Exhibit 2
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CERTIFICATE
OF THE
DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
SERIES B 9% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
XPEDIOR INCORPORATED
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
I, Brian Farrar, the President 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 B 9% Cumulative Convertible Preferred
Stock (the "Series B Preferred Stock"), and the number of shares so designated
shall be 300,000 (which shall not be subject to increase without the prior
approval of the holders (each holder of shares of Series B Preferred Stock, a
"Holder" and, together with all other Holders, the "Holders") of at least
two-thirds of the shares of Series B Preferred Stock then outstanding). Each
share of Series B Preferred Stock shall have a par value of $.01 per share and a
stated value of $50 per share (the "Stated Value").
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Section 2. Dividends.
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(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 B
Preferred Stock at the rate per share (as a percentage of the Stated Value per
share) equal to 9% 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 B 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 B 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 B 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 B 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 B
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 B
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 B 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 one 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 one director (the "Series B
Preferred Stock Director") to fill the vacancy resulting from such increase, and
the Holders may, at a meeting called and held as hereinafter provided, elect
such Series B Preferred Stock Director 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 term of
office of the Series B Preferred Stock Director shall terminate, if and when all
dividends then in default on the Series B 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 Series B
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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 B
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 a Series B Preferred Stock Director 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 B 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 a Series B Preferred Stock Director, the presence in person
or by proxy of the Holders of 40% of the outstanding Series B Preferred Stock
shall be required to constitute a quorum of such class for the election of
Series B Preferred Stock Director; provided, however, that the absence of a
quorum of the Holders of Series B 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 B Preferred Stock, the Holders of a majority of the shares of
Series B Preferred Stock who are present in person or by proxy shall have the
power to adjourn the election of the Series B Preferred Stock Director 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 B 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 B 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 B 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 B 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:
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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 B 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 B Preferred Stock);
(ii) the shares of Common Stock payable as a dividend on the
Series B 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;
or
(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.
(c) (i) So long as any shares of Series B 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 purchase, redemption or
acquisition (through a sinking fund or otherwise) of any Junior Securities.
(ii) So long as any shares of Series B 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 B 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 B 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 B Preferred Stock shall have no voting
rights; provided, however, that, so long as any shares of Series B Preferred
Stock shall remain outstanding, the Corporation shall not, without the requisite
approval of the Holders of the Series B 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 B Preferred
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Stock then outstanding, unless conditioned upon receipt of the requisite
approval of the Holders of the Series B 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 B 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 B 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 B
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 B 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 Notice, once delivered, shall be irrevocable. If
the Holder is converting less than all of the shares of Series B 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 B 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 B 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 B 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
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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 B 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 B Preferred Stock, (ii) one or more certificates
representing the number of shares of Series B 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 B Preferred
Stock until certificates evidencing such shares of Series B Preferred Stock are
either delivered for conversion to the Corporation or, if so directed by the
Corporation, to any transfer agent for the Series B Preferred Stock or Common
Stock, or the Holder of such Series B 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 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 B 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 B Preferred
Stock (the "Conversion Price") on any Conversion Date shall be equal to $2.28;
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
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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 B 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 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 B 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
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upon, or upon the conversion of, shares of Series B 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 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.
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(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 B 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 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 B 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 B 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
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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 B 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 B 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 B 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 B 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 B 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 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 B 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
<PAGE>
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certificate upon conversion in a name other than that of the Holder of such
shares of Series B 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 B 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 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 B 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 B 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 B 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
<PAGE>
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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 B
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 B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series B Preferred Stock so as to affect adversely the Series B 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 B Preferred Stock as a class;
(b) create any new class or series of capital stock having a
preference over the Series B 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 B Preferred
Stock; or
(d) issue any shares of Series B 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 B Preferred Stock.
"Commencement Date" means November 1, 2000.
"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 B
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.
<PAGE>
-13-
"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 December 31, 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 B 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 B 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, including
without limitation the Corporation's Series A 8 1/2% Cumulative Convertible
Preferred Stock.
"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 B Preferred Stock then outstanding.
<PAGE>
-14-
"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 Stock Purchase Agreement, dated
as of November 1, 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 November 1, 2000 by and among the Corporation and the
original Holders of the Series B 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 B Preferred Stock" shall have the meaning set forth in
Section 1.
"Series B Preferred Stock Director" shall have the meaning set
forth in Section 2(a)(ii).
"Stated Value" shall have the meaning set forth in Section 1.
"Thirty Day Average Market Price" as at any date shall mean
the average Per Share Market Value for the 30 Trading Days immediately
preceding, but not including, such date; provided, however, that, at the option
of the Corporation, any Trading Day during such thirty-Trading-Day period on
which a Holder sets the last closing bid price on the Common Stock shall not be
used for determining the Thirty Day Average Market Price, in which case the
first Trading Day preceding such thirty-Trading-Day period on which no Holder
set the last closing bid price on the Common Stock shall be used for determining
the Thirty Day Average Market Price.
"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).
"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 Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices).
"Two Year Date" shall have the meaning set forth in Section
5(c)(i).
<PAGE>
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"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
B Preferred Stock shall be subject to such withholdings as may be required by
applicable law.
<PAGE>
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IN WITNESS WHEREOF, Xpedior Incorporated has caused this Certificate to be
executed by J. Brian Farrar, its President, as of this first day of November,
2000.
XPEDIOR INCORPORATED
By: /s/ J. Brian Farrar
----------------------
Name: J. Brian Farrar
Title: President
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be executed by the registered Holder
in order to convert shares of Series B
9% Cumulative Convertible Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B 9%
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 B 9% Cumulative Convertible Preferred Stock to be
Converted
--------------------------------------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------------------------------------
Applicable Conversion Price
-----------------------------------
Signature
-----------------------------------
Name
-----------------------------------
Address
<PAGE>
CERTIFICATE
OF THE
DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
SERIES B 9% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
XPEDIOR INCORPORATED
FILED BY:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
