EXHIBIT 17
THIS WARRANT AND THE SHARES OF STOCK ISSUABLE ON ITS EXERCISE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
FORM OF WARRANT TO PURCHASE COMMON STOCK
ISSUE DATE: _________, 2005
This certifies that _________________________________ (the
"Warrantholder", as further defined in Section 1(t)), or its assigns, is
entitled, subject to the terms set forth below, to purchase from EXCALIBUR
INVESTMENT GROUP LIMITED, a British Virgin Islands company ("Excalibur"), up to
394,535 fully paid and nonassessable shares (the "Shares") of Common Stock,
$0.01 par value ("Common Stock"), of The A Consulting Team, Inc., a New York
corporation (the "Company"), and its successors, at a purchase price equal to
the Exercise Price (as defined in Section 1), from time to time from 9:00 a.m.,
New York City time, on ___________, 2006 [270 days after issue date] through
5:00 p.m., New York City time, on the Termination Date (as defined in Section
1). The Exercise Price and the number of Shares subject to this Warrant are
subject to adjustment as provided in Section 5 of this Warrant.
Notwithstanding any other provision of this Warrant to the contrary,
this Warrant shall not be or become exercisable unless and until the Advance (as
defined in the Credit Agreement (as defined in Section 1(e) below)) is disbursed
to the Borrower under the Credit Agreement in accordance with its terms.
1. Definitions.
As used in this Warrant, the following terms have the following meanings:
(a) "Ball" means Xxxxxx Xxxxx Xxxx, a British subject.
(b) "Ball Warrant" means the warrant of like tenor to this Warrant being
issued on the date of this Warrant to the Warrantholder by Xxxx and to
which 182,762 shares of Stock are subject.
(c) "Cashless Exercise" has the meaning given in Section 4(a).
(d) "Common Stock" has the meaning given to it in the first paragraph of this
Warrant.
(e) "Company" has the meaning given to it in the first paragraph of this
Warrant.
(f) "Convertible Securities" means securities that are convertible or
exchangeable into shares of Stock or into other securities that are
exercisable, convertible or exchangeable into shares of Stock.
(g) "Credit Agreement" means the Line of Credit Agreement of even date
herewith among Stonegate Bank, as collateral agent and administrative
agent, the lenders named therein and Oak.
(h) "Current Market Price" for one share of Stock means (i) the average of
the reported closing prices of a share of Stock quoted on The Nasdaq
SmallCap Market, The Nasdaq National Market, the NASD OTC Bulletin
Board or any exchange on which the Stock is then listed, whichever is
applicable, for the 10 trading days immediately prior to the date of
exercise of this Warrant, (ii) if no such closing price is available,
the average of the closing bid and asked prices of a share of Stock as
quoted in the Over-the-Counter Market Summary for the 10 trading days
immediately prior to the exercise date of this Warrant or (iii) if the
shares of Stock are not listed on any of the Nasdaq markets referred to
above or on any exchange or quoted in the Over-the-Counter Market, the
fair market value per share of Stock as of the date of exercise of this
Warrant as determined by agreement of Excalibur and the Warrantholder
or, if no such agreement can be reached within 15 days after the date
of exercise of this Warrant, as determined by an arbitrator pursuant to
Section 9.
For the purpose of any computation under Sections 5(b), (d), (e) and (f),
the Current Market Price per share of Stock shall be determined as
provided above with reference to the earlier of the day in question under
such sections and the day before the "ex date" (that is, the first date on
which the Stock trades regular way on the applicable securities exchange
or market without the right to receive such issuance or distribution) with
respect to the issuance or distribution requiring such computation.
(i) "Exercise Price" means $9.30 per Share, as it may be adjusted from time to
time pursuant to the provisions of Section 5.
(j) "Fully-Diluted Base" means, as of the date of this Warrant, the
fully-diluted Common Stock, that is, (i) all shares of Common Stock
issued and outstanding and (ii) all shares thereof subject to issuance
on the exercise, conversion or exchange of outstanding Options or
Convertible Securities issued by the Company that have an exercise,
conversion or exchange price of less than $16.00 per share of Common
Stock, including without limitation, all shares issuable as stock
awards, or on exercise of options, that have been, or may be, granted
under the Company's 1997 Stock Option and Award Plan or any other
employee stock option or similar plan of the Company. For the
avoidance of doubt, as of the Transaction Closing Date, the
Fully-Diluted Base is 11,545,939 shares of Common Stock, determined as
follows:
Issued and outstanding shares 10,208,346
Shares reserved for issuance to Oak or its
nominee 625,000
Shares reserved for issuance upon the exercise
of existing options with exercise price of
less than $16.00 per share 212,593
Shares reserved for issuance upon the exercise of options to be
granted on or about the Transaction Closing Date with exercise
price of less than $16.00 per share 500,000
----------
11,545,939
-2-
(k) "Oak" means Oak Finance Investments Limited, a British Virgin Islands
company.
(l) "Options" means options, warrants, rights and similar securities that are
exercisable to purchase or subscribe for shares of Stock or other
securities that are exercisable, convertible or exchangeable into shares
of Stock.
(m) "Qualifying Acquisition" means an acquisition by the Company of a
non-affiliated business by merger or the acquisition of assets, shares
or other equity interests, that is approved by the Company's Board of
Directors in good faith and as to which, after giving effect to any
issuance by the Company in connection with such acquisition of shares
of Stock as consideration, in whole or in part, does not dilute the
aggregate shares of Common Stock pledged by various parties pursuant to
the Credit Agreement below 51% of the issued and outstanding shares of
Stock, after giving effect to additional outstanding shares of Stock
pledged by Excalibur or Ball.
(n) "Shares" has the meaning given to it in the first paragraph of this
Warrant.
(o) "Stock" means shares of Common Stock and stock of any other class into
which the shares of Common Stock are subsequently changed.
(p) "Termination Date" means [insert Date that is 30 months after the date of
the Warrant].
(q) "Transaction Closing Date" has the meaning given to it in the Credit
Agreement.
(r) "Warrant Escrow Agent" means the party serving as escrow agent under the
Warrant Escrow Agreement.
(s) "Warrant Escrow Agreement" means the Escrow Agreement of even date
herewith among the Warrantholder, Excalibur, Ball and Stonegate Bank, as
escrow agent, pursuant to which the Shares and the shares of Common Stock
subject to the Ball Warrant have been placed into escrow with such escrow
agent.
(t) "Warrantholder" "means any person or entity that at the time is the holder
of this Warrant or any portion of this Warrant. References to
"Warrantholder" shall include all parties who then hold Warrants pursuant
to the transfer provisions of Sections 7 and 8.
(u) "Warrant Ratio" means the portion of the aggregate shares of Common Stock
subject to this Warrant and the Ball Warrant represented by the Shares,
expressed as a percentage, after giving effect to any stock splits,
reverse stock splits, stock dividends or combinations.
2. Aggregate Number of Shares of Common Stock. This Warrant is being
issued concurrently with the issuance to the Warrantholder by Ball of
the Ball Warrant in connection with the Credit Agreement. It is the
intention of the Warrantholder, Excalibur and Ball that the aggregate
number of shares of Common Stock subject to this Warrant and the Ball
Warrant as of the Transaction Closing Date shall equal 5% of the
Fully-Diluted Base, and Excalibur represents and warrants to the
Warrantholder that this shall be the case as of the Transaction Closing
Date. If, for any reason, including, without limitation, mistake, the
aggregate number of shares subject to this Warrant and the Ball Warrant
as of the Transaction Closing Date is more or less than 5% of the
Fully-Diluted Base, this Warrant and the Ball Warrant shall
automatically be deemed to be amended, in such respective amounts as
shall maintain the Warrant Ratio, to decrease or increase such
aggregate number of Shares so that it equals 5% of the Fully-Diluted
Base.
-3-
3. Escrow; Reservation of Shares.
(a) Deposit. On the date of this Warrant, Excalibur has deposited into
escrow pursuant to the Warrant Escrow Agreement, (i) stock certificates
in proper form for all of the Shares subject to this Warrant on the
date hereof and (ii) ten undated stock powers duly executed by
Excalibur in blank for the purpose of transferring such Shares to the
Warrantholder on exercise of this Warrant. Excalibur shall at all
times through the earliest of the Termination Date or the date on which
this Warrant has been exercised in full (A) not sell or agree to sell,
or grant any option, warrant or right in respect of any of the Shares
and (B) hold (subject to the Warrant Escrow Agreement and to the pledge
and security interest in the Shares in favor of the Agent under the
Credit Agreement), free and clear of all claims, liens, security
interests, charges, restrictions, options, warrants and other
encumbrances or rights, such number of Shares as are subject to this
Warrant, including in both cases all Shares originally subject to this
Warrant and any additional Shares that become subject to this Warrant
pursuant to the adjustment provisions of Section 5.
(b) Subsequent Deposits. If the number of Shares subject to this Warrant
increases due to the provisions of Section 5, or any other securities
and property to which the Warrantholder would be entitled on exercise
of this Warrant pursuant to Section 5 is distributed and received by or
for the account of Excalibur, Excalibur shall deposit into escrow
pursuant to the Warrant Escrow Agreement not later than three Business
Days (as defined in the Credit Agreement) after the event causing such
increase or distribution, (i) stock certificates in proper form for
such number of Shares as shall, when added to the Shares already
deposited into escrow pursuant to the Warrant Escrow Agreement, equal
such increased number of Shares or (ii) if applicable, any such other
securities or property.
(c) Subsequent Withdrawals. If the number of shares in the Fully Diluted
Base decreases, Excalibur shall have the right to receive from the
Warrant Escrow Agent one or more certificates representing a number of
Shares such that the aggregate number of Shares deposited into escrow
pursuant to the Warrant Escrow Agreement by Ball and Excalibur, after
giving effect to any similar request to receive shares from Ball,
equals 5% of the Fully Diluted Base. In such event, Excalibur shall
also have the right to withdraw any securities or other property
deposited in escrow pursuant to Section 3(b) that had been distributed
in respect of the Shares withdrawn from escrow pursuant to this Section
3(c). The withdrawals contemplated by the preceding two sentences
shall be subject to Excalibur's obligation set forth in Section 3(b) to
deposit additional Shares (and any related distributions) into escrow
pursuant to the Warrant Escrow Agreement and to the pledge and security
interest in the Shares in favor of the Agent under the Credit Agreement
so long as it is applicable.
-4-
4. Exercise.
(a) Manner of Exercise. This Warrant may be exercised, in whole or in
part, from time to time and at any time on or after the date that is
270 days after the date of issuance of this Warrant through the
Termination Date by the Warrantholder's surrendering to the Warrant
Escrow Agent, at its address as set forth in the Warrant Escrow
Agreement, this Warrant, together with the exercise form attached to
this Warrant duly executed by the Warrantholder and payment to the
Warrant Escrow Agent, for the account of Excalibur, in the amount
obtained by multiplying the then Exercise Price by the number of shares
of Stock designated in the exercise form. Payment may be made at the
option of the Warrantholder (i) by certified or official bank check or
a wire transfer to an account designated by the Warrant Escrow Agent
or (ii) by "Cashless Exercise" as describe in this Section 4(a),
including the surrender of this Warrant with instructions that
Excalibur retain as payment of the Exercise Price the number of Shares
determined as set forth in clause (ii) of the following paragraph. The
Warrantholder shall concurrently provide Excalibur with a copy of such
exercise form and appropriate advice of its payment.
In the event of a Cashless Exercise: (i) the Warrantholder shall receive
the number of Shares determined by multiplying the total number of Shares
for which the Cashless Exercise is made by a fraction, the numerator of
which shall be the difference between the then Current Market Price and
the Exercise Price, and the denominator of which shall be the Current
Market Price and (ii) the remaining Shares for which the Cashless Exercise
has been made shall be deemed to have been paid to Excalibur as the
Exercise Price and shall be released by the Warrant Escrow Agent to
Excalibur as provided in the Warrant Escrow Agreement, notwithstanding any
other provision thereof.
All payments received by the Warrant Escrow Agent on exercise of the
Warrant shall be remitted to Excalibur in accordance with the provisions
of the Warrant Escrow Agreement.
(b) Partial Exercise. On any partial exercise of this Warrant, Excalibur shall
promptly issue and deliver to the Warrantholder, at Excalibur's sole
expense, a new Warrant or Warrants of like tenor in the name of the
Warrantholder providing for the right to purchase the number of Shares as
to which this Warrant has not been exercised.
(c) Fractional Shares. Excalibur and the Escrow Agent shall not be required to
deliver fractional Shares to the Warrantholder on exercise of this
Warrant. If any fraction of a Share would, but for this Section 3(c), be
issuable on exercise of this Warrant, the number of shares to be issued to
the Warrantholder shall, if the fraction is 0.5 or greater, rounded up to
the nearest whole Share and, if less than 0.5, be rounded down to the
nearest whole Share.
-5-
(d) Delivery of Stock Certificates. The Warrant Escrow Agreement shall
require that, as promptly as practicable and in any event within three
days after full or any partial exercise of this Warrant (except as
otherwise provided in the Warrant Escrow Agreement), the Warrant Escrow
Agent shall cause to be issued in the name of, and delivered to, the
Warrantholder, a certificate or certificates for the number of shares
of Stock to which the Warrantholder is entitled on such exercise,
together with any other securities and property to which the
Warrantholder is entitled on such exercise pursuant to Section 5.
While the Warrant Escrow Agent shall be responsible for obtaining from
the Company stock certificates in the proper denominations for the
Shares deliverable to the Warrantholder on any exercise of this
Warrant, all related expenses, taxes and other charges of the Company,
the Warrant Escrow Agent and any other party payable in connection with
the preparation, issuance and delivery of share certificates shall be
the sole responsibility of Excalibur and the Borrower under the Credit
Agreement.
5. Adjustments to Exercise Price. The Exercise Price shall be subject to
adjustment from time to time, so long as this Warrant is outstanding, in
whole or in part, as follows:
(a) Stock Distributions. If at any time the Company pays or makes a
dividend or distribution on all or any portion of its Stock or makes a
dividend or other distribution on any other class of capital stock of
the Company, which dividend or distribution includes Stock, the
Exercise Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution shall be decreased by
multiplying such Exercise Price by a fraction, of which (i) the
numerator shall be the number of shares of Stock outstanding at the
close of business on the date fixed for such determination and (ii) the
denominator shall be the sum of such number of shares of Stock and the
total number of shares of Stock or other class of capital stock
constituting such dividend or other distribution, such decrease to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For purposes of this
Section 5(a), the number of shares of Stock at any time outstanding
shall not include shares held in treasury of the Company but shall
include shares issuable in respect of scrip certificates, if any,
issued in lieu of fractions of shares of Stock.
If any dividend or other distribution of the type described in this
Section 5(a) is declared, but not paid or made, the Exercise Price shall
again be adjusted to be the Exercise Price which would then be in effect
if such dividend or other distribution had not been declared.
(b) Rights Distributions. If at any time the Company pays or makes a
dividend or distribution on all or any portion of its Stock consisting
of, or shall otherwise issue to all holders of its Stock, Options
entitling the holders of Stock to subscribe for or purchase Stock at a
price per share less than the then Current Market Price on the date
fixed for the determination of shareholders entitled to receive such
Options, the Exercise Price in effect at the opening of business on the
day following the date fixed for such determination shall be decreased
by multiplying such Exercise Price by a fraction, of which (i) the
numerator shall be the number of shares of Stock outstanding at the
close of business on the date fixed for such determination, plus the
number of shares of Stock which the aggregate of the offering price of
the total number of shares of Stock so offered for subscription or
purchase would purchase at such Current Market Price, and (ii) the
denominator shall be the number of shares of Stock outstanding at the
close of business on the date fixed for such determination, plus the
number of shares of Stock so offered for subscription or purchase, such
decrease to become effective immediately after the opening of business
on the day following the date fixed for such determination.
-6-
For purposes of this Section 5(b), the number of shares of Stock at any
time outstanding shall not include shares held in treasury of the Company
(but shall include shares issuable in respect of scrip certificates, if
any, issued in lieu of fractions of shares of Stock) unless the Company
issues any Options in respect of Stock held in its treasury and does not
agree not to exercise any such Options in respect of Stock held in
treasury. If such Options are not so issued, the Exercise Price shall be
re-adjusted to be the Exercise Price which would then be in effect if such
date for the determination of shareholders entitled to receive such
Options had not been fixed. In determining whether any Options entitle the
holders thereof to subscribe for or purchase shares of Stock at less than
the then Current Market Price, and in determining the aggregate offering
price of such shares of Stock, there shall be taken into account any
consideration received for such Options. The value of such consideration,
if other than cash, shall be determined in the reasonable good faith
judgment of the Board of Directors of the Company, whose determination
shall be conclusive.
(c) Subdivisions and Combinations. If at any time all or any portion of
the Stock outstanding (i) is subdivided into a greater number of
shares of Stock, the Exercise Price in effect at the opening of
business on the day following the day on which such subdivision becomes
effective shall be proportionately reduced or (ii) is combined into a
smaller number of shares of Stock, the Exercise Price in effect at the
opening of business on the day following the day on which such
combination becomes effective shall be proportionately increased. Such
reduction or increase, as the case may be, shall become effective
immediately after the opening of business on the day following the day
on which such subdivision or combination becomes effective.
(d) Distributions of Assets. If at any time the Company, by dividend or
otherwise, distributes to all holders of its Stock evidences of its
indebtedness or assets (including securities, Options (but excluding
any Options referred to in Section 5(b)) entitling the holders of Stock
to subscribe for or purchase Stock at a price per share less than the
then Current Market Price, any dividend or distribution paid
exclusively in cash, any dividend or distribution referred to in
Section 5(a) and any dividend or distribution on a merger or
consolidation referred to in Section 6), the Exercise Price in effect
at the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or
other distribution shall be decreased by multiplying such Exercise
Price by a fraction, of which (i) the numerator shall be the Current
Market Price on the date fixed for such determination, less the then
fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the
assets or evidence of indebtedness so distributed applicable to one
share of Stock, and (ii) the denominator shall be such Current Market
Price, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such distribution.
-7-
If any dividend or distribution of the type described in this Section 5(d)
is declared but not paid or made, the Exercise Price shall be re-adjusted
to the Exercise Price which would then be in effect if such dividend or
distribution had not been declared.
(e) Distributions of Cash. If at any time the Company, by dividend or
otherwise, makes a distribution to all holders of its Stock consisting
of cash (excluding any cash that is distributed on a merger or
consolidation or a sale or transfer of all or substantially all of the
assets of the Company to which Section 6 applies or as a part of a
distribution referred to in Section 5(d)) in an aggregate amount that,
combined together with (i) the aggregate amount of any other
distributions to all holders of its Stock made exclusively in cash
within the 12 months immediately preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this
Section 5(e) has been made and (ii) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of consideration
payable in respect of any tender offer by the Company or any of its
subsidiaries or affiliates for all or any portion of the Stock
concluded with the 12 months immediately preceding the date of payment
of such distribution and in respect of which no adjustment pursuant to
this Section 5(e) has been made, exceeds 10% of the product of the
Current Market Price on the date for the determination of holders of
Stock entitled to receive such distribution, multiplied by the number
of shares of Stock outstanding on such date, then, and in each such
case, immediately after the close of business on such date for
determination, the Exercise Price in effect immediately prior to the
close of business on the date fixed for determination of the
shareholders entitled to receive such distribution shall be decreased
by multiplying such Exercise Price by a fraction (A) the numerator of
which shall be equal to the Current Market Price on the date fixed for
such determination, less an amount equal to the quotient of (x) the
excess of such combined amount over such 10% and (y) the number of
shares of Stock outstanding on such date for determination and (B) the
denominator of which shall be equal to the Current Market Price on such
date for determination.
If any dividend or distribution of the type described in this Section 5(e)
is declared but not so paid or made, the Exercise Price shall be
re-adjusted to the Exercise Price which would then be in effect if such
dividend or distribution had not been declared.
(f) Tender or Exchange Offer. In case a tender or exchange offer is made
by the Company or any subsidiary or affiliate of the Company for all or
any portion of the Stock and expires, and such tender or exchange offer
requires the payment to shareholders (based on the acceptance of the
offer (up to any maximum specified in the terms of the offer) of
Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors of
the Company, whose determination shall be conclusive) that, combined
together with (i) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors of the Company, whose
determination shall be conclusive) as of the expiration of such tender
or exchange offer, of consideration payable in respect of any other
tender or exchange offer by the Company or any subsidiary or affiliate
of the Company for all or any portion of the Stock expiring within the
12 months immediately preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to this
Section 5(f) has been made and (ii) the aggregate amount of any
distributions to all holders of the Stock made exclusively in cash
within 12 months immediately preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to
Section 5(e) has been made, exceeds 10% of the product of the Current
Market Price as of the last time (the "Expiration Time") tenders or
exchanges could have been made pursuant to such tender or exchange
offer (as it may be amended), multiplied by the number of shares of
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time,
the Exercise Price in effect immediately prior to the close of business
on the date of the Expiration Time shall be decreased by multiplying
such Exercise Price by a fraction (A) the numerator of which shall be
equal to (1) the product of (x) the Current Market Price on the date of
the Expiration Time and (y) the number of shares of Stock outstanding
(including any tendered or exchanged shares) on the date of the
Expiration Time less (2) the amount of cash plus the fair market value
(as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the aggregate consideration
payable to shareholders based on the acceptance of the offer (up to any
maximum specified in the terms of the offer) of Purchased Shares, and
(B) the denominator of which shall be equal to the product of (xx) the
Current Market Price on the date of the Expiration Time and (yy) the
number of shares of Stock outstanding (including any tendered or
exchanged shares) on the date of the Expiration Time less the number of
all shares of Stock validly tendered or exchanged and not withdrawn as
of the Expiration Time (the shares of Stock deemed so accepted up to
any such maximum, being referred to as the "Purchased Shares").
-8-
If the Company is obligated to purchase shares pursuant to any such tender
offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the
Exercise Price shall be re-adjusted to be the Exercise Price which would
then be in effect if such tender offer had not been made.
(g) Reclassifications. The reclassification of Stock into securities other
than Stock (other than any reclassification on a consolidation or
merger to which Section 6 applies) shall be deemed to involve (i) a
distribution of such securities other than Stock to all holders of
Stock (and the effective date of such reclassification shall be deemed
to be "the date fixed for the determination of shareholders entitled to
receive such distribution" and "the date fixed for such determination"
within the meaning of Section 5(a)) and (ii) a subdivision or
combination, as the case may be, of the number of shares of Stock
outstanding immediately prior to such reclassification into the number
of shares of Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day
upon which such subdivision becomes effective," as the case may be, and
"the day upon which such subdivision or combination becomes effective",
within the meaning of the Section 5(c)).
(h) Issuances Below Current Market Price, Exercise Price or $16.00. Except
as provided in Section 5(h)(F), if at any time the Company issues or
sells (or is deemed to have issued or sold, in accordance with
subparagraphs (A), (B) or (C) below) any shares of Stock without
consideration or for a consideration per share less than (1) the
Exercise Price in effect immediately prior to the time of such issuance
or sale, (2) the then Current Market Price or (3) $16.00 per share
(proportionately reduced or increased if a subdivision or combination
contemplated in Section 5(c) occurs), then, forthwith on such issuance
or sale, the Exercise Price shall be reduced to the lowest of the
prices determined:
-9-
(i) by dividing (A) an amount equal to the sum of (I) the number of
shares of Stock outstanding immediately prior to such issuance or
sale (including as outstanding for this purpose all shares included
in the Fully-Diluted Base), multiplied by the then existing Exercise
Price, and (II) the consideration, if any, received by the Company
on such issuance or sale, by (B) the total number of shares of Stock
outstanding immediately after such issuance or sale (including as
outstanding for this purposes all shares included in the
Fully-Diluted Base); or
(ii) by dividing (A) an amount equal to the sum of (I) the number of
shares of Stock outstanding immediately prior to such issuance or
sale (including as outstanding for this purpose all shares included
in the Fully-Diluted Base), multiplied by the then Current Market
Price, and (II) the consideration, if any, received by the Company
on such issuance or sale, by (B) the total number of shares of Stock
outstanding immediately after such issuance or sale (including as
outstanding for this purposes all shares included in the
Fully-Diluted Base); or
(iii) by dividing (A) an amount equal to the sum of (I) the number of
shares of Stock outstanding immediately prior to such issuance or
sale (including as outstanding for this purpose all shares included
in the Fully-Diluted Base), multiplied by $16.00 (proportionately
reduced or increased as provided above), and (II) the consideration,
if any, received by the Company on such issuance or sale, by (B) the
total number of shares of Stock outstanding immediately after such
issuance or sale (including as outstanding for this purposes all
shares included in the Fully-Diluted Base).
No adjustment of the Exercise Price shall be made, however, in an
amount less than $0.01 per share, and any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $0.01 per share or more. For purposes of this Section 5(h), the
following subparagraphs (A) through (F) shall also be applicable:
(A) Issuance of Options, Warrants or Rights. If the Company in
any manner grants (whether directly, by assumption in a merger or otherwise) any
Options for Stock or for Convertible Securities, whether or not such Options or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Stock is issuable on the exercise
of such Options or on the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance of all such Options, plus the
minimum aggregate amount of additional consideration payable to the Company on
the exercise of all such Options, plus, in the case of Options that relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable on the issuance or sale of such Convertible
Securities and on the conversion or exchange thereof, by (ii) the total maximum
number of shares of Stock issuable on the exercise of such Options or on the
conversion or exchange of all such Convertible Securities issuable on the
exercise of such Options) shall be less than the Exercise Price in effect
immediately prior to the time of the granting of such Options or the then
Current Market Price or $16.00 (proportionately reduced or increased as provided
above), then the total maximum number of shares of Stock issuable on the
exercise of all such Options or on the conversion or exchange of all such
Convertible Securities issuable on the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting of such
Options and thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph (C) below, no adjustment of such Exercise Price shall
be made on the actual issuance of such Stock or of such Convertible Securities
on exercise of such Options or on the issuance of such Stock on conversion or
exchange of such Convertible Securities.
-10-
(B) Issuance of Convertible Securities. If the Company in any
manner issues (whether directly or by assumption in a merger or otherwise) or
sells any Convertible Securities, whether or not the rights to exchange or
convert the same are immediately exercisable, and the price per share for which
Stock is issuable upon such conversion or exchange (determined by dividing (i)
the total amount received or receivable by the Company as consideration for the
issuance or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company on the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Stock issuable on the conversion or exchange of all such Convertible Securities)
shall be less than the Exercise Price in effect immediately prior to the time of
the granting of such Options or the then Current Market Price or $16.00
(proportionately reduced or increased as provided above), then the total maximum
number of shares of Stock issuable on conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such price per
share as of the date of the issuance or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subparagraph (C) below, no adjustment of such Conversion Price shall be made on
the actual issuance of Stock on conversion or exchange of such Convertible
Securities. If any such issuance or sale of such Convertible Securities is made
on exercise of any Option to purchase any such Convertible Securities for which
adjustments of any Conversion Price have been or are to be made pursuant to the
provisions of subparagraph (A) above, no further adjustment of such Conversion
Price shall be made by reason of such issuance or sale.
(C) Change in Option Price or Conversion Rate. If (i) the
purchase price provided for in any Option referred to in clause (A) above, (ii)
the additional consideration, if any, payable on the conversion or exchange of
any Convertible Securities referred to in clauses (A) or (B) above or (iii) the
rate at which any Convertible Securities referred to in clause (A) or (B) above
are convertible into or exchangeable for Stock shall change at any time (in each
case other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been in effect at
such time had such Options or Convertible Securities provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold. On the expiration of any such
Option or the termination of any such right to convert or exchange such
Convertible Securities, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities never
been issued, and the Common Stock issuable thereunder shall no longer be deemed
to be outstanding. If the purchase price provided for in any such Option
referred to in subparagraph (A) above is reduced, or the rate at which any
Convertible Securities referred to in subparagraph (A) or (B) above are
convertible into or exchangeable for Common Stock is increased, at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of Stock on the exercise of any
such Option or on conversion or exchange of any such Convertible Securities, the
Exercise Price then in effect shall forthwith be re-adjusted to such respective
amount as would have been obtained had such Option or Convertible Securities
never been issued as to such Stock and had adjustments been made upon the
issuance of the shares of Stock delivered as aforesaid, but only if as a result
of such adjustment the Exercise Price then in effect is thereby reduced.
-11-
(D) Consideration for Stock. In case any shares of Stock,
Options or Convertible Securities are issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to be
the fair value of such consideration as determined in good faith by the
Company's Board of Directors, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options are issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration.
(E) Other Transactions. If the Company takes or omits to take
any action as to which the other provisions of this Section 5(h) are not
strictly applicable but as to which the failure to make any adjustment would not
fairly protect the exercise rights of the Warrantholder in accordance with the
essential intent and principles of this Section 5(h) then, in each such case,
the Warrantholder may, on not less than five Business Days' notice to Excalibur,
appoint a firm of independent public accountants of recognized national standing
reasonably acceptable to Excalibur, which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles of this Section 5(h), necessary to preserve such exercise rights. On
receipt of such opinion, the Exercise Price shall automatically be deemed to
have been adjusted in accordance with such opinion as of the date its is
received by the Warrantholder and Excalibur. The fees and expenses of such
independent public accountants shall be borne by Excalibur.
-12-
(F) Certain Issuances of Common Stock Excepted.
Notwithstanding any other provision hereof, no adjustment to the Exercise Price
shall be made:
(1) On any exercise by Oak or any assignee of Oak (including
the Lender under the Credit Agreement) of its right to purchase 625,000 shares
of Common Stock pursuant to the Stock Purchase Agreement, dated as of January
21, 2005, between the Company and Oak;
(2) On the issuance of shares of Stock on exercise of any
Options, or the conversion of any Convertible Securities, included in the
Fully-Diluted Base;
(3) On the grant of any Options that are included in the
Fully-Diluted Base; or
(4) On any issuance of shares of Stock in a Qualifying
Acquisition.
(i) Notwithstanding any other provision of this Section 5, no adjustment of
the Exercise Price need be made until all cumulative adjustments amount to
1% or more of the Exercise Price as last adjusted. Any adjustments that
are not made shall he carried forward and taken into account in any
subsequent adjustment.
(j) In the event of any adjustment of the Exercise Price under Section
5(a), 5(b), 5(c), 5(d), 5(e), 5(f) or 5(h), the number of Shares
subject to this Warrant shall also be adjusted to the greater of (i)
the number of Shares determined by dividing (A) the product of the
Exercise Price in effect, and the number of Shares subject to this
Warrant, immediately prior to such adjustment, by (B) the Exercise
Price as adjusted and (ii) such number of Shares as then constitute (A)
the Warrant Ratio times (B) 5% of (I) the Fully-Diluted Base, plus (II)
all shares of Stock issued or issuable on exercise or conversion of
Options or Convertible Securities issued in the transaction giving rise
to the adjustment under Sections 5(a), 5(b), 5(c), 5(d), 5(e), 5(f) or
5(h).
6. Merger, Consolidation, Restructuring, Reclassification, Etc. If the
Company is a party to any transaction, including without limitation any
(i) recapitalization or reclassification of the 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 of
the Stock), (ii) any consolidation of the Company with, or merger of
the Company into, any other entity, any merger of another entity into
the Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding
shares of Stock), (iii) any sale or transfer of all or substantially
all of the assets of the Company or (iv) any compulsory share exchange,
pursuant to which the Stock is converted into the right to receive
other securities, cash or other property, then lawful provision shall
be made as part of the terms of such transaction whereby the
Warrantholder shall have the right thereafter, to exercise this Warrant
into the kind and amount of securities, cash and other property
receivable on such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of
shares of Stock into which this Warrant might have been exercised
immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange.
-13-
The Company or the entity formed by such consolidation or resulting from
such merger or which acquires such assets or which acquires the Company's
shares, as the case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document shall be as nearly equivalent as may be practicable
to die adjustments provided for in this Section 6. These provisions shall
similarly apply to successive recapitalizations, reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
7. Compliance with Securities Act. By acceptance of this Warrant, the
Warrantholder agrees that this Warrant and all Shares issued on its
exercise are being acquired for investment and that such holder shall
not offer, sell or otherwise dispose of this Warrant or any Shares
except under circumstances that shall not result in a violation of the
Securities Act of 1933, as amended (the "Act"). On exercise of this
Warrant, if requested by Excalibur or the Company. the Warrantholder
shall confirm in writing that the Shares are being acquired for
investment and not with a view toward distribution or resale (unless
sale of the Shares has been registered under the Act or an exemption
therefrom is available). Any proposed transferee of this Warrant or
the Shares shall be required to agree in writing to the provisions of
this Section 7 (unless such transfer of the Shares has been registered
under the Act). The Warrantholder acknowledges that certificates
representing the Shares shall bear an appropriate restrictive legend
unless the Shares are registered under the Act.
8. Transfer. Subject to the provisions of Section 7, any Warrantholder
may assign and transfer all or any portion of this Warrant that is held
by such Warrantholder. Prior to any such proposed transfer, the
Warrantholder shall give written notice to Excalibur of its intention
to effect such transfer, including the name and address of the proposed
transferee. Any Warrantholder may request that this Warrant be
subdivided into one or more Warrants of like tenor, but covering a
lesser number of Shares, provided that the total number of Shares
subject to such replacement Warrants does not exceed the number of
Shares covered by such Warrantholder's original Warrant. Subject to
the foregoing and to Section 7, Excalibur, at its expense, shall
execute and deliver, in lieu of any such original Warrant, the
requested number of replacement Warrants.
-14-
9. Arbitration.
(a) General. Any controversy or claim between the Warrantholder and
Excalibur and arising out of or relating to this Warrant shall be
finally resolved by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, in New York,
New York. The parties further agree that (i) the arbitrators shall be
empowered to include arbitration costs and attorney fees in the award
to the prevailing party in such proceedings and (ii) the award in such
proceedings shall be final and binding on the parties. The arbitrators
shall apply the law of the State of New York, exclusive of conflict of
laws principles, to any dispute. Judgment on the arbitrators' award
may be entered in any court having the requisite jurisdiction. Nothing
in this Agreement shall require the arbitration of disputes between the
parties that arise from actions, suits or proceedings instituted by
third parties, if such third parties cannot be joined in the
arbitration.
(b) Consent to Jurisdiction; Service of Process. Each party irrevocably
submits to the jurisdiction and venue of the arbitration described in
Section 9(a) and to the jurisdiction and venue of the federal and state
courts sitting in New York County, New York, for the enforcement of any
judgment on the arbitrators' award and the prosecution of any action
for equitable relief permitted by the last sentence of Section 9(a),
and waives any objection it may have with respect to the jurisdiction
of such arbitration or courts or the inconvenience of such forums or
venues. Warrantholder appoints Salans, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, X.X.X., Attention: Xxxxxxxx X. Xxxxxxxxx, Esq., and Group
appoints XxXxxxx Xxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000-0000, Attention: Xxxxxxx X. Xxxxxx, Esq., as their
respective attorneys-in-fact and authorized agents solely to receive on
their behalf, service of any demands for, or any notice with respect
to, arbitration hereunder or any service of process. Service on either
of such attorneys-in-fact may be made by registered or certified mail
or by personal delivery, in any case return receipt requested, and
shall be effective as service on the Warrantholder or Excalibur, as the
case may be. Nothing herein shall be deemed to affect any right to
serve any such demand, notice or process in any other manner permitted
under applicable law.
10. Miscellaneous.
(a) Amendment or Waiver. The provisions of this Warrant may be amended
only by an instrument in writing signed by Excalibur and the
Warrantholder, or if there is more than one Warrantholder, the holders
of at least 51% in interest of the then outstanding and unexpired
Warrants, provided that any such amendment that adversely affects any
Warrantholder shall require the separate consent of such
Warrantholder. So long as it is not adversely effected and subject to
the foregoing, the Warrantholder agrees that its rights hereunder may
be waived or amended by persons or entities holding not less than 51%
in interest of the then outstanding and unexpired Warrants without
obtaining any additional consents of the Warrantholders; provided,
however, that any holder of a Warrant may waive any of its rights under
this Warrant with respect to itself without obtaining the consent of
any other holder. Any amendment or waiver effected in accordance with
this Section 10(a) shall be binding on each Warrantholder and the
Warrantholder's successors and assigns.
-15-
(b) Replacement. On receipt of evidence reasonably satisfactory to Excalibur
of the loss, theft, destruction, or mutilation of this Warrant and, in the
case of loss, theft, or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to Excalibur
or, in the case of mutilation, on surrender and cancellation of this
Warrant, Excalibur at its expense shall execute and deliver, in lieu of
this Warrant, a new Warrant of like tenor.
(c) No Rights as Shareholder. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be considered a shareholder of
the Company for any purpose, nor shall anything in this Warrant be
construed to confer on any Warrantholder as such, any rights of a
shareholder of the Company or any right to vote, to give or withhold
consent to any corporate action, to receive notice of meetings of
shareholders, to receive dividends or subscription rights or otherwise.
(d) Notices. Notices hereunder to the Warrantholder shall be sent by certified
or registered mail to the address given to Excalibur by such holder and
shall be deemed given when so mailed, or if sent to a holder outside the
United States, by telecopy with a copy sent by air mail or courier.
(e) Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
conflict of laws principles.
(f) Construction. References to Sections are to the sections of this Warrant.
Dated: ________________, 2005.
EXCALIBUR INVESTMENT GROUP LIMITED
By_________________________________
Name:
Title:
-16-
Form of Exercise
(To be signed only on exercise of Warrant)
To: STONEGATE BANK
EXCALIBUR INVESTMENT GROUP LIMITED,
The undersigned holder of the attached Warrant hereby irrevocably
elects to exercise the right to purchase _____________ shares of Common Stock of
THE A CONSULTING TEAM, INC., a New York corporation (the "Company") and herewith
makes payment of $_____________ (based on an Exercise Price of $_____) for those
shares and requests that the certificate for those shares be issued in the name
of the undersigned and delivered to the address below the signature of the
undersigned. The undersigned hereby affirms the statements and covenants in
Section 7 of the Warrant.
Dated: ___________________
------------------------------------
Signature
Print Name:
(Signature must conform in all
respects to the name of holder as
specified on the face of the attached
Warrant.)
------------------------------------
Address
-17-
