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Exhibit 99.4
EXHIBIT C
TO
SECURITIES
PURCHASE
AGREEMENT
THIS INVESTMENT OPTION AND THE SHARES ISSUABLE UPON THE EXERCISE OF
THIS INVESTMENT OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN
THAT SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 25, 2000 BY AND
AMONG THE PARTIES REFERENCED BELOW, NEITHER THIS INVESTMENT OPTION NOR
ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID
ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY
FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SUCH ACT.
Right to
Purchase
800,000 Shares
of Common Stock,
$.001 par value
INVESTMENT OPTION
THIS CERTIFIES THAT, for value received, RGC International Investors,
LDC, or its registered assigns, is entitled to purchase from ARI Network
Services, Inc., a Wisconsin corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2 hereof, Eight Hundred
Thousand (800,000) fully paid and nonassessable shares of the Company's Common
Stock, $.001 par value per share (the "Common Stock"), at an exercise price of
$6.00 per share (the "Exercise Price"). The term "Investment Option Shares," as
used herein, refers to the shares of Common Stock purchasable hereunder. The
Investment Option Shares and the Exercise Price are subject to adjustment as
provided in Paragraph 4 hereof. The term Investment Option means this Investment
Option and any other investment options issued pursuant to that certain
Securities Purchase Agreement, dated April 25, 2000, by and among the Company
and the Buyers listed on the execution page thereof (the "Securities Purchase
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Agreement"). Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
This Investment Option is subject to the following terms, provisions,
and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Investment Option may be exercised by the
holder hereof, in whole or in part, by the surrender of this Investment Option,
together with a completed exercise agreement in the form attached hereto (the
"Exercise Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise Price for the
Investment Option Shares specified in the Exercise Agreement or (ii) if the
resale of the Investment Option Shares by the holder is not then registered
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act") in accordance with the terms and within
the time periods required under the Registration Rights Agreement, delivery to
the Company of a written notice of an election to effect a "Cashless Exercise"
(as defined in Section 11(c) below) for the Investment Option Shares specified
in the Exercise Agreement. The Investment Option Shares so purchased shall be
deemed to be issued to the holder hereof or such holder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Investment Option shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been made for such
shares (or an election to effect a Cashless Exercise has been made) as set forth
above. Certificates for the Investment Option Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Investment Option shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder, subject to
paragraph 7(f), or such other name as shall be designated by such holder. If
this Investment Option shall have been exercised only in part, then, unless this
Investment Option has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Investment Option
representing the number of shares with respect to which this Investment Option
shall not then have been exercised.
Notwithstanding anything in this Investment Option to the
contrary, in no event shall the Holder of this Investment Option be entitled to
exercise a number of Investment Options (or portions thereof) in excess of the
number of Investment Options (or portions thereof) upon exercise of which the
sum of (i) the number of shares of Common Stock beneficially owned by the Holder
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Investment Options
and the unexercised or unconverted portion of any other securities of the
Company (including the Debentures and the Warrants (as defined in the Securities
Purchase Agreement)) subject to a limitation on conversion or exercise analogous
to the limitation contained herein) and (ii) the number of shares of Common
Stock issuable upon exercise of the Investment Options (or portions thereof)
with respect to which the determination described herein is being made, would
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result in beneficial ownership by the Holder and its affiliates of more than
4.9% of the outstanding shares of Common Stock; provided, however, in the event
of a Company Exercise (as defined below) pursuant to section 2(b), such
beneficial ownership by the holder and its affiliates may exceed 4.9%, but shall
in no event shall such beneficial ownership exceed 9.9%, of the outstanding
shares of Common Stock. For purposes of this Section 1, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise
provided in clause (i) hereof. Notwithstanding anything in this Investment
Option to the contrary, the restriction on the Holder set forth in this
paragraph shall not be amended without (i) without the written consent of the
Holder and the Company and (ii) the approval of the holders of a majority of the
Company's Common Stock present, or represented by proxy, and voting at any
meeting called to vote on the amendment of such restriction.
2. PERIOD OF EXERCISE.
(A) EXERCISE PERIOD. This Investment Option is exercisable at
any time or from time to time on or after the date on which this Investment
Option is issued and delivered pursuant to the terms of the Securities Purchase
Agreement (the "Issue Date") and before 5:00 p.m., New York City time on October
27, 2001 (the "Exercise Period").
(B) MANDATORY EXERCISE RIGHT. Subject to the limitations on
exercise set forth in Section 1 hereof and so long as for at all times during
the period beginning ninety (90) days prior to the Forced Exercise Trigger Date
(as defined below) and ending on the Company Exercise Date (as defined below)
(i) all of the shares of Common Stock issuable upon exercise of the Investment
Option are then (x) authorized and reserved for issuance, (y) registered for
resale under the 1933 Act by the holder of the Investment Option (or may
otherwise be resold publicly without restriction) and (z) eligible to be traded
on the Nasdaq National Market ("Nasdaq"), the New York Stock Exchange ("NYSE"),
the American Stock Exchange ("AMEX") or the Nasdaq Small Cap Market ("Nasdaq
SmallCap") and (ii) there is not then a continuing Mandatory Redemption Event
(as defined in the Debenture) or Trading Market Redemption Event (as defined in
the Debenture), then, at any time after April 27, 2001 (subject to extension for
each Trading Day following effectiveness that sales of all of the Registrable
Securities (as defined in the Registration Rights Agreement) cannot be made
pursuant to the Registration Statement (whether by reason of the Company's
failure to properly supplement or amend the prospectus included therein in
accordance with the terms of the Registration Rights Agreement, during an
Allowed Delay or otherwise)) and prior to the expiration of the Exercise Period,
the Company shall have the right on any Trading Day (a "Forced Exercise Trigger
Date") on which, and for a period of twenty (20) consecutive Trading Days prior
thereto, the Closing Bid Price of the Common Stock is greater than 165% of the
Exercise Price (subject to adjustment for stock splits, stock dividends and
similar transactions), to deliver written notice (the "Company Exercise Notice")
to the holder of this Investment Option (which notice may not be sent to the
holder of this Investment Option (a) until the Company is permitted to exercise
this Investment Option pursuant to this Section 2(b) and (b) during any period
of time in which the Company is in possession of any information, the disclosure
of which could cause a material increase in the Trade Price of the Company's
Common Stock, unless such information is publicly disclosed at
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least five (5) Trading Days prior to the Company Exercise Date (as defined
below)) requiring the holder to exercise the Investment Option in accordance
with Section 1 hereof; provided, however, that a Company Exercise (as defined
herein) shall not be permitted if during the period beginning on the date the
Company Exercise Notice is delivered to the holder of the Investment Option and
ending on the Trading Day prior to the Company Exercise Date the average Closing
Bid Price of the Common Stock during such period is not greater than 150% of the
Exercise Price (subject to adjustment for stock splits, stock dividends and
similar transactions). Any requirement to exercise the Investment Option
hereunder (a "Company Exercise") shall be as of the date (the "Company Exercise
Date") specified in the Company Exercise Notice (but in no event prior to the
tenth (10th) Trading Day following the date of such notice). The Company
Exercise Notice shall be delivered to the holder of the Investment Option at its
registered address appearing on the books and records of the Company. The
Company Exercise Date shall be the "Exercise Date" for purposes of determining
the Exercise Price and the time within which certificates representing the
Common Stock must be delivered to the holder upon a Company Exercise.
Notwithstanding notice of a Company Exercise, the holder shall at all times
prior to the Company Exercise Date maintain the right to exercise all or any
portion of this Investment Option in accordance with Section 1 hereof. "Trading
Day" shall mean any day on which the Common Stock is traded for any period on
Nasdaq, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded. "Trade Price" means, for any
security as of any date, the trade price of the Common Stock on Nasdaq as
reported by Bloomberg Financial Markets or an equivalent reliable reporting
service mutually acceptable to and hereafter designated by the holders of a
majority of the outstanding principal amount of the Debentures and the Company
("Bloomberg") or, if Nasdaq is not the principal trading market for such
security, the trade price of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or, if no trade price of such security is available in any of the
foregoing manners, the bid price of any market maker for such security that is
listed in the "pink sheet" by the National Quotation Bureau, Inc. If the Trade
Price cannot be calculated for such security on such date in the manner provided
above, the Trade Price shall be the fair market value as mutually determined by
the Company and the holder of the Investment Option. Any exercise of the
Investment Options pursuant to this Section 2(b) will be subject to the
limitations set forth in Section 1. If, due to the limitations set forth in
Section 1, the holder is unable to exercise any portion of the Investment
Options pursuant to this Section 2(b), holder shall not exercise any portion of
the Investment Options not exercised as a result of such limitation until the
holder's beneficial ownership (as calculated in accordance with Section 1) of
the Company is below 9.9% of the outstanding shares of Common Stock. If (i) a
the Company Exercise Notice has been delivered, (ii) holder's beneficial
ownership (as calculated in accordance with Section 1) of the Company decreases
below 9.9% of the outstanding shares of Common Stock, and (iii) any Investment
Options remain unexercised, at any time the holder's beneficial ownership of the
Company decreases below 9.9% of the outstanding shares of Common Stock, without
any further notice to the Company, the holder shall resume exercise of the
Investment Options pursuant to this Section 2(b) until (i) Holder's beneficial
ownership (as calculated in accordance with Section 1) of the Company increases
to 9.9% of the outstanding shares of Common Stock or (ii) all the Investment
Options have been exercised.
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3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(A) SHARES TO BE FULLY PAID. All Investment Option Shares
will, upon issuance in accordance with the terms of this Investment Option, be
validly issued, fully paid, and, subject to Wisconsin Statute ss.180.0622(2)(b),
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(B) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Investment Option, a suf-ficient number of shares
of Common Stock to provide for the exercise of this Investment Option.
(C) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Investment Option upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Investment Option) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Investment
Option; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Investment Option if and so long as any shares of the same class shall
be listed on such national securities exchange or automated quotation system.
(D) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, 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 by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Investment
Option and in the taking of all such action as may reasonably be requested by
the holder of this Investment Option in order to protect the exercise privilege
of the holder of this Investment Option against dilution or other impairment,
consistent with the tenor and purpose of this Investment Option. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Investment Option above the Exercise Price then in effect, and (ii) will take
all such actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and, subject to Wisconsin Statute
ss.180.0622(2)(b), nonassessable shares of Common Stock upon the exercise of
this Investment Option.
(E) SUCCESSORS AND ASSIGNS. This Investment Option will be
binding upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
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4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Investment Option Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(A) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the Issue Date of this Investment
Option, the Company issues or sells, or in accordance with Paragraph 4(b) hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection
therewith) less than the Exercise Price in effect on the date of issuance (or
deemed issuance) of such Common Stock (a "Dilutive Issuance"), then immediately
upon the Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal
to the sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Exercise
Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.
(B) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(I) ISSUANCE OF RIGHTS OR OPTIONS. If the Company
in any manner issues or grants any warrants, rights or options, whether
or not immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for Common
Stock ("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Exercise Price on the date of issuance or grant of such Options, then
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or
grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the issuance or granting of all such
Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options,
plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional
consideration
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payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common
Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such
Options.
(II) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are
issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is less
than the Exercise Price on the date of issuance of such Convertible
Securities, then the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock is
issuable upon such conversion or exchange" is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price
will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(III) CHANGE IN OPTION PRICE OR CONVERSION RATE.
If there is a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any Options;
(ii) the amount of additional consideration, if any, payable to the
Company upon the conversion or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
(IV) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of
Common Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and the
rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise
Price then in effect
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will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(V) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued, granted or
sold for cash, the consideration received therefor for purposes of this
Investment Option will be the amount received by the Company therefor,
before deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date
of receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any acquisition, merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation
as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined in good faith by the
Board of Directors of the Company.
(VI) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE.
No adjustment to the Exercise Price will be made (i) upon the exercise
of any warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Investment Option; (ii)
upon the grant or exercise of any stock or options which may hereafter
be granted or exercised under any employee benefit plan of the Company
now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a
majority of the members of a committee of independent directors
established for such purpose; (iii) upon the exercise of the Investment
Options; (iv) upon issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant
to Rule 415 under the 0000 Xxx); and (v) upon issuances of securities
as consideration for a merger, consolidation or purchase of assets, or
in connection with any strategic alliance, relationship, partnership or
joint venture (the primary purpose of which is not to raise equity
capital), or in connection with the disposition or acquisition of a
business, product or license by the Company.
(C) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price
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in effect immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(D) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Investment Option shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Investment Option immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(E) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into, any other
corporation, then as a condition of such consolidation or merger, adequate
provision will be made whereby the holder of this Investment Option will have
the right to acquire and receive upon exercise of this Investment Option in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Investment Option, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the number of
shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of this Investment Option had such consolidation or merger not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Investment Option. The Company will not
effect any consolidation or merger unless, prior to the consummation thereof,
the successor or acquiring entity (if other than the Company) and, if an entity
different from the successor or acquiring entity, the entity whose capital stock
or assets the holders of the Common Stock of the Company are entitled to receive
as a result of such consolidation or merger assumes by written instrument the
obligations under this Paragraph 4 and the obligations to deliver to the holder
of this Investment Option such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to acquire.
(F) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Investment Option shall be entitled upon exercise of this Investment Option for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.
(G) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice
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thereof to the holder of this Investment Option, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Investment Option Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(H) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but 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 not less than 1% of such
Exercise Price.
(I) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Investment Option, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.
(J) OTHER NOTICES. In case at any time:
(I) the Company shall declare any dividend upon
the Common Stock payable in shares of stock of any class or make any
other distribution (including dividends or distributions payable in
cash out of retained earnings) to the holders of the Common Stock;
(II) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock
of any class or other rights;
(III) there shall be any capital reorganization
of the Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into, or sale of all or
substantially all its assets to, another corporation or entity; or
(IV) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Investment
Option (a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock
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or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(K) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Investment Option so that the
rights of the Holder shall be neither enhanced nor diminished by such event.
(L) CERTAIN DEFINITIONS.
(I) "COMMON STOCK DEEMED OUTSTANDING" shall mean
the number of shares of Common Stock actually outstanding (not
including shares of Common Stock held in the treasury of the Company),
plus (x) pursuant to Paragraph 4(b)(i) hereof, the maximum total number
of shares of Common Stock issuable upon the exercise of Options, as of
the date of such issuance or grant of such Options, if any, and (y)
pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of
shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(II) "MARKET PRICE," as of any date, (i) means
the average of the last reported sale prices for the shares of Common
Stock on the Nasdaq for the five (5) Trading Days immediately preceding
such date as reported by Bloomberg Financial Markets or an equivalent
reliable reporting service mutually acceptable to and hereafter
designated by the holder of this Investment Option and the Company
("Bloomberg"), or (ii) if Nasdaq is not the principal trading market
for the shares of Common Stock, the average of the last reported sale
prices on the principal trading market for the Common Stock during the
same period as reported by Bloomberg, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good
faith by (a) the Board of Directors of the Company or, at the option of
a majority-in-interest of the holders of the outstanding Investment
Options by (b) an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business of the
Company. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value
must be made hereunder.
(III) "COMMON STOCK," for purposes of this
Paragraph 4, includes the Common Stock, $.001 par value per share, and
any additional class of stock of the Company having no preference as to
dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Investment Option shall include only
shares
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of Common Stock, $.001 par value per share, in respect of which this
Investment Option is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation or merger of the
character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Investment Option Shares
upon the exercise of this Investment Option shall be made without charge to the
holder of this Investment Option or such shares for any issuance tax or other
costs in respect thereof, provided that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than the holder of this
Investment Option.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Investment Option
shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Investment Option, in the
absence of affirmative action by the holder hereof to purchase Investment Option
Shares, and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF INVESTMENT OPTION.
(A) RESTRICTION ON TRANSFER. This Investment Option and the
rights granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Investment Option, together with a properly executed
assignment in the form attached hereto, at the office or agency of the Company
referred to in Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
April 27, 2000, by and among the Company and the other signatories thereto (the
"Registration Rights Agreement").
(B) INVESTMENT OPTION EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Investment Option is exchangeable, upon the surrender hereof
by the holder hereof at the office or agency of the Company referred to in
Paragraph 7(e) below, for new Investment Options of like tenor representing in
the aggregate the right to purchase the number of shares of Common Stock which
may be purchased hereunder, each of such new Investment Options to represent the
right to purchase such number of shares as shall be designated by the holder
hereof at the time of such surrender.
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(C) REPLACEMENT OF INVESTMENT OPTION. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Investment Option and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Investment Option, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Investment Option of
like tenor.
(D) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Investment Option in connection with any transfer, exchange, or replacement
as provided in this Paragraph 7, this Investment Option shall be promptly
canceled by the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any,
incurred by the Holder or transferees) and charges payable in connection with
the preparation, execution, and delivery of Investment Options pursuant to this
Paragraph 7.
(E) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Investment
Option, in which the Company shall record the name and address of the person in
whose name this Investment Option has been issued, as well as the name and
address of each transferee and each prior owner of this Investment Option.
(F) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Investment Option in connection with any exercise,
transfer, or exchange of this Investment Option, this Investment Option (or, in
the case of any exercise, the Investment Option Shares issuable hereunder),
shall not be registered for resale under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such exercise, transfer, or exchange, (i) that the holder or transferee
of this Investment Option, as the case may be, furnish to the Company a written
opinion of counsel, which opinion and counsel are acceptable to the Company, to
the effect that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act. The first holder of this Investment
Option, by taking and holding the same, represents to the Company that such
holder is acquiring this Investment Option for investment and not with a view to
the distribution thereof.
8. REGISTRATION RIGHTS. The initial holder of this Investment Option
(and certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Investment Option Shares as are set forth in Section 2
of the Registration Rights Agreement.
9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Investment
Option shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for
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such holder on the books of the Company, or at such other address as shall have
been furnished to the Company by notice from such holder. All notices, requests,
and other communications required or permitted to be given or delivered
hereunder to the Company shall be in writing, and shall be personally delivered,
or shall be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to the office of the Company at 000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Chief Executive
Officer, or at such other address as shall have been furnished to the holder of
this Investment Option by notice from the Company. Any such notice, request, or
other communication may be sent by facsimile, but shall in such case be
subsequently confirmed by a writing personally delivered or sent by certified or
registered mail or by recognized overnight mail courier as provided above. All
notices, requests, and other communications shall be deemed to have been given
either at the time of the receipt thereof by the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 9, or, if
mailed by registered or certified mail or with a recognized overnight mail
courier upon deposit with the United States Post Office or such overnight mail
courier, if postage is prepaid and the mailing is properly addressed, as the
case may be.
10. GOVERNING LAW. THIS INVESTMENT OPTION SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF WISCONSIN (WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN DELAWARE
WITH RESPECT TO ANY SUIT OR PROCEEDING BASED ON OR ARISING UNDER THIS AGREEMENT,
THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT
OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.
11. MISCELLANEOUS.
(A) AMENDMENTS. This Investment Option and any provision
hereof may only be amended by an instrument in writing signed by the Company and
the holder hereof.
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(B) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Investment Option are inserted for purposes of
reference only, and shall not affect the meaning or construction of any of the
provisions hereof.
(C) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Investment Option, if the resale of the Investment
Option Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act, this Investment Option may be
exercised by presentation and surrender of this Investment Option to the Company
at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Investment Option for that number of shares of Common Stock determined by
multiplying the number of Investment Option Shares to which it would otherwise
be entitled by a fraction, the numerator of which shall be the difference
between the then current Market Price per share of the Common Stock and the
Exercise Price, and the denominator of which shall be the then current Market
Price per share of Common Stock.
(D) REMEDIES CUMULATIVE. The remedies provided in this
Investment Option shall be cumulative and in addition to all other remedies
available under this Investment Option, at law or in equity (including a decree
of specific performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance giving rise to such remedy and
nothing herein shall limit Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Investment Option. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to Holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees, in the event of any such breach or
threatened breach, Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
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IN WITNESS WHEREOF, the Company has caused this Investment Option to be
signed by its duly authorized officer.
ARI NETWORK SERVICES, INC.
a Wisconsin corporation
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx,
Chairman and Chief Executive Officer
Dated as of April 27, 2000
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FORM OF EXERCISE AGREEMENT
Dated: , 200
To: ARI Network Services, Inc.
The undersigned, pursuant to the provisions set forth in the within
Investment Option, hereby agrees to purchase shares of Common Stock
covered by such Investment Option, and makes payment herewith in full therefor
at the price per share provided by such Investment Option in cash or by
certified or official bank check in the amount of, or, if the resale of such
Common Stock by the undersigned is not currently registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
by surrender of securities issued by the Company (including a portion of the
Investment Option) having a market value (in the case of a portion of this
Investment Option, determined in accordance with Section 11(c) of the Investment
Option) equal to $ . Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:
-----------------------------------
Signature:
------------------------------
Address:
--------------------------------
--------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Investment Option.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Investment Option, a new Investment Option is to be
issued in the name of said undersigned covering the balance of the shares
purchasable thereunder less any fraction of a share paid in cash.
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Investment Option, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
--------------------------------------------------------------------------------
, and hereby irrevocably constitutes and appoints
as agent and attorney-in-fact to transfer said
Investment Option on the books of the within-named corporation, with full power
of substitution in the premises.
Dated: , 200
In the presence of:
-------------------------
Name:
----------------------------------
Signature:
-----------------------------
Title of Signing Officer or Agent (if any):
Address:
-------------------------------
----------------------------
Note: The above signature should correspond exactly with the name on the face of
the within Investment Option.
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