<PAGE> 1
Exhibit 4.2
EXECUTION COPY
INTERCONTINENTAL TELECOMMUNICATIONS CORP.
---------------------------------------------
CERTIFICATE OF DESIGNATION
--------------------------------------------
Series A Convertible Preferred Stock
-------------------------------------------
The undersigned Secretary of Intercontinental Telecommunications Corp.,
a Florida corporation d/b/a ITC.net (the "Corporation"), does hereby certify
that the following resolution has been duly adopted by the Board of Directors of
the Corporation (the "Board of Directors") on May 24th, 2000:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by the provisions of the Articles of
Incorporation of the Corporation (the "Articles of Incorporation"), there hereby
is created, out of the shares of Preferred Stock of the Corporation authorized
in the Articles of Incorporation (the "Preferred Stock"), a series of the
Preferred Stock consisting of 4,914,005 shares, par value $0.0001 per share,
which series shall have the following powers, designations, preferences and
relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions (in addition to the powers,
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions, set forth in the
Articles of Incorporation which are applicable to the Preferred Stock
generally):
1. DESIGNATION AND AMOUNT. This series of Preferred Stock shall be
designated as the Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), and the authorized number of shares constituting such series shall be
4,914,005, par value $0.0001 per share.
2. DIVIDENDS. The holders of Series A Preferred Stock shall have the
right to receive, in preference to the holders of Junior Stock, dividends,
payable when and as declared by the Board of Directors of the Corporation out of
assets legally available therefor an amount (determined on a per share basis as
set forth below) equal to that paid with respect to a share of Common Stock. In
determining the dividend payable with respect to a share of Preferred Stock, the
holder of a share of Preferred Stock shall be entitled to receive a dividend
equal to the dividend the holder would otherwise have received if such holder
converted the share of Preferred Stock to Common Stock pursuant to Section 5
below.
3. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES. Upon a liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary (each, a "Liquidation"), each
holder of Series A Preferred Stock shall be entitled, after provision for the
payment of the Corporation's debts and other liabilities, to be paid in cash in
full, before any distribution is made on any Junior Stock, an amount in cash
equal to (A) the number of shares of Preferred Stock held by such holder
multiplied by (B) the sum of $4.07 and, all declared and unpaid dividends
(appropriately adjusted for any recapitalizations, stock combinations, stock
dividends, stock splits and the like) (the "Liquidation Amount"). If, upon a
Liquidation, the net assets of the Corporation distributable among the holders
of all outstanding
<PAGE> 2
Series A Preferred Stock shall be insufficient to permit the payment of the
Liquidation Amount in full, then the entire net assets of the Corporation
remaining after the provision for the payment of the Corporation's debts and
other liabilities shall be distributed among the holders of the Series A
Preferred Stock ratably in proportion to the full preferential amounts to which
they would otherwise be respectively entitled on account of their Series A
Preferred Stock. After payment in full has been made to the holders of the
Series A Preferred Stock of the full amounts to which they shall be entitled
pursuant to the preceding sentences of this paragraph, the holders of Common
Stock shall be entitled to receive from the remaining assets and funds of the
corporation an amount equal to the purchase price for the Common Stock, plus all
declared and unpaid dividends (appropriately adjusted for any recapitalizations,
stock combinations, stock dividends, stock splits and the like) on the Common
Stock. After payment in full has been made to the holders of the Common Stock
pursuant to the preceding sentence, the holders of the Series A Preferred Stock
and the holders of the Common Stock shall share in the distribution of the
entire remaining assets and funds of the corporation legally available for
distribution to stockholders in proportion to the number of shares of Common
Stock held by them, or to be received upon conversion of the Series A Preferred
Stock.
A merger or consolidation of the Corporation in a single transaction or a series
of transactions pursuant to which holders of capital stock of the Corporation
immediately prior to such transaction or series of transactions do not continue
to hold more than 50% by voting power of the capital stock of the surviving
corporation after such transaction or series of transactions, or the sale of all
or substantially all the assets of the Corporation, shall be deemed to be a
Liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of the Series A Preferred Stock in accordance with the foregoing
provisions of this Section 3 at the request of holders of a majority of the
Series A Preferred Stock.
4. VOTING.
(a) Each holder of outstanding shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which the shares of Series A
Preferred Stock held by such holder are then convertible (as adjusted
from time to time pursuant to Section 5 hereof), at each meeting of
stockholders of the Corporation (including written actions of
stockholders in lieu of meetings as agreed by a majority of the holders
of the Series A Preferred Stock and Common Stock) with respect to any
and all matters presented to the stockholders of the Corporation for
their action or consideration. Except as required by law, by the
provisions of Subsection 4(b) below or elsewhere in the Corporation's
Articles of Incorporation, as amended from time to time, holders of
Series A Preferred Stock shall vote together with the holders of Common
Stock as a single class.
(b) Except as otherwise required by law, so long as the
holders of Series A Preferred Stock own at least 5% of the Company's
outstanding shares of capital stock (it being understood that for
purposes of this Section 4, such holders shall be deemed to own shares
that they had a right to obtain pursuant to Section 2.1 of the Investor
Rights Agreement, whether or not the holders exercised their rights
pursuant to Section 2.1 of the Investor Rights Agreement), which amount
shall include, without limitation, Common Stock and Series A Preferred
Stock (taking into account, without duplication, the number of shares
of Common Stock into which each share of Series A Preferred Stock is
2
<PAGE> 3
convertible and securities convertible into such Common Stock and
Series A Preferred Stock) but shall exclude options hereafter issued
under any employee incentive plan in existence as of the date that this
certificate is adopted or approved by holders of a majority of the
shares of Series A Preferred Stock, the holders of the Series A
Preferred Stock shall be entitled to select two members of the Board of
Directors (the "Series A Members"). Such Series A Members shall be
elected at the meeting of the stockholders (or pursuant to written
actions of the stockholders in lieu of meetings) at which or pursuant
to which the other members of the Board of Directors are elected. The
Series A Members may not be removed at any time without cause other
than by persons holding a majority of the outstanding shares of the
Series A Preferred Stock, pursuant to a meeting of the holders of the
Series A Preferred Stock, or pursuant to written action held in lieu of
such meeting. In the event that any Series A Member resigns, is removed
or otherwise ceases to be a member of the Board of Directors, the
holders of the Series A Preferred Stock shall be entitled to designate
a successor, such designation to be effected pursuant to a meeting of
the holders of the Series A Preferred Stock (or a written action in
lieu of such meeting).
(c) Without the affirmative vote of holders of a majority of
the Series A Preferred Stock, the Corporation shall not (i) issue any
additional shares of Series A Preferred Stock, or (ii) permit its Board
of Directors to be composed of more than seven members.
5. OPTIONAL CONVERSION. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $4.07
by the Series A Conversion Price in effect at the time of conversion.
The "Series A Conversion Price" shall initially be $4.07. The rate at
which shares of Series A Preferred Stock may be converted into shares
of Common Stock shall be subject to adjustment as provided below.
In the event of a Liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on Liquidation to the
holders of Series A Preferred Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective Series A Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series A Preferred Stock
to convert such shares into shares of Common Stock, such
holder shall surrender the certificate or certificates for
such shares of Series A Preferred Stock at the office of the
transfer agent for the Series A Preferred Stock (or at the
principal office of the Corporation if the Corporation serves
as its own transfer agent), together with written notice (a
"Conversion Demand") that such holder elects to convert all or
3
<PAGE> 4
any number of the shares of the Series A Preferred Stock
represented by such certificate or certificates. Such
Conversion Demand shall state such holder's name or the names
of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If
required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the
registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and
Conversion Demand notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The
Corporation shall, as soon as practicable after the Conversion
Date, issue and deliver at such office to such holder of
Series A Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as a result of
such conversion, together with cash in lieu of any fraction of
a share.
(ii) The Corporation shall at all times when the
Series A Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued stock, for
the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Series A Preferred
Stock. Before taking any action which would cause an
adjustment reducing the Series A Conversion Price below the
then par value of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, the Corporation
will take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares
of Common Stock at such adjusted Series A Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Series A Conversion Price shall be made for any declared but
unpaid dividends on the Series A Preferred Stock surrendered
for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding and all rights
with respect to such shares, including the rights associated
therewith, if any, to receive notices and to vote, shall
immediately cease and terminate on the Conversion Date, except
only the right of the holders thereof to receive shares of
Common Stock or cash payment for any fraction thereof, in
exchange therefor and payment of any dividends declared but
unpaid thereon. Any shares of Series A Preferred Stock so
converted shall be retired and canceled and shall not be
reissued, and the Corporation (without the need for
stockholder action) may from time to time take such
appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock upon conversion of shares
of Series A Preferred Stock pursuant to this
4
<PAGE> 5
Section 5. The Corporation shall not, however, be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common
Stock in a name other than that in which the shares of Series
A Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person
or entity requesting such issuance has paid to the Corporation
the amount of any such tax or has established, to the
reasonable satisfaction of the Corporation, that such tax has
been paid.
(vi) Notwithstanding any other provision hereof, if a
conversion of Series A Preferred Stock is to be made in
connection with a public offering of Common Stock, the
conversion of any shares of Series A Preferred Stock may, at
the election of the holder of such shares, be conditioned upon
the consummation of such public offering in which case such
conversion shall not be deemed to be effective until the
consummation of such public offering.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of Subsections
5(d)-5(g), the following definitions shall apply:
(A) "Option" shall mean rights, options or
warrants to subscribe for, purchase or otherwise
acquire Common Stock or Convertible Securities,
excluding options described in subsection
5(d)(i)(C)(IV) below.
(B) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
directly or indirectly convertible into or
exchangeable for Common Stock.
(C) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or,
pursuant to Subsection 5(d)(iii) below, deemed to be
issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock (or, in the
case of clause IV below, options or warrants to
purchase shares of Common Stock) issued or issuable:
(I) upon conversion of any Convertible
Securities outstanding on the Original Issue Date, or
upon exercise of any Options outstanding on the
Original Issue Date;
(II) as a dividend or distribution on Series
A Preferred Stock;
(III) by reason of a dividend, stock split,
split up or other distribution on shares of Common
Stock that is covered by Subsection 5(e) or 5(f)
below; or
(IV) to employees, directors, officers or
managers of, or consultants to, the Corporation or
any of its subsidiaries pursuant to a plan adopted by
the Board of Directors of the Corporation in good
faith and approved by holders of a majority of the
shares of Series A Preferred
5
<PAGE> 6
Stock or upon the exercise of options and warrants granted
prior to the date hereof.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Common Stock into which the Series A Preferred
Stock is convertible shall be made, by adjustment in the Series A
Conversion Price, as applicable, unless the consideration per share
(determined pursuant to Subsection 5(d)(v)) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less
than the Series A Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional Shares.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. If the Corporation at any time or from time to time after
the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard
to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on such
record date, provided that (I) Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share
(determined pursuant to Subsection 5(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Series A Conversion
Price, as applicable, in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and (II) in any
such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) No further adjustment in the Series A Conversion
Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase or decrease in the consideration payable to
the Corporation, upon the exercise, conversion or exchange
thereof, the Series A Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) Upon the expiration or termination of any
unexercised Option or any unexercised rights of conversion or
exchange under any Convertible Security, the Series A
Conversion Price shall be readjusted to eliminate the
Additional Shares of Common Stock deemed issued as the result
of the original issue of such Option or such Convertible
Security;
6
<PAGE> 7
(D) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion
or exchange of any Option or Convertible Security, including,
but not limited to, a change resulting from the anti-dilution
provisions thereof, the Series A Conversion Price then in
effect shall forthwith be readjusted to such Conversion Price
as would have been obtained had the adjustment which was made
upon the issuance of such Option or Convertible Security not
exercised or converted prior to such change been made upon the
basis of such change;
(E) No readjustment pursuant to clause (B), (C) or
(D) above shall have the effect of increasing the Series A
Conversion Price to an amount which exceeds the lower of (i)
the Series A Conversion Price on the original adjustment date,
or (ii) the Series A Conversion Price that would have resulted
from any issuances of Additional Shares of Common Stock
between the original adjustment date and such readjustment
date; and
(F) If any Option or Convertible Securities with
respect to which the maximum number of shares of Common Stock
issuable upon exercise or conversion or exchange thereof is
not determinable, no adjustment to the Series A Conversion
Price shall be made until such number becomes determinable.
(iv) ADJUSTMENT OF SERIES A CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation shall
at any time after the Original Issue Date issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 5(d)(iii) other than Additional Shares
deemed to be issued pursuant to (x) Convertible Securities outstanding
on the date hereof, (y) options hereafter issued under any employee
incentive plan in existence as of the date that this certificate is
adopted or (z) options approved by holders of a majority of the shares
of Series A Preferred Stock) without consideration or for a
consideration per share less than the applicable Series A Conversion
Price in effect on the date of and immediately prior to such issue,
then and in each such event, such Series A Conversion Price shall be
reduced, concurrently with such issue, to the lowest price paid for any
Additional Share of Common Stock.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Subsection 5(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(A) CASH AND PROPERTY: Such consideration shall:
(I) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation, after deducting any commissions paid
by the Corporation, excluding amounts paid or payable
for accrued interest;
(II) insofar as it consists of property
other than cash, be computed at the fair market value
thereof at the time of such issue, as determined in
good faith by the Corporation's Board of Directors
and approved by the majority of the holders of Series
A Preferred Stock; and
7
<PAGE> 8
(III) in the event Additional Shares of
Common Stock are issued (or pursuant to Section
5(d)(iii) deemed to be issued) together with other
shares or securities or other assets of the
Corporation for consideration which covers both, be
the proportion of such consideration so received,
computed as provided in clauses (I) and (II) above,
as determined in good faith by the Corporation's
Board of Directors and approved by the majority of
the holders of Series A Preferred Stock.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Subsection 5(d)(iii), relating to Options and
Convertible Securities, shall be determined by dividing
(I) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities, by
(II) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(vi) MULTIPLE CLOSING DATES. In the event the Corporation
shall issue on more than one date Additional Shares of Common Stock,
and such issuance dates occur within a period of no more than 30 days,
then the Series A Conversion Price shall each be adjusted only once on
account of such issuances, with such adjustment to occur upon the final
such issuance and to give effect to all such issuances as if they
occurred on the date of the final such issuance.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original
Issue Date effect a subdivision of the outstanding Common Stock by
stock split, reclassification or otherwise, the Series A Conversion
Price then in effect immediately before that subdivision shall each be
proportionately decreased. If the Corporation shall at any time or from
time to time after the Original Issue Date effect a subdivision of the
Series A Preferred Stock, the Series A Conversion Price then in effect
immediately before that subdivision shall be proportionately increased.
If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Series A Conversion Price then in effect immediately before the
combination shall each be proportionately increased. If the Corporation
shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Series A Preferred Stock, the Series
A Conversion Price then in effect immediately before the combination
shall be
8
<PAGE> 9
proportionately decreased. Any adjustment under this paragraph shall
become effective at the close of business on the date the subdivision
or combination becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the
Original Issue Date 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 Additional Shares of Common
Stock, then and in each such event the Series A Conversion Price then
in effect shall each be decreased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close
of business on such record date, by multiplying the Series A Conversion
Price then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on
the date fixed therefor, the Series A Conversion Price shall be
recomputed accordingly as of the close of business on such record date
and thereafter the Series A Conversion Price shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividends or
distributions; and provided further, however, that no such adjustment
shall be made if the holders of Series A Preferred Stock simultaneously
receive a dividend or other distribution of shares of Common Stock in a
number equal to the number of shares of Common Stock as they would have
received if all outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the
Original Issue Date 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, 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 amount of
securities of the Corporation that they would have received had the
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, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of the Series A
Preferred Stock; and provided further, however, that no such adjustment
shall be made if the holders of Series A Preferred Stock simultaneously
receive a dividend or other distribution of such securities in an
amount equal to the amount of such securities as they would have
received if all outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event.
9
<PAGE> 10
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the
Series A Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the holder of each
such share of Series A Preferred Stock shall have the right thereafter
to convert such share into 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
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as
provided herein.
(i) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another
corporation or the sale of all or substantially all of the assets of
the Corporation to another corporation (other than a consolidation,
merger or sale which is not a Liquidation within the meaning of Section
3), each share of Series A Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be
convertible) into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of
Common Stock of the Corporation deliverable upon conversion of such
Series A Preferred Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 5
set forth with respect to the rights and interest thereafter of the
holders of the Series A Preferred Stock to the end that the provisions
set forth in this Section 5 (including provisions with respect to
changes in and other adjustments of the Series A Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(j) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or Bylaws 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 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.
(k) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this Section 5, the Corporation at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred Stock a certificate
executed by the Chief Executive Officer of the Corporation setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A
Preferred Stock, furnish or cause to be furnished to such holder a
similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Series A Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the
10
<PAGE> 11
amount, if any, of other property which then would be received upon the
conversion of Series A Preferred Stock.
(l) NOTICE OF RECORD DATE. In the event the Corporation shall
propose at any time:
(I) to declare a dividend (or any other distribution)
on its Common Stock;
(II) to subdivide or combine its outstanding shares
of Common Stock;
(III) to cause any reclassification of the Common
Stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock or a
stock dividend or stock distribution thereon), or any
consolidation or merger of the Corporation into or with
another corporation, or the sale of all or substantially all
of the assets of the Corporation;
(IV) to commence or to have commenced against the
Corporation a proceeding seeking involuntary or voluntary
dissolution, liquidation or winding up of the Corporation; or
(V) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of
stock of any class or series or other rights;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least
twenty days prior to the date specified in (A) below or twenty days before the
date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision, combination, or subscription, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, subdivision, combination or
subscription, are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or winding
up.
6. REDEMPTION AT HOLDER'S OPTION.
(a) Each holder of Series A Preferred Stock shall have the
right (the "Redemption Right"), in its sole discretion, to require the
Corporation to redeem, in accordance with this Section 6, all or any
portion of its outstanding shares of Series A Preferred Stock at a per
share redemption price (the "Holder Redemption Price") equal to the sum
of $4.07 plus any declared but unpaid dividends payable with respect to
such shares of Series A Preferred Stock (appropriately adjusted for any
recapitalization, stock
11
<PAGE> 12
combination, stock dividends, stock splits and the like). The
Redemption Right shall be exercisable at any time after January 15,
2004.
(b) A holder of Series A Preferred Stock may elect to exercise
its Redemption Right pursuant to Section 6(a) by mailing prior written
notice (a "Holder Redemption Notice") to the Corporation by certified
mail, return receipt requested at least six months' prior to the
requested date of exercise of the Redemption Right. The Holder
Redemption Notice shall specify:
(i) the name of the holder of shares of Series A
Preferred Stock delivering such Holder Redemption Notice;
(ii) that such holder is exercising its option,
pursuant to this Section 6, to require the Corporation to
redeem shares of Series A Preferred Stock held by such holder;
and
(iii) the number of, and a description of, the shares
of Series A Preferred Stock to be subject to such redemption.
(c) Unless a Holder Redemption Notice is retracted at least 30
days prior to the date set forth in the Holder Redemption Notice as
provided in Section 6(f) below (the "Holder Redemption Date"), the
Corporation shall pay to the holder of Series A Preferred Stock that is
the subject of the Holder Redemption Notice the Holder Redemption Price
on the Holder Redemption Date.
(d) In the case of any redemption pursuant to this Section 6,
unless the Corporation defaults in the payment in full of the Holder
Redemption Price, all rights of the holders of the shares of Series A
Preferred Stock subject to such redemption by reason of their ownership
of such shares shall cease on such Holder Redemption Date, except the
right to receive the Holder Redemption Price on surrender to the
Corporation of the certificates representing such shares. After the
applicable Holder Redemption Date, the shares shall not be deemed to be
outstanding and shall not be transferable on the books of the
Corporation, except to the Corporation.
(e) Any shares of Series A Preferred Stock redeemed by the
Corporation pursuant to this Section 6 shall be canceled and shall have
the status of authorized and unissued preferred stock, without
designation as to series.
(f) Any Holder Redemption Notice may be revoked by the holder
or holders delivering such notice by notice of such revocation
delivered within 30 days prior to the applicable Holder Redemption
Date.
7. MANDATORY CONVERSION.
(a) On the first Business Day following the effective Date of
a Qualified Offering (the "Mandatory Conversion Date"), all outstanding
shares of Series A Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective conversion rate.
(b) All holders of record of shares of Series A Preferred
Stock will be given written notice of the Mandatory Conversion Date and
the place designated for
12
<PAGE> 13
mandatory conversion of all shares of Series A Preferred Stock pursuant
to this Section 7. Such notice shall be sent by first class or
registered mail, postage prepaid, to each record holder of Series A
Preferred Stock at such holder's address last shown on the records of
the transfer agent for the Series A Preferred Stock, as the case may be
(or the records of the Corporation, if it serves as its own transfer
agent). Upon receipt of such notice, each holder of shares of Series A
Preferred Stock shall surrender his or its certificate or certificates
for all such shares to the Corporation at the place designated in such
notice, and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled pursuant to
this Section 7. On the Mandatory Conversion Date, all rights with
respect to the Series A Preferred Stock so converted, including the
rights associated therewith, if any, to receive notices and vote, will
terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive
certificates for the number of shares of Common Stock or cash payment
for any fraction thereof, into which such Series A Preferred Stock has
been converted, and payment of any declared but unpaid dividends
thereon. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument
or instruments of transfer, in form reasonably satisfactory to the
Corporation, duly executed by the registered holder or by his or its
attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause
to be issued and delivered to such holder, or on his or its written
order, a certificate or certificates for the number of full shares of
Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Subsection 5(b) in respect of
any fraction of a share of Common Stock otherwise issuable upon such
conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance
with the provisions hereof shall, from and after the Mandatory
Conversion Date, be deemed to have been retired and canceled and the
shares of Series A Preferred Stock represented thereby converted into
Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to
such date. The Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce
the authorized Series A Preferred Stock accordingly.
(d) Any Series A Preferred Stock converted pursuant to this
Section 7 will be cancelled and will not under any circumstances be
reissued, sold or transferred and the Corporation may from time to time
take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
8. DEFINITIONS.
As used in this Certificate of Designation, and unless the context
requires a different meaning, the following terms have the meanings indicated:
(i) "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in
the City of New York are authorized or obligated by law or executive
order to close.
13
<PAGE> 14
(ii) "Common Stock" shall mean the Common Stock of the
Corporation, par value $0.0001 per share.
(iii) "Investor Rights Agreement" means that certain Investor
Rights Agreement dated May _, 2000, among the Corporation, the holders
of Series A Preferred Stock and the other shareholders of the
Corporation.
(iv) "Junior Stock" shall mean any of the Corporation's Common
Stock and any other stock issued by the Corporation other than Series A
Preferred Stock.
(v) "Original Issue Date" shall mean the date on which a share
of Series A Preferred Stock was first issued.
(vi) "Qualified Public Offering" shall mean the closing of an
underwritten public offering of shares of Common Stock pursuant to an
effective registration statement filed with the Securities and Exchange
Commission for a public offering and sale of securities of the
Corporation (other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a similar limited
purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation) that (A) results in gross proceeds to the Corporation of
at least $25 million, (B) is at an offering price per share of at least
$8.14 at the time of such offering (as such amount may be adjusted for
all stock splits, consolidations and other events causing adjustments
to the Series A Conversion Price) and (C) which does not result from a
merger of similar transaction with an existing public company, the
shares of which are registered under the Securities Exchange Act of
1934 and publicly traded.
[signature page follows]
14
<PAGE> 15
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Designation to be signed by its President
and attested by its Secretary this 30th day of May, 2000.
INTERCONTINENTAL TELECOMMUNICATIONS CORP.
By: /s/ William St. Laurent
---------------------------------
Name: WILLIAM ST. LAURENT
Title: PRESIDENT
ATTEST:
/s/ William St. Laurent
-------------------------------------
Secretary
[Corporate Seal]
15
