SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 30, 1998
(Date of earliest event reported)
INTERNET COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-19578 84-1095516
(State of incorporation) (Commission file number) (IRS Employer
Identification No.)
7100 E. Belleview Ave., Suite 201, Englewood, CO 80202
(Address of principal executive offices) (Zip Code)
(303) 770-7600
(Registrant's telephone number)
Not Applicable
(Former name and address)
Item 5. Other Events
The Registrant issued the press release attached as Exhibit 99.1 to this
Current Report on Form 8-K on January 4, 1999.
Item 7. Exhibits
99.1 Press Release
99.2 Articles of Amendment
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 13, 1999 INTERNET COMMUNICATIONS CORPORATION
By: /s/ T. Timothy Kershisnik
T. Timothy Kershisnik
Vice President, CFO, Treasurer
and Corporate Secretary
Internet Communications Closes $5 Million Equity
Placement
Internet Secures Long Term Bank Financing Agreement
GREENWOOD VILLAGE, Co.--(BUSINESS WIRE)--Jan. 4, 1999--Internet Communications
Corporation (Nasdaq: INCC news), a leading telecommunications integrator and
network management company, announced the closing of a $5 million equity
placement with a wholly-owned subsidiary of Anschutz Company, Interwest Group.
According to Craig D. Slater, president of Anschutz Investment Company,
"Increasing complexity of network communications continues to create tremendous
opportunities for companies who can help support these networks. We continue to
believe that Internet Communications is perfectly positioned to take advantage
of this growing market and it is our expectation that the proceeds from this
private placement will give Internet the financial flexibility to aggressively
pursue their business plan."
The placement has been issued in two traunches. The initial traunche, $2.5
million, which is issued and available to the Company, will be used for working
capital and to reduce debt (the initial traunche is a revision of the $2.0
million convertible preferred funding announced on November 24, 1998). The
second traunche, which has been escrowed subject to shareholder approval as
required by Nasdaq, will be used for additional working capital and to reduce
debt. The equity investment has been made in exchange for 7 1/8% convertible
preferred stock, convertible at $2.25 per share.
John Couzens, president and chief executive officer, stated, "The placement of
these securities is an important milestone in our growth and provides the
necessary investment capital to support our strategy." The Company intends to
file the preliminary proxy with the Securities and Exchange Commission in early
January which will seek shareholder approval of the second traunche. Couzens
added, "We are experiencing a growing demand for services from the business
marketplace. The breadth of our technical capabilities in voice and data
communications systems and enterprise-wide networking provides our customers
with the single-source accountability required for businesses to successfully
deploy distributed network technology."
In addition, INCC announced its lender has agreed to amend the Company's credit
facility. Under the terms of the agreement, INCC has committed to pay down a
total of $1.5 million of the credit line and the credit line has been revised to
$4.0 million. The Bank has agreed to extend the term of the credit facility
until March 1, 2000.
Internet Communications Corporation is a leading regional telecommunications
integration company which designs, implements, maintains and manages customized
wide-area and local-area networks for voice and data. Founded in 1986, Internet
is headquartered in Greenwood Village, Colorado. For more information, contact
Keely Hawk, Director of Investor Relations, at (303) 414-7174, or visit
Internet's World Wide Web site, at www.incc.net, for investor related
information and a description of Internet's array of products and services.
Internet Communications Corp. is traded on the Nasdaq market under the symbol
INCC.
Contact:
Internet Communications Corporation, Greenwood Village
Keely Hawk, Director of Investor Relations,
303/414-7174, [email protected]
Articles of Amendment
Mail to: Secretary of State
Corporations Section
Please include a typed 1560 Broadway, Suite 200
self-addressed envelope Denver, CO 80202
(303) 894-2251
Fax (303) 894-2242
MUST BE TYPED
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF INTERNET COMMUNICATIONS CORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is INTERNET COMMUNICATIONS CORPORATION
SECOND: The following amendment to the Articles of Incorporation was adopted on
December __, 1998, as prescribed by the Colorado Business Corporation Act, in
the manner marked with an X below:
__ No shares have been issued or Directors Elected - Action by
Incorporators
__ No shares have been issued but Directors Elected - Action
by Directors
X Such amendment was adopted by the board of directors
where shares have been issued.
__ Such amendment was adopted by a vote of the
shareholders.The number of shares voted for the amendment
was sufficient for approval.
THIRD: The following section shall be added to the end of Section 2 of Article
IV:
(a) Series A Preferred Stock. The Board of Directors by resolution has
designated 50,000 of the shares of Preferred Stock "Series A Preferred Stock"
(the "Series A Preferred"). The relative rights, preferences, privileges, and
restrictions granted to or imposed upon the Series A Preferred or the holders
thereof are as follows:
1
<PAGE>
(i) Dividend Preference.
(A) When, as and if declared by the Board of Directors, the holders of
Series A Preferred shall be entitled to receive, out of funds legally available
therefor, dividends at an annual rate equal to $7.125 (as adjusted for
combinations, consolidations, subdivisions, or stock splits with respect to such
shares) for each outstanding share of Series A Preferred held by them, in
preference and priority to the payment of dividends on any shares of Common
Stock (other than those payable solely in Common Stock). The dividends payable
to the holders of the Series A Preferred shall accrue and be cumulative and
shall not compound. Dividends shall be payable quarterly in arrears commencing
March 31, 1999, in (i) cash or (ii) shares of Common Stock, as the Corporation
shall elect. If all or any portion of a dividend payment is to be paid in Common
Stock, the number of shares to be issued will be equal to the amount of the
dividend (or portion thereof) divided by the Closing Price of the Common Stock
on the dividend payment date. The "Closing Price" shall be the average last
reported sales prices, regular way, per share of Common Stock on the preceding
10 trading days, or if no such sale takes place on any such day, the average of
the closing bid and asked prices, regular way, for that day, in each case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on a national securities exchange,
or, if shares of such stock are not listed or admitted to trading on a national
securities exchange, on the Nasdaq National Market or the Nasdaq Small Cap
Market, as the case may be, or, if such last sales price or closing bid and
asked prices are not so reported, the average of the closing bid and asked
prices on the preceding 10 trading days as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors for
such purpose, or if no such prices are available, the fair market value of the
Common Stock as determined in good faith by the Board of Directors.
(ii) Liquidation Preference.
(A) Each holder of Series A Preferred outstanding after the closing of
a Liquidation Event (as defined below) shall be entitled to receive, prior and
in preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock and the Series A Preferred Stock, by
reason of their ownership of such stock, the amount of $100.00 (the "Original
Series A Issue Price") per share (as adjusted for combinations, consolidations,
subdivisions, or stock splits with respect to such shares) for each share of
Series A Preferred then held by such holder, plus an amount equal to all accrued
and unpaid dividends on such shares of Series A Preferred (collectively, the
"Series A Preference"). If, upon the occurrence of a Liquidation Event, the
assets and funds available to be distributed among the holders of Series A
Preferred shall be insufficient to permit the payment to such holders of the
full Series A Preference, then the entire assets and funds of the Corporation
legally available for distribution to the holders of Series A Preferred shall be
distributed ratably based on the total Series A Preference due each such holder
under this Section IV.2(a)(ii)(A).
(B) In the event of any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or not, or the sale, lease, assignment, transfer,
conveyance
2
<PAGE>
or disposal of all or substantially all of the assets of the Corporation, or the
acquisition of this Corporation by another entity by means of consolidation,
corporate reorganizations or merger, or other transaction or series of related
transactions in which more than 50% of the outstanding voting power of this
Corporation is disposed of for cash or other assets other than securities (each
a "Liquidation Event"), distributions to the shareholders of the Corporation
shall be made in the following manner:
(1) After payment has been made to the holders of Series A Preferred of
the full amounts to which they are entitled pursuant to paragraph (ii)(A) above,
the remaining assets of the Corporation available for distribution to
shareholders shall be distributed ratably among the holders of Common Stock.
(2) The value of securities and property paid or distributed pursuant
to this Section IV.2(a)(ii)(B) shall be computed at fair market value at the
time made available to shareholders, all as determined by the Board of Directors
in the good faith exercise of its reasonable business judgment, provided that
(i) if such securities are listed on any established stock exchange or a
national market system, their fair market value shall be the closing sales price
for such securities as quoted on such system or exchange (or the largest such
exchange) for the date the value is to be determined (or if there are no sales
for such date, then for the last preceding business day on which there were
sales), as reported in the Wall Street Journal or similar publication, and (ii)
if such securities are regularly quoted by a recognized securities dealer but
selling prices are not reported, their fair market value shall be the mean
between the high bid and low asked prices for such securities on the date the
value is to be determined (or if there are no quoted prices for such date, then
for the last preceding business day on which there were quoted prices).
(3) Nothing hereinabove set forth shall affect in any way the right of
each holder of Series A Preferred to convert such shares at any time and from
time to time into Common Stock in accordance with Section IV.2(a)(iv) hereof.
(iii) Voting Rights.
(A) Except as otherwise required by law or hereunder, the holder of
each share of Common Stock issued and outstanding shall have one vote and the
holder of each share of Series A Preferred shall be entitled to the number of
votes equal to the number of shares of Common Stock into which such share of
Series A Preferred could be converted at the record date for determination of
the shareholders entitled to vote on such matters, or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. Fractional votes by the holders of Series A Preferred
shall not, however, be permitted and any fractional voting rights shall (after
aggregating all shares into which shares of Series A Preferred held by each
holder could be converted) be rounded to the nearest whole number (with one-half
being rounded upward). Holders of Series A Preferred shall be entitled to notice
of any shareholders' meeting in accordance with the Bylaws of the Corporation.
3
<PAGE>
(iv) Conversion.
(A) OPTIONAL CONVERSION. Shares of Series A Preferred may be converted
into shares of Common Stock, as follows:
(1) Subject to and upon compliance with the provisions of this Section
IV.2(a)(iv), at the option of the holder of such shares, shares of Series A
Preferred or any portion thereof, may be converted into shares of Common Stock
("Conversion Shares"), as said shares shall be constituted on the date on which
such shares shall be surrendered for conversion and notice given in accordance
with the provisions of this Section (the "Conversion Date"). The number of
Conversion Shares to be received on conversions shall be the quotient of (A) the
sum of the Original Series A Issue Price and all accrued and unpaid dividends on
such share of Series A Preferred, accrued to the date of conversion, divided by
(B) $2.25 (the "Conversion Price").
(2) In order to exercise the conversion privilege, the holder shall
surrender such shares to the Corporation at its executive offices, together with
the conversion notice in the form attached hereto as Exhibit A (or similar
separate written notice) duly executed, and, if so required by the Corporation,
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or by its duly authorized attorney in writing. As
promptly as practicable after the surrender of such shares for conversion as
aforesaid, but in no event later than 30 days after surrender, the Corporation
shall deliver at its executive office to such holder, or on its written order, a
certificate or certificates for the number of Conversion Shares deliverable upon
such conversion and a check or cash in amount equal to any unconverted
fractional share. Such conversion shall be deemed to have been effected on the
date on which such notice shall have been received at said executive offices and
such shares shall have been surrendered as aforesaid, and the person or persons
in whose name or names any certificate or certificates for Conversion Shares
shall be deliverable upon such conversion shall be deemed to have become on said
date the holder or holders of record of the shares represented thereby;
PROVIDED, HOWEVER, that any such surrender on any date when the stock transfer
books of the Corporation shall be closed shall constitute the person or persons
in whose name or names the certificates are to be delivered as the record holder
or holders thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date of such surrender.
(3) Notwithstanding any other provision hereof, (A) if the conversion
is to be made in connection with a merger, acquisition, tender offer or other
business combination, the exercise of the conversion privilege may at the
election of the holder be conditioned upon the conclusion of such transaction,
in which case such exercise shall not be deemed to be effective until the
conclusion of such transaction and (B) if the issuance of any Conversion Shares
is not exempt from the applicable requirements under the Hart-Scott-Rodino Act,
the exercise of the conversion privilege shall be conditioned upon the
compliance by the Corporation, the holder and all other persons with such
requirements, in which case such exercise shall not be deemed to be effective
until all such requirements are satisfied. The holder may by written notice
withdraw any such exercise of such conversion privilege before the effectiveness
thereof. Any such exercise or
4
<PAGE>
withdrawal shall not impair or otherwise affect the other rights and remedies of
the holder permitted by law, equity or contract or as set forth herein.
(B) CORPORATION'S RIGHT TO AUTOMATICALLY CONVERT. If at any time the
Closing Price of the Corporation's Common Stock for 45 consecutive trading days
is equal to or greater than $10.00, the Corporation shall thereafter have the
right to automatically convert the Series A Preferred in accordance with the
provisions of this Section IV.2(a)(iv).
(C) FRACTIONAL INTERESTS. The Corporation shall not be required to
deliver fractions of shares of Common Stock upon conversions of shares of Series
A Preferred. If any fractional interest in a share of Common Stock would be
deliverable upon the conversion of shares of Series A Preferred, the Corporation
shall make an adjustment therefor in cash equal to the Closing Price per share
of the Common Stock on the Conversion Date.
(D) MECHANICAL ADJUSTMENTS. The number of Conversion Shares issuable
upon the conversion of shares of Series A Preferred and the Conversion Price
shall be subject to adjustment from time to time, as follows:
(1) If the Corporation shall at any time pay a dividend on its Common
Stock in shares of its Common Stock (including, if applicable, shares of Common
Stock held by the Corporation in treasury or by a Subsidiary (as defined below),
subdivide its outstanding shares of Common Stock into a larger number of shares
or combine its outstanding shares of Common Stock into a smaller number of
shares or otherwise effect a reclassification or recapitalization of the Common
Stock, then in each such case the number of Conversion Shares thereafter
issuable upon conversion of shares of Series A Preferred shall be adjusted so
that shares of Series A Preferred shall thereafter be convertible into the
number of Conversion Shares equal to the number of shares of Common Stock which
the holder would have held after the occurrence of any of the events described
above had such shares of Series A Preferred been converted in full immediately
prior to the occurrence of such event. An adjustment made pursuant to this
paragraph (i) shall become effective retroactively to the related record date in
the case of a dividend and shall become effective on the related effective date
in the case of a subdivision, combination, reclassification or recapitalization.
(2) Except with respect to Permitted Issuances (as defined below), if
the Corporation or a Subsidiary shall at any time issue or sell shares of Common
Stock at a purchase price per share of Common Stock (the value of any
consideration, if other than cash, to be determined in good faith by the Board
of Directors) less than the Closing Price on the date the Corporation or such
Subsidiary agrees to the issuance or sale (for the purpose of this paragraph
(2), the "Adjustment Date"), then in each such case, the number of Conversion
Shares thereafter issuable upon conversion of shares of Series A Preferred after
such Adjustment Date shall be determined by multiplying the number of Conversion
Shares issuable upon conversion of shares of Series A Preferred on the date
immediately preceding such Adjustment Date by a fraction, the numerator of which
shall be the sum of
5
<PAGE>
the number of shares of Common Stock outstanding immediately before issuance or
sale and the number of additional shares of Common Stock so issued or sold, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately before such issuance or sale and the number of
shares of Common Stock which the aggregate offering price of the total number of
shares so offered would purchase at the Closing Price. For the purposes of this
paragraph (2), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation or by a
Subsidiary.
(3) If the Corporation or a Subsidiary shall at any time issue or sell
Derivative Securities (as defined below) providing for the purchase of shares of
Common Stock upon the conversion, exchange or exercise thereof at a price per
share of Common Stock (taking into account any consideration received by the
Corporation upon the issuance or sale of such Derivative Securities and any
additional consideration to be received upon the conversion, exchange or
exercise thereof, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors (the "Aggregate Derivative
Consideration")) less than the Closing Price on the date the Corporation or such
Subsidiary agrees to the issuance or sale (for the purpose of this paragraph
(3), the "Adjustment Date"), then in each such case, the number of Conversion
Shares thereafter issuable upon conversion of the Series A Preferred after such
Adjustment Date shall be determined by multiplying the number of Conversion
Shares issuable upon conversion of shares of Series A Preferred on the date
immediately preceding such Adjustment Date by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding on such
Adjustment Date and the number of additional shares of Common Stock so offered
for subscription or purchase upon the conversion, exchange or exercise of such
Derivative Securities, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on such Adjustment Date and the
number of shares of Common Stock which the Aggregate Derivative Consideration
for the total number of shares so offered would purchase at the Closing Price.
Such adjustment shall be made whenever any such Derivative Securities are
issued, and shall become effective on the date of issuance retroactive to the
Adjustment Date. If all the shares of Common Stock so offered for subscription
or purchase are not delivered upon the final conversion, exchange or exercise of
such Derivative Securities, then, upon the final conversion, exchange or
exercise of such Derivative Securities, or the expiration, cancellation or other
termination thereof, the number of Conversion Shares issuable upon conversion of
shares of Series A Preferred shall thereafter be readjusted to the number of
Conversion Shares which would have been in effect had the numerator and the
denominator of the foregoing fraction and the resulting adjustment been made
based upon the number of shares of Common Stock actually delivered upon the
conversion, exchange or exercise of such Derivative Securities, or the
expiration, cancellation or other termination thereof rather than upon the
number of shares of Common Stock so offered for subscription or purchase. If the
purchase price provided for in any Derivative Securities, the additional
consideration, if any, payable upon the conversion, exchange or exercise of any
Derivative Securities or the rate at which any Derivative Securities are
convertible into or exchangeable or convertible into Common Stock shall change
at any time (including, without limitation, at the time of or after such
conversion, exchange or
6
<PAGE>
exercise), the number of Conversion Shares issuable upon conversion of shares of
Series A Preferred in effect at the time of such change shall be readjusted to
the number of Conversion Shares issuable upon conversion of shares of Series A
Preferred which would have been in effect at such time had such Derivative
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, on the
related Adjustment Date, and such readjustment shall become effective on the
date of such change retroactive to the Adjustment Date; PROVIDED, that no such
readjustment shall have the effect of decreasing the number of Conversion Shares
issuable upon the conversion of shares of Series A Preferred by an amount in
excess of the amount of the adjustment initially made with respect to the
issuance or sale of the Derivative Securities. For the purposes of this
paragraph (3), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation or by a
Subsidiary.
(4) If the Corporation shall at any time declare or pay a dividend or
other distribution on its Common Stock other than (x) a stock dividend payable
solely in shares of Common Stock or (y) a cash dividend paid out of current
earnings (the value of any such dividend or other distribution, if other than
cash, to be determined in good faith by the Board of Directors), then in each
such case, the number of Conversion Shares thereafter issuable upon conversion
of shares of Series A Preferred after the declaration date therefor (for the
purpose of this paragraph (4), the "Adjustment Date") shall be determined by
multiplying the number of Conversion Shares issuable upon conversion of shares
of Series A Preferred on the date immediately preceding such Adjustment Date by
a fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on such Adjustment Date and the number of additional
shares of Common Stock which the aggregate value of such dividend or
distribution would purchase at such price and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding on such Adjustment
Date. For the purposes of this paragraph (4), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Corporation or by a Subsidiary.
(5) In case of any capital reorganization or any reclassification
(other than a change in par value) of the capital stock of the Corporation, or
of any exchange or conversion of the Common Stock for or into securities of
another corporation, or in case of the consolidation or merger of the
Corporation with or into any other person (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or a Liquidation Event) or in case of any
sale or conveyance of all or substantially all of the assets of the Corporation
(other than a Liquidation Event), the person formed by such consolidation or
resulting from such capital reorganization, reclassification or merger or which
acquires such assets, as the case may be, shall make provision such that shares
of Series A Preferred shall thereafter be convertible into the kind and amount
of shares of stock, other securities, cash and other property receivable upon
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance, as the case may be, by a holder of the shares of
Common Stock equal to the number of Conversion Shares issuable upon conversion
of shares of Series A Preferred immediately prior to the effective date of such
capital
7
<PAGE>
reorganization, reclassification of capital stock, consolidation, merger, sale
or conveyance, assuming (1) such holder of Common Stock of the Corporation is
not a person 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 ("Constituent Entity"), or an affiliate of
a Constituent Entity, and (2) such person failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such capital reorganization, reclassification of
capital stock, consolidation, merger, sale or conveyance and, in any case
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to rights and
interests thereafter of the holder, to the end that the provisions set forth
herein (including the specified changes in and other adjustments of the number
of Conversion Shares issuable upon conversion of shares of Series A Preferred)
shall thereafter be applicable, as near as reasonably may be, in relating to any
shares of stock or other securities or other property thereafter deliverable
upon conversion of shares of Series A Preferred.
(6) For the purposes of this Section IV.2(a)(iv)(D):
(X) "DERIVATIVE SECURITIES" means securities convertible into or
exchangeable or convertible into shares of Common Stock, rights or warrants to
subscribe for or purchase shares of Common Stock, options for the purchase of,
or calls, commitments or other claims of any character relating to, shares of
Common Stock or any securities convertible into or exchangeable for any of the
foregoing;
(Y)"PERMITTED ISSUANCES" means the issuance of shares of Common Stock after
the date hereof (x) pursuant to the exercise of options authorized on the date
hereof, in each case in accordance with the terms thereof as of the date hereof
and (y) pursuant to the conversion of shares of Series A Preferred; and
(Z) "SUBSIDIARIES" means any corporation or other entity in which the
Corporation is entitled by virtue of its ownership of securities (or equivalent
interests) to elect a majority of the directors (or persons performing
equivalent functions).
(7) If any shares of Common Stock or Derivative Securities are issued
or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the net amount received by the
Corporation therefor. In case any shares of Common Stock or Derivative
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
marketable securities, in which case the amount of consideration received by the
Corporation shall be the market price thereof as of the date of receipt. In case
any shares of Common Stock or Derivative Securities are issued to the owners of
the non-surviving
8
<PAGE>
entity in connection with any merger or other business combination in which the
Corporation is the surviving entity, the amount of consideration therefor shall
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock or
Derivative Securities, as the case may be. The fair value of any consideration
other than cash or marketable securities shall be determined jointly by the
Corporation and the holders of more than 50% of the outstanding shares of Series
A Preferred. If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an appraiser jointly
selected by the Corporation and such holders, whose determination shall be final
and binding on the Corporation and the holders. The fees and expenses of such
appraiser shall be paid by the Corporation.
(8) If the Corporation takes a record of the holders of Common Stock
for the purpose of entitling them (A) to receive a dividend or other
distribution on its Common Stock or (B) to subscribe for or purchase shares of
Common Stock or Derivative Securities, then such record date shall be deemed to
be the date of the payment or distribution of such dividend or other
distribution or the date of issuance and sale of any shares of Common Stock
deemed to have been issued or sold in connection thereto.
(9) All calculations under this Section IV.2(a)(iv)(D) shall be made to
the nearest share of Common Stock (with one-half being rounded upward)
(10) Whenever the number of Conversion Shares issuable upon the
conversion of shares of Series A Preferred is adjusted or readjusted pursuant to
paragraphs (1) through (9), inclusive, above, the Conversion Price shall be
adjusted or readjusted by multiplying the Conversion Price immediately prior to
the related Adjustment Date by a fraction, the numerator of which shall be the
number of Conversion Shares receivable upon the conversion of shares of Series A
Preferred immediately preceding such Adjustment Date, and the denominator of
which shall be the number of Conversion Shares so purchasable immediately
thereafter; PROVIDED that no such readjustment pursuant to paragraph (3) above
with respect to the conversion, exchange or exercise, or expiration,
cancellation or other termination, of any Derivative Securities shall have the
effect of increasing the Conversion Price by an amount in excess of the amount
of the adjustment initially made in respect of the issuance or sale of such
Derivative Securities.
(11) If any event occurs of the type contemplated by the provisions of
this Section IV.2(a)(iv)(D) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
number of Conversion Shares issuable upon conversion of shares of Series A
Preferred and the Conversion Price so as to protect the rights of the holders of
shares of Series A Preferred.
(12) For the purpose of this Section IV.2(a)(iv)(D), the term "Shares
of Common Stock" means (W) the class of stock designated as the Common Stock of
the Corporation at the date hereof or (X) any other class of stock resulting
from successive
9
<PAGE>
changes or reclassification of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to
paragraphs (1) through (4), inclusive, above, the holders of shares of Series A
Preferred shall become entitled to receive any shares of the Corporation other
than shares of Common Stock, thereafter the number of such other shares so
receivable upon conversion of shares of Series A Preferred and the Conversion
Price shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Conversion Shares contained in paragraphs (1) through (4), inclusive, above, and
the provisions of Sections IV.2(a)(iv)(D), (E), and (F), inclusive, with respect
to the Conversion Shares, shall apply on like terms to any such other shares.
(13) Notwithstanding anything herein to the contrary, there shall be no
adjustment in the number of Conversion Shares or in the Conversion Price in
respect of Permitted Issuances.
(14) In case of any consolidation or merger of the Corporation with or
into another entity (whether or not the Corporation is the surviving entity) or
in case of any sale, transfer or lease of all or substantially all of the assets
of the Corporation, the Corporation or such successor or purchasing entity, as
the case may be, shall execute with the holders of shares of Series A Preferred
an agreement that such holders shall have the right thereafter to receive upon
conversion of shares of Series A Preferred the kind and amount of shares and
other securities, cash and property that such holders would have owned or would
have been entitled to receive after the happening of such consolidation, merger,
sale, transfer, lease or conveyance had their shares of Series A Preferred been
converted in full immediately prior to such action, and if the successor or
purchasing entity is not a corporation, such person shall provide appropriate
tax indemnification with respect to such shares or other securities and property
so that upon conversion of shares of Series A Preferred, the holders thereof
would have the same benefits they otherwise would have had if such successor or
purchasing person were a corporation. Such agreement shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in paragraphs (1) through (13), inclusive, above. The
provisions of this paragraph (14) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(E) TIME OF ADJUSTMENTS; MINIMUM ADJUSTMENTS. Each adjustment required
by Section IV.2(a)(iv)(D) shall be effective as and when the event requiring
such adjustment occurs. Notwithstanding the provisions of this Section
IV.2(a)(iv)(E), no adjustment of less than one percent of the number of
Conversion Shares shall be made until the earlier of (x) such time as the total
of all previous adjustments that were less than one percent of the number of
Conversion Shares shall equal three percent of the number of Conversion Shares
and (y) conversion of the Series A Preferred in accordance with the provisions
hereof.
(F) NOTICE OF ADJUSTMENT. Whenever the number of Conversion Shares
issuable upon the conversion of shares of Series A Preferred or the Conversion
10
<PAGE>
Price is adjusted as herein provided, the Corporation shall promptly mail by
first class mail, postage prepaid, to each holder of shares of Series A
Preferred a certificate provided by, at the discretion of such holder, an
officer of the Corporation or a firm of independent public accountants selected
by the Board of Directors of the Corporation (who may be the regular accountants
employed by the Corporation) setting forth the number of Conversion Shares
purchasable upon the conversion of shares of Series A Preferred and the
Conversion Price after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made.
(G) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section
IV.2(a)(iv)(D), no adjustment in respect of any dividends declared or paid on
the Common Stock shall be made prior to or upon the conversion of shares of
Series A Preferred.
(H) TAXES. The issuance of stock certificates on conversions of shares
of Series A Preferred shall be made without charge to the holders thereof for
any tax in respect of the issue thereof. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares in any name other than that of the holders,
and the Corporation shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
(I) RESERVATION OF SHARES. The Corporation shall at all times reserve
and keep available out of the aggregate of its authorized but unissued shares or
its issued shares held in its treasury, or both, for the purpose of effecting
the conversion of shares of Series A Preferred, such number of its duly
authorized shares of Common Stock as shall from time to time be sufficient to
effect the conversion, exchange or exercise of outstanding securities of the
Corporation convertible into or exchangeable or exercisable for any shares of
the Common Stock, all rights to subscribe for or to purchase, all options for
the purchase of, and all calls, commitments or claims of any character relating
to, any shares of Common Stock and any securities convertible into or
exchangeable or exercisable for any of the foregoing.
(J) REGISTRATION OR APPROVAL. If any shares of Common Stock reserved or
to be reserved for the purpose of conversion of shares of Series A Preferred
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly delivered upon
conversion, including, without limitation, the Hart-Scott-Rodino Act, then the
Corporation covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be,
at the Corporation's expense.
(K) VALIDLY ISSUED, ETC. The Corporation covenants that all shares of
Common Stock which may be delivered upon conversion of shares of Series A
Preferred shall upon delivery be validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issue or delivery
thereof.
11
<PAGE>
(L) NOTICE. In the event:
(1) that the Corporation shall pay any dividend or make any
distribution to the holders of shares of Common Stock
otherwise than in cash charged against capital surplus,
consolidated net earnings or retained earnings of the
Corporation and its Subsidiaries; or
(2) that the Corporation shall offer for subscription or
purchase, pro rata, to all of the holders of shares of Common
Stock any additional shares of stock of any class or any
securities convertible into or exchangeable for stock of any
class; or
(3) of any reclassification or change of outstanding shares of
the class of Common Stock issuable upon the conversion of
shares of Series A Preferred (other than a change in par
value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination),
or of any merger or consolidation of the Corporation with, or
merger of the Corporation into, another corporation (other
than a merger or consolidation in which the Corporation is the
continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common
Stock issuable upon conversion of shares of Series A
Preferred), or of any sale or conveyance to another
corporation of the property of the Corporation as an entirety
or substantially as an entirety or of any other similar
business combination transaction;
then, and in any one or more of such events, the Corporation will give
to the holders of shares of Series A Preferred written notice thereof at least
15 days prior to (A) the record date fixed with respect to any of the events
specified in (1) and (2) above, and (B) the effective date of any of the events
specified in (3) above. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(M) SPECIFIC PERFORMANCE. The Corporation acknowledges that the failure
of the Corporation to perform its obligations under this Section IV.2(a)(iv)
will not be compensable by the payment of monetary damages and hereby waives any
defense to a claim by the holders of shares of Series A Preferred that the
provisions of this Section Section IV.2(a)(iv) be specifically enforced.
(N) REGISTRATION RIGHTS. The Conversion Shares shall be deemed to be
"Registrable Shares" subject to the terms of the Registration Rights Agreement
between the Corporation and Interwest Group, Inc. dated as of May 29, 1998, as
amended.
12
<PAGE>
(v) Covenants.
In addition to any other rights provided by law, the Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of a majority of the outstanding shares of Series A Preferred, voting as
a single class:
(A) amend or repeal any provision of, or add any provision to, the
Corporation's Articles of Incorporation 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;
(B) authorize or issue shares of any class or series of stock having any
preference or priority as to dividends or redemption rights, liquidation
preferences, conversion rights, or voting rights, superior to or on a parity
with any preference or priority of the Series A Preferred;
(C) authorize or issue any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of stock of this Corporation having any preference or priority as to
dividends or redemption rights, liquidation preferences, conversion rights, or
voting rights, superior to or on a parity with any preference or priority of the
Series A Preferred;
(D) reclassify any shares of capital stock of this Corporation into shares
having any preference or priority as to dividends or redemption rights,
liquidation preferences, conversion rights, or voting rights, superior to or on
a parity with any preference or priority of any series of the Series A
Preferred;
(E) apply any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through Subsidiaries (as defined in Section
425 of the Internal Revenue Code of 1986) or otherwise, of any shares of any
class or series of Common Stock;
(F) engage in any transaction or series of related transactions
constituting a Liquidation Event;
(G) declare or pay dividends on or make any distributions with respect to
the Corporation's Common Stock;
(H) increase or decrease the authorized number of shares of Preferred
Stock; or
(I) sell, lease, assign, transfer, convey or otherwise dispose of the
securities of any Subsidiary.
FOURTH: In connection with the Articles of Amendment to the Corporation's
Articles of Incorporation set forth herein, no change in the outstanding capital
stock is being effected.
13
<PAGE>
FIFTH: The manner in which such amendment effects a change in the amount of
stated capital, and the amount of stated capital as changed by such amendment,
is as follows:
NONE
SIXTH: The foregoing amendment was adopted by the Board of Directors without
shareholder action and shareholder action was not required.
Executed at Denver, Colorado this 30th day of December, 1998
INTERNET COMMUNICATIONS CORPORATION
By: /s/ John M. Couzens
John M. Couzens, President
14
<PAGE>
