
      for redemption at the respective addresses as the same shall appear on the
      stock  records of the  Company,  but no failure to mail such notice or any
      defect therein or in the mailing  thereof shall affect the validity of the
      proceeding  for  redemption.  Any  notice  which was  mailed in the manner
      herein  provided  shall be  Conclusively  presumed to have been duly given
      whether or not the holder receive5 the notice.  Upon such redemption date,
      or such earlier date as the Board of Directors shall designate for payment
      of the  redemption  price (unless the Company shall default on the payment
      of the  redemption  price set forth in such  notice).  The  holders of the
      shares of Preferred  Stock selected for redemption and to vhorn notice has
      been duly given shall cease to be stockholders with respect to such shares
      and shall  have no  interest  in or claim  against  the  Company by virtue
      thereof  and shall have no rights with  respect to such shares  except the
      right to convert  such shares  within the time  hereinabove  set forth and
      except the right to receive the monies payable upon such  redemption  from
      the Company or otherwise,  without  interest  thereon,  upon surrender and
      endorsement,  It required by the  Company,  of the  certificates,  and the
      shares  represented  thereby shall no longer be deemed to be  Outstanding.
      Upon  redemption or  conversion of the Preferred  Stock the manner set Out
      herein, or upon purchase of Preferred Stock by the Company,  the Preferred
      Stock so  acquired  by the Company  shall be  cancelable  and shall not be
      reissued.  After giving any notice of redemption and prior to the close of
      business  on the  date  prior  to the  redemption  date.  As  hereinbefore
      provided,  the holders of the Preferred Stock so called for redemption may
      convert such stock into Common Stock of the Company in accordance with the
      conversion privileges set forth in Paragraph 2 hereof.

<PAGE>

            4. Voting Rights.  Except as otherwise  required by law, the holders
      of Preferred Stock shall have no voting rights.

            5. Priority of Preferred Stock in the Event of a Dissolution. In the
      event of any liquidation,  dissolution or winding up of the affairs of the
      Company,  whether voluntary or otherwise,  after payment or provi-sion for
      payment  of debts and the  liabilities  of the  Company,  the  holders  of
      Preferred  Stock shall  receive  preference on  distribution  including an
      amount equal to all  dividends  accrued and unpaid on each share up to the
      date fixed for distribution,  before any distribution shall be made to the
      holder of any c1ass of Common Stock of the Company.

<PAGE>

      IN WITNESS  WHEREOF,  the undersigned have caused its corporate seal to be
affixed and this Certificate to be executed by its President and Secretary as of
the 1st day of June, 1993.

Attest:                           VERTICAL COMPUTER SYSTEMS

/s/ Brett Howell                  By: /s/ Brett Howell
-------------------------             --------------------------
Title: Secretary                  Brett E. Howell, President

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