WARRANT TO PURCHASE COMMON STOCK OF ARIEL WAY, INC.
EXHIBIT
99.1
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT
TO PURCHASE COMMON STOCK
OF
ARIEL
WAY, INC.
Issued
on
October 6, 2005 (“Issue
Date”)
Void
after October 5, 2010 (“Expiration
Date”)
This
certifies that in consideration of the execution of that certain warrant
agreement (the “Warrant
Agreement”),
dated
as of October 6, 2005, as amended, by and between Ariel Way, Inc., a Florida
corporation (the “Company”),
with
principal offices at 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, XX 00000,
and Xx. Xxxxxx Xxxxxxx, an individual with address c/x Xxxxxxx Capital, LLC,
00
Xxxxxxx Xxxxxx, 0xx
Xxxxx,
Xxx Xxxx, XX 00000 (“Xx.
Xxxxxxx”)
is
entitled, subject to the terms and conditions of this Warrant, to purchase
from
the Company at any time during the Exercise Period (as defined below) and
with
vesting as defined below, up to One Million (1,000,000) shares (the
“Number
of Warrant Shares”)
of
Warrant Stock (as defined below) at a price per share equal to the Warrant
Price
(as defined below), upon surrender of this Warrant at the principal offices
of
the Company, together with a duly executed subscription form in the form
attached hereto as Exhibit 1
and
simultaneous payment of the full Warrant Price for the shares of Warrant
Stock
so purchased in lawful money of the United States. The Warrant Price and
the
number and character of shares of Warrant Stock purchasable under this Warrant
are subject to adjustment as provided herein. The shares underlying the warrants
shall entitle the Warrant Holder to one-time “piggyback” registration
rights.
1. DEFINITIONS.
The
following definitions shall apply for purposes of this Warrant:
1.1 “Company”
means
the “Company”
as
defined above and includes any corporation which shall succeed to or assume
the
obligations of the Company under this Warrant.
1.2 “Exercise
Period”
means
the period (A) commencing on the Issue Date and (B) ending at 5:00 p.m. Eastern
Standard Time on the Expiration Date (as defined on the first page of this
Warrant, and as subject to adjustment as provided herein).
1.3 “SEC”
means
the U.S. Securities and Exchange Commission.
1.4 “Warrant”
means
this Warrant and any warrant(s) delivered in substitution or exchange therefor,
as provided herein.
1.5 “Warrant
Holder”
means
any person who shall at the time be the registered holder of this
Warrant.
1.6 “Warrant
Price”
means
$0.030 per share which is the latest sales price of the stock as of this
date.
The Warrant Price is subject to adjustment as provided herein.
1.7 “Warrant
Stock”
means
the Common Stock of the Company, $0.001 par value per share. The number and
character of shares of Warrant Stock are subject to adjustment as provided
herein and the term “Warrant
Stock”
shall
include stock and other securities and property at any time receivable or
issuable upon exercise of this Warrant in accordance with its
terms.
2. EXERCISE.
2.1 Method
of Exercise.
Subject
to the terms and conditions of this Warrant, the Warrant Holder may exercise
this Warrant in whole or in part, at any time or from time to time, on any
business day during the Exercise Period, for up to that number of shares
of
Warrant Stock that has vested pursuant to Section 2.2
below by
surrendering this Warrant at the principal offices of the Company, with the
subscription form attached hereto duly executed by the Warrant Holder, and
payment
of an amount equal to the product
obtained by multiplying (i) the number of shares of Warrant Stock
to be
purchased by the Warrant Holder by (ii) the Warrant Price or adjusted
Warrant Price therefor, if applicable, as determined in accordance with the
terms hereof or cancellation of indebtedness of the Company to the Warrant
Holder of the same equal amount at the option of the Warrant Holder.
The
Warrant Holder shall also have a “cash-less” exercise option such that
exercising certain number of shares of Warrant Stock and the sales proceeds
from
the sale of such shares shall provide for the payment to the Company of an
amount equal to the total warrant purchase price as defined above.
2.2 Vesting
and Exercisability of Warrant.
This
Warrant shall vest
as
follows: (i) 333,333 Warrant Shares shall vest on October 26,
2005;
and
(ii) 27,778 Warrant Shares shall vest monthly each of the first Twenty
Four
(24) months during Xx. Xxxxxxx’x engagement as a Director on the Company’s Board
of Directors.
2.3 Form
of Payment.
Payment
may be made by (i) a check payable to the Company’s order, (ii) wire
transfer of funds to the Company, (iii) cancellation of indebtedness
of the
Company to the Warrant Holder, or (iv) any combination of the
foregoing.
2.4 Partial
Exercise. Upon
a
partial exercise of this Warrant, this Warrant shall be surrendered by the
Warrant Holder and replaced with a new Warrant of like tenor in which the
Number
of Shares shall be reduced by the number of shares of Warrant Stock purchased
upon such exercise.
2
2.5 No
Fractional Shares.
No
fractional shares may be issued upon any exercise of this Warrant, and any
fractions shall be rounded down to the nearest whole number of shares. If
upon
any exercise of this Warrant a fraction of a share results, the Company will
pay
the cash value of any such fractional share, calculated on the basis of the
Warrant Price.
2.6 Restrictions
on Exercise.
This
Warrant may not be exercised if the issuance of the Warrant Stock upon such
exercise would constitute a violation of any applicable federal or state
securities laws or other laws or regulations. As a condition to the exercise
of
this Warrant, the Warrant Holder shall execute the subscription form attached
hereto as Exhibit 1,
confirming and acknowledging that the representations and warranties of the
Warrant Holder set forth in Section 5
are true
and correct as of the date of exercise.
3. ISSUANCE
OF STOCK.
This
Warrant shall be deemed to have been exercised immediately prior to the close
of
business on the date of its surrender for exercise as provided above, and
the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date. As soon as practicable on
or
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number
of
whole shares of Warrant Stock issuable upon such exercise.
4. ADJUSTMENT
PROVISIONS.
The
number and character of shares of Warrant Stock issuable upon exercise of
this
Warrant (or any shares of stock or other securities or property at the time
receivable or issuable upon exercise of this Warrant) and the Warrant Price
therefor, are subject to adjustment upon the occurrence of the following
events
between the date this Warrant is issued and the date it is
exercised:
4.1 Adjustment
for Stock Splits and Stock Dividends.
The
Warrant Price of this Warrant and the Number of Shares of Warrant Stock issuable
upon exercise of this Warrant (or any shares of stock or other securities
at the
time issuable upon exercise of this Warrant) shall each be proportionally
adjusted to reflect any stock dividend, stock split or reverse stock split,
or
other similar event affecting the number of outstanding shares of Warrant
Stock
(or such other stock or securities).
4.2 Adjustment
for Other Dividends and Distributions.
In case
the Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution payable respect to the Warrant Stock that is payable in
(a) securities of the Company (other than issuances with respect to
which
adjustment is made under Sections 4.1
or
4.3)
or
(b) assets (other than cash dividends paid or payable solely out of
retained earnings), then, and in each such case, the Warrant Holder, upon
exercise of this Warrant at any time after the consummation, effective date
or
record date of such event, shall receive, in addition to the shares of Warrant
Stock issuable upon such exercise prior to such date, the securities or such
other assets of the Company to which the Warrant Holder would have been entitled
upon such date if the Warrant Holder had exercised this Warrant immediately
prior thereto (all subject to further adjustment as provided in this
Warrant).
3
4.3 Adjustment
for Reorganization, Consolidation, Merger.
In case
of any recapitalization or reorganization of the Company after the date of
this
Warrant, or in case, after such date, the Company shall consolidate with
or
merge into another corporation, then, and in each such case, the Warrant
Holder,
upon the exercise of this Warrant (as provided in Section 2),
at any
time after the consummation of such recapitalization, reorganization,
consolidation or merger, shall be entitled to receive, in lieu of the stock
or
other securities and property receivable upon the exercise of this Warrant
prior
to such consummation, the stock or other securities or property to which
the
Warrant Holder would have been entitled upon the consummation of such
recapitalization, reorganization, consolidation or merger if the Warrant
Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in this Warrant, and the successor or purchasing
corporation in such reorganization, consolidation or merger (if other than
the
Company) shall duly execute and deliver to the Warrant Holder a supplement
hereto acknowledging such corporation’s obligations under this Warrant; and in
each such case, the terms of this Warrant shall be applicable to the shares
of
stock or other securities or property receivable upon the exercise of this
Warrant after the consummation of such reorganization, consolidation or
merger.
4.4 Conversion
of Stock.
In case
all the authorized Common Stock of the Company is converted, pursuant to
the
Company’s Certificate of Incorporation, into other securities or property, or
the Common Stock otherwise ceases to exist, then, in such case, the Warrant
Holder, upon exercise of this Warrant at any time after the date on which
the
Common Stock is so converted or ceases to exist (the “Termination
Date”),
shall
receive, in lieu of the number of shares of Common Stock that would have
been
issuable upon such exercise immediately prior to the Termination Date (the
“Former
Number of Shares of Warrant Stock”),
the
stock and other securities and property which the Warrant Holder would have
been
entitled to receive upon the Termination Date if the Warrant Holder had
exercised this Warrant with respect to the Former Number of Shares of Warrant
Stock immediately prior to the Termination Date (all subject to further
adjustment as provided in this Warrant).
4.5 Notice
of Adjustments.
The
Company shall promptly give written notice of each adjustment or readjustment
of
the Warrant Price or the number of shares of Warrant Stock or other securities
issuable upon exercise of this Warrant. The notice shall describe the adjustment
or readjustment and show in reasonable detail the facts on which the adjustment
or readjustment is based.
4.6 No
Change Necessary.
The
form of this Warrant need not be changed because of any adjustment in the
Warrant Price or in the number of shares of Warrant Stock issuable upon its
exercise.
4.7 Reservation
of Stock.
If at
any time the number of shares of Warrant Stock or other securities issuable
upon
exercise of this Warrant shall not be sufficient to effect the exercise of
this
Warrant, the Company will take such corporate action as may, in the opinion
of
its counsel, be necessary to increase its authorized but unissued shares
of
Warrant Stock or other securities issuable upon exercise of this Warrant
as
shall be sufficient for such purpose.
5. REPRESENTATIONS
AND WARRANTIES OF WARRANT HOLDER.
Warrant
Holder represents and warrants to the Company as follows:
4
5.1 Purchase
for Own Account for Investment.
Warrant
Holder is purchasing the Warrant Stock for Warrant Holder’s own account for
investment purposes only and not with a view to, or for sale in connection
with,
a distribution of the Warrant Stock within the meaning of the Securities
Act of
1933, as amended (the “1933
Act”).
Warrant Holder has no present intention of selling or otherwise disposing
of all
or any portion of the Warrant Stock and no one other than Warrant Holder
has any
beneficial ownership of any of the Warrant Stock.
5.2 Access
to Information.
Warrant
Holder has had access to all information regarding the Company and its present
and prospective business, assets, liabilities and financial condition that
Warrant Holder reasonably considers important in making the decision to purchase
the Warrant Stock, and Warrant Holder has had ample opportunity to ask questions
of the Company’s representatives concerning such matters and this
investment.
5.3 Understanding
of Risks.
Warrant
Holder is fully aware of: (a) the highly speculative nature of the
investment in the Warrant Stock; (b) the financial hazards involved;
(c) the lack of liquidity of the Warrant Stock and the restrictions
on
transferability of the Warrant Stock (e.g.,
that
Warrant Holder may not be able to sell or dispose of the Warrant Stock or
use
them as collateral for loans); (d) the qualifications and backgrounds of
the
management of the Company; and (e) the tax consequences of investment in
the
Warrant Stock.
5.4 Warrant
Holder’s Qualifications.
Warrant
Holder has a preexisting personal or business relationship with the Company
and/or certain of its officers and/or directors of a nature and duration
sufficient to make Warrant Holder aware of the character, business acumen
and
general business and financial circumstances of the Company and/or such officers
and directors. By reason of Warrant Holder’s business or financial experience,
Warrant Holder is capable of evaluating the merits and risks of this investment,
has the ability to protect Warrant Holder’s own interests in this transaction
and is financially capable of bearing a total loss of this
investment.
5.5 No
General Solicitation.
At no
time was Warrant Holder presented with or solicited by any publicly issued
or
circulated newspaper, mail, radio, television or other form of general
advertising or solicitation in connection with the offer, sale and purchase
of
the Warrant Stock.
5.6 Compliance
with Securities Laws.
Warrant
Holder understands and acknowledges that, in reliance upon the representations
and warranties made by Warrant Holder herein, the Warrant Stock are
not
being registered with the SEC under the 1933 Act, but instead are being issued
under an exemption or exemptions from the registration and qualification
requirements of the 1933 Act which impose certain restrictions on Warrant
Holder’s ability to transfer the Warrant Stock.
5.7 Restrictions
on Transfer.
Warrant
Holder understands that Warrant Holder may not transfer any Warrant Stock
unless
such Warrant Stock is registered under the 1933 Act or other applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Warrant
Holder understands that only the Company may file a registration statement
with
the SEC. Warrant Holder has also been advised that exemptions from registration
and qualification may not be available or may not permit Warrant Holder to
transfer all or any of the Warrant Stock in the amounts or at the times proposed
by Warrant Holder.
5
5.8 Legends.
It is
understood that the certificates evidencing the Warrant Stock and the Common
Stock issuable upon exercise thereof, will bear the legend set forth
below:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTIONS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER
OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
6. NO
RIGHTS OR LIABILITIES AS STOCKHOLDER.
This
Warrant does not by itself entitle the Warrant Holder to any voting rights
or
other rights as a shareholder of the Company. In the absence of affirmative
action by the Warrant Holder to purchase Warrant Stock by exercise of this
Warrant, no provisions of this Warrant, and no enumeration herein of the
rights
or privileges of the Warrant Holder, shall cause the Warrant Holder to
be a
shareholder of the Company for any purpose.
7. NO
IMPAIRMENT.
The
Company will not, by amendment of its Certificate of Incorporation or Bylaws,
or
through reorganization, consolidation, merger, dissolution, issue or sale
of
securities, sale of assets or any other voluntary action, willfully avoid
or
seek to avoid the observance or performance of any of the terms of this
Warrant,
but will at all times in good faith assist in the carrying out of all such
terms
and in the taking of all such action as may be necessary or appropriate
in order
to protect the rights of the holder against wrongful impairment. Without
limiting the generality of the foregoing, the Company will take all such
action
as may be necessary or appropriate in order that the Company may duly and
validly issue fully paid and nonassessable shares of Warrant Stock upon
the
exercise of this Warrant.
8. ATTORNEYS’
FEES.
In
the
event any party is required to engage the services of any attorneys for
the
purpose of enforcing this Warrant, or any provision thereof, the prevailing
party shall be entitled to recover its reasonable expenses and costs in
enforcing this Warrant, including attorneys’ fees.
9. TRANSFER.
Neither
this Warrant nor any rights hereunder may be assigned, conveyed or transferred,
in whole or in part, without the Company’s prior written consent, which the
Company may withhold in its sole discretion. The rights and obligations
of the
Company and the Warrant Holder under this Warrant shall be binding upon
and
benefit their respective permitted successors, assigns, heirs, administrators
and transferees.
6
10. GOVERNING
LAW.
This
Warrant shall be governed by and construed under the internal laws of the
State
of Florida as applied to agreements among Florida residents entered into
and to
be performed entirely within Florida, without reference to principles of
conflict of laws or choice of laws.
11. HEADINGS.
The
headings and captions used in this Warrant are used only for convenience
and are
not to be considered in construing or interpreting this Warrant. All references
in this Warrant to sections and exhibits shall, unless otherwise provided,
refer
to sections hereof and exhibits attached hereto, all of which exhibits
are
incorporated herein by this reference.
12. NOTICES.
Unless
otherwise provided, any notice required or permitted under this Agreement
shall
be given in writing and shall be deemed effectively given (i) at
the time
of personal delivery, if delivery is in person; (ii) one (1) business
day
after deposit with an express overnight courier for United States deliveries,
or
two (2) business days after such deposit for deliveries outside of the
United
States, with proof of delivery from the courier requested; or (iii) three
(3) business days after deposit in the United States mail by certified
mail
(return receipt requested) for United States deliveries when addressed
to the
party to be notified at the address indicated for such party in the first
paragraph of this Warrant or, in the case of the Company, at 0000 Xxxxxx
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, XX 00000, or at such other address
as any
party or the Company may designate by giving ten (10) days’ advance written
notice to all other parties.
13. AMENDMENT;
WAIVER. Any
term
of this Warrant may be amended, and the observance of any term of this
Warrant
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company
and
the Warrant Holder. Any amendment or waiver effected in accordance with
this
Section shall be binding upon the Warrant Holder, each future holder of
such
securities, and the Company.
14. SEVERABILITY.
If one
or more provisions of this Warrant are held to be unenforceable under applicable
law, such provision(s) shall be excluded from this Warrant and the balance
of
the Warrant shall be interpreted as if such provision(s) were so excluded
and
shall be enforceable in accordance with its terms.
15. TERMS
BINDING.
By
acceptance of this Warrant, the Warrant Holder accepts and agrees to be
bound by
all the terms and conditions of this Warrant.
16. COUNTERPARTS.
This
Warrant may be executed in any number of counterparts, each of which when
so
executed and delivered will be deemed an original, and all of which together
shall constitute one and the same agreement.
7
IN
WITNESS WHEREOF, the
parties hereto have executed this Warrant as of the date first above
written.
|
THE
COMPANY:
ARIEL
WAY, INC.
|
|
|
By:
|
|
|
Name:
|
Xxxx
Xxxxxx
|
|
Title:
|
President
and CEO
|
|
AGREED
AND ACKNOWLEDGED
|
|
|
THE
HOLDER:
XX.
XXXXXX XXXXXXX
_____________________________________
|
|
8
EXHIBIT 1
FORM
OF SUBSCRIPTION
(To
be signed only upon exercise of Warrant)
To:
Ariel
Way, Inc.
(1) The
undersigned Warrant Holder hereby elects to purchase
shares
of Common Stock of Ariel Way, Inc. (the “Warrant
Stock”),
pursuant to the terms of the attached Warrant, and tenders herewith payment
of
the purchase price for such shares in full or accepts cancellation of
indebtedness of the Company to the Warrant Holder of the same equal
amount.
(2) In
exercising the Warrant, the undersigned Warrant Holder hereby confirms
and
acknowledges that the representations and warranties set forth in Section 5
of the Warrant as they apply to the undersigned Warrant Holder continue
to be
true and correct as of this date.
(3) Please
issue a certificate or certificates representing such shares of Warrant
Stock in
the name specified below:
|
(Name)
|
|
(Address)
|
|
(City,
State, Zip Code)
|
|
(Federal
Tax Identification Number)
|
|
(Date)
|
9
