As filed with the Securities and Exchange Commission on August 11, 2000
================================================================================
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SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
ARINCO COMPUTER SYSTEMS INC.
-------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, Connecticut 06830
(203) 661-6942
August 11, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Arinco Computers Systems Inc. (the "Company" or
"Arinco") at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, located at
1285 Avenue of the Americas, New York, New York on Tuesday, September 12, 2000,
at 9:00 a.m., local time.
The Annual Meeting will be held for the following purposes:
(1) To consider and vote upon a proposal to elect five directors to
hold office until the next Annual Meeting of Shareholders or until their
successors are elected and qualified;
(2) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of April 21, 2000 (the "Merger Agreement"), by and
between the Company and Change Technology Partners, Inc. (formerly known as
Pangea Internet, Inc.) ("Change Technology"), pursuant to which the Company will
merge with and into Change Technology, a wholly-owned subsidiary of the Company,
upon the terms and subject to the conditions set forth in the Merger Agreement,
as more fully described in the proxy statement which follows this letter;
(3) To consider and vote upon a proposal to ratify the appointment of
KPMG LLP as the Company's independent certified public accountants for the
fiscal year 2000;
(4) To consider and vote upon a proposal to approve the Company's 2000
Stock Option Plan; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has unanimously approved proposals (1) through
(4) and recommends that you vote FOR each of them.
The Board of Directors has fixed the close of business on August 10,
2000 as the record date for determination of shareholders of the Company
entitled to notice of and to vote at the meeting, or any adjournment thereof.
<PAGE>
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999 is enclosed.
The formal notice of Annual Meeting and the Proxy Statement follow. It
is important that your shares be represented and voted, regardless of the size
of your holdings. Accordingly, whether or not you plan to attend the Annual
Meeting, please complete, sign, date and return the enclosed proxy promptly so
that your shares will be represented. The proxy is revocable and will not affect
your right to vote in person if you attend the Annual Meeting.
Very truly yours,
/s/ Cary S. Fitchey
-------------------
Cary S. Fitchey
President,
Chief Executive Officer, and
Director
2
<PAGE>
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, Connecticut 06830
(203) 661-6942
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON TUESDAY, SEPTEMBER 12, 2000 AT 9:00 A.M.
-----------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Arinco Computers Systems Inc., a New Mexico corporation
(the "Company"), will be held at the offices of Paul, Weiss, Rifkind, Wharton
and Garrison located at 1285 Avenue of the Americas, New York, New York on
Tuesday, September 12, 2000 at 9:00 a.m., local time, for the following
purposes:
(1) To consider and vote upon a proposal to elect five directors to
hold office until the next Annual Meeting of Shareholders or
until their successors are elected and qualified;
(2) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of April 21, 2000 (the "Merger
Agreement"), by and between the Company and Change Technology,
Inc. (formerly known as Pangea Internet, Inc.) ("Change
Technology"), pursuant to which the Company will merge with and
into Change Technology, a wholly-owned subsidiary of the Company,
upon the terms and subject to the conditions set forth in the
Merger Agreement, as more fully described in the proxy statement
which follows this notice;
(3) To consider and vote upon a proposal to approve the appointment
of KPMG LLP as the Company's independent public accountant for
the fiscal year 2000;
(4) To consider and vote upon a proposal to approve the Company's
2000 Stock Option Plan; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August 10,
2000, as the record date for determination of shareholders of the Company
entitled to notice of and to vote at the meeting, or any adjournment thereof.
Representation of at least one-third of the voting power represented by all
outstanding shares is required to constitute a quorum. Accordingly, it is
important that your share(s) be represented at the meeting. Whether or not you
plan to attend the
<PAGE>
Annual Meeting, please complete, date and sign the enclosed proxy card and mail
it promptly in the self-addressed envelope enclosed for your convenience. You
may revoke your proxy at any time before it is voted.
By Order of the Board of Directors,
/s/ William P. O'Donnell
------------------------
William P. O'Donnell
Secretary
August 11, 2000
YOUR VOTE IS IMPORTANT. ACCORDINGLY, WE URGE YOU TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE
MEETING.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Q: What is the proposed merger? Q: What do I do if I want to change my
vote?
A: Arinco has agreed to merge with its A: Just send in a later-dated, signed
wholly-owned subsidiary, Change voting form to the Secretary of Arinco
Technology. The purpose of the merger listed below before the special meeting
is solely to change Arinco's state of or attend the meeting in person and
incorporation. vote.
Q: When do you expect the merger to be Q: What will be the federal income tax
completed? consequences of the merger?
A: Arinco and Change Technology are A: The merger will be tax-free for the
working toward completing the merger as shareholders of Arinco for U.S. federal
soon as possible, and expect to complete income tax purposes. However, you
it shortly after the Annual Meeting, if the should consult with your own tax
shareholders of Arinco approve the advisor to be certain about the federal
merger. income tax consequences to you.
Q: How many shares of Change Q: Should Arinco shareholders send in
Technology will Arinco shareholders their stock certificates now?
receive?
A: Arinco shareholders will receive one A: No. Each stock certificate of Arinco
share of Change Technology common common stock, Arinco Series A
stock for each share of Arinco common Preferred Stock and Arinco Series B
stock, one share of Change Technology Preferred Stock will represent the
Series A convertible preferred stock for same number of shares of Change
each share of Arinco Series A convertible Technology common stock, Change
preferred stock and one share of Change Technology Series A Preferred Stock
Technology Series B convertible and Change Technology Series B
preferred stock for each share of Arinco Stock, respectively.
Series B preferred stock.
Q: Will the shares of Change Technology I Q: If my shares are held in "street
will receive be publicly traded? name" by my broker, will my
broker vote my shares for me
without my instructions?
A: We expect that shares of Change A: No. You should instruct your broker to
Technology Common Stock will be vote your shares, following the
traded on the NASDAQ Bulletin Board, directions provided by your broker.
just as shares of Arinco Common Stock Your failure to instruct your broker to
currently are traded. vote your shares will be the equivalent
of voting against the merger.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Q: What do I need to know? Q: What if I plan to attend the meeting
in person?
A: After carefully reading and considering A: We recommend that you send in your
the information contained in this voting form in any event. If you hold
document, please indicate on your voting Arinco shares through a third party,
form how you want to vote and mail your such as a broker, you should send an
signed and dated voting form in the account statement or similar
enclosed return envelope as soon as documentation of ownership to the
possible, so that your shares may be Secretary of Arinco, requesting a
represented at the Annual Meeting. If ticket.
you do not vote your shares in connection
with the merger proposal, it will have the
same effect as voting against the merger
proposal.
Q: Do I have dissenters' rights?
A: You do have dissenters' rights. You
may exercise such right if you do not
vote in favor of the merger and you
file with Arinco, prior to or at the
Annual Meeting, a written objection to
the proposed merger. If the merger is
approved, you will be able to make a
written demand on Change Technology,
within 10 days of the Annual Meeting,
and obtain payment of the fair value of
the shares you held in Arinco.
</TABLE>
Who can help answer your questions?
If you have more questions about the merger, you should contact Arinco
as follows:
Attention: Cary S. Fitchey
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, Connecticut 06830
(203) 661-6942
2
<PAGE>
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, Connecticut 06830
(203) 661-6942
PROXY STATEMENT
for Annual Meeting of Shareholders
to be held on Tuesday, September 12, 2000.
INTRODUCTION
General
This Proxy Statement and the enclosed proxy, which is first being
mailed to the shareholders of Arinco Computer Systems Inc. ("Arinco" or the
"Company") on approximately August 11, 2000, is furnished to you in connection
with the solicitation of proxies on behalf of the Board of Directors of Arinco
to be used at the Annual Meeting of Shareholders (the "Annual Meeting") to be
held at the offices of Paul, Weiss, Rifkind, Wharton and Garrison located at
1285 Avenue of the Americas, New York, New York on Tuesday, September 12, 2000
at 9:00 a.m., and at any subsequent time which may be necessary by any
adjournment or adjournments thereof. The mailing address of the Company's
principal executive office is 20 Dayton Avenue, Greenwich, Connecticut 06830.
Proxies in proper form received by the time of the meeting will be
voted as specified. Shareholders may specify their choices by marking the
appropriate boxes on the enclosed proxy. If a proxy is dated, signed and
returned without specifying choices, the shares will be voted as recommended by
the Board of Directors FOR proposals (1), (2), (3) and (4). Business transacted
at the Annual Meeting is confined to the purposes stated in the Notice of Annual
Meeting. The proxy does, however, convey discretionary authority to the persons
named therein as proxies to vote on such other business as may properly come
before the Annual Meeting. Shares of the Company's common stock, par value $0.01
per share (the "Common Stock"), and the Company's Series A Convertible Preferred
Stock, par value $0.10 per share (the "Series A Preferred Stock") and the
Company's Series B Convertible Preferred Stock, par value $0.10 (the "Series B
Preferred Stock" and, together with the Series A Preferred Stock, the "Preferred
Stock"), cannot be voted at the meeting unless the holder is present or
represented by proxy.
Voting Securities
The Board of Directors of the Company (the "Board"), in accordance with
the Bylaws of the Company (the "Bylaws"), has fixed the close of business on
August 10, 2000, as the record date (the "Record Date") for determining the
shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. At the close of business on such date, the outstanding
number of voting securities of the Company was 44,959,000 shares of Common
Stock, 3,000 shares of Series A Preferred Stock and 3,000,000 shares of Series B
Preferred Stock.
Each holder of Common Stock is entitled to one vote per share of Common
Stock held as of the Record Date, each holder of Series A Preferred Stock is
entitled to one vote per share of Series A Preferred Stock held as of the Record
Date and each holder of Series B Preferred Stock is entitled to 40 votes per
share of Series B Preferred Stock held as of the Record Date. The presence, in
person
<PAGE>
or by proxy, of stockholders entitled to cast at least one-third of the voting
power represented by all outstanding shares shall constitute a quorum.
Under the Business Corporation Act of the State of New Mexico, the
state in which the Company is incorporated, the Company's Restated Articles of
Incorporation (the "Articles of Incorporation") and the Bylaws, if a quorum is
present at the Annual Meeting, the affirmative vote of a plurality of the votes
cast is required for the election of directors (Proposal (1)) and the
affirmative vote of a majority of the voting power present (in person or by
proxy) and entitled to vote at the Annual Meeting is required for approval of
Proposal (2) and Proposal (3). With respect to Proposal (4), the Treasury
Regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), require the affirmative vote of a majority of the votes
cast on the issue to approve Proposal (4) in accordance with such treasury
regulations. Under New Mexico law, an abstention is not deemed to be a "vote
cast." As a result, abstentions and broker "non-votes" are not included in the
tabulation of the voting results of the election of directors (Proposal (1)) or
issues requiring approval of a majority of the votes cast (Proposal (4)) and,
therefore, do not have the effect of votes in opposition in such tabulations.
Abstentions are included in the tabulation of the voting results on issues
requiring the affirmative vote of a majority of the voting power present (in
person or by proxy) and entitled to vote at the Annual Meeting (Proposal (2) and
Proposal (3)) and have the effect of votes in opposition in such tabulations,
while broker "non-votes" are not included in the tabulation of the voting
results on such issues and therefore do not have the effect of votes against in
such tabulations. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker "non-votes" and the
shares as to which a shareholder abstains are included for purposes of
determining whether a quorum of shares is present at the Annual Meeting.
Revocability of Proxies
A shareholder giving a proxy may revoke it at any time before it is
exercised by filing with the Secretary of the Company a revoking instrument or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person. Attendance at the Annual Meeting will not in and of itself constitute
the revocation of a proxy.
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Board of Directors
The current number of directors is set at five. The Board is
responsible for the overall affairs of the Company.
Meetings of the Board and Certain Committees of the Board
The Board did not hold any meetings during the fiscal year ended
December 31, 1999.
The Company has standing audit, compensation and nominating committees
whose current functions and members are described below. These committees were
formed by the Board on March 28, 2000. As a result, no committee meetings were
held during the fiscal year ended December 31, 1999. It is anticipated that at
its first meeting following the Annual Meeting, the Board will designate the
directors who currently serve on these committees, except Cary S. Fitchey (who
is not a nominee for the Board), to serve on each of these committees until the
next annual meeting of the stockholders.
Audit Committee
The audit committee is composed of Cary S. Fitchey and James M. Dubin.
This committee is charged with the responsibility of overseeing the financial
reporting process of the Company. In the course of performing its functions, the
audit committee (i) reviews the Company's internal accounting controls and its
annual consolidated financial statements, (ii) reviews with the Company's
independent certified public accountants the scope of their audit, their report
and their recommendations, (iii) considers the possible effect on the
independence of such accountants in approving non-audit services requested of
them and (iv) recommends the action to be taken with respect to the appointment
of the Company's independent certified public accountants. The Board has not
adopted a written charter for the audit committee.
Based upon the definition of "independent director" in Rule 4200(a)(14)
of the National Association of Securities Dealers listing standards, James M.
Dubin is independent and Cary S. Fitchey is not independent.
Because the audit committee was not formed until after the filing of
the Company's Form 10-KSB for the fiscal year ended December 31, 1999, the audit
committee did not review, or have any other involvement with, the audited
financial statements included in such report.
Compensation Committee
The Compensation Committee is composed of James M. Dubin (Chairman) and
Cary S. Fitchey. The compensation committee is charged with the responsibility
of (i) reviewing, advising and making recommendations with respect to employee
salary and compensation plans, benefits and
3
<PAGE>
standards applicable to the executive officers of the Company, (ii) taking all
actions with respect thereto that are not specifically reserved for the Board
and (iii) administering any salary or compensation plans as the compensation
committee is designated to administer.
Nominating Committee
The Nominating Committee is composed of Michael Gleason (Chairman) and
Cary S. Fitchey. The nominating committee is charged with the responsibility of
reviewing and recommending to the Board proposed nominees for directors of the
Company.
Nominees for the Board of Directors
Five directors are to be elected at the Annual Meeting to hold office
until the next Annual Meeting of Shareholders or until their successors are
elected and qualified. The nominees for election as directors who are named
below are willing to be elected and to serve. However, in the event that a
nominee at the time of election is unable to serve, or is otherwise unavailable
for election, the Board may elect a substitute nominee. Information concerning
each nominee, including his principal occupation during the past five years and
current directorships, is set forth below.
William Avery
Mr. Avery joined the Company as Managing Director in March 2000. Mr.
Avery is also a Managing Partner of FG II Management Company, LLC ("FG II"),
where he has worked since 1999. Prior to working with FG II, Mr. Avery was
Corporate Senior Vice President and President of the International Division of
CUC International Inc. ("CUC"), now merged with Cendant, since 1982, and
developed CUC's overseas memberships and Internet businesses through organic
growth and acquisitions. Mr. Avery is 50 years of age.
James M. Dubin
Mr. Dubin has been a director of the Company since March 28, 2000. Mr.
Dubin is also 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, where he has worked since 1974. 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. Mr. Dubin is 53 years of age.
Michael Gleason
Mr. Gleason has been Chairman of the Board of Directors since March 28,
2000. He is also the Managing Partner of The Culmen Group, which has investments
in media, public and private equity, fixed income securities, oil and gas
production and real estate, where he has worked since 1993. Mr. Gleason also
represents Seven Network Australia in the United States and serves as Vice
President of Seven Network (U.S.). Mr. Gleason is 45 years of age.
4
<PAGE>
William E. Lipner
Mr. Lipner has been a director of the Company since March 28, 2000. He
is also Chairman and Chief Executive Officer of NFO Worldwide, Inc., the world's
third largest marketing information/market research company, where he has worked
since its organization in 1991. Mr. Lipner also serves on the Board of Crane
Co., a diversified aerospace engineering and manufacturing company. Mr. Lipner
is 52 years of age.
Gary C. Wendt
Mr. Wendt has been a director of the Company since June 29, 2000. He is
also the chairman and chief executive officer of Conseco, Inc., a insurance and
financial services company, since June 28, 2000. Prior to working with Conseco,
Inc., Mr. Wendt served as chief executive officer of General Electric Capital
Services, Inc., a financial unit of General Electric Company, until 1999. Mr.
Wendt serves on the Board of Sanchez Computer Associates, Inc., a company that
develops a financial services systems architectures and enterprise banking
application software for top-tier financial institutions. Mr. Wendt also serves
on the Board of IXL Entreprises, Inc., a leading Internet services company, on
the Board of Europ@web N.V. and on the Board of [eXL]. He is also an advisory
director of [Internet Capital]. Mr. Wendt is 58 years of age.
Executive Officers
The executive officers of the Company are as follows:
Name Age Present Position With the Company
---- --- ---------------------------------
William Avery 50 Managing Director
Cary S. Fitchey 47 President, Chief Executive Officer and Director
Frank Gallagi 34 Managing Director, Chief Financial Officer
William P. O'Donnell 46 Managing Director, Treasurer and Secretary
David M. Roberts 54 Managing Director
Set forth below is additional information concerning the persons listed
above (other than Mr. Avery, for whom such information has been provided under
"Nominees for the Board of Directors").
Cary S. Fitchey
Mr. Fitchey has been a director and President and Chief Executive
Officer of the Company since March 28, 2000. He is also a Managing Partner of FG
II, private investment firm where he has worked since 1999. From 1993 to 1998,
Mr. Fitchey was a partner with Dartford Partnership,
5
<PAGE>
formed to purchase and actively manage non-core "orphan" branded food and
beverage products. Mr. Fitchey also serves on the Board of eDiet.com, Inc., a
provider of on-line weight loss services.
Frank Gallagi
Mr. Gallagi joined the Company as a Managing Director since June 2000.
Mr. Gallagi is also a Managing Director of FGII Ventures since May 1999. From
1995 to 1999, Mr. Gallagi was the Chief Financial Officer at Hungarian-American
Enterprise Fund, an international venture capital firm focused on Eastern
European investments. Prior to 1995, Mr. Gallagi held positions as a financial
controller at Ethan Allen, Co., an international manufacturer and retailer of
home furnishings, and as a certified public accountant for KPMG Peat Marwick.
William P. O'Donnell
Mr. O'Donnell joined the Company as Managing Director in March 2000. He
is also a Managing Director of GMC, where he has worked since 1992.
David M. Roberts
Mr. Roberts joined the Company as Managing Director in March 2000. He
is also a Partner of FG II, where he has worked since 1999, and Executive
Chairman of IPO.com, an Internet start-up, where he has worked since March 1999.
From 1994 through 1999, Mr. Roberts was the Chairman of Caliber Collision
Center, Inc., a collision repair company.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of July 30, 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, Series A Preferred Stock
or Series B Preferred Stock, (ii) each director of the Company, (iii) the Chief
Executive Officer (and sole employee) of the Company for the Company's last
completed fiscal year and (iv) all executive officers and directors as a group.
Except as otherwise indicated, each person has sole voting and dispositive power
with respect to such shares.
Each share of the Series A Preferred Stock is convertible into one
share of Common Stock. Each share of Series B Preferred Stock is convertible
into 40 shares of Series B Common Stock.
Beneficial ownership includes shares for which a person, directly or
indirectly, has or shares voting or investment power, or both, and also includes
options and warrants which are exercisable within sixty days of July 30, 2000.
Presently, however, the Company has only 41,000 authorized but unissued shares
of Common Stock. Consequently, no material portion of the Company's presently
outstanding options, warrants or Preferred Stock may be exercised for or
converted into Common Stock. All of the listed persons have sole voting and
investment power over the shares listed opposite their names unless otherwise
indicated in the notes below.
6
<PAGE>
<TABLE>
<CAPTION>
Series A Series B
Common Stock Preferred Stock Preferred Stock
------------------------ ------------------------- ----------------------
Percent Percent Percent
Name of Beneficial Owner Shares of Class Shares of Class Shares of Class
--------------------------------------- --------------- -------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Culmen Technology Partners, L.P........ 28,000,000 62.3% 0 0% 100,000 3.3%
201 Main Street, Suite 1955
Fort Worth, TX 76102
Turtle Holdings LLC.................... 14,912,500(1) 27.0 0 0 15,000 *
115 East Putnam Avenue
Greenwich, CT 06830
Walter A. Forbes....................... 10,646,625(2) 19.5 0 0 4,100 *
c/o FG II Management Company, LLC
20 Dayton Avenue
Greenwich, CT 06830
Cary S. Fitchey........................ 10,263,750(3) 19.3 0 0 7,000 *
William Avery ......................... 8,875,625(4) 17.0 0 0 6,000 *
St. Croix Investments, LLC............. 2,464,000 5.5 0 0 8,400 *
c/o FG II Management Company, LLC
20 Dayton Avenue
Greenwich, CT 06830
James M. Dubin......................... 100,000(5) * 0 0 8,450(6) *
Michael Gleason........................ 28,100,000(7) 62.4 0 0 100,000(8) 3.3
William E. Lipner...................... 100,000(5) * 0 0 20,000 *
Gary C. Wendt.......................... 100,000(5) * 0 0 50,000(9) 1.7
Morton H. Meyerson..................... 0 0 0 0 200,000 6.7
c/o 2M Companies
4514 Cole Avenue, Suite 400
Dallas, Texas 75205-5412
Metropolis Venture Partners............ 0 0 0 0 200,000 6.7
405 Lexington Avenue
New York, New York, 10017
James A. Arias......................... 485,000(10) 1.1 0 0 0 0
1650 University Blvd., N.E.
Suite 5-100
Albuquerque, N.M. 87102
Louis Southerlands 0 0 2,576 80 0 0
P.O. Box 50311
Kalamazoo, Michigan, 49005/0311
Gordon Bryant 0 0 645 20 0 0
All officers and directors as a group 66,992,500(11) 88.8 0 0 208,950(12) 7.0
(10 persons)**.......................
</TABLE>
------------------------
* Represents less than 1% of the outstanding shares, both in number and in
terms of voting power.
** Duplications eliminated.
(1) Represents 4,600,000 shares of Common Stock, and warrants to purchase an
aggregate of 10,312,500 shares of Common Stock.
(2) Represents 1,056,000 shares of Common Stock, and warrants to purchase an
aggregate of 9,590,625 shares of Common Stock.
7
<PAGE>
(3) Represents 2,120,000 shares of Common Stock, warrants to purchase an
aggregate of 8,043,750 shares of Common Stock and options to purchase an
aggregate of 100,000 shares of Common Stock.
(4) Represents 1,760,000 shares of Common Stock, and warrants to purchase an
aggregate of 7,115,625 shares of Common Stock.
(5) Represents options to purchase an aggregate of 100,000 shares of Common
Stock.
(6) Represents 8,450 shares of Series B Preferred Stock owned by Mr. Dubin that
are convertible into 338,000 shares of Common Stock.
(7) Represents 28,000,000 shares of Common Stock owned by Culmen Technology
Partners, L.P. ("Culmen"). Mr. Gleason is the President and sole director
of CTP, Inc., the general partner of Culmen. As a result, he may be deemed
to have beneficial ownership over these shares. Also includes options to
purchase an aggregate of 100,000 shares of Common Stock.
(8) Represents 100,000 shares of Series B Preferred Stock that are convertible
into 4,000,000 shares of Common Stock owned by Culmen. Mr. Gleason is the
President and sole director of CTP, Inc., the general partner of Culmen. As
a result, he may be deemed to have beneficial ownership over these shares.
(9) Represents 50,000 shares of Series B Preferred Stock that are convertible
into 2,000,000 shares of Common Stock owned by TNRT, LLC ("TNRT"). Mr.
Wendt is the sole member of TNRT. As a result, he may be deemed to have
beneficial ownership over these shares.
(10) Represents 100,000 shares of Common Stock owned directly by Mr. Arias,
285,000 shares of Common Stock owned by Realco, Inc. ("Realco") and 100,000
shares of Common Stock owned by Financial Services Group, Inc. ("FSG"). Mr.
Arias is the President of Realco, and has voting power over shares of
Common Stock owned by Realco, and is President, Chief Executive Officer and
Chairman of the Board of FSG and has voting power over shares of Common
Stock owned by FSG. As a result, Mr. Arias may be deemed to have beneficial
ownership over the shares owned by Realco and FSG.
(11) Represents 36,480,000 shares of Common Stock, warrants to purchase an
aggregate of 30,112,500 shares of Common Stock and options to purchase
400,000 shares of Common Stock. Includes (1) 28,000,000 shares of Common
Stock owned by Culmen, which Mr. Gleason may be deemed to beneficially own,
(2) 4,600,00 shares of Common Stock and warrants to purchase an aggregate
of 10,312,500 shares of Common Stock owned by Turtle Holdings, LLC
("Turtle"), (3) warrants to purchase an aggregate of 3,093,075 shares of
Common Stock owned by David M. Roberts, a Managing Director of the Company
and (4) warrants to purchase an aggregate of 1,546,875 shares of Common
Stock owned by Frank Gallagi, a Managing Director and Chief Financial
Officer of the Company. William P. O'Donnell, a Managing Director of the
Company, is a Managing Director of Gildea Management Company, the manager
of Turtle. As a result, Mr. O'Donnell may be deemed to have beneficial
ownership over the shares and warrants owned by Turtle.
(12) Includes (1) 100,000 shares of Series B Preferred Stock owned by Culmen,
which Mr. Gleason may be deemed to beneficially own, (2) 15,000 shares of
Series B Preferred Stock owned by Turtle, which Mr. O'Donnell may be deemed
to beneficially own, (3) 12,500 shares of Series B Preferred Stock owned by
Mr. Roberts and (4) 50,000 shares of Series B Preferred Stock owned by
TNRT, which Mr. Wendt may be deemed to beneficially own.
Change of Control of the Company
On March 28, 2000, the Company issued and sold to a group of investors
led by Pangea Internet Advisors LLC, a Delaware limited liability company
(collectively, the "Purchasers"), an aggregate of 4,000,000 shares of the
Company's newly-issued Series B Preferred Stock and warrants (the "Warrants") to
purchase 41,250,000 shares of Common Stock, which amount of shares of Common
Stock equals 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 shares of Common Stock issuable upon conversion of all
shares of Series B Preferred Stock and (ii) the exercise of the Warrants. As a
result of the above, the Purchasers own approximately 97% of the outstanding
voting securities of the Company, on a fully-diluted basis.
Certain Relationships and Related Transactions
Loans to Affiliates
In 1998, the Company loaned $16,000 to a person affiliated with a
company controlled by Mr. Arias, then the sole director of the Company.
Additional advances of $20,000 were made in
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1999. These loans were evidenced by demand notes bearing interest at 8.5% per
annum. At December 31, 1999, all such amounts from this person had been repaid.
Purchases of Series B Preferred Stock
In connection with the sale of Series B Preferred Stock and warrants to
the Purchasers on March 28, 2000, the following occurred:
(i) Mr. Avery acquired 50,000 shares of Series B Preferred
Stock and warrants to purchase 7,115,625 shares of Common Stock;
(ii) Mr. Dubin acquired 8,450 shares of Series B Preferred
Stock. Mr. Dubin is also a partner of Paul, Weiss, Rifkind, Wharton & Garrison,
which provides legal services to the Company and FG II;
(iii) Mr. Fitchey acquired 60,000 shares of Series B Preferred
Stock and warrants to purchase 8,043,750 shares of Common Stock;
(iv) Culmen Technology Partners, L.P. acquired 800,000 shares
of Series B Preferred Stock. Mr. Gleason is the President and sole director of
Culmen Technology Partners, Inc., the general partner of Culmen Technology
Partners, L.P.;
(v) Mr. Lipner acquired 20,000 shares of Series B Preferred
Stock;
(vi) Turtle Holdings LLC acquired 130,000 shares of Series B
Preferred Stock and warrants to purchase 10,312,504 shares of Common Stock. Mr.
O'Donnell is the managing director of Gildea Management Company, which is the
manager of Turtle Holdings LLC;
(vii) Mr. Roberts acquired 12,500 shares of Series B Preferred
Stock and warrants to purchase 3,093,750 shares of Common Stock;
(viii) TNRT acquired 50,000 shares of Series B Preferred
Stock. Mr. Wendt is the sole member of TNRT; and
(ix) Mr. Gallagi acquired warrants to purchase an aggregate of
1,546,875 shares of Common Stock.
Grant of Non Qualified Stock Options
On June 26, 2000, Messrs. Dubin, Gleason, Lipner and Wendt were each
granted non- qualified stock options to purchase 400,000 shares of Common Stock.
One-fourth of these stock options vested on June 26, 2000, one-fourth of them
will vest on June 26, 2001 and the remainder will vest monthly from June 26,
2001 until June 26, 2003.
Business Opportunity Allocation and Miscellaneous Services Agreement
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The Company has entered into a Business Opportunity Allocation and
Miscellaneous Services Agreement, dated March 28, 2000 (the "Business
Opportunity Agreement"), with Pangea Internet Advisors, LLC ("Pangea Advisors")
and certain affiliates of Pangea Advisors, including FG II, to address the
allocation of acquisition opportunities, given the responsibilities and
management duties the Company's new management team also has with respect to
various entities affiliated with Pangea Advisors. Pangea Advisors 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 Advisors, 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.
Arias Consulting Agreement
The Company has entered into a consulting agreement with James A.
Arias, the Company's former sole director. James A. Arias has agreed to provide
administrative services for an annual fee of $50,000 the first year and $25,000
the second year, plus out-of-pocket expenses. These services aim at facilitating
the orderly transition to new management of information relating to the
Company's prior business and operations. This agreement has been in effect since
March 28, 2000, and will remain so for a 2-year term, unless terminated for
cause by the Company or at will by James A. Arias.
Executive Compensation
No compensation for services in any capacity to the Company was
awarded, earned by or paid during the fiscal years ended December 31, 1999, 1998
and 1997 to Mr. Arias, the Company's Chief Executive Officer (and sole employee
and director) during the Company's last completed fiscal year. The Company has
entered into a consulting agreement with Mr. Arias for Mr. Arias to provide
administrative services to the Company. See "Certain Relationships and Related
Party Transactions- Arias Consulting Agreements."
Employment Agreements
The Company has entered into employment agreements with each of the
Company's executive officers. Each employment agreement can be terminated at
will by either party to the agreement. Each employment agreement requires the
contracting employee to abide by the terms of the Business Opportunity
Agreement. See "Certain Relationships and Related Transactions- Business
Opportunity Allocation and Miscellaneous Services Agreement."
In a provision of the employment agreement with Messrs. Avery and
Gallagi, the Company has specifically acknowledged that Messrs. Avery and
Gallagi may devote some time to other businesses and ventures. The Company has
also agreed not to cause Mr. Avery to breach the non- compete agreement he has
entered into with CUC International Inc. on February 21, 1995.
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The employment agreements provide for reimbursement for an executive
officer's out-of- pocket expenses and provide for indemnification for any
liability that an executive officer may incur as a result of his position with
the Company.
Pursuant to the employment agreements, Cary S. Fitchey and William
Avery will receive a base annual salary of $150,000, David M. Roberts will
receive an annual base salary of $100,000, Frank Gallagi will receive an annual
base salary of $84,000 and William P. O'Donnell will receive an annual base
salary of $75,000.
Compensation of Directors
Directors will receive an annual remuneration of $2,500 for serving as
directors of the Company, and will be reimbursed their out-of-pocket expenses
incurred in connection with such service.
Stock Option Plan
The Company is considering establishing a Stock Option Plan, in which
the directors and executive officers (as well as employees) of the Company would
participate. However, the Company does not currently plan to allow holders of
Warrants to participate in the Plan. (See "PROPOSAL 4: APPROVAL OF THE COMPANY'S
2000 STOCK OPTION PLAN").
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers, and
persons who own more than ten percent of the Company's Common Stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC"). Directors, executive officers
and greater than ten percent stockholders are required by SEC regulations to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
The Company believes that all its directors, executive officers, and
greater than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to 1999.
Vote Required
The vote required for the election of directors is a plurality of the
votes cast and entitled to vote on the election of directors, provided a quorum
is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE FIVE (5) NOMINATED DIRECTORS.
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PROPOSAL 2: APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
General
The Agreement and Plan of Merger (the "Merger Agreement") between the
Company and Change Technology, Inc. ("Change Technology"), a wholly-owned
subsidiary of the Company, provides for the merger (the "Merger") of the Company
with and into Change Technology. The sole purpose of the merger is to change
Arinco's state of incorporation from the State of New Mexico to the State of
Delaware. The surviving corporation of the Merger will be Change Technology
("Change Technology" or the "Surviving Corporation"). The Merger Agreement is
attached as Annex A to this Proxy Statement.
The Board has unanimously approved the Merger. The Board believes that
the corporate laws of the State of Delaware will provide a legal environment
better suited to the Company's corporate needs in connection with its expected
business for the fiscal year 2000 and beyond. In addition, Change Technology
will have enough authorized shares of common stock ("Change Technology Common
Stock") to reserve enough Change Technology Common Stock so that (i) the holders
of the shares of preferred stock and warrants will be able to convert their
preferred stock into and exercise their warrants for shares of Change Technology
Common Stock, (ii) Change Technology can issue shares of Change Technology
Common Stock under a stock option plan, and (iii) Change Technology can issue
shares of Change Technology Common Stock as Change Technology's board of
directors may from time to time, deem appropriate.
Change Technology is a Delaware corporation with principal executive
offices at 20 Dayton Avenue, Greenwich, Connecticut 06830. The telephone number
of such office is (203) 661-6942. It has the authority to issue 500,000,000
shares of common stock, par value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $0.10 per share. Change Technology's certificate of
incorporation (the "Change Technology Certificate of Incorporation") provides
for Series A Convertible Preferred Stock, par value $0.01 per share ("Change
Technology Series A Preferred Stock") and Series B Convertible Preferred Stock,
par value $0.01 per share ("Change Technology Series B Preferred Stock"), with
voting powers, rights and preferences substantially identical to the voting
powers, rights and preferences of the Company's Series A Preferred Stock and
Series B Preferred Stock, respectively. Since its date of incorporation and
until the effective date of the Merger, Change Technology has not and will not
transact any business. The terms of the capital stock of Change Technology are
described in the Change Technology Certificate of Incorporation, attached as
Annex B to this Proxy Statement.
Description of the Merger
Regulatory Requirements
Under the New Mexico Business and Corporation Act (the "NMBCA"), the
Surviving Corporation shall file with the State Corporation Commission of the
State of New Mexico (i) an agreement that it may be served with process in the
State of New Mexico in any proceeding for the enforcement of the obligations of
the Company and in any proceeding for the enforcement of the
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rights of any dissenting shareholder of the Company against the Surviving
Corporation; (ii) an irrevocable appointment of the Secretary of State of the
State of New Mexico as its agent to accept service of process in any such
proceeding and (iii) an agreement that it will promptly pay to the dissenting
shareholders of the Company the amounts to which they shall be entitled under
the provisions of the NMBCA with respect to their shares in the Company.
Effective Time of the Merger
The Merger will become effective (the "Effective Date") at the time of
filing a Certificate of Merger with the Secretary of State of the State of
Delaware, as provided in Section 251 of the Delaware General Corporation Law
(the "DGCL").
Exchange of the Company Shares
On the Effective Date, each outstanding share of Common Stock, Series A
Preferred Stock and Series B Preferred Stock, will automatically be converted
into one share of Change Technology Common Stock, Change Technology Series A
Preferred Stock and Change Technology Series B Preferred Stock, respectively,
and Warrants will automatically be converted into warrants to purchase the same
number of shares of Change Technology Common Stock, upon the same terms and
subject to the same conditions that apply to the Warrants. Each stock
certificate representing issued and outstanding shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock will continue to represent the same
number of shares of Change Technology Common Stock, Change Technology Series A
Preferred Stock and Change Technology Series B Preferred Stock, respectively.
Each warrant certificate representing the right to purchase shares of Common
Stock will continue to represent the right to purchase the same number of shares
of Change Technology Common Stock. It will not be necessary for shareholders to
exchange their existing stock certificates for new certificates. However,
shareholders may exchange their certificates if they so choose. The Company
expects that shares of Change Technology Common Stock will be traded on the
NASDAQ Bulletin Board in the same manner as shares of Common Stock are currently
traded.
Directors and Officers
The directors and officers of the Company immediately prior to the
Effective Date will be the directors and officers of the Surviving Corporation
from and after the Effective Date and will hold office until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Change Technology Certificate of Incorporation and Change Technology's
bylaws (the "Change Technology Bylaws"), or as otherwise provided by law.
Certificate of Incorporation and ByLaws
The certificate of incorporation and bylaws of the Surviving
Corporation will be the Change Technology Certificate of Incorporation and the
Change Technology Bylaws. They are attached as Annexes B and C to this Proxy
Statement, respectively.
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Certain Differences Between the Corporation Laws of New Mexico and Delaware and
Corresponding Certificate of Incorporation and Bylaw Provisions
The following summary is not intended to be a complete statement of the
comparative rights of shareholders under New Mexico and Delaware law. Nor is the
identification of certain specific differences meant to indicate that other
differences do not exist. The foregoing summary is qualified in its entirety by
reference to the particular requirements of the NMBCA and the DGCL, and the
specific provisions of the articles of incorporation and bylaws, as amended of
Arinco and Change Technology.
Appraisal Rights
Shareholders of a New Mexico corporation are entitled to exercise
certain dissenters' rights in the event of (i) a sale or exchange of all or
substantially all of the property and assets of the corporation not in the
ordinary course of business, (ii) a plan of exchange, (iii) an amendment to the
articles of incorporation of the corporation which materially and adversely
affects the rights of shareholder and (iv) certain mergers or consolidations.
Stockholders of a Delaware corporation have rights of appraisal in
connection with certain mergers or consolidations if they are required to accept
in exchange for their shares anything other than (i) shares of stock of the
corporation surviving or resulting from such merger or consolidation, or
depository receipts in respect thereof, (ii) shares of stock of any other
corporation or depository receipts in respect thereof, which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or held of record by more than 2,000 stockholders, (iii)
cash in lieu of fractional shares or fractional depository receipts of a
corporation described in (i) and (ii) above or (iv) any combination of the
shares of stock, depository receipts and cash in lieu of fractional shares or
fractional depositary receipts described in (i), (ii) and (iii) above, PROVIDED
THAT no appraisal rights exist where, (A) on the record date fixed to determine
the stockholders entitled to vote on the merger or consolidation, the stock of
the corporation is listed on a national securities exchange, the NASDAQ National
Market or is held of record by more than 2,000 stockholders, and (B) holders of
shares of a class or series of stock of the surviving corporation and the merger
did not require the vote of the holders of that class or series of such
corporation's stock.
Special Meetings
A special meeting of shareholders of a New Mexico corporation may be
called by the board of directors, the holders of not less than one-tenth of all
outstanding shares entitled to vote at the meeting, or such other persons as
authorized in the articles or incorporation or bylaws of the corporation.
Stockholders of a Delaware corporation do not have a right to call
special meetings unless such right is conferred upon the stockholders in the
corporation's certificate of incorporation or bylaws. Neither the Change
Technology Certificate of Incorporation nor the Change Technology Bylaws provide
for such right.
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Actions Without a Meeting
New Mexico law and the Company's by-laws provide that any action to be
taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof.
Delaware law and the Change Technology Bylaws provide that stockholders
may take action without a meeting if a consent in writing to such action is
signed by the stockholders having the minimum number of votes that would be
necessary to take such action at a meeting, unless prohibited in the Change
Technology Certificate of Incorporation. The Change Technology Certificate of
Incorporation does not prohibit such stockholders action.
Voting on Other Matters
The sale, lease, exchange or other disposition of all, or substantially
all, the property and assets, with or without the goodwill, of a New Mexico
corporation, if not in the usual and regular course of its business, requires
the approval of the holders of at a majority of the shares entitled to vote
thereon and the affirmative vote of the holders of a majority of the shares of
each class entitled to vote as a class thereon. A Delaware corporation may sell,
lease or exchange all or substantially all of its property and assets when and
as authorized by the holders of a majority of the outstanding shares of the
corporation present or represented and entitled to vote thereon, unless the
certificate of incorporation requires the vote of a larger portion of the
outstanding shares of capital stock.
Under New Mexico law, the voluntary dissolution of a corporation
requires the approval of the holders of at least a majority of the shares
entitled to vote thereon, and the affirmative vote of the holders of a majority
of the shares of each class entitled to vote as a class thereon, or the written
consent of all of its shareholders. Delaware law requires that dissolution must
be approved by the holders of a majority of the corporation's stock entitled to
vote thereon, unless the certificate of incorporation requires the vote of a
larger portion of the outstanding stock.
Dividends
A New Mexico corporation may make distributions, subject to any
restrictions in its certificate of incorporation, so long as, after giving
effect thereto, (i) either the corporation would be able to pay its debts as
they become due in the usual course of its business or (ii) the corporation's
total assets would not be less than the sum of its total liabilities and the
maximum amount that then would be payable, in any liquidation, in respect of all
outstanding shares having preferential rights. A Delaware corporation may pay
dividends not only out of surplus (the excess of net assets over capital) but
also out of net profits for the current or preceding fiscal year if it has no
surplus; provided, however, that if the capital of the corporation has been
decreased to an amount less than the aggregate amount of the capital represented
by the issued and outstanding stock having a preference upon the distribution of
assets, no dividends may be declared out of net profits.
Inspection of Books and Records
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Under New Mexico law, any person who has been a shareholder of record
for at least six months preceding his demand, or who is the holder of at least
5% of all of the outstanding shares of a corporation, is entitled to examine a
corporation's relevant books and records for any proper purpose. Under Delaware
law, any shareholder has such a right, so long as such inspection has a purpose
reasonably related to his or its interest as a shareholder. Change Technology's
bylaws provide that Change Technology's board of directors may determine at what
time and under what conditions such inspection should take place.
Accounting Treatment
For financial accounting purposes, the Merger will be treated as a
transfer of assets and liabilities which are under common control. Accordingly,
the assets and liabilities transferred from the Company to Change Technology
will be reflected at their predecessor basis and no gain or loss will be
recognized.
Tax Treatment
For tax purposes, the Merger will be treated as a tax-free plan of
reorganization within the meaning of Section 368(a) of the Code and the
regulations promulgated thereunder.
Vote Required
The vote required to approve the Merger is a majority of the voting
power present (in person or by proxy) and entitled to vote on the Merger,
provided a quorum is present. Abstentions will have the effect of a vote against
the Merger Agreement; however broker non-votes with respect to such merger will
have no effect on the outcome of the vote.
Dissenters' Rights
The Company's shareholders who dissent from the Merger will have the
right to obtain cash payment for their shares of Common Stock, Series A
Preferred Stock or Series B Preferred Stock. Such shareholders shall file with
the Company, prior to or at the Annual Meeting, a written objection to the
proposed Merger. The dissenting shareholders shall then either abstain from
voting on the proposed approval of the Merger or vote against such approval.
They will then be entitled to exercise their right of appraisal, PROVIDED THAT
they send a written notice to the Company within 10 days following the date on
which the Merger is approved. The dissenting shareholders who complied with the
provisions set forth in this paragraph shall be allowed to receive payment for
the fair market value of their shares provided that they follow the procedures
established by the NMBCA. Such provisions are attached as Annex D to this Proxy
Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
MERGER.
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PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Introduction
The Board has selected the firm of KPMG LLP ("KPMG Peat Marwick") to be
the Company's independent certified public accountants for fiscal 2000, subject
to the approval of the stockholders. Before the Board selected KPMG Peat
Marwick, it carefully considered the qualifications of that firm and its
reputation for integrity and for competence in the fields of accounting and
auditing. Grant Thornton LLP ("Grant Thornton") has acted as the independent
certified public accountants for the Company's previous fiscal year.
No representative of Grant Thornton nor KPMG Peat Marwick are expected
to be present at the Annual Meeting.
Due to the Company's limited operations, the accounting services
provided by Grant Thornton were of a limited nature. Because the Company intends
to broaden its operations, on July 13, the Board of Directors and the audit
committee of the Board of Directors decided to replace Grant Thornton with KPMG
Peat Marwick as the Company's independent certified public accountants.
Grant Thornton's reports on the Company's financial statements for the
past two years have neither contained an adverse opinion, a disclaimer of
opinion nor a qualification or modification as to uncertainty, audit scope or
accounting principles. During the Company's two most recent fiscal years and
subsequent interim periods preceding Grant Thornton's dismissal, there have been
no disagreements between the Company and Grant Thornton on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement, if not resolved to Grant Thornton's
satisfaction, would have caused Grant Thornton to make reference to the subject
matter of such disagreement in connection with its report.
At no time during the past two fiscal years and subsequent interim
period preceding such dismissal did Grant Thornton advise the Company: (i) that
the internal controls necessary for the Company to develop reliable financial
statements did not exist; (ii) that information has come to Grant Thornton's
attention that has led it to no longer be able to rely on the representations of
the Company's management or that has made Grant Thornton unwilling to be
associated with the financial statements prepared by the Company's management;
(iii)(a) of the need to expand significantly the scope of Grant Thornton's
audit, or that information has come to its attention, that if further
investigated, may (1) materially impact the fairness or reliability of either: a
previously issued audit report or the underlying financial statements; or the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report (including information that may prevent it from rendering an
unqualified audit report on those financial statements), or (2) cause it to be
unwilling to rely on the representations of the Company's management or be
associated with the Company's financial statements and (b) that due to its
dismissal, or for any other reason, it did not expand the scope of
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its audit or conduct further investigation; or (iv)(a) that information has come
to Grant Thornton's attention that it has concluded materially impacts the
fairness or reliability of either (1) a previously issued audit report or the
underlying financial statements or (2) the financial statements issued or to be
issued covering the fiscal period(s) subsequent to the date of the most recent
financial statements covered by an audit report (including information that,
unless resolved to Grant Thornton's satisfaction, would prevent him from
rendering an unqualified audit report on those financial statements) and (b) due
to its dismissal, or for any other reason, the issue had not been resolved to
Grant Thornton's satisfaction prior to its dismissal.
At no time during the past two fiscal years or any subsequent interim
period prior to the selection of KPMG Peat Marwick as the Company's independent
accountant, did the Company consult with KPMG Peat Marwick regarding either the
application of accounting principles to a specified transaction or the type of
audit opinion which might be rendered on the Company's financial statements or
any matter of the sort described above with reference to Grant Thornton.
Vote Required
The vote required for the ratification of the appointment of the
independent certified public accountant is the affirmative vote of a majority of
the voting power present (in person or by proxy) and entitled to vote on such
ratification, provided a quorum is present. Abstentions will have the same
effect as votes against this item; however, broker non-votes with respect to the
approval of the appointment of the accountant will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
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PROPOSAL 4: APPROVAL OF THE 2000 STOCK OPTION PLAN
Introduction
The Board has adopted and in this proposal is requesting shareholder
approval of the Company's 2000 Stock Option Plan (the "Plan").
The Board believes it is in the best interests of the Company and its
shareholders to adopt a stock option plan that allows the Company to attract,
retain, and provide incentives to designated officers and key employees of the
Company while also permitting the Company to obtain tax deductions for
compensation paid or awarded to them.
Section 162(m) of the Code, generally does not allow publicly held
companies to obtain tax deductions for compensation of more than $1 million paid
in any year to their chief executive officer, or any of their other four most
highly compensated executive officers, unless such payments are
"performance-based" in accordance with conditions specified under Section 162(m)
and the related Treasury Regulations. One of those conditions requires the
Company to obtain shareholder approval of the material terms of the performance
goals set by a committee of outside directors. The Board is recommending that
the shareholders approve the Plan as described below. Subject to such approval,
this proposal would enable the Company to make stock option grants and to obtain
tax deductions for such grants, without regard to the limitations of Section
162(m). The Plan is not intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Summary of the Plan
The following description of the Plan is merely a summary of certain
provisions thereof and is qualified in its entirety by the full text of the Plan
attached as Annex E to this Proxy Statement. Annex E is a part of this Proxy
Statement and should be read in conjunction with the following summary.
Purpose
The purpose of the Plan is to provide a means through which the Company
and its Affiliates (as defined in the Plan) may attract able persons to enter
and remain in the employ of the Company and Affiliates and to provide a means
whereby employees, directors and consultants of the Company and its Affiliates
can acquire and maintain Common Stock ownership, thereby strengthening their
commitment to the welfare of the Company and Affiliates and promoting an
identity of interest between shareholders and these directors, employees and
consultants.
Administration
The Plan will be administered by a committee (the "Committee") to be
established by the Board. If the Board does not establish the Committee, the
Plan shall be administered by the Board. The Committee shall be comprised of two
or more members of the Board, each of whom is intended
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to be an Eligible Director (as defined in the Plan), at the time he takes any
action with respect to an award under the Plan; although, the mere fact that the
Committee member fails to qualify as an Eligible Directors shall not invalidate
any award granted under the Plan which would otherwise be valid.
Eligible Participants
Any employee, director or consultant to the Company or an Affiliate is
eligible to participate in the Plan. However, the Company does not presently
plan to allow holders of Warrants to participate in the Plan. The Committee has
the sole and complete authority to determine the participants to whom stock
options shall be granted (a "Participant" or the "Participants").
Shares of Common Stock Authorized under the Plan
The Plan authorizes the grant of stock options to Participants with
respect to a maximum of 20,000,000 shares of the Common Stock, which awards may
be made in the form of (a) non- qualified stock options and (b) stock options
intended to qualify as incentive stock options under Section 422 of the Code
("ISOs"). In any calendar year, a Participant may not receive stock options for
more than 3,000,000 shares of Common Stock, subject to adjustments in a manner
that will not cause the stock options granted under the Plan to fail to qualify
as "performance-based compensation" for purposes of Section 162(m) of the Code.
To the extent the aggregate fair market value (determined as of the date of
grant) of stock for which incentive stock options are exercisable for the first
time by any Participant during any calendar year (under all plans of the
Company) exceeds $100,000, such excess incentive stock options shall be treated
as non-qualified stock options. If any award granted under the Plan is
forfeited, or if an award has expired, terminated or been canceled for any
reason whatsoever (other than by reason of exercise or vesting), then the shares
of Common Stock covered by such award may be granted to another Participant
pursuant to the terms of the Plan, to the maximum extent permitted under Section
162(m) of the Code. As of August 1, 2000, the market value of a share of Common
Stock on the NASDAQ Bulletin Board was $15/8.
Effective Date and Duration of the Plan
The Plan was approved by the Board on March 28, 2000 and will become
effective on the date of its approval by the shareholders. The term during which
awards may be granted under the Plan, if approved, will expire on March 28,
2010.
Stock Option Price
The exercise price per share of Common Stock for each stock option
shall be set by the Committee at the time of grant. The Committee shall be
entitled to set an exercise price below the fair market value of a share of
Common Stock at the date of grant solely in the event of it decides to grant non
qualified stock options to a director of the Company.
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Manner of Exercise and Form Payment
No shares of Common Stock shall be delivered pursuant to any exercise
of an option until payment in full of the aggregate exercise price therefor is
received by the Company. Stock options which have become exercisable may be
exercised by delivery of written notice of exercise to the Committee accompanied
by payment of the stock option price. The stock option price shall be payable in
cash, and if the Committee so permits, partially or completely in shares of
Common Stock valued at the fair market value at the time the stock option is
exercised; PROVIDED, HOWEVER, that such shares are not subject to any pledge or
other security interest and have either been held by the Participant for six
months, previously acquired by the Participant on the open market or meet such
other requirements as the Committee may determine necessary in order to avoid an
accounting earnings charge in respect of the stock option) or, in the discretion
of the Committee, either (i) in other property having a fair market value on the
date of exercise equal to the stock option price, or (ii) by such other method
as the Committee may permit.
Vesting, Stock Option Period and Expiration
Stock options shall vest and become exercisable in such manner and on
such date or dates determined by the Committee and shall expire after such
period, not to exceed ten years, as may be determined by the Committee all as
set forth in an applicable Stock Option Agreement; PROVIDED, that the Committee
shall have the authority to accelerate the exercisability of any outstanding
option at such time and under such circumstances as it, in its sole discretion,
deems appropriate. If a stock option is exercisable in installments, such
installments or portions thereof which become exercisable shall remain
exercisable until the stock option expires. If an incentive stock option is
granted to a Participant who owns stock representing more than ten percent of
the voting power of all classes of stock of the Company, the stock option period
shall not exceed five years from the date of grant of such option and the stock
option price shall be at least 110 percent of the fair market value (on the date
of grant) of the Stock subject to the stock option.
Change of Control or Reorganization
Except to the extent reflected in a particular Stock Option Agreement:
(a) In the event of a Change in Control (as defined in the
Plan), notwithstanding any vesting schedule, all stock options shall become
immediately exercisable with respect to all shares subject to such stock option.
(b) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
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Transferability
Each award and each right under any award, shall be exercisable only by
the Participant during the Participant's lifetime or if permissible under
applicable law, by the Participant's guardian or legal representative. No award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any affiliate; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. The Plan provides for limited exceptions to the non-transferability
of the awards (and the rights attached thereto) received under the Plan, such
exceptions to be inserted in the relevant Stock Option Agreement or amendment
thereto.
Amendment
The Board may amend, alter, suspend, discontinue, or terminate the Plan
or any portion thereof at any time; PROVIDED that no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement applicable to the Plan (including as necessary to prevent the stock
options granted under the Plan from failing to qualify as "performance-based
compensation" for purposes of Section 162(m) of the Code); and PROVIDED FURTHER
that any such amendment, alteration, suspension, discontinuance or termination
that would impair the rights of any Participant or any holder or beneficiary of
any stock option theretofore granted shall not to that extent be effective
without the consent of the affected Participant, holder or beneficiary.
Awards and Anticipated Awards
No awards have been made under the Plan. Awards under the Plan will be
determined by the Committee in its discretion and it is, therefore, not possible
to predict the awards that will be made to particular Participants in the future
under the Plan or the awards that would have been made under the Plan in the
Company's last fiscal year.
Federal Income Tax Consequences Relating to the Plan
The following summary of the federal income tax consequences of the
grant and exercise of stock options, both ISOs and non qualified stock options,
awarded under the Plan, and the disposition of Common Stock purchased pursuant
to the exercise of such stock options, is intended to reflect the current
provisions of the Code and the regulations thereunder. The summary is not
intended to be a complete statement of applicable laws, it does not address
state and local tax considerations nor does it address the tax consequences of
options granted to individual tax payers located outside the U.S. and is not
intended as tax advice to any person. Moreover the U.S. Federal income tax
consequences to any particular individual may differ from those described herein
by reason of the particular circumstances of such individual.
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No income will be realized by an optionee upon grant of a non-qualified
stock option. Upon exercise of a non-qualified stock option, the optionee will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the underlying stock over the option exercise price
(the "Spread") at the time of exercise. The Spread will be deductible by the
Company for federal income tax purposes subject to the possible limitations on
deductibility under Sections 280G and 162(m) of the Code of compensation paid to
executives designated in those sections. The optionee's tax basis in the
underlying shares acquired by exercise of a non-qualified stock option will
equal the exercise price plus the amount taxable as compensation to the
optionee. Upon sale of the shares received by the optionee upon exercise of the
non-qualified stock option, any gain or loss is generally long-term or
short-term capital gain or loss, depending on the holding period. The optionee's
holding period for shares acquired pursuant to the exercise of a non-qualified
stock option will begin on the date of exercise of such option.
Pursuant to currently applicable rules under Section 16(b) of the
Exchange Act, the grant of an option (and not its exercise) to a person who is
subject to the reporting and short-swing profit provisions under Section 16 of
the Exchange Act (a "Section 16 Person") begins the six-month period of
potential short-swing liability. The taxable event for the exercise of an option
that has been outstanding at least six months ordinarily will be the date of
exercise. Under current rules promulgated under Section 16(b), the six month
period of potential short-swing liability may be eliminated if the option grant
(i) is approved in advance by that Company's board of directors (or a committee
composed solely of two or more non-employee directors) or (ii) approved in
advance, or subsequently ratified, by the Company's shareholders no later than
the next annual meeting of shareholders. If the grant satisfies either of the
conditions described in clause (i) or (ii) above, the taxable event will
ordinarily be the date of exercise. However, if an option is exercised by a
Section 16 Person within six months after the date of grant and neither of the
conditions described in clause (i) or (ii) above are satisfied, taxation will be
deferred until the date which is six months after the date of grant, unless the
person has filed a timely election pursuant to section 83(b) of the Code to be
taxed on the date of exercise.
The Code requires that, for ISO treatment, shares acquired through
exercise of an ISO cannot be disposed of before two years from the date of grant
of the option and one year from the date of exercise. ISO holders will generally
incur no federal income tax liability at the time of grant or upon exercise of
such options. However, the spread at exercise will be an "item of tax
preference" which may give rise to "alternative minimum tax" liability for the
taxable year in which the exercise occurs at the time of exercise. If the
optionee does not dispose of the shares before two years following the date of
grant and one year following the date of exercise, the difference between the
exercise price and the amount realized upon disposition of the Shares will
constitute long-term capital gain or loss, as the case may be. Assuming both
holding periods are satisfied, no deduction will be allowed to the Company for
federal income tax purposes in connection with the grant or exercise of the
option. If, within two years following the date of grant or within one year
following the date of exercise, the holder of shares acquired through the
exercise of an ISO disposes of such shares, the optionee will generally realize
ordinary taxable compensation at the time of such disposition equal to the
difference between the exercise price and the lesser of the fair market value of
the stock on the date of initial exercise or the amount realized on the
subsequent disposition, and such amount will generally be deductible by the
Company for federal income tax purposes, subject to the possible
23
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limitations on deductibility under Sections 280G and 162(m) of the Code for
compensation paid to executives designated in those sections.
The payment of an optionee of the exercise price, in full or in part,
with previously acquired shares will not affect the tax treatment of the
exercise described above. No gain or loss generally will be recognized by the
optionee upon the surrender of the previously acquired shares of the Company,
and shares received by the optionee, equal in number to the previously
surrendered shares, will have the same tax basis as the shares surrendered to
the Company and will have a holding period that includes the holding period of
the shares surrendered. The value of shares received by the optionee in excess
of the number of shares surrendered to the Company will be taxable to the
optionee. Such additional shares will have a tax basis equal to the fair market
value of such additional shares as of the date ordinary income is recognized,
and will have a holding period that begins on the date ordinary income is
recognized.
In general, Section 162(m) of the Code denies a publicly held
corporation a deduction for federal income tax purposes for compensation in
excess of $1,000,000 per year per person to its chief executive officer and the
four other officers whose compensation is disclosed in its proxy statement,
subject to certain exceptions. Options will generally qualify under one of these
exceptions if they are granted under a plan that states the maximum number of
shares with respect to which options may be granted to any employee during a
specified period, the exercise price is not less than the fair market value of
the common stock at the time of grant, and the plan under which the options are
granted is approved by stockholders and is administered by a compensation
committee comprised of outside directors. The Plan is intended to satisfy these
requirements with respect to grants of options to covered employees.
Vote Required
The Treasury Regulations require the affirmative vote of a majority of
the votes cast on the issue to approve the Plan, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PLAN.
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OTHER MATTERS
Expenses of Solicitation
This solicitation is being made by the Company. The cost of soliciting
proxies, including the preparation, assembling and mailing of the Notice of
Annual Meeting, Proxy Statement, form of proxy and other soliciting material, as
well as the cost of forwarding such material to the beneficial owners of the
shares of record, will be borne by the Company. Directors, officers and
employees of the Company may also solicit proxies, but without compensation, by
further mailings, personal conversations or by telephone. The Company may
reimburse brokers and others holding shares in their names or in the names of
nominees for their reasonable out-of-pocket expenses incurred in sending the
proxy materials to principals and beneficial owners. The Company may also use
the services of paid solicitors.
Shareholder Proposals for the 2001 Annual Meeting
From time to time, shareholders present proposals which may be proper
subject for inclusion in the proxy statement and for consideration at the
Company's Annual Meeting. To be considered, proposals must be submitted on a
timely basis. Proposals for the Company's Annual Meeting of Shareholders to be
held next year must be received by the Company no later than February 16, 2000
and must otherwise comply with Rule 14a-8 under the Exchange Act.
Annual Report on Form 10-KSB
Shareholders will receive with this proxy statement a copy of the
Company's annual report on Form 10-KSB, including the financial statements and
the financial statement schedules, as filed with the SEC by the Company for the
fiscal year ended December 31, 1999. Shareholders wishing to receive additional
copies may request so in writing at the following address:
Attention: Cary S. Fitchey
Arinco Computer Systems Inc.
20 Dayton Avenue
Greenwich, Connecticut 06830
(203) 661-6942
25
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Other Business
As of the date of this Proxy Statement, the Board is not aware of any
matters that will be presented for action at the Annual Meeting other than those
described above. Should other business be properly brought before the Annual
Meeting, it is intended that the accompanying proxy will be voted thereon in the
discretion of the person named as proxies.
Date: August 11, 2000 By Order of the Board of Directors,
/s/ William P. O'Donnell
------------------------
William P. O'Donnell
Secretary
26
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Annex A
AGREEMENT AND PLAN OF MERGER
OF
ARINCO COMPUTER SYSTEMS INC.
(a New Mexico corporation)
WITH AND INTO
PANGEA INTERNET, INC.
(a Delaware corporation)
Agreement and Plan of Merger entered into on April __, 2000 by Arinco
Computer Systems Inc., a business corporation of the State of New Mexico, and
approved by resolution adopted by its Board of Directors on said date, and
entered into on March 28, 2000 by Pangea Internet, Inc., a business corporation
of the State of Delaware, and approved by resolution adopted by its Board of
Directors on said date.
WHEREAS Arinco Computer Systems Inc. is a business corporation of the
State of New Mexico with its registered office therein located at 104 South
Capitol, Suite 8, City of Santa Fe, County of Santa Fe; and
WHEREAS the total number of shares of stock which Arinco Computer
Systems Inc. has authority to issue is 50,000,000 shares, 5,000,000 of which are
preferred stock of par value $0.10 each, and 45,000,000 of which are common
stock of par value of $0.01 each; and
WHEREAS Pangea Internet, Inc. is a business corporation of the State of
Delaware with its registered office therein located at 9 Loockerman Street, City
of Dover, County of Kent; and
WHEREAS the total number of shares of stock which Pangea Internet, Inc.
has authority to issue is 505,000,000 shares, 500,000,000 of which are common
stock, par value $0.01 each, and 5,000,000 of which are preferred stock, par
value $0.10 each; and
WHEREAS the Business Corporation Act of the State of New Mexico permits
a merger of a business corporation of the State of New Mexico with and into a
business corporation of another jurisdiction; and
WHEREAS the General Corporation Law of the State of Delaware permits
the merger of a business corporation of another jurisdiction with and into a
business corporation of the State of Delaware; and
WHEREAS Arinco Computer Systems Inc. and Pangea Internet, Inc. and the
respective Boards of Directors thereof declare it advisable and to the
advantage, welfare, and best interests of said corporations and their respective
stockholders to merge Arinco Computer Systems
<PAGE>
Inc. with and into Pangea Internet, Inc. pursuant to the provisions of the
Business Corporation Act of the State of New Mexico and pursuant to the
provisions of the General Corporation Law of the State of Delaware upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by Arinco
Computer Systems Inc. and approved by a resolution adopted by its Board of
Directors and being thereunto duly entered into by Pangea Internet, Inc. and
approved by a resolution adopted by its Board of Directors, the Agreement and
Plan of Merger and the terms and conditions thereof and the mode of carrying the
same into effect, together with any provisions required or permitted to be set
forth therein, are hereby determined and agreed upon as hereinafter in this Plan
and Agreement set forth.
1. Arinco Computer Systems Inc. and Pangea Internet, Inc. shall,
pursuant to the provisions of the Business Corporation Act of the State of New
Mexico and the provisions of the General Corporation Law of the State of
Delaware, be merged with and into a single corporation, to wit, Pangea Internet,
Inc., which shall be the surviving corporation from and after the effective time
of the merger, and which is sometimes hereinafter referred to as the "surviving
corporation", and which shall continue to exist as said surviving corporation
under its present name pursuant to the provisions of the General Corporation Law
of the State of Delaware. The separate existence of Arinco Computer Systems
Inc., which is sometimes hereinafter referred to as the "terminating
corporation", shall cease at said effective time in accordance with the
provisions of the Business Corporation Law of the State of New Mexico.
2. The present Certificate of Incorporation of Pangea Internet, Inc.,
will be the the Certificate of Incorporation of the surviving corporation until
changed, altered or amended in the manner prescribed by the provisions of the
General Corporation Law of the State of Delaware.
3. The present by-laws of Pangea Internet, Inc.will be the by-laws of
the surviving corporation and will continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the provisions of the General Corporation Law of the State of Delaware.
4. The directors and officers in office of Pangea Internet, Inc. at the
effective time of the merger shall be the members of the first Board of
Directors and the first officers of the surviving corporation, all of whom shall
hold their directorships and offices until the election and qualification of
their respective successors or until their tenure is otherwise terminated in
accordance with the by-laws of the surviving corporation.
5. Each issued share of common stock, series A preferred stock and
series B preferred stock of the terminating corporation shall, at the effective
time of the merger, be converted into one share of common stock, series A
preferred stock and series B preferred stock, respectively, of the surviving
corporation. The issued shares of common stock, series A preferred stock and
series B preferred stock of the surviving corporation shall not be converted or
exchanged in any manner, but shall be canceled and rendered null and void. Each
warrant to purchase shares of common stock
2
<PAGE>
of the terminating corporation shall, at the effective time of the merger, be
converted into one warrant to purchase the same number of shares of common stock
of the surviving corporation.
6. In the event that this Agreement and Plan of Merger shall have been
fully approved and adopted upon behalf of the terminating corporation in
accordance with the provisions of the Business Corporation Act of the State of
New Mexico and upon behalf of the surviving corporation in accordance with the
provisions of the General Corporation Law of the State of Delaware, the said
corporations agree that they will cause to be executed and filed and recorded
any document or documents prescribed by the laws of the State of New Mexico and
by the laws of the State of Delaware, and that they will cause to be performed
all necessary acts within the State of New Mexico and the State of Delaware and
elsewhere to effectuate the merger herein provided for.
7. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation are hereby authorized, empowered,
and directed to do any and all acts and things, and to make, execute, deliver,
file, and record any and all instruments, papers, and documents which shall be
or become necessary, proper, or convenient to carry out or put into effect any
of the provisions of this Agreement and Plan of Merger or of the merger herein
provided for.
3
<PAGE>
IN WITNESS WHEREOF, this Agreement and Plan of Merger is hereby
executed upon behalf of each of the constituent corporations parties thereto.
Dated: ______________, 2000
ARINCO COMPUTER SYSTEMS INC.
By: _______________________________________
Name: Cary S. Fitchey
Title: President and Chief Executive
Officer
PANGEA INTERNET, INC.
By: _______________________________________
Name: Cary S. Fitchey
Title: President and Chief Executive
Officer
4
<PAGE>
CERTIFICATE OF SECRETARY OF PANGEA INTERNET, INC.
The undersigned, being the Secretary of Pangea Internet, Inc., does
hereby certify that a meeting of the Board of Directors has been held at which
approval has been given to the adoption of the foregoing Agreement and Plan of
Merger by the holders of all of the outstanding stock of said corporation, in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware
Dated: ______________, 2000
_____________________________________
William P. O'Donnell, Secretary
PANGEA INTERNET, INC.
5
<PAGE>
Annex B
CERTIFICATE OF INCORPORATION
OF
PANGEA INTERNET, INC.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware (the "General Corporation
Law"), certifies as follows:
1. Name. The name of the corporation is Pangea Internet, Inc. (the
"Corporation").
2. Address; Registered Office and Agent. The address of the Corporation's
registered office is 9 East Loockerman Street, City of Dover, County of Kent,
State of Delaware; and its registered agent at such address is National
Corporate Research Ltd.
3. Purposes. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law.
4. Number of Shares; Designations and Powers, Preferences and Rights and
Qualifications, Limitations and Qualifications, Limitations or Restrictions
thereof.
4.1 Number of Shares. The total number of shares of stock that the
Corporation shall have authority to issue is: five hundred five million
(505,000,000), five hundred million (500,000,000) of which shall be shares of
Common Stock of the par value of one cent ($.01) each and five million
(5,000,000) of which shall be shares of Preferred Stock of par value of ten
cents ($.10) each.
4.2 The designation, relative rights, preferences and limitations
of the shares of each class are as follows:
1
<PAGE>
4.2.1 The shares of Preferred Stock may be issued from time
to time in one or more series of any number of shares, provided that the
aggregate number of shares issued and not cancelled of any and all such series
shall not exceed the total number of shares of Preferred Stock hereinabove
authorized, and with distinctive serial designations, all as shall hereafter be
stated and expressed in the resolution or resolutions providing for the issue of
such shares of Preferred Stock from time to time adopted by the Board of
Directors of the Corporation (the "Board") pursuant to authority so to do which
is hereby vested in the Board. Each series of shares of Preferred Stock (a) may
have such voting powers, full or limited, or may be without voting powers; (b)
may be subject to redemption at such time or times and at such prices; (c) may
be entitled to receive dividends (which may be cumulative or non-cumulative) at
such rate or rates, on such conditions and at such times, and payable in
preference to, or in such relation to, the dividends payable on any other class
or classes or series of stock; (d) may have such rights upon the dissolution of,
or upon any distribution of the assets of, the Corporation; (e) may be made
convertible into or exchangeable for, shares of any other class or classes or of
any other series of the same or any other class or classes of shares of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; (f) may be entitled to the benefit of a sinking fund to be applied
to the purchase or redemption of shares of such series in such amount or
amounts; (g) may be entitled to the benefit of conditions and restrictions upon
the creation of indebtedness of the Corporation or any subsidiary, upon the
issue of any additional shares (including additional shares of such series or of
any other series) and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other acquisition by the
Corporation or any subsidiary of, any outstanding shares of the Corporation and
(h) may have such other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof; all as shall be
stated in said resolution or resolutions
2
<PAGE>
providing for the issue of such shares of Preferred Stock. Any of the voting
powers, designations, preferences, rights and qualifications, limitations or
restrictions of any such series of Preferred Stock may be made dependent upon
facts ascertainable outside of the resolution or resolutions providing for the
issue of such Preferred Stock adopted by the Board pursuant to the authority
vested in it by this Section 4.2.1, provided that the manner in which such facts
shall operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such series of Preferred Stock is
clearly and expressly set forth in the resolution or resolutions providing for
the issue of such Preferred Stock. The term "facts" as used in the next
preceding sentence shall have the meaning given to it in section 151(a) of the
General Corporation Law. Shares of Preferred Stock of any series that have been
redeemed (whether through the operation of a sinking fund or otherwise) or that
if convertible or exchangeable, have been converted into or exchanged for shares
of any other class or classes shall have the status of authorized and unissued
shares of Preferred Stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of shares of Preferred Stock to be created by
resolution or resolutions of the Board or as part of any other series of shares
of Preferred Stock, all subject to the conditions or restrictions on issuance
set forth in the resolution or resolutions adopted by the Board providing for
the issue of any series of shares of Preferred Stock.
4.2.2 Subject to the provisions of any applicable law or of
the By-laws of the Corporation, as from time to time amended, with respect to
the closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote and except as otherwise provided
by law or by the resolution or resolutions providing for the issue of any series
of shares of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess voting power for the election of directors and for all
other purposes, each holder of record of shares of
3
<PAGE>
Common Stock being entitled to one vote for each share of Common Stock standing
in his or her name on the books of the Corporation. Except as otherwise provided
by the resolution or resolutions providing for the issue of any series of shares
of Preferred Stock, the holders of shares of Common Stock shall be entitled, to
the exclusion of the holders of shares of Preferred Stock of any and all series,
to receive such dividends as from time to time may be declared by the Board. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment shall have been made to the
holders of shares of Preferred Stock of the full amount to which they shall be
entitled pursuant to the resolution or resolutions providing for the issue of
any series of shares of Preferred Stock, the holders of shares of Common Stock
shall be entitled to share, ratably according to the number of shares of Common
Stock held by them, in all remaining assets of the Corporation available for
distribution to its stockholders.
4.2.3 Subject to the provisions of this Certificate of
Incorporation and except as otherwise provided by law, the stock of the
Corporation, regardless of class, may be issued for such consideration and for
such corporate purposes as the Board may from time to time determine.
4.2.4 The Corporation shall hereby create a series of
Preferred Stock which series shall be designated as "Series A Preferred Stock"
(the "Series A Preferred Stock"). The number of shares initially constituting
the Series A Preferred Stock shall be three hundred thousand (300,000). The
rights, preferences, privileges and restrictions granted to and imposed on the
Series A Preferred Stock are as set forth below in paragraphs (a) through (f).
(a) Dividends. Shares of Series A Preferred
Stock shall be entitled to cumulative cash dividends out of any funds legally
available therefor, as and when declared and paid thereon in the discretion of
the Board at the rate of $0.06 per share (adjusted to take into account stock
splits, combinations and other similar transactions affecting the Series A
Preferred Stock),
4
<PAGE>
payable annually on May 31 commencing on May 31, 2000. Such dividends shall
accrue on each share from the date of its original issue and shall accrue from
day to day, whether or not earned or declared. Such dividends shall be
cumulative so that if such dividends in respect of any previous or current
annual dividend period, at the annual rate specified above, shall not have been
paid or declared and a sum sufficient for the payment thereof set apart, the
deficiency shall first be fully paid or set apart before any dividend shall be
paid on or declared and set apart for the Common Stock or any other series of
preferred stock heretofore or hereafter issued. Any accumulation of dividends on
the Series A Preferred Stock shall not bear interest. In the event that
dividends declared are not sufficient to satisfy the stated cumulative dividend
on the Series A Preferred Stock (or on the Series A Preferred Stock and any
other series of preferred stock of the Corporation heretofore or hereafter
issued having a stated dividend), the holders of the Series A Preferred Stock
will share ratably in the dividend (in the case of two or more series having a
stated dividend on the basis of its relative stated dividend). Notwithstanding
anything herein to the contrary, holders of the Series A Preferred Stock shall
not be entitled to payment of any accrued but unpaid dividends existing at the
time of a voluntary conversion of the Series A Preferred Stock pursuant to the
terms of Section 4.2.4(d)(i) hereunder, and the right of the holders of Series A
Preferred Stock to such accrued but unpaid dividends shall be extinguished at
such time.
(b) Liquidated Preference. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation ("Liquidation"), the holders of Series A Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
are capital or surplus of any nature, before any payment shall be made or any
assets distributed to the holders of Common Stock, an amount equal to $1.00 per
share (adjusted to take into account stock splits, combinations and other
similar transactions affecting the Series A Preferred Stock) plus
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any declared or accrued but unpaid dividends to the holders of Series A
Preferred Stock, and no more. If upon any Liquidation the assets of the
Corporation to be distributed are insufficient to permit the payment to all
holders of Series A Preferred Stock and any other series of Preferred Stock
heretofore or hereafter issued of their full preferential amounts, the entire
assets of the Corporation to be distributed shall be distributed ratably among
the holders of Series A Preferred Stock and any other such series in accordance
with each holder's liquidation preference. A consolidation or merger of the
Corporation with or into any other corporation or corporations or a sale of the
Corporation's assets shall not be deemed to be a liquidation, dissolution or
winding up of the Corporation as those terms are used in this paragraph.
(c) Voting Rights. Except as otherwise provided
by the laws of the State of Delaware or as hereinafter specifically set forth,
each share of the Series A Preferred Stock shall have one vote which may be cast
on all matters to come before the shareholders of the Corporation, as provided
by the laws of the State of Delaware, the Certificate of Incorporation and/or
the bylaws of the Corporation. Except as otherwise provided by the laws of the
State of Delaware or as hereinafter specifically set forth, the holders of the
outstanding shares of Series A Preferred Stock shall vote with the holders of
all outstanding shares of capital stock, and not as a separate class or series.
(d) Conversion. The holders of the Series A
Preferred Stock shall have the following conversion rights (the "Conversion
Rights"):
(i) Right to Convert. Each share of
Series A Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such shares, at the office of
the Corporation or any transfer agent for the Corporation, into one fully paid
and nonassessable share of Common Stock.
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(ii) Conversion Price. Each share of
Series A Preferred Stock shall be convertible into one share of Common Stock
(hereinafter "Conversion Ratio"). The Initial Conversion Price shall be subject
to adjustment from time to time as provided herein.
(iii) Mechanics of Voluntary Conversion.
Before any holder of Series A Preferred Stock shall be entitled to voluntarily
convert the same into shares of Common Stock, he shall surrender the
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series A Preferred Stock or Common Stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the number of shares of Series A Preferred Stock
being converted. Thereupon the Corporation shall promptly issue and deliver to
such holder of Series A Preferred Stock or his designees by first class mail at
the address of such holder as set forth on the books of the Corporation's
transfer agent a certificate or certificates for the number of shares of Common
Stock to which he shall be entitled to as aforesaid and a certificate or
certificates for any shares of Series A Preferred Stock that are not 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 A
Preferred Stock to be converted, 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.
(iv) Adjustment for Stock Splits and
Combinations. If the Corporation shall at any time or from time to time effect a
subdivision of the outstanding Common Stock, the Conversion Ratio then in effect
immediately before that subdivision shall be proportionately decreased, and
conversely, if the Corporation shall at any time or from time to time
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combine the outstanding shares of Common Stock, the Conversion Ratio then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this subparagraph (d) shall become effective at the close
of business on the date of the subdivision or combination becomes effective.
(v) Adjustment for Certain Dividends
and Distributions. In the event of the Corporation at any time, or from time to
time shall make or issue, or fix a record date for the determination of holders
of Common Stock or holders of any other stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock or stock
convertible into or exchangeable for Common Stock then and in each such event
the Conversion Ratio then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, or by multiplying the Conversion Ratio
then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date,
and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution and/or the number of shares of
Common Stock issuable upon conversion or exchange of stock issuable in
payment of such dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor,
the Conversion Ratio shall be recomputed accordingly as of the close of
business on such record
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date and thereafter the Conversion Ratio shall be adjusted pursuant to
this Section 4.2.4(d)(v) as of the time of actual payment of such
dividends or distributions.
(vi) Adjustments for Other Dividends and
Distributions. In the event the Corporation at any time or from time to time
after the Commitment Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock or shares of stock convertible into or exchangeable for Common
Stock, then and in each such event provision shall be made so that the holders
of Series A Preferred Stock shall receive upon conversion thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation which they would have received had their Series A
Preferred Stock been converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments with respect to such
securities as are called for during such period under this Section 4.2.4(d)(v)
with respect to the rights of the holders of the Series A Preferred Stock.
(vii) Adjustment for Reorganization,
Reclassification, Exchange and Substitution. If the Common Stock issuable upon
the conversion of the Series A Preferred Stock shall be changed into the same or
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
4.2.4(d)(v)), then and in each such event the holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such
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reorganization, reclassification or other change, by holders of the number of
shares of Common Stock into which such shares of Series A Preferred Stock might
have been converted immediately prior to such reorganization, reclassification
or change, giving application to all adjustments with respect to such securities
as are called for under this Section 4.2.4(d)(v) with respect to the rights of
the holders of the Series A Preferred Stock.
(viii) Mergers, Consolidations or Sale of
Assets. If at any time or from time to time there shall be a merger or
consolidation of the Corporation with or into another corporation, or the sale
of all or substantially all of the Corporation's properties and assets to any
other person, then, as a part of such merger, consolidation or sale, provision
shall be made so that the holders of the Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A Preferred
Stock, the number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such merger, consolidation, or sale. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4.2.4(d) (including adjustment of the Conversion
Ratio then in effect and the number of shares purchasable upon conversion of the
Series A Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(ix) Fractional Shares. No fractional
shares of Common Stock shall be issued upon conversion of Series A Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to the product of such fraction
multiplied by the fair market value of one share of the Corporation's Common
Stock on the date of conversion, as determined in good faith by the Board of
Directors.
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(x) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient to effect
the conversion or all outstanding shares of the Series A Preferred Stock, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(xi) Certificate of Adjustment. Whenever
the amount of common shares or other securities deliverable upon the conversion
of shares of Series A Preferred Stock shall be adjusted pursuant to the
provisions hereof, the Corporation shall deliver to each holder of Series A
Preferred Stock, not later than 30 days after the date of such adjustment, a
certificate signed by the President or one of the Vice Presidents of the
Corporation, and by the Treasurer or one of the Assistant Treasurers of the
Corporation, stating the adjusted amount of its common shares or other
securities deliverable per share of Series A Preferred Stock calculated to the
nearest one one- hundredth and setting forth in reasonable detail the method of
calculation and the facts requiring such adjustment and upon which such
calculation is based. Each adjustment shall remain in effect until a subsequent
adjustment hereunder is required.
(e) Redemption. Holder of Series A Preferred
Stock shall not be entitled to demand redemption of any of the shares so held.
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(f) Protective Limitation.
(i) Senior Series. So long as any
shares of Series A Preferred Stock shall remain unredeemed and outstanding the
Corporation shall not, without the advance affirmative vote or written consent
of the holders of at least 66 2/3% of the then outstanding shares of Series A
Preferred Stock, taken together as a class, issue any other class of preferred
or special shares having any preference or priority as to dividends or assets
senior to such preference or priority of the Series A Preferred Stock, or
authorize or issue shares of any class of stock or any bonds, debentures, notes
or other obligations convertible into or exchangeable for, or having option
rights to purchase, any shares of any class of stock of this Corporation having
any preference or priority as to dividends or assets senior to such preference
or priority of the Series A Preferred Stock.
(ii) Changes. So long as any shares of
Series A Preferred Stock shall remain unredeemed and outstanding, the
Corporation shall not, without the advance affirmative vote or written consent
of the holders of at least 66 2/3% of the then outstanding shares of Series A
Preferred Stock, adversely change any of the rights and preferences of the
Series A Preferred Stock.
4.2.5 The Corporation shall hereby create a series of
Preferred Stock which series shall be designated as "Series B Preferred Stock"
(the "Series B Preferred"). The number of shares initially constituting the
Series B Preferred Stock shall be four million (4,000,000). The rights,
preferences, privileges and restrictions granted to and imposed on the Series B
Preferred are as set forth below in paragraphs (a) through (h).
(a) 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
the Corporation provided that no dividend or distribution shall be declared or
paid on any shares of the Common Stock unless at the same time an equivalent
dividend or
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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 4.2.5(d) hereof immediately
prior to the record date of such dividend or distribution.
(b) Liquidation Preference. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation (each a "Distribution Event"):
(i) 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 (x) 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 (y) 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 4.2.5(d) 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
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dividend, stock splits, recapitalization, reorganizations and other similar
transactions with respect to the Series B Preferred).
(ii) 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 4.2.5(b).
(c) 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 4.2.5(d) 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 4.2.5(c) 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).
(d) Conversion. The holders of the Series B
Preferred have conversion rights as follows (the "Conversion Rights"):
(i) 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
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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.
(ii) 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 (x) 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 (y) 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 4.25(d)(iii). 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
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such Series B Preferred until immediately prior to the closing of such sale of
securities. Notwithstanding the foregoing provisions of this Section
4.2.5(d)(ii), 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.
(iii) 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 4.2.5(d)(ii), the outstanding shares of Series B
Preferred shall be 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
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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.
(iv) 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.
(v) Adjustment of Conversion Price. The
Conversion Price of the Series B Preferred shall be subject to adjustment from
time to time as follows:
(A) 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
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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.
(B) 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 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.
(C) 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.
(D) In case any event shall
occur as to which the other provisions of this Section 4.2.5(d)(v) 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
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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 4.2.5(d), necessary to preserve, without
dilution, the conversion rights of the holders of Series B Preferred set forth
in this Section 4.2.5(d). 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.
(E) The provisions of Sections
4.2.5(d)(v)(A), (B), (C) and (D) shall similarly apply to successive events of
the type described therein. All calculations under this Section 4.2.5(d)(iv)
shall be made to the nearest cent or to the nearest one hundredth (1/100) of a
share, as the case may be.
(vi) 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.
(vii) 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 provisions of this
Section 4.2.5(d) and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
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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.
(viii) Certificate as to Adjustments. Upon
the occurrence of each adjustment or readjustment of the Conversion Rate for
Series B Preferred pursuant to this Section 4.2.5(d), 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 (A) all such adjustments and readjustments, (B) the Conversion
Rate at the time in effect, and (C) 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.
(ix) 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 4.2.5(b) hereof, the Corporation shall mail to
each holder of Series B Preferred at least 30 days prior to the record date
applicable to such
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distribution a notice (A) certifying as to (i) the anticipated aggregate
proceeds available for distribution to holders of Series B Preferred and Common
Stock, (ii) the amount expected to be distributed pursuant to Section 4.2.5(b)
in respect of each share of each outstanding series of Series B Preferred and
each share of Common Stock and (iii) the amount expected to be distributed
pursuant to Section 4.2.5(b) 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 (B) 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.
(x) Notices. Any notice required by the
provisions of this Section 4.2.5(d) 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.
(xi) Payment of Taxes. The Corporation
will pay all taxes (other than taxes based upon income) and other governmental
charges that may be 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.
(e) Redemption.
(i) 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
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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.
(ii) 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 (A) 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
(B) 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 (C) the number of shares of Common
Stock issuable pursuant to the terms of all warrants referred to in the
Securities Purchase
22
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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.
(iii) Effect of Redemption. Upon such
date as the Board of Directors shall designate for payment of the redemption
price (unless the Corporation 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.
(iv) Limitation On Redemption and
Dividends. The option and obligation of the Corporation to redeem shares of the
Series B Preferred Stock under Sections 4.2.5(e)(i) and (ii) 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 Section 4.2.5(e)(ii) hereof, then, until
such shares are redeemed, dividends shall accrue on all
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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.
(f) 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:
(i) 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;
(ii) 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;
(iii) 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
(iv) 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).
24
<PAGE>
(g) Status of Converted Stock. In the event any
shares of Series B Preferred shall be converted pursuant to Section 4.2.5(b)(iv)
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.
(h) Absence of Charter Amendment. To the extent
that the rights of the holders of Series B Preferred set forth in Sections
4.2.5(b)(i), (ii) and (iii) 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.
5. Name and Mailing Address of Incorporator. The name and mailing address
of the incorporator are: Sophia Lee, Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, New York 10019-6064.
6. Election of Directors. Members of the Board may be elected either by
written ballot or by voice vote.
7. Limitation of Liability. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as
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a director, provided that this provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) under
section 174 of the General Corporation Law or (d) for any transaction from which
the director derived any improper personal benefits.
Any repeal or modification of the foregoing provision shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
8. Indemnification.
8.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Section 8.
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8.2 The Corporation shall, from time to time, reimburse or advance
to any director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; PROVIDED, HOWEVER, that, if required by
the General Corporation Law, such expenses incurred by or on behalf of any
director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or reimbursement or advancement of expenses may have or hereafter be entitled
under any statute, this Certificate of Incorporation, the By-laws of the
Corporation (the "By-laws"), any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.4 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall continue
as to a person who has ceased to be a director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
8.5 The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is
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or was serving at the request of the Corporation as a director, officer,
employee or agent of an Other Entity, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under the provisions of
this Section 8, the By-laws or under section 145 of the General Corporation Law
or any other provision of law.
8.6 The provisions of this Section 8 shall be a contract between
the Corporation, on the one hand, and each director and officer who serves in
such capacity at any time while this Section 8 is in effect and any other person
entitled to indemnification hereunder, on the other hand, pursuant to which the
Corporation and each such director, officer, or other person intend to be, and
shall be, legally bound. No repeal or modification of this Section 8 shall
affect any rights or obligations with respect to any state of facts then or
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
8.7 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by any person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdic tion. The burden of
proving that such indemnification or reimbursement or advancement of expenses is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board, its independent legal counsel and its
stockholders) to have made a determina tion prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Corporation
(including its Board, its independent legal counsel and its stockholders) that
such person is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute
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a defense to the action or create a presumption that such person is not so
entitled. Such a person shall also be indemnified for any expenses incurred in
connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 Any director or officer of the Corporation serving in any
capacity of (a) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly, by the
Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
8.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED, HOWEVER, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be determined
by the law in effect at the time indemnification or reimbursement or advancement
of expenses is sought.
9. Adoption, Amendment and/or Repeal of By-Laws. The Board may from time
to time adopt, amend or repeal the By-laws of the Corporation; PROVIDED,
HOWEVER, that any By-laws
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adopted or amended by the Board may be amended or repealed, and any By-laws may
be adopted, by the stockholders of the Corporation by vote of a majority of the
holders of shares of stock of the Corporation entitled to vote in the election
of directors of the Corporation.
WITNESS the signature of this Certificate this ____ day of April, 2000.
______________________________
Sophia Lee
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PANGEA INTERNET, INC.
Pangea Internet, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation by a meeting of
its members, filed with the minutes of the Board, duly adopted, pursuant to
Sections 141 and 242 of the General Corporation Law of the State of Delaware
(the "GCL"), resolutions setting forth this proposed amendment to the
Certificate of Incorporation of said Corporation and declaring said amendment to
be advisable and directing that such amendment be presented to the shareholders
of the Corporation for consideration and approval;
SECOND: That the sole stockholder of the Corporation has duly approved
said proposed amendment in accordance with Section 242 of the GCL by executing a
Written Consent of Sole Stockholder in Lieu of Meeting in accordance with
Section 228 of the GCL.
THIRD: Section 1 of the Corporation's Certificate of Incorporation is
hereby deleted in its entirety and substituted in lieu thereof with the
following section:
"1. NAME. The name of the corporation is Change Technology
Partners, Inc. (the "Corporation")."
<PAGE>
IN WITNESS WHEREOF, PANGEA INTERNET, INC. has caused this Certificate
to be signed by its authorized officer and duly attested to on this 17th day of
July, 2000.
ATTEST PANGEA INTERNET, INC.
By: /s/ Edward D. Nelson By: /s/ Cary S. Fitchey
--------------------------- ----------------------------
Name: Edward D. Nelson Name: Cary S. Fitchey
Title: Assistant Secretary Title: President and Chief
Executive Officer
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Annex C
BY-LAWS
of
CHANGE TECHNOLOGY PARTNERS, INC.
A Delaware Corporation
------------------------
ARTICLE 1.
DEFINITIONS
-----------
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as amended
from time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.7 "Corporation" means Pangea Internet, Inc.
1.8 "Directors" means directors of the Corporation.
1.9 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
1.10 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
<PAGE>
1.11 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.12 "President" means the President of the Corporation.
1.13 "Secretary" means the Secretary of the Corporation.
1.14 "Stockholders" means stockholders of the Corporation.
1.15 "Treasurer" means the Treasurer of the Corporation.
1.16 "Vice President" means a Vice President of the Corporation.
ARTICLE 2.
STOCKHOLDERS
------------
2.1 Place of Meetings. Every meeting of Stockholders shall be held at
the office of the Corporation or at such other place within or without the State
of Delaware as shall be specified or fixed in the notice of such meeting or in
the waiver of notice thereof.
2.2 Annual Meeting. A meeting of Stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such business day as may be determined by the Board and designated in the
notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual
meeting of Stockholders for the election of Directors and the transaction of
other business is not held within the months specified in Section 2.2 hereof,
the Board shall call a meeting of Stockholders for the election of Directors and
the transaction of other business as soon thereafter as convenient.
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<PAGE>
2.4 Other Special Meetings. A special meeting of Stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute, may be called at any time by the Board or by the
President or by the Secretary. At any special meeting of Stockholders only such
business may be transacted as is related to the purpose or purposes of such
meeting set forth in the notice thereof given pursuant to Section 2.6 hereof or
in any waiver of notice thereof given pursuant to Section 2.7 hereof.
2.5 Fixing Record Date. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof, (ii) unless otherwise provided in the Certificate of
Incorporation to ex press consent to corporate action in writing without a
meeting or (iii) to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting, (y) in the case of
clause (a)(ii) above, more than 10 days after the date upon which the resolution
fixing the record date was adopted by the Board and (z) in the case of clause
(a)(iii) or (b) above, more than sixty days prior to such action. If no such
record date is fixed:
2.5.1 the record date for determining Stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held;
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<PAGE>
2.5.2 the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting
(unless otherwise provided in the Certificate of Incorporation), when
no prior action by the Board is required under the General Corporation
Law, shall be the first day on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded; and when prior action by the
Board is required under the General Corporation Law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the date
on which the Board adopts the resolution taking such prior action; and
2.5.3 the record date for determining stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be
at the close of business on the day on which the Board adopts the
resolution relating thereto.
When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a
4
<PAGE>
meeting, written notice shall be given stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Unless otherwise provided by any statute, the Certificate
of Incorporation or these By-laws, a copy of the notice of any meeting shall be
given, personally or by mail, not less than ten nor more than sixty days before
the date of the meeting, to each Stockholder entitled to notice of or to vote at
such meeting. If mailed, such notice shall be deemed to be given when deposited
in the United States mail, with postage prepaid, directed to the Stockholder at
his or her address as it appears on the records of the Corporation. An affidavit
of the Secretary or an Assistant Secretary or of the transfer agent of the
Corporation that the notice required by this Section 2.6 has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted at the meeting as
originally called. If, however, the adjournment is for more than thirty days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
5
<PAGE>
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Stockholders need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
2.8 List of Stockholders. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, the Stockholder's
agent, or attorney, at the Stockholder's expense, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any Stockholder who is present. The Corporation
shall maintain the Stockholder list in written form or in another form capable
of conversion into written form within a reasonable time. Upon the willful
neglect or refusal of the Directors to produce such a list at any meeting for
the election of Directors, they shall be ineligible for election to any office
at such meeting. The stock ledger shall be the only evidence as to who are the
Stockholders entitled to examine the stock ledger, the list of Stockholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
2.9 Quorum of Stockholders; Adjournment. Except as otherwise provided
by any statute, the Certificate of Incorporation or these By-laws, the holders
of one-third of all
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<PAGE>
outstanding shares of stock entitled to vote at any meeting of Stockholders,
present in person or represented by proxy, shall constitute a quorum for the
transaction of any business at such meeting. When a quorum is once present to
organize a meeting of Stockholders, it is not broken by the subsequent
withdrawal of any Stockholders. The holders of a majority of the shares of stock
present in person or represented by proxy at any meeting of Stockholders,
including an adjourned meeting, whether or not a quorum is present, may adjourn
such meeting to another time and place. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes; PROVIDED, HOWEVER, that the foregoing shall not limit the
right of the Corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such
7
<PAGE>
shares. Holders of redeemable shares of stock are not entitled to vote after the
notice of redemption is mailed to such holders and a sum sufficient to redeem
the stocks has been deposited with a bank, trust company, or other financial
institution under an irrevocable obligation to pay the holders the redemption
price on surrender of the shares of stock. At any meeting of Stockholders (at
which a quorum was present to organize the meeting), all matters, except as
otherwise provided by statute or by the Certificate of Incorporation or by these
By- laws, shall be decided by a majority of the votes cast at such meeting by
the holders of shares present in person or represented by proxy and entitled to
vote thereon, whether or not a quorum is present when the vote is taken. All
elections of Directors shall be by written ballot unless otherwise provided in
the Certificate of Incorporation. In voting on any other question on which a
vote by ballot is required by law or is demanded by any Stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
Stockholder voting or the Stockholder's proxy and shall state the number of
shares voted. On all other questions, the voting may be VIVA VOCE. Each
Stockholder entitled to vote at a meeting of Stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for such Stockholder by proxy. The validity and
enforceability of any proxy shall be determined in accordance with Section 212
of the General Corporation Law. A Stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or by delivering a proxy in accordance
with applicable law bearing a later date to the Secretary.
2.11 Voting Procedures and Inspectors of Election At Meetings of
Stockholders. The Board, in advance of any meeting of Stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may
8
<PAGE>
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate has been appointed or is able to
act at a meeting, the person presiding at the meeting may appoint, and on the
request of any Stockholder entitled to vote thereat shall appoint, one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of proxies and ballots, (c) count
all votes and ballots, (d) determine and retain for a reasonable period a record
of the disposition of any challenges made to any determination by the
inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. Unless otherwise provided by the
Board, the date and time of the opening and the closing of the polls for each
matter upon which the Stockholders will vote at a meeting shall be determined by
the person presiding at the meeting and shall be announced at the meeting. No
ballot, proxies or votes, or any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery of the State of Delaware upon application by a Stockholder shall
determine otherwise.
2.12 Organization. At each meeting of Stockholders, the President, or
in the absence of the President, the Chairman, or if there is no Chairman or if
there be one and the Chairman is absent, a Vice President, and in case more than
one Vice President shall be present, that Vice President designated by the Board
(or in the absence of any such
9
<PAGE>
designation, the most senior Vice President, based on age, present), shall act
as chairman of the meeting. The Secretary, or in his or her absence, one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
respectively, shall be present, a chairman or a secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of shares of capital stock present in person or represented by proxy
and entitled to vote at the meeting.
2.13 Order of Business. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Every written consent shall bear the
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date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated consent delivered in the manner
required by this Section 2.14, written consents signed by a sufficient number of
holders to take action are delivered to the Corporation as aforesaid. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those Stockholders who have not
consented in writing.
ARTICLE 3.
DIRECTORS
---------
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or the Certificate of
Incorporation or by statute, to be exercised and performed by the Stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of
one or more members. The number of Directors shall be fixed initially by the
incorporator and may thereafter be changed from time to time by action of the
stockholders or by action of the Board. Directors need not be stockholders. Each
Director shall hold office until a successor is elected and qualified or until
the Director's death, resignation or removal.
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3.3 Election. Directors shall, except as otherwise required by statute
or by the Certificate of Incorporation, be elected by a plurality of the votes
cast at a meeting of stockholders by the holders of shares entitled to vote in
the election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, newly created Directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any other reason, including the removal of Directors without
cause, may be filled by the affirmative votes of a majority of the entire Board,
although less than a quorum, or by a sole remaining Director, or may be elected
by a plurality of the votes cast by the holders of shares of capital stock
entitled to vote in the election at a special meeting of stockholders called for
that purpose. A Director elected to fill a vacancy shall be elected to hold
office until a successor is elected and qualified, or until the Director's
earlier death, resignation or removal.
3.5 Resignation. Any Director may resign at any time by written notice
to the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.6 Removal. Subject to the provisions of Section 141(k) of the General
Corporation Law, any or all of the Directors may be removed with or without
cause by vote of the holders of a majority of the shares then entitled to vote
at an election of Directors.
3.7 Compensation. Each Director, in consideration of his or her service
as such, shall be entitled to receive from the Corporation such amount per annum
or such fees for attendance at Directors' meetings, or both, as the Board may
from time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any, incurred by
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such Director in connection with the performance of his or her duties. Each
Director who shall serve as a member of any committee of Directors in
consideration of serving as such shall be entitled to such additional amount per
annum or such fees for attendance at committee meetings, or both, as the Board
may from time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any, incurred by such Director in the performance of
his or her duties. Nothing contained in this Section 3.7 shall preclude any
Director from serving the Corporation or its subsidiaries in any other capacity
and receiving proper compensation therefor.
3.8 Times and Places of Meetings. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of Directors is held, and as soon as
practicable there after, the Board may hold its annual meeting, without notice
of such meeting, for the purposes of organization, the election of officers and
the transaction of other business. The annual meeting of the Board may be held
at any other time and place specified in a notice given as provided in Section
3.11 hereof for special meetings of the Board or in a waiver of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.11 Special Meetings. Special meetings of the Board may be called by
the Chairman, the President or the Secretary or by any two or more Directors
then serving on at
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least one day's notice to each Director given by one of the means specified in
Section 3.14 hereof other than by mail, or on at least three days' notice if
given by mail. Special meetings shall be called by the Chairman, President or
Secretary in like manner and on like notice on the written request of any two or
more of the Directors then serving.
3.12 Telephone Meetings. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
3.13 Adjourned Meetings. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 Notice Procedure. Subject to Sections 3.11 and 3.15 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.
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3.15 Waiver of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these By-laws.
3.16 Organization. At each meeting of the Board, the Chairman, or in
the absence of the Chairman, the President, or in the absence of the President,
a chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.17 Quorum of Directors. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
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3.18 Action by Majority Vote. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4.
COMMITTEES OF THE BOARD
-----------------------
The Board may, by resolution passed by a vote of a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. If a member of a committee
shall be absent from any meeting, or disqualified from voting thereat, the
remaining member or members present and not disqualified from voting, whether or
not such member or members constitute a quorum, may, by a unanimous vote,
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent provided
in the resolution of the Board passed as aforesaid, shall have and may exercise
all the powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
impressed on all papers that may require it,
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but no such committee shall have the power or authority of the Board in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation under section 251 or section 252 of the General
Corporation Law, recommending to the stockholders (a) the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
or (b) a dissolution of the Corporation or a revocation of a dissolution, or
amending the By-laws of the Corporation; and, unless the resolution designating
it expressly so provides, no such committee shall have the power and authority
to declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law. Unless otherwise specified in the resolution of the Board
designating a committee, at all meetings of such committee a majority of the
total number of members of the committee shall constitute a quorum for the
transaction of business, and the vote of a majority of the members of the
committee present at any meeting at which there is a quorum shall be the act of
the committee. Each committee shall keep regular minutes of its meetings. Unless
the Board otherwise provides, each committee designated by the Board may make,
alter and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the Board
conducts its business pursuant to Article 3 of these By-laws.
ARTICLE 5.
OFFICERS
--------
5.1 Positions. The officers of the Corporation shall be a President, a
Secretary, a Treasurer and such other officers as the Board may appoint,
including a Chairman, one or more Vice Presidents and one or more Assistant
Secretaries and Assistant
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Treasurers, who shall exercise such powers and perform such duties as shall be
determined from time to time by the Board. The Board may designate one or more
Vice Presidents as Executive Vice Presidents and may use descriptive words or
phrases to designate the standing, seniority or areas of special competence of
the Vice Presidents elected or appointed by it. Any number of offices may be
held by the same person unless the Certificate of Incorporation or these By-laws
otherwise provide.
5.2 Appointment. The officers of the Corporation shall be chosen by the
Board at its annual meeting or at such other time or times as the Board shall
determine.
5.3 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
5.4 Term of Office. Each officer of the Corporation shall hold office
for the term for which he or she is elected and until such officer's successor
is chosen and qualifies or until such officer's earlier death, resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at such later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any. Any officer elected or appointed by
the Board may be removed at any time, with or without cause, by vote of a
majority of the entire Board. Any vacancy occurring in any office of the
Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
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5.5 Fidelity Bonds. The Corporation may secure the fidelity of any or
all of its officers or agents by bond or otherwise.
5.6 Chairman. The Chairman, if one shall have been appointed, shall
preside at all meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the Board.
5.7 President. The President shall be the Chief Executive Officer of
the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of Directors. The President shall preside at all meetings
of the Stockholders and at all meetings of the Board at which the Chairman (if
there be one) is not present. The President may sign and execute in the name of
the Corporation deeds, mortgages, bonds, contracts and other instruments except
in cases in which the signing and execution thereof shall be expressly delegated
by the Board or by these By-laws to some other officer or agent of the
Corporation or shall be required by statute otherwise to be signed or executed
and, in general, the President shall perform all duties incident to the office
of President of a corporation and such other duties as may from time to time be
assigned to the President by the Board.
5.8 Vice Presidents. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be desig nated by the Board, or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly
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delegated by the Board or by these By-laws to some other officer or agent of the
Corporation, or shall be required by statute otherwise to be signed or executed,
and each Vice President shall perform such other duties as from time to time may
be assigned to such Vice President by the Board or by the President.
5.9 Secretary. The Secretary shall attend all meetings of the Board and
of the Stockholders and shall record all the proceedings of the meetings of the
Board and of the stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required. The Secretary
shall give, or cause to be given, notice of all special meetings of the Board
and of the stockholders and shall perform such other duties as may be prescribed
by the Board or by the President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to impress
the same on any instrument requiring it, and when so impressed the seal may be
attested by the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the President or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its organization
and management, shall see that the reports, statements and other documents
required by statute are properly kept and filed and, in general, shall perform
all duties incident to the office of Secretary of a corporation and such other
duties as may from time to time be assigned to the Secretary by the Board or by
the President.
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5.10 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed in such manner
as shall be determined by the Board and be responsible for the accuracy of the
amounts of all moneys so disbursed; regularly enter or cause to be entered in
books or other records maintained for the purpose full and adequate account of
all moneys received or paid for the account of the Corporation; have the right
to require from time to time reports or state ments giving such information as
the Treasurer may desire with respect to any and all financial transactions of
the Corporation from the officers or agents transacting the same; render to the
President or the Board, whenever the President or the Board shall require the
Treasurer so to do, an account of the financial condition of the Corporation and
of all financial transactions of the Corporation; exhibit at all reasonable
times the records and books of account to any of the Directors upon application
at the office of the Corporation where such records and books are kept; disburse
the funds of the Corporation as ordered by the Board; and, in general, perform
all duties incident to the office of Treasurer of a corporation and such other
duties as may from time to time be assigned to the Treasurer by the Board or the
President.
5.11 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the President.
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ARTICLE 6.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
----------------------------------------------
6.1 Execution of Contracts. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 Loans. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized by the Board so to do, may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by the Board
may be general or confined to specific instances, or otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall
be deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositaries as the Board may select
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or as may be selected by an officer, employee or agent of the Corporation to
whom such power to select may from time to time be delegated by the Board.
ARTICLE 7.
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be impressed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registrar other than the Corporation itself or its employee. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon
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payment of all necessary transfer taxes. Every certificate exchanged, returned
or surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of
any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim
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that may be made against any of them on account of the continued existence of
any such certificate so alleged to have been lost, destroyed, stolen or
mutilated and against any expense in connection with such claim.
7.5 Rules and Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 Restriction On Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or among such stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
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7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such
amounts and at such time or times as it, in its discretion, shall deem
advisable giving due consideration to the condition of the affairs of
the Corporation;
7.7.2 may use and apply, in its discretion, any of the surplus
of the Corporation in purchasing or acquiring any shares of capital
stock of the Corpora tion, or purchase warrants therefor, in accordance
with law, or any of its bonds, debentures, notes, scrip or other
securities or evidences of indebtedness; and
7.7.3 may set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think
proper, as a reserve fund to meet contingencies, or for equalizing
dividends or for the purpose of maintaining or increasing the property
or business of the Corporation, or for any purpose it may think
conducive to the best interests of the Corporation.
ARTICLE 8.
INDEMNIFICATION
---------------
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director
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or officer of any other corporation or in a capacity with comparable authority
or responsibilities for any partnership, joint venture, trust, employee benefit
plan or other enterprise (an "Other Entity"), against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees, disbursements and other charges). Persons
who are not directors or officers of the Corporation (or otherwise entitled to
indemnification pursuant to the preceding sentence) may be similarly indemnified
in respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board at any time specifies that such persons
are entitled to the benefits of this Article 8.
8.2 Advancement of Expenses. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or
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reimbursement or advancement of expenses may have or hereafter be entitled under
any statute, the Certificate of Incorporation, these By-laws, any agreement, any
vote of stockholders or disinterested Directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office.
8.4 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article 8, the Certificate of
Incorporation or under section 145 of the General Corporation Law or any other
provision of law.
8.6 Binding Effect. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any state
of
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facts then or theretofore existing or thereafter arising or any proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.7 Procedural Rights. The rights to indemnification and reimbursement
or advancement of expenses provided by, or granted pursuant to, this Article 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 Service Deemed At Corporation's Request. Any Director or officer of
the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
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8.9 Election of Applicable Law. Any person entitled to be indemnified
or to reimbursement or advancement of expenses as a matter of right pursuant to
this Article 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
ARTICLE 9.
BOOKS AND RECORDS
-----------------
9.1 Books and Records. There shall be kept at the principal office of
the Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books,
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may be kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible written form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
stockholders for inspection.
ARTICLE 10.
SEAL
----
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11.
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
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ARTICLE 12.
PROXIES AND CONSENTS
--------------------
Unless otherwise directed by the Board, the Chairman, the President,
any Vice President, the Secretary or the Treasurer, or any one of them, may
execute and deliver on behalf of the Corporation proxies respecting any and all
shares or other ownership interests of any Other Entity owned by the Corporation
appointing such person or persons as the officer executing the same shall deem
proper to represent and vote the shares or other ownership interests so owned at
any and all meetings of holders of shares or other ownership interests, whether
general or special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid officers may attend
any meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.
ARTICLE 13.
EMERGENCY BY-LAWS
-----------------
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:
13.1 Notice to Board Members. Any one member of the Board or any one of
the following officers: Chairman, President, any Vice President, Secretary, or
Treasurer, may call a meeting of the Board. Notice of such meeting need be given
only to those
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Directors whom it is practicable to reach, and may be given in any practical
manner, including by publication and radio. Such notice shall be given at least
six hours prior to commencement of the meeting.
13.2 Temporary Directors and Quorum. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 Actions Permitted To Be Taken. The Board as constituted in Section
13.2, and after notice as set forth in Section 13.1 may:
13.3.1 prescribe emergency powers to any officer of the
Corporation;
13.3.2 delegate to any officer or Director, any of the powers
of the Board;
13.3.3 designate lines of succession of officers and agents,
in the event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action
to carry on the business of the Corporation.
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ARTICLE 14.
AMENDMENTS
----------
These By-laws may be amended or repealed and new By-laws may be adopted
by a vote of the holders of shares entitled to vote in the election of Directors
or by the Board. Any By-laws adopted or amended by the Board may be amended or
repealed by the Stockholders entitled to vote thereon.
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Annex D
SECTIONS 53-15-3 AND 53-15-4
OF THE
NEW MEXICO STATUTES
53-15-3 Right of Shareholders to Dissent and Obtain Payment for Shares
A. Any shareholder of a corporation may dissent from, and obtain
payment for the shareholder's shares in the event of, any of the following
corporate actions:
(1) any plan of merger or consolidation to which the
corporation is a party, except as provided in Subsection C of this section;
(2) any sale or exchange of all or substantially all of the
property and assets of the corporation not made in the usual and regular course
of its business, including a sale in dissolution, but not including a sale
pursuant to an order of a court having jurisdiction in the premises or a sale
for cash on terms requiring that all or substantially all of the net proceeds of
sale be distributed to the shareholders in accordance with their respective
interests within one year after the date of sale;
(3) any plan of exchange to which the corporation is a party
as the corporation the shares of which are to be acquired;
(4) any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares of the
dissenting shareholder in that it:
(a) alters or abolishes a preferential right of such
shares;
(b) creates, alters or abolishes a right in respect
of the redemption of such shares, including a provision respecting a
sinking fund for the redemption or repurchase of such shares;
(c) alters or abolishes an existing preemptive right
of the holder of such shares to acquire shares or other securities; or
(d) excludes or limits the right of the holder of
such shares to vote on any matter, or to cumulate his votes, except as
such right may be limited by dilution through the issuance of shares or
other securities with similar voting rights; or
(5) any other corporate action taken pursuant to a shareholder
vote with respect to which the articles of incorporation, the bylaws or a
resolution of the board of directors directs that dissenting shareholders shall
have a right to obtain payment for their shares.
<PAGE>
B. (1) A record holder of shares may assert dissenters' rights as to
less than all of the shares registered in his name only if the holder dissents
with respect to all the shares beneficially owned by any one person and
discloses the name and address of the person or persons on whose behalf the
holder dissents. In that event, his rights shall be determined as if the shares
as to which he has dissented and his other shares were registered in the names
of different shareholders.
(2) A beneficial owner of shares who is not the record holder
may assert dissenters' rights with respect to shares held on his behalf, and
shall be treated as a dissenting shareholder under the terms of this section and
Section 53-15-4 NMSA 1978 if he submits to the corporation at the time of or
before the assertion of these rights a written consent of the record holder.
C. The right to obtain payment under this section shall not apply to
the shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.
D. A shareholder of a corporation who has a right under this section to
obtain payment for his shares shall have no right at law or in equity to attack
the validity of the corporate action that gives rise to his right to obtain
payment, nor to have the action set aside or rescinded, except when the
corporate action is unlawful or fraudulent with regard to the complaining
shareholder or to the corporation.
53-15-4 Rights of Dissenting Shareholders
A. Any shareholder electing to exercise his right of dissent shall file
with the corporation, prior to or at the meeting of shareholders at which the
proposed corporate action is submitted to a vote, a written objection to the
proposed corporate action. If the proposed corporate action is approved by the
required vote and the shareholder has not voted in favor thereof, the
shareholder may, within ten days after the date on which the vote was taken or
if a corporation is to be merged without a vote of its shareholders into another
corporation any of its shareholders may, within twenty-five days after the plan
of the merger has been mailed to the shareholders, make written demand on the
corporation, or, or in the case of a merger or consolidation, on the surviving
or new corporation, domestic or foreign, for payment of the fair value of the
shareholder's shares, and, if the proposed corporate action is effected, the
corporation shall pay to the shareholder, upon the determination of the fair
value, by agreement or judgment as provided herein, and, in the case of shares
represented by certificates, the surrender of such certificates the fair value
thereof as of the day prior to the date on which the vote was taken approving
the proposed corporate action, excluding any appreciation or depreciation in
anticipation of the corporate action. Any shareholder failing to make demand
within the prescribed ten-day or twenty-five day period shall be bound by the
terms of the proposed corporate action. Any shareholder making such demand shall
thereafter be entitled only to payment as in this section provided and shall not
be entitled to vote or to exercise any other rights or a shareholder.
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B. No such demand may be withdrawn unless the corporation consents
thereto. If, however, the demand is withdrawn upon consent, or if the proposed
corporate action is abandoned or rescinded or the shareholders revoke the
authority to effect the action, or if, in the case of a merger, on the date of
the filing of the articles of merger the surviving corporation is the owner of
all the outstanding shares of the other corporation, domestic and foreign, that
are parties to the merger, or if no demand or petition for the determination of
fair value by a court has been made or filed within the time provided or in this
section, or if a court of competent jurisdiction determines that the shareholder
is not entitled to the relief provided by this section, then the right of the
shareholder to be paid the fair value of his shares ceases and his status as a
shareholder shall be restored, without prejudice, to any corporate proceedings
which may have been taken during the interim.
C. Within ten days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or new
corporation, domestic or foreign, shall give written notice thereof to each
dissenting shareholder who has made demand as provided in this section and shall
make a written offer to each such shareholder to pay for such shares at a
specified price deemed by the corporation to be the fair value thereof. The
notice and offer shall be accompanied by a balance sheet of the corporation, the
shares of which the dissenting shareholder holds, as of the latest available
date and not more than twelve months prior to the making of the offer, and a
profit and loss statement of the corporation for the twelve- months' period
ended on the date of the balance sheet.
D. If within thirty days after the date on which the corporate action
was effected the fair value of the shares is agreed upon between any dissenting
shareholder and the corporation, payment therefor shall be made within ninety
days after the date on which the corporate action was effected, and, in the case
of shares represented by certificates, upon surrender of the certificates. Upon
payment of the agreed value, the dissenting shareholder shall cease to have any
interest or in the shares.
E. If, within the period of thirty days, a dissenting shareholder and
the corporation do not so agree, then the corporation, within thirty days after
receipt of written demand from any dissenting shareholder, given within sixty
days after the date on which corporate action was effected, shall, or at its
election at any time within the period of sixty days may, file a petition in any
court of competent jurisdiction in the county in this state where the registered
office of the corporation is located praying that the fair value of the shares
be found and determined. If, in the case of a merger or consolidation, the
surviving or new corporation is a foreign corporation without a registered
office in this state, the petition shall be filed in the county where the
registered office of the domestic corporation was last located. If the
corporation fails to institute the proceeding as provided in this section, any
dissenting shareholder may do so in the name of the corporation. All dissenting
shareholders, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each dissenting shareholder who is a resident of this state and shall be
served by registered or certified mail on each dissenting shareholder who is a
nonresident. Service on nonresidents shall also be made by publication as
provided by law. The
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jurisdiction of the court shall be plenary and exclusive. All shareholders who
are parties to the proceeding shall be entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may, if
it so elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as specified in the order of their appointment or on an
amendment thereof. The judgment shall be payable to the holders of
uncertificated shares immediately, but to the holders of shares represented by
certificates only upon and concurrently with the surrender to the corporation of
certificates. Upon payment of the judgment, the dissenting shareholder ceases to
have any interest in the shares.
F. The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable, in all the circumstances, from the
date on which the vote was taken on the proposed corporate action to the date of
payment.
G. The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
the costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation made an offer to pay for the shares if
the court finds that the action of the shareholders in failing to accept the
offer was arbitrary or vexatious or not in good faith. Such expenses include
reasonable compensation for and reasonable expenses of the appraisers, but
exclude the fees and expenses of counsel for and experts employed by any party;
but if the fair value of the shares as determined materially exceeds the amount
which the corporation offered to pay therefor, or if no offer was made, the
court in its discretion may award to any shareholder who is a party to the
proceeding such sum as the court determines to be reasonable compensation to any
expert employed by the shareholder in the proceeding, together with reasonable
fees of legal counsel.
H. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty days after demanding payment for his shares, each holder
of shares represented by certificates demanding payment shall submit the
certificates to the corporation for notation thereon that such demand has been
made. His failure to do so shall, at the option of the corporation, terminate
his rights under this section unless a court of competent jurisdiction, for good
and sufficient cause shown, otherwise directs. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made is [are] transferred, any new certificate issued
therefor shall bear similar notation, together with the name of the original
dissenting holder of the shares, and a transferee of the shares acquires by such
transfer no rights or in the corporation other than those which the original
dissenting shareholder had after making demand for payment of the fair value
thereof.
I. Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as or in this
section provided, may be held and disposed of by the corporation as in the case
of other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
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Annex E
ARINCO COMPUTER SYSTEMS INC.
2000 STOCK OPTION PLAN
(Effective as of March 28, 2000)
1. Purpose
The purpose of the Plan is to provide a means through which the Company
and its Affiliates may attract able persons to enter and remain in the employ of
the Company and Affiliates and to provide a means whereby employees, directors,
nonemployee directors and consultants of the Company and its Affiliates can
acquire and maintain Common Stock ownership, thereby strengthening their
commitment to the welfare of the Company and Affiliates and promoting an
identity of interest between stockholders and these employees.
The Plan provides for granting Incentive Stock Options and Nonqualified
Stock Options.
2. Definitions
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means (i) any entity that directly or
indirectly is controlled by, or is under common control with the Company and
(ii) any entity in which the Company has a significant equity interest, in
either case as determined by the Committee.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control, shall, unless in the case of a
particular Option where the applicable Stock Option Agreement contains a
different definition of "Change in Control," be deemed to occur upon:
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more (on a fully diluted basis) of either (A) the then
outstanding shares of common stock of the Company, taking into account as
outstanding for this purpose such common stock issuable upon the exercise of
options or warrants, the conversion of convertible stock or debt, and the
exercise of any similar right to acquire such common stock (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote
<PAGE>
generally in the election of directors (the "Outstanding Company Voting
Securities"); PROVIDED, HOWEVER, that for purposes of this Agreement, the
following acquisitions shall not constitute a Change of Control: (I) any
acquisition by the Company or any Affiliate, (II) any acquisition by any
employee benefit plan sponsored or maintained by the Company or any Affiliate,
(III) any acquisition by any Person which complies with clauses (A), (B) and (C)
of subsection (v) of this Section 2(e), or (IV) in respect of an Option held by
a particular Participant, any acquisition by the Participant or any group of
persons including the Participant (or any entity controlled by the Participant
or any group of persons including the Participant);
(ii) individuals who, on the date hereof, constitute
the Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the
corporation in which such person is named as a nominee for director, without
written objection to such nomination) shall be an Incumbent Director; PROVIDED,
HOWEVER, that no individual initially elected or nominated as a director of the
corporation as a result of an actual or threatened election contest with respect
to directors or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board shall be
deemed to be an Incumbent Director;
(iii) the dissolution or liquidation of the Company;
(iv) the sale of all or substantially all of the
business or assets of the Company; or
(v) the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company that requires the approval of the Company's stockholders, whether for
such transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (A) more
than 50% of the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (y) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial ownership
of sufficient voting securities eligible to elect a majority of the directors of
the Surviving Corporation (the "Parent Corporation"), is represented by the
Outstanding Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, is represented by shares into
which the Outstanding Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Company's Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no Person (other than any employee benefit plan sponsored or
maintained by the Surviving Corporation or the Parent Corporation), is or
becomes the beneficial owner, directly or indirectly, of 50% or more of the
total voting power
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of the outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
and (C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were Board
members at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination.
(d) "Code" means the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations under such section.
(e) "Committee" means a committee of the Board established
under the By-Laws of the Company, or if no such committee has yet been
established, the Board. The Committee shall consist of at least two people as
the Board may appoint to administer the Plan or, if no such committee has been
appointed by the Board, the Board. Each member of the Committee shall, at the
time he takes any action with respect to an Option under the Plan, be an
Eligible Director; provided that the mere fact that a Committee member shall
fail to qualify as an Eligible Director shall not invalidate any Option granted
by the Committee which Option is otherwise validly made under the Plan.
(f) "Common Stock" means the common stock, par value $0.01 per
share, of the Company.
(g) "Company" means Arinco Computer Systems Inc.
(h) "Date of Grant" means the date on which the granting of an
Award is authorized, or such other date as may be specified in such
authorization or, if there is no such date, the date indicated on the applicable
Award agreement.
(i) "Effective Date" means March 28, 2000.
(j) "Eligible Director" means a person who is (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
or a person meeting any similar requirement under any successor rule or
regulation and (ii) an "outside director" within the meaning of Section 162(m)
of the Code, and the Treasury Regulations promulgated thereunder; PROVIDED,
HOWEVER, that clause (ii) shall apply only with respect to grants of Options
with respect to which the Company's tax deduction could be limited by Section
162(m) of the Code if such clause did not apply.
(k) "Eligible Person" means any (i) individual regularly
employed by the Company or an Affiliate who satisfies all of the requirements of
Section 6; (ii) director of the Company or an Affiliate or (iii) consultant or
advisor to the Company or an Affiliate who is entitled to participate in an
"employee benefit plan" within the meaning of 17 CFR ss. 230.405 (which, as of
the Effective Date, includes those who (A) are natural persons and (B) provide
BONA FIDE services to the Company other than in connection with the offer or
sale of
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securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the Company's securities).
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" on a given date means, except to the
extent otherwise provided in an applicable Award agreement, (i) if the Stock is
listed on a national securities exchange, the mean between the highest and
lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on a
last sale basis, or on the Over the Counter Bulletin Board, the average between
the high bid price and low ask price reported on the date prior to such date,
or, if there is no such sale on that date, then on the last preceding date on
which a sale was reported; or (iii) if the Stock is not listed on a national
securities exchange nor quoted in the NASDAQ on a last sale basis, the amount
determined by the Committee to be the fair market value based upon a good faith
attempt to value the Stock accurately and computed in accordance with applicable
regulations of the Internal Revenue Service.
(n) "Incentive Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is designated by the Committee
as an incentive stock option as described in Section 422 of the Code.
(o) "Nonqualified Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
(p) "Option" means an award granted under Section 7.
(q) "Option Period" means the period described in Section
7(c).
(r) "Option Price" means the exercise price for an Option as
described in Section 7(a).
(s) "Participant" means an Eligible Person who has been
selected by the Committee to participate in the Plan and to receive an Award
pursuant to Section 6.
(t) "Plan" means this Arinco Computer Systems Inc. 2000 Stock
Option Plan.
(u) "Securities Act" means the Securities Act of 1933, as
amended.
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(v) "Stock" means the Common Stock or such other authorized
shares of stock of the Company as the Committee may from time to time authorize
for use under the Plan.
(w) "Stock Option Agreement" means the agreement between the
Company and a Participant who has been granted an Option pursuant to Section 7
which defines the rights and obligations of the parties as required in Section
7(d).
3. Effective Date, Duration and Shareholder Approval
The Plan is effective as of the Effective Date. The effectiveness of
the Plan and the validity and exercisability of any and all Options granted
pursuant to the Plan is contingent upon approval of the Plan by the shareholders
of the Company in a manner intended to comply with the shareholder approval
requirements of Section 162(m) of the Code and 422(b)(i) of the Code. No Option
shall be treated as an Incentive Stock Option unless the Plan has been approved
by the shareholders of the Company in a manner intended to comply with the
shareholder approval requirements of Section 422(b)(i) of the Code; provided
that any Option intended to be an Incentive Stock Option shall not fail to be
effective solely on account of a failure to obtain such approval, but rather
such Option shall be treated as a Nonqualified Stock Option unless and until
such approval is obtained.
The expiration date of the Plan, on and after which no Options may be
granted hereunder, shall be the tenth anniversary of the Effective Date;
PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect
until all matters relating to the payment of Options previously granted have
been settled.
4. Administration
The Committee shall administer the Plan. The majority of the members of
the Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present or acts approved in writing
by a majority of the Committee shall be deemed the acts of the Committee.
Subject to the provisions of the Plan and applicable law, the Committee
shall have the power, in addition to other express powers and authorizations
conferred on the Committee by the Plan, to: (i) designate Participants; (ii)
determine the type or types of Options to be granted to a Participant; (iii)
determine the number of shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with
Options; (iv) determine the terms and conditions of any Options; (v) determine
whether, to what extent, and under what circumstances Options may be settled or
exercised in cash, Stock, other securities, other Options, or other property, or
canceled, forfeited, or suspended and the method or methods by which Options may
be settled, exercised, canceled, forfeited, or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, Stock, other
securities, other Options, other property, and other amounts payable with
respect to an
5
<PAGE>
Option shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret, administer, reconcile any
inconsistency, correct any default and/or supply any omission in the Plan and
any instrument or agreement relating to, or Options granted under the Plan;
(viii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan.
(a) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Option or any documents evidencing any and all
Options shall be within the sole discretion of the Committee, may be made at any
time granted pursuant to the Plan and shall be final, conclusive, and binding
upon all parties, including, without limitation, the Company, any Affiliate, any
Participant, any holder or beneficiary of any Options, and any shareholder.
(b) No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
hereunder.
5. Grant of Options; Stock Subject to the Plan
The Committee may, from time to time, grant Options to one or more
Eligible Persons; PROVIDED, HOWEVER, that:
(a) Subject to Section 9, the aggregate number of shares of
Stock in respect of which Options may be granted under the Plan is 20,000,000
shares;
(b) Such shares shall be deemed to have been used in payment
of Options whether they are actually delivered. In the event any Options shall
be surrendered, terminated, expired, or be forfeited, the number of shares of
Stock no longer subject thereto shall thereupon be released and shall thereafter
be available for new Options grants under the Plan;
(c) Stock delivered by the Company in settlement of Options
granted under the Plan may be authorized and unissued Stock or Stock held in the
treasury of the Company or may be purchased on the open market or by private
purchase; and
(d) Subject to Section 9, no person may be granted Options
under the Plan during any calendar year with respect to more than 3,000,000
shares of Stock; provided that such number shall be adjusted pursuant to Section
9 and shares otherwise counted against such number, only in a manner which will
not cause the Options granted under the Plan to fail to qualify as
"performance-based compensation" for purposes of Section 162(m) of the Code.
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<PAGE>
6. Eligibility
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.
7. Terms of Options
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; PROVIDED, HOWEVER,
that no Incentive Stock Options shall be granted to any Eligible Person who is
not an employee of the Company or a "parent" or "subsidiary" of the Company, as
such terms are used in Section 422(a)(2) of the Code. Each Option so granted
shall be subject to the following conditions, or to such other conditions as may
be reflected in the applicable Stock Option Agreement. In all events, the
provisions in the applicable Stock Option Agreement shall control the terms of
the Option issued pursuant thereto. If there shall be a conflict between the
provisions of the Plan and such Stock Option Agreement, the provisions of such
Stock Option Agreement shall control.
(a) Option Price. The exercise price (Option Price") per share
of Stock for each Option shall be set by the Committee at the time of grant, but
shall not be less than the Fair Market Value of a share of Stock at the Date of
Grant.
(b) Manner of Exercise and Form of Payment. No shares of Stock
shall be delivered pursuant to any exercise of an Option until payment in full
of the aggregate exercise price therefor is received by the Company. Options
which have become exercisable may be exercised by delivery of written notice of
exercise to the Committee accompanied by payment of the Option Price. The Option
Price shall be payable in cash, and if the Committee so permits, partially or
completely in shares of Stock valued at the Fair Market Value at the time the
Option is exercised (including by means of attestation of ownership of a
sufficient number of shares of Stock in lieu of actual delivery of such shares
to the Company); PROVIDED, HOWEVER, that such shares are not subject to any
pledge or other security interest and have either been held by the Participant
for six months, previously acquired by the Participant on the open market or
meet such other requirements as the Committee may determine necessary in order
to avoid an accounting earnings charge in respect of the Option) or, in the
discretion of the Committee, either (i) in other property having a fair market
value on the date of exercise equal to the Option Price, (ii) if by delivering
to the Committee a copy of irrevocable instructions to a stockbroker to deliver
promptly to the Company an amount of loan proceeds, or proceeds of the sale of
the Stock subject to the Option, sufficient to pay the Option Price or (iii) by
such other method as the Committee may permit.
(c) Vesting, Option Period and Expiration. Options shall vest
and become exercisable in such manner and on such date or dates determined by
the Committee and shall expire after such period, not to exceed ten years, as
may be determined by the Committee (the "Option Period") and as set forth in the
applicable Stock Option Agreement;
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<PAGE>
PROVIDED, that the Committee shall have the authority to accelerate the
exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. If an Option is
exercisable in installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option expires.
(d) Stock Option Agreement - Other Terms and Conditions. Each
Option granted under the Plan shall be evidenced by a Stock Option Agreement,
which shall contain such provisions as may be determined by the Committee and,
except as may be specifically stated otherwise in such Stock Option Agreement,
which shall be subject to the following terms and conditions:
(i) Each Option or portion thereof that is
exercisable shall be exercisable for the full amount or for any part thereof.
(ii) Each share of Stock purchased through the
exercise of an Option shall be paid for in full at the time of the exercise.
Each Option shall cease to be exercisable, as to any share of Stock, when the
Participant purchases the share or when the Option expires.
(iii) Subject to Section 8(h), Options shall not be
transferable by the Participant except by will or the laws of descent and
distribution and shall be exercisable during the Participant's lifetime only by
him.
(iv) Each Option shall vest and become exercisable by
the Participant in accordance with the vesting schedule established by the
Committee and set forth in the Stock Option Agreement evidencing such Option.
(v) Each Stock Option Agreement may contain a
provision that, upon demand by the Committee for such a representation, the
Participant shall deliver to the Committee at the time of any exercise of an
Option a written representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale or with a view to
the distribution thereof, and any other representations deemed necessary by the
Committee to ensure compliance with all applicable federal and state securities
laws. Upon such demand, delivery of such representation prior to the delivery of
any shares issued upon exercise of an Option shall be a condition precedent to
the right of the Participant or such other person to purchase any shares. In the
event certificates for Stock are delivered under the Plan with respect to which
such investment representation has been obtained, the Committee may cause a
legend or legends to be placed on such certificates to make appropriate
reference to such representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.
(vi) Each Incentive Stock Option Agreement shall
contain a provision requiring the Participant to notify the Company in writing
immediately after the Participant makes a disqualifying disposition of any Stock
acquired pursuant to the
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<PAGE>
exercise of such Incentive Stock Option. A disqualifying disposition is any
disposition (including any sale) of such Stock before the later of (a) two years
after the Date of Grant of the Incentive Stock Option or (b) one year after the
date the Participant acquired the Stock by exercising the Incentive Stock
Option.
(e) Incentive Stock Option Grants to 10% Stockholders.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Participant who owns stock representing more than
ten percent of the voting power of all classes of stock of the Company, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(f) $100,000 Per Year Limitation for Incentive Stock Options.
To the extent the aggregate Fair Market Value (determined as of the Date of
Grant) of Stock for which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all plans of the
Company) exceeds $100,000, such excess Incentive Stock Options shall be treated
as Nonqualified Stock Options.
(g) Voluntary Surrender. The Committee may permit the
voluntary surrender of all or any portion of any Nonqualified Stock Option, if
any, granted under the Plan to be conditioned upon the granting to the
Participant of a new Option for the same or a different number of shares as the
Option surrendered or require such voluntary surrender as a condition precedent
to a grant of a new Option to such Participant. Such new Option shall be
exercisable at an Option Price, during an Option Period, and in accordance with
any other terms or conditions specified by the Committee at the time the new
Option is granted, all determined in accordance with the provisions of the Plan
without regard to the Option Price, Option Period, or any other terms and
conditions of the Nonqualified Stock Option surrendered.
8. General
(a) Additional Provisions of an Option. Options granted to a
Participant under the Plan also may be subject to such other provisions (whether
or not applicable to Options granted to any other Participant) as the Committee
determines appropriate including, without limitation, provisions to assist the
Participant in financing the purchase of Stock upon the exercise of Options,
provisions for the forfeiture of or restrictions on resale or other disposition
of shares of Stock acquired under any Options, provisions giving the Company the
right to repurchase shares of Stock acquired under any Option in the event the
Participant elects to dispose of such shares or terminate employment, provisions
allowing the Participant to elect to defer the receipt of payment in respect of
Options for a specified period or until a specified event and and provisions to
comply with federal and state securities laws and federal and state tax
withholding requirements. Any such provisions shall be reflected in the
applicable Stock Option Agreement.
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<PAGE>
(b) Privileges of Stock Ownership. Except as otherwise
specifically provided in the Plan, no person shall be entitled to the privileges
of ownership in respect of shares of Stock which are subject to Options
hereunder until such shares have been issued to that person.
(c) Government and Other Regulations. The obligation of the
Company to make payment of Options in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Option to the contrary, the Company shall be under no obligation to offer to
sell or to sell and shall be prohibited from offering to sell or selling any
shares of Stock pursuant to an Option unless such shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
(d) Tax Withholding.
(i) A Participant may be required to pay to the
Company or any Affiliate and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any Shares or other property
deliverable under any Options or from any compensation or other amounts owing to
a Participant the amount (in cash, Stock or other property) of any required tax
withholding and payroll taxes in respect of an Option, its exercise, or any
payment or transfer under an Option or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i)
above, if so provided in an Option agreement, a Participant may satisfy, in
whole or in part, the foregoing withholding liability (but no more than the
minimum required withholding liability) by delivery of shares of Stock owned by
the Participant with a Fair Market Value equal to such withholding liability
(provided that such shares are not subject to any pledge or other security
interest and have either been held by the Participant for six months, previously
acquired by the Participant on the open market or meet such other requirements
as the Committee may determine necessary in order to avoid an accounting
earnings charge), or by having the Company withhold from the number of shares of
Stock otherwise issuable pursuant to the exercise or settlement of the Option a
number of shares with a Fair Market Value equal to such withholding liability.
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<PAGE>
(e) Claim to Options and Employment Rights. No employee of the
Company or an Affiliate, or other person, shall have any claim or right to be
granted an Option under the Plan or, having been selected for the grant of an
Option, to be selected for a grant of any other Option. Neither the Plan nor any
action taken hereunder shall be construed as giving any Participant any right to
be retained in the employ or service of the Company or an Affiliate.
(f) No Liability of Committee Members. No member of the
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(g) Governing Law. The Plan shall be governed by and construed
in accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof, or principals of conflicts of laws
of any other jurisdiction which could cause the application of the laws of any
jurisdiction other than the State of New York.
(h) Nontransferability.
(i) Each Option shall be exercisable only by the
Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. No Option
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or an Affiliate; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(ii) Notwithstanding the foregoing, the Committee
may, in the Stock Option Agreement or at any time after the Date of Grant in an
amendment to a Stock Option Agreement, provide that Options which are not
intended to qualify as Incentive Stock Options may be transferred by a
Participant without consideration, subject to such rules as the Committee may
adopt consistent with any applicable Stock Option Agreement to preserve the
purposes of the Plan, to:
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<PAGE>
(A) any person who is a "family member" of the
Participant, as such term is used in the
instructions to Form S-8 (collectively, the
"Immediate Family Members");
(B) a trust solely for the benefit of the
Participant and his or her Immediate Family
Members;
(C) a partnership or limited liability company
whose only partners or shareholders are the
Participant and his or her Immediate Family
Members; or
(D) any other transferee as may be approved
either (a) by the Board or the Committee in
its sole discretion, or (b) as provided in
the applicable Stock Option Agreement;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the Participant gives
the Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the Participant in writing that
such a transfer would comply with the requirements of the Plan and any
applicable Stock Option Agreement.
(iii) The terms of any Option transferred in
accordance with the immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan or in a Stock Option Agreement to a
Participant shall be deemed to refer to the Permitted Transferee, except that
(a) Permitted Transferees shall not be entitled to transfer any Options, other
than by will or the laws of descent and distribution; (b) Permitted Transferees
shall not be entitled to exercise any transferred Options unless there shall be
in effect a registration statement on an appropriate form covering the shares to
be acquired pursuant to the exercise of such Option if the Committee determines,
consistent with any applicable Stock Option Agreement, that such a registration
statement is necessary or appropriate, (c) the Committee or the Company shall
not be required to provide any notice to a Permitted Transferee, whether or not
such notice is or would otherwise have been required to be given to the
Participant under the Plan or otherwise, and (d) the consequences of termination
of the Participant's employment by, or services to, the Company or an Affiliate
under the terms of the Plan and the applicable Stock Option Agreement shall
continue to be applied with respect to the Participant, following which the
Options shall be exercisable by the Permitted Transferee only to the extent, and
for the periods, specified in the Plan and the applicable Stock Option
Agreement.
(i) Reliance on Reports. Each member of the Committee and each
member of the Board shall be fully justified in relying, acting or failing to
act, and shall not be liable for having so relied, acted or failed to act in
good faith, upon any report made by the independent public accountant of the
Company and Affiliates and upon any other information furnished in connection
with the Plan by any person or persons other than himself.
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(j) Relationship to Other Benefits. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the Company
or any Affiliate except as otherwise specifically provided in such other plan.
(k) Expenses. The expenses of administering the Plan shall be
borne by the Company and Affiliates.
(l) Pronouns. Masculine pronouns and other words of masculine
gender shall refer to both men and women.
(m) Titles and Headings. The titles and headings of the
sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings shall
control.
(n) Termination of Employment. For all purposes herein, a
person who transfers from employment or service with the Company to employment
or service with an Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company or an Affiliate.
(o) Severability. If any provision of the Plan or any Stock
Option Agreement is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or Option, or would
disqualify the Plan or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Option, such provision shall be stricken as to such jurisdiction, person or
Option and the remainder of the Plan and any such Option shall remain in full
force and effect.
9. Changes in Capital Structure
Options granted under the Plan and any Stock Option Agreements
evidencing such options, the maximum number of shares of Stock subject to all
Options stated in Section 5(a) and the maximum number of shares of Stock with
respect to which any one person may be granted Options during any period stated
in Section 5(d) shall be subject to adjustment or substitution, as determined by
the Committee in its sole discretion, as to the number, price or kind of a share
of Stock or other consideration subject to such Options or as otherwise
determined by the Committee to be equitable (i) in the event of changes in the
outstanding Stock or in the capital structure of the Company by reason of stock
or extraordinary cash dividends, stock splits, reverse stock splits,
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the Date
of Grant of any such Option or (ii) in the event of any change in applicable
laws or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Participants,
13
<PAGE>
or which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Plan. Any adjustment in Incentive Stock Options under
this Section 9 shall be made only to the extent not constituting a
"modification" within the meaning of Section 424(h)(3) of the Code, and any
adjustments under this Section 9 shall be made in a manner which does not
adversely affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another corporation or
entity and, in connection therewith, consideration is received by shareholders
of the Company in a form other than stock or other equity interests of the
surviving entity;
B. All or substantially all of the assets of the Company are acquired
by another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo an event
described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Options and cause the
holders thereof to be paid, in cash or stock, or any combination thereof, the
value of such Options based upon the price per share of Stock received or to be
received by other shareholders of the Company in the event. The terms of this
Section 9 may be varied by the Committee in any particular Stock Option
Agreement.
10. Effect of Change in Control
Except to the extent reflected in a particular Stock Option Agreement:
(a) In the event of a Change in Control, notwithstanding any
vesting schedule, all Options shall become immediately exercisable with respect
to 100 percent of the shares subject to such Option.
(b) In addition, in the event of a Change in Control, the
Committee may in its discretion and upon at least 10 days' advance notice to the
affected persons, cancel any outstanding Options and pay to the holders thereof,
in cash or stock, or any combination thereof, the value of such Options based
upon the price per share of Stock received or to be received by other
shareholders of the Company in the event.
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<PAGE>
(c) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
11. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
12. Amendments and Termination
(a) Amendment and Termination of the Plan. The Board may
amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof
at any time; PROVIDED that no such amendment, alteration, suspension,
discontinuation or termination shall be made without shareholder approval if
such approval is necessary to comply with any tax or regulatory requirement
applicable to the Plan (including as necessary to prevent Options granted under
the Plan from failing to qualify as "performance-based compensation" for
purposes of Section 162(m) of the Code); and PROVIDED FURTHER that any such
amendment, alteration, suspension, discontinuance or termination that would
impair the rights of any Participant or any holder or beneficiary of any Option
theretofore granted shall not to that extent be effective without the consent of
the affected Participant, holder or beneficiary.
(b) Amendment of Award Agreements. The Committee may, to the
extent consistent with the terms of any applicable Stock Option Agreement, waive
any conditions or rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate, any Option theretofore granted, prospectively
or retroactively; provided that any such waiver, amendment, alteration,
suspension, discontinuance, cancellation or termination that would impair the
rights of any Participant in respect of any Option theretofore granted shall not
to that extent be effective without the consent of the affected Participant.
* * *
As adopted by the Board of Directors of
Arinco Computer Systems Inc. as of March 28, 2000
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AMENDMENT ONE TO
THE ARINCO COMPUTER SYSTEMS INC.
2000 STOCK OPTION PLAN
__________________The Arinco Computer Systems Inc. 2000 Stock Option Plan (the
"Plan") is hereby amended as follows:
1. Effective June 27, 2000, Section 7(a) of the Plan is hereby
amended in its entirety to read as follows:
Option Price. The exercise price ("Option Price") per share of
Stock for each Option shall be set by the Committee at the time of
grant but shall not be less than (i) in the case of an Incentive Stock
Option, and subject to Section 7(e), the Fair Market Value of a share
of Stock at the Date of Grant, and (ii) in the case of a Non- Qualified
Stock Option, the par value of a share of Stock; PROVIDED, HOWEVER,
that all Options granted to employees which are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code shall
have an Option Price per share of Stock no less than the Fair Market
Value of a share of Stock on the Date of Grant.
2. Except for the foregoing amendment set forth in paragraph 1
above, all of the terms and conditions of the Plan shall remain in full force
and effect.
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PROXY
ARINCO COMPUTER SYSTEMS INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, TUESDAY, SEPTEMBER 12, 2000
The undersigned hereby appoints Michael Gleason and James M. Dubin as
proxies with full power of substitution to represent the undersigned and to vote
all shares of Common Stock, Series A Convertible Preferred Stock or Series B
Convertible Preferred Stock, as the case may be, of Arinco Computer Systems Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Shareholders to be held on Tuesday, September 12, 2000 or any adjournments
thereof.
1. Election of five directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and shall duly qualify:
<TABLE>
<CAPTION>
WITHHOLD
FOR AGAINST AUTHORITY
--- ------- ---------
<S> <C> <C> <C>
William Avery ______________ ______________ ______________
James M. Dubin ______________ ______________ ______________
Michael Gleason ______________ ______________ ______________
William E. Lipner ______________ ______________ ______________
Gary C. Wendt ______________ ______________ ______________
</TABLE>
2. PROPOSAL to approve and adopt the Agreement and Plan of Merger
between the Company and Change Technology Partners, Inc.
FOR AGAINST ABSTAIN
______________ ______________ ______________
3. PROPOSAL to ratify the selection of KPMG LLP as independent
certified public auditors for fiscal 2000.
FOR AGAINST ABSTAIN
______________ ______________ ______________
<PAGE>
4. PROPOSAL to approve the Company's 2000 Stock Option Plan.
FOR AGAINST ABSTAIN
______________ ______________ ______________
5. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for each of the five (5) nominees to the Board of Directors and "FOR"
the adoption of Proposals 2, 3 and 4.
The Company's Board of Directors recommends that you vote "FOR" the
election of each of the five (5) nominees to the Board of Directors, "FOR"
Proposal 2 to merge the Company with Change Technology Partners, Inc., "FOR"
Proposal 3 to ratify the selection of KPMG LLP as independent certified public
auditors for fiscal 2000 and "FOR" Proposal 4 to approve the Company's 2000
Stock Option Plan.
Please sign exactly as your name appears on the mailing label. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
Dated: _________________________
________________________________
Signature
________________________________
Signature, if held jointly
(If a corporation, please sign in the
corporate name by the president or another
authorized officer. If a partnership, please
sign in the partnership name by an
authorized person.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY BY USING THE ENCLOSED ENVELOPE
2
