Exhibit 10.5
NEITHER THIS WARRANT NOR ANY SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS.
WARRANT NO. 2
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE,
OF
ARINCO COMPUTER SYSTEMS INC.
THIS IS TO CERTIFY THAT Xxxx X. Xxxxxxx, or his registered assigns, is
the owner of 8,043,750 Warrants (as defined below), each of which entitles the
registered holder thereof to purchase from ARINCO COMPUTER SYSTEMS INC., a New
Mexico corporation (the "Company"), one fully paid, duly authorized and
non-assessable share of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at any time prior to 5:00 p.m., New York City time, on
March 28, 2005, at the following exercise prices per share (as adjusted, the
"Exercise Prices"): 1,608,750 Warrants will have an exercise price of $.25 per
share, 2,413,125 Warrants will have an exercise price of $.50 per share,
2,413,125 Warrants will have an exercise price of $.75 per share and 1,608,750
Warrants will have an exercise price of $1.00 per share.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable") and the Exercise Price is subject to adjustment
from time to time pursuant to the provisions of Section 2 of this Warrant
Certificate. The Warrants evidenced by this Certificate are part of a series of
warrants to purchase initially up to 8,043,750 shares of Common Stock (the
"Warrants") issued pursuant to a
Securities Purchase Agreement (the "Securities Purchase Agreement"), dated as of
March 9, 2000, by and among the Company and Pangea Internet Advisors LLC
("Pangea").
Capitalized terms used herein but not otherwise defined have the
meanings given them in Section 11.
Section 1. Exercise of Warrant. Subject to the last paragraph of this
Section 1, the Warrants evidenced hereby may be exercised, in whole or in part,
by the registered holder hereof at any time on or prior to the Expiration Date,
upon delivery to the Company at its principal executive office in the United
States of America, of (a) this Warrant Certificate, (b) a written notice stating
that such holder elects to exercise all or a specified number of the Warrants
(and, if a specified number, the Exercise Price of such Warrants) evidenced
hereby in accordance with the provisions of this Section 1 and specifying the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued and (c) payment of the Exercise Price for
the shares of Common Stock issuable upon exercise of such Warrants
(collectively, the "Warrant Exercise Documentation"). Such payment shall be made
(A) in cash or by certified or official bank check payable to the order of the
Company or by wire transfer of funds to an account designated by the Company for
such purpose or (B) by a Cashless Exercise (defined below). In connection with a
Cashless Exercise, the number of Warrants being exercised shall be canceled in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (x) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price as of the
date of exercise were being made in cash and (y) the Cashless Exercise Ratio. An
exercise of Warrants in accordance with clause (B) of the immediately preceding
sentence is herein referred to as a "Cashless Exercise." All provisions of this
Warrant Certificate shall be applicable with respect to an exercise pursuant to
a Cashless Exercise for less than the full number of Warrants represented
hereby.
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (i) certificates representing the number of validly
issued, fully paid and non-assessable shares of Common Stock specified in the
Warrant Exercise Documentation, (ii) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (iii) if less than the full number of
Warrants evidenced hereby are then being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the date
of delivery of the Warrant Exercise Documentation so that the Person entitled to
receive shares of Common Stock upon such exercise shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
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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;
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(C) combine the outstanding shares of Common Stock into
a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
then, and in each such case, the Number Issuable and the Exercise Price
in effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so that the
holder of the Warrants evidenced hereby thereafter exercised shall be
entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or had been
entitled to receive upon or by reason of any of the events described
above at the same aggregate Exercise Price, had such Warrants been
exercised immediately prior to the happening of such event. An
adjustment made pursuant to this clause 2(a)(i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a
date immediately following the close of business on the record date for
the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of any such
subdivision, combination or reclassification, to the close of business
on the date upon which such corporate action becomes effective.
(ii) In case the Company shall at any time or from
time to time after the Issue Date distribute to all holders of shares
of its Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment is made under Section 2(a)(i) or
rights or warrants to subscribe for or purchase securities of the
Company (excluding those in respect of which adjustments in the Number
Issuable is made pursuant to Section 2(a)(i)), then, and in each such
case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such
Current Market Price per share of Common Stock less the then Fair
Market Value (as determined in good faith by the Board of Directors of
the Company, a certified resolution with respect to which shall be
mailed to the holder of the Warrants evidenced hereby) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such
4
subscription rights or warrants applicable to one share of Common Stock
(but such denominator not to be less than one); and the Exercise Price
in effect immediately prior to such event shall be adjusted so that the
holder of the Warrants pays the same aggregate Exercise Price. Such
adjustment shall be made whenever any such distribution is made and
shall become effective retroactively to a date immediately following the
close of business on the record date for the determination of
stockholders entitled to receive such distribution.
(iii) In the event that any convertible or exchangeable
securities, options, warrants or other rights, the issuance of which
shall have given rise to an adjustment pursuant to this Section 2(a)
("Convertible Securities"), shall have expired or terminated without the
exercise thereof and/or if there shall have been an increase, with the
passage of time or otherwise, in the price payable upon the exercise or
conversion thereof or a decrease in the number of shares of Common Stock
issuable upon the exercise or conversion thereof, then the Number
Issuable hereunder and the Exercise Price shall be readjusted (but to no
greater extent then originally adjusted) on the basis of (A) eliminating
from the computation of the Number Issuable as of the time of the
issuance of the Convertible Securities any shares of Common Stock
corresponding to such Convertible Securities as shall have expired or
terminated, (B) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
Convertible Securities as having been issued for the consideration
actually received and receivable therefor and (C) treating any of such
Convertible Securities which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion price
as shall be in effect at such time.
(iv) Upon any increase or decrease in the Number Issuable and
Exercise Price, then, and in each such case, the Company promptly shall
deliver to each registered holder of Warrants at least five Business
Days prior to effecting any transaction which would result in such
increase or decrease a notice thereof, together with a certificate,
signed by the Chief Executive Officer or a Vice-President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Number Issuable and
Exercise Price then in effect following such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale of
Assets. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company
5
with or into another Person (other than a consolidation or merger in which the
Company is the resulting or surviving person and which does not result in any
reclassification or change of outstanding Common Stock), or in case of any sale
or other disposition to another Person of all or substantially all of the assets
of the Company (any of the foregoing, a "Transaction"), the Company, or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of the Warrants evidenced hereby at least five Business Days prior
to effecting any of the foregoing Transactions a certificate that the holder of
each such Warrant then outstanding shall have the right thereafter to exercise
such Warrant into the kind and amount of shares of stock or other securities (of
the Company or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which such
Warrant could have been exercised immediately prior to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 2. If, in the
case of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities of a Person other than the successor or purchasing Persons and
other than the Company, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues stock,
securities, other property or cash to holders of Common Stock, then such
certificate also shall be executed by such Person, and such Person shall, in
such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 2(b) similarly shall
apply to successive Transactions.
Section 3. Notice of Certain Events. In case at any time or from time to
time the Company shall declare any dividend or any other distribution to the
holders of its Common Stock, or shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Number Issuable pursuant to Section 2(a) or there shall be any
capital reorganization or reclassification of the Common Stock of the Company or
consolidation or merger of the Company with or into another Person, or any sale
or other disposition of all or substantially all the assets of the Company, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of such cases the Company shall mail to
each holder of the Warrants evidenced hereby at such holder's address as it
appears on the transfer books of the Company, as promptly as practicable but in
any event at least 30 days prior to the applicable date hereinafter specified, a
notice stating (a) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution,
6
rights or warrants are to be determined, (b) the date on which such dividends,
distribution, rights or warrants are made or issued or (c) the date on which
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; provided that in the
case of any event to which Section 2(b) applies, the Company shall give at least
ten Business Days' prior written notice as aforesaid. Such notice also shall
specify the date as of which it is expected that the holders of Common Stock of
record shall be entitled to exchange their Common Stock for shares of stock or
other securities or property or cash deliverable upon such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees that all
shares of capital stock of the Company which may be issued upon the exercise of
the Warrants evidenced hereby will be duly authorized, validly issued and fully
paid and non-assessable. Beginning upon consummation of the Delaware
Reincorporation (as defined in the Securities Purchase Agreement), the Company
shall at all times reserve and keep available for issuance upon the exercise of
the Warrants, such number of its authorized but unissued shares of Common Stock
as will from time to time be sufficient to permit the exercise of all
outstanding Warrants, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the exercise of all outstanding Warrants.
Section 5. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered holder of this Warrant
Certificate, in its capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 6. Transfer of Warrants. Any transfer of the rights represented
by this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered holder hereof, at the principal
executive office of the Company in the United States of America, together with
an appropriate investment letter, if deemed reasonably necessary by counsel to
the Company to assure compliance with applicable securities laws. Thereupon, the
Company shall issue in the name or names specified by the registered holder
hereof and, in the event of a partial transfer, in the name of the registered
holder hereof, a new Warrant Certificate or Certificates evidencing the right to
purchase such number of shares of Common Stock as shall be equal to the number
of shares of Common Stock then purchasable hereunder.
Section 7. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive
7
office of the Company in the United States of America, execute and deliver to
the registered holder hereof a new Warrant Certificate or Certificates in
denominations specified by such holder for an aggregate number of Warrants equal
to the number of Warrants evidenced by this Warrant Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate (which evidence, in the case of an institutional holder
of Warrants, shall consist of a letter from such holder to such effect) and, in
the case of loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Company (which indemnity, in the case of an institutional
holder of Warrants, shall consist of an unsecured letter of indemnity from such
holder), or, in the case of mutilation, upon surrender and cancellation thereof,
the Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants evidenced by
this Warrant Certificate will inure to the benefit of and be binding upon the
registered holder thereof and the Company and their respective successors and
permitted assigns. Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the registered holder thereof any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered holder. Nothing in this Warrant Certificate shall be
construed to give the registered holder hereof any rights as a holder of shares
of Common Stock until such time, if any, as the Warrants evidenced by this
Warrant Certificate are exercised in accordance with the provisions hereof.
Section 11. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Price per share of Common Stock on the date of
8
exercise over the Exercise Price per share and the denominator of which is the
Current Market Price per share of Common Stock on the date of exercise.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 20 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed on a national securities exchange or quoted in
the over-counter market, the Market Price on such date.
"Exercise Price" shall have the meaning given it in the first paragraph
hereof.
"Expiration Date" shall have the meaning given it in the first paragraph
hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Issue Date" shall mean March 28, 2000.
"Market Price" shall mean, per share of Common Stock, on any
date specified herein: (a) the closing price per share of the Common Stock on
such date published in The Wall Street Journal or, if no such closing price on
such date is published in The Wall Street Journal, the average of the closing
bid and asked prices on such date, as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; or (b) if the Common Stock is not then listed or admitted
to trading on any national securities exchange but is designated as a national
market system security by the NASD, the last trading price of the Common Stock
on such date; or (c) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the reported closing bid and
asked price of the Common Stock, on such date as shown by NASDAQ and reported by
any member firm of The New York Stock Exchange, Inc. selected by the Company; or
(d) if none of (a), (b) or (c) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company based on an
opinion of a nationally recognized investment banking firm unaffiliated with
either the Company or the holders of the Warrants, chosen by the Company (who
shall bear the expense thereof) and acceptable to the holder of this Warrant
Certificate.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq Stock Market.
9
"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 00 Xxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000, Attention: CEO, or such other address as shall have been
furnished to the party given or making such notice, demand or other
communication. All such notices and communications shall be deemed to have been
duly given: when delivered, if delivered by hand or by overnight courier
service; and three Business Days after being deposited in the mail, postage
prepaid, if mailed.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
ARINCO COMPUTER SYSTEMS INC.
By: /s/ Xxxxxxx X. X'Xxxxxxx
------------------------
Name: Xxxxxxx X. X'Xxxxxxx
Title: Managing Director and
Secretary
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[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is _________________________
____________, and irrevocably appoints ________________ as agent to transfer
this security on the books of the Company. Such agent may substitute another to
act for such agent.
Signature:
--------------------------
Signature Guarantee:
--------------------------
Date: ___________________________
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Schedule A
----------
The Warrants which have not been included in this exhibit are: the
Warrants for Xxxxxxx Xxxxx and Xxxxx X. Xxxxxxx. The material differences
between those Warrants and this Warrant are: (a) the party thereto, (b) the
number of Warrants in the first paragraph, (c) the exercise prices in the first
paragraph, and (d) the number of shares of Common Stock in paragraph 2, which
are as follows:
Number of
Number Shares of
of Common
Warrants Exercise Prices Stock
-------- --------------- -----
Xxxxxxx Xxxxx 7,115,625 1,423,125 Warrants will have an 7,115,625
exercise price of $.25 per share,
2,134,688 Warrants will have an
exercise price of $.50 per share,
2,134,687 Warrants will have an
exercise price of $.75 per share,
1,423,125 Warrants will have an
exercise price of $1.00 per share.
Xxxxxxx' Children 100,000 20,000 Warrants will have an 100,000
Irrevocable Trust exercise price of $.25 per share,
U/D/T dated 30,000 Warrants will have an
October 21, 1996, exercise price of $.50 per share,
Xxxxxxx X. 30,000 Warrants will have an
Xxxxxxx, Trustee exercise price of $.75 per share,
20,000 Warrants will have an
exercise price of $1.00 per share.
The Xxxxxxx Family 2,993,750 598,750 Warrants will have an 2,993,750
Revocable Trust exercise price of $.25 per share,
U/D/T dated 898,125 Warrants will have an
December 15, 1997, exercise price of $.50 per share,
Xxxxx X. Xxxxxxx 898,125 Warrants will have an
and Xxxx X. Xxxxxxx, exercise price of $.75 per share,
Trustees 598,750 Warrants will have an
exercise price of $1.00 per share.
Turtle Holdings 10,312,500 2,062,500 Warrants will have an 10,312,500
LLC exercise price of $.25 per share,
3,093,750 Warrants will have an
exercise price of $.50 per share,
3,093,750 Warrants will have an
exercise price of $.75 per share,
2,062,500 Warrants will have an
exercise price of $1.00 per share.
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