<PAGE> 1
SCHEDULE 14C
(Rule 14c-101)
Information Required in Information Statement
Schedule 14C Information
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
(Amendment No.___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
Xpedior Incorporated
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Information Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
XPEDIOR INCORPORATED
ONE NORTH FRANKLIN STREET
SUITE 1500
CHICAGO, ILLINOIS 60606
NOTICE OF ACTION BY WRITTEN CONSENT
TO THE STOCKHOLDERS:
The Board of Directors of Xpedior Incorporated has approved (1) the
issuance of shares of Xpedior's Series A Preferred Stock upon conversion of a
$50 million Convertible Note issued to PSINet Inc., and the issuance of shares
of common stock of Xpedior in payment of interest on the Convertible Note and in
payment of dividends on, and upon the conversion of, the Series A Preferred
Stock, (2) an amendment to Xpedior's amended and restated certificate of
incorporation to permit holders of the Series A Preferred Stock to call special
meetings of the stockholders, (3) an amendment to Xpedior's amended and restated
certificate of incorporation to eliminate the provision that prohibits Xpedior
from issuing or selling any capital stock of Xpedior other than pursuant to its
Stock Incentive Plan without the consent of the holders of a majority of the
voting stock of Xpedior, (4) the issuance of shares of common stock of Xpedior
upon the conversion of 7% Convertible Subordinated Promissory Notes due 2002
issued by Xpedior in connection with the acquisition of Kinderhook Systems, Inc.
and (5) the adoption of an employee stock purchase plan. Pursuant to Delaware
state law, we have obtained the written consent of our principal stockholder
beneficially owing more than 50% of our common stock approving these actions.
Your consent is not required and is not being solicited in connection with
these actions. Pursuant to Section 228 of the Delaware General Corporation Law,
we are providing you with notice of approval of action by less than unanimous
consent of Xpedior stockholders. The enclosed information statement is being
provided to you for your information to comply with the requirements of the
Securities Exchange Act of 1934, as amended.
These actions will be effective 20 days after mailing this notice and
enclosed information statement to stockholders.
By Order of the Board of Directors
Caesar J. Belbel
Senior Vice President, General Counsel
and Secretary
Boston, Massachusetts
September 26, 2000
<PAGE> 3
XPEDIOR INCORPORATED
ONE NORTH FRANKLIN STREET
SUITE 1500
CHICAGO, ILLINOIS 60606
INFORMATION STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION..................................................... 1
ITEM (1)................................................................ 3
ITEM (2)................................................................ 6
ITEM (3)................................................................ 6
ITEM (4)................................................................ 7
ITEM (5)................................................................ 15
RELATED INFORMATION..................................................... 15
SHAREHOLDER PROPOSALS................................................... 16
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GENERAL INFORMATION
This information statement, which is first being mailed on or about
September 26, 2000, is distributed in connection with certain actions taken by
written consent of PSINet Consulting Solutions Holdings, Inc. ("PSINET
CONSULTING"), formerly known as Metamor Worldwide, Inc., the majority
shareholder of Xpedior Incorporated (the "COMPANY" or "XPEDIOR"), which will be
effective on or about October 16, 2000, all as more fully described below. THIS
DOCUMENT IS REQUIRED UNDER THE FEDERAL SECURITIES LAWS AND IS PROVIDED SOLELY
FOR YOUR INFORMATION. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
The Board of Directors of Xpedior has established June 12, 2000 as the
record date (the "INITIAL RECORD DATE") for determining the number of shares
required to consent to the actions described in Items 1 and 2 below and the
stockholders entitled to receive notice of such consent and this information
statement. The Board of Directors has established August 28, 2000 as the record
date (the "SECOND RECORD DATE") for determining the number of shares required to
consent to the actions described in Items 3, 4 and 5 below and the stockholders
entitled to receive this information statement in connection therewith. On the
Initial Record Date the number of outstanding shares of common stock, $0.01 par
value per share (the "COMMON STOCK") of Xpedior was 50,000,000. On the Second
Record Date the number of outstanding shares of Common Stock was 50,490,250. To
Xpedior's knowledge, on June 30, 2000, the directors and executive officers of
the Xpedior owned less than 1% of the outstanding shares of Common Stock.
Information concerning stockholders who were known to be the beneficial owners
of more than 5% of the shares of Common Stock as of June 30, 2000 is as follows:
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON PERCENT OF COMPANY'S
BENEFICIAL OWNER STOCK BENEFICIALLY OWNED COMMON STOCK
------------------- -------------------------- --------------------
PSINet Consulting Solutions 40,005,048 80%
Holdings, Inc.
4400 Post Oak Parkway
Suite 1100
Houston, Texas 77027
PSINet Inc. 40,005,048(1) 80%
44983 Knoll Square
Ashburn, Virginia 20147
-----------
(1) PSINet Inc. became the indirect beneficial owner of the Common Stock
beneficially owned by PSINet Consulting Solutions Holding, Inc. when it
acquired PSINet Consulting on June 15, 2000, as described below.
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<PAGE> 5
As described more fully below, the Board of Directors and our principal
stockholder beneficially owning more than 50% of our outstanding common stock
have approved the following matters:
Item (1) The issuance of 1,000,000 shares of Series A 8 1/2% Cumulative
Convertible Preferred Stock ("SERIES A PREFERRED STOCK") of the
Company to PSINet Inc. ("PSINET") upon the conversion of a $50 million
convertible note issued by Xpedior to PSINet on June 15, 2000 (the
"CONVERTIBLE NOTE") and the issuance of shares of Common Stock in
payment of interest on the Convertible Note and dividends on, and upon
conversion of, the Series A Preferred Stock.
Item (2) An amendment to our Amended and Restated Certificate of
Incorporation (the "CERTIFICATE OF INCORPORATION") to permit holders
of the Series A Preferred Stock to call special meetings of the
holders of Series A Preferred Stock.
Item (3) An amendment to the Certificate of Incorporation to eliminate
Article Thirteenth which prohibits us, for so long as PSINet
Consulting is the holder of record of a majority of the voting stock
of the Company on a per vote basis, from issuing or selling any of our
capital stock, other than pursuant to our Stock Incentive Plan without
the consent of the holders of a majority of the voting stock of
Xpedior.
Item (4) The adoption of an employee stock purchase plan (the "EMPLOYEE STOCK
PURCHASE PLAN").
Item (5) The issuance of 508,417 shares of Common Stock upon the
conversion of convertible notes issued in connection with our
acquisition of Kinderhook Systems, Inc. in September 1999.
The Certificate of Incorporation requires the approval of the holders of a
majority of the voting stock of the Company for the issuance and sale of any
capital stock of the Company, other than pursuant to our Stock Incentive Plan,
prior to the first date on which PSINet Consulting is not the holder of record
of a majority of the outstanding voting stock of the Company (the "TRIGGER
DATE"). The Certificate of Incorporation also provides that, prior to the
Trigger Date, the Company may not amend the Certificate of Incorporation without
the consent of a majority of the voting stock of the Company.
The Board of Directors of Xpedior has approved Items (1) through (5) and,
pursuant to the Delaware General Corporation Law, we have obtained the requisite
written consent from our principal stockholder beneficially owning more than 50%
of the outstanding Common Stock with respect to Items (1) through (5). Other
than this written consent, no further action by stockholders is necessary to
approve Items (1) through (5) and no such approval will be sought. This
information statement constitutes the notice of corporate action without meeting
required by Section 228(d) of the Delaware General Corporate Law. These actions
will be effective 20 days after mailing this notice and information statement to
stockholders.
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<PAGE> 6
ITEM (1)
ISSUANCE OF 1,000,000 SHARES OF
SERIES A PREFERRED STOCK TO PSINET INC. AND ISSUANCE
OF SHARES OF COMMON STOCK IN PAYMENT OF INTEREST ON CONVERTIBLE
NOTE, DIVIDENDS ON AND UPON CONVERSION
OF SERIES A PREFERRED STOCK
Xpedior has issued a $50 million Convertible Note to PSINet. The
Convertible Note will automatically convert into 1,000,000 shares of Series A
Preferred Stock 20 days after the mailing of this information statement to
stockholders of Xpedior.
DESCRIPTION OF CAPITAL STOCK
The Series A Preferred Stock has the rights and preferences described below
and more fully set forth in the form of the Certificate of the Designations,
Preferences and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series A Preferred Stock
attached hereto as EXHIBIT A.
DIVIDENDS. Cumulative dividends accrue on the Series A Preferred Stock at a
rate of 8 1/2% per annum. Xpedior has the option of paying dividends on the
Series A Preferred Stock in cash or shares of Common Stock, or any combination
thereof. Xpedior may not pay dividends on the Series A Preferred Stock in shares
of Common Stock, however, if, on the date on which the Board of Directors
declares such dividend, one of the following conditions exists:
- there are an insufficient number of shares of Common Stock reserved for
issuance or held as treasury stock for the payment of such dividends,
- the shares of Common Stock payable as a dividend on the Series A
Preferred Stock are not designated for quotation on the Nasdaq National
Market or other applicable national exchange,
- the Company has failed to timely satisfy its obligations with respect
to any conversion notice with respect to the conversion of shares of
Series A Preferred Stock into Common Stock,
- the aggregate number of shares of Common Stock then held by holders of
the Series A Preferred Stock which had been issued as a dividend on, or
upon prior conversion of, the Series A Preferred Stock PLUS the
aggregate number of Shares of Common Stock then issuable upon
conversion of any shares of Series A Preferred Stock exceeds 7,500,000
prior to June 15, 2003 or 8,750,000 on or after June 15, 2003, or
- at any time prior to June 15, 2003, the five day average market price
of the Common Stock on the date that the Board of Directors declares
the dividend to be paid in shares of Common Stock is less than $10.00
per share (subject to adjustment for stock splits, reverse stock
splits, recapitalizations and similar events).
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In order to pay dividends on the Series A Preferred Stock by issuance of
shares of Common Stock, Xpedior must provide at least 30 days prior written
notice of its intention to pay dividends in shares of Common Stock.
If Xpedior is in default in the payment of dividends on the Series A
Preferred Stock in an amount equal to six quarterly dividends, the size of the
Board of Directors shall increase by two directors and the holders of the Series
A Preferred Stock, voting separately as a class, shall have the right to elect
such additional directors (the "PREFERRED STOCK DIRECTORS"), who shall serve as
directors until the dividends in default are paid.
CONVERSION. Shares of Series A Preferred Stock may be converted into shares
of Common Stock at any time and from time to time at the option of the holders
of such shares of Series A Preferred Stock. The number of shares of Common Stock
into which shares of Series A Preferred Stock shall convert is determined by
multiplying the number of shares of Series A Preferred Stock being converted by
the conversion ratio, which is a number calculated by dividing the stated value
of a share of Series A Preferred Stock, $50.00, by the conversion price. The
conversion price for each share of Series A Preferred Stock (the "CONVERSION
PRICE") initially is $37.50. If the thirty day average market price of the
Company's Common Stock on the first anniversary of the original issue date (the
"ONE YEAR RESET PRICE") is less than the then effective Conversion Price, then
on and after such first anniversary date the Conversion Price shall be adjusted
to equal the One Year Reset Price. If the thirty day average market price of the
Company's Common Stock on the second anniversary of the original issue date (the
"TWO YEAR RESET PRICE") is less than the then effective Conversion Price, then
on and after such second anniversary date the Conversion Price shall be adjusted
to equal the Two Year Reset Price. If the thirty day average market price of the
Company's Common Stock on the third anniversary of the original issue date (the
"THREE YEAR RESET PRICE") is less than the then effective Conversion Price, then
on and after such third anniversary date the Conversion Price shall be adjusted
to equal 95% of the Three Year Reset Price. The Conversion Price for the Series
A Preferred Stock will also be adjusted for issuances of stock dividends or
certain distributions on shares of Common Stock, stock splits, combinations or
reclassifications, and issuances of Common Stock at a price per share that is
less than the five day average market price in effect immediately prior to such
issuance or sale. In addition, if Xpedior issues rights and/or warrants to all
of the holders of Common Stock as a class at any time while any shares of Series
A Preferred Stock are outstanding, then PSINet shall receive the rights and/or
warrants that it would have received if it had converted all of its shares of
Series A Preferred Stock and if all dividends due but not paid on the Series A
Preferred Stock had been paid in shares of Common Stock.
Xpedior has the right to cause the conversion of all, but not less than
all, of the then outstanding shares of Series A Preferred Stock into Common
Stock if, at any time after June 15, 2001, the per share market value of the
Common Stock for at least 30 consecutive trading days is greater than 225% of
the Conversion Price then in effect and the average daily trading volume of the
Common Stock on the Nasdaq National Market for such 30 consecutive trading days
exceeds 100,000 shares (subject to applicable adjustments). Xpedior may not
cause the conversion of the outstanding shares of Series A Preferred Stock into
shares of Common Stock, however, if at the time Xpedior delivers a conversion
notice to the holders of the Series A Preferred Stock or on the conversion date
selected by Xpedior, the shares of Common Stock to be issued upon conversion of
the Series A Preferred Stock have not been listed for trading on The Nasdaq
National Market or other applicable national exchange and reserved for issuance
by the Company.
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<PAGE> 8
The holders of Series A Preferred Stock will not have any voting rights
other than those provided by law or in the Certificate of Incorporation of
Xpedior, except that Xpedior cannot take any of the following actions without
the approval of the holders of two-thirds of the shares of Series A Preferred
Stock outstanding at such time:
- alter or change the rights, preferences or privileges of the Series A
Preferred Stock so as to affect adversely the Series A Preferred Stock
as a class,
- create any new class or series of capital stock having a preference
over the Series A Preferred Stock as to redemption, conversion, the
payment of dividends or distribution of assets upon any liquidation,
dissolution or winding up of Xpedior,
- increase the authorized number of shares of Series A Preferred Stock,
or
- issue any shares of Series A Preferred Stock.
LIQUIDATION, ETC. Upon the liquidation, dissolution or winding-up of
Xpedior, holders of the Series A Preferred Stock are entitled to receive out of
the assets of Xpedior for each share of Series A Preferred Stock, $50.00 per
share plus all accrued but unpaid dividends per share.
So long as any shares of Series A Preferred Stock remain outstanding,
Xpedior and its Subsidiaries are, with limited exceptions, prohibited from
redeeming, purchasing or otherwise acquiring any Common Stock or other equity
securities of Xpedior that are not on parity with the Series A Preferred Stock
("JUNIOR SECURITIES"), paying or declaring dividends or making distributions on
any Junior Securities or setting aside or applying funds to the purchase,
redemption or acquisition of Junior Securities.
PSINet is permitted to transfer shares of Series A Preferred Stock to its
affiliates and to affiliates of its affiliates, and PSINet and its affiliates
may transfer shares of Series A Preferred Stock among themselves. Except for
these permitted transfers, shares of Series A Preferred Stock may not be sold,
hypothecated, transferred or otherwise conveyed by PSINet or its permitted
transferee without the prior written consent of Xpedior.
DESCRIPTION OF TRANSACTION
On June 15, 2000 PSINet acquired PSINet Consulting in an acquisition which
was effected through the merger of a wholly-owned subsidiary of PSINet with and
into PSINet Consulting (the "MERGER"). Stockholders of PSINet Consulting
received 0.9 shares of PSINet common stock in exchange for each share of common
stock of PSINet Consulting. Both before and after giving effect to the Merger,
PSINet Consulting was the record and beneficial owner of 40,005,048, or 80%, of
outstanding shares of Common Stock. As a result of the Merger, PSINet also
became the beneficial owner of such shares of Common Stock. Xpedior used all of
the proceeds from the issuance of the Convertible Note to PSINet for working
capital and general corporate purposes and to repay intercompany debt owed to
PSINet Consulting.
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<PAGE> 9
The issuance of the Convertible Note to PSINet and the issuance of the
Series A Preferred Stock upon conversion of the Convertible Note have not been
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and are being conducted pursuant to an exemption from the registration
requirements of the Securities Act. The Company and PSINet have entered into a
Registration Rights Agreement dated as of June 15, 2000 pursuant to which PSINet
may require that Xpedior file a registration statement and cause such
registration statement to become effective with respect to the shares of Common
Stock issued or issuable to holders of the Series A Preferred Stock in payment
of interest upon the Convertible Note and dividends upon, or upon conversion of,
Series A Preferred Stock.
ITEM (2)
AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF XPEDIOR INCORPORATED
Article Tenth of the Certificate of Incorporation states that special
meetings of the stockholders, and any proposals to be considered at such
meetings, may be called and proposed exclusively by the Board of Directors, and
no stockholder may require the Board of Directors to call a special meeting of
the common stockholders or to propose business at a special meeting of
stockholders.
As described above, the holders of the Series A Preferred Stock shall
become entitled to elect two directors to the Board of Directors if Xpedior
defaults in the payment of dividends upon the Series A Preferred Stock in an
amount equal to six quarterly dividends. The amendments to the Certificate of
Incorporation and an amendment to Xpedior's bylaws approved by the Board of
Directors permit the holders of the Series A Preferred Stock to call a special
meeting of the holders of the Series A Preferred Stock in order to elect such
two directors.
ITEM (3)
AMENDMENT OF AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF XPEDIOR INCORPORATED
Article Thirteenth of the Certificate of Incorporation states that, prior
to the Trigger Date, the Company may not issue or sell any capital stock other
than pursuant to Xpedior's Stock Incentive Plan without the consent of the
holders of a majority of the voting stock of Xpedior. The amendment to the
Certificate of Incorporation eliminates this prohibition.
In connection with this amendment, PSINet, PSINet Consulting and Xpedior
have entered into an agreement dated as of September 12, 2000 that will become
effective as of the date that the amendment to Article Thirteenth is effective
(the "AGREEMENT"), which will prohibit the Company, subject to certain limited
exceptions described below, for so long as PSINet is the direct or indirect
record holder of a majority of the outstanding shares of the Company entitled to
vote generally in the election of directors, calculated on a per vote basis
from, without the prior written consent of PSINet, (a) issuing, delivering,
selling or granting (i) any shares of capital stock
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<PAGE> 10
of Xpedior, (ii) any security convertible into or exchangeable for any shares of
capital stock of Xpedior, or (iii) any option, conversion right, exchange right
or warrant obligating Xpedior to issue, deliver, sell or grant any shares of
capital stock of Xpedior, or (b) entering into any other agreement or commitment
of any nature whatsoever obligating Xpedior to issue, deliver, sell or grant any
shares of capital stock of Xpedior. Pursuant to the Agreement, Xpedior may
without PSINet's consent (a) issue shares of Common Stock in connection with
acquisitions, subject to limitations on the number of shares issuable in
connection with each individual acquisition and with all acquisitions in the
aggregate and to certain other limitations, (b) issue, deliver, sell and/or
grant shares of Common Stock or options to purchase shares of Common Stock
pursuant to and in accordance with its Stock Incentive Plan and (c) issue,
deliver, sell and/or grant up to 2,000,000 shares of common stock of Xpedior or
options to purchase shares of Common Stock pursuant to and in accordance with
the terms of the Employee Stock Purchase Plan. A copy of the Agreement is
attached hereto as EXHIBIT B.
ITEM (4)
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved an employee stock purchase plan (the
"PLAN") pursuant to which employees of the Company, PSINet and designated
subsidiaries of the Company (the "PARTICIPATING COMPANIES") may be granted
options to purchase shares of Common Stock. A copy of the Plan is attached
hereto as EXHIBIT C. The aggregate number of shares of Common Stock which may be
sold pursuant to options granted under the Plan will not exceed 2,000,000
shares. On September 21, 2000, the closing price of the Common Stock on The
Nasdaq National Market was $4.3125 per share.
The Plan is designed to enable eligible employees to purchase shares of
Common Stock at a discount through payroll deductions. All employees of the
Participating Companies on August 1, 2000 and on each date that options are
granted pursuant to the Plan, other than employees owning 5% or more of the
Common Stock, are eligible to participate in the Plan. As of August 1, 2000
there were approximately 1,688 employees eligible to participate in the Plan.
Purchases occur four times a year at the end of three-month option periods
beginning on January 1, April 1, July 1 and October 1. The purchase price for
Common Stock under the Purchase Plan is 85% of the lesser of the fair market
value of the Common Stock at the beginning of the option period and the fair
market value of the Common Stock at the end of the option period. Participants
may elect under the Plan to have between 1% and 15% of their pay withheld and
applied to the purchase of shares at the end of the option period. In no event,
however, will a participant be granted an option under the Plan that permits the
participant's rights to purchase Common Stock under the Plan to accrue at a rate
which exceeds $25,000 of fair market value of Common Stock per calendar year.
The Plan is administered by the Plan Committee of the Board of Directors.
If a participant's employment with the Participating Company terminates,
the participant's option to purchase shares for that period will be deemed
canceled and the balance of the participant's payroll withholding account will
be refunded. If a participant retires, dies or becomes disabled during an option
period, the participant's option will be deemed canceled and the balance of his
or her payroll withholding account refunded unless the participant or the
participant's personal representative, as the case may be,
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<PAGE> 11
elects to have such balance applied at the end of the period toward the purchase
of shares of Common Stock to be delivered to the participant or the
participant's personal representative, as the case may be.
The following description of certain federal income tax consequences
associated with participation in the Plan is based on the law as in effect on
August 1, 2000. It does not purport to cover federal employment tax or other
federal tax consequences that may be associated with the Plan, nor does it cover
state, local or non-U.S. taxes.
Under the Plan, no income is realized either upon the grant of an option at
the beginning of an option period or upon the exercise of the option at the end
of that period. If shares of Common Stock acquired upon exercise are disposed of
within two years from the date of grant of the option, the participant realizes
ordinary income at the time of disposition equal in general to the excess of the
fair market value of the shares on the measurement date over the exercise price.
A corresponding deduction is available to the Company. If shares acquired upon
exercise are disposed of after the two-year period described above, or if the
participant dies at any time while holding the shares, ordinary income is
realized in an amount equal to the lesser of (i) 15% of the fair market value of
the shares at the time the option was granted, or (ii) the excess of the fair
market value of the shares at the time of disposition (or death) over the
exercise price. No deduction is available to the Company for this amount. Any
further gain is taxed as capital gain.
EXECUTIVE COMPENSATION
NAMED EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth, for the fiscal years ended December 31,
1998 and 1999, the annual compensation paid to the Company's Chief Executive
Officer and to each of its four most highly compensated executive officers (the
"Named Executive Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION(1) RESTRICTED SECURITIES
--------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS AWARD(S) OPTIONS(2) COMPENSATION
------------------------------ ---- ------ ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David N. Campbell
Chief Executive Officer 1999 $113,014(3) $140,118 50,000(4) 1,000,000 $85,000(5)
Eugene Rooney 1999 162,500 81,250 -- 300,000 --
Executive Vice President(6) 1998 150,000 -- -- -- --
J. Brian Farrar 1999 212,500 212,933 -- 400,000 --
Executive Vice President 1998 156,250 193,723 -- -- --
and Chief Operating Officer
Steven M. Isaacson 1999 165,000 129,337 -- 130,000 --
Senior Vice President and 1998 156,250 159,687 -- -- --
Chief Financial Officer
Kenneth R. Johnsen 1999 -- -- -- -- --
Former Chief Executive Officer(7)
</TABLE>
----------
(1) The compensation described in this table does not include (a) medical,
group life insurance or other benefits received by the Named Executive
Officers which are available generally to all salaried employees of the
Company, and (b) certain perquisites and other personal benefits,
securities or property received by the Named Executive Officer which do not
exceed the lesser of $50,000 or 10% of any such officer's salary and bonus
disclosed in this table.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payouts during the fiscal years ended December 31,
1998 and 1999.
(3) Represents pro rata salary paid to Mr. Campbell from September 9, 1999, the
date Mr. Campbell joined the Company.
(4) Represents shares issued to Mr. Campbell under a Restricted Stock Agreement
dated September 9, 1999. The fair market value of such shares as of
December 31, 1999, the Company's fiscal year-end, was $1,437,500 based upon
a closing price of $28.75 per share. The shares may be forfeited upon
termination of Mr. Campbell's employment with the Company. These forfeiture
restrictions lapse for 25,000 of such shares after 24 full months of
employment; an additional 12,500 shares after 36 full months of employment;
and the remaining 12,500 shares after 48 full months of employment. Mr.
Campbell is entitled to receive dividends on the restricted shares when and
if declared by the Company. See "Employment Agreements."
(5) Represents amounts accrued by the Company as of January 31, 2000, for
payments due to Mr. Campbell for certain benefits under Mr. Campbell's
prior employment arrangements. See "Employment Agreements."
(6) Mr. Rooney resigned from the Company effective March 27, 2000.
(7) Mr. Johnsen served in this capacity in the course of his service as an
officer of PSINet Consulting, and, as such, his compensation was paid by
PSINet Consulting, not by Xpedior. Mr. Johnsen ceased serving in this
capacity on June 1, 1999.
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<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding the grants of stock
options during the last fiscal year to the Named Executive Officers under the
Xpedior Stock Incentive Plan:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) 1999 PER SHARE DATE 5% 10%
---- ---------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David N. Campbell 1,000,000 9.9% $7.71 09/09/09 $4,850,000 $12,290,000
Eugene Rooney 250,000 2.5 6.91 08/12/09 1,087,500 2,752,500
Eugene Rooney 50,000 .5 10.71 10/13/09 337,000 853,500
J. Brian Farrar 300,000 3.0 6.91 08/12/09 1,305,000 3,303,000
J. Brian Farrar 100,000 1.0 10.71 10/13/09 674,000 1,707,000
Steven M. Isaacson 130,000 1.3 6.91 08/12/09 565,500 1,431,300
Kenneth R. Johnsen -- -- -- -- -- --
</TABLE>
----------
(1) The options granted generally become exercisable in equal annual
installments on each of the three anniversaries of the date of grant.
Options are subject to the continued employment of the Named Executive
Officer, but may fully vest and become exercisable under certain conditions
involving a change in control of the Company. See "Employment Agreements."
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of options immediately prior to expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
market value of the Company's Common Stock on the date of the option grant
over the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Company's Common
Stock. There can be no assurance that the rates of appreciation assumed in
this table can be achieved or that the amounts reflected will be received
by the individuals.
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<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive
Officers, information with respect to the exercise of stock options during the
fiscal year ended December 31, 1999, and the year-end value of unexercised
options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE ------------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David N. Campbell -- -- - 0 - 1,000,000 - 0 - $21,040,000
Eugene Rooney -- -- - 0 - 300,000 - 0 - 6,362,000
J. Brian Farrar -- -- - 0 - 400,000 - 0 - 8,356,000
Steven M. Isaacson -- -- - 0 - 130,000 - 0 - 2,839,200
Kenneth R. Johnsen -- -- -- -- -- --
</TABLE>
----------
(1) Value is based upon the difference between the option exercise price and
the fair market value of the Company's Common Stock at December 31, 1999,
the Company's fiscal year-end ($28.75 per share), multiplied by the number
of shares underlying the option.
EMPLOYMENT AGREEMENTS
In September 1999, Mr. Campbell entered into an employment agreement with
the Company and he was elected President and Chief Executive Officer. The
agreement provides that Mr. Campbell will receive a minimum annual base salary
of $375,000. Under the agreement, Mr. Campbell also may receive bonuses of up to
150% of his base salary based upon his meeting or exceeding performance
objectives. At the same time, the Company granted Mr. Campbell an option to
purchase 1,000,000 shares of Common Stock at $7.71 per share, and issued him
50,000 shares of Common Stock that may be forfeited upon termination of his
employment. These forfeiture restrictions lapse for (a) 25,000 of such shares
after 24 full months of employment; (b) an additional 12,500 of such shares
after 36 full months of employment; and (c) the remaining 12,500 shares after 48
full months of employment.
Mr. Campbell also purchased 129,702 shares of Common Stock at $7.71 per
share. Mr. Campbell is restricted from selling any of his Common Stock until the
earlier of the second anniversary of our initial public offering or the
distribution to the stockholders of PSINet Consulting of its remaining interest
in Xpedior. Mr. Campbell's employment agreement also provides that if he
terminates his employment with the Company on or before September 9, 2001, the
Company can require him to sell back to Xpedior the 129,702 shares of Common
Stock for an amount equal to the actual cost plus $400,000.
In addition, as part of Mr. Campbell's employment arrangements with the
Company, Xpedior has agreed to provide Mr. Campbell the benefits that he is
entitled to receive under a non-competition agreement between Mr. Campbell and
Computer Task Group ("CTG") dated as of March 1, 1984, and the Computer Task
Group Executive Benefit Plan, as restated and effective January 31, 1997.
Xpedior agreed to provide the benefits in the event CTG ceases to make the
payments described in these instruments. The agreements provide that, through
November 4, 2002, Mr. Campbell will receive (a) monthly payments aggregating
approximately $255,000 per year; (b) reimbursement for medical premiums; (c)
premiums for a life insurance policy; and (d) continued benefits under the
Computer Task Group Executive Benefit Plan.
-11-
<PAGE> 15
Mr. Campbell will also receive payments aggregating approximately $165,000
per year and continued benefits under the Computer Task Group Executive Benefit
Plan after November 4, 2002, until his death. In addition, Xpedior has agreed to
indemnify Mr. Campbell in the event his employment with the Company violates any
legal obligations owed to CTG. CTG has indicated that while it will not seek any
injunctive relief relating to Mr. Campbell's employment with Xpedior, it is
terminating all of the benefits owned to Mr. Campbell, including those which the
Company has agreed to undertake. At January 31, 2000, the Company had accrued
approximately $85,000 in respect of these obligations. Xpedior believes that the
agreement has not been breached by Mr. Campbell and that CTG is obligated to
make the required payments. Although the Company plans to pursue this matter
vigorously and believes that it has strong legal defenses, there can be no
assurance as to the outcome of this matter.
Either Xpedior or Mr. Campbell can terminate the employment agreement at
any time. If the employment agreement is not terminated on or before September
9, 2001, the term of the agreement will be extended for an additional year. If
(a) the Company terminates the agreement prior to the expiration of the initial
term without cause; (b) there is a substantial and adverse change in Mr.
Campbell's duties; (c) there is a reduction in Mr. Campbell's base compensation
which is not less than ten percent of such base compensation and not imposed on
any similarly situated employees; or (d) PSINet Consulting continues to own a
majority of the Company's common stock on September 9, 2001, and Mr. Campbell
provides the Company with notice of his intention to resign within ninety days
of such date, then the Company will pay Mr. Campbell an amount equal to two
years salary plus certain health benefits. If Mr. Campbell's employment with the
Company terminates because of his death or disability, or Xpedior fails to renew
the term for an additional one year beyond the initial term, then Xpedior will
pay Mr. Campbell (or his estate) an amount equal to one year's salary (plus his
most recent incentive bonus in the case of death). Xpedior has also agreed to
pay other benefits offered to Mr. Campbell by his former employer in the event
Mr. Campbell's employment with Xpedior terminates.
Mr. Farrar entered into an employment agreement with Xpedior effective
October 13, 1999. The agreement provides that Mr. Farrar will receive a minimum
annual base salary of $250,000. Under the agreement, Mr. Farrar also (a) may
receive bonuses of up to 150% of his base salary based upon his meeting or
exceeding performance objectives, and (b) will be allowed to participate in all
benefit plans offered by Xpedior to similarly situated employees. Either Mr.
Farrar or the Company can terminate the agreement at any time. If the employment
agreement is not terminated on or before October 13, 2001, the term of the
agreement will be extended for one additional year. If (a) the Company
terminates the agreement prior to the expiration of the initial term without
cause; (b) there is a substantial and adverse change in Mr. Farrar's duties; (c)
there is a reduction in his base compensation which is not less than ten percent
of such base compensation and not imposed on any similarly situated employees;
or (d) PSINet Consulting continues to own a majority of the Company's Common
Stock on October 13, 2001, and Mr. Farrar provides the Company with notice of
his intention to resign within ninety days of such date, then the Company will
pay Mr. Farrar an amount equal to two years salary plus certain health benefits.
If Mr. Farrar's employment terminates because of his death or disability, or
Xpedior fails to renew the term for an additional year beyond the initial term,
then the Company will pay him (or his estate) an amount equal to one year's
salary (plus an amount equal to his most recent incentive bonus in the case of
death).
Mr. Isaacson entered into an employment agreement with Xpedior effective
November 1, 1999. The agreement provides that Mr. Isaacson will receive a
minimum annual base salary of $180,000. Under the agreement, Mr. Isaacson also
(a) may receive bonuses of up to 112.5% of his base salary based upon his
-12-
<PAGE> 16
meeting or exceeding performance objectives, and (b) will be allowed to
participate in all benefit plans offered by Xpedior to similarly situated
employees. Either Mr. Isaacson or the Company can terminate the agreement at any
time. The employment agreement is in effect for a period of two years ending on
November 1, 2001. If the Company terminates the agreement prior to the
expiration of the initial term without cause, or if there is a substantial and
adverse change in Mr. Isaacson's duties, or a reduction in his base compensation
which is not less than ten percent of such base compensation and not imposed on
any similarly situated employees, then the Company will pay Mr. Isaacson an
amount equal to one year's base compensation.
Under the stock option agreements entered into by Xpedior with each of
Messrs. Campbell, Farrar, and Isaacson covering 1,000,000, 400,000, and 130,000
shares of Common Stock, respectively, all of the options to purchase Common
Stock granted by Xpedior under such agreements will fully vest and become
immediately exercisable if there is a change in control of Xpedior, and within
two years of such change of control in the case of Messrs. Campbell and Farrar
and one year in the case of Mr. Jameson, any of Messrs. Campbell, Farrar or
Isaacson are terminated by Xpedior without cause, or any of Messrs. Campbell,
Farrar or Isaacson terminate their employment with Xpedior for good reason (as
defined in the agreements).
STOCK INCENTIVE PLAN
On August 5, 1999, the Board of Directors of the Company approved and
adopted the Xpedior Incorporated Stock Incentive Plan. The purpose of the plan
is to provide our directors, employees, advisors and professionals additional
incentive and reward opportunities to enhance our profitable growth. The plan
provides for the granting of:
- incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code;
- options that do not constitute incentive stock options;
- restricted stock awards; and
- stock appreciation rights.
The plan is administered by a committee of the Board of Directors. The
committee will consist of two or more outside directors within the meaning of
Section 162(m) of the Code. In general, the committee is authorized to select
the recipients of awards and to establish the terms and conditions of those
awards.
The number of shares of Common Stock that may be issued under the plan may
not exceed 15,000,000 shares, adjusted to reflect stock dividends, stock splits,
recapitalizations, and similar changes in our capital structure. Shares of
Common Stock which are attributable to awards that have expired, terminated, or
been canceled or forfeited are available for issuance or use in connection with
future awards. The number of shares of Common Stock that may be granted under
the plan to any one individual during any calendar year may not exceed
2,000,000, adjusted to reflect stock dividends, stock splits, recapitalizations
and similar changes in our capital structure.
The price at which a share of Common Stock may be purchased upon exercise
of an option granted under the plan will be determined by the committee. In the
case of an incentive stock option, the purchase price will not be less than the
fair market value of a share of Common Stock on the date such option is granted.
In the case of an option that does not constitute an incentive stock option,
such purchase price will not be less than 85% of the fair market value of a
share of Common Stock on the date such option is granted.
-13-
<PAGE> 17
Additionally, a stock appreciation right may be granted in connection with the
grant of an option. A stock appreciation right allows the holder to surrender
the right to purchase shares under the related option in return for a payment
in: (1) cash; (2) shares of Common Stock; or (3) a combination of cash and
Common Stock. The amount of the payment will equal the difference between the
fair market value of the shares of Common Stock on the date such right is
exercised and the purchase price for such shares under the related option.
Stock options granted under the plan are not freely transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by the optionee. Options granted under the plan must generally be exercised
within three months of the optionee's separation of service with us or within
twelve months after the optionee's termination by death or disability. From and
after the closing of the Merger, all options granted by Xpedior, including
previously granted options but excluding any options granted to the Named
Executive Officers, will vest ratably and become exercisable on a monthly basis.
Shares of Common Stock that are the subject of a restricted stock award
under the plan will be governed by restrictions on disposition by the holder of
such award and an obligation of such holder to forfeit and surrender the shares
to us under certain circumstances. The forfeiture restrictions will be
determined by the committee in its sole discretion. The committee may provide
that the forfeiture restrictions will lapse upon
- the attainment of one or more performance goals or targets established by
the committee which are based on:
- the price of a share of Common Stock;
- our earnings per share;
- our market share;
- the market share of one of our business units designated by the
committee;
- our sales;
- the sales of one of our business units designated by the committee our
net income (before or after taxes) or the net income of any one of our
business units designated by the committee;
- our cash flow return on investment or the cash flow return on
investment of any one of our business units designated by the
committee;
- our earnings before or after interest, taxes, depreciation and/or
amortization of Xpedior or of any one of our business units designated
by the committee;
- the economic value added; or
- the return on stockholders' equity;
- the award holder's continued employment with us or continued service as a
consultant or director for a specified period of time;
- the occurrence of any event or the satisfaction of any other condition
specified by the committee in its sole discretion; or
- a combination of any of the foregoing.
-14-
<PAGE> 18
No awards under the plan may be granted after ten years from the date the
plan was adopted by the Board of Directors. The plan will remain in effect until
all options granted under the plan have been satisfied or expired, and all
shares of restricted stock granted under the Plan have vested or been forfeited.
The Board of Directors in its discretion may terminate the plan at any time as
to any shares of Common Stock for which awards have not been granted. The plan
may be amended, other than to increase the maximum aggregate number of shares
that may be issued under the plan or to change the class of individuals eligible
to receive awards under the plan, by the Board of Directors without the consent
of our stockholders. No change in any award previously granted under the plan
may be made that would impair the rights of the holder of that award without the
approval of the holder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Messrs. Crownover,
Shapiro and Whiteside. Mr. Whiteside serves as the Chairman of the compensation
committee. None of Messrs. Crownover, Shapiro and Whiteside have been an
employee or officer of the Company or any of its subsidiaries during 1999.
ITEM (5)
ISSUANCE OF SHARES OF COMMON STOCK
UPON THE CONVERSION OF THE KINDERHOOK NOTES
On September 24, 1999, the Company issued 7% Convertible Subordinated
Promissory Notes due 2002 in the aggregate principal amount of $9.1 million in
connection with the acquisition of Kinderhook Systems Inc. The Kinderhook Notes
were guaranteed by PSINet Consulting. On June 15, 2000, in connection with the
acquisition of PSINet Consulting by PSINet and the purchase and sale of the
Convertible Note by PSINet, the holders of the Kinderhook Notes agreed to
release PSINet Consulting from its guaranty of the repayment of the Kinderhook
Notes by Xpedior and the Kinderhook Notes became convertible into 508,417 shares
of Common Stock and payment of all unpaid interest accrued from the time of
issuance and repayment of an aggregate of $661,364 in principal due under the
Kinderhook Notes.
RELATED INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Initial Record Date, PSINet Consulting, whose principal executive
offices are located at 4400 Post Oak Parkway, Suite 1100, Houston, Texas 77027,
owned, beneficially and of record, 80% of the Common Stock of the Company. On
June 15, 2000, PSINet acquired PSINet Consulting pursuant to the Merger.
Accordingly, as of June 15, 2000, PSINet also became the beneficial owner of 80%
of the outstanding Common Stock.
FINANCIAL AND OTHER INFORMATION
-15-
<PAGE> 19
The financial and other information required hereunder is incorporated by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000 and the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2000.
FORWARD-LOOKING STATEMENTS
This Information Statement contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. In particular, statements regarding the Company's expected
performance and financial results in future periods are based upon management's
current expectations and beliefs and are subject to a number of known and
unknown risks and uncertainties that could cause actual results to differ
materially from those described in the preceding forward-looking statements. The
following factors known to management, among others, could cause actual results
to differ materially from those described in the preceding forward-looking
statements: the Company's ability to continue to attract new clients and obtain
new and expanded assignments from existing clients; the Company's ability to
retain its personnel and continue to hire, train and timely deploy new personnel
on client engagements; the Company's ability to manage, maintain and promote its
brand, and the recognition of its brand, in the marketplace; management of the
Company's growth and successful integration of the Company's operations;
continued robust growth in demand in the United States and abroad for eBusiness
consulting services such as those offered by the Company; and the effect of
intensifying competition among a rising number of companies offering services
similar to those offered by the Company. In addition, Xpedior encourages you to
review the Company's latest reports filed with the SEC, including Xpedior's
Annual Report on Form 10-K filed with the SEC on March 30, 2000, which describes
a number of additional risks and uncertainties that could cause actual results
to differ materially from those expected in the forward-looking statements made
in this Information Statement.
SHAREHOLDER PROPOSALS
Any proposals of holders of the Company Common Stock intended to be
presented at the annual meeting of stockholders of the Company to be held in
2001 must be received by the Company, addressed to the Secretary of the Company
at the address set forth below, no later than December 2, 2000, to be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
Proponents are requested to submit their proposals by certified mail, return
receipt requested. Detailed information for submitting resolutions will be
provided upon written request to the Secretary of Xpedior Incorporated, One
North Franklin Street, Suite 1500, Chicago, Illinois 60606, attention:
Secretary. No stockholder proposals were received for inclusion in this
document.
In addition to the rules of the Commission described in the preceding
paragraph, the Company's bylaws provide that at an annual meeting of
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting given by or at the
direction of the Board of Directors, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or (c) otherwise
properly brought before the meeting by a stockholder of the Company. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice
-16-
<PAGE> 20
thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 30 days nor more than
50 days prior to the meeting; provided, however, that in the event that less
than 40 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 10th day following the date
on which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, (b) the name and address, as they appear on the Company's books, of the
stockholder proposing such business, (c) the class and number of shares of the
Company that are beneficially owned by the stockholder, and (d) any material
interest of the stockholder in such business.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
By Order of the
Board of Directors
Caesar J. Belbel
Senior Vice President, General
Counsel and Secretary
Boston, Massachusetts
September 26, 2000
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<PAGE> 21
EXHIBIT A
CERTIFICATE
OF THE
DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
SERIES A 8-1/2% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
XPEDIOR INCORPORATED
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
I, David N. Campbell, President and Chief Executive Officer of Xpedior
Incorporated, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "CORPORATION"), do hereby certify that the
Board of Directors of the Corporation, at a meeting, adopted the following
resolution, which resolution remains in full force and effect on the date
hereof:
RESOLVED: That, pursuant to the authority conferred upon the
Board of Directors of the Corporation by its Certificate of Incorporation (the
"CERTIFICATE OF INCORPORATION"), and pursuant to the provisions of Sections 151
and 157 of the General Corporation Law of the State of Delaware, a series of
Preferred Stock of the Corporation be and hereby is created, classified and
authorized, and the issuance thereof is provided for, and that the designation
and number of shares, and the preferences and relative, participating, optional
and other special rights and qualifications, limitations and restrictions shall
be as set forth in the following Sections 1 through 9 (in addition to those set
forth in the Certificate of Incorporation which are applicable to all classes
and series of Preferred Stock) and in EXHIBIT A attached hereto and made a part
hereof:
Section 1. Designation, Number and Par Value. The series of
preferred stock shall be designated as the Series A 8-1/2% Cumulative
Convertible Preferred Stock (the "SERIES A PREFERRED STOCK"), and the number of
shares so designated shall be 1,000,000 (which shall not be subject to increase
without the prior approval of the holders (each holder of shares of Series A
Preferred Stock, a "HOLDER" and, together with all other Holders, the "HOLDERS")
of at least two-thirds of the shares of Series A Preferred Stock then
outstanding). Each share of Series A Preferred Stock shall have a par value of
$.01 per share and a stated value of $50 per share (the "STATED VALUE").
<PAGE> 22
A - 2 -
Section 2. Dividends.
(a) (i) Holders shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available therefor, and the
Corporation shall, to the extent funds are legally available therefor, pay on
each Dividend Payment Date, in arrears, cumulative dividends on the Series A
Preferred Stock at the rate per share (as a percentage of the Stated Value per
share) equal to 8-1/2% per annum, payable in cash or shares of Common Stock, or
any combination thereof, at (subject to the terms and conditions set forth
herein) the option of the Corporation. Dividends on the Series A Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the date of the first issuance of any shares of the Series A
Preferred Stock, and shall be deemed to accrue on such date whether or not
earned or declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends. The party
that holds of record the Series A Preferred Stock on the record date for the
applicable Dividend Payment Date for any dividend payment shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available therefor, such dividend payment and any other accrued and unpaid
dividends which accrued prior to such Dividend Payment Date, without regard to
any sale or disposition of such Series A Preferred Stock subsequent to the
applicable record date but prior to the applicable Dividend Payment Date. Except
as otherwise provided in the Certificate of Incorporation or this Certificate of
Designations, and except as otherwise required by law, if at any time the
Corporation pays a portion, but less than the total amount, of dividends then
accrued on account of the Series A Preferred Stock, such payment shall be
distributed ratably among the Holders based upon the number of shares held by
each Holder. In order for the Corporation to exercise its right to pay dividends
in shares of Common Stock on a Dividend Payment Date, the Corporation shall, no
less than 30 days prior to the Dividend Payment Date, provide each Holder notice
(the "COMMON STOCK DIVIDEND NOTICE") of its intention to pay dividends in shares
of Common Stock. If the Corporation elects to pay dividends in shares of Common
Stock, then the number of shares of Common Stock issuable with respect to each
share of Series A Preferred Stock outstanding on the record date for payment of
such dividend shall be equal to the aggregate dollar value of all dividends then
payable in respect of such share, divided by the Five Day Average Market Price
at the applicable Dividend Payment Date.
(ii) If, and so often as, the Corporation shall be in default in the
payment of dividends on the Series A Preferred Stock in an amount equivalent to
six quarterly dividends (whether or not consecutive, earned or declared), the
number of directors of the Corporation shall thereupon, and until all dividends
in default shall have been paid, be two more than the full number constituting
the Board of Directors immediately prior to such default. The Holders, voting
separately as a class, shall be entitled to elect two directors (the "SERIES A
PREFERRED STOCK DIRECTORS") to fill the vacancies resulting from such increase,
and the Holders may, at a meeting called and held as hereinafter provided, elect
such Series A Preferred Stock Directors to hold office until the next annual
meeting of shareholders. When the special class voting rights provided for in
this Section 2(a)(ii) shall have become vested, they shall remain so vested at
each succeeding meeting of shareholders for the election of directors; provided,
however, that such special voting rights shall become divested, and the terms of
office of the Series A Preferred Stock Directors shall terminate, if and when
all dividends then in default on the Series A Preferred Stock shall be paid, but
always subject to the same provisions for the vesting of such special rights in
case of further like defaults in the payment of dividends. No
<PAGE> 23
A -3 -
Series A Preferred Stock Director shall, during his or her term of office, be
removed from office except upon the vote of the Holders, voting separately as a
class, and, regardless of any provision of the Corporation's By-laws, any
vacancy caused by the death, resignation, inability to serve or removal of any
Series A Preferred Stock Director shall be filled only by the vote of the
Holders, voting separately as a class, at a special meeting of the Holders
called for such purpose, or at the next annual meeting of shareholders. Whenever
the Holders become entitled to elect Series A Preferred Stock Directors pursuant
to this Section 2(a)(ii), a meeting of the Holders shall be held upon call by
the Secretary of the Corporation within 60 days after receipt of a request in
writing of the Holders of not less than 10% of the Series A Preferred Stock then
outstanding, addressed to the Secretary at the principal office of the
Corporation; provided, however, that the Corporation shall not be required to
call such a special meeting if the annual meeting of shareholders is to be held
within 90 days after the date of receipt of such request. The Corporation shall
pay all reasonable expenses incurred in connection with the calling and holding
of any such meeting (and the solicitation of proxies therefor), and the notice
of the meeting shall be accompanied by a proxy statement containing such
material as is then required by the applicable rules and regulations of the
Securities and Exchange Commission. At all meetings of shareholders held for the
purpose of electing Series A Preferred Stock Directors, the presence in person
or by proxy of the Holders of 40% of the outstanding Series A Preferred Stock
shall be required to constitute a quorum of such class for the election of
Series A Preferred Stock Directors; provided, however, that the absence of a
quorum of the Holders of Series A Preferred Stock shall not prevent the election
at any such meeting (or any adjournment thereof) of any other directors by the
holders of all other classes of shares having voting rights for the election of
directors if the necessary quorums are present in person or by proxy at such
meeting; provided further, however, that, in the absence of a quorum of the
Holders of Series A Preferred Stock, the Holders of a majority of the shares of
Series A Preferred Stock who are present in person or by proxy shall have the
power to adjourn the election of the Series A Preferred Stock Directors from
time to time, without notice other than an announcement at such meeting (or
adjournment thereof), until the Holders of the requisite number of shares of
Series A Preferred Stock shall be present in person or by proxy.
(iii) Notwithstanding anything contained in the Certificate of
Incorporation or this Certificate of Designations to the contrary, no dividends
or distributions on shares of Series A Preferred Stock shall be declared by the
Board of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement,
instrument or indenture of the Corporation relating to its indebtedness
specifically prohibits such declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for payment would
constitute a breach thereof or a default or event of default thereunder;
provided, however, that nothing contained in the Certificate of Incorporation or
this Certificate of Designations shall be construed or deemed to require the
Board of Directors to declare, or the Corporation to pay or set apart for
payment, any dividends or distributions on shares of Series A Preferred Stock at
any time, whether permitted by any of such agreements, instruments or
indentures, or not.
(b) Notwithstanding anything to the contrary contained in Section
2(a)(i), the Corporation may not pay dividends on the Series A Preferred Stock
in shares of Common Stock (and, except as otherwise provided below, must deliver
cash in respect thereof) if, at the date of declaration of such dividend:
<PAGE> 24
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(i) (A) the number of shares of Common Stock at the time
reserved for issuance for the payment of such dividends in shares of Common
Stock on such Dividend Payment Date, together with the number of shares of
Common Stock held as treasury stock, are insufficient to satisfy the
Corporation's then existing obligations to issue shares of Common Stock for the
payment of such dividends in shares of Common Stock on such Dividend Payment
Date, or (B) the number of shares of Common Stock equal to the sum of (I) the
number of shares of Common Stock at the time reserved for issuance in payment of
dividends upon, or upon conversion of, the Series A Preferred Stock, (II) the
number of authorized but unissued shares of Common Stock not reserved for any
purpose, (III) the number of shares of Common Stock at the time reserved for
issuance for all other purposes, and (IV) the number of shares of Common Stock
held as treasury stock, is insufficient to satisfy the Corporation's then
existing obligations to issue shares of Common Stock for all purposes (including
the conversion of shares of Series A Preferred Stock);
(ii) the shares of Common Stock payable as a dividend on the
Series A Preferred Stock are not designated for quotation on the Nasdaq National
Market or listed on the New York Stock Exchange or the American Stock Exchange;
(iii) the Corporation has failed to timely satisfy its
obligations with respect to any Conversion Notice and such failure shall be
continuing as of such Dividend Payment Date;
(iv) the aggregate number of shares of Common Stock (A) then
held by the Holders (or former Holders) of Series A Preferred Stock which were
issued upon the conversion of shares of Series A Preferred Stock, (B) then
issuable upon conversion of any shares of Series A Preferred Stock held by the
Holders, and (C) then held by the Holders (or former Holders) which were
received as payment of dividends upon shares of Series A Preferred Stock,
including in payment of the current dividend, exceeds (I) prior to the Three
Year Date, ___________ shares (which amount is equivalent to 15% of the
aggregate number of outstanding shares of Common Stock as of the Commencement
Date), or (II) on or after the Three Year Date, ___________ shares (which amount
is equivalent to 17.5% of the aggregate number of outstanding shares of Common
Stock as of the Commencement Date), as such amounts may be adjusted to reflect
the occurrence of any of the events described in Sections 5(c)(ii), 5(c)(iii) or
5(c)(iv); or
(v) at any time prior to the Three Year Date, the Five Day
Average Market Price at the applicable Dividend Payment Date is less than $10
per share (subject to adjustment for stock splits, reverse stock splits,
recapitalizations and similar events).
(c) (i) So long as any shares of Series A Preferred Stock shall remain
outstanding, neither the Corporation nor any of its subsidiaries or affiliates
shall (A) redeem, purchase or otherwise acquire, directly or indirectly, any
Junior Securities other than the repurchase of Common Stock pursuant to
employment agreements or employee or director benefit or stock plans, (B)
directly or indirectly pay or declare any dividend or make any distribution
upon, nor shall any distribution (other than a dividend or distribution
described in Sections 5(c)(ii) or 5(c)(iii)) be made in respect of, any Junior
Securities, or set aside any funds for any such payment or distribution, or (C)
set aside any funds for or apply any funds to the
<PAGE> 25
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purchase, redemption or acquisition (through a sinking fund or otherwise) of any
Junior Securities.
(ii) So long as any shares of Series A Preferred
Stock shall remain outstanding, neither the Corporation nor any of its
subsidiaries or affiliates shall take any of the actions set forth in Section
2(c)(i) with respect to Parity Stock, if any, (A) unless and until the
Corporation shall have taken substantially similar actions with respect to the
Series A Preferred Stock, or (B) in a manner or on terms more favorable to the
holders of such Parity Stock, if any, than to the Holders of the Series A
Preferred Stock.
Section 3. Voting Rights. Except as otherwise provided in the
Certificate of Incorporation or this Certificate of Designations, and except as
otherwise required by law, the Series A Preferred Stock shall have no voting
rights; provided, however, that, so long as any shares of Series A Preferred
Stock shall remain outstanding, the Corporation shall not, without the requisite
approval of the Holders of the Series A Preferred Stock then outstanding, (a)
take any of the actions described in Section 7, or (b) enter into any agreement
or arrangement with respect to any other action which requires the approval of
the Holders of the Series A Preferred Stock then outstanding, unless conditioned
upon receipt of the requisite approval of the Holders of the Series A Preferred
Stock.
Section 4. Liquidation Preference. Subject to applicable law, upon any
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary (a "LIQUIDATION"), the Holders shall be entitled to receive out of
the assets of the Corporation, whether such assets are capital or surplus, for
each share of Series A Preferred Stock, an amount equal to the Stated Value plus
all accrued but unpaid dividends per share, whether declared or not, before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Corporation shall be insufficient to pay in full such
amounts and all amounts payable to holders of Parity Stock, if any, then,
subject to applicable law, the entire assets to be distributed to the Holders
and the holders of Parity Stock, if any, shall be distributed among the Holders
and the holders of Parity Stock, if any, ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. The Corporation shall mail written notice of any such
Liquidation to each Holder not less than 45 days prior to the payment date
stated therein.
Section 5. Conversion.
(a) (i) Each share of Series A Preferred Stock is convertible by the
Holder thereof into shares of Common Stock (subject to adjustment as provided in
this Section 5) at the Conversion Ratio at the option of the Holder at any time
and from time to time. A Holder shall effect conversions by surrendering the
certificate or certificates representing the shares of Series A Preferred Stock
to be converted to the Corporation, together with the form of conversion notice
attached hereto as EXHIBIT A (the "CONVERSION NOTICE"). Each Conversion Notice
shall specify the number of shares of Series A Preferred Stock to be converted
and the date on which such conversion is to be effected, which date may not be
prior to the date on which the Holder delivers such Conversion Notice (the
"CONVERSION DATE"). If no Conversion Date is specified in a Conversion Notice,
the Conversion Date shall be deemed to be the date that the Conversion Notice is
deemed delivered pursuant to Section 5(i). Subject to Section 5(b), each
Conversion
<PAGE> 26
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Notice, once delivered, shall be irrevocable. If the Holder is converting less
than all of the shares of Series A Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Corporation shall promptly deliver to such Holder (in the manner and within the
time set forth in Section 5(b)) a certificate for such number of shares of
Series A Preferred Stock as have not been converted. Except as otherwise
provided in the Certificate of Incorporation or this Certificate of
Designations, on and after the effective date of a conversion, the Holder
entitled to receive Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder of the shares of Common Stock issuable
upon conversion, and the Series A Preferred Stock so converted shall no longer
be deemed to be issued and outstanding.
(ii) Notwithstanding anything contained in the Certificate of
Incorporation or this Certificate of Designations to the contrary, in no event
shall the Corporation be obligated to issue any shares of Common Stock upon
conversion of a Holder's shares of Series A Preferred Stock if, based upon the
number of shares of Common Stock outstanding as at the Commencement Date, such
issuance would be in violation of Nasdaq Rule 4460(i)(1)(D) ("RULE 4460"), if
then applicable; provided, however, that, in such event, the Corporation shall
be obligated to (A) deliver (in the manner and within the time set forth in
Section 5(b)) the maximum number of shares of Common Stock as would not be in
violation of Rule 4460, (B) use its reasonable best efforts to take all such
actions as shall be necessary or appropriate to promptly cause such issuance not
to be in violation of Rule 4460, and (C) deliver the remaining shares of Common
Stock (in the manner and within the time set forth in Section 5(b)) as soon as
it is possible to do so other than in violation of Rule 4460; provided further,
however, that in the case of clauses (A) and (C) above, each such issuance shall
be distributed ratably among the Holders based upon the number of shares of
Series A Preferred Stock each Holder has requested to be converted into Common
Stock.
(b) Not later than three Trading Days after a Conversion Date, the Corporation
shall deliver to the converting Holder (i) one or more certificates representing
the number of shares of Common Stock being issued upon the conversion of shares
of Series A Preferred Stock, (ii) one or more certificates representing the
number of shares of Series A Preferred Stock not converted, (iii) a bank check
in the amount of accrued and unpaid dividends (if the Corporation has elected or
is required hereunder to pay accrued dividends in cash), and (iv) if the
Corporation has elected and is permitted hereunder (notwithstanding any
applicable notice period) to pay accrued dividends in shares of Common Stock,
one or more certificates representing such number of shares of Common Stock as
are issuable on account of accrued dividends determined in accordance with
Section 2(a); provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Series A Preferred Stock until certificates
evidencing such shares of Series A Preferred Stock are either delivered for
conversion to the Corporation or, if so directed by the Corporation, to any
transfer agent for the Series A Preferred Stock or Common Stock, or the Holder
of such Series A Preferred Stock certifies to the Corporation and, if required,
any such transfer agent that such certificates have been lost, stolen or
destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Corporation and any such transfer agent to indemnify and
hold harmless the Corporation and any such transfer agent from any loss incurred
by it in connection therewith. The Corporation shall, upon request of the
Holder, use its reasonable best efforts to deliver any certificate or
certificates required to be delivered by the
<PAGE> 27
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Corporation under this Section 5(b) electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions. If in the case of any Conversion Notice such certificate or
certificates, including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid dividends
hereunder, are not delivered to or as directed by the applicable Holder by the
close of business on the third Trading Day after the Conversion Date, the Holder
shall be entitled by written notice to the Corporation at any time on or before
its receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Corporation shall immediately return the
certificates representing the shares of Series A Preferred Stock tendered to it
for conversion and thereupon the Holder shall no longer be treated as a record
holder of the shares of Common Stock issuable upon conversion.
(c) (i) The conversion price for each share of Series A Preferred Stock
(the "CONVERSION PRICE") on any Conversion Date shall be equal to $37.50;
provided, however, that (A) if on the first anniversary of the Commencement Date
(the "ONE YEAR DATE") the Thirty Day Average Market Price of the Common Stock
(the "ONE YEAR RESET PRICE") is less than the then effective Conversion Price,
then on and after the One Year Date the Conversion Price shall be equal to the
One Year Reset Price, (B) if on the second anniversary of the Commencement Date
(the "TWO YEAR DATE") the Thirty Day Average Market Price of the Common Stock
(the "TWO YEAR RESET PRICE") is less than the then effective Conversion Price,
then on and after the Two Year Date the Conversion Price shall be equal to the
Two Year Reset Price, and (C) if on the third anniversary of the Commencement
Date (the "THREE YEAR DATE") the Thirty Day Average Market Price of the Common
Stock (the "THREE YEAR RESET PRICE") is less than the then effective Conversion
Price, then on and after the Three Year Date the Conversion Price shall be equal
to 95% of the Three Year Reset Price. The Conversion Price determined in
accordance with this Section 5(c)(i) shall be subject to further adjustment as
set forth in Sections 5(c)(ii), 5(c)(iii) and 5(c)(iv).
(ii) If the Corporation, at any time after the Commencement
Date, shall (A) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock payable in shares of Common Stock,
(B) subdivide any outstanding shares of Common Stock into a larger number of
shares, (C) combine any outstanding shares of Common Stock into a smaller number
of shares, or (D) issue by reclassification of shares of Common Stock any shares
of capital stock of the Corporation, then the Conversion Price shall be adjusted
by multiplying the Conversion Price then in effect by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding before such
event, and the denominator of which shall be the number of shares of Common
Stock outstanding after such event. Such adjustment shall be made each time any
such dividend, distribution, subdivision, combination or reclassification is
made and shall become effective (X) immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
or (Y) immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Corporation, at any time after the Commencement
Date, shall distribute to all holders of Common Stock as a class (and not to
Holders) evidences of its indebtedness or assets, then in each such case the
Conversion Price at which each share of Series A Preferred Stock shall
thereafter be convertible shall be adjusted by multiplying the Conversion Price
in effect immediately prior to the record date fixed for determination of
stockholders
<PAGE> 28
A -8 -
entitled to receive such distribution by a fraction, the denominator of which
shall be the Five Day Average Market Price of Common Stock determined as of the
record date mentioned above, and the numerator of which shall be such Five Day
Average Market Price of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or the value of
such evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by the Board of Directors in good faith; provided,
however, that in the event of a distribution exceeding 10% of the net assets of
the Corporation, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Corporation) (an "APPRAISER")
selected in good faith by the Corporation and reasonably acceptable to the
Holders of a majority in interest of the shares of Series A Preferred Stock then
outstanding. Such adjustment shall be made each time any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(iv) (A) If the Corporation, at any time after the
Commencement Date, shall issue or sell any shares of Common Stock (other than
(I) in payment of a dividend upon, or upon the conversion of, shares of Series A
Preferred Stock, or (II) upon exercise or conversion of warrants, options or
convertible or exchangeable securities outstanding as of the Commencement Date)
without consideration or at a price per share that is less than the Five Day
Average Market Price in effect immediately prior to such issuance or sale, then
in each such case the Conversion Price, upon each such issuance or sale, shall
be lowered to that price determined by multiplying the Conversion Price then in
effect by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
plus the number of shares of Common Stock which the aggregate consideration, if
any, received by the Corporation for such additional shares of Common Stock so
issued or sold would purchase at the Five Day Average Market Price then in
effect, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus the number of
such additional shares of Common Stock so issued or sold.
(B) For purposes of this Section 5(c)(iv), the issuance
(or adjustment in exercise or purchase price) of any warrants, options,
subscriptions or other purchase rights with respect to shares of Common Stock
(other than to all holders of Common Stock as a class), and the issuance (or
adjustment in conversion price or exchange ratio) of any securities convertible
into or exchangeable for shares of Common Stock (or the issuance or adjustment
in exercise or purchase price of any warrants, options, subscriptions or other
purchase rights with respect to such convertible or exchangeable securities)
shall be deemed to be an issuance at such time of shares of Common Stock, and
shall be subject to the provisions of Section 5(c)(iv)(A), if the Five Day
Average Market Price then in effect is greater than an amount equal to (I) the
sum of the aggregate consideration, if any, received by the Corporation for the
issuance of such warrants, options, subscriptions, other purchase rights and/or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Corporation upon the exercise, purchase,
conversion or exchange thereof, divided by (II) the aggregate number of shares
of Common Stock that would be issued if all such warrants, options,
subscriptions, other purchase rights and/or convertible and exchangeable
securities were exercised, purchased, converted or exchanged, in each case
determined as of the date of issuance or sale (or adjustment in exercise,
purchase or conversion price or exchange ratio), without
<PAGE> 29
A -9 -
giving effect to any possible future upward price adjustments or rate
adjustments. For purposes of this Section 5(c)(iv), if a part or all of the
consideration received by the Corporation in connection with such issuance or
sale shall consist of property other than cash, then the fair market value of
such property shall be determined by the Board of Directors in good faith;
provided, however, that in the event the aggregate number of shares of Common
Stock subject to issuance or sale exceeds 10% of the shares of Common Stock
outstanding immediately prior to the issuance or sale of such warrants, options,
subscriptions, other purchase rights and/or convertible or exchangeable
securities, then the fair market value of such property shall be determined by
an Appraiser.
(v) All calculations under this Section 5 shall be made to the
nearest whole cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
this Section 5(c), the Corporation shall promptly give notice to each Holder,
which notice shall set forth the Conversion Price after such adjustment and a
brief statement of the facts requiring such adjustment.
(vii) If:
(A) the Corporation shall declare a dividend (or any
other distribution) on its Common Stock;
(B) the Corporation shall declare a special non-recurring
cash dividend on its Common Stock;
(C) the Corporation shall authorize the granting to all
holders of the Common Stock, as a class, rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights;
(D) the approval of any stockholders of the Corporation
shall be required in connection with any reclassification of the Common Stock of
the Corporation, any consolidation or merger to which the Corporation is a
party, or any sale or transfer of all or substantially all of the assets of the
Corporation; or
(E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Corporation;
then the Corporation shall cause to be filed at each office or agency maintained
for the purpose of conversion and transfer of Series A Preferred Stock, and
shall cause to be mailed to each of the Holders at their last addresses as they
shall appear upon the stock books of the Corporation, at least 30 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (I) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, 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, redemption, rights or warrants are to
be determined, or (II) the date on which such reclassification, consolidation,
merger, sale or transfer is expected by the Corporation to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be
<PAGE> 30
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entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale or
transfer.
(d) If at any time conditions shall arise by reason of action taken by
the Corporation which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which would materially and
adversely affect the rights of the Holders (different than or distinguished from
the effect generally on rights of holders of any class of the Corporation's
capital stock), or if at any time any such conditions are expected by the
Corporation to arise by reason of any action contemplated by the Corporation,
the Corporation shall mail a written notice briefly describing the action
contemplated and the material adverse effects of such action on the rights of
the Holders at least 30 calendar days prior to the effective date of such
action, and an Appraiser selected by the Corporation and reasonably acceptable
to the Holders of a majority in interest of the Series A Preferred Stock then
outstanding shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Series A Preferred Stock may thereafter be convertible) and
any distribution which is or would be required to preserve without diluting the
rights of the Holders. To the extent permitted by applicable law and stock
exchange or Nasdaq rules, the Corporation shall make the adjustment recommended
forthwith upon the receipt of such opinion or the taking of any such action
contemplated, as the case may be; provided, however, that no such adjustment of
the Conversion Price shall be made which in the opinion of the Appraiser would
result in an increase of the Conversion Price to more than the Conversion Price
then in effect.
(e) The Corporation shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of issuance
in payment of dividends upon, and upon conversion of, the Series A Preferred
Stock as herein provided, free from preemptive rights or any other actual or
contingent purchase rights of Persons other than the Holders (in their capacity
as Holders), not less than the number of shares of Common Stock as shall be
issuable (taking into account the adjustments and restrictions of Section 5(c))
in payment of dividends upon, or upon the conversion of, all outstanding shares
of Series A Preferred Stock assuming the payment of all future dividends in
shares of Common Stock in accordance with the terms hereof. All shares of Common
Stock that shall be so issuable shall, upon issue, be duly authorized, validly
issued and fully paid and non-assessable. At such time as the Corporation would
be, if a notice of conversion were to be delivered on such date, precluded from
converting the then outstanding Series A Preferred Stock by reason of an
insufficient number of authorized shares of Common Stock then being authorized
for issuance, the Corporation shall promptly prepare and mail to the
shareholders of the Corporation proxy materials requesting authorization to
amend the Corporation's Certificate of Incorporation to increase the number of
shares of Common Stock which the Corporation is authorized to issue to at least
a number of shares equal to the sum of (i) all shares of Common Stock then
outstanding, (ii) the number of shares of Common Stock issuable on account of
all outstanding warrants, options and convertible securities (other than the
Series A Preferred Stock) and on account of all shares reserved under any stock
option, stock purchase or similar plan or agreement, and (iii) the number of
shares of Common Stock as would then be issuable in payment of dividends upon,
and upon conversion in full of, the Series A Preferred Stock, assuming the
payment of all future dividends in shares of Common Stock in accordance with the
terms hereof. In connection therewith, the Corporation shall use reasonable
efforts to cause its Board of Directors to (i) adopt
<PAGE> 31
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proper resolutions authorizing such increase, (ii) recommend to and otherwise
use its reasonable best efforts to promptly and duly obtain shareholder approval
to carry out such resolutions (and hold a special meeting of the shareholders no
later than the 60th day after delivery of the proxy materials to the
shareholders relating to such meeting), and (iii) within five Trading Days of
obtaining such shareholder authorization, file an appropriate amendment to the
Corporation's Certificate of Incorporation to evidence such increase.
(f) Upon a conversion hereunder, the Corporation shall not be required
to issue certificates representing fractions of shares of Common Stock, but may,
to the extent permitted by applicable law, make a cash payment in respect of any
final fraction of a share based on the Five Day Average Market Price as at the
applicable Conversion Date.
(g) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Stock shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificates; provided, however,
that the Corporation shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder of such
shares of Series A Preferred Stock so converted, and that the Corporation shall
not be required to issue or deliver such certificates unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Corporation
the amount of any such tax or shall have established to the satisfaction of the
Corporation that any such tax has been paid.
(h) Shares of Series A Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares of
undesignated Preferred Stock.
(i) Except as may otherwise be required by applicable law, any and all
notices or other communications or deliveries to be provided by the Holders
hereunder, including, without limitation, any Conversion Notice, shall be in
writing and delivered personally, transmitted by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the attention of the President of the Corporation,
with a copy to the Corporation's General Counsel (provided that the failure to
send a copy of such notice to the Corporation's General Counsel shall not affect
the validity of such notice), at the facsimile telephone number or address of
the principal place of business of the Corporation as set forth in the Purchase
Agreement, or at such other facsimile number or address as the Corporation may
notify the Holders in writing from time to time. Except as otherwise
specifically provided herein, any and all notices or other communications or
deliveries to be provided by the Corporation hereunder shall be delivered in
accordance with the provisions of the Purchase Agreement and deemed given on the
date or time provided therein.
Section 6. Optional Conversion. If at any time (the "225% DATE") after
the One Year Date (a) the Per Share Market Value for at least 30 consecutive
Trading Days (provided, however, that, for purposes of such calculation, at the
option of the Corporation, any Trading Day during such 30-Trading-Day period on
which a Holder sets the last closing bid price on the
<PAGE> 32
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Common Stock shall not be used in such calculation, in which case the first
Trading Day preceding such 30-Trading-Day period on which no Holder set the last
closing bid price on the Common Stock shall be used for determining such
calculation) is greater than 225% of the then effective Conversion Price (as
adjusted in accordance with Section 5(c)), and (b) the average daily trading
volume of the Common Stock on the Nasdaq National Market (or such other stock
exchange or quotation system on which the shares of Common Stock are listed or
quoted) for such 30 consecutive Trading Days exceeds 100,000 shares (as adjusted
in accordance with Section 5(c)), then the Corporation shall, at its option,
have the right to cause the conversion of all, but not less than all, of the
then outstanding shares of Series A Preferred Stock into Common Stock in
accordance with the terms of this Certificate of Designations at the Conversion
Price in effect on the date of the 225% Conversion Notice. If the Corporation
elects to cause such a conversion, it shall, within 15 days after the 225% Date,
give written notice (the "225% CONVERSION NOTICE") to the Holders of its intent
to cause the conversion of the Series A Preferred Stock on the date which is 30
days subsequent to the date of the 225% Conversion Notice (the "225% CONVERSION
DATE"); provided, however, that no such conversion shall be permitted unless at
the time of the delivery of the 225% Conversion Notice and on the 225%
Conversion Date, (x) the shares of Common Stock which would be issuable upon
conversion of the Series A Preferred Stock are designated for quotation or
listed for trading on the Nasdaq National Market, the New York Stock Exchange or
the American Stock Exchange, and (y) the Corporation has duly reserved for
issuance the shares of Common Stock which would be issuable upon such
conversion.
Section 7. Protective Provisions. So long as any shares of Series A
Preferred Stock shall remain outstanding, except as otherwise provided herein or
by applicable law, the Corporation shall not, without first obtaining the
approval of the Holders of at least two-thirds of the then outstanding shares of
Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series
A Preferred Stock so as to affect adversely the Series A Preferred Stock as a
class; provided, however, that neither the designation, creation or issuance of
any Junior Stock or Parity Stock shall be deemed to affect adversely the Series
A Preferred Stock as a class;
(b) create any new class or series of capital stock having a preference
over the Series A Preferred Stock as to redemption, conversion, the payment of
dividends or distribution of assets upon a Liquidation Event or any other
liquidation, dissolution or winding up of the Corporation;
(c) increase the authorized number of shares of Series A Preferred
Stock; or
(d) issue any shares of Series A Preferred Stock.
Section 8. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"APPRAISER" shall have the meaning set forth in Section 5(c)(iii).
"CERTIFICATE OF INCORPORATION" shall have the meaning set forth in the
resolution creating the Series A Preferred Stock.
"COMMENCEMENT DATE" means June 15, 2000.
<PAGE> 33
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"COMMON STOCK" means the common stock, $.01 par value per share, of the
Corporation, and any stock of any other class into which such shares may
hereafter have been reclassified or changed.
"COMMON STOCK DIVIDEND NOTICE" shall have the meaning set forth in
Section 2(a)(i).
"CONVERSION DATE" shall have the meaning set forth in Section 5(a)(i).
"CONVERSION NOTICE" shall have the meaning set forth in Section
5(a)(i).
"CONVERSION PRICE" shall have the meaning set forth in Section 5(c)(i).
"CONVERSION RATIO" with respect to a share of Series A Preferred Stock
means, at any time, a fraction, the numerator of which is the Stated Value of
such share, and the denominator of which is the Conversion Price as at such
time.
"CORPORATION" shall have the meaning set forth in the introduction to
this Certificate of Designations.
"DIVIDEND PAYMENT DATE" shall mean March 31, June 30, September 30 and
December 31 of each year, commencing on September 30, 2000, and each Conversion
Date.
"FIVE DAY AVERAGE MARKET PRICE" as at any date shall mean the average
Per Share Market Value for the five Trading Days immediately preceding, but not
including, such date; provided, however, that, at the option of the Corporation,
any Trading Day during such five-Trading-Day period on which a Holder sets the
last closing bid price on the Common Stock shall not be used for determining the
Five Day Average Market Price, in which case the first Trading Day preceding
such five-Trading-Day period on which no Holder set the last closing bid price
on the Common Stock shall be used for determining the Five Day Average Market
Price.
"HOLDER" or "HOLDERS" shall have the meaning set forth in Section 1.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities of the Corporation, other than Series A Preferred Stock and Parity
Stock, if any.
"LIQUIDATION" shall have the meaning set forth in Section 4.
"ONE YEAR DATE" shall have the meaning set forth in Section 5(c)(i).
"ONE YEAR RESET PRICE" shall have the meaning set forth in Section
5(c)(i).
"PARITY STOCK" means any capital stock of the Corporation that ranks on
parity with the Series A Preferred Stock as to redemption, conversion, the
payment of dividends or distribution of assets upon a Liquidation Event or any
other liquidation, dissolution or winding up of the Corporation.
<PAGE> 34
A -14 -
"PER SHARE MARKET VALUE" as at any particular date means (a)
the closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or other principal stock exchange or quotation system on which
the Common Stock is then listed or quoted or, if there is no such price as at
such date, then the closing bid price on such exchange or quotation system as at
the date nearest preceding such date, or (b) if the Common Stock is not listed
or quoted then on the Nasdaq National Market or any other national securities
exchange or quotation system, the closing bid price for a share of Common Stock
in the over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices) as at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices), then the average of the "Pink Sheet" bid
quotes for the relevant day, as determined in good faith by the Holder, or (d)
if the Common Stock is not then publicly traded, the fair market value of a
share of Common Stock on such date as determined by an Appraiser selected in
good faith by the Corporation and reasonably acceptable to Holders of a majority
in interest of the shares of the Series A Preferred Stock then outstanding.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
June 15, 2000, by and between the Corporation and PSINet Inc., a New York
corporation, a copy of which is available for inspection at the principal
corporate office of the Corporation.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of June 15, 2000 by and among the Corporation and the
original Holders of the Series A Preferred Stock, a copy of which is available
for inspection at the principal corporate office of the Corporation.
"RULE 4460" shall have the meaning set forth in Section
5(a)(ii).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall have the meaning set forth in
Section 1.
"SERIES A PREFERRED STOCK DIRECTORS" shall have the meaning
set forth in Section 2(a)(ii).
"STATED VALUE" shall have the meaning set forth in Section 1.
"TRADING DAY" means (a) a day on which the Common Stock is
traded on the Nasdaq National Market or other principal stock exchange or
quotation system on which the Common Stock is then listed or quoted, or (b) if
the Common Stock is not listed or quoted on the Nasdaq National Market or any
other national securities exchange or quotation system, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National
<PAGE> 35
A -15 -
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices).
"THREE YEAR DATE" shall have the meaning set forth in Section
5(c)(i).
"THREE YEAR RESET PRICE" shall have the meaning set forth in
Section 5(c)(i).
"TWO YEAR DATE" shall have the meaning set forth in Section
5(c)(i).
"TWO YEAR RESET PRICE" shall have the meaning set forth in
Section 5(c)(i).
"225% DATE" shall have the meaning set forth in Section 6.
"225% CONVERSION DATE" shall have the meaning set forth in
Section 6.
"225% CONVERSION NOTICE" shall have the meaning set forth in
Section 6.
Section 9. Tax Withholding. Notwithstanding any provision
hereof to the contrary, all payments, distributions or transfers in respect of
the Series A Preferred Stock shall be subject to such withholdings as may be
required by applicable law.
<PAGE> 36
A -16 -
IN WITNESS WHEREOF, Xpedior Incorporated has caused this Certificate to
be executed by David N. Campbell, its President and Chief Executive Officer, as
of this ___ day of _______, 2000.
XPEDIOR INCORPORATED
By: ______________________
Name:
Title:
<PAGE> 37
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be executed by the registered Holder
in order to convert shares of Series A 8-1/2%
Cumulative Convertible Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series A 8-1/2%
Cumulative Convertible Preferred Stock of Xpedior Incorporated (the
"CORPORATION") indicated below, into the number of shares of the Corporation's
common stock, par value $.01 per share (the "COMMON STOCK"), indicated below, as
of the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto, if any, and is delivering herewith such certificates and
opinions as reasonably requested by the Corporation in connection therewith. No
fee will be charged to the Holder for any conversion, except for such transfer
taxes, if any.
Conversion calculations:
________________________________________________________________________________
Date to Effect Conversion
________________________________________________________________________________
Number of shares of Series A 8-1/2% Cumulative
Convertible Preferred Stock to be Converted
________________________________________________________________________________
Number of shares of Common Stock to be Issued
________________________________________________________________________________
Applicable Conversion Price
____________________________________
Signature
____________________________________
Name
____________________________________
Address
<PAGE> 38
CERTIFICATE
OF THE
DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
SERIES A 8-1/2% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
XPEDIOR INCORPORATED
FILED BY:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
<PAGE> 39
EXHIBIT B
AGREEMENT
This AGREEMENT (this "AGREEMENT"), dated as of September 12, 2000, is
entered into by and among PSINet INC., a New York corporation ("PSINET"), PSINet
CONSULTING SOLUTIONS HOLDINGS, INC., a Delaware corporation formerly known as
Metamor Worldwide, Inc. ("PSINet Consulting") and XPEDIOR INCORPORATED, a
Delaware corporation ("XPEDIOR").
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as
of March 21, 2000 by and among PSINet, PSINet Consulting and PSINet Shelf IV
Inc., PSINet Consulting acquired all of the issued and outstanding shares of
capital stock of PSINet Consulting;
WHEREAS, PSINet Consulting owns approximately 80% of the issued and
outstanding capital stock of Xpedior;
WHEREAS, PSINet Consulting and Xpedior have approved an amendment (the
"Charter Amendment") to the Xpedior Certificate of Incorporation to eliminate
Article Thirteenth, which prohibits Xpedior, for so long as PSINet Consulting is
the holder of record of a majority of the voting stock of Xpedior on a per vote
basis, from issuing or selling any Xpedior capital stock, other than shares
issued pursuant to the Xpedior Stock Incentive Plan, without the consent of the
holders of a majority of the voting stock of Xpedior;
WHEREAS, the Charter Amendment will automatically become effective 20
days after the mailing of an information statement to the stockholders of
Xpedior describing the Charter Amendment and prepared in accordance with
Regulation 14C of the Securities Exchange Act of 1934, as amended (such
effective date, the "Effectiveness Date"); and
WHEREAS, in connection with the Charter Amendment, PSINet, PSINet
Consulting and Xpedior wish to enter into this Agreement relating to the
issuance of capital stock by Xpedior from time to time;
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Prohibition Against Issuance of Xpedior Securities.
Except as expressly otherwise provided in Section 2 of this
Agreement, from and after the date hereof, Xpedior shall not, without the prior
written consent of PSINet, (a) issue, deliver, sell or grant (i) any shares of
capital stock of Xpedior, (ii) any security convertible into or exchangeable for
any shares of capital stock of Xpedior, or (iii) any option, conversion right,
exchange right or warrant obligating Xpedior to issue, deliver, sell or grant
any shares of capital stock of Xpedior, or (b) enter into any other agreement or
commitment of any nature whatsoever obligating Xpedior to issue, deliver, sell
or grant any shares of capital stock of Xpedior.
2. Exceptions to Prohibition Against Issuance of Xpedior Securities.
The restrictions set forth in Section 1 of this Agreement shall not
apply under the following circumstances:
(a) Xpedior may issue shares of common stock of Xpedior in partial
or complete satisfaction of Xpedior's obligation to pay the purchase price in
one or more "Qualified Acquisitions." For purposes of this Agreement, the term
"Qualified Acquisition" will mean the acquisition by Xpedior, with the prior
approval of the Board of Directors of Xpedior, of (i) all of
<PAGE> 40
B -2 -
the outstanding capital stock of a company, (ii) all or substantially all of the
assets of a company, or (iii) a discreet division or line of business of a
company. Notwithstanding the foregoing, Xpedior shall not, without the prior
written consent of PSINet, issue shares of common stock of Xpedior having an
aggregate value (as determined by reference to the average closing price of a
share of common stock of Xpedior for the five trading days ending on the last
trading day prior to the issuance of the stock being valued) in excess of
US$5,000,000 per Qualified Acquisition or US$25,000,000 in the aggregate for all
such Qualified Acquisitions. In no event shall Xpedior issue, deliver, sell or
grant any share of common stock of Xpedior in exchange for consideration having
a value less than the average closing price of a share of common stock of
Xpedior for the five trading days ending on the last trading day prior to the
issuance of the stock being valued.
(b) Xpedior may issue, deliver, sell and/or grant shares of common
stock of Xpedior or options to purchase shares of common stock of Xpedior
pursuant to and in accordance with Xpedior's Stock Incentive Plan.
(c) Xpedior may issue, deliver, sell and/or grant up to 2,000,000
shares of common stock of Xpedior or options to purchase shares of common stock
of Xpedior pursuant to and in accordance with the terms of an Xpedior employee
stock purchase plan approved by the Board of Directors of Xpedior.
3. Termination.
This Agreement shall automatically terminate on the first date upon
which PSINet is not the direct or indirect holder of record of a majority of the
outstanding voting stock of Xpedior entitled to vote generally in the election
of directors calculated on a per vote basis.
4. General Provisions
(a) This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect thereto. This Agreement may be
amended only by a written instrument signed by the parties hereto. No provision
of this Agreement may be waived without a written instrument signed by the
waiving party. The failure of any party to insist, in any one or more instances,
on performance of any of the terms or conditions of this Agreement will not be
construed as a waiver or relinquishment of any rights granted hereunder or of
the future performance of any such term, covenant or condition, and the
obligations of the parties with respect thereto shall continue in full force and
effect.
(b) This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument. A facsimile copy of an original signature shall be
deemed an original signature.
(c) This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors in interest and
permitted assigns. Neither this Agreement nor any of the rights or obligations
hereunder (or under any document delivered pursuant hereto) may be assigned by a
party hereto without the prior written consent of the other parties.
<PAGE> 41
B -3 -
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to any conflict or
choice of laws, rules or principles.
(e) Each party represents and acknowledges that, in the negotiation
and drafting of this Agreement, it has been represented and relied upon the
advice of counsel of its choice. Each party hereby affirms that its counsel has
had a substantial role in the drafting and negotiation of this Agreement.
Therefore, each party agrees that no rule of construction to the effect that any
ambiguities are to be resolved against the drafter shall be employed in the
interpretation of this Agreement.
<PAGE> 42
B -4 -
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PSINET INC.
By: /s/ Kathleen B. Horne
--------------------------------------
Name: Kathleen B. Horne
Title: Senior Vice President
PSINET CONSULTING SOLUTIONS HOLDINGS, INC.
By: /s/ Margaret G. Reed
--------------------------------------
Name: Margaret G. Reed
Title: Senior Vice President
XPEDIOR INCORPORATED
By: /s/ Caesar J. Belbel
--------------------------------------
Name: Caesar J. Belbel
Title: Senior Vice President
<PAGE> 43
EXHIBIT C
XPEDIOR INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The XPEDIOR INCORPORATED EMPLOYEE STOCK PURCHASE PLAN (the
"Plan") is intended to provide an incentive for employees of XPEDIOR
INCORPORATED, a Delaware corporation (the "Company") and its participating
subsidiaries (as defined in Paragraph 4) to acquire or increase a proprietary
interest in the Company through the purchase of shares of the Company's common
stock, and to encourage eligible employees to remain in the employ of the
Company and its participating subsidiaries. The Plan is intended to constitute
an "employee stock purchase plan" within the meaning of Section 423 (b) of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
Plan shall, accordingly, be construed so as to extend and limit participation in
the Plan in a manner consistent with the requirements of that section of the
Code.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Where the following words and phrases
are used in the Plan, they shall have the respective meanings set forth
below, unless the context clearly indicates to the contrary:
(i) "BOARD" means the Board of Directors of the Company.
(ii) "CODE" means the Internal Revenue Code of 1986, as amended.
(iii) "COMMITTEE" means a committee appointed from time to time by
the Board to administer the Plan as provided in Paragraph 3
and constituted so as to permit the Plan to comply with Rule
16b-3, as currently in effect or as hereafter modified,
promulgated under the Securities Exchange Act of 1934, as
amended.
(iv) "COMPANY" means Xpedior Incorporated, a Delaware corporation.
(v) "DATE OF EXERCISE" means the last day of each Option Period.
(vi) "DATE OF GRANT" means August 1, 2000, and, thereafter, the
first day of each successive October, January, April and July.
(vii) "ELIGIBLE COMPENSATION" means regular straight-time earnings
or base salary, plus overtime pay, incentive compensation,
bonuses, and commissions.
(viii) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(ix) "OPTION PERIOD" means the three-month period beginning on each
Date of Grant.
(x) "OPTION PRICE" shall have the meaning assigned to such term in
Paragraph 8.2.
C-1
<PAGE> 44
(xi) "PARTICIPATING COMPANY" means any present or future parent or
subsidiary corporation of the Company that participates in the
Plan pursuant to Paragraph 4.
(xii) "PLAN" means this Xpedior Incorporated Employee Stock Purchase
Plan, as amended from time to time.
(xiii) "RESTRICTION PERIOD" means the period of time, if any, during
which shares of Stock acquired by a participant in the Plan
may not be sold, assigned, pledged, exchanged, hypothecated,
or otherwise transferred, encumbered, or disposed of by such
participant as provided in Paragraph 8.4.
(xiv) "STOCK" means the shares of the Company's Common Stock, par
value $.01 per share.
2.2 NUMBER AND GENDER. Wherever appropriate herein, words used
in the singular shall be considered to include the plural, and words
used in the plural shall be considered to include the singular. The
masculine gender, where appearing in the Plan, shall be deemed to
include the feminine gender.
2.3 HEADINGS. The headings and subheadings in the Plan are
included solely for convenience, and, if there is any conflict between
such headings or subheadings and the text of the Plan, the text shall
control.
2.4 SEVERABILITY. If any provision of the Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions hereof; instead, each provision
shall be fully severable, and the Plan shall be construed and enforced
as if said illegal or invalid provision had never been included herein.
2.5 GOVERNING LAW. All provisions of the Plan shall be
construed in accordance with the laws of the state of Delaware, except
to the extent preempted by federal law.
2.6 SECTION 423 OF THE CODE. The Plan is intended to qualify
as an "employee stock purchase plan" under Section 423 of the Code. The
provisions of the Plan shall be construed in a manner consistent with
the requirements of that section of the Code.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Committee, the members of which shall be appointed from time to time by the
Board. Each member of the Committee shall serve for a term commencing on a date
specified by the Board and continuing until he dies, resigns, or is removed from
office by the Board. Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all options granted under the Plan, make such rules as it
deems necessary for the proper administration of the Plan, and make all other
determinations necessary or advisable for the administration of the Plan. In
addition, the Committee shall correct any defect or supply any omission or
reconcile any inconsistency in the Plan, or in any option granted under the
Plan, in the manner and to the extent that the Committee deems desirable to
carry the Plan or any option into effect. The Committee shall, in its sole
discretion, make such decisions or determinations and take such actions, and all
such decisions, determinations, and actions taken or made by the Committee
pursuant to this and the other Paragraphs of the Plan shall be conclusive on all
parties. The Committee shall not be liable for any decision, determination, or
action taken in good faith in connection with the administration of the Plan.
The Committee shall have the authority to delegate routine day-to-day
administration of the Plan to such officers and employees of the Company as the
Committee deems appropriate.
C-2
<PAGE> 45
4. PARTICIPATING COMPANIES. The Committee may from time to time
designate any present or future parent or subsidiary corporation of the Company
that is eligible by law to participate in the Plan as a Participating Company.
The terms of the Plan may be modified as applied to a Participating Company only
to the extent permitted under Section 423 of the Code. Transfer of employment
among the Company and Participating Companies (and among any other parent or
subsidiary corporation of the Company) shall not be considered a termination of
employment hereunder. Any Participating Company may, by appropriate action of
its Board of Directors, terminate its participation in the Plan. Moreover, the
Committee may, in its discretion, terminate a Participating Company's Plan
participation at any time.
5. ELIGIBILITY TO PARTICIPATE. Subject to the provisions hereof,
all employees of the Company and the Participating Companies who are employed by
the Company or any Participating Company as of a Date of Grant shall be eligible
to participate in the Plan. The preceding notwithstanding, no option shall be
granted to an employee if such employee, immediately after the option is
granted, owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of its parent or
subsidiary corporations (within the meaning of Sections 423(b)(3) and 424(d) of
the Code).
6. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 13 hereof, the aggregate number of shares which may be sold pursuant
to options granted under the Plan shall not exceed 2,000,000 shares of the
authorized Stock, which shares may be unissued shares or reacquired shares,
including shares bought on the market or otherwise for purposes of the Plan.
Should any option granted under the Plan expire or terminate prior to its
exercise in full, the shares theretofore subject to such option may again be
subject to an option granted under the Plan. Any shares that are not subject to
outstanding options upon the termination of the Plan shall cease to be subject
to the Plan.
7. GRANT OF OPTIONS.
7.1 IN GENERAL. Following the effective date of the Plan
and continuing while the Plan remains in force, the Company shall offer
options under the Plan to purchase shares of Stock to all eligible
employees who elect to participate in the Plan. Except as otherwise
determined by the Committee, these options shall be granted on each
Date of Grant. Except as provided in Paragraph 14, the term of each
option shall be for three months, which shall begin on the Date of
Grant and end on the last day of such three-month period. Subject to
Subparagraph 7.4, the number of shares of Stock subject to an option
for a participant shall be equal to the quotient of (i) the aggregate
payroll deductions withheld on behalf of such participant during the
Option Period in accordance with Subparagraph 7.2, divided by (ii) the
Option Price of the Stock applicable to the Option Period, including
fractions.
7.2 ELECTION TO PARTICIPATE; PAYROLL DEDUCTION
AUTHORIZATION. Except as provided in Subparagraph 7.6, each eligible
employee may elect to participate in the Plan by delivering to the
Company, within the time period prescribed by the Committee, a written
payroll deduction authorization in a form prepared by the Company,
whereby such employee gives notice of his election to participate in
the Plan as of the next following Date of Grant, and whereby such
employee designates an integral percentage of his Eligible Compensation
to be deducted from his compensation for each pay period and paid into
the Plan for his account. The designated percentage may not be less
than 1% nor exceed 15% of Eligible Compensation. An eligible employee
may participate in the Plan only by means of payroll deduction.
C-3
<PAGE> 46
7.3 CHANGES IN PAYROLL AUTHORIZATION. The payroll
deduction authorization referred to in Subparagraph 7.2 may not be
changed during the Option Period. However, a participant may withdraw
from the Plan as provided in Paragraph 9.
7.4 $25,000 LIMITATION. No employee shall be granted any
option under the Plan that permits his rights to purchase Stock under
the Plan and under all other employee stock purchase plans of the
Company and its parent and subsidiary corporations to accrue at a rate
which exceeds $25,000 of fair market value of Stock (determined at the
time such option is granted) for each calendar year in which such
option is outstanding at any time (within the meaning of Section
423(b)(8) of the Code). Any payroll deductions in excess of the amount
specified in the foregoing sentence shall be returned to the
participant as soon as administratively feasible after the next
following Date of Exercise.
7.5 LEAVES OF ABSENCE. During a paid leave of absence
approved by the Company and meeting the requirements of Treasury
Regulation Section 1.421-7(h)(2), a participant's elected payroll
deductions shall continue. A participant may not contribute to the Plan
during an unpaid leave of absence. If a participant takes an unpaid
leave of absence that is approved by the Company and meets the
requirements of Treasury Regulation Section 1.421-7(h)(2), then such
participant's payroll deductions for such Option Period that were made
prior to such leave may remain in the Plan and be used to purchase
Stock under the Plan on the Date of Exercise relating to such Option
Period. If a participant takes a leave of absence that is not described
in the first or third sentence of this Subparagraph 7.5, then he shall
be considered to have withdrawn from the Plan pursuant to the
provisions of Paragraph 9 hereof. Furthermore, notwithstanding the
preceding provisions of this Subparagraph 7.5, if a participant takes a
leave of absence that is described in the first or third sentence of
this Subparagraph 7.5 and such leave of absence exceeds 30 days, then
he shall be considered to have withdrawn from the Plan pursuant to the
provisions of Paragraph 9 hereof on the 31st day of such leave of
absence.
7.6 CONTINUING ELECTION. Subject to the limitation set
forth in Subparagraph 7.4, a participant (i) who has elected to
participate in the Plan pursuant to Subparagraph 7.2 as of a Date of
Grant and (ii) who takes no action to change or revoke such election as
of the next following Date of Grant and/or as of any subsequent Date of
Grant prior to any such respective Date of Grant shall be deemed to
have made the same election, including the same attendant payroll
deduction authorization, for such next following and/or subsequent
Date(s) of Grant as was in effect immediately prior to such respective
Date of Grant. Payroll deductions that are limited by Subparagraph 7.4
shall recommence at the rate provided in such participant's payroll
deduction authorization at the beginning of the first Option Period
that is scheduled to end in the following calendar year, unless the
participant changes the amount of his payroll deduction authorization
pursuant to Paragraph 7, withdraws from the Plan as provided in
Paragraph 9, or is terminated from participation in the Plan as
provided in Paragraph 10.
8. EXERCISE OF OPTIONS.
8.1 GENERAL STATEMENT. Subject to the limitation set
forth in Subparagraph 7.4, each participant in the Plan automatically,
and without any act on his part, shall be deemed to have exercised his
option on each Date of Exercise to the extent of his unused payroll
deductions under the Plan and to the extent the issuance of Stock to
such participant upon such exercise is lawful.
C-4
<PAGE> 47
8.2 "OPTION PRICE" DEFINED. The term "Option Price" shall
mean the per share price of Stock to be paid by each participant on
each exercise of his option, which price shall be equal to 85% of the
lesser of (i) the fair market value of the Stock on the Date of
Exercise or (ii) the fair market value of the Stock on the Date of
Grant. For all purposes under the Plan, the fair market value of a
share of Stock on a particular date shall be equal to the closing price
of the Stock on the NASDAQ National Market on that date (or, if no
shares of Stock have been traded on that date, on the next regular
business date on which shares of the Stock are so traded).
8.3 DELIVERY OF SHARE CERTIFICATES. As soon as
practicable after each Date of Exercise, the Company shall deliver to a
custodian selected by the Committee one or more certificates
representing (or shall otherwise cause to be credited to the account of
such custodian) the total number of whole shares of Stock respecting
options exercised on such Date of Exercise in the aggregate (for both
whole and fractional shares) of all of the participating employees
hereunder. Any remaining amount representing a fractional share shall
not be certificated (or otherwise so credited), and such remaining
amount shall be paid in cash to the custodian. Such custodian shall
keep accurate records of the beneficial interests of each participating
employee in such shares by means of participant accounts under the
Plan, and shall provide each eligible employee with quarterly or such
other periodic statements with respect thereto as may be directed by
the Committee. If the Company is required to obtain from any U.S.
commission or agency authority to issue any such shares, the Company
shall seek to obtain such authority. Inability of the Company to obtain
from any commission or agency (whether U.S. or foreign) authority,
which counsel for the Company deems necessary for the lawful issuance
of any such shares, shall relieve the Company from liability to any
participant in the Plan except to return to him the amount of his
payroll deductions under the Plan that would have otherwise been used
upon exercise of the relevant option.
8.4 RESTRICTIONS ON TRANSFER. The Committee may from time
to time specify with respect to a particular grant of options a
Restriction Period that shall apply to the shares of Stock acquired
pursuant to such options. In the event the Committee has specified that
a Restriction Period will apply with respect to a particular grant of
options, unless another Restriction Period is specified by the
Committee, the Restriction Period applicable to shares of Stock
acquired pursuant to such grant shall be a period of six months after
the Date of Exercise of the options pursuant to which such shares were
acquired. Except as hereinafter provided, during the Restriction Period
applicable to shares of Stock acquired under the Plan, such shares may
not be sold, assigned, pledged, exchanged, hypothecated, or otherwise
transferred, encumbered, or disposed of by the participant who has
purchased such shares; provided, however, that such Restriction shall
not apply to the transfer, exchange, or conversion of such shares of
Stock pursuant to a merger, consolidation, or other plan of
reorganization of the Company, but the stock, securities, or other
property (other than cash) received upon any such transfer, exchange or
conversion shall also become subject to the same transfer restrictions
applicable to the original shares of Stock, and shall be held by the
custodian, pursuant to the provisions hereof. Upon the expiration of
such Restriction Period, if any, the transfer restrictions set forth in
this Subparagraph 8.4 shall cease to apply and the optionee may,
pursuant to procedures established by the Committee and the custodian,
direct the sale or distribution of some or all of the whole shares of
Stock in his Company stock account that are not then subject to
transfer restrictions and, in the event of a sale, request payment of
the net proceeds from such sale. Further, upon the termination of the
participant's employment with the Company and its parent or subsidiary
corporations for any reason whatsoever, the transfer restrictions set
forth in this Subparagraph 8.4 shall cease to apply and the custodian
shall, upon the request of such participant, deliver to such
participant a certificate
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issued in his name representing (or otherwise credit to an account of
such participant) the aggregate whole number of shares of Stock in his
Company stock account under the Plan. At the time of distribution of
such shares, any fractional share in such Company stock account shall
be converted to cash based on the fair market value of the Stock on the
date of distribution and such cash shall be paid to the participant.
The Committee may cause the Stock issued in connection with the
exercise of options under the Plan to bear such legends or other
appropriate restrictions, and the Committee may take such other
actions, as it deems appropriate in order to reflect the transfer
restrictions set forth in this Subparagraph 8.4 and to assure
compliance with applicable laws.
9. WITHDRAWAL FROM THE PLAN.
9.1 GENERAL STATEMENT. Any participant may withdraw in
whole from the Plan at any time prior to the Date of Exercise relating
to a particular Option Period. Partial withdrawals shall not be
permitted. A participant who wishes to withdraw from the Plan must
timely deliver to the Company a notice of withdrawal in a form prepared
by the Company. The Company, promptly following the time when the
notice of withdrawal is delivered, shall refund to the participant the
amount of his payroll deductions under the Plan which have not yet been
otherwise returned to him or used upon exercise of options, and
thereupon, automatically and without any further act on his part, his
payroll deduction authorization and his interest in unexercised options
under the Plan shall terminate.
9.2 ELIGIBILITY FOLLOWING WITHDRAWAL. A participant who
withdraws from the Plan shall be eligible to participate again in the
Plan upon expiration of the Option Period during which he withdrew
(provided that he is otherwise eligible to participate in the Plan at
such time in accordance with Paragraph 5 hereof).
10. TERMINATION OF EMPLOYMENT AND OF PARTICIPATION.
10.1 GENERAL STATEMENT. Except as provided in Subparagraph
10.2, if the employment of a participant terminates for any reason
whatsoever, then his participation in the Plan automatically, and
without any act on his part, shall terminate as of the date of the
termination of his employment. The Company shall promptly refund to him
the amount of his payroll deductions under the Plan which have not yet
been otherwise returned to him or used upon exercise of options, and
thereupon his interest in unexercised options under the Plan shall
terminate.
10.2 TERMINATION BY RETIREMENT, DEATH, OR DISABILITY. If
the employment of a participant terminates after such participant has
attained age 65 or due to such participant's death or permanent and
total disability (within the meaning of Section 22(e)(3) of the Code),
then such participant, or such participant's personal representative,
as applicable, shall have the right to elect either to:
(i) Withdraw all of such participant's accumulated
unused payroll deductions under the Plan; or
(ii) Exercise such participant's option for the
purchase of Stock on the last day of the Option Period during
which termination of employment occurs for the purchase of the
number of full shares of Stock that the accumulated payroll
deductions at the date of such participant's termination of
employment will purchase at the applicable Option Price
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(subject to Subparagraph 7.4), with any excess payroll
deduction amounts to be returned to such participant or such
personal representative.
The participant or, if applicable, such personal representative, must make such
election by giving written notice to the Committee at such time and in such
manner as the Committee prescribes. In the event that no such written notice of
election is timely received by the Committee, the participant or personal
representative will automatically be deemed to have elected as set forth in
Clause (ii) above, and promptly after the exercise so described in Clause (ii)
above, all shares of Stock in such participant's account under the Plan shall be
distributed to the participant or such personal representative.
11. RESTRICTION UPON ASSIGNMENT OF OPTION. An option granted under
the Plan shall not be transferable otherwise than by will or the laws of descent
and distribution. Each option shall be exercisable, during his lifetime, only by
the employee to whom such option is granted. The Company shall not recognize,
and shall be under no duty to recognize, any assignment or purported assignment
by an employee of his option or of any rights under his option or under the
Plan.
12. NO RIGHTS OF STOCKHOLDER UNTIL EXERCISE OF OPTION. With
respect to shares of Stock subject to an option, an optionee shall not be deemed
to be a stockholder, and he shall not have any of the rights or privileges of a
stockholder, until such option has been exercised. With respect to an
individual's Stock held by the custodian pursuant to Subparagraph 8.4, the
custodian shall, as soon as practicable, pay the individual any cash dividends
attributable thereto and shall, in accordance with procedures adopted by the
custodian, facilitate the individual's voting rights attributable thereto.
13. ADJUSTMENTS. Whenever any change is made in the Stock, by
reason of a stock dividend or by reason of subdivision, stock split, reverse
stock split, recapitalization, reorganization, combination, reclassification of
shares, or other similar change, appropriate action will be taken by the
Committee to adjust accordingly the number of shares subject to the Plan, the
maximum number of shares that may be subject to any option, and the number and
Option Price of shares subject to options outstanding under the Plan.
14. MERGER, CONSOLIDATION, OR LIQUIDATION OF COMPANY. If the
Company shall not be the surviving corporation in any merger or consolidation
(or survives only as a subsidiary of another entity), or if the Company is to be
dissolved or liquidated, then, unless a surviving corporation assumes or
substitutes new options (within the meaning of Section 424(a) of the Code) for
all options then outstanding, (i) the Date of Exercise for all options then
outstanding shall be accelerated to a date fixed by the Committee prior to the
effective date of such merger or consolidation or such dissolution or
liquidation and (ii) upon such effective date, any unexercised options shall
expire, and the Company promptly shall refund to each participant the amount of
such participant's payroll deductions under the Plan that have not yet been
returned to him or used upon exercise of options.
15. USE OF FUNDS; NO INTEREST PAID. All funds received or held by
the Company under the Plan shall be included in the general funds of the
Company, free of any trust or other restriction, and may be used for any
corporate purpose. No interest shall be paid to any participant.
16. EFFECTIVE DATE AND TERM OF THE PLAN. The Plan shall be
effective on August 1, 2000, provided the Plan is approved by the stockholders
of the Company within twelve months of such date. Notwithstanding any provision
in the Plan, no option granted under the Plan shall be exercisable prior to such
stockholder approval, and, if the stockholders of the Company do not approve the
Plan by the Date of Exercise of the first option granted hereunder, then the
Plan will have no force and effect. Except with
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respect to options then outstanding, if not sooner terminated under the
provisions of Paragraph 17, the Plan shall terminate upon, and no further
payroll deductions shall be made and no further options shall be granted after
July 31, 2010.
17. AMENDMENT OR TERMINATION OF THE PLAN. The Board in its
discretion may terminate the Plan at any time with respect to any Stock for
which options have not theretofore been granted. The Board and the Committee
shall each have the right to alter or amend the Plan or any part thereof from
time to time; provided, however, that no change in any option theretofore
granted may be made that would impair the rights of the optionee without the
consent of such optionee.
18. SECURITIES LAWS. The Company shall not be obligated to issue
any Stock pursuant to any option granted under the Plan at any time when the
offer, issuance, or sale of shares covered by such option has not been
registered under the Securities Act of 1933, as amended, or does not comply with
such other state, federal, or foreign laws, rules, or regulations, or the
requirements of any stock exchange upon which the Stock may then be listed, as
the Company or the Committee deems applicable and, in the opinion of legal
counsel for the Company, there is no exemption from the requirements of such
laws, rules, regulations, or requirements available for the offer, issuance, and
sale of such shares. Furthermore, all Stock acquired pursuant to the Plan shall
be subject to the Company's policies concerning compliance with securities laws
and regulations, as such policies may be amended from time to time. The terms
and conditions of options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act shall comply with any
applicable provisions of Rule 16b-3 promulgated thereunder. As to such persons,
the Plan shall be deemed to contain, and such options shall contain, and the
shares issued upon exercise thereof shall be subject to, such additional
conditions and restrictions as may be required from time to time by Rule 16b-3
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
19. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from taking any
corporate action that is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No employee,
beneficiary, or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
20. MISCELLANEOUS PROVISIONS.
20.1 PARENT AND SUBSIDIARY CORPORATIONS. For all purposes of
the Plan, a corporation shall be considered to be a parent or
subsidiary corporation of the Company only if such corporation is a
parent or subsidiary corporation of the Company within the meaning of
Sections 424(e) and 424(f) of the Code.
20.2 NOT A CONTRACT OF EMPLOYMENT. The adoption and
maintenance of the Plan shall not be deemed to be a contract between
the Company or any Participating Company and any person or to be
consideration for the employment of any person. Participation in the
Plan at any given time shall not be deemed to create the right to
participate in the Plan or in any other arrangement permitting an
employee of the Company or any Participating Company to purchase Stock
at a discount in the future. The rights and obligations under any
participant's terms of employment with the Company or any Participating
Company shall not be affected by participation in the Plan. Nothing
herein contained shall be deemed to give any person the right to be
retained in the employ of the Company or any Participating Company or
to restrict the right of the Company or any Participating Company to
discharge any person at any time, nor shall the Plan
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be deemed to give the Company or any Participating Company the right to
require any person to remain in the employ of the Company or such
Participating Company or to restrict any person's right to terminate
his employment at any time. The Plan shall not afford any participant
any additional right to compensation as a result of the termination of
such participant's employment for any reason whatsoever.
20.3 COMPLIANCE WITH APPLICABLE LAWS. The Company's obligation
to offer, issue, sell, or deliver Stock under the Plan is at all times
subject to all approvals of and compliance with any governmental
authorities (whether domestic or foreign) required in connection with
the authorization, offer, issuance, sale, or delivery of Stock as well
as all federal, state, local, and foreign laws. Without limiting the
scope of the preceding sentence, and notwithstanding any other
provision in the Plan, the Company shall not be obligated to grant
options or to offer, issue, sell, or deliver Stock under the Plan to
any employee who is a citizen or resident of a jurisdiction the laws of
which, for reasons of its public policy, prohibit the Company from
taking any such action with respect to such employee.
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