<PAGE>
EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
of
SERIES A PREFERRED STOCK
of E*TRADE GROUP, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-----------------------------
E*Trade Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"
or "EGI"), hereby certifies that the following resolutions were duly adopted by
the Board of Directors of the Corporation on July 26, 2000, as required by
Section 151 of the Delaware General Corporation Law;
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Corporation (hereinafter called the "Board of Directors" or
the "Board,") in accordance with the provisions of the Amended and Restated
Certificate of Incorporation of the Corporation (the "Certificate"), the Board
of Directors hereby creates from its authorized class of Preferred Stock a
series designated as Series A Preferred Stock (hereinafter referred to as the
"EGI Special Voting Share" or the "Voting Share"), par value $.01 per share, of
the Corporation;
RESOLVED, that the Board of Directors does hereby establish the Series A
Preferred Stock as follows:
Section l. Designation and Amount. One (1) share of Preferred Stock of the
----------------------
Corporation shall be designated as Series A Preferred Stock. The Corporation
will not issue any additional shares of the same series of such Series A
Preferred Stock without the consent of the holders at the relevant time of
Exchangeable Shares (as defined in Section 4(A) below).
Section 2. Dividends and Distributions.
---------------------------
(A) Except as required by applicable law, the holder(s) of the EGI Special
Voting Share ("Holder") shall not be entitled to receive any dividends or
distributions of the Corporation, whether payable in cash, property or in
shares of capital stock
Section 3. Liquidation. In the event of any liquidation, dissolution or
-----------
winding up of the Corporation, the holder of the Series A Preferred Stock shall
not be entitled to receive any assets of the Corporation available for
distribution to its stockholders.
1.
<PAGE>
Section 4. Voting Rights. The EGI Special Voting Share shall have the
-------------
following Voting Rights:
(A) With respect to all meetings of stockholders of EGI at which holders of
the Corporation's common stock are entitled to vote (each, an "EGI Meeting") and
with respect to all written consents sought by EGI from its stockholders
including the holders of EGI common stock (each, an "EGI Consent"), the EGI
Special Voting Share shall vote together with the common stock of the
Corporation as a single class and each such vote of the EGI Special Voting Share
shall have identical voting rights to those of the Corporation's common stock.
The holder of the Special Voting Share shall have a number of votes equal to the
number of Exchangeable Non-Voting Shares of EG1 Canada Corporation
("Exchangeab1e Shares"), a corporation existing under the laws of Ontario,
outstanding on the record date for determining stockholders entitled to vote at
the applicable EGI Meeting or the applicable EGI Consent, other than those held
by EGI or its Affiliates. For purposes hereof, an "Affiliate" is: (i) any
corporate entity that controls another corporate entity or is a subsidiary of
another or are subsidiaries of the same corporation or are controlled by the
same person; and (ii) corporate entities that are affiliated with the same
corporation shall be deemed to be affiliates. For purposes of this definition, a
corporation is controlled by a person or two or more corporations if: such
person or corporation(s) has a sufficient number of beneficial voting securities
of the corporation to elect a majority of the directors of the corporation.
(B) Except as set forth herein, or as otherwise provided by law, the
registered holders from time to time of Exchangeable Shares ("Beneficiaries'')
shall have no special voting rights and their consent shall not be required for
taking any corporate action.
Section 5. Termination of Voting Rights. At such time as the EGI Special
----------------------------
Voting Share has no votes attached to it because there are no Exchangeable
Shares outstanding that are not owned by the Corporation or its Affiliates, and
there are no shares of stock, debt, options or other agreements that could give
rise to the issuance of any Exchangeable Shares to any person (other than the
Corporation, any of its subsidiaries or any person directly or indirectly
controlled by or under the common control of the Corporation), the EGI Special
Voting Share shall be deemed to be surrendered by the Holder of EGI.
Section 6. No Redemption. The EGI Special Voting Share shall not be
-------------
redeemable.
2.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Chief International Officer and its corporate
seal attested by its Assistant Secretary this 24th day of August, 2000.
E*TRADE GROUP, INC.
By: __________________________________
Name: Judy Balint
Title: Chief International Officer
Attest:
By: ___________________________________
Name: Brigitte VanBaelen
Title: Assistant Secretary
