ARINCO COMPUTER SYSTEMS INC.
1650 UNIVERSITY BOULEVARD, N.E.
SUITE 5-100
ALBUQUERQUE, NEW MEXICO 87102
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND SEC RULE 14F-1
NOTICE OF CHANGE IN THE
MAJORITY OF THE BOARD OF DIRECTORS
MARCH 17, 2000
This Information Statement is being furnished to all holders of record at the
close of business on March 7, 2000 of the common stock, par value $.01 per share
("Common Stock") of Arinco Computer Systems Inc., a New Mexico corporation
("Arinco" or the "Company"), in accordance with the requirements of Section
14(f) of the Securities Exchange Act of 1934 (the "Exchange Act") and Securities
and Exchange Commission ("SEC") Rule 14f-1.
NO VOTE OR OTHER ACTION BY THE COMPANY'S SHAREHOLDERS IS REQUIRED IN RESPONSE TO
THIS INFORMATION STATEMENT. PROXIES ARE NOT BEING SOLICITED.
INTRODUCTION
The Company anticipates that on or about March 27, 2000 the transactions
contemplated by the Purchase Agreement discussed below will be completed and the
Board of Directors of the Company (the "Board") will be reconstituted. Effective
as of the closing of the transactions pursuant to the Purchase Agreement, the
current sole member of the Board of Directors of the Company, James A. Arias,
will elect James M. Dubin, Cary S. Fitchey, Michael Gleason and William E.
Lipner to the Board. Immediately thereafter, James A. Arias will resign as a
director of the Company. The closing will not occur, and the new directors will
not begin their term, until after the expiration of the ten day period beginning
on the later of the date of the filing of this Information Statement with the
SEC pursuant to Rule 14f-1 or the date of mailing of this Information Statement
to the Company's shareholders.
Because of the change in the composition of the Board and the transactions
contemplated by the Purchase Agreement described below, there will be a change
in control of the Company on the date the new directors referred to above take
office.
As of March 7, 2000, the Company had 4,959,000 shares of Common Stock issued and
outstanding, the Company's only class of voting securities that would be
entitled to vote for directors at a shareholders meeting if one were to be held,
each share being entitled to one vote.
Please read this Information Statement carefully. It describes the terms of the
Purchase Agreement and contains certain biographical and other information
concerning the executive officers and directors after the closing of the
transactions contemplated by the Purchase Agreement. Additional information
about the transactions contemplated by the Purchase Agreement and the business
of the Company is contained in the Company's Current Reports on Forms 8-K dated
March 7, 2000 and March 13, 2000, on file with the Securities and Exchange
Commission. All Company filings, and exhibits thereto, may be inspected without
charge at the public reference section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 or obtained on the SEC's world wide
website, www.sec.gov.
THE PURCHASE AGREEMENT
The Company intends to issue to Pangea Internet Advisors LLC, a Delaware limited
liability company ("Pangea" and, together with its Permitted assignees, the
"Purchasers"), an aggregate of 4,000,000 shares (the "Shares") of the Company's
newly-issued Series B Convertible Preferred Stock, par value $.10 per share (the
"Preferred Stock"), and warrants (the "Warrants") to purchase 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 the issuance of the
Warrants, assuming (i) the issuance of all of the Shares and (ii) the exercise
of the Warrants.
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CHANGE IN CONTROL OF THE COMPANY
Giving effect to the transactions contemplated by the Purchase Agreement, the
Company's current shareholders will own, on a fully diluted basis, approximately
3%, and the Purchasers shall own approximately 97%, of the outstanding voting
securities of the Company. The current shareholders of the Company shall own an
aggregate of approximately 5,000,000 shares of Common Stock and the Purchasers
shall own Shares and Warrants which are convertible or exercisable into an
aggregate of approximately 200,000,000 shares of Common Stock.
EXECUTIVE COMPENSATION
The summary compensation table is omitted because no compensation for services
in all capacities to the Company was awarded, earned by or paid to the sole
officer of the Company for the fiscal years ended December 31, 1999, 1998 and
1997.
The sole director of the Company has not received any remuneration from the
Company as such. Directors do not currently receive fees or other remuneration
from the Company.
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF MANAGEMENT
The following table sets forth certain information as of March 7, 2000 regarding
(i) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (ii) each current director, nominee
and executive officer of the Company and (iii) all current officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME & ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------------------- ---------------------------------- --------------------- ------------------
<S> <C> <C> <C>
Common Stock James A. Arias
1650 University Blvd., N.E.
Suite 5-100
Albuquerque, NM 87102 100,000 - Direct 2.0%
Common Stock Realco, Inc. (1)
1650 University Blvd., N.E.
Suite 5-100
Albuquerque, NM 87102 285,000 - Direct 5.8%
Common Stock Financial Services Group, Inc.
(2)
1650 University Blvd., N.E.
Suite 5-100
Albuquerque, NM 87102 100,000 - Direct 2.0%
Common Stock Steven P. Kadner
8401 Washington Pl., N.E.
Albuquerque, NM 87113 252,500 - Direct 5.1%
Common Stock Jerome F. Beckes
8401 Washington Pl., N.E.
Albuquerque, NM 87113 279,000 - Direct 5.6%
All directors and executive officers 485,000 - Direct 9.8%
as a group (1 person) (1) (2) and Indirect
</TABLE>
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- -----------------------------------
Note to Beneficial Ownership Table:
1. Mr. Arias is President of Realco, Inc. (a publicly traded company) and as
such, votes these shares.
2. Mr. Arias is President, Chief Executive Officer and Chairman of Board of
Financial Services Group, Inc. and as such, votes the shares.
Giving effect to the consummation of the transactions contemplated by the
Purchase Agreement, the current shareholders of the Company will collectively
own approximately 3%, and the Purchasers shall own approximately 97%, of the
outstanding voting securities of the Company, on a fully-diluted basis.
Concurrent with the closing of the transactions contemplated by the Purchase
Agreement, the incumbent director of the Company will be replaced by James M.
Dubin, Cary S. Fitchey, Michael Gleason and William E. Lipner and the sole
officer of the Company will resign and be replaced by Cary S. Fitchey, William
Avery, David M. Roberts, William P. O'Donnell and Frederick G. Noell.
DIRECTORS AND EXECUTIVE OFFICERS
The Company anticipates that on or about March 27, 2000, the transactions
contemplated by the Purchase Agreement discussed above will be completed and the
Board will be reconstituted. Effective as of the closing of the transactions
pursuant to the Purchase Agreement, the current member of the Board of Directors
of the Company, James A. Arias will elect James M. Dubin, Cary S. Fitchey,
Michael Gleason and William E. Lipner to the Board. Immediately thereafter,
James A. Arias will resign as a director of the Company. The following table
sets forth information regarding the Company's current executive officers and
directors and the proposed executive officers and directors of the Company after
the consummation of the transactions contemplated by the Purchase Agreement. If
any proposed director listed in the table below should become unavailable for
any reason, the directors of the Board will vote for any substitute nominee or
nominees who may be selected by Pangea prior to the closing of the transactions
contemplated by the Purchase Agreement.
CURRENT EXECUTIVE OFFICERS AND DIRECTORS
NAME AGE POSITION
- ---- --- --------
James A. Arias 61 Director, President, Chief
Executive Officer and Chief
Financial Officer
James A. Arias has served as the Company's Interim President, Chief Executive
Officer, Chief Financial Officer and sole Director since June 1995. From 1975 to
September of 1983, Mr. Arias was a partner of James Bentley & Associates, a
financial consulting and real estate syndication firm in Albuquerque, New
Mexico, which was merged into and became a division of Financial Services Group,
Inc., a New Mexico corporation, of which Mr. Arias is President and a
controlling shareholder. Mr. Arias devotes substantially all of his time to
service as the President, Chief Executive Officer and a Director of Realco,
Inc., a NASDAQ listed company based in New Mexico. Mr. Arias has served in this
capacity since 1983. Mr. Arias also serves as a Director and Audit Committee
Member of Miller and Schroeder Financial, Inc., a broker dealer headquartered in
Minneapolis, Minnesota, and a Director of Quatros, Inc., a New Mexico
electronics company. Both Miller and Schroeder and Quatros, Inc. are privately
held corporations.
PROPOSED EXECUTIVE OFFICERS AND DIRECTORS AFTER THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT
NAME AGE POSITION
- ---- --- --------
James M. Dubin 53 Director
Cary S. Fitchey 47 President, Chief Executive Officer
and Director
Michael Gleason 45 Chairman of the Board and Director
William E. Lipner 52 Director
Bill Avery 50 Managing Director
David M. Roberts 54 Managing Director
William P. O'Donnell 45 Managing Director
Frederick G. Noell 52 Managing Director
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James M. Dubin. Mr. Dubin is a Senior Partner and Co-Chair of the Corporate
Department of Paul, Weiss, Rifkind, Wharton & Garrison, an international law
firm headquartered in New York City. His practice focuses on the corporate
finance, mergers and acquisitions, international business and securities areas.
He has been a member of Paul, Weiss since 1982. Mr. Dubin serves on the boards
of directors of Carnival Corporation, the world's largest cruise line operator,
and Conair Corporation, an international designer, manufacturer and marketer of
branded consumer products.
Cary S. Fitchey. Mr. Fitchey is a Managing Partner of FG II Management Company,
LLC, a private investment firm ("FG II"), and is based in Los Angeles. From 1993
to 1998, Mr. Fitchey was a partner with Dartford Partnership ("Dartford"), which
was formed to purchase and actively manage non-core "orphan" branded food and
beverage products. Dartford's primary portfolio included eight brands including
Duncan Hines, Mrs. Buttersworth, Log Cabin, Mrs. Pauls, and Van de Kamp's. The
company was taken public in June 1998. Mr. Fitchey is a member of various
boards, including eDiets.com.
Michael Gleason. Mr. Gleason is the Managing Partner of The Culmen Group. The
Culmen Group has investments in oil and gas production, real estate, public and
private equity and fixed income securities and media. Mr. Gleason also
represents Seven Network Australia in the United States. He serves as Vice
President of Seven Network (U.S.). In 1995, Mr. Gleason helped form the Asian
Corporate Finance Fund, a $62 million private equity fund to invest in
Southeastern Asian businesses. Subsequently, Mr. Gleason affiliated with Prime
Partners, the partnership's general partner. Prime Partners is also general
partner for the Prime Enterprises Fund, a new limited partnership with over $180
million in committed capital for investment in the same region. Prior to forming
The Culmen Group, Mr. Gleason spent five years in investment banking for Salomon
Brothers and PaineWebber in Dallas, Texas.
William E. Lipner. Mr. Lipner is Chairman, CEO and President of NFO Worldwide,
Inc., the world's third largest marketing information/market research company.
NFO specializes in marketing research for the consumer packaged goods,
pharmaceutical, healthcare, financial services, travel & leisure, and
information technology industries worldwide. Today NFO has revenue in excess of
$500 million, employs 13,000 full and part-time employees in more than 35
countries throughout North America, Europe and the Australasia and Middle East.
NFO specializes in helping clients develop superior products, build more
powerful brands as well as implement more effective marketing strategies. When
Mr. Lipner joined NFO, the company had less than $5 million in revenue. Mr.
Lipner is an active member of Young Presidents' Organization, and serves as a
member of the Board of Trustees for Eagle Hill School which specializes in
helping gifted children with learning disabilities to get the most out of life.
Mr. Lipner also serves on the Board of Crane Co., a manufacturer of engineered
industrial products.
Bill Avery. Mr. Avery is a Managing Partner of FG II, based in Greenwich. Prior
to working with FG II, Mr. Avery joined CUC International Inc. ("CUC") in 1982
and helped it grow from 40 employees to 12,000 employees. In 1997, CUC merged
with HFS Incorporated to form Cendant. Mr. Avery was Executive Vice President of
Sales and Marketing of CUC's largest division until 1994. From 1994 through
1998, Mr. Avery was Corporate Senior Vice President and President of the
International Division, based in England. With offices in 16 countries, over
1200 employees and responsibility for the formation and management of joint
ventures in Japan and Southeast Asia, Mr. Avery developed CUC's and Cendant's
membership and overseas Internet businesses through organic growth and
acquisition. He is a board member of Recollections, a photography publishing
company based in New York, and Net4Music, an Internet music portal.
David M. Roberts. Mr. Roberts is a Partner of FG II and Executive Chairman of
IPO.com. Mr. Roberts, who resides in San Francisco, has been responsible for
developing strategy, raising capital, recruiting senior management and
organizing the infrastructure of IPO.com, which is an Internet start-up. From
1994 through 1999, Mr. Roberts was the Chairman of Caliber Collision Center,
Inc., a collision repair company. He helped raised over $20 million from various
sources, and he helped create the company's successful acquisition strategy and
led the acquisition team in its first $75 million acquisition. He continues to
serve as the company's Chairman of the Board and Strategic Advisor.
William P. O'Donnell. Mr. O'Donnell is a Managing Director of Gildea Management
Company ("GMC"). Mr. O'Donnell has been involved in various aspects of private
and public company investing over the past 16 years and has been associated with
GMC since 1992. From 1990 to 1992, Mr. O'Donnell was a Vice President in the
Corporate Finance Group of Chrysler Capital Corporation, which invested in
private mezzanine and distressed investments.
Frederick G. Noell. Mr. Noell is a Director of GMC. Mr. Noell has been involved
in three technology firms, two of which were concept to market startups during
the past twenty years. From 1992 to present, Mr. Noell has been involved with
Patrina Corporation, an application service provider focused on archival data
and records retention for the financial services industry. From 1985 to 1992,
Mr. Noell worked in sales and marketing for Towne-Oller & Associates and
developed and marketed Towne-Oller Trends, targeted to Wall Street analysts and
developed sourcing relationships with numerous business publications, including
a weekly feature in The Wall Street Journal.
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COMMITTEES
The Company does not have any standing audit, nominating, or compensation
committees of the Board, or committees performing similar functions.
MEETINGS OF THE BOARD OF DIRECTORS
The Board did not hold any meetings during the fiscal year ended December 31,
1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers, directors and
persons who beneficially own more than 10% of the Company's Common Stock to file
reports of ownership and changes in ownership with the SEC. These reporting
persons also are required to furnish the Company with copies of all Section
16(a) forms they file. Mr. Arias failed to file a Form 4 in connection the with
disposition of 45,000 shares of the Company's Common Stock in 1999. Mr. Arias
plans to report such disposition on a Form 5 this year.
ARINCO COMPUTER SYSTEMS INC.
Dated: March 17, 2000
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