Document:

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                                                                    Exhibit 4.10

                     CERTIFICATE OF DESIGNATION OF SERIES
                  AND DETERMINATION OF RIGHTS AND PREFERENCES

                                      OF

              SERIES D CONVERTIBLE PARTICIPATING PREFERRED STOCK

                                      OF

                              CAIS INTERNET, INC.

         CAIS Internet, Inc., a Delaware corporation (the "Company"), acting
                                                           -------
pursuant to Section 151 of the General Corporation Law of Delaware, does hereby
submit the following Certificate of Designation of Series and Determination of
Rights and Preferences of its Series D Convertible Participating Preferred
Stock.

         FIRST:  The name of the Company is CAIS Internet, Inc.

         SECOND: By unanimous consent of the Board of Directors of the Company
(the "Board"), dated as of December 20, 1999, the following resolutions were
duly adopted:

         WHEREAS, the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") authorizes 25,000,000 shares of
              ----------------------------
preferred stock, par value $.01 per share (the "Preferred Stock"), issuable from
                                                ---------------
time to time in one or more series;

         WHEREAS, the Board is authorized, subject to certain limitations
prescribed by law and certain provisions of the Certificate of Incorporation, to
establish and fix the number of shares to be included in any series of Preferred
Stock and the designation, rights, preferences, powers, restrictions and
limitations of the shares of such series; and

         WHEREAS, the Board deems it advisable to establish a series of
Preferred Stock, designated as Series D Convertible Participating Preferred
Stock, par value $.01 per share.

         NOW, THEREFORE, BE IT RESOLVED, that the series of Preferred Stock
designated as Series D Convertible Participating Preferred Stock is hereby
authorized and established; and

         FURTHER, RESOLVED, that the Board does hereby fix and determine the
designation, rights, preferences, powers, restrictions and limitations of the
Series D Convertible Participating Preferred Stock as follows:

         Section 1.        Designation; Rank.

         This series of cumulative convertible participating Preferred Stock
shall be designated and known as the "Series D Convertible Participating
Preferred Stock" (hereinafter in this Certificate of Designation called the
"Series D Preferred Stock"). The number of shares constituting the Series D
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Preferred Stock shall be 9,620,393 shares (including 2,477,536 shares of Series
D Preferred Stock reserved exclusively for the payment of dividends pursuant to

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Section 2).

         The Series D Preferred Stock shall, with respect to dividends and
rights upon liquidation, dissolution or winding up, whether voluntary or
involuntary, rank (i) senior to the common stock of the Company, par value $.01
per share (the "Common Stock"), and to each other class of capital stock or
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series of Preferred Stock or other equity-linked security established after the
date on which the first share of Series D Preferred Stock is issued by the
Company under this Certificate of Designation (the "Original Issue Date") by the
                                                    -------------------
Board the terms of which do not expressly provide that it ranks senior to or on
a parity with the Series D Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up, whether voluntary or involuntary
(collectively referred to with the Common Stock as "Junior Securities"); (ii) on
                                                    -----------------
parity with any additional shares of Series D Preferred Stock issued by the
Company in the future, any shares of Series E Convertible Participating
Preferred Stock (the "Series E Preferred Stock") issued by the Company pursuant
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to the irrevocable option (the "Purchase Option") to purchase Option Shares (as
                                ---------------
defined in the Preferred Stock Purchase Agreement, dated as of December 20, 1999
(the "Purchase Agreement"), between the Company and CII Ventures LLC, a Delaware
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limited liability company (the "Investor Stockholder")) and any other class of
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capital stock or series of Preferred Stock or other equity-linked security
issued by the Company established after the Original Issue Date by the Board,
the terms of which expressly provide that it will rank on a parity with the
Series D Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up, whether voluntary or involuntary (collectively
referred to as "Parity Securities"); and (iii) junior to the Company's Series C
                -----------------
Convertible Preferred Stock ("Series C Preferred Stock") and to each class of
                              ------------------------
capital stock or series of Preferred Stock or other equity-linked security
issued by the Company after the Original Issue Date by the Board the terms of
which expressly provide that it will rank senior to the Series D Preferred Stock
as to dividends and rights upon liquidation, dissolution or winding up, whether
voluntary or involuntary (collectively referred to as "Senior Securities").
                                                       -----------------
         Section 2.        Dividends.

         (a) The holders of outstanding shares of Series D Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the assets of the Company which are, by law, available for such payment,
cumulative dividends, payable in additional shares of Series D Preferred Stock,
at a rate per annum equal to 6.0% of the sum of (i) $14.00 per share (the
"Original Series D Issue Price") and (ii) all compounded accrued and unpaid
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dividends on such share of Series D Preferred Stock from the Original Issue
Date, in each case, as adjusted for any stock dividends, combinations or splits
or similar events with respect to the shares. Such dividends shall be paid and
compounded quarterly on the fifteenth day of December, March, June and September
in each year commencing with a payment on March 15, 2000 of dividends accrued
from the Original Issue Date. Each such dividend shall be payable to the holders
of record of shares of Series D Preferred Stock as they appear on the share
register of the Company on the corresponding Record Date. As used herein, the
term "Record Date" means, with respect to the dividend payable on March 15, June
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15, September 15 and December 15, respectively of each year, the preceding
February 28, May 31, August 31 and November 30, or such other record date, not
more than 60 days or less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board.
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         (b) The amount of dividends payable for each full dividend period for
the Series D Preferred Stock shall be computed by dividing the annual 6.0% rate
by four. The amount of dividends payable for the initial dividend period, or any
other period shorter or longer than a full dividend period, on the Series D
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year.

         (c) Dividends on the Series D Preferred Stock shall accumulate and
compound quarterly whether or not the Company has earnings or profits, whether
or not there are funds legally available for payment of such dividends and
whether or not dividends are declared. Dividends will accumulate and compound
quarterly to the extent they are not paid. The Company shall take all actions
required or permitted under the General Corporation Law of Delaware to permit
the payment of dividends on the Series D Preferred Stock and shall declare and
pay such dividends to the extent there are funds legally available therefor.

         (d) So long as any shares of the Series D Preferred Stock are
outstanding, except as described in the next succeeding sentence, unless full
cumulative dividends on all outstanding shares of Series D Preferred Stock for
all past dividends have contemporaneously been declared and paid in full or
declared and consideration sufficient for the payment thereof set apart for such
payment on the Series D Preferred Stock, then: (A) no dividend shall be declared
or paid upon, or any sum set apart for the payment of dividends upon, any shares
of Parity Securities; (B) no other distribution shall be declared or made upon,
or any sum set apart for the payment of any distribution upon, any shares of
Parity Securities; (C) no shares of Parity Securities shall be purchased,
redeemed or otherwise acquired or retired for value (except by conversion into
or an exchange for shares of Junior Securities) by the Company or any entity as
to which the Company owns, directly or indirectly, more than 50% of such
entity's stock (or similar voting interests) entitled to vote generally in the
election of directors (or other governing body) (a "Subsidiary"); and (D) no
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monies shall be paid into or set apart or made available for a sinking or other
like fund for the purchase, redemption or other acquisition or retirement for
value of any shares of Parity Securities by the Company or any of its
Subsidiaries. If at any time the Company pays less than the total amount of
dividends then accrued with respect to the Series D Preferred Stock, such
payment shall be distributed ratably among the holders of Series D Preferred
Stock based upon the aggregate accrued but unpaid dividends on the Series D
Preferred Stock held by each holder. When dividends are not paid in full or
consideration sufficient for such payment is not set apart, as aforesaid, all
dividends declared upon any other class or series of Parity Securities shall be
declared ratably in proportion to the respective amounts dividends accumulated
and unpaid on the Series D Preferred Stock and accumulated and unpaid on such
Parity Securities.

         (e) Unless full cumulative dividends on all outstanding shares of
Series D Preferred Stock for all past dividends have been declared and paid in
full or declared and consideration sufficient for the payment thereof set apart
for such payment on the Series D Preferred Stock, then: (A) no dividend (other
than a dividend payable solely in shares of any Junior Securities) shall be
declared or paid upon, or any sum set apart for the payment of dividends upon,
any shares of Junior Securities; (B) no other distribution shall be declared or
made upon, or any sum set apart for the payment of any distribution upon, any
shares of Junior Securities; (C) no shares of Junior Securities shall be
purchased, redeemed or otherwise acquired or retired for value
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(excluding an exchange for shares of other Junior Securities) by the Company or
any of its Subsidiaries; and (D) no monies shall be paid into or set apart or
made available for a sinking or other like fund for the purchase, redemption or
other acquisition or retirement for value of any shares of Junior Securities by
the Company or any of its Subsidiaries. Holders of Series D Preferred Stock will
not be entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.

         (f) In addition, when and if the Board of Directors shall declare a
dividend payable with respect to the then outstanding shares of Common Stock,
the holders of the Series D Preferred Stock shall be entitled to the amount of
dividends per share as would be payable on the largest number of whole shares of
Common Stock into which each share of Series D Preferred Stock could then be
converted pursuant to Section 5 hereof. Any such declared and unpaid dividends
will be payable upon a liquidation, dissolution or winding up, whether voluntary
or involuntary, first to the holders of Series D Preferred Stock and then to the
holders of Common Stock.

         Section 3.        Liquidation Preference.

         (a) Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any distribution or payment shall be
made to the holders of any Junior Securities, the holders of Series D Preferred
Stock shall be entitled to be paid out of the remaining assets of the Company
legally available for distribution with respect to each share of Series D
Preferred Stock an amount in cash equal to the greater of (i) the sum of (A) the
Original Series D Issue Price per share plus (B) any compounded accrued but
unpaid dividends thereon (whether or not declared, whether or not funds of the
Company are legally available for the payment of dividends and whether or not
such dividends have been declared by the Board), in each case as adjusted for
any stock dividends, combinations or splits or similar events with respect to
such shares or (ii) an amount equal to the amount the holders of Series D
Preferred Stock would have received upon liquidation, dissolution or winding up
had such holders converted their shares of Series D Preferred Stock in
accordance with the terms of Section 5, and any accrued but unpaid dividends
thereon, into shares of Common Stock (such greater amount, the "Liquidation
                                                                -----------
Preference"). If upon any such liquidation, dissolution or winding up of the
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Company, the remaining assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series D
Preferred Stock the full Liquidation Preference and the holders of all Parity
Securities the full liquidation preference thereof, the holders of shares of
Series D Preferred Stock and any such other Parity Securities shall share
ratably in any distribution of the remaining assets of the Company in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.

         (b) After payment in full of the Liquidation Preference, the remaining
assets of the Company legally available for distribution, if any, shall be
distributed to the holders of any Junior Securities.

         (c) The value of any property not consisting of cash which is
distributed by the Company to the holders of the Series D Preferred Stock
pursuant to Section 3(a) or otherwise
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will equal the Fair Market Value (as defined below) thereof. For purposes
hereof, the "Fair Market Value" of any property shall mean the fair market value
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thereof as determined in good faith by the Board; provided, however, that the
value of any securities will be determined as follows:

                  (i)  Securities not subject to investment letter or other
         similar restrictions on free marketability covered by (ii) below:

                       (A)  If traded on a securities exchange or through the
                            Nasdaq National Market, the value shall be deemed to
                            be the average of the closing prices of the
                            securities on such quotation system over the thirty
                            (30) day period ending three (3) days prior to the
                            closing;

                       (B)  If actively traded over-the-counter, the value shall
                            be deemed to be the average of the closing bid or
                            sale prices (whichever is applicable) over the
                            thirty (30) day period ending three (3) days prior
                            to the closing; and

                       (C)  If there is no active public market, the value shall
                            be the fair market value thereof, as mutually
                            determined by the Board and the holders of at least
                            a majority of the voting power of all then
                            outstanding shares of Series D Preferred Stock.

                  (ii) The method of valuation of securities subject to
                       investment letter or other restrictions on free
                       marketability (other than restrictions arising solely by
                       virtue of a stockholder's status as an Affiliate (as
                       defined in Section 7) or former Affiliate) shall be to
                       make an appropriate discount from the market value
                       determined as above in (i)(A), (B) or (C) to reflect the
                       approximate fair market value thereof, as mutually
                       determined by the Board and the holders of at least a
                       majority of the voting power of all then outstanding
                       shares of Series D Preferred Stock and Series E Preferred
                       Stock, voting together as a single class.

         (d)      For purposes of this paragraph 3, holders of a majority of the
voting power of the outstanding shares of Series D Preferred Stock and Series E
Preferred Stock, voting together as a single class, may designate that (1) a
merger or consolidation of the Company with or into another Person (as defined
in Section 7) where (A) the stockholders of the Company immediately prior to
such transaction in the aggregate cease to own at least 50% of the voting
securities of the entity surviving or resulting from such transaction (or
ultimate parent thereof) or (B) any Person becomes the beneficial owner of more
than 50% of the voting securities of the entity surviving or resulting from such
transactions (or ultimate parent thereof) or (2) a sale, lease, transfer or
other disposition of all or substantially all of the Company's assets or stock
of its Subsidiaries shall be deemed a liquidation, dissolution or winding up of
the Company with respect to the Series D Preferred Stock, and holders of shares
of Series D Preferred Stock shall be entitled to payment of the Liquidation
Preference in accordance with this Section 3.
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Section 4.     Voting Rights.

        (a)    Each holder of outstanding shares of Series D Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which all of the shares of Series D Preferred Stock held by
such holder are convertible (as adjusted from time to time pursuant to Section 5
hereof), at each meeting of stockholders of the Company (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Company for their action or consideration. Except as
provided by law or by the express provisions hereof, holders of Series D
Preferred Stock shall vote together with the holders of Common Stock as a single
class.

       (b)     Subject to Section 4(c), unless otherwise provided by law, the
vote or written consent of the holders of at least a majority of the then
outstanding shares of Series D Preferred Stock and Series E Preferred Stock,
voting together as a single class, shall be necessary for effecting or
validating the following actions:

               (i)    any amendment, alteration or change to the rights,
                      preferences, privileges or powers of Series D Preferred
                      Stock in any manner that adversely affects the shares of
                      such series;

               (ii)   any increase or decrease in the total number of authorized
                      or issued shares of Series D Preferred Stock;

               (iii)  any authorization, creation (by way of reclassification or
                      otherwise) or issuance of any Senior Securities, Parity
                      Securities or Junior Securities, other than (1) the
                      issuance of additional shares of Series D Preferred Stock
                      pursuant to Section 2 hereof or any shares of Series E
                      Preferred Stock to be issued to the Investor Stockholder
                      pursuant to the Purchase Option or pursuant to Section 2
                      of the Certificate of Designation establishing the Series
                      E Preferred Stock, (2) the issuance of Parity Securities
                      or Junior Securities with a total aggregate value of not
                      more than $30 million (in addition to the securities
                      described in clauses (1), (3), (4) and (5) of this
                      subsection (iii) and in addition to any Parity Securities
                      or Junior Securities the issuance of which has been
                      approved by the holders of the Series D Preferred Stock
                      and Series E Preferred Stock pursuant to this subsection
                      (iii)), (3) the issuance of Parity Securities or Junior
                      Securities as consideration in any transaction of the type
                      described in clause (iv) of this Section 4(b) which does
                      not require the consent of the holders of the Series D
                      Preferred Stock or Series E Preferred Stock or to which
                      such holders have consented, (4) Common Stock issued upon
                      the conversion or exercise of the securities described in
                      Sections 5(d)(i)(C)(3), 5(d)(i)(C)(5) and 5(d)(i)(C)(7) in
                      accordance with the terms of such securities, and (5) the
                      Reserved Employee Shares (as defined in Section
                      5(d)(i)(D));

               (iv)   (A) any merger or consolidation with or into any other
                      Person, or any acquisition of another Person, whether in a
                      single transaction or series of
<PAGE>

                      related transactions, other than Exempt Acquisitions (as
                      defined in Section 7) or (B) any proposed transaction or
                      series of related transactions involving a Change of
                      Control (as defined in Section 7) of the Company;

               (v)    any redemption, acquisition or other purchase of any share
                      of Common Stock or Preferred Stock of the Company with an
                      aggregate redemption or purchase price in excess of $10
                      million, unless, in the case of any Preferred Stock, such
                      redemption, acquisition or purchase is required by the
                      terms of such Preferred Stock or, in the case of the
                      Hilton Warrant (as defined in Section 5(d)(i)(C)(5)), such
                      redemption, acquisition or purchase is required by the
                      terms of the Hilton Warrant;

               (vi)   any sale of a Subsidiary's securities to any third party
                      (other than the Company or any other wholly owned
                      Subsidiary of the Company);

               (vii)  any amendment, repeal or alteration of the Company's
                      Certificate of Incorporation or Amended and Restated
                      Bylaws in a manner that adversely affects the holders of
                      the Series D Preferred Stock; provided that no increase in
                      the number of authorized shares of Common Stock or
                      Preferred Stock shall, per se, be deemed to adversely
                      affect such holders;

               (viii) any sale or transfer of any of the technology or other
                      intellectual property, to any other Person other than in
                      the ordinary course of business; or

               (ix)   any arrangement or contract to do any of the foregoing.

        (c)    Except as otherwise set forth below, the consent rights of the
holders of the Series D Preferred Stock and the Series E Preferred Stock set
forth in Section 4(b) shall continue until such time as no shares of Series D
Preferred Stock or Series E Preferred Stock are outstanding:

               (i)    At such time as the Investor Stockholder, together with
                      its  Affiliates:

               (A)    shall cease to own at least 10% of the outstanding Common
                      Stock (determined with respect to the Series D Preferred
                      Stock and the Series E Preferred Stock and any other
                      Equity Securities (as defined in Section 7) owned by the
                      Investor Stockholder and its Affiliates that are
                      convertible into, or exchangeable or exercisable for
                      Common Stock, on an as-converted, exchanged or exercised
                      basis (any determination made in accordance with the
                      foregoing shall hereinafter be referred to as "as
                                                                     --
                      converted")), the holders of the Series D
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                      Preferred Stock and the Series E Preferred Stock shall
                      cease to have the consent rights set forth in clauses
                      (iii), (iv) (except with respect to clause (B) thereof),
                      (vi) (except where such a sale would constitute a Change
                      of Control) and (viii) of Section 4(b); and
<PAGE>

               (B)    shall either (A) cease to own at least 5% of the
                      outstanding Common Stock as converted or (B) cease to have
                      the right to designate an Investor Director pursuant to
                      Section 2.1 of the Stockholders Agreement (as defined in
                      Section 4(d)) as a result of a Transfer (as defined in the
                      Stockholders Agreement) of such rights in accordance with
                      Section 3.1(b)(i) of the Stockholders Agreement or in
                      accordance with Section 2.7(a) of the Stockholders
                      Agreement, the holders of the Series D Preferred Stock and
                      the Series E Preferred Stock shall cease to have the
                      consent rights set forth in Section 4(b) except for those
                      set forth in clauses (i), (ii), (vii) and (ix) (in the
                      case of clause (ix), however, only as it relates to
                      clauses (i), (ii) and (vii)) thereof. For the purposes of
                      this Section 4(c)(i), "Common Stock" shall include any
                      securities issued in respect thereof, or in substitution
                      therefor, in connection with any stock split, dividend or
                      combination, or any reclassification, recapitalization,
                      merger, consolidation, exchange or other similar
                      reorganization.

               (ii)   Notwithstanding Section 4(c)(i), the consent rights of the
                      holders of the Series D Preferred Stock and the Series E
                      Preferred Stock set forth in Section 4(b) (except for
                      those rights specified in clauses (i), (ii), (vii) and
                      (ix) (in the case of clause (ix), however, only as it
                      relates to clauses (i), (ii) and (vii)), which shall
                      continue until such time as no shares of Series D
                      Preferred Stock or Series E Preferred Stock are
                      outstanding) shall terminate at such time as the Investor
                      Stockholder and its Affiliates shall cease to own a
                      majority of the outstanding shares of the Series D
                      Preferred Stock and the Series E Preferred Stock, taken as
                      a whole.

         (d)   If an "Event of Default" specified in clauses (A), (B), (C) or
(E) of Section 6(b)(v) shall exist, the number of directors constituting the
Company's Board shall be increased to a number so that after the newly created
vacancies are filled by the holders of the shares of Series D Preferred Stock
and Series E Preferred Stock, as provided in the next succeeding sentence, such
number of directors, together with the directors designated pursuant to Section
2.1 of the Stockholders Agreement, dated as of the date hereof (the
"Stockholders Agreement"), among the Company, the Investor Stockholder and the
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other stockholders signatory thereto shall constitute a majority of the Board.
The holders of a majority of the outstanding shares of Series D Preferred Stock
and Series E Preferred Stock, voting together as a single class, shall be
entitled to elect such number of additional directors to the Board necessary to
fill the vacancies created pursuant to the preceding sentence. Such right may be
exercised initially either at a special meeting of the holders of Series D
Preferred Stock and Series E Preferred Stock or at any annual meeting of
stockholders held for purposes of electing directors, and thereafter at such
annual meetings. If any director so elected by the holders of Series D Preferred
Stock and Series E Preferred Stock shall cease to serve as a director before his
or her term shall expire, the holders of the Series D Preferred Stock and Series
E Preferred Stock, voting together as a single class, then outstanding may, at a
special meeting of the holders, elect a successor to hold office for the
unexpired term of the director whose place shall be vacant. Whenever any such
Event of Default ceases to exist, then the right of the holders of the Series D
Preferred Stock and the Series E Preferred Stock to elect such additional
directors shall cease (but subject always to the same provisions for the
<PAGE>

vesting of such voting rights in the case of any future Events of Default), and
the term of office of any Person elected as director by the holders of the
Series D Preferred Stock and Series E Preferred Stock pursuant to this
subsection 4(d) shall forthwith terminate and the number of directors
constituting the Board shall be reduced accordingly.

         Section 5.      Conversion Rights.

         The holders of the Series D Preferred Stock and the Company shall have
conversion rights as follows (the "Conversion Rights"):

         (a)  Right to Convert.
              ----------------

                  (i)    Each share of Series D Preferred Stock shall be
                         convertible, at the option of the holder thereof, at
                         any time and from time to time, subject to compliance
                         with this Section 6, into fully paid and nonassessable
                         shares of Common Stock at the then effective Conversion
                         Rate (as defined below) (each such conversion, an
                         "Optional Conversion"). The Conversion Rate shall equal
                          -------------------
                         an amount determined by dividing (i) the Original
                         Series D Issue Price, plus any compounded accrued and
                         unpaid dividends (whether or not declared, whether or
                         not funds of the Company are legally available for the
                         payment of dividends and whether or not such dividends
                         have been declared by the Board) on such shares of
                         Series D Preferred Stock, by (ii) the Conversion Price
                         (as defined below) in effect at the time of conversion.
                         The Conversion Price at which shares of Common Stock
                         shall be deliverable upon conversion of Series D
                         Preferred Stock without the payment of additional
                         consideration by the holder thereof (the "Conversion
                                                                   ----------
                         Price") shall initially be $16.50. Such initial
                         -----
                         Conversion Price and the rate at which shares of Series
                         D Preferred Stock may be converted into shares of
                         Common Stock, shall be subject to adjustment as
                         provided below.

                  (ii)   Commencing on the fifth anniversary of the Original
                         Issue Date, upon the written election of the Board and
                         written notice to the holders of Series D Preferred
                         Stock, each share of Series D Preferred Stock then
                         outstanding shall be converted automatically into fully
                         paid and nonassessable shares of Common Stock at the
                         then effective Conversion Rate; provided the Board
                         makes this election and provides written notice of its
                         election to the holders of the Series D Preferred Stock
                         within 60 days of the fifth anniversary of the Original
                         Issue Date.

                  (iii)  In the event of a liquidation, dissolution or winding
                         up of the Company, whether voluntary or involuntary, as
                         set forth in Section 3 above, 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 D Preferred Stock.
<PAGE>

         (b) Fractional Shares. No fractional shares of Common Stock shall be
             -----------------
issued upon conversion of the Series D Preferred Stock. In lieu of fractional
shares, the Company shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.

         (c) Mechanics of Conversion.
             -----------------------

             (i)   In order to convert shares of Series D Preferred Stock into
                   shares of Common Stock, the holder shall surrender the
                   certificate or certificates for such shares of Series D
                   Preferred Stock at the office of the transfer agent (or at
                   the principal office of the Company if the Company serves as
                   its own transfer agent), together with, in the case of an
                   Optional Conversion, written notice that such holder elects
                   to convert all or any number of the shares represented by
                   such certificate or certificates. Such notice shall state the
                   number of shares of Series D Preferred Stock which the holder
                   seeks to convert. If required by the Company, certificates
                   surrendered for conversion shall be endorsed or accompanied
                   by a written instrument or instruments of transfer, in form
                   reasonably satisfactory to the Company, duly executed by the
                   registered holder or his or its attorney duly authorized in
                   writing. The date of receipt of such certificates and notice
                   by the transfer agent or the Company shall be the conversion
                   date ("Conversion Date"). As soon as practicable after the
                          ---------------
                   Conversion Date, the Company shall promptly issue and deliver
                   at such office to such holder a certificate or certificates
                   for the number of shares of Common Stock to which such holder
                   is entitled. Such conversion shall be deemed to have been
                   made at the close of business on the date of such surrender
                   of the certificate representing the shares of Series D
                   Preferred Stock to be converted, and the Person entitled to
                   receive the shares of Common Stock issuable upon such
                   conversion shall be treated for all purposes as the record
                   holder of such shares of Common Stock on such date.

             (ii)  The Company shall at all times during which the Series D
                   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 D 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 D Preferred Stock.
                   Before taking any action which would cause an adjustment
                   reducing the Conversion Price below the then par value of the
                   shares of Common Stock issuable upon conversion of the Series
                   D Preferred Stock, the Company will take any corporate action
                   which may, in the opinion of its counsel, be necessary in
                   order that the Company may validly and legally issue fully
                   paid and nonassessable shares of Common Stock at such
                   adjusted Conversion Price.

             (iii) All shares of Series D 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,
<PAGE>

                                                                              11

               if any, to receive dividends, 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 in exchange therefor, and if applicable, cash for any
               fractional shares of Common Stock. Any shares of Series D
               Preferred Stock so converted shall be retired and canceled and
               shall not be reissued as Series D Preferred Stock, and the
               Company may from time to time take such appropriate action as may
               be necessary to reduce the number of shares of authorized Series
               D Preferred Stock accordingly.

          (iv) If the conversion is in connection with an underwritten offering
               of securities registered pursuant to the Securities Act of 1933,
               as amended, the conversion may, at the option of any holder
               tendering Series D Preferred Stock for conversion, be conditioned
               upon the closing with the underwriter of the sale of securities
               pursuant to such offering, in which event the Person(s) entitled
               to receive the Common Stock issuable upon such conversion of the
               Series D Preferred Stock shall not be deemed to have converted
               such Series D Preferred Stock until immediately prior to the
               closing of the sale of securities.

     (d)  Adjustments to Conversion Price for Diluting Issues.
          ---------------------------------------------------

          (i)  Special Definitions. For purposes of this Subsection 5(d), 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 the Reserved Employee
                    Shares.

               (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 Company after the
                    Original Issue Date, other than Reserved Employee Shares and
                    other than shares of Common Stock issued or issuable:

                    (1)  as a dividend or distribution on Series C Preferred
                         Stock, Series D Preferred Stock or Series E Preferred
                         Stock;

                    (2)  by reason of a dividend, stock split, split-up or other
                         distribution on shares of Common Stock excluded from
                         the definition by the foregoing clause (1);
<PAGE>

                                                                              12

                    (3)  upon conversion of shares of Series C Preferred Stock
                         or Series D Preferred Stock;

                    (4)  upon exercise of the Purchase Option or upon conversion
                         of the shares of Series E Preferred Stock;

                    (5)  pursuant to warrants issued by the Company pursuant to
                         (a) the Common Stock Warrant dated as of October 27,
                         1999 and the Series C Preferred Stock Purchase
                         Agreement, dated as of September 29, 1999 between the
                         Company and U.S. Telesource, Inc., (b) the Warrant
                         Agreement dated as of September 4, 1998 among the
                         Company, Cleartel Communications, Inc., CAIS, Inc. and
                         ING (U.S.) Capital Corporation, Inc., (c) the Series A
                         Preferred Stock and Warrant Purchase Agreement dated as
                         of February 19, 1999 among the Company and the several
                         purchasers set forth therein; and (d) the Warrant to
                         Purchase Common Stock issued pursuant to the First
                         Amendment to the Master License Agreement, dated as of
                         April 23, 1999, among the Company, CAIS, Inc., and
                         Hilton Hotels Corporation (the "Hilton Warrant");
                                                         --------------

                    (6)  pursuant to Rights issued or sold to strategic partners
                         after the date hereof which are exercisable,
                         exchangeable or convertible into up to 1,000,000
                         Additional Shares of Common Stock (as appropriately
                         adjusted for any stock dividends, combinations, splits
                         or the like);

                    (7)  Additional Shares of Common Stock issued to the former
                         shareholders of Atcom, Inc. and Business Anywhere USA,
                         Inc. in accordance with the terms of the Amended and
                         Restated Agreement and Plan of Merger, dated as of
                         August 4, 1999, among the Company, CIAM Corp. and
                         Atcom, Inc., as amended by Amendment No. 1, dated as of
                         September 1, 1999, and as further amended by Amendment
                         No. 2, dated as of November 19, 1999, and the Agreement
                         and Plan of Merger, dated as of September 7, 1999,
                         among the Company, Business Anywhere USA, Inc., CIBA
                         Merger Corp., Kim Kao and Amy Hsiao, respectively; and

                    (8)  any other shares of Common Stock issued or deemed
                         issued that the holders of a majority of the then
                         outstanding shares of the Series D Preferred Stock and
                         Series E Preferred Stock, voting together as a single
                         class, vote to exclude such shares from the definition
                         of Additional Shares of Common Stock.
<PAGE>

                                                                              13

               (D)  "Reserved Employee Shares" shall mean shares reserved, as of
                     ------------------------
                    the date hereof, for issuance upon the exercise of
                    outstanding options to purchase up to 5,601,825 shares of
                    Common Stock plus options to acquire up to 947,671 shares of
                    Common Stock to be issued under the Company's Amended and
                    Restated 1998 Equity Incentive Plan as in effect on December
                    20, 1999 and shares of Common Stock to be issued upon
                    exercise of such options (as appropriately adjusted for any
                    stock dividends, combinations, splits or the like).

               (E)  "Rights to Acquire Common Stock" (or "Rights") shall mean
                     ------------------------------       ------
                    all rights issued by the Company to acquire Common Stock
                    whether by exercise of a warrant, option or similar call, or
                    conversion of any existing instruments, in either case for
                    consideration fixed, in amount or by formula, as of the date
                    of issuance.

         (ii)  No Adjustment of Conversion Price. No adjustment in the number of
               ---------------------------------
               shares of Common Stock into which the Series D Preferred Stock is
               convertible shall be made, by adjustment in the applicable
               Conversion Price thereof, unless the Fair Market Value of the
               consideration per share (determined pursuant to subsection
               5(d)(v) below) received by the Company for an Additional Share of
               Common Stock issued or deemed to be issued by the Company is less
               than 95% of the Fair Market Value per share of the Common Stock
               immediately prior to the issue of such additional shares, or if
               prior to such issuance, the Company receives written notice from
               the holders of at least a majority of the then outstanding shares
               of Series D Preferred Stock and Series E Preferred Stock, voting
               together as a single class, agreeing that no such adjustment
               shall be made as the result of the issuance of Additional Shares
               of Common Stock.

         (iii) Issue of Securities Deemed Issue of Additional Shares of Common
               ---------------------------------------------------------------
               Stock. If the Company at any time or from time to time after the
               -----
               Original Issue Date issues any Options or Convertible Securities
               or Rights to Acquire Common Stock, 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, Rights to Acquire Common Stock or, in the case
               of Convertible Securities, 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; provided,
               however, that Additional Shares of Common Stock shall not be
               deemed to have been issued unless the Fair Market Value of the
               consideration per share (determined pursuant to Subsection
               5(d)(v) hereof) received by the Company for such Additional
               Shares of Common Stock would be less than 95% of the Fair Market
               Value per share of Common Stock on the
<PAGE>

                                                                              14

               date of and immediately prior to such issue, or such record date,
               as the case may be, and provided, further, that in any such case:

               (A)  No further adjustment in the Conversion Price shall be made
                    upon the subsequent issue of shares of Common Stock upon the
                    exercise of such Options, Rights or conversion or exchange
                    of such Convertible Securities;

               (B)  Upon the expiration or termination of any unexercised
                    Option, Right or Convertible Security, the Conversion Price
                    shall be adjusted immediately to reflect the applicable
                    Conversion Price which would have been in effect had such
                    Option, Right or Convertible Security (to the extent
                    outstanding immediately prior to such expiration or
                    termination) never been issued; and

               (C)  In the event of any change in the number of shares of Common
                    Stock issuable upon the exercise, conversion or exchange of
                    any Option, Right or Convertible Security, including, but
                    not limited to, a change resulting from the anti-dilution
                    provisions thereof, the Conversion Price then in effect
                    shall forthwith be readjusted to such Conversion Price as
                    would have obtained had the Conversion Price adjustment that
                    was originally made upon the issuance of such Option, Right
                    or Convertible Security which were not exercised or
                    converted prior to such change been made upon the basis of
                    such change, but no further adjustment shall be made for the
                    actual issuance of Common Stock upon the exercise or
                    conversion of any such Option, Right or Convertible
                    Security.

         (iv)  Adjustment of Conversion Price upon Issuance of Additional Shares
               -----------------------------------------------------------------
               of Common Stock. If the Company 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 Subsection 5(d)(iii), but excluding shares issued as
               a dividend or distribution as provided in subsection 5(f) or upon
               a stock split or combination as provided in subsection 5(e)),
               without consideration, or for a consideration per share less than
               95% of the Fair Market Value per share of Common Stock on the
               date of and immediately prior to such issue, or without the
               requisite number of notices contemplated by subsection 5(d)(ii)
               hereof, then and in such event, the Conversion Price shall be
               reduced, concurrently with such issuance, to a price (calculated
               to the nearest cent) determined by multiplying such Conversion
               Price by a fraction, the numerator of which shall be the sum of
               (A) the number of shares of Common Stock outstanding, on a fully
               diluted basis, immediately prior to such issuance plus (B) the
               number of shares of Common Stock which the aggregate
               consideration received by the Company for the total number of
               Additional Shares of Common Stock so issued would purchase at 95%
               of
<PAGE>

                                                                              15

               the Fair Market Value per share of Common Stock and the
               denominator of which shall be the sum of (1) the number of shares
               of Common Stock outstanding immediately prior to such issuance
               plus (2) the number of such Additional Shares of Common Stock so
               issued.

               Notwithstanding the foregoing, the applicable Conversion Price
               shall not be reduced if the amount of such reduction would be an
               amount less than $.01, but any such amount shall be carried
               forward and reduction with respect thereto made at the time of
               and together with any subsequent reduction which, together with
               such amount and any other amount or amounts so carried forward,
               shall aggregate $.01 or more.

         (v)   Determination of Consideration. For purposes of this Subsection
               ------------------------------
               5(d), "Fair Market Value" of the consideration received by the
                      -----------------
               Company for the issue of any Additional Shares of Common Stock
               shall be computed as follows:

               (A)  Cash and Property. Such consideration shall:
                    -----------------

                    (1)  insofar as it consists of cash, be computed at the
                         aggregate of cash received by the Company, excluding
                         amounts paid or payable for accrued interest or accrued
                         dividends;

                    (2)  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
                         Board; and

                    (3)  in the event Additional Shares of Common Stock are
                         issued together with other shares or securities or
                         other assets of the Company for consideration which
                         covers both, be the proportion of such consideration so
                         received, computed as provided in clauses (1) and (2)
                         above, as determined in good faith by the Board.

               (B)  Options, Rights and Convertible Securities. The
                    ------------------------------------------
                    consideration per share received by the Company for
                    Additional Shares of Common Stock deemed to have been issued
                    pursuant to subsection 5(d)(iii), relating to Options,
                    Rights and Convertible Securities, shall be determined by
                    dividing

                    (1)  the total amount, if any, received or receivable by the
                         Company as consideration for the issue of such Options,
                         Rights 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
<PAGE>

                                                                              16

                         such consideration) payable to the Company upon the
                         exercise of such Options, Rights or the conversion or
                         exchange of such Convertible Securities, by

                    (2)  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, Rights or the conversion or
                         exchange of such Convertible Securities.

     (e)  Adjustment for Stock Splits and Combinations. If the Company shall at
          --------------------------------------------
any time or from time to time after the Original Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. 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
          --------------------------------------------------
Company at any time or from time to time after the Original Issue Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price shall be
decreased as of the time of such issuance, by multiplying such Conversion Price
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding, on a fully diluted basis, immediately prior to such
issuance and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
such Additional Shares of Common Stock issuable in payment of such dividend or
distribution; provided that no such adjustment shall be made if the holders of
the Series D Preferred Stock receive such dividend or distribution in accordance
with the terms of Section 2(f).

     (g)  Adjustments for Other Dividends and Distributions. In the event the
          -------------------------------------------------
Company at any time, or from time to time after the Original Issue Date shall
make or issue, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock or other assets or properties, then
and in each such event provision shall be made so that the holders of shares of
the Series D 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 Company or other assets or properties that they would have
received had their Series D Preferred Stock been converted into Common Stock on
the date of such event and had 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 given application to all
adjustments called for during such period, under this paragraph with respect to
the rights of the holders of the Series D Preferred Stock; provided that no such
adjustment shall be made if the holders of the Series D Preferred Stock receive
such dividend or distribution in accordance with the terms of Section 2(f).
<PAGE>

                                                                              17

     (h)  Adjustment for Reclassification, Exchange or Substitution. If the
          ---------------------------------------------------------
Common Stock issuable upon the conversion of the Series D 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, stock dividend or
reorganization, reclassification, merger, consolidation or asset sale provided
for elsewhere in this Section 5), then and in each such event the holder of each
share of Series D Preferred Stock (whether then outstanding or thereafter
issued) 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 all such shares of Series D Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein or with respect to such other securities or property by the terms
thereof.

     (i)  Reorganizations, Mergers, Consolidations or Asset Sales. If at any
          -------------------------------------------------------
time after the Original Issue Date there is a merger, consolidation,
recapitalization, sale of all or substantially all of the Company's assets or
reorganization involving the Common Stock (collectively, a "Capital
                                                            -------
Reorganization") (other than a merger, consolidation, sale of assets,
--------------
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as part of
such Capital Reorganization, provision will be made so that the holders of
Series D Preferred Stock (whether then outstanding or thereafter issued) will
thereafter be entitled to receive upon conversion of the Series D Preferred
Stock the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such Capital Reorganization, subject
to adjustment in respect to such stock or securities by the terms thereof. In
any such case, appropriate adjustment will be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
D Preferred Stock after the Capital Reorganization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Price then
in effect and the number of shares issuable upon conversion of the Series D
Preferred Stock) will be applicable after that event and be as nearly equivalent
as practicable. In the event that the Company is not the surviving entity of any
such Capital Reorganization, each share of Series D Preferred Stock shall become
shares of preferred stock of such surviving entity, with the same powers, rights
and preferences as provided herein.

     (j)  No Impairment. The Company will not, by amendment of its Certificate
          -------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, 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 D Preferred Stock against impairment to the extent required hereunder.
Nothing in this Section 5 shall affect the continued accrual of dividends on the
Series D Preferred Stock in accordance with the terms of this Certificate of
Designation.
<PAGE>

                                                                              18

          (k)  Certificate as to Adjustments. Upon the occurrence of each
               -----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder, if
any, of Series D Preferred Stock outstanding a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based and shall file a copy of such certificate
with its corporate records. The Company shall, upon the reasonable written
request of any holder of Series D Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series D Preferred
Stock. Despite such adjustment or readjustment, the form of each or all Series D
Preferred Stock certificates, if the same shall reflect the initial or any
subsequent Conversion Price, need not be changed in order for the adjustments or
readjustments to be valid in accordance with the provisions of this Certificate
of Designation, which shall control.

          (l)  Notice of Record Date.  In the event
               ---------------------

               (i)    that the Company declares a dividend (or any other
                      distribution) on its Common Stock payable in Common Stock
                      or other securities of the Company;

               (ii)   that the Company subdivides or combines its outstanding
                      shares of Common Stock;

               (iii)  of any reclassification of the Common Stock of the Company
                      (other than a subdivision or combination of its
                      outstanding shares of Common Stock or a stock dividend or
                      stock distribution thereon);

               (iv)   of any Capital Reorganization; or

               (v)    of the involuntary or voluntary dissolution, liquidation
                      or winding up of the Company;

               then the Company shall cause to be filed at its principal office
          or at the office of the transfer agent of the Series D Preferred
          Stock, and shall cause to be mailed to the holders of the Series D
          Preferred Stock at their last addresses as shown on the records of the
          Company, or such transfer agent, at least 10 days prior to the record
          date specified in (A) below or 20 days prior to the date specified in
          (B) below, a notice stating

                      (A)  the record date of such dividend, distribution,
                           subdivision or combination, 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 or combination are to be
                           determined, or
<PAGE>

                                                                              19

                      (B)  the date on which such reclassification, Capital
                           Reorganization, 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, Capital
                           Reorganization, dissolution or winding up.

          Section 6.  Mandatory Redemption.
                      --------------------

          (a)  Upon the occurrence of a Mandatory Redemption Event (as defined
below) at the option and written election of the holders of a majority of the
voting power of the outstanding shares of the Series D Preferred Stock (a
"Redemption Demand"), the Company shall redeem all outstanding shares of Series
 -----------------
D Preferred Stock, out of funds of the Company legally available therefor, at a
redemption price per share (the "Redemption Price") equal to the greater of (i)
                                 ----------------
the sum of (A) the Original Series D Issue Price plus (B) any compounded accrued
and unpaid dividends thereon (whether or not declared, whether or not funds of
the Company are legally available for the payment of dividends and whether or
not such dividends have been declared by the Board), in each case as adjusted
for any stock dividends, combinations or splits or similar events with respect
to such shares and (ii) the Fair Market Value (as defined in Section 3(c)) of
the number of shares of Common Stock issuable upon conversion of such shares of
Series D Preferred Stock if converted in accordance with the terms of Section 5
of this Certificate of Designation as of the Redemption Date (as defined below).
The redemption under this Section 6 shall take place on a date (the "Redemption
Date") that is no later than 30 days after the receipt by the Company of the
Redemption Demand.

          (b)  The following events shall constitute a "Mandatory Redemption
                                                        --------------------
Event" for purposes hereof:
-----

               (i)    the fifth anniversary of the Original Issuance Date;
                      provided that the holders of the Series D Preferred Stock
                      make the election described in subsection 6(a) within 60
                      days of such fifth anniversary;

               (ii)   a Change of Control occurs;

               (iii)  a sale, transfer, lease, assignment, conveyance or other
                      disposition of all or substantially all of the assets of
                      the Company to any other Person;

               (iv)   the execution of, or entering into by the Company, an
                      agreement to do any of the above; or

               (v)    any of the following events occurs, each of which shall
                      constitute an "Event of Default":
                                     ----------------

                      (A)  failure by the Company to pay any dividend on the
                           Series D Preferred Stock when due or to make any
                           required liquidation or
<PAGE>

                                                                              20

                           redemption payment and such failure continues for a
                           period of 5 days;

                      (B)  failure by the Company to perform or observe in any
                           material respect any Material Covenant (as defined in
                           the Purchase Agreement) of the Company contained in
                           the Purchase Agreement, and such failure continues
                           for 30 days after written notice thereof shall have
                           been given to the Company by the holders of at least
                           25% of the then outstanding shares of Series D
                           Preferred Stock;

                      (C)  any representation or warranty of the Company set
                           forth in Section 3.3, 3.5, 3.6 and 3.9 in the
                           Purchase Agreement was not accurate or complete in
                           all material respects as of the time such
                           representation or warranty was made;

                      (D)  (1) failure by the Company or any Subsidiary to make
                           payment due on any indebtedness or other security
                           with an aggregate principal amount or liquidation
                           preference in excess of $1,000,000 prior to the
                           expiration of the grace period provided in such
                           indebtedness or other security, and/or (2) default by
                           the Company or any Subsidiary under any financing
                           agreement under which the Company or any Subsidiary
                           has outstanding indebtedness with an aggregate
                           principal amount in excess of $1,000,000 which
                           default would permit the holder thereof pursuant to
                           the terms of such agreement to accelerate such
                           indebtedness;

                      (E)  (i) the Company's voluntary or involuntary
                           bankruptcy, receivership, assignment for the benefit
                           of creditors, liquidation which, in the case of any
                           such involuntary proceeding, has not been discharged
                           or stayed within 60 days after the commencement
                           thereof, or (ii) acceleration of third party
                           obligations or unsatisfied judgments in excess of
                           $500,000 of, by or on behalf of the Company which
                           obligations shall not have been satisfied or
                           discharged or which judgments have not been
                           satisfied, discharged or stayed within 30 days
                           thereafter.

          (c) At least twenty (20) days prior to the Redemption Date, the
Company shall send a notice (the "Redemption Notice") of such redemption to be
                                  -----------------
effected to all holders of record (at the close of business on the business day
next preceding the day on which notice is given) of the outstanding Series D
Preferred Stock specifying the number of shares to be redeemed from such holder,
the Redemption Date, the Redemption Price and the place at which payment may be
obtained.

          (d) On or prior to the Redemption Date, the Company shall deposit the
Redemption Price of all shares to be redeemed as of such date with a bank or
trust company having aggregate capital and surplus in excess of $50,000,000, as
a trust fund, with irrevocable instructions and
<PAGE>

                                                                              21

authority to the bank or trust company to pay, upon receipt of notice from the
Company that such holder has surrendered the Series D Preferred Stock share
certificates in accordance with Section 6(e), the Redemption Price of the shares
to their respective holders. Any moneys deposited by the Company pursuant to
this Section 6(d) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 5 hereof no later than the fifth (5th) day
preceding the Redemption Date shall be returned to the Company forthwith upon
such conversion. The balance of any funds deposited by the Company pursuant to
this Section 6(d) remaining unclaimed at the expiration of one (1) year
following such Redemption Date shall be returned to the Company promptly upon
its written request.

          (e) On such Redemption Date, each holder of shares of Series D
Preferred Stock to be redeemed shall surrender such holder's certificates
representing such shares to the Company in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the Person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares which new certificate shall entitle the
holder thereof to all the powers, preferences and rights of a holder of such
shares. From and after such Redemption Date, unless there shall have been a
default in payment of the Redemption Price or the Company is unable to pay the
Redemption Price due to not having sufficient legally available funds, all
rights of the holder of such shares as a holder of Series D Preferred Stock
(except the right to receive the Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares; provided that in the event that shares of Series D Preferred Stock are
not redeemed due to a default in payment by the Company or because the Company
does not have sufficient legally available funds, such shares of Series D
Preferred Stock shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.

          (f) Shares subject to redemption pursuant to this Section 6 shall be
redeemed from each holder of Series D Preferred Stock on a pro rata basis.

          (g) If upon any Redemption Date the assets of the Company available
for redemption are insufficient to pay the redeeming holders of outstanding
shares of Series D Preferred Stock the full amounts to which they are entitled,
all shares of the Series D Preferred Stock will be redeemable for cash upon
demand. The shares of Series D Preferred Stock not redeemed shall remain
outstanding and be entitled to all the powers, preferences and rights provided
herein. At any time thereafter when additional funds of the Company are legally
available for the redemption of shares of Series D Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which the Company
has become obligated to redeem on any Redemption Date but which it has not
redeemed.

          (h) The Company will not enter into any contract or agreement (whether
verbal or written) restricting or impairing its ability to redeem shares of the
Series D Preferred Stock in accordance with this Section 6.
<PAGE>

                                                                              22

          Section 7.  Additional Definitions.  For purposes of this Certificate
                      ----------------------
of Designation, the following terms shall have the following meanings:

          (a) "Affiliate" means, with respect to any Person, any other Person
               ---------
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person, for so
long as such Person remains so associated to the specified Person;

          (b) "beneficial owner" or "beneficially own" has the meaning given
               ----------------      ----------------
such term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of voting securities shall be calculated in accordance with the
provisions of such Rule; provided, however, that for purposes of determining
                         --------  -------
beneficial ownership, a Person shall be deemed to be the beneficial owner of any
security which may be acquired by such Person whether within 60 days or
thereafter, upon the conversion, exchange or exercise of any warrants, options,
rights or other.

          (c) "Capital Stock" means, with respect to any Person at any time, any
               -------------
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or
issued by such Person, and with respect to the Company includes, without
limitation, any and all shares of Common Stock, the Series D Preferred Stock and
the Series E Preferred Stock.

          (d) "Change of Control" means (i) during any period of two consecutive
               -----------------
years, individuals who at the beginning of such period constituted the directors
of the Company (together with any new directors whose election by such directors
or whose nomination for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office, (ii) any merger or consolidation with
or into any other entity or any other similar transaction, whether in a single
transaction or series of related transactions where (A) the stockholders of the
Company immediately prior to such transaction in the aggregate cease to own at
least 50% of the voting securities of the entity surviving or resulting from
such transaction (or the ultimate parent thereof) or (B) any Person becomes the
beneficial owner of more than 50% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent thereof),
(iii) any transaction or series of related transactions in which in excess of
50% of the Company's voting power is transferred to any Person, (iv) the sale,
transfer, lease, assignment, conveyance, exchange, mortgage or other disposition
of all or substantially all of the assets of the Company and its Subsidiaries,
or (v) any liquidation, dissolution or winding-up of the Company;

          (e) "Equity Securities" means any and all shares of Capital Stock of
               -----------------
the Company, securities of the Company convertible into, or exchangeable or
exercisable for, such shares, and options, warrants or other rights to acquire
such shares (including the Purchase Option).

          (f) "Exempt Acquisition" means any acquisition (whether through
               ------------------
merger, consolidation or otherwise) (i) which has a purchase price (including
any assumed indebtedness
<PAGE>

                                                                              23

and valuing any non-cash consideration at its Fair Market Value, as defined in
Section 3(c)) of less than 5% of the market capitalization (as reflected by the
aggregate Fair Market Value of the outstanding Common Stock) of the Company as
of the date of the execution of the definitive agreement relating thereto and
(ii) which, together with all other Exempt Acquisitions, has an aggregate
purchase price (including any assumed indebtedness and valuing any non-cash
consideration at its Fair Market Value) of not more than $50.0 million (which
amount, for the purposes of Section 4(b)(iv)(A) shall be measured from December
21, 1999);

          (g) "Group" has the meaning assigned to such term in Section 13(d)(3)
               -----
of the Securities Exchange Act of 1934, as amended;

          (h) "Investor Director" means any member of the Board designated by
               -----------------
the Investor Stockholder pursuant to Section 2.1 of the Stockholders Agreement;

          (i) "Person" means any individual, corporation, limited liability
               ------
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivisions thereof or any Group comprised of two or more of the
foregoing.

                   [Signatures appear on the following page]
<PAGE>

                                                                              24

         IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be executed this ___ day of February, 2000.

                                         CAIS INTERNET, INC.

                                         By: __________________________________
                                             Name:
                                             Title:

ATTEST:

______________________________<PAGE>

                                                                    Exhibit 4.11

                     CERTIFICATE OF DESIGNATION OF SERIES
                  AND DETERMINATION OF RIGHTS AND PREFERENCES

                                      OF

              SERIES E CONVERTIBLE PARTICIPATING PREFERRED STOCK

                                      OF

                              CAIS INTERNET, INC.

     CAIS Internet, Inc., a Delaware corporation (the"Company"), acting pursuant
                                                      -------
to Section 151 of the General Corporation Law of Delaware, does hereby submit
the following Certificate of Designation of Series and Determination of Rights
and Preferences of its Series E Convertible Participating Preferred Stock.

     FIRST:  The name of the Company is CAIS Internet, Inc.

     SECOND:  By unanimous consent of the Board of Directors of the Company (the
"Board"), dated as of December 20, 1999, the following resolutions were duly
 -----
adopted:

     WHEREAS, the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") authorizes 25,000,000 shares of
              ----------------------------
preferred stock, par value $.01 per share (the "Preferred Stock"), issuable from
                                                ---------------
time to time in one or more series;

     WHEREAS, the Board is authorized, subject to certain limitations prescribed
by law and certain provisions of the Certificate of Incorporation, to establish
and fix the number of shares to be included in any series of Preferred Stock and
the designation, rights, preferences, powers, restrictions and limitations of
the shares of such series; and

     WHEREAS, the Board deems it advisable to establish a series of Preferred
Stock, designated as Series E Convertible Participating Preferred Stock, par
value $.01 per share.

     NOW, THEREFORE, BE IT RESOLVED, that the series of Preferred Stock
designated as Series E Convertible Participating Preferred Stock is hereby
authorized and established; and

     FURTHER, RESOLVED, that the Board does hereby fix and determine the
designation, rights, preferences, powers, restrictions and limitations of the
Series E Convertible Participating Preferred Stock as follows:

     Section 1.  Designation; Rank.
<PAGE>

     This series of cumulative convertible participating Preferred Stock shall
be designated and known as the "Series E Convertible Participating Preferred
Stock" (hereinafter in this Certificate of Designation called the "Series E
                                                                   --------
Preferred Stock"). The number of shares constituting the Series E Preferred
---------------
Stock shall be 9,620,393 shares (including 2,477,536 shares of Series E
Preferred Stock reserved exclusively for the payment of dividends pursuant to
Section 2).

     The Series E Preferred Stock shall, with respect to dividends and rights
upon liquidation, dissolution or winding up, whether voluntary or involuntary,
rank (i) senior to the common stock of the Company, par value $.01 per share
(the "Common Stock"), and to each other class of capital stock or series of
      ------------
Preferred Stock or other equity-linked security established after the date on
which the first share of Series E Preferred Stock is issued by the Company under
this Certificate of Designation (the "Original Issue Date") by the Board the
                                      -------------------
terms of which do not expressly provide that it ranks senior to or on a parity
with the Series E Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up, whether voluntary or involuntary (collectively
referred to with the Common Stock as "Junior Securities"); (ii) on parity with
                                      -----------------
any additional shares of Series E Preferred Stock issued by the Company in the
future pursuant to the irrevocable option (the "Purchase Option") to purchase
                                                ---------------
Option Shares (as defined in the Preferred Stock Purchase Agreement, dated as of
December 20, 1999 (the "Purchase Agreement") between the Company and CII
                        ------------------
Ventures LLC, a Delaware limited liability company (the "Investor
                                                         --------
Stockholder")), any shares of Series D Convertible Participating Preferred Stock
(the "Series D Preferred Stock") issued by the Company and any other class of
      ------------------------
capital stock or series of Preferred Stock or other equity-linked security
issued by the Company established after the Original Issue Date by the Board,
the terms of which expressly provide that it will rank on a parity with the
Series E Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up, whether voluntary or involuntary (collectively
referred to as "Parity Securities"); and (iii) junior to the Company's Series C
                -----------------
Convertible Preferred Stock ("Series C Preferred Stock") and to each class of
                              ------------------------
capital stock or series of Preferred Stock or other equity-linked security
issued by the Company after the Original Issue Date by the Board the terms of
which expressly provide that it will rank senior to the Series E Preferred Stock
as to dividends and rights upon liquidation, dissolution or winding up, whether
voluntary or involuntary (collectively referred to as "Senior Securities").
                                                       -----------------

     Section 2.  Dividends.

     (a) The holders of outstanding shares of Series E Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Company which are, by law, available for such payment,
cumulative dividends, payable in additional shares of Series E Preferred Stock,
at a rate per annum equal to 6.0% of the sum of (i) $14.00 per share (the
"Original Series E Issue Price") and (ii) all compounded accrued and unpaid
------------------------------
dividends on such share of Series E Preferred Stock from the Original Issue
Date, in each case, as adjusted for any stock dividends, combinations or splits
or similar events with respect to the shares.  Such dividends shall be paid and
compounded quarterly on the fifteenth day of December, March, June and September
in each year commencing with a payment on the first such payment date following
the Original Issue Date with respect to any shares of Series E Preferred Stock
of dividends accrued from the Original Issue Date.  Each such dividend shall be
payable to the
<PAGE>

holders of record of shares of Series E Preferred Stock as they appear on the
share register of the Company on the corresponding Record Date. As used herein,
the term "Record Date" means, with respect to the dividend payable on March 15,
          -----------
June 15, September 15 and December 15, respectively of each year, the preceding
February 28, May 31, August 31 and November 30, or such other record date, not
more than 60 days or less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board.

     (b)  The amount of dividends payable for each full dividend period for the
Series E Preferred Stock shall be computed by dividing the annual 6.0% rate by
four. The amount of dividends payable for the initial dividend period, or any
other period shorter or longer than a full dividend period, on the Series E
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year.

     (c)  Dividends on the Series E Preferred Stock shall accumulate and
compound quarterly whether or not the Company has earnings or profits, whether
or not there are funds legally available for payment of such dividends and
whether or not dividends are declared. Dividends will accumulate and compound
quarterly to the extent they are not paid. The Company shall take all actions
required or permitted under the General Corporation Law of Delaware to permit
the payment of dividends on the Series E Preferred Stock and shall declare and
pay such dividends to the extent there are funds legally available therefor.

     (d)  So long as any shares of the Series E Preferred Stock are outstanding,
except as described in the next succeeding sentence, unless full cumulative
dividends on all outstanding shares of Series E Preferred Stock for all past
dividends have contemporaneously been declared and paid in full or declared and
consideration sufficient for the payment thereof set apart for such payment on
the Series E Preferred Stock, then: (A) no dividend shall be declared or paid
upon, or any sum set apart for the payment of dividends upon, any shares of
Parity Securities; (B) no other distribution shall be declared or made upon, or
any sum set apart for the payment of any distribution upon, any shares of Parity
Securities; (C) no shares of Parity Securities shall be purchased, redeemed or
otherwise acquired or retired for value (except by conversion into or an
exchange for shares of Junior Securities) by the Company or any entity as to
which the Company owns, directly or indirectly, more than 50% of such entity's
stock (or similar voting interests) entitled to vote generally in the election
of directors (or other governing body) (a "Subsidiary"); and (D) no monies shall
                                           ----------
be paid into or set apart or made available for a sinking or other like fund for
the purchase, redemption or other acquisition or retirement for value of any
shares of Parity Securities by the Company or any of its Subsidiaries. If at any
time the Company pays less than the total amount of dividends then accrued with
respect to the Series E Preferred Stock, such payment shall be distributed
ratably among the holders of Series E Preferred Stock based upon the aggregate
accrued but unpaid dividends on the Series E Preferred Stock held by each
holder. When dividends are not paid in full or consideration sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon any other
class or series of Parity Securities shall be declared ratably in proportion to
the respective amounts dividends accumulated and unpaid on the Series E
Preferred Stock and accumulated and unpaid on such Parity Securities.

     (e)  Unless full cumulative dividends on all outstanding shares of Series E
Preferred Stock for all past dividends have been declared and paid in full or
declared and consideration
<PAGE>

sufficient for the payment thereof set apart for such payment on the Series E
Preferred Stock, then: (A) no dividend (other than a dividend payable solely in
shares of any Junior Securities) shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any shares of Junior Securities; (B) no
other distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Junior Securities; (C) no shares
of Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for shares of other Junior Securities)
by the Company or any of its Subsidiaries; and (D) no monies shall be paid into
or set apart or made available for a sinking or other like fund for the
purchase, redemption or other acquisition or retirement for value of any shares
of Junior Securities by the Company or any of its Subsidiaries. Holders of
Series E Preferred Stock will not be entitled to any dividends, whether payable
in cash, property or stock, in excess of the full cumulative dividends as herein
described.

     (f)  In addition, when and if the Board of Directors shall declare a
dividend payable with respect to the then outstanding shares of Common Stock,
the holders of the Series E Preferred Stock shall be entitled to the amount of
dividends per share as would be payable on the largest number of whole shares of
Common Stock into which each share of Series E Preferred Stock could then be
converted pursuant to Section 5 hereof.  Any such declared and unpaid dividends
will be payable upon a liquidation, dissolution or winding up, whether voluntary
or involuntary, first to the holders of Series E Preferred Stock and then to the
holders of Common Stock.

     Section 3.  Liquidation Preference.

     (a)  Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any distribution or payment shall be
made to the holders of any Junior Securities, the holders of Series E Preferred
Stock shall be entitled to be paid out of the remaining assets of the Company
legally available for distribution with respect to each share of Series E
Preferred Stock an amount in cash equal to the greater of (i) the sum of (A) the
Original Series E Issue Price per share plus (B) any compounded accrued but
unpaid dividends thereon (whether or not declared, whether or not funds of the
Company are legally available for the payment of dividends and whether or not
such dividends have been declared by the Board), in each case as adjusted for
any stock dividends, combinations or splits or similar events with respect to
such shares or (ii) an amount equal to the amount the holders of Series E
Preferred Stock would have received upon liquidation, dissolution or winding up
had such holders converted their shares of Series E Preferred Stock in
accordance with the terms of Section 5, and any accrued but unpaid dividends
thereon, into shares of Common Stock (such greater amount, the "Liquidation
                                                                -----------
Preference"). If upon any such liquidation, dissolution or winding up of the
----------
Company, the remaining assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series E
Preferred Stock the full Liquidation Preference and the holders of all Parity
Securities the full liquidation preference thereof, the holders of shares of
Series E Preferred Stock and any such other Parity Securities shall share
ratably in any distribution of the remaining assets of the Company in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
<PAGE>

     (b)  After payment in full of the Liquidation Preference, the remaining
assets of the Company legally available for distribution, if any, shall be
distributed to the holders of any Junior Securities.

     (c)  The value of any property not consisting of cash which is distributed
by the Company to the holders of the Series E Preferred Stock pursuant to
Section 3(a) or otherwise will equal the Fair Market Value (as defined below)
thereof. For purposes hereof, the "Fair Market Value" of any property shall mean
                                   -----------------
the fair market value thereof as determined in good faith by the Board;
provided, however, that the value of any securities will be determined as
follows:

          (i)  Securities not subject to investment letter or other similar
     restrictions on free marketability covered by (ii) below:

               (A)  If traded on a securities exchange or through the Nasdaq
                    National Market, the value shall be deemed to be the average
                    of the closing prices of the securities on such quotation
                    system over the thirty (30) day period ending three (3) days
                    prior to the closing;

               (B)  If actively traded over-the-counter, the value shall be
                    deemed to be the average of the closing bid or sale prices
                    (whichever is applicable) over the thirty (30) day period
                    ending three (3) days prior to the closing; and

               (C)  If there is no active public market, the value shall be the
                    fair market value thereof, as mutually determined by the
                    Board and the holders of at least a majority of the voting
                    power of all then outstanding shares of Series E Preferred
                    Stock.

          (ii) The method of valuation of securities subject to investment
               letter or other restrictions on free marketability (other than
               restrictions arising solely by virtue of a stockholder's status
               as an Affiliate (as defined in Section 7) or former Affiliate)
               shall be to make an appropriate discount from the market value
               determined as above in (i)(A), (B) or (C) to reflect the
               approximate fair market value thereof, as mutually determined by
               the Board and the holders of at least a majority of the voting
               power of all then outstanding shares of Series E Preferred Stock
               and Series D Preferred Stock, voting together as a single class.

     (d)  For purposes of this paragraph 3, holders of a majority of the voting
power of the  outstanding shares of Series E Preferred Stock and Series D
Preferred Stock, voting together as a single class, may designate that (1) a
merger or consolidation of the Company with or into another Person (as defined
in Section 7) where (A) the stockholders of the Company immediately prior to
such transaction in the aggregate cease to own at least 50% of the voting
securities of the entity surviving or resulting from such transaction (or
ultimate parent thereof) or (B) any Person becomes the beneficial owner of more
than 50% of the voting securities of the entity surviving or resulting from such
transactions (or ultimate parent thereof) or (2) a sale, lease, transfer or
other
<PAGE>

disposition of all or substantially all of the Company's assets or stock
of its Subsidiaries shall be deemed a liquidation, dissolution or winding up of
the Company with respect to the Series E Preferred Stock, and holders of shares
of Series E Preferred Stock shall be entitled to payment of the Liquidation
Preference in accordance with this Section 3.

Section 4.  Voting Rights.

        (a) Each holder of outstanding shares of Series E Preferred Stock shall
be entitled to the number of votes equal to the number of whole shares of Common
Stock into which all of the shares of Series E Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Section 5
hereof), at each meeting of stockholders of the Company (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Company for their action or consideration. Except as
provided by law or by the express provisions hereof, holders of Series E
Preferred Stock shall vote together with the holders of Common Stock as a single
class.

     (b) Subject to Section 4(c), unless otherwise provided by law, the vote or
written consent of the holders of at least a majority of the then outstanding
shares of Series E Preferred Stock and Series D Preferred Stock, voting together
as a single class, shall be necessary for effecting or validating the following
actions:

         (i)   any amendment, alteration or change to the rights, preferences,
               privileges or powers of Series E Preferred Stock in any manner
               that adversely affects the shares of such series;

         (ii)  any increase or decrease in the total number of authorized or
               issued shares of Series E Preferred Stock;

         (iii) any authorization, creation (by way of reclassification or
               otherwise) or issuance of any Senior Securities, Parity
               Securities or Junior Securities, other than (1) the issuance of
               additional shares of Series E Preferred Stock pursuant to Section
               2 hereof or any shares of Series D Preferred Stock to be issued
               to the Investor Stockholder pursuant to Section 2 of the
               Certificate of Designation establishing the Series D Preferred
               Stock, (2) the issuance of Parity Securities or Junior Securities
               with a total aggregate value of not more than $30 million (in
               addition to the securities described in clauses (1), (3), (4) and
               (5) of this subsection (iii) and in addition to any Parity
               Securities or Junior Securities the issuance of which has been
               approved by the holders of the Series E Preferred Stock and
               Series D Preferred Stock pursuant to this subsection (iii)), (3)
               the issuance of Parity Securities or Junior Securities as
               consideration in any transaction of the type described in clause
               (iv) of this Section 4(b) which does not require the consent of
               the holders of the Series E Preferred Stock or Series D Preferred
               Stock or to which such holders have consented, (4) Common Stock
               issued upon the conversion or exercise of the securities
               described in Sections 5(d)(i)(C)(3), 5(d)(i)(C)(5) and
               5(d)(i)(C)(7) in accordance with
<PAGE>

                 the terms of such securities, and (5) the Reserved Employee
                 Shares (as defined in Section 5(d)(i)(D));

          (iv)   (A) any merger or consolidation with or into any other Person,
                 or any acquisition of another Person, whether in a single
                 transaction or series of related transactions, other than
                 Exempt Acquisitions (as defined in Section 7) or (B) any
                 proposed transaction or series of related transactions
                 involving a Change of Control (as defined in Section 7) of the
                 Company;

          (v)    any redemption, acquisition or other purchase of any share of
                 Common Stock or Preferred Stock of the Company with an
                 aggregate redemption or purchase price in excess of $10
                 million, unless, in the case of any Preferred Stock, such
                 redemption, acquisition or purchase is required by the terms of
                 such Preferred Stock or, in the case of the Hilton Warrant (as
                 defined in Section 5(d)(i)(C)(5)), such redemption, acquisition
                 or purchase is required by the terms of the Hilton Warrant;

          (vi)   any sale of a Subsidiary's securities to any third party (other
                 than the Company or any other wholly owned Subsidiary of the
                 Company);

          (vii)  any amendment, repeal or alteration of the Company's
                 Certificate of Incorporation or Amended and Restated Bylaws in
                 a manner that adversely affects the holders of the Series E
                 Preferred Stock; provided that no increase in the number of
                 authorized shares of Common Stock or Preferred Stock shall,
                 per se, be deemed to adversely affect such holders;

          (viii) any sale or transfer of any of the technology or other
                 intellectual property, to any other Person other than in the
                 ordinary course of business; or

          (ix)   any arrangement or contract to do any of the foregoing.

     (c)  Except as otherwise set forth below, the consent rights of the holders
of the Series E Preferred Stock and the Series D Preferred Stock set forth in
Section 4(b) shall continue until such time as no shares of Series E Preferred
Stock or Series D Preferred Stock are outstanding:

          (i)    At such time as the Investor Stockholder, together with its
                 Affiliates:

          (A)    shall cease to own at least 10% of the outstanding Common Stock
                 (determined with respect to the Series E Preferred Stock and
                 the Series D Preferred Stock and any other Equity Securities
                 (as defined in Section 7) owned by the Investor Stockholder and
                 its Affiliates that are convertible into, or exchangeable or
                 exercisable for Common Stock, on an as-converted, exchanged or
                 exercised basis (any determination made in accordance with the
                 foregoing shall hereinafter be referred to as "as converted")),
                                                                ------------
                 the holders of the Series E Preferred Stock and the Series D
                 Preferred Stock shall cease to have the consent rights set
                 forth in clauses
<PAGE>

                 (iii), (iv) (except with respect to clause (B) thereof), (vi)
                 (except where such a sale would constitute a Change of Control)
                 and (viii) of Section 4(b); and

          (B)    shall either (A) cease to own at least 5% of the outstanding
                 Common Stock as converted or (B) cease to have the right to
                 designate an Investor Director pursuant to Section 2.1 of the
                 Stockholders Agreement (as defined in Section 4(d)) as a result
                 of a Transfer (as defined in the Stockholders Agreement) of
                 such rights in accordance with Section 3.1(b)(i) of the
                 Stockholders Agreement or in accordance with Section 2.7(a) of
                 the Stockholders Agreement, the holders of the Series E
                 Preferred Stock and the Series D Preferred Stock shall cease to
                 have the consent rights set forth in Section 4(b) except for
                 those set forth in clauses (i), (ii), (vii) and (ix) (in the
                 case of clause (ix), however, only as it relates to clauses
                 (i), (ii) and (vii)) thereof. For the purposes of this Section
                 4(c)(i), "Common Stock" shall include any securities issued in
                 respect thereof, or in substitution therefor, in connection
                 with any stock split, dividend or combination, or any
                 reclassification, recapitalization, merger, consolidation,
                 exchange or other similar reorganization.

          (ii)   Notwithstanding Section 4(c)(i), the consent rights of the
                 holders of the Series E Preferred Stock and the Series D
                 Preferred Stock set forth in Section 4(b) (except for those
                 rights specified in clauses (i), (ii), (vii) and (ix) (in the
                 case of clause (ix), however, only as it relates to clauses
                 (i), (ii) and (vii)), which shall continue until such time as
                 no shares of Series E Preferred Stock or Series D Preferred
                 Stock are outstanding) shall terminate at such time as the
                 Investor Stockholder and its Affiliates shall cease to own a
                 majority of the outstanding shares of the Series E Preferred
                 Stock and the Series D Preferred Stock, taken as a whole.

     (d)  If an "Event of Default" specified in clauses (A), (B), (C) or (E) of
Section 6(b)(v) shall exist, the number of directors constituting the Company's
Board shall be increased to a number so that after the newly created vacancies
are filled by the holders of the shares of Series E Preferred Stock and Series D
Preferred Stock, as provided in the next succeeding sentence, such number of
directors, together with the directors designated pursuant to Section 2.1 of the
Stockholders Agreement, dated as of [ ], 2000 (the "Stockholders Agreement"),
                                                    ----------------------
among the Company, the Investor Stockholder and the other stockholders signatory
thereto shall constitute a majority of the Board. The holders of a majority of
the outstanding shares of Series E Preferred Stock and Series D Preferred Stock,
voting together as a single class, shall be entitled to elect such number of
additional directors to the Board necessary to fill the vacancies created
pursuant to the preceding sentence. Such right may be exercised initially either
at a special meeting of the holders of Series E Preferred Stock and Series D
Preferred Stock or at any annual meeting of stockholders held for purposes of
electing directors, and thereafter at such annual meetings. If any director so
elected by the holders of Series E Preferred Stock and Series D Preferred Stock
shall cease to serve as a director before his or her term shall expire, the
holders of the Series E Preferred Stock and Series D Preferred Stock, voting
together as a single class, then outstanding
<PAGE>

may, at a special meeting of the holders, elect a successor to hold office for
the unexpired term of the director whose place shall be vacant. Whenever any
such Event of Default ceases to exist, then the right of the holders of the
Series E Preferred Stock and the Series D Preferred Stock to elect such
additional directors shall cease (but subject always to the same provisions for
the vesting of such voting rights in the case of any future Events of Default),
and the term of office of any Person elected as director by the holders of the
Series E Preferred Stock and Series D Preferred Stock pursuant to this
subsection 4(d) shall forthwith terminate and the number of directors
constituting the Board shall be reduced accordingly.

     Section 5.   Conversion Rights.

     The holders of the Series E Preferred Stock and the Company shall have
conversion rights as follows (the "Conversion Rights"):
                                   -----------------

     (a)  Right to Convert.
          ----------------

            (i)   Each share of Series E Preferred Stock shall be convertible,
                  at the option of the holder thereof, at any time and from time
                  to time, subject to compliance with this Section 6, into fully
                  paid and nonassessable shares of Common Stock at the then
                  effective Conversion Rate (as defined below) (each such
                  conversion, an "Optional Conversion"). The Conversion Rate
                                  -------------------
                  shall equal an amount determined by dividing (i) the Original
                  Series E Issue Price, plus any compounded accrued and unpaid
                  dividends (whether or not declared, whether or not funds of
                  the Company are legally available for the payment of dividends
                  and whether or not such dividends have been declared by the
                  Board) on such shares of Series E Preferred Stock, by (ii) the
                  Conversion Price (as defined below) in effect at the time of
                  conversion. The Conversion Price at which shares of Common
                  Stock shall be deliverable upon conversion of Series E
                  Preferred Stock without the payment of additional
                  consideration by the holder thereof (the "Conversion Price")
                                                            ----------------
                  shall initially be $20.00. Such initial Conversion Price and
                  the rate at which shares of Series E Preferred Stock may be
                  converted into shares of Common Stock, shall be subject to
                  adjustment as provided below.

            (ii)  Commencing on the fifth anniversary of the Original Issue
                  Date, upon the written election of the Board and written
                  notice to the holders of Series E Preferred Stock, each share
                  of Series E Preferred Stock then outstanding shall be
                  converted automatically into fully paid and nonassessable
                  shares of Common Stock at the then effective Conversion Rate;
                  provided the Board makes this election and provides written
                  notice of its election to the holders of the Series E
                  Preferred Stock within 60 days of the fifth anniversary of the
                  Original Issue Date.

            (iii) In the event of a liquidation, dissolution or winding up of
                  the Company, whether voluntary or involuntary, as set forth in
                  Section 3 above, the
<PAGE>

                  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 E Preferred Stock.

     (b)  Fractional Shares.  No fractional shares of Common Stock shall be
          -----------------
issued upon conversion of the Series E Preferred Stock. In lieu of fractional
shares, the Company shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.

     (c)  Mechanics of Conversion.
          -----------------------

          (i)     In order to convert shares of Series E Preferred Stock into
                  shares of Common Stock, the holder shall surrender the
                  certificate or certificates for such shares of Series E
                  Preferred Stock at the office of the transfer agent (or at the
                  principal office of the Company if the Company serves as its
                  own transfer agent), together with, in the case of an Optional
                  Conversion, written notice that such holder elects to convert
                  all or any number of the shares represented by such
                  certificate or certificates. Such notice shall state the
                  number of shares of Series E Preferred Stock which the holder
                  seeks to convert. If required by the Company, certificates
                  surrendered for conversion shall be endorsed or accompanied by
                  a written instrument or instruments of transfer, in form
                  reasonably satisfactory to the Company, duly executed by the
                  registered holder or his, her or its attorney duly authorized
                  in writing. The date of receipt of such certificates and
                  notice by the transfer agent or the Company shall be the
                  conversion date ("Conversion Date"). As soon as practicable
                                    ---------------
                  after the Conversion Date, the Company shall promptly issue
                  and deliver at such office to such holder a certificate or
                  certificates for the number of shares of Common Stock to which
                  such holder is entitled. Such conversion shall be deemed to
                  have been made at the close of business on the date of such
                  surrender of the certificate representing the shares of Series
                  E Preferred Stock to be converted, and the Person entitled to
                  receive the shares of Common Stock issuable upon such
                  conversion shall be treated for all purposes as the record
                  holder of such shares of Common Stock on such date.

          (ii)    The Company shall at all times during which the Series E
                  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 E 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 E Preferred Stock. Before
                  taking any action which would cause an adjustment reducing the
                  Conversion Price below the then par value of the shares of
                  Common Stock issuable upon conversion of the Series E
                  Preferred Stock, the Company will take any corporate action
                  which may, in the opinion of its counsel, be necessary in
                  order that the Company may validly and legally issue fully
                  paid and nonassessable shares of Common Stock at such adjusted
                  Conversion Price.
<PAGE>

          (iii)  All shares of Series E 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, if any, to receive dividends,
                 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 in exchange therefor,
                 and if applicable, cash for any fractional shares of Common
                 Stock. Any shares of Series E Preferred Stock so converted
                 shall be retired and canceled and shall not be reissued as
                 Series E Preferred Stock, and the Company may from time to time
                 take such appropriate action as may be necessary to reduce the
                 number of shares of authorized Series E Preferred Stock
                 accordingly.

          (iv)   If the conversion is in connection with an underwritten
                 offering of securities registered pursuant to the Securities
                 Act of 1933, as amended, the conversion may, at the option of
                 any holder tendering Series E Preferred Stock for conversion,
                 be conditioned upon the closing with the underwriter of the
                 sale of securities pursuant to such offering, in which event
                 the Person(s) entitled to receive the Common Stock issuable
                 upon such conversion of the Series E Preferred Stock shall not
                 be deemed to have converted such Series E Preferred Stock until
                 immediately prior to the closing of the sale of securities.

     (d)  Adjustments to Conversion Price for Diluting Issues.
          ---------------------------------------------------

          (i)    Special Definitions.  For purposes of this Subsection 5(d), 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 the Reserved Employee
                      Shares.

                 (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 Company after
                      the Original Issue Date, other than Reserved Employee
                      Shares and other than shares of Common Stock issued or
                      issuable:

                      (1)  as a dividend or distribution on Series C Preferred
                           Stock, Series E Preferred Stock or Series D Preferred
                           Stock;
<PAGE>

                      (2)  by reason of a dividend, stock split, split-up or
                           other distribution on shares of Common Stock excluded
                           from the definition by the foregoing clause (1);

                      (3)  upon conversion of shares of Series C Preferred Stock
                           or Series D Preferred Stock;

                      (4)  upon any further exercise of the Purchase Option or
                           upon conversion of the shares of Series E Preferred
                           Stock;

                      (5)  pursuant to warrants issued by the Company pursuant
                           to (a) the Common Stock Warrant dated as of October
                           27, 1999 and the Series C Preferred Stock Purchase
                           Agreement, dated as of September 29, 1999 between the
                           Company and U.S. Telesource, Inc., (b) the Warrant
                           Agreement dated as of September 4, 1998 among the
                           Company, Cleartel Communications, Inc., CAIS, Inc.
                           and ING (U.S.) Capital Corporation, Inc., (c) the
                           Series A Preferred Stock and Warrant Purchase
                           Agreement dated as of February 19, 1999 among the
                           Company and the several purchasers set forth therein;
                           and (d) the Warrant to Purchase Common Stock issued
                           pursuant to the First Amendment to the Master License
                           Agreement, dated as of April 23, 1999, among the
                           Company, CAIS, Inc., and Hilton Hotels Corporation
                           (the "Hilton Warrant");
                                 --------------

                      (6)  pursuant to Rights issued or sold to strategic
                           partners after the date hereof which are exercisable,
                           exchangeable or convertible into up to 1,000,000
                           Additional Shares of Common Stock (as appropriately
                           adjusted for any stock dividends, combinations,
                           splits or the like);

                      (7)  Additional Shares of Common Stock issued to the
                           former shareholders of Atcom, Inc. and Business
                           Anywhere USA, Inc. in accordance with the terms of
                           the Amended and Restated Agreement and Plan of
                           Merger, dated as of August 4, 1999, among the
                           Company, CIAM Corp. and Atcom, Inc., as amended by
                           Amendment No. 1, dated as of September 1, 1999, and
                           as further amended by Amendment No. 2, dated as of
                           November 19, 1999, and the Agreement and Plan of
                           Merger, dated as of September 7, 1999, among the
                           Company, Business Anywhere USA, Inc., CIBA Merger
                           Corp., Kim Kao and Amy Hsiao, respectively; and

                      (8)  any other shares of Common Stock issued or deemed
                           issued that the holders of a majority of the then
                           outstanding shares
<PAGE>

                           of the Series E Preferred Stock and Series D
                           Preferred Stock, voting together as a single class,
                           vote to exclude such shares from the definition of
                           Additional Shares of Common Stock.

               (D)    "Reserved Employee Shares" shall mean shares reserved, as
                       ------------------------
                      of the date hereof, for issuance upon the exercise of
                      outstanding options to purchase up to 5,601,825 shares of
                      Common Stock plus options to acquire up to 947,671 shares
                      of Common Stock to be issued under the Company's Amended
                      and Restated 1998 Equity Incentive Plan as in effect on
                      December 20, 1999 and shares of Common Stock to be issued
                      upon exercise of such options (as appropriately adjusted
                      for any stock dividends, combinations, splits or the
                      like).

               (E)    "Rights to Acquire Common Stock" (or "Rights") shall mean
                       ------------------------------       ------
                      all rights issued by the Company to acquire Common Stock
                      whether by exercise of a warrant, option or similar call,
                      or conversion of any existing instruments, in either case
                      for consideration fixed, in amount or by formula, as of
                      the date of issuance.

         (ii)  No Adjustment of Conversion Price.  No adjustment in the number
               ---------------------------------
               of shares of Common Stock into which the Series E Preferred Stock
               is convertible shall be made, by adjustment in the applicable
               Conversion Price thereof, unless the Fair Market Value of the
               consideration per share (determined pursuant to subsection
               5(d)(v) below) received by the Company for an Additional Share of
               Common Stock issued or deemed to be issued by the Company is less
               than 95% of the Fair Market Value per share of the Common Stock
               immediately prior to the issue of such additional shares, or if
               prior to such issuance, the Company receives written notice from
               the holders of at least a majority of the then outstanding shares
               of Series E Preferred Stock and Series D Preferred Stock, voting
               together as a single class, agreeing that no such adjustment
               shall be made as the result of the issuance of Additional Shares
               of Common Stock.

         (iii) Issue of Securities Deemed Issue of Additional Shares of Common
               ---------------------------------------------------------------
               Stock. If the Company at any time or from time to time after the
               -----
               Original Issue Date issues any Options or Convertible Securities
               or Rights to Acquire Common Stock, 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, Rights to Acquire Common Stock or, in the case
               of Convertible Securities, 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; provided,
               however,
<PAGE>

               that Additional Shares of Common Stock shall not be deemed to
               have been issued unless the Fair Market Value of the
               consideration per share (determined pursuant to Subsection
               5(d)(v) hereof) received by the Company for such Additional
               Shares of Common Stock would be less than 95% of the Fair Market
               Value per share of Common Stock on the date of and immediately
               prior to such issue, or such record date, as the case may be, and
               provided, further, that in any such case:

               (A)  No further adjustment in the Conversion Price shall be made
                    upon the subsequent issue of shares of Common Stock upon the
                    exercise of such Options, Rights or conversion or exchange
                    of such Convertible Securities;

               (B)  Upon the expiration or termination of any unexercised
                    Option, Right or Convertible Security, the Conversion Price
                    shall be adjusted immediately to reflect the applicable
                    Conversion Price which would have been in effect had such
                    Option, Right or Convertible Security (to the extent
                    outstanding immediately prior to such expiration or
                    termination) never been issued; and

               (C)  In the event of any change in the number of shares of Common
                    Stock issuable upon the exercise, conversion or exchange of
                    any Option, Right or Convertible Security, including, but
                    not limited to, a change resulting from the anti-dilution
                    provisions thereof, the Conversion Price then in effect
                    shall forthwith be readjusted to such Conversion Price as
                    would have obtained had the Conversion Price adjustment that
                    was originally made upon the issuance of such Option, Right
                    or Convertible Security which were not exercised or
                    converted prior to such change been made upon the basis of
                    such change, but no further adjustment shall be made for the
                    actual issuance of Common Stock upon the exercise or
                    conversion of any such Option, Right or Convertible
                    Security.

          (iv) Adjustment of Conversion Price upon Issuance of Additional Shares
               -----------------------------------------------------------------
               of Common Stock.  If the Company 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 Subsection 5(d)(iii), but excluding shares issued as
               a dividend or distribution as provided in subsection 5(f) or upon
               a stock split or combination as provided in subsection 5(e)),
               without consideration, or for a consideration per share less than
               95% of the Fair Market Value per share of Common Stock on the
               date of and immediately prior to such issue, or without the
               requisite number of notices contemplated by subsection 5(d)(ii)
               hereof, then and in such event, the Conversion Price shall be
               reduced, concurrently with such issuance, to a price (calculated
               to the nearest cent) determined by multiplying such Conversion
               Price by a fraction, the
<PAGE>

               numerator of which shall be the sum of (A) the number of shares
               of Common Stock outstanding, on a fully diluted basis,
               immediately prior to such issuance plus (B) the number of shares
               of Common Stock which the aggregate consideration received by the
               Company for the total number of Additional Shares of Common Stock
               so issued would purchase at 95% of the Fair Market Value per
               share of Common Stock and the denominator of which shall be the
               sum of (1) the number of shares of Common Stock outstanding
               immediately prior to such issuance plus (2) the number of such
               Additional Shares of Common Stock so issued.

               Notwithstanding the foregoing, the applicable Conversion Price
               shall not be reduced if the amount of such reduction would be an
               amount less than $.01, but any such amount shall be carried
               forward and reduction with respect thereto made at the time of
               and together with any subsequent reduction which, together with
               such amount and any other amount or amounts so carried forward,
               shall aggregate $.01 or more.

          (v)  Determination of Consideration.  For purposes of this Subsection
               ------------------------------
               5(d), "Fair Market Value" of the consideration received by the
                      -----------------
               Company for the issue of any Additional Shares of Common Stock
               shall be computed as follows:

               (A)  Cash and Property.  Such consideration shall:
                    -----------------

                    (1)  insofar as it consists of cash, be computed at the
                         aggregate of cash received by the Company, excluding
                         amounts paid or payable for accrued interest or accrued
                         dividends;

                    (2)  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
                         Board; and

                    (3)  in the event Additional Shares of Common Stock are
                         issued together with other shares or securities or
                         other assets of the Company for consideration which
                         covers both, be the proportion of such consideration so
                         received, computed as provided in clauses (1) and (2)
                         above, as determined in good faith by the Board.

               (B)  Options, Rights and Convertible Securities.  The
                    ------------------------------------------
                    consideration per share received by the Company for
                    Additional Shares of Common Stock deemed to have been issued
                    pursuant to subsection 5(d)(iii), relating to Options,
                    Rights and Convertible Securities, shall be determined by
                    dividing
<PAGE>

                    (1)  the total amount, if any, received or receivable by the
                         Company as consideration for the issue of such Options,
                         Rights 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 Company upon the exercise of such Options, Rights
                         or the conversion or exchange of such Convertible
                         Securities, by

                    (2)  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, Rights or the conversion or
                         exchange of such Convertible Securities.

     (e)  Adjustment for Stock Splits and Combinations.  If the Company shall at
          --------------------------------------------
any time or from time to time after the Original Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased.  If the Company
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased.  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
          --------------------------------------------------
Company at any time or from time to time after the Original Issue Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price shall be
decreased as of the time of such issuance, by multiplying such Conversion Price
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding, on a fully diluted basis, immediately prior to such
issuance and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
such Additional Shares of Common Stock issuable in payment of such dividend or
distribution; provided that no such adjustment shall be made if the holders of
the Series E Preferred Stock receive such dividend or distribution in accordance
with the terms of Section 2(f).

     (g)  Adjustments for Other Dividends and Distributions.  In the event the
          -------------------------------------------------
Company at any time, or from time to time after the Original Issue Date shall
make or issue, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock or other assets or properties, then
and in each such event provision shall be made so that the holders of shares of
the Series E 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 Company or other assets or properties that they would have
received had their Series E Preferred Stock been converted into Common Stock on
the date of such event and had thereafter, during
<PAGE>

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
given application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Series E Preferred
Stock; provided that no such adjustment shall be made if the holders of the
Series E Preferred Stock receive such dividend or distribution in accordance
with the terms of Section 2(f).

     (h)  Adjustment for Reclassification, Exchange or Substitution.  If the
          ---------------------------------------------------------
Common Stock issuable upon the conversion of the Series E 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, stock dividend or
reorganization, reclassification, merger, consolidation or asset sale provided
for elsewhere in this Section 5), then and in each such event the holder of each
share of Series E Preferred Stock (whether then outstanding or thereafter
issued) 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 all such shares of Series E Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein or with respect to such other securities or property by the terms
thereof.

     (i)  Reorganizations, Mergers, Consolidations or Asset Sales.  If at any
          -------------------------------------------------------
time after the Original Issue Date there is a merger, consolidation,
recapitalization, sale of all or substantially all of the Company's assets or
reorganization involving the Common Stock (collectively, a "Capital
                                                            -------
Reorganization") (other than a merger, consolidation, sale of assets,
--------------
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as part of
such Capital Reorganization, provision will be made so that the holders of
Series E Preferred Stock (whether then outstanding or thereafter issued) will
thereafter be entitled to receive upon conversion of the Series E Preferred
Stock the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such Capital Reorganization, subject
to adjustment in respect to such stock or securities by the terms thereof.  In
any such case, appropriate adjustment will be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
E Preferred Stock after the Capital Reorganization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Price then
in effect and the number of shares issuable upon conversion of the Series E
Preferred Stock) will be applicable after that event and be as nearly equivalent
as practicable.  In the event that the Company is not the surviving entity of
any such Capital Reorganization, each share of Series E Preferred Stock shall
become shares of preferred stock of such surviving entity, with the same powers,
rights and preferences as provided herein.

     (j)  No Impairment.  The Company will not, by amendment of its Certificate
          -------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
<PAGE>

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 E Preferred Stock against impairment to the extent required hereunder.
Nothing in this Section 5 shall affect the continued accrual of dividends on the
Series E Preferred Stock in accordance with the terms of this Certificate of
Designation.

     (k)  Certificate as to Adjustments.  Upon the occurrence of each adjustment
          -----------------------------
or readjustment of the Conversion Price pursuant to this Section 5, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder, if any, of Series E
Preferred Stock outstanding a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based and shall file a copy of such certificate with its
corporate records.  The Company shall, upon the reasonable written request of
any holder of Series E Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series E Preferred Stock.  Despite such
adjustment or readjustment, the form of each or all Series E Preferred Stock
certificates, if the same shall reflect the initial or any subsequent Conversion
Price, need not be changed in order for the adjustments or readjustments to be
valid in accordance with the provisions of this Certificate of Designation,
which shall control.

     (l)  Notice of Record Date.  In the event
          ---------------------

          (i)    that the Company declares a dividend (or any other
                 distribution) on its Common Stock payable in Common Stock or
                 other securities of the Company;

          (ii)   that the Company subdivides or combines its outstanding shares
                 of Common Stock;

          (iii)  of any reclassification of the Common Stock of the Company
                 (other than a subdivision or combination of its outstanding
                 shares of Common Stock or a stock dividend or stock
                 distribution thereon);

          (iv)   of any Capital Reorganization; or

          (v)   of the involuntary or voluntary dissolution, liquidation or
                winding up of the Company;

          then the Company shall cause to be filed at its principal office or at
     the office of the transfer agent of the Series E Preferred Stock, and shall
     cause to be mailed to the holders of the Series E Preferred Stock at their
     last addresses as shown on the records of the Company, or such transfer
     agent, at least 10 days prior to the record date specified in (A) below or
     20 days prior to the date specified in (B) below, a notice stating
<PAGE>

               (A)  the record date of such dividend, distribution, subdivision
                    or combination, 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 or
                    combination are to be determined, or

               (B)  the date on which such reclassification, Capital
                    Reorganization, 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, Capital Reorganization, dissolution or
                    winding up.

     Section 6.  Mandatory Redemption.
                 --------------------

     (a)  Upon the occurrence of a Mandatory Redemption Event (as defined below)
at the option and written election of the holders of a majority of the voting
power of the outstanding shares of the Series E Preferred Stock (a "Redemption
                                                                    ----------
Demand"), the Company shall redeem all outstanding shares of Series E Preferred
------
Stock, out of funds of the Company legally available therefor, at a redemption
price per share (the "Redemption Price") equal to the greater of (i) the sum of
                      ----------------
(A) the Original Series E Issue Price plus (B) any compounded accrued and unpaid
dividends thereon (whether or not declared, whether or not funds of the Company
are legally available for the payment of dividends and whether or not such
dividends have been declared by the Board), in each case as adjusted for any
stock dividends, combinations or splits or similar events with respect to such
shares and (ii) the Fair Market Value (as defined in Section 3(c)) of the number
of shares of Common Stock issuable upon conversion of such shares of Series E
Preferred Stock if converted in accordance with the terms of Section 5 of this
Certificate of Designation as of the Redemption Date (as defined below).  The
redemption under this Section 6 shall take place on a date (the "Redemption
                                                                 ----------
Date") that is no later than 30 days after the receipt by the Company of the
----
Redemption Demand.

     (b)  The following events shall constitute a "Mandatory Redemption Event"
                                                   --------------------------
for purposes hereof:

          (i)    the fifth anniversary of the Original Issuance Date; provided
                 that the holders of the Series E Preferred Stock make the
                 election described in subsection 6(a) within 60 days of such
                 fifth anniversary;

          (ii)   a Change of Control occurs;

          (iii)  a sale, transfer, lease, assignment, conveyance or other
                 disposition of all or substantially all of the assets of the
                 Company to any other Person;

          (iv)   the execution of, or entering into by the Company, an agreement
                 to do any of the above; or
<PAGE>

          (v)  any of the following events occurs, each of which shall
               constitute an "Event of Default":
                              ----------------

               (A)  failure by the Company to pay any dividend on the Series E
                    Preferred Stock when due or to make any required liquidation
                    or redemption payment and such failure continues for a
                    period of 5 days;

               (B)  failure by the Company to perform or observe in any material
                    respect any Material Covenant (as defined in the Purchase
                    Agreement) of the Company contained in the Purchase
                    Agreement, and such failure continues for 30 days after
                    written notice thereof shall have been given to the Company
                    by the holders of at least 25% of the then outstanding
                    shares of Series E Preferred Stock;

               (C)  any representation or warranty of the Company set forth in
                    Section 3.3, 3.5, 3.6 and 3.9 in the Purchase Agreement was
                    not accurate or complete in all material respects as of the
                    time such representation or warranty was made;

               (D)  (1) failure by the Company or any Subsidiary to make payment
                    due on any indebtedness or other security with an aggregate
                    principal amount or liquidation preference in excess of
                    $1,000,000 prior to the expiration of the grace period
                    provided in such indebtedness or other security, and/or (2)
                    default by the Company or any Subsidiary under any financing
                    agreement under which the Company or any Subsidiary has
                    outstanding indebtedness with an aggregate principal amount
                    in excess of $1,000,000 which default would  permit the
                    holder thereof pursuant to the terms of such agreement to
                    accelerate such indebtedness;

               (E)  (i) the Company's voluntary or involuntary bankruptcy,
                    receivership, assignment for the benefit of creditors,
                    liquidation which, in the case of any such involuntary
                    proceeding, has not been discharged or stayed within 60 days
                    after the commencement thereof, or (ii) acceleration of
                    third party obligations or unsatisfied judgments in excess
                    of $500,000 of, by or on behalf of the Company which
                    obligations shall not have been satisfied or discharged or
                    which judgments have not been satisfied, discharged or
                    stayed within 30 days thereafter.

     (c)  At least twenty (20) days prior to the Redemption Date, the Company
shall send a notice (the "Redemption Notice") of such redemption to be effected
                          -----------------
to all holders of record (at the close of business on the business day next
preceding the day on which notice is given) of the outstanding Series E
Preferred Stock specifying the number of shares to be redeemed from such
<PAGE>

holder, the Redemption Date, the Redemption Price and the place at which payment
may be obtained.

     (d)  On or prior to the Redemption Date, the Company shall deposit the
Redemption Price of all shares to be redeemed as of such date with a bank or
trust company having aggregate capital and surplus in excess of $50,000,000, as
a trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, upon receipt of notice from the Company that such holder has
surrendered the Series E Preferred Stock share certificates in accordance with
Section 6(e), the Redemption Price of the shares to their respective holders.
Any moneys deposited by the Company pursuant to this Section 6(d) for the
redemption of shares thereafter converted into shares of Common Stock pursuant
to Section 5 hereof no later than the fifth (5th) day preceding the Redemption
Date shall be returned to the Company forthwith upon such conversion.  The
balance of any funds deposited by the Company pursuant to this Section 6(d)
remaining unclaimed at the expiration of one (1) year following such Redemption
Date shall be returned to the Company promptly upon its written request.

     (e)  On such Redemption Date, each holder of shares of Series E Preferred
Stock to be redeemed shall surrender such holder's certificates representing
such shares to the Company in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the Person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled.  In the event less than all the shares represented by such
certificates are redeemed, a new certificate shall be issued representing the
unredeemed shares which new certificate shall entitle the holder thereof to all
the powers, preferences and rights of a holder of such shares.  From and after
such Redemption Date, unless there shall have been a default in payment of the
Redemption Price or the Company is unable to pay the Redemption Price due to not
having sufficient legally available funds, all rights of the holder of such
shares as a holder of Series E Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificates), shall
cease and terminate with respect to such shares; provided that in the event that
shares of Series E Preferred Stock are not redeemed due to a default in payment
by the Company or because the Company does not have sufficient legally available
funds, such shares of Series E Preferred Stock shall remain outstanding and
shall be entitled to all of the rights and preferences provided herein.

     (f)  Shares subject to redemption pursuant to this Section 6 shall be
redeemed from each holder of Series E Preferred Stock on a pro rata basis.

     (g) If upon any Redemption Date the assets of the Company available for
redemption are insufficient to pay the redeeming holders of outstanding shares
of Series E Preferred Stock the full amounts to which they are entitled, all
shares of the Series E Preferred Stock will be redeemable for cash upon demand.
The shares of Series E Preferred Stock not redeemed shall remain outstanding and
be entitled to all the powers, preferences and rights provided herein.  At any
time thereafter when additional funds of the Company are legally available for
the redemption of shares of Series E Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Company has
become obligated to redeem on any Redemption Date but which it has not redeemed.
<PAGE>

     (h)  The Company will not enter into any contract or agreement (whether
verbal or written) restricting or impairing its ability to redeem shares of the
Series E Preferred Stock in accordance with this Section 6.

     Section 7.  Additional Definitions.  For purposes of this Certificate of
                 ----------------------
Designation, the following terms shall have the following meanings:

     (a)  "Affiliate" means, with respect to any Person, any other Person that
           ---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person, for so
long as such Person remains so associated to the specified Person;

     (b)  "beneficial owner" or "beneficially own" has the meaning given such
           ----------------      ----------------
term in Rule 13d-3 under the Exchange Act and a Person's beneficial ownership of
voting securities shall be calculated in accordance with the provisions of such
Rule; provided, however, that for purposes of determining beneficial ownership,
      --------  -------
a Person shall be deemed to be the beneficial owner of any security which may be
acquired by such Person whether within 60 days or thereafter, upon the
conversion, exchange or exercise of any warrants, options, rights or other.

     (c)  "Capital Stock" means, with respect to any Person at any time, any and
           -------------
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited) or equivalent ownership interests in or issued by such
Person, and with respect to the Company includes, without limitation, any and
all shares of Common Stock, the Series E Preferred Stock and the Series D
Preferred Stock.

     (d)  "Change of Control" means (i) during any period of two consecutive
           -----------------
years, individuals who at the beginning of such period constituted the directors
of the Company (together with any new directors whose election by such directors
or whose nomination for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office, (ii) any merger or consolidation with
or into any other entity or any other similar transaction, whether in a single
transaction or series of related transactions where (A) the stockholders of the
Company immediately prior to such transaction in the aggregate cease to own at
least 50% of the voting securities of the entity surviving or resulting from
such transaction (or the ultimate parent thereof) or (B) any Person becomes the
beneficial owner of more than 50% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent thereof),
(iii) any transaction or series of related transactions in which in excess of
50% of the Company's voting power is transferred to any Person, (iv) the sale,
transfer, lease, assignment, conveyance, exchange, mortgage or other disposition
of all or substantially all of the assets of the Company and its Subsidiaries,
or (v) any liquidation, dissolution or winding-up of the Company;
<PAGE>

     (e)  "Equity Securities" means any and all shares of Capital Stock of the
           -----------------
Company, securities of the Company convertible into, or exchangeable or
exercisable for, such shares, and options, warrants or other rights to acquire
such shares (including the Purchase Option).

     (f)  "Exempt Acquisition" means any acquisition (whether through merger,
           ------------------
consolidation or otherwise) (i) which has a purchase price (including any
assumed indebtedness and valuing any non-cash consideration at its Fair Market
Value, as defined in Section 3(c)) of less than 5% of the market capitalization
(as reflected by the aggregate Fair Market Value of the outstanding Common
Stock) of the Company as of the date of the execution of the definitive
agreement relating thereto and (ii) which, together with all other Exempt
Acquisitions, has an aggregate purchase price (including any assumed
indebtedness and valuing any non-cash consideration at its Fair Market Value) of
not more than $50.0 million (which amount, for the purposes of Section
4(b)(iv)(A) shall be measured from December 21, 1999);

     (g)  "Group" has the meaning assigned to such term in Section 13(d)(3) of
           -----
the Securities Exchange Act of 1934, as amended;

     (h)  "Investor Director" means any member of the Board designated by the
           -----------------
Investor Stockholder pursuant to Section 2.1 of the Stockholders Agreement;

     (i)  "Person" means any individual, corporation, limited liability company,
           ------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivisions thereof or any Group comprised of two or more of the foregoing.

                   [Signatures appear on the following page]
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be executed this ___ day of ____________.

                                        CAIS INTERNET, INC.

                                        By: __________________________________
                                             Name:
                                             Title:

ATTEST:

______________________________

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