SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 28, 2000
ARINCO COMPUTER SYSTEMS INC.
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(Exact name of registrant as specified in charter)
New Mexico 0-13347 85-0272154
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
20 Dayton Avenue, Greenwich, Connecticut 06830
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-6942
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Item 5. Other Events
On March 28, 2000 Arinco Computer Systems Inc. (the "Company") closed (the
"Closing") the transactions contemplated by the Securities Purchase Agreement
with Pangea Internet Advisors LLC ("Pangea") which was signed on March 9 (the
"Agreement"). Pursuant to the Agreement, principals of Pangea and other
investors identified by Pangea invested $40 million in newly-issued convertible
preferred stock of the Company, representing approximately 97% of the issued and
outstanding common stock of the Company on an as converted fully-diluted basis.
The purchase price was $.25 per share of common stock calculated on an as
converted basis. In addition, certain investors purchased five year warrants to
purchase shares representing 20% of the Company's common stock on a
fully-diluted basis. 20% of the warrants have an exercise price of $.25 per
share, 30% have an exercise price of $.50 per share, 30% have an exercise price
of $.75 per share and 20% have an exercise price of $1.00 per share.
Pursuant to the Agreement, four new directors, designated by Pangea, were
elected to the Company's board of directors, and new officers were appointed,
all effective as of the Closing. James Arias, the Company's previous sole
director resigned, effective as of the Closing.
Because the Company's new management team also have responsibilities and
management duties with respect to various entities, including FG II Management
Company, LLC ("FG II") and other affiliates of Pangea, the Company entered into
a Business Opportunity Allocation and Miscellaneous Services Agreement with
Pangea to address the allocation of acquisition opportunities. Pangea on behalf
of itself, FG II and its other affiliates will refer to the Company all
opportunities for the Company to acquire interests in its target businesses
where the Company's allocation is a minimum of $1,000,000 or where 50% of the
amount of such opportunity could be acquired for no less than $500,000 and such
an acquisition would give the Company primary control of the target business. If
the opportunity is appropriate for both the Company and for Pangea, FG II or its
other affiliates, then the opportunity will be allocated on an equitable basis
which recognizes the Company's objective of not being classified as an
investment company, but in any event, the Company will be allocated at least 50%
of the opportunity.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit Number Description
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4.1 Certificate of Designations of
Series B Convertible Preferred
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Stock of Arinco Computer Systems
Inc.
4.2 Amendment to Certificate of Resignations
of Series A Convertible Preferred Stock
of Arinco Computer Systems Inc.
10.1 Securities Purchase Agreement, dated
March 9, 2000, by and between Arinco
Computer Systems Inc., Pangea Internet
Advisors LLC and the purchasers listed
on Schedule I attached thereto.
10.2 Registration Rights Agreement by and
among Arinco Computer Systems Inc.,
Pangea Internet Advisors LLC and the
persons party to the Securities Purchase
Agreement, dated as of March 28, 2000.
10.3 Business Opportunity Allocation and
Miscellaneous Services Agreement by and
among Arinco Computer Systems Inc. and
Pangea Internet Advisors LLC, dated as
of March 28, 2000.
10.4 Employment Agreements entered into by
and between Arinco Computer Systems Inc.
and each of Cary S. Fitchey, William
Avery, David M. Roberts, William P.
O'Donnell and Frederick G. Noell.
10.5 Warrants for William Avery, Cary
S. Fitchey, The Roberts Family Revocable
Trust U/D/T dated December 15, 1997,
David M. Roberts and Gail M. Simpson,
Trustees, Roberts' Children Irrevocable
Trust U/D/T dated October 21, 1996,
Stephen H. Roberts, Trustee, and Turtle
Holdings LLC.
99 Press Release of Arinco Computer Systems
Inc. dated March 28, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARINCO COMPUTER SYSTEMS INC.
Date: March 28, 2000 By: /s/ Cary S. Fitchey
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Cary S. Fitchey
President and Chief Executive Officer
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Exhibit Index
Exhibit Number Description
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4.1 Certificate of Designations of
Series B Convertible Preferred
Stock of Arinco Computer Systems
Inc.
4.2 Amendment to Certificate of Resignations
of Series A Convertible Preferred Stock
of Arinco Computer Systems Inc.
10.1 Securities Purchase Agreement, dated
March 9, 2000, by and between Arinco
Computer Systems Inc., Pangea Internet
Advisors LLC and the purchasers listed
on Schedule I attached thereto.
10.2 Registration Rights Agreement by and
among Arinco Computer Systems Inc.,
Pangea Internet Advisors LLC and the
persons party to the Securities Purchase
Agreement, dated as of March 28, 2000.
10.3 Business Opportunity Allocation and
Miscellaneous Services Agreement by and
among Arinco Computer Systems Inc. and
Pangea Internet Advisors LLC, dated as
of March 28, 2000.
10.4 Employment Agreements entered into by
and between Arinco Computer Systems Inc.
and each of Cary S. Fitchey, William
Avery, David M. Roberts, William P.
O'Donnell and Frederick G. Noell.
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10.5 Warrants for William Avery, Cary
S. Fitchey, The Roberts Family Revocable
Trust U/D/T dated December 15, 1997,
David M. Roberts and Gail M. Simpson,
Trustees, Roberts' Children Irrevocable
Trust U/D/T dated October 21, 1996,
Stephen H. Roberts, Trustee, and Turtle
Holdings LLC.
99 Press Release of Arinco Computer Systems
Inc. dated March 28, 2000.
Exhibit 4.1
ARINCO COMPUTER SYSTEMS INC.
STATEMENT PURSUANT TO SECTION 53-11-16 OF THE
NEW MEXICO BUSINESS CORPORATION ACT
ESTABLISHING AND DESIGNATING A SERIES OF
PREFERRED STOCK TO BE KNOWN AS SERIES B CONVERTIBLE
PREFERRED STOCK AND FIXING AND DETERMINING THE
RELATIVE RIGHTS AND PREFERENCES THEREOF
Arinco Computer Systems Inc., a corporation organized and existing under
the laws of the State of New Mexico, does hereby certify:
A. Name of the Corporation. The name of the corporation is Arinco
Computer Systems Inc. (the "Corporation").
B. Copy of Resolutions. Pursuant to the authority conferred upon the
Board of Directors by the Restated Articles of Incorporation of the Corporation
and pursuant to the provisions of Section 53-11-16 of the Business Corporation
Act of the State of New Mexico, the Board of Directors of the Corporation duly
adopted resolutions establishing and designating a series of 4,000,000 shares of
preferred stock, which resolutions are as follows:
"RESOLVED, that pursuant to the authority expressly granted and vested
in the Board of Directors of the Corporation in accordance with the provisions
of the Corporation's Restated Articles of Incorporation, a series of preferred
stock of the Corporation be, and it hereby is, created and given the distinctive
designation of "Series B Convertible Preferred Stock" (the "Series B
Preferred"), such series to consist of 4,000,000 shares of preferred stock, par
value $0.10 per share, the relative rights and preferences of which shall be as
follows:
Rights, Preferences and Restrictions of Series B Preferred. The rights,
preferences, privileges and restrictions granted to and imposed on the Series B
Preferred are as set forth below in Sections 1 through 8.
1. Dividends. The holders of the Series B Preferred shall be entitled to
receive, out of any funds legally available therefor, such dividends as may be
declared from time to time by the Board of Directors of the Corporation provided
that no dividend or distribution shall be declared or paid on any shares of the
Common Stock of the Corporation (the "Common Stock") unless at the same time an
equivalent dividend or distribution is declared or paid, as the case may be, on
all outstanding shares of Series B Preferred and provided further that any
dividend or distribution on Series B Preferred shall be payable at the same rate
per share as would be payable on the shares of Common Stock which the holder of
the Series B Preferred would be entitled to receive if he had converted the
shares of Series B Preferred into Common Stock pursuant to Section 4 hereof
immediately prior to the record date of such dividend or distribution.
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2. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (each a "Distribution
Event"):
(a) Series B Preferred Preference. The holders of the Series B Preferred
shall be entitled to receive with respect to such Distribution Event pro rata in
accordance with the shares of Series B Preferred then held by them, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership of
such shares, an amount equal to the greater of (i) the aggregate of the Original
Issue Price (as defined below) for all such shares of Series B Preferred plus an
amount equal to all declared but unpaid dividends on such shares of Series B
Preferred and (ii) the amount that the holders of Series B Preferred would be
entitled to receive if all such shares of Series B Preferred had been converted
into Common Stock pursuant to Section 4 hereof immediately prior to the record
date for the distributions relating to the Distribution Event. If the assets and
funds thus distributed among the holders of the Series B Preferred shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed among the holders of the Series
B Preferred pro rata in accordance with the shares of Series B Preferred then
held by them. The "Original Issue Price" of the Series B Preferred shall be
$10.00 per share (as adjusted for any stock dividend, stock splits,
recapitalization, reorganizations and other similar transactions with respect to
the Series B Preferred).
(b) Reorganization, Merger or Sale of Assets. Neither a consolidation or
a merger of the Corporation with or into any other corporation or corporations
nor the sale of all or substantially all of the assets of the Corporation shall
be deemed to be a liquidation, dissolution or winding up within the meaning of
this Section 2.
3. Voting Rights. Except as otherwise provided herein or required by
law, each share of Series B Preferred shall be entitled to the number of votes
equal to the number of shares of Common Stock into which the Series B Preferred
could be converted pursuant to Section 4 hereof as of the record date for the
determination of the stockholders entitled to vote on such matter or, if no
record date is established, as of the date such vote is taken, and the holders
of Series B Preferred shall vote share for share with the holders of the Common
Stock without distinction as to class and shall not be entitled to vote
separately as a class or series of a class. Nothing set forth in this Section 3
shall be construed as a waiver of the right of the holders of the Series B
Preferred to vote as a class when specifically entitled to do so pursuant to
Section 6 herein. The voting rights of the Series B Preferred shall include, but
not be limited to, the right to vote on the Charter Amendment (as hereinafter
defined).
4. Conversion. The holders of the Series B Preferred have conversion
rights as follows (the "Conversion Rights"):
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(a) Right to Convert. Each share of Series B Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Corporation or any transfer agent
for the Series B Preferred, into such number of fully paid and nonassessable
shares of Common Stock (the "Conversion Rate") as is determined by dividing the
Original Issue Price by the Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion. The price at which shares of
Common Stock shall be deliverable upon conversion (the "Conversion Price") for
the Series B Preferred shall initially be $0.25 per share of Common Stock. Such
initial Conversion Price shall be subject to adjustment as hereinafter provided.
(b) Automatic Conversion. Each share of Series B Preferred shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate of such stock (i) immediately prior to the closing of the first
firmly underwritten public offering of Common Stock of the Corporation that
occurs after March 20, 2000 and that is pursuant to a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
(or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Act")) under the Act, covering the offer and sale of
Common Stock to the public at a public offering price per share (before
deductions for underwriter commissions and expenses) of not less than four times
the then prevailing Conversion Price and that results in proceeds to the
Corporation (before deduction for underwriter commissions and expenses) of at
least $10,000,000 (a "Qualified Offering"), and (ii) upon the conversion of a
number of shares of Series B Preferred which when added to all shares of Series
B Preferred previously converted at any time equals at least 60% of the number
of shares of Series B Preferred issued pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement") dated March 9, 2000 between the
Corporation and Pangea Internet Advisors LLC. Upon such automatic conversion,
any declared but unpaid dividends shall be paid in accordance with the
provisions of Section 4(c). In the event of the automatic conversion of the
Series B Preferred upon a Qualified Offering, the person(s) entitled to receive
the Common Stock issuable upon such conversion of Series B Preferred shall not
be deemed to have converted such Series B Preferred until immediately prior to
the closing of such sale of securities. Notwithstanding the foregoing provisions
of this Section 4(b), no automatic conversion of the Series B Preferred shall be
effected unless and until such conversion will not violate any laws, rules,
regulations, orders or other legal requirements of any governing body or until
the Charter Amendment shall have occurred, and such automatic conversion shall
be held in abeyance pending compliance with any such requirements, provided that
the holders of Series B Preferred will use their best efforts to comply with
such requirements.
(c) Mechanics of Conversion. Before any holder of Series B Preferred
shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates for such Series B Preferred, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series B Preferred, and shall give
written notice to the Corporation at such office that such holder elects to
convert the same. In the event of an automatic conversion pursuant to Section
4(b), the outstanding shares of Series B Preferred shall be
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converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent. The Corporation is not obligated to issue
certificates evidencing the shares of Common Stock issuable upon such automatic
conversion unless the certificates evidencing such shares of Series B Preferred
are either delivered to the Corporation or its transfer agent as provided above,
or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable after such delivery, or such agreement and indemnification
in the case of a lost certificate, issue and deliver at such office to such
holder of Series B Preferred, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid and a
check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Thereupon, the
Corporation shall promptly pay in cash or, to the extent sufficient funds are
not then legally available therefor, in Common Stock (at the Common Stock's fair
market value determined by the Board of Directors as of the date of such
conversion), any declared but unpaid dividends on the shares of Series B
Preferred being converted. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series B Preferred to be converted, or in the case of automatic
conversion on the date of closing of a Qualified Offering or the date on which
more than 60% of the originally issued Series B Preferred have been converted
into Common Stock and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to which the
holder of Series B Preferred would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series B Preferred
of each holder at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Price of the Series B
Preferred shall be subject to adjustment from time to time as follows:
(i) If the number of shares of Common Stock outstanding at any time
after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Conversion Price
of the Series B Preferred shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of any shares of the Series B
Preferred shall be increased in proportion to such increase of outstanding
shares.
(ii) If the number of shares of Common Stock outstanding at any time
after the date hereof is decreased by a combination of the outstanding shares of
Common Stock, on the
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effective date of such combination, the Conversion Price of the Series B
Preferred shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of any shares of the Series B Preferred
shall be decreased in proportion to such decrease in outstanding shares.
(iii) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into another
person (other than a consolidation or merger in which the Corporation is the
continuing entity and which does not result in any change in the Common Stock),
the shares of the Series B Preferred shall, after such reorganization,
reclassification, consolidation, merger, sale or other disposition, be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or otherwise to which such holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition such holder had converted its
shares of the Series B Preferred into Common Stock.
(iv) In case any event shall occur as to which the other provisions of
this subsection (e) are not strictly applicable but the failure to make any
adjustment would not fairly protect the conversion rights of the holders of
Series B Preferred set forth in this Section 4 in accordance with the essential
intent and principles hereof, then, in each such case, the Corporation at its
expense shall appoint a firm of independent public accountants of recognized
national standing (which may be the regular auditors of the Corporation), which
shall give its opinion as to the adjustment, if any, on a basis consistent with
the essential intent and principles established in this Section 4, necessary to
preserve, without dilution, the conversion rights of the holders of Series B
Preferred set forth in this Section 4. Upon receipt of such opinion, the
Corporation will promptly mail a copy thereof to the holders of Series B
Preferred and shall make the adjustments described therein.
(v) The provisions of clauses (i), (ii), (iii) and (iv) shall similarly
apply to successive events of the type described therein. All calculations under
this Section 4(e) shall be made to the nearest cent or to the nearest one
hundredth (1/100) of a share, as the case may be. (f) Minimal Adjustments. No
adjustment in the Conversion Price for any Series B Preferred need be made if
such adjustment would result in a change in the Conversion Price of less than
1%. Any adjustment of less than 1% which is not made shall be carried forward
and shall be made at the time of and together with any subsequent adjustment
which, on a cumulative basis, amounts to an adjustment of 1% or more in the
Conversion Price.
(g) No Impairment. The Corporation will not through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the
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provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of Series B Preferred against impairment. This provision shall not
restrict the Corporation's right to amend its Certificate of Incorporation with
the requisite shareholder consent.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for Series B Preferred
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series B Preferred a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Series B Preferred, furnish or cause to be
furnished to such holder a like certificate setting forth (i) all such
adjustments and readjustments, (ii) the Conversion Rate at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares of Series B Preferred.
(i) Notices of Record Date and Proposed Liquidation Distribution. In the
event of any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property or to receive
any other right, the Corporation shall mail to each holder of Series B Preferred
at least 30 days prior to such record date, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution or right, and the amount and character of such dividend,
distribution or right. In the event of a liquidation distribution pursuant to
Section 2 hereof, the Corporation shall mail to each holder of Series B
Preferred at least 30 days prior to the record date applicable to such
distribution a notice (i) certifying as to (x) the anticipated aggregate
proceeds available for distribution to holders of Series B Preferred and Common
Stock, (y) the amount expected to be distributed pursuant to Section 2 in
respect of each share of each outstanding series of Series B Preferred and each
share of Common Stock and (z) the amount expected to be distributed pursuant to
Section 2 in respect of each share of outstanding Series B Preferred if the
holder of Series B Preferred converted such share of Series B Preferred into
Common Stock immediately prior to the liquidation distribution and (ii) stating
that in connection with such liquidation distribution the holders of shares of
Series B Preferred may prior to such liquidation distribution convert their
shares of Series B Preferred into Common Stock at the applicable Conversion
Rate.
(j) Notices. Any notice required by the provisions of this Section 4 to
be given to the holder of shares of the Series B Preferred shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at such holder's address appearing on the Corporation's books.
(k) Payment of Taxes. The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be
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imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series B Preferred, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which shares of Series B
Preferred so converted were registered.
5. Redemption.
(a) Optional Redemption by Corporation. The shares of the Series B
Preferred are redeemable at the option of the Corporation in whole or in part at
any time and from time to time after March 26, 2001, at a redemption price of
$10.00 per share plus an amount equal to the dividends accrued and unpaid
(including interest, if any) thereon to the redemption date. In case only a part
of the Series B Preferred Stock at the time outstanding is to be redeemed, the
shares selected shall be allocated among all of the holders of the Series B
Preferred at the time outstanding in proportion to their respective holdings. At
least 30 days in advance of the date designated for any redemption pursuant to
this paragraph (a), the Corporation shall mail or deliver notices of such
redemption to the holders of record of the shares so to be redeemed at their
respective addresses as shown on the books of the Corporation.
(b) Redemption at Option of Holders. If the Charter Amendment has not
occurred prior to December 31, 2000, then at any time after December 31, 2000
and prior to the Charter Amendment the Corporation shall, upon the written
request (a "Redemption Request") of the holders of at least 50% of the shares of
Series B Preferred issued pursuant to the Securities Purchase Agreement, redeem
all of the then outstanding shares of the Series B Preferred at the redemption
price of $10.00 per share, plus all dividends accrued and unpaid (including
interest, if any) on such Series B Preferred up to the date fixed for
redemption, upon giving the notice hereinafter provided. "Charter Amendment"
means an amendment to the Corporation's Certificate of Incorporation providing
for an increase in the number of shares of Common Stock that the Corporation is
authorized to issue so that the number thereof is at least equal to the sum of
(i) the number of shares of Common Stock that were outstanding or reserved for
issuance immediately prior to the issuance of any share of Series B Preferred
pursuant to the Securities Purchase Agreement plus (ii) the number of shares of
Common Stock that would be required to be issued immediately after the issuance
of all shares of Series B Preferred issued pursuant to the Securities Purchase
Agreement if all such shares of Series B Preferred were converted at such time
plus (iii) the number of shares of Common Stock issuable pursuant to the terms
of all warrants referred to in the Securities Purchase Agreement. Not less than
30 days after receipt of a Redemption Request, a notice specifying the time and
place fixed for redemption of the Series B Preferred shall be given by mail or
delivered to the holders of record of the shares of Series B Preferred Stock
selected for redemption at their respective addresses as shown on the books of
the Corporation. The time so fixed for redemption shall be not less than 30 days
after the date of such notice.
(c) Effect of Redemption. Upon such date as the Board of Directors shall
designate for payment of the redemption price (unless the Corporation
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shall default in the payment of the redemption price set forth in the Redemption
notice), the shares of Series B Preferred redeemed shall cease to be deemed
outstanding and the holders of certificates therefor shall have no voting or
other rights with respect to such shares except the right to receive the moneys
payable upon such redemption from the Corporation, without interest thereon,
upon surrender (and endorsement, if required by the Corporation) of their
applicable stock certificates. Upon redemption of the Series B Preferred in the
manner set forth herein, the Series B Preferred Stock so redeemed by the
Corporation shall be cancelled, shall not be reissued and shall cease to be a
part of the authorized shares of the Corporation.
(d) Limitation on Redemption and Dividends. The option and obligation of
the Corporation to redeem shares of the Series B Preferred Stock under
paragraphs (a) and (b) hereof, shall be subject to the restrictions imposed by
applicable law or any provision of any agreement now or hereafter existing
relating to the indebtedness of the Corporation for borrowed money, unless such
provision shall be waived. In the event that the Corporation shall fail to
redeem any shares of Series B Preferred Stock required to be redeemed under
paragraph (b) hereof, then, until such shares are redeemed, dividends shall
accrue on all shares at a rate equal to 10% compounded semi-annually from the
date such redemption price is required to be paid to the date payment is made.
6. Covenants. In addition to any other rights provided by law, so long
as any shares of Series B Preferred shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of not less than a majority of such outstanding shares of Series B
Preferred:
(a) Certificate and Bylaws. Amend or repeal any provision of, or add any
provision to, this Corporation's Certificate of Incorporation or Bylaws if such
action would adversely alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, such shares of
Series B Preferred;
(b) Authorized Shares. Increase the authorized number of shares of
Series B Preferred or increase or decrease the authorized number of shares of
preferred stock of the Corporation;
(c) Senior Securities. Make any authorization or any designation,
whether by reclassification or otherwise, of any new class or series of stock or
any other securities convertible into equity securities of the Corporation
ranking senior to the Series B Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such class or series; or
(d) Distribution. Redeem or repurchase any shares of Common Stock
(except for acquisitions of Common Stock by the Corporation pursuant to
agreements which permit the Corporation to repurchase such shares upon
termination of services to the Corporation or its affiliates).
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7. Status of Converted Stock. In the event any shares of Series B
Preferred shall be converted pursuant to Section 4 hereof, the shares so
converted shall be cancelled and shall not be issuable by the Corporation, and
any declared but unpaid dividends with respect to such converted shares shall be
cancelled. The Certificate of Incorporation of the Corporation may be
appropriately amended from time to time to effect the corresponding reduction in
the Corporation's authorized capital stock.
8. Absence of Charter Amendment. To the extent that the rights of the
holders of Series B Preferred set forth in Sections 1, 2 and 3 depend upon or
relate to the number of shares of Common Stock into which the Series B Preferred
may be converted from time to time, such rights shall be construed as if the
Corporation has at all times a sufficient number of shares of Common Stock
authorized and reserved for issuance to satisfy such conversion rights
notwithstanding the fact that a sufficient number of such shares of Common Stock
may not be authorized and reserved because of the failure of the Charter
Amendment to have been effected or for any other reason."
C. Date of Adoption. The above resolutions were duly adopted by the
Corporation's Board of Directors on March 20, 2000.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
D. Due Adoption. The above resolutions were duly adopted by the
Corporation's Board of Directors.
IN WITNESS WHEREOF, Arinco Computer Services Inc. has caused this
statement to be signed in its corporate name by its President and Secretary this
20th day of March, 2000, and by his signature hereto James A. Arias, as
President, certifies, verifies and acknowledges that the statements herein are
true.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ James A. Arias
------------------
JAMES A. ARIAS
PRESIDENT
/s/ James A. Arias
------------------
JAMES A. ARIAS
SECRETARY
10
<PAGE>
STATE OF New York )
) ss.:
COUNTY OF New York )
On the 21st day of March in the year 2000 before me, the undersigned, a
Notary Public in and for said state, personally appeared JAMES A. ARIAS, known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the foregoing document and who, being by me duly
sworn, did depose and say that he resides in 8909 Camino Osito N.E.,
Albuquerque, NM 87111; that he is the President and Secretary of Arinco Computer
Systems Inc., the corporation described in and which executed the above
instrument; and that he signed this name thereto by authority of the Board of
Directors.
/s/ Sophia Lee
--------------
NOTARY PUBLIC
11
Exhibit 4.2
ARINCO COMPUTER SYSTEMS INC.
AMENDMENT TO STATEMENT
PURSUANT TO SECTION 53-11-16 OF THE
NEW MEXICO BUSINESS CORPORATION ACT
ESTABLISHING AND DESIGNATING A SERIES OF
PREFERRED SHARES KNOWN AS SERIES A PREFERRED
Arinco Computer Services Inc., a corporation organized and existing
under the laws of the State of New Mexico, does hereby certify:
A. Name of the Corporation. The name of the corporation is Arinco
Computer Systems Inc. (the "Corporation").
B. Prior Establishment of Series A Preferred. On May 18, 1984 the
Corporation filed with the State Corporation Commission of the State of New
Mexico a Statement Establishing and Designating a Series of Preferred Stock
designated as Series A Preferred consisting of 3,000,000 authorized shares. On
March 20, 2000, pursuant to Article IV of the Corporation's Restated Articles of
Incorporation, the Corporation's Board of Directors duly adopted resolutions
decreasing (but not below the number of shares of Series A Preferred then
outstanding) the number of authorized shares of Series A Preferred from
3,000,000 to 500,000.
C. Copy of Resolution. A true and complete copy of the resolutions of
the Corporation's Board of Directors decreasing the number of authorized shares
of Series A Preferred Stock from 3,000,000 to 500,000 is set forth below.
"RESOLVED, that pursuant to the authority expressly
granted and vested in the Board of Directors of the
Corporation in accordance with the Corporation's Restated
Articles of Incorporation, the number of authorized shares of
the series of the Corporation's preferred stock designated as
Series A Preferred be and hereby is decreased from 3,000,000
to 500,000, which amount of authorized shares of Series A
Preferred as so decreased is more than the number of shares of
Series A Preferred outstanding on the date hereof; and the
remaining 2,500,000 shares shall be designated as authorized
but unissued shares of the Corporation's Preferred Stock."
D. Date of Adoption. The above resolutions were duly adopted on March
20, 2000.
E. Due Adoption. The above resolutions were duly adopted by the
Corporation's Board of Directors.
<PAGE>
IN WITNESS WHEREOF, Arinco Computer Services Inc. has caused this
statement to be signed in its corporate name by its President and Secretary this
20th day of March, 2000 and by his signature hereto James A. Arias, as
President, certifies, verifies and acknowledges that the statements herein are
true.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ James A. Arias
------------------
JAMES A. ARIAS
PRESIDENT
/s/ James A. Arias
------------------
JAMES A. ARIAS
SECRETARY
<PAGE>
STATE OF New York )
) ss.:
COUNTY OF New York )
On the 21st day of March in the year 2000 before me, the undersigned, a
Notary Public in and for said state, personally appeared JAMES A. ARIAS, known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the foregoing document and who, being by me duly
sworn, did depose and say that he resides at 8909 Camino Osito, N.E.,
Albuquerque, NM 87111; that he is the President and Secretary of Arinco Computer
Systems Inc., the corporation described in and which executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors.
/s/ Sophia Lee
--------------
NOTARY PUBLIC
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
By and Between
ARINCO COMPUTER SYSTEMS INC.
and
PANGEA INTERNET ADVISORS LLC
------------------------------
Dated as of March 9, 2000
------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS......................................................1
1.1 Definitions..............................................1
ARTICLE 2
PURCHASE AND SALE................................................7
2.1 Purchase and Sale of Shares..............................7
2.2 Preferred Stock Terms....................................7
2.3 Purchase and Sale of Warrants............................8
2.4 Closing..................................................8
2.5 Purchasers' Representative...............................8
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE ...................................9
3.1 Representations and Warranties True......................9
3.2 Compliance with this Agreement...........................9
3.3 Officer's Certificate....................................9
3.4 Secretary's Certificate..................................9
3.5 Documents................................................9
3.6 Purchase Permitted by Applicable Laws; Legal Investment..9
3.7 Opinion of Counsel......................................10
3.8 Approval of Counsel to the Purchaser....................10
3.9 No Material Adverse Change..............................10
3.10 Registration Rights Agreement...........................10
3.11 Certificate of Incorporation and By-Laws of the Company.10
3.12 No Litigation...........................................10
3.13 Funding Commitments.....................................10
3.14 Board Representation; Executive Officers................11
3.15 Certificate of Designations.............................11
3.16 Assets..................................................11
3.17 Office Services Agreement...............................11
3.18 Annual Report...........................................11
3.19 New Start...............................................11
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE.......................................11
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Page
----
4.1 Representations and Warranties True.....................11
4.2 Compliance with this Agreement..........................12
4.3 Issuance Permitted by Applicable Laws...................12
4.4 Approval of Counsel to the Company......................12
4.5 No Litigation. .........................................12
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.......................................12
5.1 Corporate Existence and Power...........................12
5.2 Corporate Authorization; No Contravention...............13
5.3 Governmental Authorization; Third Party Consents........13
5.4 Binding Effect..........................................13
5.5 No Legal Bar............................................14
5.6 Litigation..............................................14
5.7 No Default or Breach....................................14
5.8 SEC Documents...........................................14
5.9 No Material Adverse Change..............................15
5.10 Operations of the Company...............................15
5.11 Capitalization..........................................16
5.12 Subsidiaries............................................16
5.13 Investment Company......................................17
5.14 Environmental Matters...................................17
5.15 Real Properties.........................................17
5.16 Taxes...................................................18
5.17 ERISA...................................................19
5.18 Intellectual Property...................................19
5.19 Contractual Obligations.................................19
5.20 Anti-Dilution Protection................................19
5.21 Private Offering........................................19
5.22 Solvency................................................20
5.23 Contracts Affecting Stockholders........................20
5.24 Employment and Labor Matters............................20
5.25 Related Party Transactions..............................20
5.26 Broker's, Finder's or Similar Fees......................21
5.27 Full Disclosure.........................................21
ii
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Page
----
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS....................................21
6.1 Existence and Power; Share Ownership. .................21
6.2 Authorization; No Contravention.........................21
6.3 Binding Effect..........................................22
6.4 No Legal Bar............................................22
6.5 Purchase for Own Account................................22
6.6 Sophistication..........................................23
6.7 Broker's, Finder's or Similar Fees......................23
6.8 Additional Representations..............................23
ARTICLE 7
AFFIRMATIVE COVENANTS...........................................23
7.1 Reincorporation in Delaware.............................23
7.2 Reservation of Common Stock.............................24
7.3 Inspection..............................................24
7.4 No Solicitation.........................................24
7.5 Additional Covenants....................................25
7.7 Insurance...............................................25
7.8 Further Assurances......................................25
ARTICLE 8
INDEMNIFICATION.................................................26
8.1 Indemnification by the Company..........................26
8.2 Indemnification by the Purchasers.......................26
8.3 Indemnification to Pangea...............................26
8.4 Contribution............................................27
8.5 Notification............................................27
8.6 Expense Reimbursement...................................28
8.7 Registration Rights Agreement...........................28
ARTICLE 9
TERMINATION.....................................................29
9.1 Termination.............................................29
9.2 Procedure for the Effect of Termination.................29
iii
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Page
----
ARTICLE 10
MISCELLANEOUS...................................................29
10.1 Survival of Provisions..................................29
10.2 Expenses................................................30
10.3 Notices.................................................30
10.4 Successors and Assigns..................................31
10.5 Waiver and Amendment....................................31
10.6 Counterparts............................................32
10.7 Headings................................................32
10.8 Governing Law...........................................32
10.9 Jurisdiction............................................32
10.10 Severability............................................32
10.11 Rules of Construction...................................32
10.12 Remedies................................................32
10.13 Entire Agreement........................................33
10.14 Publicity...............................................33
Schedule I Purchasers; Allocation of Shares and Warrants
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Warrant
Exhibit C Form of Certificate of Designations
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of March 9, 2000, by and
between Arinco Computer Systems Inc., a corporation organized under the laws of
New Mexico (the "Company") and Pangea Internet Advisors LLC, a Delaware limited
liability company ("Pangea" and, together with its permitted assignees, the
"Purchasers").
WHEREAS, the Company desires to issue to the Purchasers, and the
Purchasers desire to purchase from the Company, (i) up to an aggregate of
4,000,000 shares of the Company's Series B Convertible Preferred Stock, par
value $.10 per share (the "Preferred Stock"), and (ii) Warrants to purchase the
Specified Number (defined below) of shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Actions or Proceedings" has the meaning assigned to that term in
Section 8.1.
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Avery Noncompete" has the meaning assigned to that term in Section
7.5.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
<PAGE>
"Certificate of Designations" means the Certificate of Designations
substantially in the form attached hereto as Exhibit C.
"Closing" has the meaning assigned to that term in Section 2.4.
"Closing Date" has the meaning assigned to that term in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Commitments" has the meaning assigned to that term in Section 3.13.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company or any other shares of common stock into which the Common Stock may
be converted pursuant to the Delaware Reincorporation or otherwise.
"Commonly Controlled Entity" means any entity which is under common
control with the Company within the meaning of Code section 414(b), (c), (m),
(o) or (t).
"Company" means Arinco Computer Systems Inc., a New Mexico
corporation, and any successor thereof by merger or otherwise.
"Company Liabilities" has the meaning assigned to that term in
Section 5.8.
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the Company shall be deemed not to have a Contingent
2
<PAGE>
Obligation by virtue of its guaranty of obligations of a Subsidiary that, except
for shares held by nominees, is wholly owned by the Company. The amount of any
Contingent Obligation shall be deemed to be the stated amount of such Contingent
Obligation or, if there is no such stated amount, an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Contractual Obligations" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Delaware Reincorporation" has the meaning assigned to that term in
Section 7.1.
"Disclosure Letter" has the meaning assigned to that term in Article
5.
"Environmental Laws" means any federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters,
including those pertaining to land use, air, soil, surface water, ground water
(including the protection, cleanup, removal, remediation or damage thereof),
public or employee health or safety or any other environmental matter, together
with any other laws (federal, state, territorial, provincial or local) relating
to emissions, discharges, releases or threatened releases of any contaminant
including, without limitation, medical, biological, biohazardous or radioactive
waste and materials, into ambient air, land, surface water, groundwater, person,
property or structures, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C.ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C.ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C.ss. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C.ss.
2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C.ss. 651 et
seq.), as such laws have been amended or supplemented and any analogous future
federal, or present or future state or local laws, statutes and regulations
promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
3
<PAGE>
"Forbes Noncompete" has the meaning assigned to that term in Section
7.5.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"Governmental Authority" means the government of any nation, state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means (i) any "hazardous waste" or "solid
waste" as defined by the Resource Conservation and Recovery Act of 1976, as
amended, and regulations promulgated thereunder; (ii) any "hazardous substance"
as defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and regulations promulgated thereunder; (iii)
any "pollutant" or "toxic pollutant" or "oil" as defined in the Clear Water Act,
as amended, and regulations promulgated thereunder; (iv) asbestos; (v)
polychlorinated biphenyls; and (vi) any waste oils.
"Indebtedness" means, as to any Person, (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations to pay the deferred
purchase price of property or services, except trade accounts payable and
accrued liabilities arising in the ordinary course of business, (c) all interest
rate and currency swaps and similar agreements under which payments are
obligated to be made, whether periodically or upon the happening of a
contingency, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all obligations under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (f) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (e)) on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person, and (g) any
Contingent Obligation.
"Indemnified Party" has the meaning assigned to that term in Section
8.5.
4
<PAGE>
"Indemnifying Party" has the meaning assigned to that term in
Section 8.5.
"Intellectual Property" means all of the following as they exist in
all jurisdictions throughout the world, in each case, to the extent owned by,
licensed to, or otherwise used by the Company:
(i) patents, patent applications, and other patent rights (including
any divisions, continuations, continuations-in-part, substitutions, or reissues
thereof, whether or not patents are issued on any such applications and whether
or not any such applications are modified, withdrawn, or resubmitted);
(ii) trademarks, service marks, trade dress, trade names, brand
names, Internet domain names, designs, logos, or corporate names, whether
registered or unregistered, and all registrations and applications for
registration thereof;
(iii) copyright registrations and applications for registration
thereof and non-registered copyrights;
(iv) trade secrets, concepts, ideas, designs, research processes,
procedures, techniques, methods, know-how, data, mask works, discoveries,
inventions, modifications, extensions, improvements, and other proprietary
rights (whether or not patentable or subject to copyright, mask work, or trade
secret protection); and
(v) computer software programs, including, without limitation, all
source code, object code, and documentation related thereto, licensed to or from
the Company.
"Investment Company Act" has the meaning assigned to that term in
Section 5.10.
"Liabilities" has the meaning assigned to that term in Section 9.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Newco" has the meaning assigned to that term in Section 7.1.
5
<PAGE>
"Pangea" means Pangea Internet Advisors LLC, Delaware limited
liability company.
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" means the Series B Convertible Preferred Stock,
par value $.10 per share, of the Company or any other shares of preferred stock
into which the Series B Convertible Preferred Stock may be converted pursuant to
the Delaware Reincorporation or otherwise.
"Purchasers" means, as of the date hereof, Pangea and, at such time
as Pangea has assigned any part of its obligations to purchase Shares or
Warrants to an assignee who has agreed to assume those obligations, the term
"Purchasers" also shall include such assignees.
"Reduced Share Number" has the meaning assigned to that term in
Section 3.13.
"Registration Rights Agreement" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit A.
"Representative" has the meaning assigned to that term in Section
2.5.
"Requirements of Law" means, as to any Person, any statute, law,
treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable or binding upon such Person or
any of its property or to which such Person or any of its property is subject.
"SEC Documents" has the meaning assigned to that term in Section
5.8.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Shares" has the meaning assigned to that term in Section 2.1,
subject to Section 3.16.
"Shares Purchase Price" has the meaning assigned to that term in
Section 2.1.
6
<PAGE>
"Solvent" means, with respect to any Person, that the fair saleable
value of the assets and property of such Person is, on the date of
determination, greater than the total amount of liabilities (including
contingent and unliquidated liabilities) of such Person as of such date and
that, as of such date, such Person is able to pay all liabilities of such Person
as such liabilities mature. In computing the amount of contingent or liquidated
liabilities at any time, such liabilities will be computed as the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that is probable to become an actual or matured liability.
"Specified Number" means a number of shares of Common Stock equal to
20% of the total number of shares of Common Stock outstanding on a fully diluted
basis as of the date of issuance of the Warrants, assuming (i) the issuance of
all of the Shares issuable hereunder, (ii) the exercise of the Warrants and
(iii) the exercise of all outstanding employee options, if any.
"Subsidiary" means, with respect to any Person, a corporation,
partnership or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest, or rights to profits, is owned,
directly or indirectly, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" has the meaning assigned to that term in Section
5.16.
"Tax Returns" has the meaning assigned to that term in Section 5.16.
"Transaction Documents" shall mean each of this Agreement, the
Shares, the Warrants, the Certificate of Designations and the Registration
Rights Agreement.
"Warrants" means the warrants, substantially in the form of Exhibit
B, to be purchased by certain of the Purchasers designated by Pangea, entitling
the holders thereof to purchase initially up to the Specified Number of shares
of Common Stock, as such number may be adjusted from time to time in accordance
with the terms thereof.
"Warrants Purchase Price" has the meaning assigned to that term in
Section 2.3.
7
<PAGE>
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Shares. Subject to the terms and conditions
set forth herein, the Company agrees that it will issue and sell to the
Purchasers, and the Purchasers agree, severally and not jointly, that they will
acquire from the Company, at the Closing, an aggregate of 4,000,000 shares of
Preferred Stock (the "Shares"). The number of Shares committed to be purchased
hereunder by each Purchaser will be as set forth on Schedule I, which will be
prepared by Pangea and attached to this Agreement on or prior to the Closing
Date. The per share purchase price for the Shares will be $10.00 (the "Shares
Purchase Price").
2.2 Preferred Stock Terms. The terms of the Preferred Stock shall be
as set forth in the Certificate of Designations.
2.3 Purchase and Sale of Warrants. Subject to the terms and
conditions set forth herein, the Company agrees that it will sell to those
Purchasers designated by Pangea, and such Purchasers agree, severally and not
jointly, that they will acquire from the Company, at the Closing, the Warrants.
The allocation of the number of Warrants among the Purchasers will be as set
forth on Schedule I. The aggregate purchase price for the Warrants will be
$100,000 (the "Warrants Purchase Price"). 20% of the Warrants will have an
exercise price of $.25 per share, 30% of the Warrants will have an exercise
price of $.50 per share, 30% of the Warrants will have an exercise price of $.75
per share and 20% of the Warrants will have an exercise price of $1.00 per
share.
2.4 Closing. The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064, at 10:00
a.m., New York City time, on the third Business Day to occur following the
satisfaction (or waiver by the party entitled to the benefit thereof) of each of
the conditions set forth in Articles 3 and 4, or on such other date and at such
other time and place as the Company and Pangea may agree (the "Closing Date").
At the Closing, subject to the terms and conditions set forth herein, the
Company shall sell Shares to the Purchasers acquiring such Shares by delivering
to such Purchasers duly executed certificates representing the Shares to be sold
at such Closing, registered in the name of the Purchaser acquiring such Shares,
with appropriate issue stamps, if any, affixed at the expense of the Company,
free and clear of any Lien, and such Purchasers shall purchase such Shares for
the Shares Purchase Price. At the Closing, subject to the terms and conditions
set forth herein, the Company shall also sell the Warrants to those Purchasers
designated by Pangea by delivering to such Purchasers duly executed certificates
representing the Warrants in the name of the Purchaser acquiring such Warrants,
free and clear of any
8
<PAGE>
Lien, and such Purchasers shall purchase the Warrants for the Warrants Purchase
Price. The Shares Purchase Price and the Warrants Purchase Price shall be paid
in cash by wire transfer to a bank account agreed to by the Company and Pangea.
2.5 Purchasers' Representative. Each Purchaser hereby appoints
Pangea as such Purchaser's representative (the "Representative"), to do any and
all things and to execute any and all documents, in such Purchaser's name, place
and stead, in any way which such Purchaser could do if personally present, in
connection with any closing of the transactions contemplated by this Agreement
and the other Transaction Documents, including, without limitation, the ability
to waive any condition to the obligation of such Purchaser to purchase Shares or
Warrants on any Closing Date (which Pangea may do in its sole discretion) and
otherwise determine that the such conditions have been satisfied. The Company
shall be entitled to rely upon the foregoing as being binding upon the
Purchasers.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase Shares or Warrants on
the Closing Date shall be subject to the satisfaction or waiver (by the parties
entitled to the benefit thereof) of the following conditions:
3.1 Representations and Warranties True. The representations and
warranties of the Company contained in Article 5 shall be true and correct in
all material respects at and as of the Closing Date (and after giving effect to
the transactions contemplated hereby) as if made at and as of such date.
3.2 Compliance with this Agreement. The Company shall have performed
and complied with its agreements and conditions set forth or contemplated herein
that are required to be performed or complied with by the Company on or before
the Closing Date.
3.3 Officer's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 have been satisfied on and as of such date.
3.4 Secretary's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying the truth and correctness of attached
copies of the
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Certificate of Incorporation and By-laws of the Company and resolutions of the
Board of Directors of the Company, in effect as of the Closing Date, approving
the transactions contemplated by this Agreement and the other Transaction
Documents.
3.5 Documents. The Purchasers shall have received copies of such
documents as they reasonably may request in connection with the sale of the
Shares and Warrants and the other transactions contemplated hereby, all in form
and substance reasonably satisfactory to Pangea.
3.6 Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Shares and Warrants to be purchased on the
Closing Date and the consummation of the other transactions contemplated hereby
(i) shall not be prohibited by any applicable law or governmental regulation and
(ii) shall be permitted by the laws and regulations of the jurisdictions to
which they are subject.
3.7 Opinion of Counsel. The Purchasers shall have received the
opinion of Thad H. Turk, Esquire, counsel to the Company, dated the Closing
Date, in form and substance reasonably satisfactory to Pangea.
3.8 Approval of Counsel to the Purchaser. All actions and
proceedings hereunder and all documents required to be delivered by the Company
hereunder or in connection with the consummation of the other transactions
contemplated hereby, and all other related matters, shall have been reasonably
acceptable to Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the
Purchasers, as to their form and substance.
3.9 No Material Adverse Change. There shall have been no material
adverse change, nor shall any such change be threatened, in the assets,
business, properties, operations or financial or other condition of the Company
since December 31, 1999.
3.10 Registration Rights Agreement. The Company shall have duly
executed and delivered to the Purchasers the Registration Rights Agreement
substantially in the form of Exhibit A, which shall be in full force and effect.
3.11 Certificate of Incorporation and By-Laws of the Company. No
amendments to the Certificate of Incorporation or By-Laws of the Company as in
effect on the date hereof shall have been effected on or prior to the Closing
Date.
3.12 No Litigation. No action, suit, proceeding, claim or dispute
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company which would, if adversely
determined, in the reasonable opinion of Pangea (i) have a material adverse
effect on the assets,
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business, properties or financial or other condition of the Company, or (ii)
have a material adverse effect on the ability of the Company to perform its
obligations under this Agreement or any of the other Transaction Documents. No
injunction, writ, temporary restraining order, decree or any order of any nature
shall have been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery and performance of this Agreement
or any of the other Transaction Documents.
3.13 Funding Commitments. On or prior to the Closing Date, Pangea
shall have received firm commitments (the "Commitments"), from financially
sophisticated investors in an aggregate amount equal to not less than
$40,000,000, and such investors shall have become parties to this Agreement as
"Purchasers" hereunder on or prior to the Closing Date; provided, that if such
Commitments are less than $40,000,000 but equal to at least $30,000,000, (i) the
condition set forth in this Section 3.13 shall be deemed to have been satisfied,
and (ii) the term "Shares" shall be deemed to mean that number of shares of
Preferred Stock equal to (x) such Commitments divided by (y) the Shares Purchase
Price (the "Reduced Share Number").
3.14 Board Representation; Executive Officers. The following
individuals shall have become directors of the Board effective as of the Closing
Date: James M. Dubin, Cary S. Fitchey, Michael Gleason and William E. Lipner.
The following officers shall have been appointed effective as of the Closing
Date: Michael Gleason - Chairman; Cary S. Fitchey - Chief Executive Officer and
President; William Avery - Executive Vice President; David M. Roberts - Senior
Vice President; William P. O'Donnell - Senior Vice President; and Frederick G.
Noell - Senior Vice President.
3.15 Certificate of Designations. The Company shall have filed the
Certificate of Designations with the State Corporation Commission of the State
of New Mexico.
3.16 Assets. The Company shall own no assets other than cash and
government securities.
3.17 Office Services Agreement. The Company shall have duly executed
and delivered to Pangea an Office Services Agreement in a form to be reasonably
agreed to by the parties, which shall be in full force and effect.
3.18 Annual Report. The Company's Annual Report on Form 10- KSB for
the fiscal year ended December 31, 1999 as filed with the Commission shall be
substantially in the form of the Company's draft Form 10-KSB dated March 8,
2000, delivered to Pangea on March 9, 2000.
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3.19 New Start. The Company shall have divested itself of all
interest in New Start, Inc. or shall have dissolved it.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Shares and the
Warrants on the Closing Date shall be subject to the satisfaction or waiver by
it of the following conditions:
4.1 Representations and Warranties True. The representations and
warranties of the Purchasers contained in Article 6 shall be true and correct in
all material respects at and as of the Closing Date (and after giving effect to
the transactions contemplated hereby) as if made at and as of such date.
4.2 Compliance with this Agreement. The Purchasers shall have
performed and complied with all of their agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Closing Date.
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Shares and Warrants by the Company to be issued on the Closing Date and the
consummation of the transactions contemplated hereby (i) shall not be prohibited
by any applicable law or governmental regulation and (ii) shall be permitted by
the laws and regulations of the jurisdictions in which the transactions are
subject.
4.4 Approval of Counsel to the Company. All actions and proceedings
hereunder and all documents required to be delivered by the Purchasers hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Thad H.
Turk, Esquire, counsel to the Company, as to their form and substance.
4.5 No Litigation. No injunction, writ, temporary restraining order,
decree or any order of any nature shall have been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
and performance of this Agreement or any of the other Transaction Documents.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to the Purchasers as
follows, except as set forth in the corresponding Section of the "Disclosure
Letter" delivered to the Purchasers simultaneously herewith (for purposes of
this Article 5 the term "Company" shall include its wholly-owned subsidiary, New
Start, Inc., except where the context otherwise requires):
5.1 Corporate Existence and Power. The Company:
(a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization;
(b) has (i) full corporate power and authority and (ii) all
governmental licenses, authorizations, consents and approvals to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged;
(c) is duly qualified as a foreign corporation, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with (i) its Certificate of Incorporation and
By-Laws or other organizational or governing documents and (ii) all Requirements
of Law; except, in the case of (b)(ii), (c) or (d)(ii) of this Section 5.1, to
the extent that the failure to do so, individually or in the aggregate, would
not have a material adverse effect on the assets, business, operations,
properties or financial or other condition of the Company.
5.2 Corporate Authorization; No Contravention.
(a) The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents, and the transactions contemplated
hereby and thereby (such transactions to include, for purposes of this
Agreement, among other things, the issuance of the Shares, the issuance of the
Warrants, and the issuance of Common Stock upon the exercise of the Warrants);
(i) is within the Company's corporate power and
authority and has been duly authorized by all necessary corporate action;
(ii) does not contravene the terms of the Certificate of
Incorporation or By-Laws or other organizational or governing documents of
the Company, or any amendment thereof; and
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(iii) will not violate any order or decree directly
relating to the Company.
(b) The Company has delivered to the Purchasers complete and correct
copies of the Company's Certificate of Incorporation and By-Laws, in each case,
as amended to the date of this Agreement.
5.3 Governmental Authorization; Third Party Consents. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement or any of the other
Transaction Documents, or the transactions contemplated hereby or thereby.
5.4 Binding Effect. This Agreement has been duly executed and
delivered by the Company, and at the Closing the other Transaction Documents
will be, duly executed and delivered by the Company, and this Agreement
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, and at the Closing the other
Transaction Documents will constitute the legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms.
5.5 No Legal Bar. Neither the execution, delivery and performance of
this Agreement or any of the other Transaction Documents nor the issuance of the
Shares or the Warrants will violate any Requirement of Law. The Company is not a
party to any agreement granting any registration rights to any Person that are
inconsistent with the rights to be granted to the Purchasers in the Registration
Rights Agreement.
5.6 Litigation. There are no actions, suits, investigations,
proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company:
(a) with respect to this Agreement or any of the other Transaction
Documents or any of the transactions contemplated hereby or thereby; or
(b) which would, if adversely determined, (i) have a material
adverse effect on the assets, business, properties, operations or financial or
other condition of the Company or (ii) have a material adverse effect on the
ability of the Company to perform its obligations under this Agreement or any of
the other Transaction Documents. No injunction, writ, temporary restraining
order, decree or any order of any nature has been issued by any court or other
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Governmental Authority purporting to enjoin or restrain the execution, delivery
and performance of this Agreement or any of the other Transaction Documents.
5.7 No Default or Breach. The Company is not in default under or
with respect to any Contractual Obligation in any respect, which, individually
or together with all such defaults, would be materially adverse to the assets,
business, properties, operations or financial or other condition of the Company
or which could materially adversely affect the ability of the Company to perform
its obligations under this Agreement or any of the other Transaction Documents.
5.8 SEC Documents.
(a) The Company has filed all reports, schedules, forms, statements
and other documents required to be filed with the Commission by the Company
since January 1, 1996 (collectively, "SEC Documents") on a timely basis. As of
their respective dates, the SEC Documents did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All of the
consolidated financial statements of the Company contained in the SEC Documents
(i) complied as to form with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto, (ii)
have been prepared in accordance with GAAP consistently applied throughout the
periods indicated (subject, in the case of the unaudited interim statements, to
normal year-end audit adjustments) and (iii) present fairly in all material
respects the financial position, results of operations and the related changes
in financial position as at the dates and for the periods indicated.
(b) The Company has no material direct or indirect Indebtedness,
liability or obligation, whether known or unknown, fixed or unfixed, contingent
or otherwise, and whether or not of a kind required by GAAP to be set forth on a
financial statement (collectively "Company Liabilities"), other than (i) Company
Liabilities fully and adequately reflected in the financial statements included
in the SEC Documents filed prior to the date hereof, (ii) Company Liabilities as
set forth in Section 5.8 of the Disclosure Letter, and (iii) Company Liabilities
incurred in the ordinary course of business.
5.9 No Material Adverse Change. Since December 31, 1999, there has
not been any event or development that has had, or could reasonably be expected
to have, a material adverse effect on the assets, business, properties,
operations or financial or other condition of the Company.
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5.10 Operations of the Company. Except as contemplated by the
Transaction Documents or otherwise consented to by Pangea, since December 31,
1999, the Company has not:
(a) declared or paid any dividend or declared or made any other
distributions of any kind to its stockholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(b) incurred any Indebtedness for borrowed money;
(c) waived any material right under any contract or other agreement
of the type required to be set forth on any section to the Disclosure Letter;
(d) made any change in its accounting methods or practices or made
any change in depreciation or amortization policies or rates adopted by it;
(e) increased the compensation of any officer or other key employee
of the Company;
(f) made any loan or advance to any of its stockholders, officers,
directors, employees, consultants, agents or other representatives, or made any
other loan or advance;
(g) sold, abandoned or made any other disposition of any of its
properties or assets or made any acquisition of all or any part of the
properties, capital stock or business of any other Person;
(h) taken any action that would cause it to be required to register
as an "investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act");
(i) amended its Certificate of Incorporation or By-laws or agreed to
change in any manner the rights of its outstanding capital stock or the
character of its business;
(j) issued any shares of its Common Stock or any securities
convertible, exchangeable or exercisable into Common Stock;
(k) engaged in any other material transaction; or
(l) agreed to do any of the foregoing.
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5.11 Capitalization. As of the date hereof, the Company's authorized
capital stock consists of 45,000,000 shares of Common Stock, 4,958,234 shares of
which are issued and outstanding and 50,000 shares of which are held in
treasury, and 5,000,000 shares of "blank check" preferred stock, none of which
are issued and outstanding. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued and are
fully paid and non-assessable. As of the date of this Agreement there are no
existing options, warrants, calls, commitments or agreements of any character to
which the Company is a party or by which it is bound calling for the issuance or
sale of shares of its respective capital stock or securities convertible into or
exchangeable for shares of such capital stock. All of the outstanding shares of
capital stock of the Company have been duly authorized and are fully paid,
non-assessable and free of preemptive rights. The Shares and the Warrants are
duly authorized, and, when issued upon payment of the Shares Purchase Price and
the Warrants Purchase Price therefor, will be fully paid and non-assessable.
Except as provided for or in the Transaction Documents, there are no options,
warrants or other rights to purchase shares of capital stock or other securities
of the Company, nor is the Company obligated in any manner to issue shares of
its capital stock or other securities. Except as contemplated hereby and for
relevant state and federal securities laws, there are no restrictions on the
Company's ability to transfer shares of capital stock of the Company.
5.12 Subsidiaries. Except for New Start, Inc., the Company does not
have any Subsidiaries. The Company owns all of the issued and outstanding
capital stock of the Subsidiaries, free and clear of all Liens. All of such
shares of capital stock are duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with the registration and
qualification requirements of all applicable federal, state and foreign
securities laws. There are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued, unauthorized or
treasury shares of capital stock or other securities of, or any proprietary
interest in, any of the Subsidiaries, and there is no outstanding security of
any kind convertible into or exchangeable for such shares or proprietary
interest.
5.13 Investment Company. Neither the Company nor any Person
controlling the Company is an "investment company" within the meaning of the
Investment Company Act.
5.14 Environmental Matters.
(a) The property, assets and operations of the Company comply with
all applicable Environmental Laws, except to the extent that failure to comply
with such Environmental Laws would not have a material adverse effect on the
assets, business, properties or financial or other condition of the Company.
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(b) None of the Company nor the property, assets or operations of
the Company is the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Materials into the environment or is in contravention of any federal,
state or local law, order or regulation that is likely to have a materially
adverse effect on the assets, business, properties or financial or other
condition of the Company.
(c) The Company has not received any notice or claim, nor are there
pending, threatened or reasonably anticipated lawsuits against them, with
respect to violations of an Environmental Law or in connection with any release
of any Hazardous Materials into the environment.
(d) The Company does not have any contingent liability which is
material to the Company in connection with any release of any Hazardous
Materials into the environment.
5.15 Real Properties.
(a) The Company does not own or lease any real property.
(b) The Company does not own or hold, and is not obligated under or
a party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell or dispose of any real property or any portion thereof
or interest therein.
5.16 Taxes
(a) The Company has paid or caused to be paid, or established
reserves that the Company reasonably believes to be adequate in all material
respects for all federal, state, county, local, foreign and other taxes
(including income, profits, premium, estimated, excise, sales, use, value added,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, inventory and merchandise, capital stock, tollgate, asset and
license, net worth, transaction, transfer, withholding, employment, unemployment
compensation, payroll-related and real and personal property taxes, taxes on
services and import duties and other governmental charges and assessments),
whether or not measured in whole or in part by net income, and including all
deficiencies, additions to tax, interest and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustment related to
any of the foregoing (collectively, "Taxes" or, individually, a "Tax") required
to be paid by it through the date hereof, and no such Taxes shall be payable by
it in connection with the consummation of the transactions contemplated by this
Agreement.
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(b) The Company has filed when due with the appropriate Governmental
Authorities all returns, estimates, reports and forms relating to Taxes ("Tax
Returns") required to be filed by it through the date hereof.
(c) No penalties or other charges are or will become due with
respect to the late filing of any Tax Return of the Company required to be filed
on or before the Closing Date in the ordinary course of the Company's business.
(d) The Company has not been nor is it currently being audited by
any taxing authority. There is no unassessed Tax deficiency or audit proposed or
threatened against the Company. No extension of time with respect to any date on
which any Tax Return was or is to be filed by the Company is in force, and no
waiver or agreement is in force for the extension of time for the assessment or
payment of any tax.
(e) Prior to the date of this Agreement, the Company has not made
any payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G or would constitute
compensation in excess of the limitation set forth in Section 162(m) of the
Code.
(f) Section 5.16 of the Disclosure Letter sets forth all material
Tax elections made by the Company that are in effect with respect to the Company
for the fiscal year ended December 31, 1998 and the fiscal year ending December
31, 1999.
(g) Except as set forth in Section 5.16 of the Disclosure Letter,
the Company has not agreed or are required to make any adjustments under section
481(a) of the Code by reason of a change in accounting method or otherwise.
(h) The Company has not at any time filed a consent pursuant to
section 341(f)(1) of the Code, or agreed to have section 341(f)(2) of the Code
apply to any dispositions of "subsection (f) assets" (as such term is defined in
section 341(f)(4) of the Code).
(i) The Company is not a party to any Tax allocation, sharing, or
similar agreement. The Company has not been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the common
parent of which was the Company).
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5.17 ERISA. The Company does not have any existing plan, policy,
program or arrangement providing for compensation, severance, bonus,
profit-sharing, stock options or other stock-related compensation or other forms
of incentive or deferred compensation, insurance coverage, health or medical
benefits, or retirement benefits (including pension, health, medical or other
similar benefits).
5.18 Intellectual Property. The Company does not own or license any
Intellectual Property.
5.19 Contractual Obligations. There are no Contractual Obligations
to which the Company is a party or by or to which any of them or any of their
properties may be bound or subject.
5.20 Anti-Dilution Protection. Except as contemplated in the
Transaction Documents, no holder of shares of Common Stock (or securities
convertible into or exchangeable or exercisable for any of the foregoing) has
any rights to purchase or receive additional or other securities upon the
occurrence of an event that might dilute such holder's percentage interest in
the Company (other than rights with respect to equitable adjustments in the
event of a stock dividend, stock split, share combination or similar
occurrences).
5.21 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Shares or the Warrants. No registration
of the Shares or the Warrants pursuant to the provisions of the Securities Act
or any state securities or "blue sky" laws will be required by the offer, sale
or issuance of the Shares or the Warrants pursuant to this Agreement. The
Company agrees that neither it, nor anyone acting on its behalf, will offer or
sell the Shares or the Warrants or any other security so as to require the
registration of the Shares or the Warrants pursuant to the provisions of the
Securities Act or any state securities or "blue sky" laws, unless such
securities are so registered.
5.22 Solvency. On and as of such Closing Date, after giving effect
to the transactions contemplated in this Agreement, the Company will be Solvent.
5.23 Contracts Affecting Stockholders. Other than the Transaction
Documents, the Company is not a party to any stockholders agreement, voting
trust agreement, registration rights agreement or other contract to which the
Common Stock or any other capital stock of the Company is bound by, subject to
or entitled to the benefit of or to which any of the existing stockholders is
bound by, subject to or entitled to the benefit of as a result of its ownership
of the Common Stock or any other interest in the Company.
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5.24 Employment and Labor Matters.
(a) Except as disclosed in Section 5.24 of the Disclosure Letter,
neither the Company nor any Commonly Controlled Entity is a party to any
collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to represent,
any employee of the Company or any Commonly Controlled Entity.
(b) Neither the Company nor any Commonly Controlled Entity has
violated any provision of federal or state law or any governmental rule or
regulation, or any order, decree, judgment arbitration award of any court,
arbitrator or any government agency regarding the terms and conditions of
employment of employees, former employees or prospective employees or other
labor related matters, including, without limitation, laws, rules, regulations,
orders, rulings, decrees, judgments and awards relating to discrimination, fair
labor standards and occupational health and safety, wrongful discharge or
violation of the personal rights of employees, former employees or prospective
employees.
5.25 Related Party Transactions. Except as set forth in Section 5.26
of the Disclosure Letter, none of the officers, directors or Affiliates of the
Company:
(a) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any Person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of the Company;
(b) owns, directly or indirectly, in whole or in part, any property
that the Company use in the conduct of their business;
(c) is or has been a party to any Contractual Obligations with the
Company; or
(d) has any actions, causes of action, suits, claims, complaints,
demands, litigations or legal, administrative or arbitral proceedings or
investigations whatsoever against, or owes any amount to, the Company.
5.26 Broker's, Finder's or Similar Fees. Except as set forth herein,
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company, or any action taken by
the Company.
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5.27 Full Disclosure. No statement by the Company contained in this
Agreement or any of the other Transaction Documents, or by the Company in any
document, certificate, notice or consent delivered to the Purchasers in
connection with the purchase and sale of the Shares and the Warrants at or prior
to the Closing, contains (or will contain) an untrue statement of a material
fact or omits (or will omit) to state a material fact required to be stated
therein or necessary to make the statements made, in light of the circumstances
in which made, not materially false or misleading.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser (as to itself) represents and warrants to, and
covenants and agrees with, the Company as follows:
6.1 Existence and Power; Share Ownership. Such Purchaser:
(a) if not a natural person, is duly organized and validly existing
under the laws of the jurisdiction of its organization;
(b) if not a natural person, has the power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is currently proposed to be, engaged;
and
(c) other than as disclosed in the Addendum executed by such
Purchaser, owns no shares of Common Stock or any rights to acquire Common Stock
as of the date hereof.
6.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and the other Transaction
Documents to which it is a party:
(a) is within such Purchaser's power and authority and has been duly
authorized by all necessary action;
(b) if not a natural person, does not contravene the terms of such
Purchaser's organizational documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, and Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser;
and
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(d) does not require approval, consent, exemption, authorization or
other action by, or notice to, or filing with, any Governmental Authority or any
other Person, other than those that have been obtained or made on or prior to
the applicable Closing.
6.3 Binding Effect. Each of this Agreement and the other Transaction
Documents to which it is a party has been duly executed and delivered by such
Purchaser, and constitutes the legal, valid and binding obligation of such
Purchaser enforceable against it in accordance with its terms.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by such
Purchaser will not violate any Requirement of Law.
6.5 Purchase for Own Account. The Shares and Warrants to be acquired
by such Purchaser pursuant to this Agreement are being acquired for such
Purchaser's own account and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the securities laws of the United States of America, or any state, without
prejudice, however, to the rights of such Purchaser at all times to sell or
otherwise dispose of all or any part of the Shares or Warrants under an
effective registration statement under the Securities Act, or under an exemption
from such registration available under the Securities Act. If such Purchaser
should in the future decide to dispose of any of the Shares or Warrants, such
Purchaser understands and agrees that it may do so only in compliance with the
Securities Act and applicable state securities laws, as then in effect, and that
stop-transfer instructions to that effect, where applicable, will be in effect
with respect to such securities. Each Purchaser agrees to the imprinting, so
long as required by law, of a legend on certificates representing all of the
Shares and Warrants to the following effect: THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
6.6 Sophistication. Such Purchaser, by reason of its business and
financial experience, and the business and financial experience of those persons
that may have been retained to advise it with respect to its investment in the
Shares, together with such advisors, has such knowledge and experience in
business and financial matters to be capable of evaluating the merits and risks
of the prospective investment and to make an informed investment decision. Such
Purchaser acknowledges that it has been afforded the opportunity (i) to ask such
questions as it has deemed necessary of, and to
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<PAGE>
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and Warrants and the merits and risks
of investing in such securities and (ii) to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information heretofore provided to it; provided, however, that the availability
of the foregoing opportunity shall not in any way affect, diminish or derogate
from the representations and warranties made or deemed made to the Purchasers by
the Company hereunder or the Purchasers' right to rely thereon.
6.7 Broker's, Finder's or Similar Fees. Except as otherwise set
forth in this Agreement, there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
such Purchaser.
6.8 Additional Representations. Such Purchaser understands that the
offer and sale of the Shares and the Warrants has not been and will not be
registered under the Securities Act, by reason of the issuance of such
securities by the Company in a transaction exempt from the registration
requirements of the Securities Act. Such Purchaser is an accredited investor, as
such term is defined in Rule 501 of Regulation D under the Securities Act.
ARTICLE 7
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that:
7.1 Reincorporation in Delaware. As soon as practicable following
the Closing Date, the Company shall take all steps within its power that may be
necessary or desirable in order to cause the jurisdiction of incorporation of
the Company to be changed to Delaware (the "Delaware Reincorporation"), as
expeditiously as possible, including, without limitation, taking all necessary
action as may be required under New Mexico and Delaware law to merge the Company
into a newly-formed Delaware company to be named Pangea Internet, Inc.
("Newco"), filing any required proxy solicitation materials with the Commission
in connection therewith, soliciting any stockholder approval required therefor
(including the holding of a stockholders meeting), recommending to the
stockholders that they approve the Delaware Reincorporation, and making any
required state filings. In connection with any stockholder vote to approve the
Delaware Reincorporation, the Company shall direct the individuals designated as
proxies in the Company's proxy materials to vote all shares of Common Stock and
Preferred Stock for which the Company has received proxies (unless
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otherwise directed by the stockholder submitting such proxy), in favor of the
Delaware Reincorporation. Newco's certificate of incorporation shall provide for
a sufficient number of authorized shares of Common Stock to permit the
reservation of Common Stock required by Section 7.2.
7.2 Reservation of Common Stock. Upon consummation of the Delaware
Reincorporation, the Company shall at all times reserve and keep available out
of its authorized Common Stock, solely for the purpose of issue or delivery upon
conversion of the Shares or exercise of the Warrants, such number of shares of
Common Stock as shall then be issuable or deliverable upon the conversion of all
outstanding Shares and the exercise of all outstanding Warrants. Such shares of
Common Stock shall, when issued or delivered in accordance with the terms of the
Preferred Stock or Warrants, as the case may be, be duly and validly issued and
fully paid as non-assessable. The Company shall issue the Common Stock issuable
upon conversion of the Shares or exercise of the Warrants upon the proper
conversion of the Shares or exercise of the Warrants in accordance with the
provisions thereof, and shall otherwise comply with the terms thereof.
7.3 Inspection. The Company will permit the Purchasers and their
respective representatives to make such investigation of the properties,
businesses and operations of the Company, and such examination of the books,
records and financial condition of the Company as they may reasonably request.
Any such investigation and examination shall be conducted at reasonable times
and under reasonable circumstances and the Company shall cooperate fully
therewith. To the extent the Purchasers are advised that any information
obtained from the exercise of the Purchasers' rights hereunder, and not
previously known to the Purchasers, is to be treated in a confidential manner,
the Purchasers shall treat such information as confidential unless otherwise
required by law.
7.4 No Solicitation. Except as provided in this Agreement and the
other Transaction Documents, until the Closing days from the date hereof none of
the Company shall, directly or indirectly (through representatives or
otherwise), solicit, actively encourage, participate in or initiate discussions
or negotiations with, or provide any information to, any person or group (other
than the Purchasers or any designee of the Purchasers) concerning any merger,
consolidation, business combination or recapitalization involving the Company,
the issuance of 5% or greater interest in the equity or voting power of the
Company, or the sale of all or any substantial part of the business and
properties of the Company; provided, however, that the foregoing shall not
prohibit the Company from participating in discussions and negotiations and
furnishing information to any party following the receipt of an unsolicited
proposal from any such party if the Board in good faith determines that such
proposal is more favorable to the Company's stockholders than the transactions
contemplated by the Transaction Documents and, after consultation with outside
counsel having expertise in the relevant
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legal principles, that the failure to engage in such discussions or negotiations
or to provide such information would result in a breach by the Board of its
fiduciary duties.
7.5 Additional Covenants. The Company shall not make any
acquisitions or take any action (a) until November 13, 2002, which would cause
Walter A. Forbes, as an investor in the Company, to violate the Forbes
Noncompete or (b) until February 28, 2001, which would cause William Avery, as
an officer and investor in the Company, to violate the Avery Noncompete. "Forbes
Noncompete" means the restrictions in Exhibit II of Annex B of that certain
agreement, dated July 28, 1998, between Walter A. Forbes and Cendant
Corporation, a true copy of which has been provided by Pangea to the Company.
"Avery Noncompete" means the restrictions in that certain non-competition
agreement, dated February 21, 1995, between William Avery and CUC International
Inc., as incorporated by reference in that certain agreement, dated December 28,
1998, between William Avery and Cendant Corporation, true copies of which have
been provided by Pangea to the Company.
7.6 Reverse Stock Splits. For a period of six (6) months after the
Closing, and except to the extent necessary to meet the minimum bid price for
listing on The Nasdaq National Market ("NASDAQ") or to maintain listing on the
NASDAQ, for a period of six (6) months thereafter, the Company shall not effect
any reverse stock split of the Common Stock.
7.7 Insurance. Not later than the Closing, the Company shall have
obtained directors and officers insurance and general liability insurance that
is reasonably satisfactory to Pangea.
7.8 Further Assurances. Each of the parties hereto agrees to use its
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Transaction Documents, to not
take any action that would cause its representations and warranties not to be
true as of the Closing Date and shall use its reasonable efforts promptly to
obtain all waivers, permits, consents and approvals and to effect all
registration, filings and notices with or to third parties or governmental or
public bodies or authorities which are necessary or desirable in connection with
the transactions contemplated by the Transaction Documents. Nothing contained in
this Section shall require any party to pay any money to any third party
<PAGE>
other than filing fees or similar costs or expenses that may be required or
imposed by governmental authorities.
7.9 Assets. If the Company is unable to liquidate its equity
interests in Realco, Inc. prior to the Closing, Pangea and its affiliates will
purchase such equity interests from the Company.
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ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Purchasers and their Affiliates and their respective
officers, directors, agents, members, employees and partners to the fullest
extent permitted by law from and against any and all losses, claims, damages,
expenses (including reasonable fees, disbursements and other charges of counsel)
or other liabilities ("Liabilities") resulting from (i) any breach of any
representation, warranty or covenant of the Company in this Agreement or (ii)
any legal, administrative or other actions (including actions brought by any
equity holders of the Company or derivative actions brought by any Person
claiming through the Company or in the Company's name), proceedings or
investigations (whether formal or informal) (collectively, "Actions or
Proceedings"), or written threats thereof, based upon, relating to or arising
out of this Agreement or the other Transaction Documents, the transactions
contemplated hereby or thereby, or any indemnified person's role therein;
provided, however that the Company shall not be liable under this Section 8.1
(i) for any amount paid in settlement of claims without the Company's consent
(which consent shall not be unreasonably withheld), (ii) any Liabilities arising
out of a claim or action brought by a Purchaser against another Purchaser or
(iii) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct, bad faith or gross
negligence of such indemnified party.
8.2 Indemnification by the Purchasers. Each Purchaser agrees to
indemnify and hold harmless the Company and its Affiliates and their respective
officers, directors, agents, members, employees and partners to the fullest
extent permitted by law from and against any and all Liabilities resulting from
any breach of any representation, warranty or covenant of such Purchaser in this
Agreement or provided, however, that such Purchaser shall not be liable under
this Section 8.2: (x) for any amount paid in settlement of claims without the
consent of the Purchaser (which consent shall not be unreasonably withheld); (y)
to the extent that it is finally judicially determined that such Liabilities
resulted primarily from the willful misconduct, bad faith or gross negligence of
such indemnified party.
8.3 Indemnification to Pangea. The Company agrees to indemnify and
hold harmless Pangea and its officers, directors, agents, members, employees and
partners to the full extent permitted by law from and against any and all
Liabilities resulting from any misstatements of a material fact contained in any
private offering materials in connection with the private offering contemplated
by this Agreement or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
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8.4 Contribution. If the indemnification provided for in this
Article 8 shall for any reason be held by a court to be unavailable to an
indemnified party in respect of any loss, claim, damage or liability, or any
action in respect thereof, then, in lieu of the amount paid or payable under
Section 8.1, 8.2 or 8.3, the indemnified party and the indemnifying party under
Section 8.1, 8.2 or 8.3 shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying and indemnified
parties which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, as well as any other relevant equitable considerations or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the indemnifying and indemnified parties from the offering of the
Shares, provided, that for purposes of clause (i) or (ii), no party shall be
required to contribute any amount in excess of the amount such party would have
been required to pay to an indemnified party if the indemnity under Section 8.1,
8.2 or 8.3, as applicable, was available. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. As among parties who are guilty of such fraudulent
misrepresentation, such parties' obligations to contribute as provided in this
Section 8.4 are several and not joint. In addition, no person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such person's consent, which consent shall not be
unreasonably withheld.
8.5 Notification. Each party entitled to indemnification under
Section 8.1, 8.2 or 8.3 hereof (an "Indemnified Party") will, promptly after the
receipt of notice of the commencement of any action or other proceeding against
such Indemnified Party, or any other event or occurrence in respect of which
indemnity may be sought from the party obligated to provide such indemnification
under Section 8.1, 8.2 or 8.3 hereof (an "Indemnifying Party"), notify the
Indemnifying Party in writing thereof. The failure of any Indemnified Party so
to notify an Indemnifying Party shall not relieve such Indemnifying Party from
any liability which it may have to such Indemnified Party (i) other than
pursuant to this Article 8 or (ii) under this Article 8 unless, and only to the
extent that, such omission results in actual prejudice to such Indemnifying
Party. In case any such action or other proceeding shall be brought against any
Indemnified Party and it shall notify the Indemnifying Party of the commencement
thereof, such Indemnifying Party shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the
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foregoing, in any action or proceeding in which both an Indemnifying Party and
an Indemnified Party is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel reasonably
acceptable to the Indemnifying Party (in terms of such counsel's experience) at
the Indemnifying Party's expense and to control its own defense of such action
or proceeding if, in the reasonable opinion of counsel to such Indemnified
Party, (a) there are or may be legal defenses available to such Indemnified
Party or to other Indemnified Parties that are different from or additional to
those available to the Indemnifying Party or (b) any conflict or potential
conflict exists between the Indemnifying Party and such Indemnified Party that
would make such separate representation advisable; provided, however, that in no
event shall the Indemnifying Party be required to pay fees and expenses under
this Article 8 for more than one firm of attorneys in any jurisdiction in any
one legal action or group of related legal actions. The Indemnifying Party will
not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising or
that may arise out of such claim, action or proceeding. The rights accorded to
Indemnified Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise.
8.6 Expense Reimbursement. In connection with the obligation of an
Indemnifying Party to indemnify an Indemnified Party for expenses pursuant to
Section 8.1, 8.2 or 8.3 above, the Indemnifying Party shall reimburse each
Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent that the Indemnified Party was not entitled to be indemnified
therefore pursuant to Section 8.1, 8.2 or 8.3, as the case may be.
8.7 Registration Rights Agreement. Notwithstanding anything to the
contrary in this Article 8, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
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ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of the parties hereto;
(b) by the Purchasers or the Company, if the Closing shall not have
occurred on or prior to 60 days from the date hereof; provided that the right to
terminate this Agreement pursuant to this Section 9.1(b) shall not be available
to any party whose failure to perform any of its obligations under this
Agreement results in the failure of such condition;
(c) by the Purchasers, in the event the Company breaches in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement which breach is not susceptible of cure
or, if susceptible of cure, has not been cured within 30 days after the giving
of written notice to the Company; and
(d) by the Company, in the event the Purchasers breach in any
material respect any of their representations, warranties, covenants or other
agreements contained in this Agreement which breach is not susceptible of cure
or, if susceptible of cure, has not been cured within 30 days after the giving
of written notice to the Purchasers.
9.2 Procedure for the Effect of Termination. In the event this
Agreement is terminated by the Purchasers, on the one hand, or by the Company,
on the other hand, pursuant to Section 9.1, written notice of such termination
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned without any further
action. If this Agreement is terminated as provided herein, no party hereto
shall have any liability or further obligation to any other party under the
terms of this Agreement except with respect to the willful breach by any party
hereto and except that the provisions of this Section 9.2 and Article 10 shall
survive the termination of this Agreement.
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ARTICLE 10
MISCELLANEOUS
10.1 Survival of Provisions. All of the representations and
warranties made herein shall survive the execution and delivery of this
Agreement, any investigation by or on behalf of the Purchasers or any Affiliate,
acceptance of the Shares and payment therefor, or termination of this Agreement
and shall terminate on the 90th day following the delivery to the Purchasers of
audited financial statements of the Company covering one full year following the
Closing.
10.2 Expenses. If the Closing occurs, the Company shall reimburse
Pangea and the Purchasers for all of their legal fees and expenses incurred in
connection with the transactions contemplated hereby.
10.3 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
services or personal delivery to the following addresses, or to such other
addresses as shall be designated from time to time by a party in accordance with
this Section 10.2:
(a) if to the Purchasers or Pangea:
Pangea Internet Advisors LLC
20 Dayton Avenue
Greenwich, CT 06830
Attention: Cary S. Fitchey
Telephone No.: (203) 661-4431
Telecopier No.: (203) 661-1331
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
Telephone No.: (212) 373-3000
Telecopier No.: (212) 757-3990
and
Richard & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Attention: Craigh Leonard, Esq.
Telephone No.: (212) 207-1222
Telecopier No.: (212) 750-9022
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(b) if to the Company:
Arinco Computer Systems Inc.
1650 University Boulevard, N.E.
Suite 5-100
Albuquerque, New Mexico 87102
Attention: James A. Arias
Telephone No.: (505) 242-4561
Telecopier No.: (505) 242-6788
with a copy to:
Thad H. Turk, Esq.
4804 College Heights Dr., N.W.
Albuquerque, New Mexico
Telephone: (505) 899-8193
Facsimile: (505) 899-5792
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one Business Day
after delivery to a courier, if delivered by commercial overnight courier
service; five Business Days after being deposited in the mail, postage prepaid,
if mailed; and when receipt is acknowledged, if telecopied.
10.4 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Pangea may assign any of its rights under this Agreement as a
"Purchaser" to one or more financially sophisticated investors who is reasonably
acceptable to the Company and who is an "accredited investor" as defined in Rule
501 of Regulation D under the Securities Act. The Purchasers may assign any of
their rights under this Agreement to any of their Affiliates or to any
institutional investor to whom the Shares or Warrants (or any portion thereof)
are transferred. The Company may not assign any of its rights hereunder without
the consent of Pangea. Except as provided in Article 8, no Person
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other than the parties hereto and their permitted assignees is intended to be a
beneficiary of this Agreement.
10.5 Waiver and Amendment.
(a) No failure or delay on the part of the Company, Pangea or any
Purchaser in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company, Pangea or the Purchasers at law, in equity or otherwise.
(b) Subject to Section 2.4, this Agreement may not be amended
without the consent of each party hereto.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10.8 Governing Law. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
10.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts pursuant to a contractual provision
in any such suit, action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the address set forth in
Section 10.2, such service to become effective ten days after such mailing.
10.10 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal
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or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
10.11 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
10.12 Remedies. If a breach of this Agreement occurs and is
continuing, any Purchaser may pursue any available remedy by proceeding at law
or in equity to enforce the performance (including, without limitation, the
specific performance) of any provision of this Agreement. A Purchaser may
maintain a proceeding even if it does not possess any of the Shares or Warrants
or does not produce any of them in the proceeding. Except as otherwise provided
by law, a delay or omission by any Purchaser in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or constitute
a waiver of or acquiescence in any such breach. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
10.13 Entire Agreement. This Agreement, together with the exhibits
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits and
schedules hereto and the other Transaction Documents, supersede all prior
agreements and understandings among the parties with respect to such subject
matter.
10.14 Publicity. Except as may be required by applicable law, no
party hereto shall issue a publicity release or announcement or otherwise make
any public disclosure concerning this Agreement or the transactions contemplated
hereby, without prior approval by the other parties hereto. If any announcement
is required by law to be made by a party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed and delivered by their respective officers
hereunto duly authorized as of the date first above written.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ James A. Arias
------------------
Name: James A. Arias
Title: President and Chief Executive Officer
PANGEA INTERNET ADVISORS LLC
By: /s/ Cary S. Fitchey
-------------------
Name: Cary S. Fitchey
Title: Managing Director
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ADDENDUM
This Addendum forms part of the Securities Purchase Agreement
entered into by and between Arinco Computer Systems Inc. and Pangea Internet
Advisors LLC as of March 9, 2000 (the "Securities Purchase Agreement"). The
undersigned hereby agrees that, as of the date hereof, the undersigned shall
become a "Purchaser" under the Securities Purchase Agreement, as defined
therein, that the representations and warranties made in the Securities Purchase
Agreement as to the Purchasers are true as to the undersigned and that the terms
and conditions of the Securities Purchase Agreement shall be binding upon and
inure to the benefit of the undersigned.
The undersigned represents and warrants to Arinco Computer Systems
Inc. that, except as described below, the undersigned owns no shares of Arinco
Common Stock or rights to acquire such Common Stock. [Describe ownership]
IN WITNESS WHEREOF, the undersigned has caused this Addendum to be
duly executed and delivered as of this _____ day of _____________, 2000.
[PURCHASER]
By: _________________________________
Name:
Title:
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
by and among
ARINCO COMPUTER SYSTEMS INC.
and the Persons referred to herein
-----------------------
March 28, 2000
-----------------------
<PAGE>
Table of Contents
Page
----
1. Registration on Request.............................................1
2. Incidental Registration.............................................3
3. Registration Procedures.............................................4
4. Underwritten Offerings..............................................8
5. Preparation; Reasonable Investigation..............................10
6. Rights of Requesting Holders.......................................11
7. Registration Expenses..............................................11
8. Indemnification and Contribution...................................11
9. Registration Rights to Others......................................14
10. Nominees for Beneficial Owners.....................................14
11. Rule 144...........................................................15
12. Definitions........................................................15
13. Miscellaneous......................................................17
i
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 28, 2000, by and among
ARINCO COMPUTER SYSTEMS INC., a New Mexico corporation (the "Company"), Pangea
Internet Advisors LLC, a Delaware limited liability company ("Pangea"), and the
Persons (the "Purchasers") party to the Securities Purchase Agreement (defined
below) as "Purchasers" (collectively with Pangea, the "Holders").
This Agreement is made in connection with the Securities Purchase
Agreement, dated as of March 9, 2000, by and among the Company and the
Purchasers (the "Securities Purchase Agreement"), pursuant to which the Company
has agreed to issue and sell to the Purchasers shares of the Company's Series B
Convertible Preferred Stock, par value $.10 per share (the "Preferred Stock"),
and Warrants ("Warrants") to purchase shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"). In order to induce the Holders to
purchase the shares of Preferred Stock and the Warrants, the Company has agreed
to grant registration rights with respect to the Registrable Securities (defined
below) as set forth in this Agreement. Capitalized terms used herein and not
otherwise defined shall have the respective meanings given them in Section 12.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Registration on Request.
(a) Request. Except as otherwise provided in this Section 1, at any time
and from time to time after the first anniversary of the date hereof, upon the
written request of one or more Initiating Holders requesting that the Company
effect a registration under the Securities Act of all or any part of such
Initiating Holders' Registrable Securities, and specifying the intended method
or methods of disposition thereof, the Company will promptly, but in any event
within ten (10) days after receipt of such written request, give written notice
of such requested registration to all holders of Registrable Securities, and
thereupon will use its best efforts to effect, as reasonably expeditiously as
practicable, the registration under the Securities Act, including by means of a
shelf registration pursuant to Rule 415 under the Securities Act if so requested
in such request (but in the case of a shelf registration only if the Company is
then eligible to use Form S-2 or S-3 (or any successor forms) for such a shelf
registration), of:
(i) the Registrable Securities which the Company has been so requested
to register by such Initiating Holder(s), for disposition in
<PAGE>
accordance with the intended method or methods of disposition stated in
such request, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request
delivered to the Company within thirty (30) days after the giving of
such written notice by the Company (which request shall specify the
intended method or methods of disposition thereof),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that the reasonably anticipated aggregate price to the
public of such offering would be at least $5,000,000; and provided further that
any holder of Registrable Securities to be included in any such registration, by
written notice to the Company within ten (10) days after its receipt of a copy
of a notice from the managing underwriter delivered pursuant to Section 4(a) may
withdraw such request and, upon receipt of such notice of the withdrawal of such
request from holders comprising the Requisite Holders, the Company may elect not
to effect such registration; and provided further, that the Company shall not be
required to pay Registration Expenses in connection with a registration request
pursuant to this Section 1 if such request is withdrawn by the Requisite
Holders.
(b) Number of Registrations. The Company shall not be required to effect
more than three (3) registrations, plus three (3) additional registrations if
the Company is then eligible to use Form S-3 (for a total of six (6)), pursuant
to this Section 1.
(c) Registration Statement Form. Registrations under this Section 1
shall be on such appropriate registration form of the Commission (i) as shall be
requested by the Requisite Holders (provided that the Company is then eligible
to use such form) and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request for their registration.
(d) Effective Registration Statement. A registration requested pursuant
to this Section 1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective, (ii) if the
registration does not remain effective for a period of at least ninety (90) days
(or, with respect to any registration statement filed pursuant to Rule 415 under
the Securities Act, for a period of at least nine (9) months) or, in either case
if earlier, until all the Registrable Securities requested to be registered in
connection therewith are sold or withdrawn by the participating Holders, (iii)
if, after it has become effective, such registration is subject to any stop
order, injunction or other order or requirement of the Commission
2
<PAGE>
or other governmental agency or court for any reason not attributable to actions
taken by the holders of Registrable Securities, or (iv) if the 3 conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied and no such closing
occurs, other than by reason of some act or omission by the holders of the
Registrable Securities that were to have been registered.
(e) Registration of Other Securities. Whenever the Company shall effect
a registration pursuant to this Section 1, no securities other than Registrable
Securities shall be included among the securities covered by such registration
unless (i) holders of Registrable Securities requesting registration thereof
pursuant to Section 1, representing not less than 50% of the Registrable
Securities with respect to which registration has been requested, shall have
consented in writing to the inclusion of such other securities or (ii) such
inclusion would not have the effect of reducing the amount of Registrable
Securities included in such registration.
(f) Postponement. The Company shall be entitled to postpone for a
reasonable period of time (but not exceeding sixty (60) days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 1 if the Company determines, in its reasonable
judgment, that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material transaction
involving the Company and promptly gives the holders of Registrable Securities
requesting registration thereof pursuant to this Section 1 written notice of
such determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. The Company may not
postpone a filing pursuant to this Section 1(f) more than once in any
twelve-month period. If the Company shall so postpone the filing of a
registration statement, holders of Registrable Securities requesting
registration thereof pursuant to Section 1, representing not less than 15% of
the Registrable Securities with respect to which registration has been requested
and constituting not less than 50% of the Initiating Holders, shall have the
right to withdraw the request for registration by giving written notice to the
Company within thirty (30) days after receipt of the notice of postponement and,
in the event of such withdrawal, such request shall not be counted for purposes
of the registrations to which holders of Registrable Securities are entitled
pursuant to Section 1.
(g) Limitations on Registration on Request. Notwithstanding anything in
this Section 1 to the contrary, the Company shall not be required to effect a
registration pursuant to this Section 1 within the six (6)-month period
occurring immediately subsequent to the effectiveness (within the meaning of
Section 1(d) hereof) of a registration statement filed pursuant to this Section
1.
3
<PAGE>
2. Incidental Registration.
(a) Incidental Rights. If the Company at any time proposes to register,
on any form which may be used for the registration of Registrable Securities
other than Form S-4 or Form S-8 (or any successor or similar forms then in
effect), any of its securities under the Securities Act (other than pursuant to
Section 1), whether or not pursuant to registration rights granted to other
holders of its securities and whether or not for sale for its own account, in a
manner which would permit registration of Registrable Securities for sale to the
public under the Securities Act, it will give written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this Section 2; such notice to be given to all such holders at least
twenty (20) days prior to the filing of such proposed registration statement.
Upon the written request of any such holder (a "Requesting Holder") made within
fifteen (15) days after the giving of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such holder and
the intended method or methods of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Requesting Holders, to the extent necessary to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered. With respect to an underwritten offering, prior
to the effective date of any registration statement filed in connection with a
registration described in this Section 2, promptly upon notification to the
Company from the managing underwriter of the price at which the Registrable
Securities requested to be registered pursuant to this Section 2 are to be sold,
the Company shall advise each Requesting Holder of such price, and if such price
is below the price which any Requesting Holder shall have indicated to be
acceptable to such Requesting Holder, such Requesting Holder shall then have the
right to withdraw its request to have its Registrable Securities included in
such registration statement.
(b) Not Deemed a Demand Registration. No registration effected pursuant
to this Section 2 shall be deemed to have been effected pursuant to Section 1.
(c) Holdback. If the Company previously shall have received a request
for registration pursuant to Section 1 or this Section 2, and if such previous
registration shall not have been withdrawn or abandoned, the Company will not
effect any registration of any of its securities under the Securities Act (other
than on Form S-4 or Form S-8 or a successor form), whether or not for sale for
its own account, until a period of ninety (90) days shall have elapsed from the
effective date of such previous registration.
(d) Discontinuance. Notwithstanding anything to the contrary in this
Section 2, the Company shall have the right to discontinue any registration
under
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<PAGE>
this Section 2 at any time prior to the effective date of such registration, if
the registration of other securities giving rise to such registration under this
Section 2 is discontinued; but no such discontinuation shall preclude an
immediate or subsequent request for registration pursuant to Section 1 or 2.
3. Registration Procedures. If and whenever the Company is/ required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 1 or Section 2, the Company will
promptly:
(a) prepare and (in any event within ninety (90) days after the end of
the period within which requests for registration may be given to the Company)
file with the Commission the requisite registration statement to effect such
registration and thereafter use its best reasonable efforts promptly to cause
such registration statement to become effective; provided that the Company may
discontinue any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration statement
relating thereto;
(b) prepare and file with the Commission such amendments, post-effective
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement until the earlier of (i) such time as all of such
Registrable Securities have either been disposed of in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement or the sale thereof has been abandoned by such sellers
and (ii) ninety (90) days after the effective date of such registration
statement, except with respect to any such registration statement filed pursuant
to Rule 415 (or any successor Rule) under the Securities Act, in which case such
period shall be one year;
(c) furnish as soon as available to each seller of Registrable
Securities covered by such registration statement such number of copies of such
drafts and final versions of such registration statement and of each such
amendment, post- effective amendment and supplement thereto (in each case
including all exhibits), such number of copies of such drafts and final versions
of the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus), any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the requirements of
the Securities Act, such documents, if any, incorporated by reference in such
registration statement or prospectus, and such other documents, as such seller
or such holder may reasonably request;
5
<PAGE>
(d) use its commercially reasonably efforts to register or qualify all
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller thereof shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this clause (d) be obligated to
be so qualified or to consent to general service of process in any such
jurisdiction;
(e) cooperate with the sellers of such Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which securities shall not bear any
restrictive legends indicating that the securities have not been registered
under the Securities Act and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Securities to be in such
denominations and registered in such names as such sellers may request at least
two (2) business days prior to any sale of Registrable Securities;
(f) furnish to each seller of Registrable Securities upon
request a copy of (i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration involves an
underwritten public offering, dated the date of the closing under the
underwriting agreement), covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) as are
customarily covered in opinions of issuer's counsel in underwritten public
offerings of securities and (ii) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, with respect to events subsequent to the
date of such financial statements, as are customarily covered in accountants'
comfort letters delivered to the underwriters in underwritten public offerings
of securities and such other financial matters as the Requisite Holders or the
underwriters, as the case may be, may reasonably request, subject to the
delivery by such seller to such independent public accountants of such documents
as are reasonable and customary in transactions of this nature;
(g) promptly notify each seller of such Registrable Securities, and (if
requested by any such seller) confirm such advice in writing, (i) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to the registration statement or any post-effective
amendment, when
6
<PAGE>
the same has become effective, (ii) of any request by the Commission for
amendments or supplements to the registration statement or the prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(h) promptly notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such seller
or holder promptly prepare and furnish to such seller or holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers or prospective
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(i) use its reasonable commercial efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at the
earliest possible time;
(j) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its securities holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen (18) months, beginning with the first full
calendar month after the effective date of such registration statement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(k) furnish to each such seller prior to the filing thereof a copy of
any amendment or supplement to such registration statement or prospectus and
shall not file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or the rules or
regulations thereunder;
(l) provide and cause to be maintained a transfer agent and a registrar
for all Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration statement;
7
<PAGE>
(m) cause all Registrable Securities covered by such registration
statement to be listed on each securities exchange or approved for quotation on
any inter-dealer quotation system on which similar securities issued by the
Company are then listed or quoted;
(n) cause its subsidiaries and affiliates to take all action necessary
or advisable to effect the registration of the Registrable Securities
contemplated hereby, including preparing and filing any required financial
information; and
(o) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the applicable registration statement.
The Company may require each holder of Registrable Securities which will be
included in such registration (i) to furnish the Company such information
relating to such holder as the Company may reasonably request and as is required
by applicable laws or regulations, and (ii) to provide the Company with written
confirmation that such holder will comply with applicable securities laws and
regulations, and provide the Company with such further information necessary for
the Company to abide by applicable laws and regulations, in such form as the
Company may reasonably request.
4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the Initiating
Holders for any underwritten offering of Registrable Securities pursuant to a
registration requested under Section 1, the Company will use its commercially
reasonable efforts to enter into a firm commitment underwriting agreement with
the underwriters for such offering, such agreement to be reasonably satisfactory
in substance and form to the underwriters and to contain such representations
and warranties by the Company and such other terms as are generally prevailing
in such agreements, including, without limitation, indemnities to the effect and
to the extent provided in Section 8. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities. Except as set forth in this Agreement,
no holder of Registrable Securities shall be required (i) to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law or (ii) to
indemnify (or contribute with respect to an indemnifiable claim) the Company or
any underwriters of the Registrable Securities, except as set forth in Section
8. Notwithstanding the
8
<PAGE>
foregoing, if the managing underwriter of such underwritten offering shall
advise the Company in writing (with a copy to the holders of Registrable
Securities requesting such registration) that, in its opinion the total number
of shares which the holders of Registrable Securities and, if applicable, any
other holders of securities of the Company or the Company propose to be included
in such registration is sufficiently large to materially and adversely affect
the success of such offering (such writing to state the basis of such opinion
and the approximate number of such securities which may be included in such
offering without such effect), then the amount of securities to be offered for
the accounts of holders of Registrable Securities shall be reduced pro rata (in
accordance with the number of Registrable Securities requested to be included in
such registration) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter; provided that if securities are being offered for the
account of other Persons as well as the Company, the amount of such securities
shall be reduced prior to any reduction of the amount of securities to be
offered for the accounts of holders of Registrable Securities. Any holder of
Registrable Securities to be included in such registration may withdraw its
request to have its securities so included by notice to the Company promptly
after receipt of a copy of a notice from the managing underwriter pursuant to
this Section 4(a).
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2, whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for its
own account, and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 2 and subject to the provisions of this
Section 4(b), use its best efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters; provided that if the managing
underwriter of such underwritten offering shall advise the Company in writing
(with a copy to the holders of Registrable Securities requesting such
registration) that, in its opinion the total number of shares which the Company,
the holders of Registrable Securities and any other holders of securities of the
Company propose to be included in such registration is sufficiently large to
materially and adversely affect the success of such offering (such writing to
state the basis of such opinion and the approximate number of such securities
which may be included in such offering without such effect), then after
inclusion of the number of securities to be sold by the Company for its own
account in such registration, the amount of securities to be offered for the
accounts of holders of Registrable Securities shall be reduced pro rata (in
accordance with the number of Registrable Securities requested to be included in
such registration) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter; provided that if securities are being offered for the
account of other Persons as well as the Company,
9
<PAGE>
such reduction shall not represent a greater fraction of the number of
securities intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other Persons over the amount of
securities they intended to offer. Any holder of Registrable Securities to be
included in such registration may withdraw its request to have its securities so
included by notice to the Company promptly after receipt of a copy of a notice
from the managing underwriter pursuant to this Section 4(b). The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities. Except as set forth in this Agreement, no holder of
Registrable Securities shall be required (i) to make any representations or
warranties to or agreements with the Company or the underwriters other than
customary representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law or (ii) to indemnify
(or contribute with respect to an indemnifiable claim) the Company or any
underwriters of the Registrable Securities, except as set forth in Section 8.
(c) Holdback Agreements. Each holder of Registrable Securities agrees,
if so required by the managing underwriter, not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in such registration statement, during the seven (7) days prior to the
date on which any underwritten registration has become effective and the ninety
(90) days thereafter, except as part of such underwritten registration or to the
extent that such holder is prohibited by applicable law from agreeing to
withhold Registrable Securities from sale or is acting in its capacity as a
fiduciary or an investment adviser. The Company agrees not to effect any public
sale or distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven (7) days
prior to and the ninety (90) days after any underwritten registration pursuant
to Section 1 or 2 has become effective, except as part of such underwritten
registration (other than on Form S-4 or Form S-8 or a successor form).
(d) Selection of Underwriters. If a requested registration pursuant to
Section 1 involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the Company, which selection shall be subject to
the approval of the Requisite Holders. If an incidental registration pursuant to
Section 2 involves one or more underwriters, the underwriter or underwriters
shall be selected by the Company.
5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities
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<PAGE>
under the Securities Act, the Company will give the holders of Registrable
Securities on whose behalf such Registrable Securities are to be so registered,
and their underwriters, if any, and their respective counsel the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
6. Rights of Requesting Holders. If any registration statement refers to
any Requesting Holder by name or otherwise as the holder of any securities of
the Company, such holder shall have the right to require (a) the insertion
therein of language, in form and substance reasonably satisfactory to such
holder, to the effect that, if true, the holding by such holder of such
securities does not necessarily make such holder a "controlling person" of the
Company within the meaning of the Securities Act or (b) in the event that such
reference to such holder by name or otherwise is not required by the Securities
Act or any rules and regulations promulgated thereunder, the deletion of the
reference to such holder.
7. Registration Expenses. The Company will, whether or not any
registration pursuant to this Agreement shall become effective, pay all
Registration Expenses incident to its performance under or compliance with this
Agreement promptly as such Registration Expenses are incurred.
8. Indemnification and Contribution.
(a) The Company will, and hereby does, indemnify and hold harmless, in
the case of any registration statement filed pursuant to Section 1 or 2, each
seller of any Registrable Securities covered by such registration statement and
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act, and their respective
directors, officers, partners, agents and Affiliates, against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or any such director, officer, partner, agent, Affiliate or
controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary
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<PAGE>
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller or underwriter and each such director, officer, partner,
agent, Affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged
/untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such seller or
underwriter, as the case may be, specifically stating that it is for use in the
preparation thereof; and provided, further, that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and such final prospectus was required to be
delivered to such Person. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, partner, agent, Affiliate or controlling person and shall
survive the transfer of such securities by such seller.
(b) As a condition to including any Registrable Securities in any
registration statement, the Company shall have received an undertaking
satisfactory to it from each prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 8(a)) the Company, each other prospective seller, and each
director of the Company, each officer of the Company and each other Person, if
any, who participates as an underwriter in the offering or sale of such
securities and each other Person who controls the Company or any such
underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus, contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such seller specifically stating that it is for use in the
preparation of such registration statement,
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<PAGE>
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
under this Section 8(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 8(a) or (b), such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the latter
of the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 8, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event a bona fide conflict of interest between the
indemnified and indemnifying parties exists, the indemnifying party hereunder
shall only be responsible for the payment of reasonable fees and expenses of a
single counsel for the indemnified parties hereunder. No indemnifying party
shall be liable for any settlement of any action or proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 8
shall for any reason be held by a court to be unavailable to an indemnified
party under Section 8(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid or
payable under Section 8(a) or (b), the indemnified party and the indemnifying
party under Section 8(a)
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or (b) shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating the same), (i) in such proportion as is appropriate to reflect the
relative fault of the Company and the prospective sellers of Registrable
Securities covered by the registration statement which resulted in such loss,
claim, damage or liability, or action or proceeding in respect thereof, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action or proceeding in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as shall
be appropriate to reflect the relative benefits received by the Company and such
prospective sellers from the offering of the securities covered by such
registration statement, provided, that for purposes of clause (i) or (ii), the
relative benefits received by the prospective sellers shall be deemed not to
exceed the amount of proceeds received by such prospective sellers and no holder
of Registrable Securities shall be required to contribute any amount in excess
of the amount such holder would have been required to pay to an indemnified
party if the indemnity under clause (a) of this Section 8 was available. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. As among sellers who
are guilty of such fraudulent misrepresentation, such sellers' obligations to
contribute as provided in this Section 8(d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Section 8 (with appropriate modifications) shall
be given by the Company and each seller of Registrable Securities with respect
to any required registration or other qualification of securities under any
federal or state law or regulation of any governmental authority other than the
Securities Act.
(f) An indemnifying party shall make payments of all amounts required to
be made pursuant to the foregoing provisions of this Section 8 to or for the
account of the indemnified party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due or payable; provided
that the indemnified party shall reimburse the indemnifying party for any
payments made with the stated purpose of satisfying the requirements of this
clause (f) which were not required to be made by this Section 8.
9. Registration Rights to Others. The Company hereby represents to the
holders of Registrable Securities that the rights granted herein do not conflict
with the rights, if any, granted to any other holder of securities of the
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Company. If the Company shall at any time provide to any holder of any
securities of the Company rights with respect to the registration of such
securities under the Securities Act, such rights shall not be in conflict with
any of the rights provided in this Agreement to the holders of Registrable
Securities. The Company shall provide to the holders of Registrable Securities
copies of any agreements which purport to grant rights with respect to the
registration of any of the Company's securities to any holder or prospective
holder thereof promptly upon executing the same.
10. Nominees for Beneficial Owners. For purposes of this Agreement, in
the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election, be
treated as the holder of such Registrable Securities for purposes of any request
or other action by any holder or holders of Registrable Securities pursuant to
this Agreement or any determination of any number or percentage of shares of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
11. Rule 144. So long as the Company shall be required to file reports
under the Exchange Act, the Company shall take all actions reasonably necessary
to enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the provisions of
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission,
including, without limitation, filing on a timely basis all reports required to
be filed pursuant to the Exchange Act. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
12. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Affiliate" means any Person controlling, controlled by or under common
control with the Person in question. As used herein, "control" means the
beneficial ownership of at least a majority of the equity interests of a Person
entitling the owner of such interests to direct the policies and operations of
such Person.
"Commission" means the Securities and Exchange Commission and any
successor federal agency having similar powers.
"Common Stock" means the Common Stock, par value $0.1 per share, of the
Company, together with any stock into which such Common Stock shall have
15
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been changed or any stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes (however designated) of the
Company the holders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.
"Company" shall have the meaning assigned such term in the introductory
paragraph of this Agreement and shall include any successor by merger or
otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holders" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Initiating Holders" means, as of any date of determination, any holder
or holders of Registrable Securities holding individually or in the aggregate
more than 25% of the shares of Registrable Securities then outstanding.
"Person" means an individual, a partnership, a limited liability
company, a joint venture, a corporation, a trust, an association, an
organization, a business, an unincorporated organization or a government or
political subdivision thereof or agency thereof or other entity of any kind.
"Registrable Securities" means any shares of Common Stock (i) issued
upon conversion of shares of Preferred Stock sold by the Company pursuant to the
Securities Purchase Agreement, (ii) issued or issuable upon exercise of the
Warrants, or (iii) issued or issuable with respect to any of the securities
referred to in clauses (i) or (ii) by way of a dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or antidilution protection or otherwise. As to any
particular Registrable Security, such security shall cease to be a Registrable
Security when (x) a registration statement with respect to the sale of such
security shall have become effective under the Securities Act and such security
shall have been disposed of in accordance with such registration statement, (y)
such security shall have been sold as permitted by Rule 144 (or any successor
provision) under the Securities Act or (z) such security, once issued, shall
have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Sections 1 and 2, including, without
limitation, all registration and filing fees, all fees of national securities
exchanges or the National Association of Securities Dealers, Inc., all fees and
expenses of complying with
16
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securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities, which shall not be paid
by the Company) and the reasonable fees and expenses of one counsel to the
selling holders of Registrable Securities (selected by selling holders of
Registrable Securities representing a majority of the Registrable Securities
covered by such registration); provided, however, that in the event the Company
shall, in accordance with Section 2(d), not register any securities with respect
to which it had given written notice of its intention to so register to holders
of Registrable Securities, all of the costs of the type (and subject to any
limitation to the extent) set forth in this definition and incurred by
Requesting Holders in connection with such registration shall be deemed
Registration Expenses.
"Requesting Holders" shall have the meaning assigned to such term in
Section 2 hereof.
"Requisite Holders" means, with respect to any registration of
Registrable Securities by the Company pursuant to this Agreement, any holder or
holders of a majority of the Registrable Securities requested to be registered.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall have the meaning assigned such
term in the recitals of this Agreement.
"Warrants" shall have the meaning assigned to such term in the
recitals of this Agreement.
13. Miscellaneous.
(a) Remedies. Each holder of Registrable Securities, in addition to the
rights provided herein and at law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by the Company of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
17
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(b) Adjustments Affecting Registrable Securities. The Company will not
take any action, or permit any change to occur, with respect to the Registrable
Securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to the terms of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of holders of a
majority of the Registrable Securities.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in accordance with
the provisions of this Section 13(d); and
(ii) if to the Company, at Arinco Computer Systems Inc., 1650
University Boulevard, N.E., Suite 5-100, Albuquerque, New Mexico 87102,
Attention: CEO; or at such other address, notice of which is given in
accordance with the provisions of this Section 13(d).
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; and on the
next business day if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and permitted assigns and, with respect to
the Holders, any subsequent holder of any Registrable Securities who agrees in
writing to assume the obligations of a holder of Registrable Securities
hereunder (a copy of which agreement shall be delivered promptly to the
Company), subject to the provisions respecting the minimum numbers of
percentages of shares of Registrable Securities required in order to be entitled
to certain rights, or take certain actions, contained herein. This Agreement may
not be assigned by the Company without the prior written consent of the holders
of a majority of the Registrable Securities at the time such consent is
requested. The Purchasers (and not any other holder of Registrable Securities or
any other Person) shall be permitted, in connection with the transfer or
disposition of Registrable Securities, to impose conditions or constraints on
the ability
18
<PAGE>
of the transferee, as a holder of Registrable Securities, to request a
registration pursuant to Section 1 and shall provide the Company with copies of
such conditions or constraints and the identity of such transferees.
(f) Calculation of Percentage Interests in Registrable Securities. For
purposes of this Agreement, all references to a percentage of the Registrable
Securities shall be calculated based upon the number of shares of Registrable
Securities outstanding at the time such calculation is made, assuming, if
applicable, the exercise, conversion or exchange of the Company's securities
into Registrable Securities in accordance with the terms of such securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Certain Distributions. The Company shall not at any time make a
distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
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<PAGE>
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Registration Rights Agreement as of the date first above written.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ Cary S. Fitchey
-------------------
Name: Cary S. Fitchey
Title: President and Chief Executive Officer
PANGEA INTERNET ADVISORS LLC
By: /s/ Cary S. Fitchey
-------------------
Name: Cary S. Fitchey
Title: Managing Director
21
<PAGE>
PURCHASERS:
James M. Allwin
William Avery
Lance Bakrow
L.A. Bay Investments, LLC
Sun Valley Investments
VBM Equities, LLC
Harry Chandler
Davis Capital, LLC
SGII, LLC
Steve J. Gilbert
Turtle Holdings LLC
Grant Gregory
Grant Gregory Jr.
Wayne Huizenga
Walnut Associates I, LLC
Michael J. Levitt
William Lipner
JCK (US), Ltd.
Community Property LLC
Robert W. Matschullat
The Matschullat 1996 Children's Trust
Charles Moore
Robert A. Nielsen
Charles D. Peebler Jr.
22
<PAGE>
Robert P. Rittereiser
Clayton J. Rohrbach, III
The Rohrbach 1991 Children's Trust
Stanley Rumbough, Jr.
Pemaxrina Investors, LLC
Westmark Industries, LLC
Riva Capital, LLC
Steven J. Simmons
James L. Tullis
Linda A. Tullis
Sara D. Tullis
John L. Tullis
Elisabeth P. Tullis
TNRT, LLC
Robert C. Wright
Arthur Bellows
B&B Investments
Kenneth Fadner
Trevor Traina
John Todd Buchanan Traina
Culmen Technology Partners, L.P.
Sterling Payot Capital LP
Morton H. Meyerson
Metropolis Venture Partners
Wamtech Investments Inc.
L.I.I., LLC
New River Capital Partners
North Atlantic Smaller Companies
Investment Trust Plc.
American Opportunity Trust
23
<PAGE>
Trident North Atlantic Fund
Trident Holdings Limited
Oryx International Growth Fund
Trident Private Equity
JO Hambro Capital Management Ltd A/c B
JO Hambro Capital Management Ltd A/c C
JO Hambro Capital Management Ltd A/c A
Antares Investment Partners
Arthur A. Bushkin
Arthur Dodge
PW-Pangea LLC
Richard Fields
Charles F. Fitchey
Ken Gestal
H. Leland Getz
Gillian Gamsy
Terry Glen
Fred Green
Craig Herron
Steven Kotler
Robert Warren Lautz
Craigh Leonard
John Maxwell
Financial Performance Corporation
24
<PAGE>
Daniel Nissan
Fred Rosen
Jack Schneider
Kirk Shelton
Stanley S. Shuman
Dan Schley
Dolphin II LLC
Ed Sim
Edwin P. Carlson
Robert T. Tucker
The Roberts Family Revocable Trust U/D/T dated
December 15, 1997, David M. Roberts and Gail
M. Simpson, Trustees
IPO Partners
Roberts' Children Irrevocable Trust U/D/T dated
October 21, 1996, Stephen H. Roberts, Trustee
Jonathan Avery
Byron Avery
Tom Avery
Laura M. Forbes Carlin
Scott Carlin
Alison L. Forbes
Elise Ebert
Frank Gallagi
Kathleen Shepphird
John Sculley
Anthony L. Bucci
Stephen Roberts
Matthew Ohrnstein
Caran Establishment
Lawrence Utzig
Deloris Utzig
Mario Gobbo
FG II Seed Fund LLC
25
<PAGE>
Lixuan An
Wiley Buchanan, III Trust
Alis & Co.
Cary S. Fitchey
Walter A. Forbes
St. Croix Investments, LLC
Edmund Hajim
By: PANGEA INTERNET ADVISORS LLC
Attorney-in-Fact
By: /s/ Cary S. Fitchey
-----------------------
Name: Cary S. Fitchey
Title: Managing Director
26
Exhibit 10.3
BUSINESS OPPORTUNITY ALLOCATION
AND MISCELLANEOUS SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement"), made as of the 28th day of March,
2000, by and among Arinco Computer Systems Inc., a New Mexico corporation (the
"Company"), and Pangea Internet Advisors LLC, a Delaware limited liability
company ("Pangea").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Pangea desire to set forth their understanding
with respect to certain investment opportunities identified by Pangea and FG II
Management Company, LLC, a Delaware limited liability company ("FG II"). Pangea,
FG II and/or their affiliates are collectively referred to herein as "Pangea
Affiliates".
WHEREAS, the Company and Pangea desire to set forth their understanding
with respect to the reimbursement by the Company of certain amounts that may be
incurred, paid or payable by Pangea with respect to corporate headquarters
expenses.
WHEREAS, it is a condition to the closing of that certain Securities
Purchase Agreement by and among the Company, Pangea and the investors who are
parties thereto (the "Investors"), dated as of March 9, 2000 (the "Securities
Purchase Agreement"), that the parties enter into this Agreement. The term
"Pangea Affiliates" shall not include the Investors solely as a result of their
participation in the investment under the Securities Purchase Agreement and the
other transactions contemplated thereby.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Investments in Target Businesses.
(a) Referral of Deals. Pangea will refer to the Company all
opportunities for the Company to acquire interests in business enterprises that
are or propose to be engaged in businesses relating primarily to the internet,
e-commerce and related technologies ("Target Businesses") that any Pangea
Affiliate may investigate or otherwise pursue for its own account or for funds
with which they are affiliated or other clients where either (i) the minimum
amount required to be allocated to the Company pursuant to Section 1(b) would be
$1,000,000 or more or (ii) where 50% of the amount of such opportunity could be
acquired for no less than $500,000 and such an acquisition would give the
Company "control" of the Target Business for purposes of Rule 3a-1(a)(4) under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
or any successor rule thereto ("Rule 3a-1(a)(4)"). The referral requirements of
this Section 1(a) (the "Referral Requirements") shall not apply to investments
in publicly traded securities not offered in a private placement. Any
opportunity for the Company to acquire interests in Target Businesses that any
Pangea Affiliate may so investigate and that do not fall within the Referral
Requirements is referred to as an "Other Opportunity". The Company
<PAGE>
hereby renounces any interest it may have in any Other Opportunity and renounces
any expectancy that any Other Opportunity be offered to it, such that, as a
result of such renunciation, any Pangea Affiliate or any officer, director,
member or affiliate of any Pangea Affiliate who is also an officer or director
of the Company (A) shall have no duty to communicate or present such Other
Opportunity to the Company, shall have the right to hold such Other Opportunity
for its or its affiliates' (and the respective officers, directors, agents,
shareholders, members, partners, or subsidiaries of such affiliates) own
account, or to recommend, assign or transfer such Other Opportunity to persons
other than the Company and (B) shall not breach any duty it may have to the
Company by reason of the fact that such person pursues or acquires such Other
Opportunity for itself, directs, assigns or transfers such Other Opportunity to
another person, or does not communicate information regarding such Other
Opportunity to the Company.
(b) Allocation of Investment Opportunities. If an opportunity to
acquire a Target Business (or an interest therein) is presented to a Pangea
Affiliate which is within the Referral Requirements, Pangea will refer such
opportunity to the Company, and if one or more Pangea Affiliates or clients or
affiliates of such Pangea Affiliates (collectively, the "Pangea Group") wishes
to participate in such acquisition, Pangea shall allocate such opportunity
between the Company and the Pangea Group on an equitable basis which recognizes
the objective of the Company to avoid being classified as an investment company;
provided, however, that not less than 50% of the value of the opportunity
available to the Pangea Group and the Company shall be offered to the Company.
Any portion of such opportunity allocated to the Pangea Group shall be deemed to
be an "Other Opportunity" for purposes of Section 1(a). Pangea shall disclose in
advance all such proposed allocations to the Company and, to the extent
necessary for the Company to avoid classification as an investment company, use
good faith efforts to cause the members of the Pangea Group to whom any
allocation has been made to assign their voting rights to the Company. For
purposes of this Section 3(b), the term "Pangea Group" shall not include persons
who were solicited by any member of the Pangea Group to invest in a Target
Business but who are not clients or affiliates of any Pangea Affiliate.
(c) Failure to Approve Acquisitions. If Pangea refers to the Company an
opportunity to acquire a Target Business (or an interest therein) which is
within the Referral Requirements and the Company does not make such acquisition
(whether based on the merits of the opportunity, a disagreement with the portion
of the opportunity allocated to the Company or other factors), then Pangea and
the Pangea Group shall be free to pursue such Target Business for their own
account and such opportunity shall be deemed to be an "Other Opportunity" for
purposes of Section 1(a).
2. Office Services. Subject to the terms and conditions hereof, during
the term of this Agreement, Pangea will provide the Company with office space in
Pangea's offices in Greenwich, Connecticut for use by the Company's staff.
Pangea will also provide the Company's staff with access to secretarial support
services and to such communications, computer, photocopying and similar office
equipment as is located at such offices from time to time and will provide such
staff with reasonable office supplies, postage, overnight express courier and
similar services. (The foregoing provision of space, secretarial support, access
to office equipment and provision of office supplies is referred to herein as
"Office Services".) At least monthly the Company shall reimburse Pangea for the
cost of such Office Services, such
2
<PAGE>
reimbursement to be in such amounts as the Company and Pangea may reasonably
agree upon from time to time based upon an estimate of Pangea's actual costs for
providing such Office Services.
3. Legal Expenses. The Company shall also reimburse Pangea for all
reasonable legal fees and expenses incurred by Pangea in connection with the
transactions contemplated by the Securities Purchase Agreement, including,
without limitation, those relating to the preparation of this Agreement, the
Securities Purchase Agreement, the Transaction Documents (as defined in the
Securities Purchase Agreement), and the private placement memorandum relating to
the Securities Purchase Agreement.
4. Term. Section 1 of this Agreement shall remain in full force and
effect for so long as any Pangea Affiliate is serving as a director or as a
senior executive officer of the Company. Either party may terminate Section 2 of
this Agreement upon 90 days prior written notice to the other party. The
provisions of Sections 3 and 5 hereof shall survive indefinitely.
5. Liability; Indemnification.
(a) Liability. None of Pangea, the Pangea Affiliates, or any of their
respective principals, shareholders, members, directors, officers, employees or
agents (all of the foregoing, except for Pangea are collectively, the "Pangea
Parties") shall be liable to the Company or any of its shareholders, directors,
officers, employees or agents for any losses, damages, costs or expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
(collectively, "Losses"), in any way arising out of or incurred in connection
with the performance by Pangea or the Pangea Parties of any obligation herein
including, but not limited to, any claim arising out of a referral made pursuant
to Section 1 or the pursuit by any Pangea Party of any Other Opportunity, except
that Pangea may be liable to the Company to the extent that any such Losses are
directly caused by the gross negligence or willful misconduct of Pangea or any
of the Pangea Parties in the performance of their duties hereunder during the
term of this Agreement.
(b) Indemnification. The Company shall indemnify in the manner and to
the fullest extent permitted by applicable law and the bylaws of the Company,
each Pangea Party in the event that the Pangea Party (or his or her estate, as
the case may be), was or is a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding, whether or not
by or in the right of the Company, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the performance or alleged lack of
performance of any obligation in Sections 1 or 2, against Losses actually and
reasonably incurred by such person in connection with such action, suit or
proceeding (including, without limitation, in connection with the defense or
settlement of such action, suit or proceeding). To the extent and in the manner
provided by applicable law, any expenses (including attorneys' fees) shall be
paid by the Company in advance of the final disposition of such action, suit or
proceedings, even if the Pangea Party is alleged to have not met any applicable
standard of conduct or is alleged to have committed conduct so that, if true,
the Pangea Party (or the Pangea Party's estate) would not be entitled to
indemnification under this Section 5, upon receipt of an undertaking, which need
not be secured, by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in this Section
3
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5. The Company's obligations under this Section 5 shall survive any termination
of this Agreement.
(c) Nonexclusive Remedy. The indemnification remedy contained in this
Agreement shall not be deemed to be the exclusive remedy of the Indemnified
Party in connection with or arising from any failure by the Company to perform
any of its covenants or obligations in this Agreement, nor shall such
indemnification remedy be deemed to prejudice or to operate as a waiver of any
remedy to which the Indemnified Party may be entitled at law or equity.
6. Miscellaneous.
(a) Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be deemed to have been delivered, given and received for all purposes (i)
if delivered personally, with a copy transmitted by telephonic facsimile, to the
party or to an officer of the party to whom the same is directed or (ii) whether
or not the same is actually received, if sent by registered or certified mail,
postage and charges prepaid, with a copy transmitted by telephonic facsimile
addressed as follows:
If to the Company:
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, CT 06830
Telephone: 203-661-4431
Facsimile: 203-661-1331
Attention: Chief Executive Officer
With a copy to:
Paul Weiss Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Telephone: 212-373-3000
Facsimile: 212-757-3990
Attention: James Dubin, Esq.
4
<PAGE>
and
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10021-4873
Telephone: 212-207-1200
Facsimile: 212-750-9022
Attention: Craigh Leonard, Esq.
If to Pangea:
Pangea Internet Advisors LLC
20 Dayton Avenue
Greenwich, CT 06830
Telephone: 203-661-4431
Facsimile: 203-661-1331
Attention: Cary S. Fitchey
Any such notice shall be deemed to be delivered, given and received as of the
date so delivered, if delivered personally, or as of the date on which the same
was deposited in a regularly maintained receptacle for the deposit of United
States mail, addressed and sent as aforesaid.
(b) Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
(c) Counterpart Execution. This Agreement may be executed in any number
of counterparts with the same effect as if all of the parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
(d) Amendments. This Agreement may only be amended upon the written
consent of all of the parties hereto.
(e) Entire Understanding; No Third Party Beneficiaries. This Agreement
and the Transaction Documents represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and supersedes any
and all other oral or written agreements heretofore made. Except as provided in
Section 1 with respect to the Pangea Group, and Section 5 with respect to the
Pangea Parties, nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
(f) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties hereto and any purported assignment in violation of this Section 6(f)
shall be void. Subject to the preceding sentence, this
5
<PAGE>
Assignment shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, legal representatives, successors
and permitted assigns.
(g) Specific Performance. The parties hereto agree that their
respective rights and obligations under this Agreement shall be enforceable in a
court of equity by decree of specific performance and that appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and nonexclusive and shall be in addition
to any other remedies which any party hereto may have under this Agreement or
otherwise.
(h) No Partnership Relationship. Nothing contained herein shall be
construed or deemed to create any partnership relationship between the Company,
on the one hand, and Pangea or any of its Affiliates, on the other hand.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ Cary S. Fitchey
-----------------------
Name: Cary S. Fitchey
Title: President and Chief Executive Officer
PANGEA INTERNET ADVISORS LLC
By: /s/ John W. Gilden
------------------
Name: John W. Gilden
Title: Manager
6
Exhibit 10.4
ARINCO COMPUTER SYSTEMS INC.
20 Dayton Avenue
Greenwich, CT 06830
March 28, 2000
Cary S. Fitchey
20 Dayton Avenue
Greenwich, CT 06830
Dear Mr. Fitchey:
I am pleased to submit to you the following offer of employment with
Arinco Computer Systems Inc., a New Mexico corporation (the "Company").
1. Title; Duties. At the commencement of your employment, the Company
shall employ you and you shall accept employment as President and Chief
Executive Officer of the Company and you shall have such authority and perform
such duties of an executive and managerial nature as are consistent with such
title and status. You shall devote substantial business time, skill and efforts
to the performance of your duties to the Company. However, the Company is aware
that you are now engaged, and from time to time hereafter may become engaged, in
other businesses, ventures and opportunities and that you intend to devote a
substantial amount of time to such businesses, ventures and opportunities. The
Company expressly consents to such activities and agrees that such activities
shall not constitute a breach of this Letter Agreement.
2. Commencement; At-Will Employment. Your employment shall commence,
and this Letter Agreement shall become effective, on the Closing Date (as
defined in the Securities Purchase Agreement by and between the Company and
Pangea Internet Advisors LLC, a Delaware limited liability company ("Pangea"),
dated as of March 9, 2000 (the "Purchase Agreement")). You shall be an at-will
employee and, accordingly, your employment by the Company may be terminated by
the Company or by you at any time for any reason or for no reason.
3. Salary. During your employment, you will be paid a base salary at an
annual rate of $150,000, payable in bi-weekly installments, subject to
adjustment at the discretion of the Board of Directors of the Company. During
your employment, you shall also be entitled to payment of or reimbursement for
all reasonable and properly documented out-of-pocket expenses incurred or paid
by you in connection with the performance of your duties hereunder and in
accordance with the general expense reimbursement policy of the Company then in
effect.
<PAGE>
4. Benefits. During your employment, you shall be entitled to
participate in the employee benefit plans and programs, if any, which are
maintained by the Company for similarly situated employees of the Company.
5. Business Opportunity Allocation. You acknowledge that you have read
the Business Opportunity Allocation and Miscellaneous Services Agreement by and
between the Company and Pangea dated as of the Closing Date (the "BOA
Agreement"). During your employment, and for so long as you are a Pangea
Affiliate (as defined in the BOA Agreement), you shall observe all requirements
and obligations imposed on the Pangea Affiliates pursuant to the BOA Agreement,
including the referral, through Pangea, of investment opportunities meeting the
Referral Requirements (as defined in the BOA Agreement) to the Company in
accordance with Section 1 of the BOA Agreement. The Company hereby renounces any
interest it may have in any Other Opportunity (as defined in the BOA Agreement)
and renounces any expectancy that any Other Opportunity be offered to it, such
that, as a result of such renunciation, you (A) shall have no duty to
communicate or present such Other Opportunity to the Company, shall have the
right to hold such Other Opportunity for your or your affiliates' (and the
respective officers, directors, agents, shareholders, members, partners, or
subsidiaries of such affiliates) own account, or to recommend, assign or
transfer such Other Opportunity to persons other than the Company and (B) shall
not breach any duty you may have to the Company by reason of the fact that you
pursue or acquire such Other Opportunity for yourself, direct, assign or
transfer such Other Opportunity to another person, or do not communicate
information regarding such Other Opportunity to the Company.
6. Indemnification. The Company shall indemnify, in the manner and to
the fullest extent permitted by applicable law and the by-laws of the Company,
you (or your estate) in the event you (or your estate) were or are a party to,
or are threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the Company,
and whether civil, criminal, administrative, investigative or otherwise, by
reason of the fact that you are or were a director, officer, employee, or agent
of the Company, or are or were serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees) ("Expenses"), judgments, fines and amounts paid in settlement
actually and reasonably incurred by you (or your estate) in connection with such
action, suit or proceeding (including, without limitation, in connection with
the defense or settlement of such action, suit or proceeding). To the extent and
in the manner provided by applicable law, any such Expenses shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding,
even if you are alleged to have not met the applicable standard of conduct
required under this Section 6 or are alleged to have committed conduct such
that, if true, you (or your estate) would not be entitled to indemnification
under this Section 6, upon receipt of an undertaking, which need not be secured,
by or on behalf of you (or your estate) to repay such amount if it shall
ultimately be determined that you (or your estate) are not entitled to be
indemnified by the Company as authorized in this Section. The Company's
obligations under this Section 6 shall survive any termination of this Letter
Agreement or any termination of your employment.
2
<PAGE>
7. Insurance. During your employment, the Company shall maintain
liability and director's and officer's insurance provided by a reputable insurer
in amounts appropriate for a public company engaged in business (in nature and
size) like the Company's business on your behalf.
8. Miscellaneous.
(a) Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Letter Agreement shall be in
writing and shall be deemed to have been delivered, given and received for all
purposes (i) if delivered personally, with a copy transmitted by telephonic
facsimile, to the party or to an officer of the party to whom the same is
directed or (ii) whether or not the same is actually received, if sent by
registered or certified mail, postage and charges prepaid, with a copy
transmitted by telephonic facsimile addressed as follows:
If to the Company:
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, CT 06830
Telephone: 203-661-4431
Facsimile: 203-661-1331
Attention: Chief Executive Officer
If to Employee:
Cary S. Fitchey
20 Dayton Avenue
Greenwich, CT 06830
Telephone: 203-661-4431
Facsimile: 203-661-1331
Any such notice shall be deemed to be delivered, given and received as of the
date so delivered, if delivered personally, or as of the date on which the same
was deposited in a regularly maintained receptacle for the deposit of United
States mail, addressed and sent as aforesaid.
(b) Governing Law. This Letter Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
(c) Counterpart Execution. This Letter Agreement may be executed in any
number of counterparts with the same effect as if all of the parties hereto had
signed the same document. All counterparts shall be construed together and shall
constitute one agreement.
3
<PAGE>
(d) Amendments. This Letter Agreement may only be amended upon the
written consent of all of the parties hereto.
(e) Entire Understanding; No Third Party Beneficiaries. This Agreement
and the BOA Agreement represent the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made. Except as provided in
Section 6, nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(f) Successors and Assigns. The Company may assign this Letter
Agreement to a successor, affiliate or subsidiary, provided that no such
assignment shall relieve the Company of its obligation hereunder. This Letter
Agreement is a personal contract and your rights and interests hereunder may not
be sold, transferred, assigned, pledged, encumbered, or hypothecated by you,
except as otherwise expressly permitted by the provisions of this Letter
Agreement. Nothing in this Section 8(f) shall preclude (i) you from designating
a beneficiary to receive any benefit payable hereunder upon your death, or (ii)
the executors, administrators, or other legal representatives of yours or your
estate from assigning any rights hereunder to distributees, legatees,
beneficiaries, testamentary trustees or other legal heirs of yours. This Letter
Agreement shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
(g) Severability. If any provision of this Letter Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Letter Agreement or the
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid and unenforceable, shall not be
affected thereby, and each other provision hereof shall continue to be valid and
shall be enforceable to the fullest extent permitted by law.
(h) Headings. All descriptive headings of sections and paragraphs in
this Letter Agreement are intended solely for convenience, and no provision of
this Letter Agreement is to be construed by reference to the heading of any
section or paragraph.
(i) Withholdings. All payments to you under this Letter Agreement shall
be reduced by all applicable tax withholding required by federal, state or local
law.
(j) Termination of Agreement. This Letter Agreement shall terminate and
have no further force and effect if the Purchase Agreement is terminated.
4
<PAGE>
If the foregoing is acceptable, please indicate your agreement by
signing in the space designated below.
Sincerely,
ARINCO COMPUTER SYSTEMS INC.
By: /s/ William P. O'Donnell
------------------------
Name: William P. O'Donnell
Title: Managing Director and Secretary
AGREED AND ACCEPTED BY:
/s/ Cary S. Fitchey
- -------------------
Name: Cary S. Fitchey
5
<PAGE>
Schedule A
----------
The agreements which have not been included in this Exhibit are: the
Employment Agreements by and between Arinco Corporate Systems Inc. and each of
William Avery, David M. Roberts, William P. O'Donnell and Frederick G. Noell.
The only differences between those agreements and this agreement are (a) the
party thereto, (b) the individual's title in Section 1 and (c) the individual's
salary in Section 3, which are as follows:
Title Salary
----- ------
William Avery Managing Director $150,000
David M. Roberts Managing Director $100,000
William P. O'Donnell Managing Director $ 75,000
Frederick G. Noell Managing Director $ 75,000
Exhibit 10.5
NEITHER THIS WARRANT NOR ANY SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS.
WARRANT NO. 2
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE,
OF
ARINCO COMPUTER SYSTEMS INC.
THIS IS TO CERTIFY THAT Cary S. Fitchey, or his registered assigns, is
the owner of 8,043,750 Warrants (as defined below), each of which entitles the
registered holder thereof to purchase from ARINCO COMPUTER SYSTEMS INC., a New
Mexico corporation (the "Company"), one fully paid, duly authorized and
non-assessable share of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at any time prior to 5:00 p.m., New York City time, on
March 28, 2005, at the following exercise prices per share (as adjusted, the
"Exercise Prices"): 1,608,750 Warrants will have an exercise price of $.25 per
share, 2,413,125 Warrants will have an exercise price of $.50 per share,
2,413,125 Warrants will have an exercise price of $.75 per share and 1,608,750
Warrants will have an exercise price of $1.00 per share.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable") and the Exercise Price is subject to adjustment
from time to time pursuant to the provisions of Section 2 of this Warrant
Certificate. The Warrants evidenced by this Certificate are part of a series of
warrants to purchase initially up to 8,043,750 shares of Common Stock (the
"Warrants") issued pursuant to a
<PAGE>
Securities Purchase Agreement (the "Securities Purchase Agreement"), dated as of
March 9, 2000, by and among the Company and Pangea Internet Advisors LLC
("Pangea").
Capitalized terms used herein but not otherwise defined have the
meanings given them in Section 11.
Section 1. Exercise of Warrant. Subject to the last paragraph of this
Section 1, the Warrants evidenced hereby may be exercised, in whole or in part,
by the registered holder hereof at any time on or prior to the Expiration Date,
upon delivery to the Company at its principal executive office in the United
States of America, of (a) this Warrant Certificate, (b) a written notice stating
that such holder elects to exercise all or a specified number of the Warrants
(and, if a specified number, the Exercise Price of such Warrants) evidenced
hereby in accordance with the provisions of this Section 1 and specifying the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued and (c) payment of the Exercise Price for
the shares of Common Stock issuable upon exercise of such Warrants
(collectively, the "Warrant Exercise Documentation"). Such payment shall be made
(A) in cash or by certified or official bank check payable to the order of the
Company or by wire transfer of funds to an account designated by the Company for
such purpose or (B) by a Cashless Exercise (defined below). In connection with a
Cashless Exercise, the number of Warrants being exercised shall be canceled in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (x) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price as of the
date of exercise were being made in cash and (y) the Cashless Exercise Ratio. An
exercise of Warrants in accordance with clause (B) of the immediately preceding
sentence is herein referred to as a "Cashless Exercise." All provisions of this
Warrant Certificate shall be applicable with respect to an exercise pursuant to
a Cashless Exercise for less than the full number of Warrants represented
hereby.
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (i) certificates representing the number of validly
issued, fully paid and non-assessable shares of Common Stock specified in the
Warrant Exercise Documentation, (ii) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (iii) if less than the full number of
Warrants evidenced hereby are then being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the date
of delivery of the Warrant Exercise Documentation so that the Person entitled to
receive shares of Common Stock upon such exercise shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
2
<PAGE>
such time. No such surrender shall be effective to constitute the Person
entitled to receive such shares as the record holder thereof while the transfer
books of the Company for the Common Stock are closed for any purpose (but not
for any period in excess of five days); but any such surrender of this Warrant
Certificate for exercise during any period while such books are so closed shall
become effective for exercise immediately upon the reopening of such books, as
if the exercise had been made on the date this Warrant Certificate was
surrendered and for the Number Issuable of Common Stock specified in the Warrant
Exercise Documentation and at the Exercise Price in effect at the date of such
surrender.
The Company shall pay all expenses in connection with, and all taxes and
other governmental charges (other than income taxes of the holder) that may be
imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Current Market Price
per share of Common Stock on the Business Day which next precedes the date of
exercise. If more than one such Warrant shall be exercised by the holder thereof
at the same time, the number of full shares of Common Stock issuable on such
exercise shall be computed on the basis of the total number of Warrants so
exercised.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall be subject
to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make any other distribution on the
outstanding shares of Common Stock in capital stock (which, for
purposes of this Section 2 shall include, without limitation,
any options, warrants or other rights to acquire capital stock)
of the Company;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares;
3
<PAGE>
(C) combine the outstanding shares of Common Stock into
a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
then, and in each such case, the Number Issuable and the Exercise Price
in effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so that the
holder of the Warrants evidenced hereby thereafter exercised shall be
entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or had been
entitled to receive upon or by reason of any of the events described
above at the same aggregate Exercise Price, had such Warrants been
exercised immediately prior to the happening of such event. An
adjustment made pursuant to this clause 2(a)(i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a
date immediately following the close of business on the record date for
the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of any such
subdivision, combination or reclassification, to the close of business
on the date upon which such corporate action becomes effective.
(ii) In case the Company shall at any time or from
time to time after the Issue Date distribute to all holders of shares
of its Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment is made under Section 2(a)(i) or
rights or warrants to subscribe for or purchase securities of the
Company (excluding those in respect of which adjustments in the Number
Issuable is made pursuant to Section 2(a)(i)), then, and in each such
case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such
Current Market Price per share of Common Stock less the then Fair
Market Value (as determined in good faith by the Board of Directors of
the Company, a certified resolution with respect to which shall be
mailed to the holder of the Warrants evidenced hereby) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such
4
<PAGE>
subscription rights or warrants applicable to one share of Common Stock
(but such denominator not to be less than one); and the Exercise Price
in effect immediately prior to such event shall be adjusted so that the
holder of the Warrants pays the same aggregate Exercise Price. Such
adjustment shall be made whenever any such distribution is made and
shall become effective retroactively to a date immediately following the
close of business on the record date for the determination of
stockholders entitled to receive such distribution.
(iii) In the event that any convertible or exchangeable
securities, options, warrants or other rights, the issuance of which
shall have given rise to an adjustment pursuant to this Section 2(a)
("Convertible Securities"), shall have expired or terminated without the
exercise thereof and/or if there shall have been an increase, with the
passage of time or otherwise, in the price payable upon the exercise or
conversion thereof or a decrease in the number of shares of Common Stock
issuable upon the exercise or conversion thereof, then the Number
Issuable hereunder and the Exercise Price shall be readjusted (but to no
greater extent then originally adjusted) on the basis of (A) eliminating
from the computation of the Number Issuable as of the time of the
issuance of the Convertible Securities any shares of Common Stock
corresponding to such Convertible Securities as shall have expired or
terminated, (B) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
Convertible Securities as having been issued for the consideration
actually received and receivable therefor and (C) treating any of such
Convertible Securities which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion price
as shall be in effect at such time.
(iv) Upon any increase or decrease in the Number Issuable and
Exercise Price, then, and in each such case, the Company promptly shall
deliver to each registered holder of Warrants at least five Business
Days prior to effecting any transaction which would result in such
increase or decrease a notice thereof, together with a certificate,
signed by the Chief Executive Officer or a Vice-President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Number Issuable and
Exercise Price then in effect following such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale of
Assets. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company
5
<PAGE>
with or into another Person (other than a consolidation or merger in which the
Company is the resulting or surviving person and which does not result in any
reclassification or change of outstanding Common Stock), or in case of any sale
or other disposition to another Person of all or substantially all of the assets
of the Company (any of the foregoing, a "Transaction"), the Company, or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of the Warrants evidenced hereby at least five Business Days prior
to effecting any of the foregoing Transactions a certificate that the holder of
each such Warrant then outstanding shall have the right thereafter to exercise
such Warrant into the kind and amount of shares of stock or other securities (of
the Company or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which such
Warrant could have been exercised immediately prior to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 2. If, in the
case of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities of a Person other than the successor or purchasing Persons and
other than the Company, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues stock,
securities, other property or cash to holders of Common Stock, then such
certificate also shall be executed by such Person, and such Person shall, in
such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 2(b) similarly shall
apply to successive Transactions.
Section 3. Notice of Certain Events. In case at any time or from time to
time the Company shall declare any dividend or any other distribution to the
holders of its Common Stock, or shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Number Issuable pursuant to Section 2(a) or there shall be any
capital reorganization or reclassification of the Common Stock of the Company or
consolidation or merger of the Company with or into another Person, or any sale
or other disposition of all or substantially all the assets of the Company, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of such cases the Company shall mail to
each holder of the Warrants evidenced hereby at such holder's address as it
appears on the transfer books of the Company, as promptly as practicable but in
any event at least 30 days prior to the applicable date hereinafter specified, a
notice stating (a) the date on which a record is to be taken for the purpose of
such dividend, distribution, 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,
6
<PAGE>
rights or warrants are to be determined, (b) the date on which such dividends,
distribution, rights or warrants are made or issued or (c) the date on which
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; provided that in the
case of any event to which Section 2(b) applies, the Company shall give at least
ten Business Days' prior written notice as aforesaid. Such notice also shall
specify the date as of which it is expected that the holders of Common Stock of
record shall be entitled to exchange their Common Stock for shares of stock or
other securities or property or cash deliverable upon such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees that all
shares of capital stock of the Company which may be issued upon the exercise of
the Warrants evidenced hereby will be duly authorized, validly issued and fully
paid and non-assessable. Beginning upon consummation of the Delaware
Reincorporation (as defined in the Securities Purchase Agreement), the Company
shall at all times reserve and keep available for issuance upon the exercise of
the Warrants, such number of its authorized but unissued shares of Common Stock
as will from time to time be sufficient to permit the exercise of all
outstanding Warrants, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the exercise of all outstanding Warrants.
Section 5. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered holder of this Warrant
Certificate, in its capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 6. Transfer of Warrants. Any transfer of the rights represented
by this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered holder hereof, at the principal
executive office of the Company in the United States of America, together with
an appropriate investment letter, if deemed reasonably necessary by counsel to
the Company to assure compliance with applicable securities laws. Thereupon, the
Company shall issue in the name or names specified by the registered holder
hereof and, in the event of a partial transfer, in the name of the registered
holder hereof, a new Warrant Certificate or Certificates evidencing the right to
purchase such number of shares of Common Stock as shall be equal to the number
of shares of Common Stock then purchasable hereunder.
Section 7. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive
7
<PAGE>
office of the Company in the United States of America, execute and deliver to
the registered holder hereof a new Warrant Certificate or Certificates in
denominations specified by such holder for an aggregate number of Warrants equal
to the number of Warrants evidenced by this Warrant Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate (which evidence, in the case of an institutional holder
of Warrants, shall consist of a letter from such holder to such effect) and, in
the case of loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Company (which indemnity, in the case of an institutional
holder of Warrants, shall consist of an unsecured letter of indemnity from such
holder), or, in the case of mutilation, upon surrender and cancellation thereof,
the Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants evidenced by
this Warrant Certificate will inure to the benefit of and be binding upon the
registered holder thereof and the Company and their respective successors and
permitted assigns. Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the registered holder thereof any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered holder. Nothing in this Warrant Certificate shall be
construed to give the registered holder hereof any rights as a holder of shares
of Common Stock until such time, if any, as the Warrants evidenced by this
Warrant Certificate are exercised in accordance with the provisions hereof.
Section 11. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Price per share of Common Stock on the date of
8
<PAGE>
exercise over the Exercise Price per share and the denominator of which is the
Current Market Price per share of Common Stock on the date of exercise.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 20 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed on a national securities exchange or quoted in
the over-counter market, the Market Price on such date.
"Exercise Price" shall have the meaning given it in the first paragraph
hereof.
"Expiration Date" shall have the meaning given it in the first paragraph
hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Issue Date" shall mean March 28, 2000.
"Market Price" shall mean, per share of Common Stock, on any
date specified herein: (a) the closing price per share of the Common Stock on
such date published in The Wall Street Journal or, if no such closing price on
such date is published in The Wall Street Journal, the average of the closing
bid and asked prices on such date, as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; or (b) if the Common Stock is not then listed or admitted
to trading on any national securities exchange but is designated as a national
market system security by the NASD, the last trading price of the Common Stock
on such date; or (c) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the reported closing bid and
asked price of the Common Stock, on such date as shown by NASDAQ and reported by
any member firm of The New York Stock Exchange, Inc. selected by the Company; or
(d) if none of (a), (b) or (c) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company based on an
opinion of a nationally recognized investment banking firm unaffiliated with
either the Company or the holders of the Warrants, chosen by the Company (who
shall bear the expense thereof) and acceptable to the holder of this Warrant
Certificate.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq Stock Market.
9
<PAGE>
"Number Issuable" shall have the meaning given it in the second
paragraph hereof.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Securities Purchase Agreement" shall have the meaning given it in the
second paragraph hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 12. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, or personal
delivery, (a) if to the holder of a Warrant, at such holder's last known address
appearing on the books of the Company; and (b) if to the Company, at its
principal executive office in the United States located at 20 Dayton Avenue,
Greenwich, CT 06830, Attention: CEO, or such other address as shall have been
furnished to the party given or making such notice, demand or other
communication. All such notices and communications shall be deemed to have been
duly given: when delivered, if delivered by hand or by overnight courier
service; and three Business Days after being deposited in the mail, postage
prepaid, if mailed.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ William P. O'Donnell
------------------------
Name: William P. O'Donnell
Title: Managing Director and
Secretary
11
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is _________________________
____________, and irrevocably appoints ________________ as agent to transfer
this security on the books of the Company. Such agent may substitute another to
act for such agent.
Signature:
--------------------------
Signature Guarantee:
--------------------------
Date: ___________________________
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Schedule A
----------
The Warrants which have not been included in this exhibit are: the
Warrants for William Avery and David M. Roberts. The material differences
between those Warrants and this Warrant are: (a) the party thereto, (b) the
number of Warrants in the first paragraph, (c) the exercise prices in the first
paragraph, and (d) the number of shares of Common Stock in paragraph 2, which
are as follows:
Number of
Number Shares of
of Common
Warrants Exercise Prices Stock
-------- --------------- -----
William Avery 7,115,625 1,423,125 Warrants will have an 7,115,625
exercise price of $.25 per share,
2,134,688 Warrants will have an
exercise price of $.50 per share,
2,134,687 Warrants will have an
exercise price of $.75 per share,
1,423,125 Warrants will have an
exercise price of $1.00 per share.
Roberts' Children 100,000 20,000 Warrants will have an 100,000
Irrevocable Trust exercise price of $.25 per share,
U/D/T dated 30,000 Warrants will have an
October 21, 1996, exercise price of $.50 per share,
Stephen H. 30,000 Warrants will have an
Roberts, Trustee exercise price of $.75 per share,
20,000 Warrants will have an
exercise price of $1.00 per share.
The Roberts Family 2,993,750 598,750 Warrants will have an 2,993,750
Revocable Trust exercise price of $.25 per share,
U/D/T dated 898,125 Warrants will have an
December 15, 1997, exercise price of $.50 per share,
David M. Roberts 898,125 Warrants will have an
and Gail M. Simpson, exercise price of $.75 per share,
Trustees 598,750 Warrants will have an
exercise price of $1.00 per share.
Turtle Holdings 10,312,500 2,062,500 Warrants will have an 10,312,500
LLC exercise price of $.25 per share,
3,093,750 Warrants will have an
exercise price of $.50 per share,
3,093,750 Warrants will have an
exercise price of $.75 per share,
2,062,500 Warrants will have an
exercise price of $1.00 per share.
13
Exhibit 99
Press Contact:
Owen Blicksilver: 212-419-4283
Arinco Computer Systems Closes $40 Million Preferred Investment
With Pangea Internet Advisors;
New Management Team Takes Over;
Internet Acquisitions Strategy Launched
Name to be Changed to Pangea Internet Inc.;
Relocation Effective
Albuquerque, NM, March 28, 2000 - Arinco Computer Systems (OTCBB: ARCU) said
today that it has closed its previously-announced agreement with Pangea Internet
Advisors LLC (PIA), a private investment firm, in which principals of PIA and
other investors identified by PIA have invested $40 million in newly-issued
preferred stock of Arinco, representing approximately 97% of the company on a
fully diluted basis.
Under its new owners, the company will seek to acquire controlling interests in
and actively manage Internet-related companies with a particular focus on
business-to-business opportunities as well as Internet technology,
infrastructure and support service-related companies. The investors, led by The
Culmen Group of Fort Worth, Texas, will own four million shares of preferred
stock that will initially be convertible into 160 million shares of common
stock. In addition, certain investors will receive five-year warrants to acquire
shares representing 20% of the company's fully diluted outstanding common stock
at varying exercise prices.
Michael Gleason has become the Chairman of the Company and Cary S. Fitchey has
been named President and Chief Executive Officer, replacing James Arias, who has
resigned. The Company intends to relocate its corporate headquarters to
Greenwich, Connecticut, effective immediately, and begin conducting business as
Pangea Internet, Inc., (Pangea) pending formal shareholder approval of the name
change and the Company's reincorporation in Delaware.
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2
Acquisition Parameters
Pangea intends to focus on gaining control of companies with valuations
typically below those targeted by the larger Internet related funds and public
entities. The acquisitions will primarily be controlling stakes in early or
developmental stage companies, but Pangea will also participate in second and
later stage funding opportunities. Some investments may be in public companies.
Pangea anticipates completing its first transaction late in the second quarter
of 2000.
Mr. Fitchey and other members joining the Company's senior management have
served as executives of FG II Management Company, LLC, a proven investment firm
in the Internet, e-commerce and related technologies space. FG II has
participated in more than 60 investments over the past seven years, including
various stage investments in Greenwich Technology Partners, Inc., a leading
network services company serving Fortune 1000 clients, and an early round
investment in LivePerson, Inc., a web-based customer service application
provider. Examples of FG II portfolio companies that have gone public or have
been sold to strategic investors include Wit Capital, Inc., WebTV Networks,
Inc., NFO Worldwide, Inc., Bluestone Software, Home Financial Network, Brooks
Fiber, and @Mobile.
"Pangea's initial capital is coming from some of the nation's most sophisticated
private investors, many of whom have significant investment track records in
Internet related technologies. Their referrals and strategic and operating
insights will add significant value to Pangea and will give us a strong edge,"
Mr. Gleason said.
Mr. Fitchey added, "Pangea will invest in an industry niche of companies that
focus on the New Economy, primarily B2B-related companies and infrastructure and
services companies that support the Internet."
New Board of Directors
Pangea has appointed a new four-member Board of Directors and expects to add
three other executives to the Board within the next 12 months. The new Board is
initially comprised of:
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<PAGE>
3
o James M. Dubin, Senior Partner and Co-Chair of the Corporate Department of
Paul, Weiss, Rifkind, Wharton & Garrison, an international law firm
headquartered in New York.
o Cary S. Fitchey, President and CEO, Pangea, and a Managing Partner of FG
II.
o Michael Gleason, Managing Partner of The Culmen Group, a private investment
firm with investments in media, oil and gas production, real estate, public
and private equity and fixed income securities. Mr. Gleason will serve as
Chairman.
o William E. Lipner, Chairman, CEO and President of NFO Worldwide, Inc.
(NYSE: NFO), the world's third largest custom marketing research business.
Pangea has also formed an Advisory Committee comprised of a diverse group of
people with extensive experience in Internet, e-commerce and related
technologies. Members of the Committee include:
o Daniel Nissan, CEO and Founder of StructuredWeb, a B2B company focusing on
Web development.
o Josh Huffard, Principal, Sterling Payot Investment Company, a San Francisco
based venture firm specializing in technology.
o Clayton J. Rorhbach, III, Managing Director and Senior Banker, Credit
Suisse First Boston.
o Matthew Ryan, President and CEO of the New York office of Ryan,
Drossman/Marc USA, a general advertising and marketing agency.
o Dan Schley, Chairman and CEO of Home Financial Network, an Internet
financial services company that specializes in the development of e-finance
websites.
o Trevor Traina, Founder and former President, CompareNet (sold to
Microsoft).
Pangea plans to expand the Advisory Committee with up to three additional
members within the next six months.
The Company is headquartered at 20 Dayton Ave., Greenwich, CT 06830, telephone:
(203) 661-6942.
# # #
<PAGE>
4
Statements in this press release using the words "intends", "believes",
"expects", "anticipates", and the like are forward-looking statements within the
meaning of the U.S. Securities Exchange Act of 1934, and as such are subject to
a number of risks and uncertainties that could significantly affect outcomes.
Actual outcomes, therefore, may differ materially from the expectations,
estimates, or assumptions expressed or implied by any such statements. Typical
risks and uncertainties may be reviewed in the Company's public filings on file
with the U.S. Securities and Exchange Commission (including its most recent Form
10-KSB).
