EXECUTION COPY
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ARIEL CORPORATION
COMMON STOCK PURCHASE AGREEMENT
February 24, 2000
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COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of
the 24th day of February, 2000 between and among Ariel Corporation, a Delaware
corporation with its principal office at 0000 Xxxxx 000, Xxxxxxxx, Xxx Xxxxxx
00000 (the "Company"), and the persons listed on the Schedule of Purchasers
attached hereto as Schedule I (the "Purchasers").
In consideration of the mutual covenants contained in this Agreement,
the Company and the Purchasers agree as follows:
SECTION 1
AUTHORIZATION AND SALE OF COMMON STOCK AND WARRANTS
1.1 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the sale of up to Two Million One Hundred
and Fifty-one Thousand (2,151,000) shares (the "Shares") of its Common Stock,
par value $.001 per share ("Common Stock"), and Two Million One Hundred and
Fifty-one Thousand (2,151,000) warrants to purchase Common Stock (the
"Warrants"). The Shares and the Warrants are referred to collectively as the
"Securities."
1.2 Sale of the Shares. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Shares set
forth opposite each Purchaser's name on Schedule I for a purchase price of $4.00
per share in cash.
1.3 Issuance of Warrants. Subject to the terms and conditions set forth
in the certificate evidencing the Warrants attached hereto as Exhibit A (the
"Warrant Certificate"), the Company agrees to issue to each Purchaser one
Warrant for each Share purchased by such Purchaser.
1.4 Additional Shares. In the event the Company sells shares of its
Common Stock or securities convertible into, or exercisable for, Common Stock on
or after the Closing Date (as defined below) but prior to the date exactly 24
months following the Closing Date, at a price per share below $4.00 (the
"Selling Per Share Price") (other than (i) the issuance, conversion, exchange or
exercise of options to acquire shares of Common Stock by officers, directors,
employees, consultants, vendors, suppliers, dealers or other service providers
of the Company which are outstanding as of the date hereof or which are or may
be issuable pursuant to stock option or similar equity based plans approved by
the Board of Directors, (ii) options, warrants or other agreements or rights to
purchase capital stock of the Company issued and outstanding prior to the
Closing Date and any issuance of shares of Common Stock in connection therewith,
(iii) securities convertible into or exchangeable or exercisable for shares of
Common Stock outstanding as of the date hereof and any issuance of Common Stock
in connection therewith, (iv) rights to purchase shares of Common Stock in lieu
of cash dividends pursuant to a Company plan for reinvestment of dividends or
interest, (v) a change in the par value of shares of Common Stock (including a
change from par value to no par value or vice versa), (vi) sales of shares of
Common Stock pursuant to an employee stock purchase plan qualified under Section
423 of the Internal Revenue Code of 1986, as amended, approved by the Company'
Board of Directors where such sales are at prices at least equal to 85% of the
fair market value as applicable pursuant to Section 423 of the Internal Revenue
Code of 1986, as amended and (vii) shares of Common Stock issued in good faith
in connection with any business collaboration, including a merger or acquisition
where a company or business is merged with or acquired by the Company or any
subsidiary of the Company; provided, however, that, on the date of determination
of the number of shares of Common Stock to be so issued, the Board of Directors
shall have determined in good faith that the issue price of such shares shall be
at least equal to the current market value of such shares), the Company will
issue to each Purchaser such number of additional shares of Common Stock so that
the number of shares of Common Stock purchased hereunder by such Purchaser plus
such number of additional shares of Common Stock equals the Adjustment Amount.
The Adjustment Amount shall be determined by dividing (i) the aggregate purchase
price of all the shares of Common Stock purchased hereunder by such Purchaser by
(ii) the Selling Price Per Share. Notwithstanding the foregoing, the Company
shall not be obligated to issue such additional shares if such issuance would
not be permitted by NASD Rule 4460(i)(1) without approval of the Company's
stockholders. If the Company is required to issue additional shares pursuant to
this Section 1.4 in an amount in excess of that permitted by Rule 4460(i)(1),
the Company will use its best efforts to secure stockholder approval of the
issuance of shares of Common Stock to the Purchasers at the Annual Meeting of
Stockholder of the Company following the closing of the transaction that gave
rise to the obligation of the Company to issue additional shares pursuant to
this Section 1.4. Pending stockholder approval, upon the closing of the
transaction which would obligate the Company to issue additional shares pursuant
to this Section 1.4, the Company shall issue additional shares pro rata to the
Purchasers up to the maximum number of additional shares that it is permitted to
issue without approval of the Company's stockholders. If the Company's
stockholders do not approve such issuance of additional shares, the Company will
have no obligation to issue any further additional shares to the Purchasers
pursuant to this Section 1.4.
1.5 Demand Registration Rights. In the event the Company issues
additional shares pursuant to Section 1.4 above and such shares are not covered
by the Registration Statement the Company is required to file pursuant to
Section 7.1(a) hereof, the Company agrees to use its best efforts to file a
registration statement covering such additional shares within 45 days of the
issuance of such shares. The Company agrees to use its best efforts to have the
registration statement declared effective by the Securities and Exchange
Commission (the "SEC") and to take all necessary steps to have the registration
statement remain effective for a period of two years from the effective date of
such registration statement.
SECTION 2
RIGHT OF FIRST REFUSAL
If at any time after the Closing Date but prior to the date exactly 24
months following the Closing Date, the Company proposes to issue and sell shares
of its Common Stock or securities convertible into, or exercisable for, Common
Stock other than (i) the issuance, conversion, exchange or exercise of options
to acquire shares of Common Stock by officers, directors, employees,
consultants, vendors, suppliers, dealers or other service providers of the
Company which are outstanding as of the date hereof or which are or may be
issuable pursuant to stock option or similar equity based plans approved by the
Board of Directors, (ii) options, warrants or other agreements or rights to
purchase capital stock of the Company issued and outstanding prior to the
Closing Date and any issuance of shares of Common Stock in connection therewith,
(iii) securities convertible into or exchangeable or exercisable for shares of
Common Stock outstanding as of the date hereof and any issuance of Common Stock
in connection therewith, (iv) rights to purchase shares of Common Stock in lieu
of cash dividends pursuant to a Company plan for reinvestment of dividends or
interest, (v) a change in the par value of shares of Common Stock (including a
change from par value to no par value or vice versa), (vi) sales of shares of
Common Stock pursuant to an employee stock purchase plan qualified under Section
423 of the Internal Revenue Code of 1986, as amended, approved by the Company's
Board of Directors where such sales are at prices at least equal to 85% of the
fair market value as applicable pursuant to Section 423 of the Internal Revenue
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Code of 1986, as amended and (vii) shares of Common Stock issued in good faith
in connection with any business collaboration, including a merger or acquisition
where a company or business is merged with or acquired by the Company or any
subsidiary of the Company; provided, however, that, on the date of determination
of the number of shares of Common Stock to be so issued, the Board of Directors
shall have determined in good faith that the issue price of such shares shall be
at least equal to the current market value of such shares, the Company shall:
(1) give to each Purchaser written notice (the "Notice")
setting forth in reasonable detail the price and other terms of the
proposed sale of such shares of Common Stock and the amount of such
securities proposed to be issued, and
(2) offer to issue and sell to the Purchasers on the same
terms as set out in the Notice such number of additional shares of
Common Stock so that the number of shares of Common Stock purchased
pursuant to the Notice by such Purchaser equals the Adjustment Amount.
Each Purchaser must exercise its purchase rights hereunder within ten
(10) days after receipt of the Notice from the Company. Upon the expiration of
the 10-day offering period, the Company will be free to sell the shares of
Common Stock as set out in the Notice to Purchasers.
SECTION 3
CLOSING DATE; DELIVERY
3.1 Closing Date. The completion of the purchase and sale of the Shares
and the issuance of the Warrants (the "Closing") shall occur as soon as
practicable and as agreed by the parties hereto, at a place and time (the
"Closing Date") to be agreed upon by the Company and the Purchasers. The
Purchasers will be notified by facsimile transmission or otherwise.
3.2 Delivery. At the Closing, the Company shall deliver to each
Purchaser one or more stock certificates and one or more Warrant Certificates
registered in the name of such Purchaser, or in such nominee name(s) as
designated by the Purchaser in writing, representing the number of Shares and
Warrants set forth opposite such Purchaser's name on Schedule I attached hereto.
The name(s) in which the stock certificates and Warrant Certificates are to be
registered are set forth in the Certificate Questionnaire attached hereto as
part of Exhibit C. The Company's obligation to complete the purchase and sale of
the Shares and the issuance of the Warrants and deliver such certificates to
each Purchaser at the Closing shall be subject to the following conditions, any
one or more of which may be waived by the Company: (a) receipt by the Company of
same-day funds in the full amount of the purchase price for the Shares being
purchased hereunder; (b) receipt by the Company of a completed copy of each of
Exhibit B, Exhibit C and Exhibit D-1 or D-2, as applicable, attached hereto; and
(c) the accuracy of the representations and warranties made by the Purchasers
and the fulfillment of those undertakings of the Purchasers to be fulfilled
prior to the Closing. Each Purchaser's obligation to accept delivery of such
certificates and to pay for the Shares evidenced thereby shall be subject to the
accuracy in all material respects of the representations and warranties made by
the Company herein and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to the Closing.
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SECTION 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
4.1 Incorporation and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is qualified to do business as a foreign corporation in each
jurisdiction in which qualification is required, except where failure to so
qualify would not result in a material adverse change in the condition
(financial or otherwise), properties, business, or results of operations of the
Company and its subsidiaries taken as a whole (a "Material Adverse Change").
4.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to sell and issue the Securities and to carry out and
perform all of its obligations under this Agreement. This Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and (b) as limited by equitable
principles generally. The execution and delivery of this Agreement does not, and
the performance of this Agreement and the compliance with the provisions hereof
and the issuance, sale and delivery of the Securities by the Company will not
materially conflict with, or result in a material breach or violation of the
terms, conditions or provisions of, or constitute a material default under, or
result in the creation or imposition of any material lien pursuant to the terms
of, the Restated Certificate of Incorporation or Bylaws of the Company or any
applicable statute, law, rule or regulation or any state or federal order,
judgment or decree or any indenture, mortgage, lease or other agreement or
instrument to which the Company or any of its properties is subject that is
material to the Company and its subsidiaries taken as a whole.
4.3 Authorized Capital Stock. The authorized capital stock of the
Company consists of (a) Twenty Million (20,000,000) shares of Common Stock,
$.001 par value, of which, as of December 31, 1999, 10,835,320 shares were
outstanding (excluding, as of such date (i) 842,809 shares of Common Stock
issuable upon the exercise of outstanding options under the Company's 1992 Stock
Option and Restricted Plan, 1994 Stock Option Plan, 1995 Stock Option Plan and
the 1996 Directors Plan (collectively, the "Stock Option Plans"), (ii) 871,502
options outstanding pursuant to non-plan Options granted in 1998, (iii)
1,145,600 shares of Common Stock reserved for future option grants under the
Stock Option Plans and (iv) approximately 200,000 shares of Common Stock
issuable upon the exercise of outstanding warrants and agreements to issue
warrants and (b) 2,000,000 shares of Preferred Stock, $.001 par value, no shares
of which are outstanding. The issued and outstanding shares of the Company's
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and conform in
all material respects to the description thereof contained in the Offering
Documents (as defined herein). Other than pursuant to this Agreement, and except
as set forth in Section 1.1, this Section 4.3 or as disclosed or contemplated by
in the Offering Documents, the Company does not have outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder set forth in the Offering
Documents accurately and fairly describes such plans, arrangements, options and
rights.
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4.4 Issuance, Sale and Delivery of the Securities. The Shares have been
duly authorized and, when issued, delivered and paid for in the manner set forth
in this Agreement, will be validly issued, fully paid and nonassessable. No
preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Shares by the Company pursuant to this
Agreement. No stockholder of the Company has any right (which has not been
waived or has not expired by reason of lapse of time following notification of
the Company's intent to file a registration statement on behalf of the
Purchasers pursuant to Section 7 hereof (the "Registration Statement")) to
require the Company to register the sale of any securities owned by such
stockholder under the Securities Act of 1933, as amended (the "Securities Act")
in the Registration Statement. The shares of Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares") have been duly authorized and, when the
issued, delivered and the exercise price paid in the manner set forth in the
Warrant Certificate, the Warrant Shares will be validly issued, fully paid and
nonassessable. Other than as set forth in this Agreement and the Warrant
Certificate, no further approval or authority of the stockholders or the Board
of Directors of the Company will be required for the issuance and sale of the
Shares to be sold by the Company as contemplated herein or the issuance and sale
of the Warrant Shares as set forth in the Warrant Certificate.
4.5 SEC Documents; Financial Statements. The Company has filed in a
timely manner all documents that the Company was required to file with
Securities and Exchange Commission (the "SEC") under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
during the twelve (12) months preceding the date of this Agreement. As of their
respective filing dates, all documents filed by the Company with the SEC (the
"SEC Documents") complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable. None of the SEC Documents as
of their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial position of
the Company and any subsidiaries at the dates thereof and the consolidated
results of their operations and consolidated cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, recurring
adjustments).
4.6 Accountants. PricewaterhouseCoopers LLP, who have expressed their
opinion with respect to the consolidated financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.
4.7 No Defaults. Except as disclosed in the Offering Documents, and
except as to defaults, violations and breaches which individually or in the
aggregate would not result in a Material Adverse Change, the Company is not in
violation or default of any provision of its Restated Certificate of
Incorporation or Bylaws, or in breach of or default with respect to any
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of fact which, with notice or lapse of time or both, would constitute an event
of default on the part of the Company as defined in such documents, except such
defaults which individually or in the aggregate would not result in a Material
Adverse Change.
4.8 No Actions. Except as disclosed in the Offering Documents, there
are no legal or governmental actions, suits or proceedings pending or, to the
Company's knowledge, threatened to which the Company is a party or of which
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property owned or leased by the Company is or may be the subject, which actions,
suits or proceedings, individually or in the aggregate, might prevent or might
reasonably be expected to materially and adversely affect the transactions
contemplated by this Agreement or result in a Material Adverse Change; and no
labor disturbance by the employees of the Company exists to or, to the Company's
knowledge, is imminent which might reasonably be expected to result in a
Material Adverse Change. Except as disclosed in the Offering Documents, the
Company is not party to or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body.
4.9 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (a) compliance with the securities and Blue Sky laws
in the states in which Shares are offered and/or sold and (b) the filing of the
Registration Statement as contemplated by Section 7 of this Agreement.
4.10 Litigation. Except as disclosed in the Offering Documents and
except as set forth in Schedule 4.10 hereto, there are no actions, suits
proceedings or investigations pending or, to the best of the Company's
knowledge, threatened against the Company or any of its properties before or by
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable likelihood (in the judgment of the Company) of an adverse
decision that (a) could result in a Material Adverse Change or (b) could impair
the ability of the Company to perform in any material respect its obligations
under this Agreement.
4.11 No Material Change. Since December 31, 1999 and except as
disclosed in the Offering Documents, (a) the Company has not sustained any
material loss or interference with its businesses or properties from fire,
flood, windstorm, accident or other calamity not covered by insurance; (b) the
Company has not paid or declared any dividends or other distributions with
respect to its capital stock and is not in default in the payment of principal
or interest on any outstanding debt obligations; (c) there has not been any
change in the capital stock of the Company other than the issuance and sale of
the Securities hereunder and shares or options issued pursuant to the Stock
Option Plans, as approved by the Company's Board of Directors; (d) there has not
been any increase in indebtedness material to the Company (other than in the
ordinary course of business); and (e) there has not been a Material Adverse
Change.
4.12 Intellectual Property. Except as disclosed in the Offering
Documents (a) the Company owns or has obtained valid and enforceable licenses or
options for the inventions, patent applications, patents, trademarks (both
registered and unregistered), tradenames, copyrights and trade secrets necessary
for the conduct of the Company's business as currently conducted and as the
Offering Documents indicate the Company contemplates conducting (collectively,
the "Intellectual Property"); and (b) to the Company's knowledge (for each of
the following subsections (i) through (v)): (i) there are no third parties who
have any ownership rights to any Intellectual Property that is owned by, or has
been licensed to, the Company for the products described in the Offering
Documents that would preclude the Company from conducting its business as
currently conducted and as the Offering Documents indicate the Company
contemplates conducting, except for the ownership rights of the owners of the
Intellectual Property licensed or optioned by the Company; (ii) there are
currently no sales of any products that would constitute a material infringement
by third parties of any Intellectual Property owned, licensed or optioned by the
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Company; (iii) there is no pending or threatened action, suit, proceeding or
claim by others challenging the rights of the Company in or to any Intellectual
Property owned, licensed or optioned by the Company, other than non-material
claims; (iv) there is no pending or threatened action, suit, proceeding or claim
by others challenging the validity or scope of any Intellectual Property owned,
licensed or optioned by the Company, other than claims which would not result in
a Material Adverse Change; and (v) there is no pending or threatened action,
suit, proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
right of others, other than non-material claims which would not result in a
Material Adverse Change.
4.13 Compliance. To the Company's knowledge, the Company has not been
advised, nor does it have reason to believe, that it is not conducting business
in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without limitation,
all applicable local, state and federal environmental laws regulations known to
the Company; except where failure to be so in compliance would not result in a
Material Adverse Change.
4.14 Taxes. The Company has filed all necessary federal, state and
foreign income and franchise tax returns and has paid or accrued all taxes shown
as due thereon, and the Company has no knowledge of a tax deficiency which has
been or might be asserted or threatened against it which would result in a
Material Adverse Change.
4.15 Transfer Taxes. On the Closing Date, all stock transfer taxes
(other than income taxes) which are required to be paid in connection with the
sale and transfer of the Securities to the Purchasers hereunder will be, or will
have been, fully paid or provided for by the Company.
4.16 Investment Company. The Company is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
4.17 Distribution of Offering Materials. The Company has not
distributed and will not distribute prior to the Closing Date any offering
materials related to the offering and sale of the Securities other than the
Offering Documents or any amendment or supplement thereto. The Company will not
take any action independent of the Placement Agent to sell, offer for sale or
solicit offers to buy any securities of the Company which would bring the offer,
issuance or sale of the Securities, as contemplated by this Agreement, within
the provisions of Section 5 of the Securities Act, unless such offer, issuance
or sale was or shall be within the exemptions of the Securities Act.
4.18 Insurance. The Company maintains insurance of the types and in the
amounts that it reasonably believes is adequate for its business, including, but
not limited to, insurance covering all material real and personal property owned
or leased by the Company against theft, damage, destruction, acts of vandalism,
all of which insurance is in full force and effect.
4.19 Offering Documents. The Company represents and warrants that the
information contained in the following documents (collectively, the "Offering
Documents"), which the Placement Agent has furnished each Purchaser, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that the representations and
warranties of the Company do not apply to statements or omissions in the
Offering Documents based upon information furnished to the Company by the
Placement Agent expressly for use therein:
(1) the Private Placement Memorandum dated November 10, 1999 (the
"PPM"); and
(2) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 filed pursuant to the Exchange Act on November
15, 1999.
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4.20 Legal Opinion. At the Closing, Shearman & Sterling, counsel to the
Company, will deliver a legal opinion addressed to the Purchasers named on
Schedule I hereto in a form reasonably satisfactory to counsel to the Placement
Agent regarding the due incorporation of the Company, the due authorization,
issuance and delivery of the Shares to be purchased and the due authorization,
execution and delivery of this agreement.
4.21 Certificate. At the Closing, the Company will deliver to each
Purchaser a certificate, in form and substance reasonably satisfactory to
counsel for the Placement Agent, to the effect that the representations and
warranties of the Company set forth in this Section 4 are true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date, and the Company has complied in all material respects with all the
agreements and satisfied all the conditions herein on its part to be performed
or satisfied on or prior to the Closing Date.
SECTION 5
Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants to the Company,
effective as of the Closing Date, as follows:
5.1 Authorization. Purchaser represents and warrants to the Company
that: (a) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Securities to be purchased by it and to
carry out and perform all of its obligations under this Agreement; and (b) this
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) as limited by equitable
principles generally.
5.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. Purchaser
is aware of the Company's business affairs and financial condition and has had
access to and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Purchaser has
such business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Securities.
5.3 Investment Intent. Purchaser is purchasing the Securities for its
own account as principal, for investment purposes only, and not with a present
view to, or for, resale, distribution or fractionalization thereof, in whole or
in part, within the meaning of the Securities Act. Purchaser understands that
its acquisition of the Securities has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser's investment intent as expressed
herein. Purchaser has completed or caused to be completed the Registration
Statement Questionnaire attached hereto as Exhibit B, The Certificate attached
hereto as Exhibit C and the Certificate attached hereto as Exhibit D-1 or D-2,
as applicable, and the responses provided therein shall be true and correct as
of the Closing Date and will be true and correct as of the effective date of the
Registration Statement. Purchaser has, in connection with its decision to
purchase the number of shares set forth in Schedule I relied solely upon the
Offering Documents and the representations and warranties of the Company
contained herein. Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Securities except in
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compliance with the Securities Act, and the rules and regulations promulgated
thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available and that the
certificates evidencing the Securities will bear a legend to that effect.
5.5 Restriction on Short Sales. Purchaser represents and warrants to
and covenants with the Company that Purchaser has not engaged and will not
engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement, except to the extent that any such
short sale is fully covered by shares of Common Stock of the Company other than
the Shares.
5.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Securities constitutes legal, tax
or investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.
5.7 Certificate. At the Closing, each Purchaser will deliver to the
Company a certificate in form and substance reasonably satisfactory to the
counsel for the Company to the effect that the representations and warranties of
each Purchaser set forth in this Section 5 are true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, and the
Purchaser has complied in all material respects will all the agreements and
satisfied all the conditions herein on its part to be performed or satisfied on
or prior to the Closing Date.
SECTION 6
Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement
or by the Placement Agent, all covenants, agreements, representations and
warranties made by the Company and the Purchaser herein delivered pursuant
hereto shall survive the execution of this Agreement, the delivery to the
Purchaser of the Securities being purchased and the payment therefor.
SECTION 7
Registration of the Shares; Compliance With the Securities Act
7.1 Registration Procedures and Expenses. The Company shall:
(a) as soon as practicable, but in no event later than April
4, 2000, file with the SEC the Registration Statement on an appropriate
form relating to the sale of the Shares and the Warrant Shares by the
Purchasers from time to time on the Nasdaq Stock Market or the
facilities of any national securities exchange on which the Common
Stock is then traded or in privately negotiated transactions, provided,
however, if the Registration Statement is not filed with the SEC by the
above specified date, then the Company, to the extent permitted under
Delaware law, will issue to each Purchaser such number of additional
shares of Common Stock that is equal to one percent (1%) of the
aggregate number of Shares purchased by the Purchaser as set forth in
9
Schedule I hereto for each additional thirty day period that the
registration statement is not filed. Notwithstanding the foregoing, in
the event that the Company is prohibited from issuing additional shares
pursuant to NASD Rule 4460(i)(1), then the Company will pay in cash to
the Purchaser one percent (1%) of the aggregate amount of the
commitment of such Purchaser as set forth in Schedule I hereto. The
shares will be issued or the cash payment will be payable on the first
day of each month during which the Registration Statement is not filed;
(b) use its best efforts, subject to receipt of necessary
information from the Purchasers, to cause such Registration Statement
to become effective within 120 days after filing provided however, if
the Registration Statement is not declared effective by the SEC within
120 days of the date on which it is filed, then the Company, to the
extent permitted under Delaware law, will issue to each Purchaser such
number of additional shares of Common Stock that is equal to one
percent (1%) of the aggregate number of shares purchased by the
Purchaser as set forth in Schedule I hereto for each additional thirty
day period that the registration statement is not effective.
Notwithstanding the foregoing, in the event that the Company is
prohibited from issuing additional shares pursuant to NASD Rule
4460(i)(1), then the Company will pay in cash to the Purchaser one
percent (1%) of the aggregate amount of the commitment of such
Purchaser as set forth in Schedule I hereto. The shares will be issued
or the cash payment will be payable on the first day of each month
during which the Registration Statement is not effective;
(c) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration
Statement effective until twenty-four months after the effective date
of the Registration Statement;
(d) furnish to each Purchaser with respect to their Shares and
Warrant Shares registered under the Registration Statement (and to each
underwriter, if any, of such Shares or Warrant Shares) such reasonable
number of copies of prospectuses as such Purchaser may reasonably
request in order to facilitate the public sale or other disposition of
all or any of the Shares and Warrant Shares by the Purchaser;
(e) file documents required of the Company for normal Blue Sky
clearance in states as may reasonably be requested in writing by each
Purchaser; provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so
consented;
(f) advise each Purchaser promptly (i) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement under the Securities Act or of the suspension by any state
securities commission of the qualification of the Shares or the Warrant
Shares for offering or sale in any jurisdiction, or the initiation of
any proceeding for any preceding purposes and (ii) of the happening of
any event or discovery of any facts during the period the Registration
Statement is effective which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such
Registration Statement or the Prospectus in order to make the statement
therein not misleading; and
(g) bear all expenses in connection with the procedures in
paragraphs (a) through (f) of this Section 7.1 and the registration of
the Shares and Warrant Shares pursuant to the Registration Statement,
other than fees and expenses, if any, of counsel or other advisers to
10
the Purchasers or underwriting discounts, brokerage fees and
commissions incurred by the Purchasers, if any.
7.2 Transfer of Shares and Warrant Shares After Registration. Each
Purchaser agrees that it will not effect any disposition of the Shares or the
Warrant Shares or of its right to purchase the Shares or the Warrant Shares that
would constitute a sale within the meaning of the Securities Act, except as
contemplated by the Registration Statement referred to in Section 7.1, and that
it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding such Purchaser or its plan of
distribution.
7.3 Indemnification. For the purpose of this Section 7.3:
(a) The term "Registration Statement" shall mean the
registration statement filed pursuant to Section 7.1 hereof including
the exhibits thereto, schedules thereto, if any, and the documents
incorporated by reference therein, if any, at the time it became
effective and including any information deemed to be part thereof at
the time of effectiveness pursuant to Rule 430A or Rule 434 of the
Rules and Regulations. The term Prospectus shall mean the final
prospectus including the documents incorporated by reference therein,
if any, in the form filed pursuant to Rule 424(b) of the Rules and
Regulations, or filed as part of the Registration Statement at the time
of effectiveness if no Rule 424(b) filing is required.
(b) The Company agrees to indemnify and hold harmless each of
the Purchasers and each person, if any, who controls any Purchaser
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages, liabilities or expenses, joint or several,
to which such Purchasers or such controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Offering Documents or the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise of or
are based upon the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each Purchaser and each such controlling
person for any reasonable legal and other expenses as such expenses are
incurred by such Purchaser or such controlling person in connection
with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable with respect to any such
case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
PPM, the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
expressly for use therein, (ii) the failure of such Purchaser to comply
with the covenants and agreements contained in Section 5 or 7.2 hereof,
(iii) the inaccuracy of any representations made by such Purchaser
herein or (iv) any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to such
Purchaser prior to the pertinent sale or sales by such Purchaser.
(c) Each Purchaser will severally indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act,
11
against any losses, claims, damages, liabilities or expenses to which
the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person may become subject, under
the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation) insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure to
comply with the covenants and agreements contained in Section 5 or 7.2
hereof or (ii) the inaccuracy of any representation made by such
Purchaser herein or (iii) any untrue or alleged untrue statement of any
material fact contained in the PPM, the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or which arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the PPM, the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Purchaser expressly for use therein,
and will reimburse the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person
for any reasonable legal and other expense incurred by the Company,
each of its directors, each of it officers who signed the Registration
Statement or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action.
(d) Promptly after receipt by an indemnified party under this
Section 7.3 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 7.3 promptly notify
the indemnifying party in writing thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section
7.3 or to the extent it is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be an actual
conflict between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party
of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7.3 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal
defenses in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by
such indemnifying party in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the
indemnified party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
12
party within a reasonable time after notice of commencement of action,
in each of which cases the reasonable fees and expenses of counsel
shall be at the expense of the indemnifying party.
7.4 Termination of Conditions and Obligations. The restrictions on
transfer set out in Section 5.4 shall cease upon the effectiveness of the
Registration Statement or at such time as an opinion of counsel satisfactory in
form and substance to the Company shall have been rendered to the effect that
the Securities can be transferred pursuant to an available exemption under the
Securities Act.
7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Shares and Warrant Shares owned by the
Purchasers, the Company will furnish to each Purchaser as soon as practicable
after available (but in the case of the Company's Annual Report to Stockholders,
within 120 days after the end of each fiscal year of the Company), one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants), (ii) if not
included in substance in the Annual Report to Stockholders, its Annual Report on
Form 10-K, (iii) if not included in substance in its Quarterly Reports to
Stockholders, its Quarterly Reports on Form 10-Q and (iv) a full copy of the
Registration Statement covering the Shares and the Warrant Shares (the
foregoing, in each case, excluding exhibits).
SECTION 8
MISCELLANEOUS
8.1 Broker's Fee. The Purchaser acknowledges that the Company intends
to pay to the Placement Agent a fee in respect of the sale of the Securities to
the Purchaser. Each of the parties hereto hereby represents that, on the basis
of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Securities to the
Purchaser.
8.2 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:
(a) if to the Company, to:
Ariel Corporation
0000 Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xx. Xxx X. Atlas, Chief Executive Officer and President
Facsimile: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
13
or to such other person at such other place as the Company shall
designate to each Purchaser in writing; and
(b) if to a Purchaser, at its address as set forth at the end
of this Agreement for such purchaser, or at such other address or
addresses as may have been furnished to the Company in writing.
8.3 Changes. With the exception of Section 7 hereof, this Agreement may
not be modified or amended except pursuant to an instrument in writing signed by
the Company and each Purchaser. With respect to Section 7 hereof, with the
written consent of the Company and holders of more than sixty-six and two-thirds
percent (66 2/3%) of the Shares then outstanding and held by Purchasers, the
terms of the Agreement may be waived or amended and any such waiver or amendment
shall be binding upon the Company and all holders of Shares.
8.4 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
8.5 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the federal law of the
United States of America.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
ARIEL CORPORATION
By ____________________________________________
Name:
Title:
_______________________________________________
Printed Name of Purchaser
(Individual or Institution):
_______________________________________________
Printed Name of Individual representing
Purchaser (if an Institution):
_______________________________________________
Title of Individual representing Purchaser
(if an Institution):
_______________________________________________
Signature of Individual Purchaser or Individual
representing Purchaser
Address: _______________________________
_______________________________
_______________________________
Telephone: ____________________________
Telecopier: ____________________________
15
_______________________________________________
Printed Name of Purchaser
(Individual or Institution):
_______________________________________________
Printed Name of Individual representing
Purchaser (if an Institution):
_______________________________________________
Title of Individual representing Purchaser
(if an Institution):
_______________________________________________
Signature of Individual Purchaser or Individual
representing Purchaser
Address: _______________________________
_______________________________
_______________________________
Telephone: ____________________________
Telecopier: ____________________________
16
_______________________________________________
Printed Name of Purchaser
(Individual or Institution):
_______________________________________________
Printed Name of Individual representing
Purchaser (if an Institution):
_______________________________________________
Title of Individual representing Purchaser
(if an Institution):
_______________________________________________
Signature of Individual Purchaser or Individual
representing Purchaser
Address: _______________________________
_______________________________
_______________________________
Telephone: ____________________________
Telecopier: ____________________________
17
SCHEDULE 4.10
The Company has contacted Alis Technologies, Inc., a Canadian
corporation ("Alis"), regarding indemnification for an alleged breach of
representation and warranty claim under the Stock Purchase and Sale Agreement
dated November 23, 1998 between the Company and Alis. Under the agreement, the
Company purchased Solutions for Communications and International ISDN, a French
corporation. The Company may pursue arbitration to enforce its rights under the
agreement.
SCHEDULE I
SCHEDULE OF PURCHASERS
Purchaser Commitment Number of Shares Number of Warrants
--------- ---------- ---------------- ------------------
Special Situations, LLC $1,800,000 450,000 450,000
Zeke, L.P. $ 900,000 225,000 225,000
Xxxxxxx X. Xxxxxxxx $ 250,000 62,500 62,500
Xxxxx X. Xxxxxxx $ 200,000 50,000 50,000
Peconic Fund Limited $ 900,000 225,000 225,000
Pennsylvania Merchant
Group, on behalf of
its institutional and
individual purchasers $4,554,000 1,138,500 1,138,500
Total $8,604,000 2,151,000 2,151,000
EXHIBIT A
FORM OF COMMON STOCK PURCHASE WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHWERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OF UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
ARIEL CORPORATION
COMMON STOCK PURCHASE WARRANT
EXPIRATION DATE: ________, 2005
Warrant to Purchase _______ Issued as of ________, 2000
Shares of Common Stock
For value received, ________________, or registered assigns, is entitled
to subscribe for and purchase from ARIEL CORPORATION, a Delaware corporation
(hereinafter called the "Company"), at the price of $____ per share, which
represents the closing price of the Company's common stock on February 23, 2000
plus a premium of 1/8 (the "Warrant Purchase Price"), at any time beginning six
months after the date hereof until 5:00 p.m. New York City time on __________,
2005 (the "Expiration Date"), up to that number of fully paid and non-assessable
shares of the Company's common stock, $.001 par value (the "Common Stock") as is
specified, above, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the holder hereof, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed if
required) at the office of any duly appointed transfer agent for the Common
Stock or at the office of the Company at 0000 Xxxxx 000, Xxxxxxxx, Xxx Xxxxxx
00000, and upon payment to the Company, or for the account of the Company, by
cash, or by means of transferring to the Company that number of shares of Common
Stock which, when multiplied by the difference between the closing price of the
Common Stock as reported by Nasdaq National Market on the trading day
immediately preceding exercise of this Warrant and the Warrant Purchase Price
equals, the aggregate Warrant Purchase Price for such shares. The Company agrees
that the shares so purchased shall be, and be deemed to be, issued to the holder
hereof as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares as aforesaid. Certificates for the shares so purchased shall be delivered
to the holder hereof within a reasonable time, not exceeding 10 business days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within such time.
2. Shares to be Issued; Reservation of Shares. The Company covenants and
agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon
A-1
issuance, be validly authorized, duly issued, fully paid and non-assessable. The
Company further covenants and agrees that, during the period within which the
rights represented by this Warrant may be exercised, the Company will at times
have authorized and reserved a sufficient number of shares of its Common Stock
to provide for the exercise of the rights represented by this Warrant, and will
at its expense expeditiously upon each exercise of this Warrant procure the
listing of the shares so acquired (subject to issuance or notice of issuance) on
the Nasdaq or stock exchanges, if any, on which the Common Stock may then be
listed.
3. Adjustments.
(a) Adjustments on the First Anniversary of Issuance. On the first
anniversary of the date hereof, if the average closing price on the Nasdaq
National Market for the five trading days immediately preceding the first
anniversary of the date hereof is lower than the Warrant Purchase Price, the
Warrant Purchase Price will be reset to such average closing price.
(b) Adjustments for Consolidations, Split-Ups. If the Company
shall at any time prior to the expiration of this Warrant subdivide its
outstanding securities for which this Warrant is exercisable, by split-up or
otherwise, or combine or consolidate by reclassification, reverse split or
otherwise such outstanding securities, the amount of securities issuable on the
exercise of the unexercised portion of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination or consolidation, and the
Warrant Purchase Price then applicable to securities covered by the unexercised
portion of this Warrant shall forthwith be proportionately decreased in the case
of a subdivision or stock dividend, or proportionately increased in the case of
a combination or consolidation.
(c) Reorganizations. If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of the Common Stock of the
Company immediately theretofore issuable upon exercise of the rights represented
hereby, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common stock immediately theretofore
issuable upon exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place; and in any such
case appropriate provisions shall be made with respect to the rights and
interests of each holder hereof to the end that the provisions hereof (including
without limitation provisions for adjustment of the Warrant Purchase Price and
of the number of shares issuable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the corporation (if other than
the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume (by a written instrument executed and mailed
by registered mail or delivered to each registered holder hereof at the last
address of such holder appearing on the books of the Company) the obligation of
the Company to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.
(d) Adjustments for Issuances of Stock at a Price below the
Current Market Price. If the Company shall at any time prior to the expiration
of this Warrant issue and sell shares of its Common
A-2
Stock or securities convertible into or exercisable for shares of Common Stock,
at a price lower than the average closing price for the Common Stock on the
Nasdaq National Market for the five trading days immediately preceding the date
of issuance and sale of such shares (the "Current Market Price"), then the
Warrant Purchase Price will be adjusted downward to equal the Current Market
Price.
(e) Exceptions to Adjustment Provisions. Without limiting any
other exception contained in this Section 3, and in addition thereto, no
adjustment need be made for (i) the issuance, conversion, exchange or exercise
of options to acquire shares of Common Stock by officers, directors, employees,
consultants, vendors, suppliers, dealers or other service providers of the
Company which are outstanding as of the date hereof or which are or may be
issuable pursuant to stock option or similar equity based plans approved by the
Board of Directors, (ii) options, warrants or other agreements or rights to
purchase capital stock of the Company issued and outstanding prior to the
Closing Date and any issuance of shares of Common Stock in connection therewith,
(iii) securities convertible into or exchangeable or exercisable for shares of
Common Stock outstanding as of the date hereof and any issuance of Common Stock
in connection therewith, (iv) rights to purchase shares of Common Stock in lieu
of cash dividends pursuant to a Company plan for reinvestment of dividends or
interest, (v) a change in the par value of shares of Common Stock (including a
change from par value to no par value or vice versa), (vi) sales of shares of
Common Stock pursuant to an employee stock purchase plan qualified under Section
423 of the Internal Revenue Code of 1986, as amended, approved by the Company's
Board of Directors where such sales are at prices at least equal to 85% of the
fair market value as applicable pursuant to Section 423 of the Internal Revenue
Code of 1986, as amended and (vii) shares of Common Stock issued in good faith
in connection with any business collaboration, including a merger or acquisition
where a company or business is merged with or acquired by the Company or any
subsidiary of the Company; provided, however, that, on the date of determination
of the number of shares of Common Stock to be so issued, the Board of Directors
shall have determined in good faith that the issue price of such shares shall be
at least equal to the current market value of such shares.
(f) Notice of Adjustment. Upon each adjustment of the
aforementioned adjustments, the Company shall give prompt written notice thereof
addressed to the registered holder hereof at the address of such holder as shown
on the records of the Company, which notice shall state the change, if any, in
the Warrant Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares of Common Stock (or, other securities
or assets) issuable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Any determination that the Company or the Board of
Directors makes pursuant to this Section 3 shall be conclusive.
4. Notice of Capital Changes. In case at any time: (a) the Company shall
pay any dividend payable in stock upon its Common Stock or make any distribution
to the holders of its Common Stock; (b) the Company shall offer for subscription
pro rata to the holders of its Common Stock any additional shares of stock of
any class or other rights; (c) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or (d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of such cases, the Company shall give to the holder of this Warrant: (i) at
least 10 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 20 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (i) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and such notice in
A-3
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall be given by first
class mail, postage prepaid, addressed to the holder of this Warrant at the
address of such holder as shown on the books of the Company.
5. Common Stock. As used herein in the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Warrants and shall also include any capital stock of any class of
the Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided that the shares
which may be purchased pursuant to this Warrant shall include only shares of the
class of Common Stock, $.001 par value referred to at the beginning of this
agreement or, in the case of any reorganization, reclassification,
consolidation, merger or sale of assets of the character referred to in
subparagraph 3(b) hereof, the stock, securities or assets provided for in such
subparagraph.
6. Transfer. Subject to the provisions of the Agreement, this Warrant
and all rights hereunder are transferable, in whole or in part, at the offices
referred to in paragraph 1 hereof by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed for transfer by the attachment of stock
powers or otherwise, shall be deemed negotiable and that when this Warrant is so
endorsed, the holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purposes and as
the person entitled to exercise the rights represented by this Warrant or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until each transfer on such books, the Company may treat
the registered holder hereof as the owner hereof for all purposes.
7. Exchange. This Warrant is exchangeable, upon its surrender at the
offices referred to in paragraph 1, for new Warrants of like tenor representing
in the aggregate the right to subscribe for and purchase the number of shares
which may be subscribed for and purchased hereunder, each of such new Warrants
to represent the right to subscribe for and purchase such number of shares as
shall be designated by the holder hereof at the time of such surrender. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity satisfactory to the Company,
or, in the case of any such mutilation, upon surrender or cancellation of this
Warrant, the Company will issue to the holder hereof a new warrant of like
tenor, in lieu of this Warrant, representing the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder.
8. Rights of the Holder. The Warrant holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Warrant holder are limited to those expressed in
the Warrant Certificate and the Common Stock Purchase Agreement and are not
enforceable against the Company except to the extent set forth herein.
A-4
IN WITNESS WHEREOF, Ariel Corporation has caused this Warrant to be
signed by its duly authorized officer as of the date first written above.
ARIEL CORPORATION
By:________________________________________
Xxxx X. Xxxxxxx, Vice President, Finance
A-5
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Signature Page - Provide the information regarding the Purchaser
requested on the signature page. The agreement must be executed by an
individual authorized to bind the Purchaser.
2. Exhibit B - Registration Statement Questionnaire: Provide the
information requested by the Registration Statement Questionnaire.
3. Exhibit C - Stock Certificate Questionnaire: Provide the information
requested by the Stock Certificate Questionnaire.
3. Exhibit D-1 and D-2 - Purchaser Certificate: Provide the information
requested by the Certificate for individual Purchasers or the
Certificate for Corporate, Partnership, Trust, Foundation and Joint
Purchasers, as applicable.
B. Return the properly completed and signed Common Stock Purchase Agreement
signature pages and Exhibits B, C and D-1 or D-2, as applicable, to:
Xx. Xxxxxxxx X. Xxxxxxxx, Esq.
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
C. Instructions regarding the transfer of funds for the purchase of Shares will
be sent by facsimile to the Purchaser by the Placement Agent at a later date.
D. Upon the resale of the Shares or the Warrant Shares by the Purchasers after
the Registration Statement covering the Shares is effective, as described in the
Purchase Agreement, the Purchaser:
1. must deliver a current prospectus of the Company to the buyer
(prospectuses must be obtained from the Company at the Purchaser's
request); and
2. must send a letter in the form of Exhibit E to the Company so that the
Shares or the Warrant Shares may be properly transferred.
B-1
EXHIBIT B
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Registration, please state your or your organization's name exactly as
it should appear in the "Selling Stockholder" section of the
Registration Statement:
___________________________________________________________________
2. Please provide the number of shares of the Company's Common Stock that
you or your organization will own immediately after Closing, including
those purchased by you or your organization pursuant to this Agreement
and those shares of Common Stock purchased by you or your organization
through other transactions:
___________________________________________________________________
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or
its affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
B-2
EXHIBIT C
CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5.3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares and Warrant are to be registered in
(this is the name that will appear on your stock or Warrant
certificate(s)). You may use a nominee name if appropriate:
_________________________________________________________________
2. The relationship between the Purchaser and the Registered Holder
listed in response to item 1 above:
_________________________________________________________________
3. The mailing address of the Registered Holder listed in response to
item 1 above:
_________________________________________________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to item 1 above:
X-0
XXXXXXX X-0
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchasers (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below
are true and accurate.
(a) The investor has been duly formed and is validly existing and has
full power and authority to invest in the Company. The person signing on behalf
of the undersigned has the authority to exercise and deliver the Common Stock
Purchase Agreement on behalf of the Purchaser, and to take other sections with
respect thereto.
(b) Indicate the form of entity of the undersigned:
________ Limited Partnership
________ General Partnership
________ Corporation
________ Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor _______________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(Continue on a separate piece of paper, if necessary.)
____________ Other Type of Trust (indicate type of trust and, for
trusts other than pension trust, name the guarantors and
beneficiaries:____________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(Continue on a separate piece of paper, if necessary.)
D-1-1
____________ Other form of organization (indicate form of
organization (_______)
(c) Indicate the approximate date the undersigned entity was
formed: ________
(d) In order for the Company to offer and sell the Shares in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor sums. Please initial each category
applicable to you as an investor in the Company.
____ 1. A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;
____ 2. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
____ 3. An insurance company as defined in Section 2(13) of the
Securities Act;
____ 4. As investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of that Act;
____ 5. A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
____ 6. A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;
____ 7. An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
____ 8. A private business development company as defined in
Section 202(a)(23) of the Investment Advisers Act of 1940;
____ 9. An organization described in Section 501(c)(3) of the Internal
Revenue Code, a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares, with
total assets in excess of $5,000,000;
____ 10. A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares, whose purchase is directed by
a sophisticated person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the merits and risks
of investing in the Company;
____ 11. An entity in which all of the equity owners qualify under any
of the above subparagraphs. If the undersigned belongs to this investor category
only, list the equity owners of the undersigned, and the investor category which
each such equity owner satisfies:
D-1-2
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(Combine on a separate piece of paper, if necessary.)
Dated: _________________________ , 2000
_______________________________________
Name of investors
_______________________________________
Signature and title of authorized
officer, partner or trustee
X-0-0
XXXXXXX X-0
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign the Certificate.
CERTIFICATE
I certify that the representations and responses below are
true and accurate:
In order for the Company to offer and sell the Shares in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
(1) A natural person whose net worth, either individually or jointly with
such person's spouse exceeds $1,000,000.
(2) A natural person who had an income in excess of $200,000, or joint
income with the person's spouse in excess of $300,000, in 1996, 1997 and 1998,
and reasonable expects to have individual income reaching the same level in
1999.
(3) An executive officer or director of the Company.
Dated: ___________________________
Name(s) of Purchaser
__________________________________
Signature
__________________________________
Signature
D-2-1
EXHIBIT E
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, ___________________ of _________________ hereby
certify that I am the Purchaser of the shares evidenced by the attached
certificate or I am the authorized representative of the Purchaser of the shares
evidenced by the attached certificate, and as such, have sold such shares on
_____________ in accordance with Registration Statement No. 333-_____ dated
______________ and the requirement of delivering a current prospectus by the
Company has been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or Institution):
____________________________________
Name of Individual
representing
Purchaser, if an Institution:
____________________________________
Title of Individual
representing
Purchaser, if an Institution:
____________________________________
Signature by:
Individual or Individual
representing Purchaser:
____________________________________
E-1
PURCHASER'S CERTIFICATE FOR
INSTITUTIONAL ACCREDITED INVESTOR
I, __________________, certify that I am_____________________ of
___________________ (the "Purchaser"), and that, as such, I am authorized to
execute this certificate on behalf of the Purchaser pursuant to Section 5.7 of
the Common Stock Purchase Agreement dated as of February 24, 2000 (the "Purchase
Agreement") among Ariel Corporation and the Purchasers party thereto, and DO
HEREBY FURTHER CERTIFY THAT:
1. as of the date hereof, the representations and warranties of the
Purchaser contained in the Purchase Agreement are true and correct in all
material respects, and
2. the Purchaser has complied in all material respects with all of the
agreements and satisfied all of the conditions set forth in the Purchase
Agreement.
IN WITNESS WHEREOF, I have executed this Purchaser's
Certificate on this 1st day of March, 2000.
By: ________________________________
Name:
Title:
PURCHASER'S CERTIFICATE FOR
INDIVIDUAL ACCREDITED INVESTOR
I, __________________, (the "Purchaser") pursuant to Section 5.7 of the
Common Stock Purchase Agreement dated as of February ___, 2000 (the "Purchase
Agreement") among Ariel Corporation and the Purchasers party thereto, and DO
HEREBY CERTIFY THAT:
1. as of the date hereof, the representations and warranties of the
Purchaser contained in the Purchase Agreement are true and correct in all
material respects, and
2. the Purchaser has complied in all material respects with all of the
agreements and satisfied all of the conditions set forth in the Purchase
Agreement.
IN WITNESS WHEREOF, I have executed this Purchaser's Certificate on this
___ day of February, 2000.
By: _______________________________
Name:
