SECURITIES PURCHASE AGREEMENT, dated as of March 9, 2000, by and
between Arinco Computer Systems Inc., a corporation organized under the laws
of New Mexico (the "Company") and Pangea Internet Advisors LLC, a Delaware
limited liability company ("Pangea" and, together with its permitted
assignees, the "Purchasers").
WHEREAS, the Company desires to issue to the Purchasers, and the
Purchasers desire to purchase from the Company, (i) up to an aggregate of
4,000,000 shares of the Company's Series B Convertible Preferred Stock, par
value $.10 per share (the "Preferred Stock"), and (ii) Warrants to purchase
the Specified Number (defined below) of shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), upon the terms and
subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Actions or Proceedings" has the meaning assigned to that term in
Section 8.1.
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Xxxxx Noncompete" has the meaning assigned to that term in
Section 7.5.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized
or required by law or executive order to close.
"Certificate of Designations" means the Certificate of
Designations substantially in the form attached hereto as Exhibit C.
"Closing" has the meaning assigned to that term in Section 2.4.
"Closing Date" has the meaning assigned to that term in
Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Commitments" has the meaning assigned to that term in
Section 3.13.
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company or any other shares of common stock into which the Common
Stock may be converted pursuant to the Delaware Reincorporation or
otherwise.
"Commonly Controlled Entity" means any entity which is under
common control with the Company within the meaning of Code section 414(b),
(c), (m), (o) or (t).
"Company" means Arinco Computer Systems Inc., a New Mexico
corporation, and any successor thereof by merger or otherwise.
"Company Liabilities" has the meaning assigned to that term in
Section 5.8.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, guaranty, letter of credit or other
obligation (the "primary obligation") of another Person (the "primary
obligor"), including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase, repurchase or otherwise acquire
such primary obligations or any property constituting direct or indirect
security therefor, or (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation, or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain
the net worth or solvency or any balance sheet item, level of income or
financial condition of the primary obligor or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the Company shall be deemed not to have a
Contingent Obligation by virtue of its guaranty of obligations of a
Subsidiary that, except for shares held by nominees, is wholly owned by the
Company. The amount of any Contingent Obligation shall be deemed to be the
stated amount of such Contingent Obligation or, if there is no such stated
amount, an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which
such Person is a party or by which it or any of its property is bound.
"Delaware Reincorporation" has the meaning assigned to that term
in Section 7.1.
"Disclosure Letter" has the meaning assigned to that term in
Article 5.
"Environmental Laws" means any federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree,
judgment, injunction, license, permit or regulation relating to
environmental matters, including those pertaining to land use, air, soil,
surface water, ground water (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any
other environmental matter, together with any other laws (federal, state,
territorial, provincial or local) relating to emissions, discharges,
releases or threatened releases of any contaminant including, without
limitation, medical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, person,
property or structures, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. 1251
et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), and
the Occupational Safety and Health Act (29 U.S.C. 651 et seq.), as such
laws have been amended or supplemented and any analogous future federal, or
present or future state or local laws, statutes and regulations promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Forbes Noncompete" has the meaning assigned to that term in
Section 7.5.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means the government of any nation,
state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Hazardous Materials" means (i) any "hazardous waste" or "solid
waste" as defined by the Resource Conservation and Recovery Act of 1976, as
amended, and regulations promulgated thereunder; (ii) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and regulations
promulgated thereunder; (iii) any "pollutant" or "toxic pollutant" or "oil"
as defined in the Clear Water Act, as amended, and regulations promulgated
thereunder; (iv) asbestos; (v) polychlorinated biphenyls; and (vi) any
waste oils.
"Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured),
(b) all obligations to pay the deferred purchase price of property or
services, except trade accounts payable and accrued liabilities arising in
the ordinary course of business, (c) all interest rate and currency swaps
and similar agreements under which payments are obligated to be made,
whether periodically or upon the happening of a contingency, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such
property), (e) all obligations under leases which have been or should be,
in accordance with GAAP, recorded as capital leases, (f) all indebtedness
secured by any Lien (other than Liens in favor of lessors under leases
other than leases included in clause (e)) on any property or asset owned or
held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of
that Person, and (g) any Contingent Obligation.
"Indemnified Party" has the meaning assigned to that term in
Section 8.5.
"Indemnifying Party" has the meaning assigned to that term in
Section 8.5.
"Intellectual Property" means all of the following as they exist
in all jurisdictions throughout the world, in each case, to the extent
owned by, licensed to, or otherwise used by the Company:
(i) patents, patent applications, and other patent rights
(including any divisions, continuations, continuations-in-part,
substitutions, or reissues thereof, whether or not patents are issued
on any such applications and whether or not any such applications are
modified, withdrawn, or resubmitted);
(ii) trademarks, service marks, trade dress, trade names, brand
names, Internet domain names, designs, logos, or corporate names,
whether registered or unregistered, and all registrations and
applications for registration thereof;
(iii) copyright registrations and applications for
registration thereof and non-registered copyrights;
(iv) trade secrets, concepts, ideas, designs, research processes,
procedures, techniques, methods, know-how, data, mask works,
discoveries, inventions, modifications, extensions, improvements, and
other proprietary rights (whether or not patentable or subject to
copyright, mask work, or trade secret protection); and
(v) computer software programs, including, without limitation,
all source code, object code, and documentation related thereto,
licensed to or from the Company.
"Investment Company Act" has the meaning assigned to that term in
Section 5.10.
"Liabilities" has the meaning assigned to that term in
Section 9.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority
or other security interest or preferential arrangement of any kind or
nature whatsoever (including, without limitation, those created by, arising
under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capitalized lease obligation,
or any financing lease having substantially the same economic effect as any
of the foregoing).
"Newco" has the meaning assigned to that term in Section 7.1.
"Pangea" means Pangea Internet Advisors LLC, Delaware limited
liability company.
"Person" means any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental authority (or
an agency or political subdivision thereof) or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" means the Series B Convertible Preferred Stock,
par value $.10 per share, of the Company or any other shares of preferred
stock into which the Series B Convertible Preferred Stock may be converted
pursuant to the Delaware Reincorporation or otherwise.
"Purchasers" means, as of the date hereof, Pangea and, at such
time as Pangea has assigned any part of its obligations to purchase Shares
or Warrants to an assignee who has agreed to assume those obligations, the
term "Purchasers" also shall include such assignees.
"Reduced Share Number" has the meaning assigned to that term in
Section 3.13.
"Registration Rights Agreement" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit A.
"Representative" has the meaning assigned to that term in
Section 2.5.
"Requirements of Law" means, as to any Person, any statute, law,
treaty, rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"SEC Documents" has the meaning assigned to that term in
Section 5.8.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Shares" has the meaning assigned to that term in Section 2.1,
subject to Section 3.16.
"Shares Purchase Price" has the meaning assigned to that term in
Section 2.1.
"Solvent" means, with respect to any Person, that the fair
saleable value of the assets and property of such Person is, on the date of
determination, greater than the total amount of liabilities (including
contingent and unliquidated liabilities) of such Person as of such date and
that, as of such date, such Person is able to pay all liabilities of such
Person as such liabilities mature. In computing the amount of contingent
or liquidated liabilities at any time, such liabilities will be computed as
the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that is probable to become an actual or
matured liability.
"Specified Number" means a number of shares of Common Stock equal
to 20% of the total number of shares of Common Stock outstanding on a fully
diluted basis as of the date of issuance of the Warrants, assuming (i) the
issuance of all of the Shares issuable hereunder, (ii) the exercise of the
Warrants and (iii) the exercise of all outstanding employee options, if
any.
"Subsidiary" means, with respect to any Person, a corporation,
partnership or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest, or rights to profits, is
owned, directly or indirectly, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement
shall refer to a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" has the meaning assigned to that term in
Section 5.16.
"Tax Returns" has the meaning assigned to that term in
Section 5.16.
"Transaction Documents" shall mean each of this Agreement, the
Shares, the Warrants, the Certificate of Designations and the Registration
Rights Agreement.
"Warrants" means the warrants, substantially in the form of
Exhibit B, to be purchased by certain of the Purchasers designated by
Pangea, entitling the holders thereof to purchase initially up to the
Specified Number of shares of Common Stock, as such number may be adjusted
from time to time in accordance with the terms thereof.
"Warrants Purchase Price" has the meaning assigned to that term
in Section 2.3.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Shares. Subject to the terms and
conditions set forth herein, the Company agrees that it will issue and sell
to the Purchasers, and the Purchasers agree, severally and not jointly,
that they will acquire from the Company, at the Closing, an aggregate of
4,000,000 shares of Preferred Stock (the "Shares"). The number of Shares
committed to be purchased hereunder by each Purchaser will be as set forth
on Schedule I, which will be prepared by Pangea and attached to this
Agreement on or prior to the Closing Date. The per share purchase price
for the Shares will be $10.00 (the "Shares Purchase Price").
2.2 Preferred Stock Terms. The terms of the Preferred Stock
shall be as set forth in the Certificate of Designations.
2.3 Purchase and Sale of Warrants. Subject to the terms and
conditions set forth herein, the Company agrees that it will sell to those
Purchasers designated by Pangea, and such Purchasers agree, severally and
not jointly, that they will acquire from the Company, at the Closing, the
Warrants. The allocation of the number of Warrants among the Purchasers
will be as set forth on Schedule I. The aggregate purchase price for the
Warrants will be $100,000 (the "Warrants Purchase Price"). 20% of the
Warrants will have an exercise price of $.25 per share, 30% of the Warrants
will have an exercise price of $.50 per share, 30% of the Warrants will
have an exercise price of $.75 per share and 20% of the Warrants will have
an exercise price of $1.00 per share.
2.4 Closing. The closing of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Xxxx, Weiss, Rifkind,
Xxxxxxx & Xxxxxxxx, 1285 Avenue of the Americas, New York, New York 10019-
6064, at 10:00 a.m., New York City time, on the third Business Day to occur
following the satisfaction (or waiver by the party entitled to the benefit
thereof) of each of the conditions set forth in Articles 3 and 4, or on
such other date and at such other time and place as the Company and Pangea
may agree (the "Closing Date"). At the Closing, subject to the terms and
conditions set forth herein, the Company shall sell Shares to the
Purchasers acquiring such Shares by delivering to such Purchasers duly
executed certificates representing the Shares to be sold at such Closing,
registered in the name of the Purchaser acquiring such Shares, with
appropriate issue stamps, if any, affixed at the expense of the Company,
free and clear of any Lien, and such Purchasers shall purchase such Shares
for the Shares Purchase Price. At the Closing, subject to the terms and
conditions set forth herein, the Company shall also sell the Warrants to
those Purchasers designated by Pangea by delivering to such Purchasers duly
executed certificates representing the Warrants in the name of the
Purchaser acquiring such Warrants, free and clear of any Lien, and such
Purchasers shall purchase the Warrants for the Warrants Purchase Price.
The Shares Purchase Price and the Warrants Purchase Price shall be paid in
cash by wire transfer to a bank account agreed to by the Company and
Pangea.
2.5 Purchasers' Representative. Each Purchaser hereby appoints
Pangea as such Purchaser's representative (the "Representative"), to do any
and all things and to execute any and all documents, in such Purchaser's
name, place and stead, in any way which such Purchaser could do if
personally present, in connection with any closing of the transactions
contemplated by this Agreement and the other Transaction Documents,
including, without limitation, the ability to waive any condition to the
obligation of such Purchaser to purchase Shares or Warrants on any Closing
Date (which Pangea may do in its sole discretion) and otherwise determine
that the such conditions have been satisfied. The Company shall be
entitled to rely upon the foregoing as being binding upon the Purchasers.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase Shares or Warrants
on the Closing Date shall be subject to the satisfaction or waiver (by the
parties entitled to the benefit thereof) of the following conditions:
3.1 Representations and Warranties True. The representations
and warranties of the Company contained in Article 5 shall be true and
correct in all material respects at and as of the Closing Date (and after
giving effect to the transactions contemplated hereby) as if made at and as
of such date.
3.2 Compliance with this Agreement. The Company shall have
performed and complied with its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by
the Company on or before the Closing Date.
3.3 Officer's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the President or a Vice-
President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 have been satisfied on and as of such date.
3.4 Secretary's Certificate. The Purchasers shall have received
a certificate, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying the truth and correctness of
attached copies of the Certificate of Incorporation and By-laws of the
Company and resolutions of the Board of Directors of the Company, in effect
as of the Closing Date, approving the transactions contemplated by this
Agreement and the other Transaction Documents.
3.5 Documents. The Purchasers shall have received copies of
such documents as they reasonably may request in connection with the sale
of the Shares and Warrants and the other transactions contemplated hereby,
all in form and substance reasonably satisfactory to Pangea.
3.6 Purchase Permitted by Applicable Laws; Legal Investment.
The acquisition of and payment for the Shares and Warrants to be purchased
on the Closing Date and the consummation of the other transactions
contemplated hereby (i) shall not be prohibited by any applicable law or
governmental regulation and (ii) shall be permitted by the laws and
regulations of the jurisdictions to which they are subject.
3.7 Opinion of Counsel. The Purchasers shall have received the
opinion of Xxxx X. Xxxx, Esquire, counsel to the Company, dated the Closing
Date, in form and substance reasonably satisfactory to Pangea.
3.8 Approval of Counsel to the Purchaser. All actions and
proceedings hereunder and all documents required to be delivered by the
Company hereunder or in connection with the consummation of the other
transactions contemplated hereby, and all other related matters, shall have
been reasonably acceptable to Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx,
special counsel to the Purchasers, as to their form and substance.
3.9 No Material Adverse Change. There shall have been no
material adverse change, nor shall any such change be threatened, in the
assets, business, properties, operations or financial or other condition of
the Company since December 31, 1999.
3.10 Registration Rights Agreement. The Company shall have duly
executed and delivered to the Purchasers the Registration Rights Agreement
substantially in the form of Exhibit A, which shall be in full force and
effect.
3.11 Certificate of Incorporation and By-Laws of the Company. No
amendments to the Certificate of Incorporation or By-Laws of the Company as
in effect on the date hereof shall have been effected on or prior to the
Closing Date.
3.12 No Litigation. No action, suit, proceeding, claim or
dispute shall have been brought or otherwise arisen at law, in equity, in
arbitration or before any Governmental Authority against the Company which
would, if adversely determined, in the reasonable opinion of Pangea
(i) have a material adverse effect on the assets, business, properties or
financial or other condition of the Company, or (ii) have a material
adverse effect on the ability of the Company to perform its obligations
under this Agreement or any of the other Transaction Documents. No
injunction, writ, temporary restraining order, decree or any order of any
nature shall have been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery and performance of
this Agreement or any of the other Transaction Documents.
3.13 Funding Commitments. On or prior to the Closing Date,
Pangea shall have received firm commitments (the "Commitments"), from
financially sophisticated investors in an aggregate amount equal to not
less than $40,000,000, and such investors shall have become parties to this
Agreement as "Purchasers" hereunder on or prior to the Closing Date;
provided, that if such Commitments are less than $40,000,000 but equal to
at least $30,000,000, (i) the condition set forth in this Section 3.13
shall be deemed to have been satisfied, and (ii) the term "Shares" shall be
deemed to mean that number of shares of Preferred Stock equal to (x) such
Commitments divided by (y) the Shares Purchase Price (the "Reduced Share
Number").
3.14 Board Representation; Executive Officers. The following
individuals shall have become directors of the Board effective as of the
Closing Date: Xxxxx X. Xxxxx, Xxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx
X. Xxxxxx. The following officers shall have been appointed effective as
of the Closing Date: Xxxxxxx Xxxxxxx - Chairman; Xxxx X. Xxxxxxx - Chief
Executive Officer and President; Xxxxxxx Xxxxx - Executive Vice President;
Xxxxx X. Xxxxxxx - Senior Vice President; Xxxxxxx X. X'Xxxxxxx - Senior
Vice President; and Xxxxxxxxx X. Xxxxx - Senior Vice President.
3.15 Certificate of Designations. The Company shall have filed
the Certificate of Designations with the State Corporation Commission of
the State of New Mexico.
3.16 Assets. The Company shall own no assets other than cash and
government securities.
3.17 Office Services Agreement. The Company shall have duly
executed and delivered to Pangea an Office Services Agreement in a form to
be reasonably agreed to by the parties, which shall be in full force and
effect.
3.18 Annual Report. The Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999 as filed with the Commission
shall be substantially in the form of the Company's draft Form 10-KSB dated
March 8, 2000, delivered to Pangea on March 9, 2000.
3.19 New Start. The Company shall have divested itself of all
interest in New Start, Inc. or shall have dissolved it.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Shares and the Warrants
on the Closing Date shall be subject to the satisfaction or waiver by
it of the following conditions:
4.1 Representations and Warranties True. The representations and
warranties of the Purchasers contained in Article 6 shall be true and
correct in all material respects at and as of the Closing Date (and after
giving effect to the transactions contemplated hereby) as if made at and as
of such date.
4.2 Compliance with this Agreement. The Purchasers shall have
performed and complied with all of their agreements and conditions set forth
or contemplated herein that are required to be performed or complied with by
the Purchasers on or before the Closing Date.
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Shares and Warrants by the Company to be issued on the Closing Date and the
consummation of the transactions contemplated hereby (i) shall not be
prohibited by any applicable law or governmental regulation and (ii) shall
be permitted by the laws and regulations of the jurisdictions in which the
transactions are subject.
4.4 Approval of Counsel to the Company. All actions and
proceedings hereunder and all documents required to be delivered by the
Purchasers hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters, shall have
been reasonably acceptable to
Xxxx X. Xxxx, Esquire, counsel to the Company, as to their form and
substance.
4.5 No Litigation. No injunction, writ, temporary restraining
order, decree or any order of any nature shall have been issued by any court
or other Governmental Authority purporting to enjoin or restrain the
execution, delivery and performance of this Agreement or any of the other
Transaction Documents.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows, except as set forth in the corresponding Section of the "Disclosure
Letter" delivered to the Purchasers simultaneously herewith (for purposes of
this Article 5 the term "Company" shall include its wholly-owned subsidiary,
New Start, Inc., except where the context otherwise requires):
5.1 Corporate Existence and Power. The Company:
(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate power and authority and (ii) all
governmental licenses, authorizations, consents and approvals to own and
operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently, or is currently proposed to
be, engaged;
(c) is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with (i) its Certificate of
Incorporation and By-Laws or other organizational or governing documents and
(ii) all Requirements of Law; except, in the case of (b)(ii), (c) or (d)(ii)
of this Section 5.1, to the extent that the failure to do so, individually
or in the aggregate, would not have a material adverse effect on the assets,
business, operations, properties or financial or other condition of the
Company.
5.2 Corporate Authorization; No Contravention.
(a) The execution, delivery and performance by the Company
of this Agreement and the other Transaction Documents, and the transactions
contemplated hereby and thereby (such transactions to include, for purposes
of this Agreement, among other things, the issuance of the Shares, the
issuance of the Warrants, and the issuance of Common Stock upon the exercise
of the Warrants);
(i) is within the Company's corporate power and
authority and has been duly authorized by all necessary corporate
action;
(ii) does not contravene the terms of the Certificate of
Incorporation or By-Laws or other organizational or governing documents
of the Company, or any amendment thereof; and
(iii) will not violate any order or decree directly
relating to the Company.
(b) The Company has delivered to the Purchasers complete and
correct copies of the Company's Certificate of Incorporation and By-Laws, in
each case, as amended to the date of this Agreement.
5.3 Governmental Authorization; Third Party Consents. No
approval, consent, exemption, authorization, or other action by, or notice
to, or filing with, any Governmental Authority or any other Person, is
necessary or required in connection with the execution, delivery or
performance by the Company or enforcement against the Company of this
Agreement or any of the other Transaction Documents, or the transactions
contemplated hereby or thereby.
5.4 Binding Effect. This Agreement has been duly executed and
delivered by the Company, and at the Closing the other Transaction Documents
will be, duly executed and delivered by the Company, and this Agreement
constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, and at the
Closing the other Transaction Documents will constitute the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms.
5.5 No Legal Bar. Neither the execution, delivery and
performance of this Agreement or any of the other Transaction Documents nor
the issuance of the Shares or the Warrants will violate any Requirement of
Law. The Company is not a party to any agreement granting any registration
rights to any Person that are inconsistent with the rights to be granted to
the Purchasers in the Registration Rights Agreement.
5.6 Litigation. There are no actions, suits, investigations,
proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company:
(a) with respect to this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or
thereby; or
(b) which would, if adversely determined, (i) have a
material adverse effect on the assets, business, properties, operations or
financial or other condition of the Company or (ii) have a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or any of the other Transaction Documents. No injunction, writ,
temporary restraining order, decree or any order of any nature has been
issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery and performance of this Agreement or any of
the other Transaction Documents.
5.7 No Default or Breach. The Company is not in default under or
with respect to any Contractual Obligation in any respect, which,
individually or together with all such defaults, would be materially adverse
to the assets, business, properties, operations or financial or other
condition of the Company or which could materially adversely affect the
ability of the Company to perform its obligations under this Agreement or
any of the other Transaction Documents.
5.8 SEC Documents.
(a) The Company has filed all reports, schedules, forms,
statements and other documents required to be filed with the Commission by
the Company since January 1, 1996 (collectively, "SEC Documents") on a
timely basis. As of their respective dates, the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All of the consolidated financial statements of the Company
contained in the SEC Documents (i) complied as to form with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, (ii) have been prepared in accordance with
GAAP consistently applied throughout the periods indicated (subject, in the
case of the unaudited interim statements, to normal year-end audit
adjustments) and (iii) present fairly in all material respects the financial
position, results of operations and the related changes in financial
position as at the dates and for the periods indicated.
(b) The Company has no material direct or indirect
Indebtedness, liability or obligation, whether known or unknown, fixed or
unfixed, contingent or otherwise, and whether or not of a kind required by
GAAP to be set forth on a financial statement (collectively "Company
Liabilities"), other than (i) Company Liabilities fully and adequately
reflected in the financial statements included in the SEC Documents filed
prior to the date hereof, (ii) Company Liabilities as set forth in Section
5.8 of the Disclosure Letter, and (iii) Company Liabilities incurred in the
ordinary course of business.
5.9 No Material Adverse Change. Since December 31, 1999, there
has not been any event or development that has had, or could reasonably be
expected to have, a material adverse effect on the assets, business,
properties, operations or financial or other condition of the Company.
5.10 Operations of the Company. Except as contemplated by the
Transaction Documents or otherwise consented to by Pangea, since
December 31, 1999, the Company has not:
(a) declared or paid any dividend or declared or made any
other distributions of any kind to its stockholders, or made any direct or
indirect redemption, retirement, purchase or other acquisition of any shares
of its capital stock;
(b) incurred any Indebtedness for borrowed money;
(c) waived any material right under any contract or other
agreement of the type required to be set forth on any section to the
Disclosure Letter;
(d) made any change in its accounting methods or practices
or made any change in depreciation or amortization policies or rates adopted
by it;
(e) increased the compensation of any officer or other key
employee of the Company;
(f) made any loan or advance to any of its stockholders,
officers, directors, employees, consultants, agents or other
representatives, or made any other loan or advance;
(g) sold, abandoned or made any other disposition of any of
its properties or assets or made any acquisition of all or any part of the
properties, capital stock or business of any other Person;
(h) taken any action that would cause it to be required to
register as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(i) amended its Certificate of Incorporation or By-laws or
agreed to change in any manner the rights of its outstanding capital stock
or the character of its business;
(j) issued any shares of its Common Stock or any securities
convertible, exchangeable or exercisable into Common Stock;
(k) engaged in any other material transaction; or
(l) agreed to do any of the foregoing.
5.11 Capitalization. As of the date hereof, the Company's
authorized capital stock consists of 45,000,000 shares of Common Stock,
4,958,234 shares of which are issued and outstanding and 50,000 shares of
which are held in treasury, and 5,000,000 shares of "blank check" preferred
stock, none of which are issued and outstanding. All of the issued and
outstanding shares of the Company's capital stock have been duly authorized
and validly issued and are fully paid and non-assessable. As of the date of
this Agreement there are no existing options, warrants, calls, commitments
or agreements of any character to which the Company is a party or by which
it is bound calling for the issuance or sale of shares of its respective
capital stock or securities convertible into or exchangeable for shares of
such capital stock. All of the outstanding shares of capital stock of the
Company have been duly authorized and are fully paid, non-assessable and
free of preemptive rights. The Shares and the Warrants are duly authorized,
and, when issued upon payment of the Shares Purchase Price and the Warrants
Purchase Price therefor, will be fully paid and non-assessable. Except as
provided for or in the Transaction Documents, there are no options, warrants
or other rights to purchase shares of capital stock or other securities of
the Company, nor is the Company obligated in any manner to issue shares of
its capital stock or other securities. Except as contemplated hereby and
for relevant state and federal securities laws, there are no restrictions on
the Company's ability to transfer shares of capital stock of the Company.
5.12 Subsidiaries. Except for New Start, Inc., the Company does
not have any Subsidiaries. The Company owns all of the issued and
outstanding capital stock of the Subsidiaries, free and clear of all Liens.
All of such shares of capital stock are duly authorized, validly issued,
fully paid and non-assessable, and were issued in compliance with the
registration and qualification requirements of all applicable federal, state
and foreign securities laws. There are no options, warrants, conversion
privileges, subscription or purchase rights or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued,
unauthorized or treasury shares of capital stock or other securities of, or
any proprietary interest in, any of the Subsidiaries, and there is no
outstanding security of any kind convertible into or exchangeable for such
shares or proprietary interest.
5.13 Investment Company. Neither the Company nor any Person
controlling the Company is an "investment company" within the meaning of the
Investment Company Act.
5.14 Environmental Matters.
(a) The property, assets and operations of the Company
comply with all applicable Environmental Laws, except to the extent that
failure to comply with such Environmental Laws would not have a material
adverse effect on the assets, business, properties or financial or other
condition of the Company.
(b) None of the Company nor the property, assets or
operations of the Company is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond to
a release of any Hazardous Materials into the environment or is in
contravention of any federal, state or local law, order or regulation that
is likely to have a materially adverse effect on the assets, business,
properties or financial or other condition of the Company.
(c) The Company has not received any notice or claim, nor
are there pending, threatened or reasonably anticipated lawsuits against
them, with respect to violations of an Environmental Law or in connection
with any release of any Hazardous Materials into the environment.
(d) The Company does not have any contingent liability which
is material to the Company in connection with any release of any Hazardous
Materials into the environment.
5.15 Real Properties.
(a) The Company does not own or lease any real property.
(b) The Company does not own or hold, and is not obligated
under or a party to, any option, right of first refusal or other contractual
right to purchase, acquire, sell or dispose of any real property or any
portion thereof or interest therein.
5.16 Taxes.
(a) The Company has paid or caused to be paid, or
established reserves that the Company reasonably believes to be adequate in
all material respects for all federal, state, county, local, foreign and
other taxes (including income, profits, premium, estimated, excise, sales,
use, value added, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, inventory and merchandise, capital
stock, tollgate, asset and license, net worth, transaction, transfer,
withholding, employment, unemployment compensation, payroll-related and real
and personal property taxes, taxes on services and import duties and other
governmental charges and assessments), whether or not measured in whole or
in part by net income, and including all deficiencies, additions to tax,
interest and penalties with respect thereto, and including expenses
associated with contesting any proposed adjustment related to any of the
foregoing (collectively, "Taxes" or, individually, a "Tax") required to be
paid by it through the date hereof, and no such Taxes shall be payable by it
in connection with the consummation of the transactions contemplated by this
Agreement.
(b) The Company has filed when due with the appropriate
Governmental Authorities all returns, estimates, reports and forms relating
to Taxes ("Tax Returns") required to be filed by it through the date hereof.
(c) No penalties or other charges are or will become due
with respect to the late filing of any Tax Return of the Company required to
be filed on or before the Closing Date in the ordinary course of the
Company's business.
(d) The Company has not been nor is it currently being
audited by any taxing authority. There is no unassessed Tax deficiency or
audit proposed or threatened against the Company. No extension of time with
respect to any date on which any Tax Return was or is to be filed by the
Company is in force, and no waiver or agreement is in force for the
extension of time for the assessment or payment of any tax.
(e) Prior to the date of this Agreement, the Company has not
made any payments, is not obligated to make any payments, and is not a party
to any agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G or would
constitute compensation in excess of the limitation set forth in Section
162(m) of the Code.
(f) Section 5.16 of the Disclosure Letter sets forth all
material Tax elections made by the Company that are in effect with respect
to the Company for the fiscal year ended December 31, 1998 and the fiscal
year ending December 31, 1999.
(g) Except as set forth in Section 5.16 of the Disclosure
Letter, the Company has not agreed or are required to make any adjustments
under section 481(a) of the Code by reason of a change in accounting method
or otherwise.
(h) The Company has not at any time filed a consent pursuant
to section 341(f)(1) of the Code, or agreed to have section 341(f)(2) of the
Code apply to any dispositions of "subsection (f) assets" (as such term is
defined in section 341(f)(4) of the Code).
(i) The Company is not a party to any Tax allocation,
sharing, or similar agreement. The Company has not been a member of an
affiliated group filing a consolidated federal income tax return (other than
a group the common parent of which was the Company).
5.17 ERISA. The Company does not have any existing plan, policy,
program or arrangement providing for compensation, severance, bonus, profit-
sharing, stock options or other stock-related compensation or other forms of
incentive or deferred compensation, insurance coverage, health or medical
benefits, or retirement benefits (including pension, health, medical or
other similar benefits).
5.18 Intellectual Property. The Company does not own or license
any Intellectual Property.
5.19 Contractual Obligations. There are no Contractual
Obligations to which the Company is a party or by or to which any of them or
any of their properties may be bound or subject.
5.20 Anti-Dilution Protection. Except as contemplated in the
Transaction Documents, no holder of shares of Common Stock (or securities
convertible into or exchangeable or exercisable for any of the foregoing)
has any rights to purchase or receive additional or other securities upon
the occurrence of an event that might dilute such holder's percentage
interest in the Company (other than rights with respect to equitable
adjustments in the event of a stock dividend, stock split, share combination
or similar occurrences).
5.21 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its
representatives in connection with the offer or sale of the Shares or the
Warrants. No registration of the Shares or the Warrants pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws
will be required by the offer, sale or issuance of the Shares or the
Warrants pursuant to this Agreement. The Company agrees that neither it,
nor anyone acting on its behalf, will offer or sell the Shares or the
Warrants or any other security so as to require the registration of the
Shares or the Warrants pursuant to the provisions of the Securities Act or
any state securities or "blue sky" laws, unless such securities are so
registered.
5.22 Solvency. On and as of such Closing Date, after giving
effect to the transactions contemplated in this Agreement, the Company will
be Solvent.
5.23 Contracts Affecting Stockholders. Other than the Transaction
Documents, the Company is not a party to any stockholders agreement, voting
trust agreement, registration rights agreement or other contract to which
the Common Stock or any other capital stock of the Company is bound by,
subject to or entitled to the benefit of or to which any of the existing
stockholders is bound by, subject to or entitled to the benefit of as a
result of its ownership of the Common Stock or any other interest in the
Company.
5.24 Employment and Labor Matters.
(a) Except as disclosed in Section 5.24 of the Disclosure
Letter, neither the Company nor any Commonly Controlled Entity is a party to
any collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to
represent, any employee of the Company or any Commonly Controlled Entity.
(b) Neither the Company nor any Commonly Controlled Entity
has violated any provision of federal or state law or any governmental rule
or regulation, or any order, decree, judgment arbitration award of any
court, arbitrator or any government agency regarding the terms and
conditions of employment of employees, former employees or prospective
employees or other labor related matters, including, without limitation,
laws, rules, regulations, orders, rulings, decrees, judgments and awards
relating to discrimination, fair labor standards and occupational health and
safety, wrongful discharge or violation of the personal rights of employees,
former employees or prospective employees.
5.25 Related Party Transactions. Except as set forth in
Section 5.26 of the Disclosure Letter, none of the officers, directors or
Affiliates of the Company:
(a) owns, directly or indirectly, any interest in (excepting
less than 1% stock holdings for investment purposes in securities of
publicly held and traded companies), or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent or customer
of the Company;
(b) owns, directly or indirectly, in whole or in part, any
property that the Company use in the conduct of their business;
(c) is or has been a party to any Contractual Obligations
with the Company; or
(d) has any actions, causes of action, suits, claims,
complaints, demands, litigations or legal, administrative or arbitral
proceedings or investigations whatsoever against, or owes any amount to, the
Company.
5.26 Broker's, Finder's or Similar Fees. Except as set forth
herein, there are no brokerage commissions, finder's fees or similar fees or
commissions payable in connection with the transactions contemplated hereby
based on any agreement, arrangement or understanding with the Company, or
any action taken by the Company.
5.27 Full Disclosure. No statement by the Company contained in
this Agreement or any of the other Transaction Documents, or by the Company
in any document, certificate, notice or consent delivered to the Purchasers
in connection with the purchase and sale of the Shares and the Warrants at
or prior to the Closing, contains (or will contain) an untrue statement of a
material fact or omits (or will omit) to state a material fact required to
be stated therein or necessary to make the statements made, in light of the
circumstances in which made, not materially false or misleading.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser (as to itself) represents and warrants to, and
covenants and agrees with, the Company as follows:
6.1 Existence and Power; Share Ownership. Such Purchaser:
(a) if not a natural person, is duly organized and validly
existing under the laws of the jurisdiction of its organization;
(b) if not a natural person, has the power and authority to
own and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently, or is currently
proposed to be, engaged; and
(c) other than as disclosed in the Addendum executed by such
Purchaser, owns no shares of Common Stock or any rights to acquire Common
Stock as of the date hereof.
6.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and the other Transaction
Documents to which it is a party:
(a) is within such Purchaser's power and authority and has
been duly authorized by all necessary action;
(b) if not a natural person, does not contravene the terms
of such Purchaser's organizational documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach
or contravention of or the creation of any Lien under, and Contractual
Obligation of such Purchaser, or any order or decree directly relating to
such Purchaser; and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any
Governmental Authority or any other Person, other than those that have been
obtained or made on or prior to the applicable Closing.
6.3 Binding Effect. Each of this Agreement and the other
Transaction Documents to which it is a party has been duly executed and
delivered by such Purchaser, and constitutes the legal, valid and binding
obligation of such Purchaser enforceable against it in accordance with its
terms.
6.4 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party by
such Purchaser will not violate any Requirement of Law.
6.5 Purchase for Own Account. The Shares and Warrants to be
acquired by such Purchaser pursuant to this Agreement are being acquired for
such Purchaser's own account and with no intention of distributing or
reselling such securities or any part thereof in any transaction that would
be in violation of the securities laws of the United States of America, or
any state, without prejudice, however, to the rights of such Purchaser at
all times to sell or otherwise dispose of all or any part of the Shares or
Warrants under an effective registration statement under the Securities Act,
or under an exemption from such registration available under the Securities
Act. If such Purchaser should in the future decide to dispose of any of the
Shares or Warrants, such Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities
laws, as then in effect, and that stop-transfer instructions to that effect,
where applicable, will be in effect with respect to such securities. Each
Purchaser agrees to the imprinting, so long as required by law, of a legend
on certificates representing all of the Shares and Warrants to the following
effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS.
6.6 Sophistication. Such Purchaser, by reason of its business
and financial experience, and the business and financial experience of those
persons that may have been retained to advise it with respect to its
investment in the Shares, together with such advisors, has such knowledge
and experience in business and financial matters to be capable of evaluating
the merits and risks of the prospective investment and to make an informed
investment decision. Such Purchaser acknowledges that it has been afforded
the opportunity (i) to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Shares and Warrants and the merits and
risks of investing in such securities and (ii) to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy and completeness
of the information heretofore provided to it; provided, however, that the
availability of the foregoing opportunity shall not in any way affect,
diminish or derogate from the representations and warranties made or deemed
made to the Purchasers by the Company hereunder or the Purchasers' right to
rely thereon.
6.7 Broker's, Finder's or Similar Fees. Except as otherwise set
forth in this Agreement, there are no brokerage commissions, finder's fees
or similar fees or commissions payable in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding
with such Purchaser.
6.8 Additional Representations. Such Purchaser understands that
the offer and sale of the Shares and the Warrants has not been and will not
be registered under the Securities Act, by reason of the issuance of such
securities by the Company in a transaction exempt from the registration
requirements of the Securities Act. Such Purchaser is an accredited
investor, as such term is defined in Rule 501 of Regulation D under the
Securities Act.
ARTICLE 7
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that:
7.1 Reincorporation in Delaware. As soon as practicable
following the Closing Date, the Company shall take all steps within its
power that may be necessary or desirable in order to cause the jurisdiction
of incorporation of the Company to be changed to Delaware (the "Delaware
Reincorporation"), as expeditiously as possible, including, without
limitation, taking all necessary action as may be required under New Mexico
and Delaware law to merge the Company into a newly-formed Delaware company
to be named Pangea Internet, Inc. ("Newco"), filing any required proxy
solicitation materials with the Commission in connection therewith,
soliciting any stockholder approval required therefor (including the holding
of a stockholders meeting), recommending to the stockholders that they
approve the Delaware Reincorporation, and making any required state filings.
In connection with any stockholder vote to approve the Delaware
Reincorporation, the Company shall direct the individuals designated as
proxies in the Company's proxy materials to vote all shares of Common Stock
and Preferred Stock for which the Company has received proxies (unless
otherwise directed by the stockholder submitting such proxy), in favor of
the Delaware Reincorporation. Newco's certificate of incorporation shall
provide for a sufficient number of authorized shares of Common Stock to
permit the reservation of Common Stock required by Section 7.2.
7.2 Reservation of Common Stock. Upon consummation of the
Delaware Reincorporation, the Company shall at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issue or delivery upon conversion of the Shares or exercise of the Warrants,
such number of shares of Common Stock as shall then be issuable or
deliverable upon the conversion of all outstanding Shares and the exercise
of all outstanding Warrants. Such shares of Common Stock shall, when issued
or delivered in accordance with the terms of the Preferred Stock or
Warrants, as the case may be, be duly and validly issued and fully paid as
non-assessable. The Company shall issue the Common Stock issuable upon
conversion of the Shares or exercise of the Warrants upon the proper
conversion of the Shares or exercise of the Warrants in accordance with the
provisions thereof, and shall otherwise comply with the terms thereof.
7.3 Inspection. The Company will permit the Purchasers and their
respective representatives to make such investigation of the properties,
businesses and operations of the Company, and such examination of the books,
records and financial condition of the Company as they may reasonably
request. Any such investigation and examination shall be conducted at
reasonable times and under reasonable circumstances and the Company shall
cooperate fully therewith. To the extent the Purchasers are advised that
any information obtained from the exercise of the Purchasers' rights
hereunder, and not previously known to the Purchasers, is to be treated in a
confidential manner, the Purchasers shall treat such information as
confidential unless otherwise required by law.
7.4 No Solicitation. Except as provided in this Agreement and
the other Transaction Documents, until the Closing days from the date hereof
none of the Company shall, directly or indirectly (through representatives
or otherwise), solicit, actively encourage, participate in or initiate
discussions or negotiations with, or provide any information to, any person
or group (other than the Purchasers or any designee of the Purchasers)
concerning any merger, consolidation, business combination or
recapitalization involving the Company, the issuance of 5% or greater
interest in the equity or voting power of the Company, or the sale of all or
any substantial part of the business and properties of the Company;
provided, however, that the foregoing shall not prohibit the Company from
participating in discussions and negotiations and furnishing information to
any party following the receipt of an unsolicited proposal from any such
party if the Board in good faith determines that such proposal is more
favorable to the Company's stockholders than the transactions contemplated
by the Transaction Documents and, after consultation with outside counsel
having expertise in the relevant legal principles, that the failure to
engage in such discussions or negotiations or to provide such information
would result in a breach by the Board of its fiduciary duties.
7.5 Additional Covenants. The Company shall not make any
acquisitions or take any action (a) until November 13, 2002, which would
cause Xxxxxx X. Xxxxxx, as an investor in the Company, to violate the Forbes
Noncompete or (b) until February 28, 2001, which would cause Xxxxxxx Xxxxx,
as an officer and investor in the Company, to violate the Xxxxx Noncompete.
"Forbes Noncompete" means the restrictions in Exhibit II of Annex B of that
certain agreement, dated July 28, 1998, between Xxxxxx X. Xxxxxx and Cendant
Corporation, a true copy of which has been provided by Pangea to the
Company. "Xxxxx Noncompete" means the restrictions in that certain non-
competition agreement, dated February 21, 1995, between Xxxxxxx Xxxxx and
XXX International Inc., as incorporated by reference in that certain
agreement, dated December 28, 1998, between Xxxxxxx Xxxxx and Cendant
Corporation, true copies of which have been provided by Pangea to the
Company.
7.6 Reverse Stock Splits. For a period of six (6) months after
the Closing, and except to the extent necessary to meet the minimum bid
price for listing on The Nasdaq National Market ("NASDAQ") or to maintain
listing on the NASDAQ, for a period of six (6) months thereafter, the
Company shall not effect any reverse stock split of the Common Stock.
7.7 Insurance. Not later than the Closing, the Company shall
have obtained directors and officers insurance and general liability
insurance that is reasonably satisfactory to Pangea.
7.8 Further Assurances. Each of the parties hereto agrees to use
its reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated by the Transaction
Documents, to not take any action that would cause its representations and
warranties not to be true as of the Closing Date and shall use its
reasonable efforts promptly to obtain all waivers, permits, consents and
approvals and to effect all registration, filings and notices with or to
third parties or governmental or public bodies or authorities which are
necessary or desirable in connection with the transactions contemplated by
the Transaction Documents. Nothing contained in this Section shall require
any party to pay any money to any third party other than filing fees or
similar costs or expenses that may be required or imposed by governmental
authorities.
7.9 Assets. If the Company is unable to liquidate its equity
interests in Realco, Inc. prior to the Closing, Pangea and its affiliates
will purchase such equity interests from the Company.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Purchasers and their Affiliates and their
respective officers, directors, agents, members, employees and partners to
the fullest extent permitted by law from and against any and all losses,
claims, damages, expenses (including reasonable fees, disbursements and
other charges of counsel) or other liabilities ("Liabilities") resulting
from (i) any breach of any representation, warranty or covenant of the
Company in this Agreement or (ii) any legal, administrative or other actions
(including actions brought by any equity holders of the Company or
derivative actions brought by any Person claiming through the Company or in
the Company's name), proceedings or investigations (whether formal or
informal) (collectively, "Actions or Proceedings"), or written threats
thereof, based upon, relating to or arising out of this Agreement or the
other Transaction Documents, the transactions contemplated hereby or
thereby, or any indemnified person's role therein; provided, however that
the Company shall not be liable under this Section 8.1 (i) for any amount
paid in settlement of claims without the Company's consent (which consent
shall not be unreasonably withheld), (ii) any Liabilities arising out of a
claim or action brought by a Purchaser against another Purchaser or (iii) to
the extent that it is finally judicially determined that such Liabilities
resulted primarily from the willful misconduct, bad faith or gross
negligence of such indemnified party.
8.2 Indemnification by the Purchasers. Each Purchaser agrees to
indemnify and hold harmless the Company and its Affiliates and their
respective officers, directors, agents, members, employees and partners to
the fullest extent permitted by law from and against any and all Liabilities
resulting from any breach of any representation, warranty or covenant of
such Purchaser in this Agreement or provided, however, that such Purchaser
shall not be liable under this Section 8.2: (x) for any amount paid in
settlement of claims without the consent of the Purchaser (which consent
shall not be unreasonably withheld); (y) to the extent that it is finally
judicially determined that such Liabilities resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified party.
8.3 Indemnification to Pangea. The Company agrees to indemnify
and hold harmless Pangea and its officers, directors, agents, members,
employees and partners to the full extent permitted by law from and against
any and all Liabilities resulting from any misstatements of a material fact
contained in any private offering materials in connection with the private
offering contemplated by this Agreement or any omission to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
8.4 Contribution. If the indemnification provided for in this
Article 8 shall for any reason be held by a court to be unavailable to an
indemnified party in respect of any loss, claim, damage or liability, or any
action in respect thereof, then, in lieu of the amount paid or payable under
Section 8.1, 8.2 or 8.3, the indemnified party and the indemnifying party
under Section 8.1, 8.2 or 8.3 shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the
indemnifying and indemnified parties which resulted in such loss, claim,
damage or liability, or action or proceeding in respect thereof, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action or proceeding in respect thereof, as well as
any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received
by the indemnifying and indemnified parties from the offering of the Shares,
provided, that for purposes of clause (i) or (ii), no party shall be
required to contribute any amount in excess of the amount such party would
have been required to pay to an indemnified party if the indemnity under
Section 8.1, 8.2 or 8.3, as applicable, was available. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. As among parties who are
guilty of such fraudulent misrepresentation, such parties' obligations to
contribute as provided in this Section 8.4 are several and not joint. In
addition, no person shall be obligated to contribute hereunder any amounts
in payment for any settlement of any action or claim effected without such
person's consent, which consent shall not be unreasonably withheld.
8.5 Notification. Each party entitled to indemnification under
Section 8.1, 8.2 or 8.3 hereof (an "Indemnified Party") will, promptly after
the receipt of notice of the commencement of any action or other proceeding
against such Indemnified Party, or any other event or occurrence in respect
of which indemnity may be sought from the party obligated to provide such
indemnification under Section 8.1, 8.2 or 8.3 hereof (an "Indemnifying
Party"), notify the Indemnifying Party in writing thereof. The failure of
any Indemnified Party so to notify an Indemnifying Party shall not relieve
such Indemnifying Party from any liability which it may have to such
Indemnified Party (i) other than pursuant to this Article 8 or (ii) under
this Article 8 unless, and only to the extent that, such omission results in
actual prejudice to such Indemnifying Party. In case any such action or
other proceeding shall be brought against any Indemnified Party and it shall
notify the Indemnifying Party of the commencement thereof, such Indemnifying
Party shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action
or proceeding in which both an Indemnifying Party and an Indemnified Party
is, or is reasonably likely to become, a party, such Indemnified Party shall
have the right to employ separate counsel reasonably acceptable to the
Indemnifying Party (in terms of such counsel's experience) at the
Indemnifying Party's expense and to control its own defense of such action
or proceeding if, in the reasonable opinion of counsel to such Indemnified
Party, (a) there are or may be legal defenses available to such Indemnified
Party or to other Indemnified Parties that are different from or additional
to those available to the Indemnifying Party or (b) any conflict or
potential conflict exists between the Indemnifying Party and such
Indemnified Party that would make such separate representation advisable;
provided, however, that in no event shall the Indemnifying Party be required
to pay fees and expenses under this Article 8 for more than one firm of
attorneys in any jurisdiction in any one legal action or group of related
legal actions. The Indemnifying Party will not, without the prior written
consent of the Indemnified Party, settle, compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto)
unless such settlement, compromise or consent includes an unconditional
release of each Indemnified Party from all liability arising or that may
arise out of such claim, action or proceeding. The rights accorded to
Indemnified Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or
otherwise.
8.6 Expense Reimbursement. In connection with the obligation of
an Indemnifying Party to indemnify an Indemnified Party for expenses
pursuant to Section 8.1, 8.2 or 8.3 above, the Indemnifying Party shall
reimburse each Indemnified Party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by
such Indemnified Party; provided, however, that if an Indemnified Party is
reimbursed hereunder for any expenses, such reimbursement of expenses shall
be refunded to the extent that the Indemnified Party was not entitled to be
indemnified therefore pursuant to Section 8.1, 8.2 or 8.3, as the case may
be.
8.7 Registration Rights Agreement. Notwithstanding anything to
the contrary in this Article 8, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim made
with respect to registration statements filed pursuant thereto or sales made
thereunder.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of the parties hereto;
(b) by the Purchasers or the Company, if the Closing shall
not have occurred on or prior to 60 days from the date hereof; provided that
the right to terminate this Agreement pursuant to this Section 9.1(b) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of such condition;
(c) by the Purchasers, in the event the Company breaches in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement which breach is not susceptible
of cure or, if susceptible of cure, has not been cured within 30 days after
the giving of written notice to the Company; and
(d) by the Company, in the event the Purchasers breach in
any material respect any of their representations, warranties, covenants or
other agreements contained in this Agreement which breach is not susceptible
of cure or, if susceptible of cure, has not been cured within 30 days after
the giving of written notice to the Purchasers.
9.2 Procedure for the Effect of Termination. In the event this
Agreement is terminated by the Purchasers, on the one hand, or by the
Company, on the other hand, pursuant to Section 9.1, written notice of such
termination shall forthwith be given to the other party and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned
without any further action. If this Agreement is terminated as provided
herein, no party hereto shall have any liability or further obligation to
any other party under the terms of this Agreement except with respect to the
willful breach by any party hereto and except that the provisions of this
Section 9.2 and Article 10 shall survive the termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Provisions. All of the representations and
warranties made herein shall survive the execution and delivery of this
Agreement, any investigation by or on behalf of the Purchasers or any
Affiliate, acceptance of the Shares and payment therefor, or termination of
this Agreement and shall terminate on the 90th day following the delivery to
the Purchasers of audited financial statements of the Company covering one
full year following the Closing.
10.2 Expenses. If the Closing occurs, the Company shall reimburse
Pangea and the Purchasers for all of their legal fees and expenses incurred
in connection with the transactions contemplated hereby.
10.3 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested,
telecopier, courier services or personal delivery to the following
addresses, or to such other addresses as shall be designated from time to
time by a party in accordance with this Section 10.2:
(a) if to the Purchasers or Pangea:
Pangea Internet Advisors LLC
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
and
Xxxxxxx & X'Xxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(b) if to the Company:
Arinco Computer Systems Inc.
0000 Xxxxxxxxxx Xxxxxxxxx, X.X.
Xxxxx 0-000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxx X. Xxxx, Esq.
0000 Xxxxxxx Xxxxxxx Xx., X.X.
Xxxxxxxxxxx, Xxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one Business
Day after delivery to a courier, if delivered by commercial overnight
courier service; five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged, if telecopied.
10.4 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Pangea may assign any of its rights under this Agreement as
a "Purchaser" to one or more financially sophisticated investors who is
reasonably acceptable to the Company and who is an "accredited investor" as
defined in Rule 501 of Regulation D under the Securities Act. The
Purchasers may assign any of their rights under this Agreement to any of
their Affiliates or to any institutional investor to whom the Shares or
Warrants (or any portion thereof) are transferred. The Company may not
assign any of its rights hereunder without the consent of Pangea. Except as
provided in Article 8, no Person other than the parties hereto and their
permitted assignees is intended to be a beneficiary of this Agreement.
10.5 Waiver and Amendment.
(a) No failure or delay on the part of the Company, Pangea
or any Purchaser in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided
for herein are cumulative and are not exclusive of any remedies that may be
available to the Company, Pangea or the Purchasers at law, in equity or
otherwise.
(b) Subject to Section 2.4, this Agreement may not be
amended without the consent of each party hereto.
10.6 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
10.7 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning
hereof.
10.8 Governing Law. This Agreement has been negotiated, executed
and delivered in the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
10.9 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated
hereby may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York and hereby
expressly submits to the personal jurisdiction and venue of such courts for
the purposes thereof and expressly waives any claim of improper venue and
any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts pursuant to a contractual provision in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 10.2, such service to
become effective ten days after such mailing.
10.10 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired, unless the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions hereof.
10.11 Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections
refer to sections or subsections of this Agreement.
10.12 Remedies. If a breach of this Agreement occurs and is
continuing, any Purchaser may pursue any available remedy by proceeding at
law or in equity to enforce the performance (including, without limitation,
the specific performance) of any provision of this Agreement. A Purchaser
may maintain a proceeding even if it does not possess any of the Shares or
Warrants or does not produce any of them in the proceeding. Except as
otherwise provided by law, a delay or omission by any Purchaser in
exercising any right or remedy accruing upon any such breach shall not
impair the right or remedy or constitute a waiver of or acquiescence in any
such breach. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
10.13 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, is
intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
or therein. This Agreement, together with the exhibits and schedules hereto
and the other Transaction Documents, supersede all prior agreements and
understandings among the parties with respect to such subject matter.
10.14 Publicity. Except as may be required by applicable law,
no party hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other parties hereto. If
any announcement is required by law to be made by a party hereto, prior to
making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed and delivered by their respective officers
hereunto duly authorized as of the date first above written.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ Xxxxx X. Xxxxx
XXXXX X. XXXXX, President and
Chief Executive Officer
PANGEA INTERNET ADVISORS LLC
By: /s/ Xxxx X. Xxxxxxx
XXXX X. XXXXXXX, Managing
Director
ADDENDUM
This Addendum forms part of the Securities Purchase Agreement
entered into by and between Arinco Computer Systems Inc. and Pangea Internet
Advisors LLC as of March 9, 2000 (the "Securities Purchase Agreement"). The
undersigned hereby agrees that, as of the date hereof, the undersigned shall
become a "Purchaser" under the Securities Purchase Agreement, as defined
therein, that the representations and warranties made in the Securities
Purchase Agreement as to the Purchasers are true as to the undersigned and
that the terms and conditions of the Securities Purchase Agreement shall be
binding upon and inure to the benefit of the undersigned.
The undersigned represents and warrants to Arinco Computer Systems
Inc. that, except as described below, the undersigned owns no shares of
Arinco Common Stock or rights to acquire such Common Stock.
IN WITNESS WHEREOF, the undersigned has caused this Addendum to be
duly executed and delivered as of this _____ day of _____________, 2000.
[PURCHASER]
By:
Name:
Title:
Execution Copy
SECURITIES PURCHASE AGREEMENT
By and Between
ARINCO COMPUTER SYSTEMS INC.
and
PANGEA INTERNET ADVISORS LLC
______________________________
Dated as of March 9, 2000
______________________________
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 13
1.1 Definitions 13
ARTICLE 2 PURCHASE AND SALE 19
2.1 Purchase and Sale of Shares 19
2.2 Preferred Stock Terms 20
2.3 Purchase and Sale of Warrants 20
2.4 Closing 20
2.5 Purchasers' Representative 20
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE 21
3.1 Representations and Warranties True 21
3.2 Compliance with this Agreement 21
3.3 Officer's Certificate 21
3.4 Secretary's Certificate 21
3.5 Documents 21
3.6 Purchase Permitted by Applicable Laws; Legal Investment 21
3.7 Opinion of Counsel 22
3.8 Approval of Counsel to the Purchaser 22
3.9 No Material Adverse Change 22
3.10 Registration Rights Agreement 22
3.11 Certificate of Incorporation and By-Laws of the Company 22
3.12 No Litigation 22
3.13 Funding Commitments 22
3.14 Board Representation; Executive Officers 23
3.15 Certificate of Designations 23
3.16 Assets 23
3.17 Office Services Agreement 23
3.18 Annual Report 23
3.19 New Start 23
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE 23
4.1 Representations and Warranties True 23
4.2 Compliance with this Agreement 24
4.3 Issuance Permitted by Applicable Laws 24
4.4 Approval of Counsel to the Company 24
4.5 No Litigation 24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 24
5.1 Corporate Existence and Power 24
5.2 Corporate Authorization; No Contravention 25
5.3 Governmental Authorization; Third Party Consents 25
5.4 Binding Effect 26
5.5 No Legal Bar 26
5.6 Litigation 26
5.7 No Default or Breach 26
5.8 SEC Documents 26
5.9 No Material Adverse Change 27
5.10 Operations of the Company 27
5.11 Capitalization 28
5.12 Subsidiaries 29
5.13 Investment Company 29
5.14 Environmental Matters 29
5.15 Real Properties 30
5.16 Taxes 30
5.17 ERISA 31
5.18 Intellectual Property 31
5.19 Contractual Obligations 31
5.20 Anti-Dilution Protection 31
5.21 Private Offering 32
5.22 Solvency 32
5.23 Contracts Affecting Stockholders 32
5.24 Employment and Labor Matters 32
5.25 Related Party Transactions 33
5.26 Broker's, Finder's or Similar Fees 33
5.27 Full Disclosure 33
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 33
6.1 Existence and Power; Share Ownership. 33
6.2 Authorization; No Contravention 34
6.3 Binding Effect 34
6.4 No Legal Bar 34
6.5 Purchase for Own Account 34
6.6 Sophistication 35
6.7 Broker's, Finder's or Similar Fees 35
6.8 Additional Representations 35
ARTICLE 7 AFFIRMATIVE COVENANTS 36
7.1 Reincorporation in Delaware 36
7.2 Reservation of Common Stock 36
7.3 Inspection 36
7.4 No Solicitation 37
7.5 Additional Covenants 37
7.7 Insurance 38
7.8 Further Assurances 38
ARTICLE 8 INDEMNIFICATION 38
8.1 Indemnification by the Company 38
8.2 Indemnification by the Purchasers 39
8.3 Indemnification to Pangea 39
8.4 Contribution 39
8.5 Notification 40
8.6 Expense Reimbursement 41
8.7 Registration Rights Agreement 41
ARTICLE 9 TERMINATION 41
9.1 Termination 41
9.2 Procedure for the Effect of Termination 42
ARTICLE 10 MISCELLANEOUS 42
10.1 Survival of Provisions 42
10.2 Expenses 42
10.3 Notices 42
10.4 Successors and Assigns 43
10.5 Waiver and Amendment 44
10.6 Counterparts 44
10.7 Headings 44
10.8 Governing Law 44
10.9 Jurisdiction 44
10.10 Severability 38
10.11 Rules of Construction 45
10.12 Remedies 45
10.13 Entire Agreement 45
10.14 Publicity 45
Schedule I Purchasers; Allocation of Shares and Warrants
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Warrant
Exhibit C Form of Certificate of Designations
Exhibit A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 28, 2000, by and
among ARINCO COMPUTER SYSTEMS INC., a New Mexico corporation (the
"Company"), Pangea Internet Advisors LLC, a Delaware limited liability
company ("Pangea"), and the Persons (the "Purchasers") party to the
Securities Purchase Agreement (defined below) as "Purchasers" (collectively
with Pangea, the "Holders").
This Agreement is made in connection with the Securities Purchase
Agreement, dated as of March 9, 2000, by and among the Company and the
Purchasers (the "Securities Purchase Agreement"), pursuant to which the
Company has agreed to issue and sell to the Purchasers shares of the
Company's Series B Convertible Preferred Stock, par value $.10 per share
(the "Preferred Stock"), and Warrants ("Warrants") to purchase shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"). In
order to induce the Holders to purchase the shares of Preferred Stock and
the Warrants, the Company has agreed to grant registration rights with
respect to the Registrable Securities (defined below) as set forth in this
Agreement. Capitalized terms used herein and not otherwise defined shall
have the respective meanings given them in Section 12.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. Registration on Request.
(a) Request. Except as otherwise provided in this
Section 1, at any time and from time to time after the first anniversary of
the date hereof, upon the written request of one or more Initiating Holders
requesting that the Company effect a registration under the Securities Act
of all or any part of such Initiating Holders' Registrable Securities, and
specifying the intended method or methods of disposition thereof, the
Company will promptly, but in any event within ten (10) days after receipt
of such written request, give written notice of such requested registration
to all holders of Registrable Securities, and thereupon will use its best
efforts to effect, as reasonably expeditiously as practicable, the
registration under the Securities Act, including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested
in such request (but in the case of a shelf registration only if the Company
is then eligible to use Form S-2 or S-3 (or any successor forms) for such a
shelf registration), of:
(i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holder(s), for
disposition in accordance with the intended method or methods of
disposition stated in such request, and
(ii) all other Registrable Securities which the
Company has been requested to register by the holders thereof by
written request delivered to the Company within thirty (30) days after
the giving of such written notice by the Company (which request shall
specify the intended method or methods of disposition thereof),
all to the extent necessary to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered; provided that the reasonably anticipated aggregate price
to the public of such offering would be at least $5,000,000; and provided
further that any holder of Registrable Securities to be included in any such
registration, by written notice to the Company within ten (10) days after
its receipt of a copy of a notice from the managing underwriter delivered
pursuant to Section 4(a) may withdraw such request and, upon receipt of such
notice of the withdrawal of such request from holders comprising the
Requisite Holders, the Company may elect not to effect such registration;
and provided further, that the Company shall not be required to pay
Registration Expenses in connection with a registration request pursuant to
this Section 1 if such request is withdrawn by the Requisite Holders.
(b) Number of Registrations. The Company shall not be
required to effect more than three (3) registrations, plus three (3)
additional registrations if the Company is then eligible to use Form S-3
(for a total of six (6)), pursuant to this Section 1.
(c) Registration Statement Form. Registrations under this
Section 1 shall be on such appropriate registration form of the Commission
(i) as shall be requested by the Requisite Holders (provided that the
Company is then eligible to use such form) and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the request for their
registration.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 1 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if the registration does not remain effective for a period
of at least ninety (90) days (or, with respect to any registration statement
filed pursuant to Rule 415 under the Securities Act, for a period of at
least nine (9) months) or, in either case if earlier, until all the
Registrable Securities requested to be registered in connection therewith
are sold or withdrawn by the participating Holders, (iii) if, after it has
become effective, such registration is subject to any stop order, injunction
or other order or requirement of the Commission or other governmental agency
or court for any reason not attributable to actions taken by the holders of
Registrable Securities, or (iv) if the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied and no such closing occurs, other
than by reason of some act or omission by the holders of the Registrable
Securities that were to have been registered.
(e) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 1, no securities other
than Registrable Securities shall be included among the securities covered
by such registration unless (i) holders of Registrable Securities requesting
registration thereof pursuant to Section 1, representing not less than 50%
of the Registrable Securities with respect to which registration has been
requested, shall have consented in writing to the inclusion of such other
securities or (ii) such inclusion would not have the effect of reducing the
amount of Registrable Securities included in such registration.
(f) Postponement. The Company shall be entitled to postpone
for a reasonable period of time (but not exceeding sixty (60) days) the
filing of any registration statement otherwise required to be prepared and
filed by it pursuant to this Section 1 if the Company determines, in its
reasonable judgment, that such registration and offering would interfere
with any material financing, acquisition, corporate reorganization or other
material transaction involving the Company and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to this
Section 1 written notice of such determination, containing a general
statement of the reasons for such postponement and an approximation of the
anticipated delay. The Company may not postpone a filing pursuant to this
Section 1(f) more than once in any twelve-month period. If the Company
shall so postpone the filing of a registration statement, holders of
Registrable Securities requesting registration thereof pursuant to
Section 1, representing not less than 15% of the Registrable Securities with
respect to which registration has been requested and constituting not less
than 50% of the Initiating Holders, shall have the right to withdraw the
request for registration by giving written notice to the Company within
thirty (30) days after receipt of the notice of postponement and, in the
event of such withdrawal, such request shall not be counted for purposes of
the registrations to which holders of Registrable Securities are entitled
pursuant to Section 1.
(g) Limitations on Registration on Request. Notwithstanding
anything in this Section 1 to the contrary, the Company shall not be
required to effect a registration pursuant to this Section 1 within the six
(6)-month period occurring immediately subsequent to the effectiveness
(within the meaning of Section 1(d) hereof) of a registration statement
filed pursuant to this Section 1.
2. Incidental Registration.
(a) Incidental Rights. If the Company at any time proposes
to register, on any form which may be used for the registration of
Registrable Securities other than Form S-4 or Form S-8 (or any successor or
similar forms then in effect), any of its securities under the Securities
Act (other than pursuant to Section 1), whether or not pursuant to
registration rights granted to other holders of its securities and whether
or not for sale for its own account, in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will give written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2; such notice to be given to all such holders at least twenty (20)
days prior to the filing of such proposed registration statement. Upon the
written request of any such holder (a "Requesting Holder") made within
fifteen (15) days after the giving of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such holder
and the intended method or methods of disposition thereof), the Company will
use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to
register by the Requesting Holders, to the extent necessary to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered. With respect to an
underwritten offering, prior to the effective date of any registration
statement filed in connection with a registration described in this
Section 2, promptly upon notification to the Company from the managing
underwriter of the price at which the Registrable Securities requested to be
registered pursuant to this Section 2 are to be sold, the Company shall
advise each Requesting Holder of such price, and if such price is below the
price which any Requesting Holder shall have indicated to be acceptable to
such Requesting Holder, such Requesting Holder shall then have the right to
withdraw its request to have its Registrable Securities included in such
registration statement.
(b) Not Deemed a Demand Registration. No registration
effected pursuant to this Section 2 shall be deemed to have been effected
pursuant to Section 1.
(c) Holdback. If the Company previously shall have received
a request for registration pursuant to Section 1 or this Section 2, and if
such previous registration shall not have been withdrawn or abandoned, the
Company will not effect any registration of any of its securities under the
Securities Act (other than on Form S-4 or Form S-8 or a successor form),
whether or not for sale for its own account, until a period of ninety (90)
days shall have elapsed from the effective date of such previous
registration.
(d) Discontinuance. Notwithstanding anything to the
contrary in this Section 2, the Company shall have the right to discontinue
any registration under this Section 2 at any time prior to the effective
date of such registration, if the registration of other securities giving
rise to such registration under this Section 2 is discontinued; but no such
discontinuation shall preclude an immediate or subsequent request for
registration pursuant to Section 1 or 2.
3. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 1 or
Section 2, the Company will promptly:
(a) prepare and (in any event within ninety (90) days after
the end of the period within which requests for registration may be given to
the Company) file with the Commission the requisite registration statement
to effect such registration and thereafter use its best reasonable efforts
promptly to cause such registration statement to become effective; provided
that the Company may discontinue any registration of its securities which
are not Registrable Securities at any time prior to the effective date of
the registration statement relating thereto;
(b) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier of (i) such time as
all of such Registrable Securities have either been disposed of in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement or the sale thereof has been
abandoned by such sellers and (ii) ninety (90) days after the effective date
of such registration statement, except with respect to any such registration
statement filed pursuant to Rule 415 (or any successor Rule) under the
Securities Act, in which case such period shall be one year;
(c) furnish as soon as available to each seller of
Registrable Securities covered by such registration statement such number of
copies of such drafts and final versions of such registration statement and
of each such amendment, post-effective amendment and supplement thereto (in
each case including all exhibits), such number of copies of such drafts and
final versions of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus), any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, such documents, if
any, incorporated by reference in such registration statement or prospectus,
and such other documents, as such seller or such holder may reasonably
request;
(d) use its commercially reasonably efforts to register or
qualify all Registrable Securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this clause (d) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(e) cooperate with the sellers of such Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which securities shall not
bear any restrictive legends indicating that the securities have not been
registered under the Securities Act and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names as such
sellers may request at least two (2) business days prior to any sale of
Registrable Securities;
(f) furnish to each seller of Registrable Securities upon
request a copy of (i) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration
involves an underwritten public offering, dated the date of the closing
under the underwriting agreement), covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel in
underwritten public offerings of securities and (ii) a "comfort" letter
signed by the independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
registration statement, covering substantially the same matters with respect
to such registration statement (and the prospectus included therein) and,
with respect to events subsequent to the date of such financial statements,
as are customarily covered in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities and such other
financial matters as the Requisite Holders or the underwriters, as the case
may be, may reasonably request, subject to the delivery by such seller to
such independent public accountants of such documents as are reasonable and
customary in transactions of this nature;
(g) promptly notify each seller of such Registrable
Securities, and (if requested by any such seller) confirm such advice in
writing, (i) when the prospectus or any prospectus supplement or post-
effective amendment has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose;
(h) promptly notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller or holder
promptly prepare and furnish to such seller or holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers or prospective
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(i) use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time;
(j) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its securities holders,
as soon as reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen (18) months, beginning
with the first full calendar month after the effective date of such
registration statement, which earning statement shall satisfy the provisions
of Section 11(a) of the Securities Act;
(k) furnish to each such seller prior to the filing thereof
a copy of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller shall
have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or the rules or regulations thereunder;
(l) provide and cause to be maintained a transfer agent and
a registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(m) cause all Registrable Securities covered by such
registration statement to be listed on each securities exchange or approved
for quotation on any inter-dealer quotation system on which similar
securities issued by the Company are then listed or quoted;
(n) cause its subsidiaries and affiliates to take all action
necessary or advisable to effect the registration of the Registrable
Securities contemplated hereby, including preparing and filing any required
financial information; and
(o) provide a CUSIP number for all Registrable Securities,
not later than the effective date of the applicable registration statement.
The Company may require each holder of Registrable Securities which will be
included in such registration (i) to furnish the Company such information
relating to such holder as the Company may reasonably request and as is
required by applicable laws or regulations, and (ii) to provide the Company
with written confirmation that such holder will comply with applicable
securities laws and regulations, and provide the Company with such further
information necessary for the Company to abide by applicable laws and
regulations, in such form as the Company may reasonably request.
4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
Initiating Holders for any underwritten offering of Registrable Securities
pursuant to a registration requested under Section 1, the Company will use
its commercially reasonable efforts to enter into a firm commitment
underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the
underwriters and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in such agreements,
including, without limitation, indemnities to the effect and to the extent
provided in Section 8. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities. Except as
set forth in this Agreement, no holder of Registrable Securities shall be
required (i) to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and
such holder's intended method of distribution and any other representation
required by law or (ii) to indemnify (or contribute with respect to an
indemnifiable claim) the Company or any underwriters of the Registrable
Securities, except as set forth in Section 8. Notwithstanding the
foregoing, if the managing underwriter of such underwritten offering shall
advise the Company in writing (with a copy to the holders of Registrable
Securities requesting such registration) that, in its opinion the total
number of shares which the holders of Registrable Securities and, if
applicable, any other holders of securities of the Company or the Company
propose to be included in such registration is sufficiently large to
materially and adversely affect the success of such offering (such writing
to state the basis of such opinion and the approximate number of such
securities which may be included in such offering without such effect), then
the amount of securities to be offered for the accounts of holders of
Registrable Securities shall be reduced pro rata (in accordance with the
number of Registrable Securities requested to be included in such
registration) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter; provided that if securities are being offered for the
account of other Persons as well as the Company, the amount of such
securities shall be reduced prior to any reduction of the amount of
securities to be offered for the accounts of holders of Registrable
Securities. Any holder of Registrable Securities to be included in such
registration may withdraw its request to have its securities so included by
notice to the Company promptly after receipt of a copy of a notice from the
managing underwriter pursuant to this Section 4(a).
(b) Incidental Underwritten Offerings. If the Company at
any time proposes to register any of its securities under the Securities Act
as contemplated by Section 2, whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for
its own account, and such securities are to be distributed by or through one
or more underwriters, the Company will, if requested by any holder of
Registrable Securities as provided in Section 2 and subject to the
provisions of this Section 4(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters; provided that if the managing underwriter of such underwritten
offering shall advise the Company in writing (with a copy to the holders of
Registrable Securities requesting such registration) that, in its opinion
the total number of shares which the Company, the holders of Registrable
Securities and any other holders of securities of the Company propose to be
included in such registration is sufficiently large to materially and
adversely affect the success of such offering (such writing to state the
basis of such opinion and the approximate number of such securities which
may be included in such offering without such effect), then after inclusion
of the number of securities to be sold by the Company for its own account in
such registration, the amount of securities to be offered for the accounts
of holders of Registrable Securities shall be reduced pro rata (in
accordance with the number of Registrable Securities requested to be
included in such registration) to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount
recommended by such managing underwriter; provided that if securities are
being offered for the account of other Persons as well as the Company, such
reduction shall not represent a greater fraction of the number of securities
intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other Persons over the amount
of securities they intended to offer. Any holder of Registrable Securities
to be included in such registration may withdraw its request to have its
securities so included by notice to the Company promptly after receipt of a
copy of a notice from the managing underwriter pursuant to this
Section 4(b). The holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between the
Company and such underwriters and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such holders of Registrable
Securities. Except as set forth in this Agreement, no holder of Registrable
Securities shall be required (i) to make any representations or warranties
to or agreements with the Company or the underwriters other than customary
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law or (ii) to
indemnify (or contribute with respect to an indemnifiable claim) the Company
or any underwriters of the Registrable Securities, except as set forth in
Section 8.
(c) Holdback Agreements. Each holder of Registrable
Securities agrees, if so required by the managing underwriter, not to effect
any public sale or distribution of securities of the Company of the same
class as the securities included in such registration statement, during the
seven (7) days prior to the date on which any underwritten registration has
become effective and the ninety (90) days thereafter, except as part of such
underwritten registration or to the extent that such holder is prohibited by
applicable law from agreeing to withhold Registrable Securities from sale or
is acting in its capacity as a fiduciary or an investment adviser. The
Company agrees not to effect any public sale or distribution of its equity
securities or securities convertible into or exchangeable or exercisable for
any of such securities during the seven (7) days prior to and the ninety
(90) days after any underwritten registration pursuant to Section 1 or 2 has
become effective, except as part of such underwritten registration (other
than on Form S-4 or Form S-8 or a successor form).
(d) Selection of Underwriters. If a requested registration
pursuant to Section 1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company, which selection shall
be subject to the approval of the Requisite Holders. If an incidental
registration pursuant to Section 2 involves one or more underwriters, the
underwriter or underwriters shall be selected by the Company.
5. Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered, and their underwriters, if any, and
their respective counsel the opportunity to participate in the preparation
of such registration statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders and such
underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
6. Rights of Requesting Holders. If any registration statement
refers to any Requesting Holder by name or otherwise as the holder of any
securities of the Company, such holder shall have the right to require
(a) the insertion therein of language, in form and substance reasonably
satisfactory to such holder, to the effect that, if true, the holding by
such holder of such securities does not necessarily make such holder a
"controlling person" of the Company within the meaning of the Securities Act
or (b) in the event that such reference to such holder by name or otherwise
is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
7. Registration Expenses. The Company will, whether or not any
registration pursuant to this Agreement shall become effective, pay all
Registration Expenses incident to its performance under or compliance with
this Agreement promptly as such Registration Expenses are incurred.
8. Indemnification and Contribution.
(a) The Company will, and hereby does, indemnify and hold
harmless, in the case of any registration statement filed pursuant to
Section 1 or 2, each seller of any Registrable Securities covered by such
registration statement and each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, and their respective directors, officers,
partners, agents and Affiliates, against any losses, claims, damages or
liabilities, joint or several, to which such seller or underwriter or any
such director, officer, partner, agent, Affiliate or controlling person may
become subject under the Securities Act or otherwise, including, without
limitation, the reasonable fees and expenses of legal counsel, insofar as
such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company will reimburse such seller or underwriter and
each such director, officer, partner, agent, Affiliate and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such seller or underwriter, as
the case may be, specifically stating that it is for use in the preparation
thereof; and provided, further, that the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus and such
final prospectus was required to be delivered to such Person. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, partner, agent, Affiliate or controlling person and shall survive
the transfer of such securities by such seller.
(b) As a condition to including any Registrable Securities
in any registration statement, the Company shall have received an
undertaking satisfactory to it from each prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 8(a)) the Company, each other
prospective seller, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in
the offering or sale of such securities and each other Person who controls
the Company or any such underwriter within the meaning of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus, contained therein, or
any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such seller
specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the liability
of such indemnifying party under this Section 8(b) shall be limited to the
amount of proceeds received by such indemnifying party in the offering
giving rise to such liability. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred
to in Section 8(a) or (b), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 8, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party the
indemnifying party shall be entitled to participate in and, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, to
assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. In the event a bona fide conflict of interest
between the indemnified and indemnifying parties exists, the indemnifying
party hereunder shall only be responsible for the payment of reasonable fees
and expenses of a single counsel for the indemnified parties hereunder. No
indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the consent of
the indemnified party, which consent shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation or which requires action other than the
payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for in
this Section 8 shall for any reason be held by a court to be unavailable to
an indemnified party under Section 8(a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under Section 8(a) or (b), the
indemnified party and the indemnifying party under Section 8(a) or (b) shall
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating the same), (i) in such proportion as is appropriate to reflect
the relative fault of the Company and the prospective sellers of Registrable
Securities covered by the registration statement which resulted in such
loss, claim, damage or liability, or action or proceeding in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and such prospective sellers from the
offering of the securities covered by such registration statement, provided,
that for purposes of clause (i) or (ii), the relative benefits received by
the prospective sellers shall be deemed not to exceed the amount of proceeds
received by such prospective sellers and no holder of Registrable Securities
shall be required to contribute any amount in excess of the amount such
holder would have been required to pay to an indemnified party if the
indemnity under clause (a) of this Section 8 was available. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation. As among sellers who
are guilty of such fraudulent misrepresentation, such sellers' obligations
to contribute as provided in this Section 8(d) are several in proportion to
the relative value of their respective Registrable Securities covered by
such registration statement and not joint. In addition, no Person shall be
obligated to contribute hereunder any amounts in payment for any settlement
of any action or claim effected without such Person's consent, which consent
shall not be unreasonably withheld.
(e) Indemnification and contribution similar to that
specified in the preceding subdivisions of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
(f) An indemnifying party shall make payments of all amounts
required to be made pursuant to the foregoing provisions of this Section 8
to or for the account of the indemnified party from time to time promptly
upon receipt of bills or invoices relating thereto or when otherwise due or
payable; provided that the indemnified party shall reimburse the
indemnifying party for any payments made with the stated purpose of
satisfying the requirements of this clause (f) which were not required to be
made by this Section 8.
9. Registration Rights to Others. The Company hereby represents
to the holders of Registrable Securities that the rights granted herein do
not conflict with the rights, if any, granted to any other holder of
securities of the Company. If the Company shall at any time provide to any
holder of any securities of the Company rights with respect to the
registration of such securities under the Securities Act, such rights shall
not be in conflict with any of the rights provided in this Agreement to the
holders of Registrable Securities. The Company shall provide to the holders
of Registrable Securities copies of any agreements which purport to grant
rights with respect to the registration of any of the Company's securities
to any holder or prospective holder thereof promptly upon executing the
same.
10. Nominees for Beneficial Owners. For purposes of this
Agreement, in the event that any Registrable Securities are held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may,
at its election, be treated as the holder of such Registrable Securities for
purposes of any request or other action by any holder or holders of
Registrable Securities pursuant to this Agreement or any determination of
any number or percentage of shares of Registrable Securities held by any
holder or holders of Registrable Securities contemplated by this Agreement.
If the beneficial owner of any Registrable Securities so elects, the Company
may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
11. Rule 144. So long as the Company shall be required to file
reports under the Exchange Act, the Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell
such securities without registration under the Securities Act within the
limitation of the provisions of Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission, including, without limitation, filing
on a timely basis all reports required to be filed pursuant to the Exchange
Act. Upon the request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to whether it has
complied with such requirements.
12. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Affiliate" means any Person controlling, controlled by or under
common control with the Person in question. As used herein, "control" means
the beneficial ownership of at least a majority of the equity interests of a
Person entitling the owner of such interests to direct the policies and
operations of such Person.
"Commission" means the Securities and Exchange Commission and any
successor federal agency having similar powers.
"Common Stock" means the Common Stock, par value $0.1 per share,
of the Company, together with any stock into which such Common Stock shall
have been changed or any stock resulting from any reclassification of such
Common Stock, and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
"Company" shall have the meaning assigned such term in the
introductory paragraph of this Agreement and shall include any successor by
merger or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Holders" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Initiating Holders" means, as of any date of determination, any
holder or holders of Registrable Securities holding individually or in the
aggregate more than 25% of the shares of Registrable Securities then
outstanding.
"Person" means an individual, a partnership, a limited liability
company, a joint venture, a corporation, a trust, an association, an
organization, a business, an unincorporated organization or a government or
political subdivision thereof or agency thereof or other entity of any kind.
"Registrable Securities" means any shares of Common Stock
(i) issued upon conversion of shares of Preferred Stock sold by the Company
pursuant to the Securities Purchase Agreement, (ii) issued or issuable upon
exercise of the Warrants, or (iii) issued or issuable with respect to any of
the securities referred to in clauses (i) or (ii) by way of a dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or antidilution protection or
otherwise. As to any particular Registrable Security, such security shall
cease to be a Registrable Security when (x) a registration statement with
respect to the sale of such security shall have become effective under the
Securities Act and such security shall have been disposed of in accordance
with such registration statement, (y) such security shall have been sold as
permitted by Rule 144 (or any successor provision) under the Securities Act
or (z) such security, once issued, shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Sections 1 and 2, including,
without limitation, all registration and filing fees, all fees of national
securities exchanges or the National Association of Securities Dealers,
Inc., all fees and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of "cold
comfort" letters required by or incident to such performance and compliance,
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (excluding any underwriting discounts or commissions
with respect to the Registrable Securities, which shall not be paid by the
Company) and the reasonable fees and expenses of one counsel to the selling
holders of Registrable Securities (selected by selling holders of
Registrable Securities representing a majority of the Registrable Securities
covered by such registration); provided, however, that in the event the
Company shall, in accordance with Section 2(d), not register any securities
with respect to which it had given written notice of its intention to so
register to holders of Registrable Securities, all of the costs of the type
(and subject to any limitation to the extent) set forth in this definition
and incurred by Requesting Holders in connection with such registration
shall be deemed Registration Expenses.
"Requesting Holders" shall have the meaning assigned to such term
in Section 2 hereof.
"Requisite Holders" means, with respect to any registration of
Registrable Securities by the Company pursuant to this Agreement, any holder
or holders of a majority of the Registrable Securities requested to be
registered.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall have the meaning assigned
such term in the recitals of this Agreement.
"Warrants" shall have the meaning assigned to such term in the
recitals of this Agreement.
13 Miscellaneous.
(a) Remedies. Each holder of Registrable Securities, in
addition to the rights provided herein and at law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss
incurred by reason of a breach by the Company of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) Adjustments Affecting Registrable Securities. The
Company will not take any action, or permit any change to occur, with
respect to the Registrable Securities which would adversely affect the
ability of the holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to the terms of this
Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the
written consent of holders of a majority of the Registrable Securities.
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at
the most current address given by such holder to the Company in
accordance with the provisions of this Section 13(d); and
(ii) if to the Company, at Arinco Computer Systems
Inc., 0000 Xxxxxxxxxx Xxxxxxxxx, X.X., Xxxxx 0-000, Xxxxxxxxxxx, Xxx
Xxxxxx 00000, Attention: CEO; or at such other address, notice of which
is given in accordance with the provisions of this Section 13(d).
All such notices and communications shall be deemed to have been
duly given at the time delivered by hand, if personally delivered; five (5)
business days after being deposited in the mail, postage prepaid, if mailed;
and on the next business day if timely delivered to an air courier
guaranteeing overnight delivery.
(e) Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and permitted assigns and,
with respect to the Holders, any subsequent holder of any Registrable
Securities who agrees in writing to assume the obligations of a holder of
Registrable Securities hereunder (a copy of which agreement shall be
delivered promptly to the Company), subject to the provisions respecting the
minimum numbers of percentages of shares of Registrable Securities required
in order to be entitled to certain rights, or take certain actions,
contained herein. This Agreement may not be assigned by the Company without
the prior written consent of the holders of a majority of the Registrable
Securities at the time such consent is requested. The Purchasers (and not
any other holder of Registrable Securities or any other Person) shall be
permitted, in connection with the transfer or disposition of Registrable
Securities, to impose conditions or constraints on the ability of the
transferee, as a holder of Registrable Securities, to request a registration
pursuant to Section 1 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
(f) Calculation of Percentage Interests in Registrable
Securities. For purposes of this Agreement, all references to a percentage
of the Registrable Securities shall be calculated based upon the number of
shares of Registrable Securities outstanding at the time such calculation is
made, assuming, if applicable, the exercise, conversion or exchange of the
Company's securities into Registrable Securities in accordance with the
terms of such securities.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Certain Distributions. The Company shall not at any
time make a distribution on or with respect to the Common Stock (including
any such distribution made in connection with a consolidation or merger in
which the Company is the resulting or surviving corporation and such
Registrable Securities are not changed or exchanged) of securities of
another issuer if holders of Registrable Securities are entitled to receive
such securities in such distribution as holders of Registrable Securities
and any of the securities so distributed are registered under the Securities
Act, unless the securities to be distributed to the holders of Registrable
Securities are also registered under the Securities Act.
(l) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the undersigned has executed this
Registration Rights Agreement as of the date first above written.
ARINCO COMPUTER SYSTEMS INC.
By:
Name:
Title:
PANGEA INTERNET ADVISORS LLC
By:
Name:
Title:
PURCHASERS:
Xxxxx X. Xxxxxx
Xxxxxxx Xxxxx
Xxxxx Xxxxxx
L.A. Bay Investments, LLC
Sun Valley Investments
VBM Equities, LLC
Xxxxx Xxxxxxxx
Xxxxx Capital, LLC
SGII, LLC
Xxxxx X. Xxxxxxx
Turtle Holdings LLC
Grant Xxxxxxx
Xxxxx Xxxxxxx Xx.
Xxxxx Xxxxxxxx
Walnut Associates I, LLC
Xxxxxxx X. Xxxxxx
Xxxxxxx Xxxxxx
JCK (US), Ltd.
Community Property LLC
Xxxxxx X. Xxxxxxxxxxx
The Matschullat 1996 Children's Trust
Xxxxxxx Xxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx Xx.
Xxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxx, III
The Xxxxxxxx 1991 Children's Trust
Xxxxxxx Xxxxxxxx, Xx.
Pemaxrina Investors, LLC
Westmark Industries, LLC
Riva Capital, LLC
Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
Xxxxxxxxx X. Xxxxxx
TNRT, LLC
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxxxx
B&B Investments
Xxxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxx Xxxx Xxxxxxxx Xxxxxx
Culmen Technology Partners, L.P.
Sterling Payot Capital XX
Xxxxxx X. Xxxxxxxx
Metropolis Venture Partners
Wamtech Investments Inc.
L.I.I., LLC
New River Capital Partners
North Atlantic Smaller Companies Investment Trust Plc.
American Opportunity Trust
Trident North Atlantic Fund
Trident Holdings Limited
Oryx International Growth Fund
Trident Private Equity
XX Xxxxxx Capital Management Ltd A/c B
XX Xxxxxx Capital Management Ltd A/c C
XX Xxxxxx Capital Management Ltd A/c A
Antares Investment Partners
Xxxxxx X. Xxxxxxx
Xxxxxx Xxxxx
PW-Pangea LLC
Xxxxx & Co., Inc.
Xxxxxxx X. Xxxxxxx
Xxx Xxxxxx
H. Xxxxxx Xxxx
Gillian Gamsy
Xxxxx Xxxx
Xxxx Xxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx
Xxxxxx Xxxxxxx
Xxxx Xxxxxxx
Financial Performance Corporation
Xxxxxx Nissan
Xxxx Xxxxx
Xxxx Xxxxxxxxx
Xxxx Xxxxxxx
Xxxxxxx X. Xxxxxx
Dolphin II LLC
Xxxxxxx Xxxxxx
Xx Xxx
Xxx Xxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx Family Revocable Trust, dated____
IPO Partners
Xxxxxxxx Xxxxx
Xxxxx Xxxxx
Xxx Xxxxx
Xxxxx X. Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx X. Xxxxxx
Xxxxx Xxxxx
Xxxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxx
Caran Establishment
Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx
Lixuan An
Xxxxx Xxxxxxxx, III Trust
Xxxxx Xxxxx
XX XX Seed Fund LLC
Alis & Co.
Xxxx X. Xxxxxxx
Xxxxxx X. Xxxxxx
St. Croix Investments, LLC
Xxxxxx Xxxxx
By: PANGEA INTERNET ADVISORS LLC
Attorney-in-Fact
By:
Name: Xxxx X. Xxxxxxx
Title: Managing Director
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
by and among
ARINCO COMPUTER SYSTEMS INC.
and the Persons referred to herein
_______________________
March 28, 2000
_______________________
Table of Contents
Page
1. Registration on Request 1
2. Incidental Registration 3
3. Registration Procedures 4
4. Underwritten Offerings 8
5. Preparation; Reasonable Investigation 10
6. Rights of Requesting Holders 11
7. Registration Expenses 11
8. Indemnification and Contribution 11
9. Registration Rights to Others 14
10. Nominees for Beneficial Owners 14
11. Rule 144 15
12. Definitions 15
13. Miscellaneous 17
Exhibit B
NEITHER THIS WARRANT NOR ANY SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
WARRANT NO. __
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE,
OF
ARINCO COMPUTER SYSTEMS INC.
THIS IS TO CERTIFY THAT ______________________,1/ or its
registered assigns, is the owner of ______ Warrants (as defined below), each
of which entitles the registered holder thereof to purchase from ARINCO
COMPUTER SYSTEMS INC., a New Mexico corporation (the "Company"), one fully
paid, duly authorized and non-assessable share of Common Stock, par value
$.01 per share, of the Company (the "Common Stock"), at any time prior to
5:00 p.m., New York City time, on ____________, 2005 (the "Expiration
Date"), at an exercise price of $[ ] per share (as adjusted, the
"Exercise Price"), all on the terms and subject to the conditions
hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of
each such Warrant (the "Number Issuable") and the Exercise Price is subject
to adjustment from time to time pursuant to the provisions of Section 2 of
this Warrant Certificate. The Warrants evidenced by this Certificate are
part of a series of warrants to purchase initially up to _________ shares of
Common Stock (the "Warrants") issued pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement"), dated as of March ___,
2000, by and among the Company and Pangea Internet Advisors LLC ("Pangea").
Capitalized terms used herein but not otherwise defined have the
meanings given them in Section 11.
Section 1. Exercise of Warrant. Subject to the last paragraph
of this Section 1, the Warrants evidenced hereby may be exercised, in whole
or in part, by the registered holder hereof at any time on or prior to the
Expiration Date, upon delivery to the Company at its principal executive
office in the United States of America, of (a) this Warrant Certificate,
(b) a written notice stating that such holder elects to exercise all or a
specified number of the Warrants evidenced hereby in accordance with the
provisions of this Section 1 and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued and (c) payment of the Exercise Price for the shares of Common
Stock issuable upon exercise of such Warrants (collectively, the "Warrant
Exercise Documentation"). Such payment shall be made (A) in cash or by
certified or official bank check payable to the order of the Company
or by wire transfer of funds to an account designated by the Company for
such purpose or (B) by a Cashless Exercise (defined below). In connection
with a Cashless Exercise, the number of Warrants being exercised shall
be canceled in exchange for the issuance of such number of shares of Common
Stock equal to the product of (x) the number of shares of Common Stock for
which such Warrant would otherwise then be nominally exercised if payment
of the Exercise Price as of the date of exercise were being made in cash
and (y) the Cashless Exercise Ratio. An exercise of Warrants in accordance
with clause (B) of the immediately preceding sentence is herein referred to
as a "Cashless Exercise." All provisions of this Warrant Certificate shall
be applicable with respect to an exercise pursuant to a Cashless Exercise
for less than the full number of Warrants represented hereby.
As promptly as practicable, and in any event within five Business
Days after receipt of the Warrant Exercise Documentation, the Company shall
deliver or cause to be delivered (i) certificates representing the number of
validly issued, fully paid and non-assessable shares of Common Stock
specified in the Warrant Exercise Documentation, (ii) if applicable, cash in
lieu of any fraction of a share, as hereinafter provided, and (iii) if less
than the full number of Warrants evidenced hereby are then being exercised,
a new Warrant Certificate or Certificates, of like tenor, for the number of
Warrants evidenced by this Warrant Certificate less the number of Warrants
then being exercised. Such exercise shall be deemed to have been made at
the close of business on the date of delivery of the Warrant Exercise
Documentation so that the Person entitled to receive shares of Common Stock
upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such
surrender shall be effective to constitute the Person entitled to receive
such shares as the record holder thereof while the transfer books of the
Company for the Common Stock are closed for any purpose (but not for any
period in excess of five days); but any such surrender of this Warrant
Certificate for exercise during any period while such books are so closed
shall become effective for exercise immediately upon the reopening of such
books, as if the exercise had been made on the date this Warrant Certificate
was surrendered and for the Number Issuable of Common Stock specified in the
Warrant Exercise Documentation and at the Exercise Price in effect at the
date of such surrender.
The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of
Common Stock issuable upon the exercise of the Warrants evidenced hereby.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for shares of Common Stock in any name other than that of the
registered holder of the Warrants evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby,
no fractions of shares of Common Stock shall be issued, but in lieu thereof
the Company shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the Business Day which
next precedes the date of exercise. If more than one such Warrant shall be
exercised by the holder thereof at the same time, the number of full shares
of Common Stock issuable on such exercise shall be computed on the basis of
the total number of Warrants so exercised.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable
shall be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time
to time after the Issue Date:
(A) pay a dividend or make any other distribution
on the outstanding shares of Common Stock in capital stock (which,
for purposes of this Section 2 shall include, without limitation,
any options, warrants or other rights to acquire capital stock) of
the Company;
(B) subdivide the outstanding shares of Common
Stock into a larger number of shares;
(C) combine the outstanding shares of Common Stock
into a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
then, and in each such case, the Number Issuable and the Exercise Price
in effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so that the
holder of the Warrants evidenced hereby thereafter exercised shall be
entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or had
been entitled to receive upon or by reason of any of the events
described above at the same aggregate Exercise Price, had such Warrants
been exercised immediately prior to the happening of such event. An
adjustment made pursuant to this clause 2(a)(i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of any such
subdivision, combination or reclassification, to the close of business
on the date upon which such corporate action becomes effective.
(ii) In case the Company shall at any time or from time
to time after the Issue Date distribute to all holders of shares of its
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment is made under Section 2(a)(i) or
rights or warrants to subscribe for or purchase securities of the
Company (excluding those in respect of which adjustments in the Number
Issuable is made pursuant to Section 2(a)(i)), then, and in each such
case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such
Current Market Price per share of Common Stock less the then Fair
Market Value (as determined in good faith by the Board of Directors of
the Company, a certified resolution with respect to which shall be
mailed to the holder of the Warrants evidenced hereby) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator not to be less than
one); and the Exercise Price in effect immediately prior to such event
shall be adjusted so that the holder of the Warrants pays the same
aggregate Exercise Price. Such adjustment shall be made whenever any
such distribution is made and shall become effective retroactively to a
date immediately following the close of business on the record date for
the determination of stockholders entitled to receive such
distribution.
(iii) In the event that any convertible or
exchangeable securities, options, warrants or other rights, the
issuance of which shall have given rise to an adjustment pursuant to
this Section 2(a) ("Convertible Securities"), shall have expired or
terminated without the exercise thereof and/or if there shall have been
an increase, with the passage of time or otherwise, in the price
payable upon the exercise or conversion thereof or a decrease in the
number of shares of Common Stock issuable upon the exercise or
conversion thereof, then the Number Issuable hereunder and the Exercise
Price shall be readjusted (but to no greater extent then originally
adjusted) on the basis of (A) eliminating from the computation of the
Number Issuable as of the time of the issuance of the Convertible
Securities any shares of Common Stock corresponding to such Convertible
Securities as shall have expired or terminated, (B) treating the
additional shares of Common Stock, if any, actually issued or issuable
pursuant to the previous exercise of such Convertible Securities as
having been issued for the consideration actually received and
receivable therefor and (C) treating any of such Convertible Securities
which remain outstanding as being subject to exercise or conversion on
the basis of such exercise or conversion price as shall be in effect at
such time.
(iv) Upon any increase or decrease in the Number
Issuable and Exercise Price, then, and in each such case, the Company
promptly shall deliver to each registered holder of Warrants at least
five Business Days prior to effecting any transaction which would
result in such increase or decrease a notice thereof, together with a
certificate, signed by the Chief Executive Officer or a Vice-President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company, setting forth in reasonable detail
the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased
Number Issuable and Exercise Price then in effect following such
adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger
or Sale of Assets. In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock
(other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation or merger of the Company with
or into another Person (other than a consolidation or merger in which the
Company is the resulting or surviving person and which does not result in
any reclassification or change of outstanding Common Stock), or in case of
any sale or other disposition to another Person of all or substantially all
of the assets of the Company (any of the foregoing, a "Transaction"), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each holder of the Warrants evidenced hereby at least
five Business Days prior to effecting any of the foregoing Transactions a
certificate that the holder of each such Warrant then outstanding shall have
the right thereafter to exercise such Warrant into the kind and amount of
shares of stock or other securities (of the Company or another issuer) or
property or cash receivable upon such Transaction by a holder of the number
of shares of Common Stock into which such Warrant could have been exercised
immediately prior to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable
thereupon by a holder of Common Stock includes shares of stock or other
securities of a Person other than the successor or purchasing Persons and
other than the Company, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues
stock, securities, other property or cash to holders of Common Stock, then
such certificate also shall be executed by such Person, and such Person
shall, in such certificate, specifically assume the obligations of such
successor or purchasing Person and acknowledge its obligations to issue such
stock, securities, other property or cash to holders of the Warrants upon
exercise thereof as provided above. The provisions of this Section 2(b)
similarly shall apply to successive Transactions.
Section 3. Notice of Certain Events. In case at any time or from
time to time the Company shall declare any dividend or any other
distribution to the holders of its Common Stock, or shall authorize the
granting to the holders of its Common Stock of rights or warrants to
subscribe for or purchase any additional shares of stock of any class or any
other right, or shall authorize the issuance or sale of any other shares or
rights which would result in an adjustment to the Number Issuable pursuant
to Section 2(a) or there shall be any capital reorganization or
reclassification of the Common Stock of the Company or consolidation or
merger of the Company with or into another Person, or any sale or other
disposition of all or substantially all the assets of the Company, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of such cases the Company shall
mail to each holder of the Warrants evidenced hereby at such holder's
address as it appears on the transfer books of the Company, as promptly as
practicable but in any event at least 30 days prior to the applicable date
hereinafter specified, a notice stating (a) the date on which a record is to
be taken for the purpose of such dividend, distribution, rights or warrants
or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, (b) the date on which such dividends,
distribution, rights or warrants are made or issued or (c) the date on which
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; provided that in
the case of any event to which Section 2(b) applies, the Company shall give
at least ten Business Days' prior written notice as aforesaid. Such notice
also shall specify the date as of which it is expected that the holders of
Common Stock of record shall be entitled to exchange their Common Stock for
shares of stock or other securities or property or cash deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and non-assessable. Beginning upon consummation of
the Delaware Reincorporation (as defined in the Securities Purchase
Agreement), the Company shall at all times reserve and keep available for
issuance upon the exercise of the Warrants, such number of its authorized
but unissued shares of Common Stock as will from time to time be sufficient
to permit the exercise of all outstanding Warrants, and shall take all
action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the exercise of all
outstanding Warrants.
Section 5. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of
the Warrants evidenced hereby for all purposes. The registered holder of
this Warrant Certificate, in its capacity as such, shall not be entitled to
any rights whatsoever as a stockholder of the Company, except as herein
provided.
Section 6. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender
of this Warrant Certificate, along with the form of assignment attached
hereto, properly completed and executed by the registered holder hereof, at
the principal executive office of the Company in the United States of
America, together with an appropriate investment letter, if deemed
reasonably necessary by counsel to the Company to assure compliance with
applicable securities laws. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.
Section 7. Denominations. The Company covenants that it will, at
its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant
Certificate or Certificates in denominations specified by such holder for an
aggregate number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate (which evidence, in the case of an institutional
holder of Warrants, shall consist of a letter from such holder to such
effect) and, in the case of loss, theft or destruction, upon delivery of an
indemnity reasonably satisfactory to the Company (which indemnity, in the
case of an institutional holder of Warrants, shall consist of an unsecured
letter of indemnity from such holder), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their
respective successors and permitted assigns. Nothing in this Warrant
Certificate shall be construed to give to any Person other than the Company
and the registered holder thereof any legal or equitable right, remedy or
claim under this Warrant Certificate, and this Warrant Certificate shall be
for the sole and exclusive benefit of the Company and such registered
holder. Nothing in this Warrant Certificate shall be construed to give the
registered holder hereof any rights as a holder of shares of Common Stock
until such time, if any, as the Warrants evidenced by this Warrant
Certificate are exercised in accordance with the provisions hereof.
Section 11. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized
or required by law or executive order to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which
is the excess of the Current Market Price per share of Common Stock on the
date of exercise over the Exercise Price per share and the denominator of
which is the Current Market Price per share of Common Stock on the date of
exercise.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of
the Common Stock for those days during the period of 20 days, ending on such
date, on which the national securities exchanges were open for trading, and
(b) if the Common Stock is not then listed on a national securities exchange
or quoted in the over-counter market, the Market Price on such date.
"Exercise Price" shall have the meaning given it in the first
paragraph hereof.
"Expiration Date" shall have the meaning given it in the first
paragraph hereof.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion
to sell, in an arm's-length transaction.
"Issue Date" shall mean _________, 2000.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on
such date published in The Wall Street Journal or, if no such closing price
on such date is published in The Wall Street Journal, the average of the
closing bid and asked prices on such date, as officially reported on the
principal national securities exchange on which the Common Stock is then
listed or admitted to trading; or (b) if the Common Stock is not then listed
or admitted to trading on any national securities exchange but is designated
as a national market system security by the NASD, the last trading price of
the Common Stock on such date; or (c) if there shall have been no trading on
such date or if the Common Stock is not so designated, the average of the
reported closing bid and asked price of the Common Stock, on such date as
shown by NASDAQ and reported by any member firm of The New York Stock
Exchange, Inc. selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, the Fair Market Value per share determined in good faith by the
Board of Directors of the Company based on an opinion of a nationally
recognized investment banking firm unaffiliated with either the Company or
the holders of the Warrants, chosen by the Company (who shall bear the
expense thereof) and acceptable to the holder of this Warrant Certificate.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NASDAQ" shall mean the Nasdaq Stock Market.
"Number Issuable" shall have the meaning given it in the second
paragraph hereof.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Securities Purchase Agreement" shall have the meaning given it in
the second paragraph hereof.
"Warrant Exercise Documentation" shall have the meaning given it
in Section 1 hereof.
Section 12. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing
and shall be by registered or certified first-class mail, return receipt
requested, or personal delivery, (a) if to the holder of a Warrant, at such
holder's last known address appearing on the books of the Company; and
(b) if to the Company, at its principal executive office in the United
States located at 0000 Xxxxxxxxxx Xxxxxxxxx, X.X., Xxxxx 0-000, Xxxxxxxxxxx,
New Mexico 87102, Attention: CEO, or such other address as shall have been
furnished to the party given or making such notice, demand or other
communication. All such notices and communications shall be deemed to have
been duly given: when delivered, if delivered by hand or by overnight
courier service; and three Business Days after being deposited in the mail,
postage prepaid, if mailed.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
ARINCO COMPUTER SYSTEMS INC.
By:
Name:
Title:
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to ____________________ whose Social Security Number or Tax ID
Number is _________________ and whose record address is
_____________________________________, and irrevocably appoints
________________ as agent to transfer this security on the books of the
Company. Such agent may substitute another to act for such agent.
Signature:
Signature Guarantee:
Date:
Exhibit C
STATEMENT PURSUANT TO SECTION 53-11-16 OF THE
NEW MEXICO BUSINESS CORPORATION ACT
Statement of establishing and designating a series of preferred
shares, and fixing and determining the relative rights and preferences
thereof pursuant to Section 15-11-16 of the New Mexico Business Corporation
Law.
A. Name of the Corporation. The name of the corporation is
Arinco Computer Systems Inc. (the "Corporation").
B. Copy of Resolution. Pursuant to the authority conferred upon
the Board of Directors by the Certificate of Incorporation of the
Corporation, as amended, and pursuant to the provisions of Section 53-11-16
of the Business Corporation Act of the State of New Mexico, the Board of
Directors of the Corporation duly adopted Resolutions establishing and
designating a series of 4,000,000 shares of preferred stock, which
Resolutions are as follows:
"RESOLVED, that pursuant to the authority expressly granted and
vested in the Board of Directors of the Corporation in accordance with the
provisions of the Corporation's Certificate of Incorporation, a series of
preferred stock of the Corporation be, and it hereby is, created and given
the distinctive designation of "Series B Convertible Preferred Stock" (the
"Series B Preferred"), such series to consist of 4,000,000 shares of the par
value of $0.10 per share, the relative rights and preferences of which shall
be as follows:
Rights, Preferences and Restrictions of Series B Preferred. The
rights, preferences, privileges and restrictions granted to and imposed on
the Series B Preferred are as set forth below in Sections 1 through 8.
1. Dividends. The holders of the Series B Preferred shall be
entitled to receive, out of any funds legally available therefor, such
dividends as may be declared from time to time by the Board of Directors of
the Corporation provided that no dividend or distribution shall be declared
or paid on any shares of the Common Stock of the Corporation (the "Common
Stock") unless at the same time an equivalent dividend or distribution is
declared or paid, as the case may be, on all outstanding shares of Series B
Preferred and provided further that any dividend or distribution on Series
B Preferred shall be payable at the same rate per share as would be payable
on the shares of Common Stock which the holder of the Series B Preferred
would be entitled to receive if he had converted the shares of Series B
Preferred into Common Stock pursuant to Section 4 hereof immediately prior
to the record date of such dividend or distribution.
2. Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation (each
a "Distribution Event"):
(a) Series B Preferred Preference. The holders of the
Series B Preferred shall be entitled to receive with respect to such
Distribution Event pro rata in accordance with the shares of Series B
Preferred then held by them, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership of such shares, an amount equal to
the greater of (i) the aggregate of the Original Issue Price (as defined
below) for all such shares of Series B Preferred plus an amount equal to all
declared but unpaid dividends on such shares of Series B Preferred and
(ii) the amount that the holders of Series B Preferred would be entitled to
receive if all such shares of Series B Preferred had been converted into
Common Stock pursuant to Section 4 hereof immediately prior to the record
date for the distributions relating to the Distribution Event. If the
assets and funds thus distributed among the holders of the Series B
Preferred shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among
the holders of the Series B Preferred pro rata in accordance with the shares
of Series B Preferred then held by them. The "Original Issue Price" of the
Series B Preferred shall be $10.00 per share (as adjusted for any stock
dividend, stock splits, recapitalization, reorganizations and other similar
transactions with respect to the Series B Preferred).
(b) Reorganization, Merger or Sale of Assets. Neither a
consolidation or a merger of the Corporation with or into any other
corporation or corporations nor the sale of all or substantially all of the
assets of the Corporation shall be deemed to be a liquidation, dissolution
or winding up within the meaning of this Section 2.
3. Voting Rights. Except as otherwise provided herein or
required by law, each share of Series B Preferred shall be entitled to the
number of votes equal to the number of shares of Common Stock into which
the Series B Preferred could be converted pursuant to Section 4 hereof as
of the record date for the determination of the stockholders entitled to
vote on such matter or, if no record date is established, as of the date
such vote is taken, and the holders of Series B Preferred shall vote share
for share with the holders of the Common Stock without distinction as to
class and shall not be entitled to vote separately as a class or series of
a class. Nothing set forth in this Section 3 shall be construed as a
waiver of the right of the holders of the Series B Preferred to vote as a
class when specifically entitled to do so pursuant to Section 3 herein.
The voting rights of the Series B Preferred shall include, but not be
limited to, the right to vote on the Charter Amendment (as hereinafter
defined).
4. Conversion. The holders of the Series B Preferred have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series B Preferred
shall be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share at the office of the Corporation or any
transfer agent for the Series B Preferred, into such number of fully paid
and nonassessable shares of Common Stock (the "Conversion Rate") as is
determined by dividing the Original Issue Price by the Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion.
The price at which shares of Common Stock shall be deliverable upon
conversion (the "Conversion Price") for the Series B Preferred shall
initially be $0.25 per share of Common Stock. Such initial Conversion Price
shall be subject to adjustment as hereinafter provided.
(b) Automatic Conversion. Each share of Series B Preferred
shall automatically be converted into shares of Common Stock at the then
effective Conversion Rate of such stock (i) immediately prior to the closing
of the first firmly underwritten public offering of Common Stock of the
Corporation that occurs after March [__], 2000 and that is pursuant to a
registration statement filed with, and declared effective by, the Securities
and Exchange Commission (or any other federal agency at the time
administering the Securities Act of 1933, as amended (the "Act")) under the
Act, covering the offer and sale of Common Stock to the public at a public
offering price per share (before deductions for underwriter commissions and
expenses) of not less than four times the then prevailing Conversion Price
and that results in proceeds to the Corporation (before deduction for
underwriter commissions and expenses) of at least $10,000,000 (a "Qualified
Offering"), and (ii) upon the conversion of a number of shares of Series B
Preferred which when added to all shares of Series B Preferred previously
converted at any time equals at least 60% of the number of shares of Series
B Preferred issued pursuant to a Securities Purchase Agreement (the
"Securities Purchase Agreement") dated March [__], 2000 between the
Corporation and Pangea Internet Advisors LLC. Upon such automatic
conversion, any declared but unpaid dividends shall be paid in accordance
with the provisions of Section 4(c). In the event of the automatic
conversion of the Series B Preferred upon a Qualified Offering, the
person(s) entitled to receive the Common Stock issuable upon such conversion
of Series B Preferred shall not be deemed to have converted such Series B
Preferred until immediately prior to the closing of such sale of securities.
Notwithstanding the foregoing provisions of this Section 4(b), no automatic
conversion of the Series B Preferred shall be effected unless and until such
conversion will not violate any laws, rules, regulations, orders or other
legal requirements of any governing body or until the Charter Amendment
shall have occurred, and such automatic conversion shall be held in abeyance
pending compliance with any such requirements, provided that the holders of
Series B Preferred will use their best efforts to comply with such
requirements.
(c) Mechanics of Conversion. Before any holder of Series B
Preferred shall be entitled to convert the same into full shares of Common
Stock and to receive certificates therefor, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series B Preferred, and shall
give written notice to the Corporation at such office that such holder
elects to convert the same. In the event of an automatic conversion
pursuant to Section 4(b), the outstanding shares of Series B Preferred shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent. The Corporation is
not obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless the certificates evidencing
such shares of Series B Preferred are either delivered to the Corporation or
its transfer agent as provided above, or the holder notifies the Corporation
or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with
such certificates. The Corporation shall, as soon as practicable after such
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Series B
Preferred, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid and a check payable
to the holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. Thereupon, the
Corporation shall promptly pay in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Stock (at the Common
Stock's fair market value determined by the Board of Directors as of the
date of such conversion), any declared but unpaid dividends on the shares of
Series B Preferred being converted. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred to be converted, or in the
case of automatic conversion on the date of closing of a Qualified Offering
or the date on which more than 60% of the originally issued Series B
Preferred have been converted into Common Stock and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to
which the holder of Series B Preferred would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Series B Preferred of each holder at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Price of
the Series B Preferred shall be subject to adjustment from time to time as
follows:
(i) If the number of shares of Common Stock outstanding
at any time after the date hereof is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of the Series B Preferred shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of any shares of the Series B Preferred shall be
increased in proportion to such increase of outstanding shares.
(ii) If the number of shares of Common Stock outstanding
at any time after the date hereof is decreased by a combination of the
outstanding shares of Common Stock, on the effective date of such
combination, the Conversion Price of the Series B Preferred shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of any shares of the Series B Preferred shall be
decreased in proportion to such decrease in outstanding shares.
(iii)In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing entity and which does not
result in any change in the Common Stock), the shares of the Series B
Preferred shall, after such reorganization, reclassification, consolidation,
merger, sale or other disposition, be convertible into the kind and number
of shares of stock or other securities or property of the Corporation or
otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale or
other disposition such holder had converted its shares of the Series B
Preferred into Common Stock.
(iv) In case any event shall occur as to which the other
provisions of this subsection (e) are not strictly applicable but the
failure to make any adjustment would not fairly protect the conversion
rights of the holders of Series B Preferred set forth in this Section 4 in
accordance with the essential intent and principles hereof, then, in each
such case, the Corporation at its expense shall appoint a firm of
independent public accountants of recognized national standing (which may be
the regular auditors of the Corporation), which shall give its opinion as to
the adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 4, necessary to preserve, without
dilution, the conversion rights of the holders of Series B Preferred set
forth in this Section 4. Upon receipt of such opinion, the Corporation will
promptly mail a copy thereof to the holders of Series B Preferred and shall
make the adjustments described therein.
(v) The provisions of clauses (i), (ii) and (iii) shall
similarly apply to successive events of the type described therein. All
calculations under this Section 4(e) shall be made to the nearest cent or to
the nearest one hundredth (1/100) of a share, as the case may be.
(f) Minimal Adjustments. No adjustment in the Conversion
Price for any Series B Preferred need be made if such adjustment would
result in a change in the Conversion Price of less than 1%. Any adjustment
of less than 1% which is not made shall be carried forward and shall be made
at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of 1% or more in the Conversion
Price.
(g) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation, but will at all times
in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
Series B Preferred against impairment. This provision shall not restrict
the Corporation's right to amend its Certificate of Incorporation with the
requisite shareholder consent.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for Series B
Preferred pursuant to this Section 4, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series B Preferred a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon written request at any time of any holder of Series
B Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (i) all such adjustments and readjustments, (ii)
the Conversion Rate at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such holder's shares of Series B
Preferred.
(i) Notices of Record Date and Proposed Liquidation
Distribution. In the event of any taking by the Corporation of a record of
the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property or to receive any other right, the Corporation shall mail to
each holder of Series B Preferred at least 30 days prior to such record
date, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right. In the event of a
liquidation distribution pursuant to Section 2 hereof, the Corporation shall
mail to each holder of Series B Preferred at least 30 days prior to the
record date applicable to such distribution a notice (i) certifying as to
(x) the anticipated aggregate proceeds available for distribution to holders
of Series B Preferred and Common Stock, (y) the amount expected to be
distributed pursuant to Section 2 in respect of each share of each
outstanding series of Series B Preferred and each share of Common Stock and
(z) the amount expected to be distributed pursuant to Section 2 in respect
of each share of outstanding Series B Preferred if the holder of Series B
Preferred converted such share of Series B Preferred into Common Stock
immediately prior to the liquidation distribution and (ii) stating that in
connection with such liquidation distribution the holders of shares of
Series B Preferred may prior to such liquidation distribution convert their
shares of Series B Preferred into Common Stock at the applicable Conversion
Rate.
(j) Notices. Any notice required by the provisions of this
Section 4 to be given to the holder of shares of the Series B Preferred
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at such holder's address
appearing on the Corporation's books.
(k) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may
be imposed with respect to the issue or delivery of shares of Common Stock
upon conversion of shares of Series B Preferred, excluding any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which shares
of Series B Preferred so converted were registered.
5. Redemption.
(a) Optional Redemption by Corporation. The shares of the
Series B Preferred are redeemable at the option of the Corporation in whole
or in part at any time and from time to time after March [__], 2001, at a
redemption price of $10.00 per share plus an amount equal to the dividends
accrued and unpaid (including interest, if any) thereon to the redemption
date. In case only a part of the Series B Preferred Stock at the time
outstanding is to be redeemed, the shares selected shall be allocated among
all of the holders of the Series B Preferred at the time outstanding in
proportion to their respective holdings. At least 30 days in advance of the
date designated for any redemption pursuant to this paragraph (a), the
Corporation shall mail or deliver notices of such redemption to the holders
of record of the shares so to be redeemed at their respective addresses as
shown on the books of the Corporation.
(b) Redemption at Option of Holders. If the Charter
Amendment has not occurred prior to December 31, 2000, then at any time
after December 31, 2000 and prior to the Charter Amendment the Corporation
shall, upon the written request (a "Redemption Request") of the holders of
at least 50% of the shares of Series B Preferred issued pursuant to the
Securities Purchase Agreement, redeem all of the then outstanding shares of
the Series B Preferred at the redemption price of $10.00 per share, plus all
dividends accrued and unpaid (including interest, if any) on such Series B
Preferred up to the date fixed for redemption, upon giving the notice
hereinafter provided. "Charter Amendment" means an amendment to the
Corporation's Certificate of Incorporation providing for an increase in the
number of shares of Common Stock that the Corporation is authorized to issue
so that the number thereof is at least equal to the sum of (i) the number of
shares of Common Stock that were outstanding or reserved for issuance
immediately prior to the issuance of any share of Series B Preferred
pursuant to the Securities Purchase Agreement plus (ii) the number of shares
of Common Stock that would be required to be issued immediately after the
issuance of all shares of Series B Preferred issued pursuant to the
Securities Purchase Agreement if all such shares of Series B Preferred were
converted at such time plus (iii) the number of shares of Common Stock
issuable pursuant to the terms of all warrants referred to in the Securities
Purchase Agreement. Not less than 30 days after receipt of a Redemption
Request, a notice specifying the time and place fixed for redemption of the
Series B Preferred shall be given by mail or delivered to the holders of
record of the shares of Series B Preferred Stock selected for redemption at
their respective addresses as shown on the books of the Corporation. The
time so fixed for redemption shall be not less than 30 days after the date
of such notice.
(c) Effect of Redemption. Upon such date as the Board of
Directors shall designate for payment of the redemption price (unless the
Corporation shall default in the payment of the redemption price set forth
in the Redemption notice), the shares of Series B Preferred redeemed shall
cease to be deemed outstanding and the holders of certificates therefor
shall have no voting or other rights with respect to such shares except the
right to receive the moneys payable upon such redemption from the
Corporation, without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of their applicable stock certificates. Upon
redemption of the Series B Preferred in the manner set forth herein, the
Series B Preferred Stock so redeemed by the Corporation shall be cancelled,
shall not be reissued and shall cease to be a part of the authorized shares
of the Corporation.
(d) Limitation on Redemption and Dividends. The option and
obligation of the Corporation to redeem shares of the Series B Preferred
Stock under paragraphs (a) and (b) hereof, shall be subject to the
restrictions imposed by applicable law or any provision of any agreement now
or hereafter existing relating to the indebtedness of the Corporation for
borrowed money, unless such provision shall be waived. In the event that
the Corporation shall fail to redeem any shares of Series B Preferred Stock
required to be redeemed under paragraph (b) hereof, then, until such shares
are redeemed, dividends shall accrue on all shares at a rate equal to 10%
compounded semi-annually from the date such redemption price is required to
be paid to the date payment is made.
6. Covenants. In addition to any other rights provided by law,
o long as any shares of Series B Preferred shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of not less than a majority of such
outstanding shares of Series B Preferred:
(a) Certificate and Bylaws. Amend or repeal any provision
of, or add any provision to, this Corporation's Certificate of Incorporation
or Bylaws if such action would adversely alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the
benefit of, such shares of Series B Preferred, voting as a class;
(b) Authorized Shares. Increase or decrease the authorized
number of shares of Series B Preferred or increase or decrease the
authorized number of shares of preferred stock of the Corporation;
(c) Senior Securities. Make any authorization or any
designation, whether by reclassification or otherwise, of any new class or
series of stock or any other securities convertible into equity securities
of the Corporation ranking senior to the Series B Preferred in right of
redemption, liquidation preference, voting or dividends or any increase in
the authorized or designated number of any such class or series; or
(d) Distribution. Redeem or repurchase any shares of Common
Stock (except for acquisitions of Common Stock by the Corporation pursuant
to agreements which permit the Corporation to repurchase such shares upon
termination of services to the Corporation or its affiliates).
7. Status of Converted Stock. In the event any shares of
Series B Preferred shall be converted pursuant to Section 4 hereof, the
shares so converted shall be cancelled and shall not be issuable by the
Corporation, and any declared but unpaid dividends (whether or not
declared) with respect to such converted shares shall be cancelled. The
Certificate of Incorporation of the Corporation may be appropriately
amended from time to time to effect the corresponding reduction in the
Corporation's authorized capital stock.
8. Absence of Charter Amendment. To the extent that the rights
of the holders of Series B Preferred set forth in Sections 1, 2 and 3
depend upon or relate to the number of shares of Common Stock into which
the Series B Preferred may be converted from time to time, such rights
shall be construed as if the Corporation has at all times a sufficient
number of shares of Common Stock authorized and reserved for issuance to
satisfy such conversion rights notwithstanding the fact that a sufficient
number of such shares of Common Stock may not be authorized and reserved
because of the failure of the Charter Amendment to have been effected or
for any other reason."
X. Xxxx of Adoption. The above resolutions were duly adopted on
March [___], 2000.
D. Due Adoption. The above resolutions were duly adopted by the
Corporation's Board of Directors.
IN WITNESS WHEREOF, the undersigned has executed this document
this ____ day of _______________ and affirms that the facts contained herein
are true under penalty of perjury.
ARINCO COMPUTER SYSTEMS INC.
By:
Name:
Title:
ATTEST:
Name:
Title: Secretary
