INVESTOR REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of February 28, 2006, by and among ARIEL
WAY, INC. a
corporation organized and existing under the laws of the State of Florida (the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP,
a
Delaware limited partnership and XXXXXXXXXX
EQUITY PARTNERS, LP,
a
Cayman Island exempted company ( individually referred to as “Cornell”
and
“Xxxxxxxxxx”
collectively referred to as the “Investors”).
WHEREAS:
A. The
parties hereto have entered into an Investment Agreement (the “Investment
Agreement”)
of
even date herewith.
B. This
Agreement is a condition precedent of the Investment Agreement.
C. To
induce
the Investors to execute and deliver the Investment Agreement, the Company
has
agreed to provide certain Investor Registration Rights under the Securities
Act
of 1933, as amended, and the rules and regulations there under, or any similar
successor statute (collectively, the “1933
Act”),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Person”
means
a
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(b) “Register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the “SEC”).
(c) “Registrable
Securities”
means
the shares of Common Stock issuable to the Investors upon conversion of the
Series A Preferred Shares (the “Series
A Preferred Shares”)
pursuant to the Investment Agreement, .
(d) “Registration
Statement”
means
a
registration statement under the 1933 Act which covers the Registrable
Securities.
2. REGISTRATION.
(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare and
file, no later than thirty (30) days from the date demanded by the Buyers (the
“Scheduled
Filing Deadline”),
with
the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
then
eligible, on Form S-3) under the 1933 Act (the “Initial
Registration Statement”)
for
the registration for the resale by the Investors one hundred ninety four million
five hundred thousand (194,500,000) shares of the Company’s Common Stock to be
issued upon conversion of the Series A Preferred Shares issued pursuant to
the
Investment Agreement,.
(b) The
Company shall cause the Registration Statement to remain effective until all
of
the Registrable Securities have been sold.
(c) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days after
the
filing thereof (the “Scheduled
Effective Deadline”)
and
(ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this Agreement. It shall
be an event of default hereunder if the Initial Registration Statement is not
declared effective by the SEC within ninety (90) days after filing
thereof.
(d) Failure
to File or Obtain Effectiveness of the Registration Statement.
In the
event the Registration Statement is not filed by the Scheduled Filing Deadline
or is not declared effective by the SEC on or before the Scheduled Effective
Deadline, or if after the Registration Statement has been declared effective
by
the SEC, sales cannot be made pursuant to the Registration Statement (whether
because of a failure to keep the Registration Statement effective, failure
to
disclose such information as is necessary for sales to be made pursuant to
the
Registration Statement, failure to register sufficient shares of Common Stock
or
otherwise in addition to filing a new registration statement or post effective
amendment within thirty (30) calendar days of determining that there are
insufficient shares of Common Stock registered), then as partial relief for
the
damages to any holder of Registrable Securities by reason of any such delay
in
or reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies at law or in equity), the
Company will pay as liquidated damages (the “Liquidated
Damages”)
to the
holder, at the holder’s option, either a cash amount or shares of the Company’s
Common Stock equal to two percent (2%) of the Liquidation Amount (as defined
in
the Certificate of Designation of Series A Convertible Preferred Shares)
outstanding as Liquidated Damages for each thirty (30) day period or any part
thereof after the Scheduled Filing Deadline or the Scheduled Effective Deadline
as the case may be. Any Liquidated Damages payable hereunder shall not limit,
prohibit or preclude the Investors from seeking any other remedy available
to it
under contract, at law or in equity. The Company shall pay the Investors the
Liquidated Damages within three (3) business days of the Investors making
written demand.
(e) Liquidated
Damages.
The
Company and the Investors hereto acknowledge and agree that the sums payable
under subsection 2(c) above shall constitute liquidated damages and not
penalties and are in addition to all other rights of the Investors, including
the right to call a default. The parties further acknowledge that (i) the amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (ii) the amounts specified in such subsections bear a
reasonable relationship to, and are not plainly or grossly disproportionate
to
the probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investors reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investors are
sophisticated business parties and have been represented by sophisticated and
able legal counsel and negotiated this Agreement at arm’s length.
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(f) Insufficient
Number of Registered Shares.
In the
event that the number of registered shares is insufficient to effectuate full
conversion of the Series A Preferred Shares into Common Stock of the Company,
the Company shall within thirty (30) calendar days of the issuance of all of
the
Registrable Securities (the “Subsequent
Scheduled Filing Deadline”)
the
Company shall prepare and file with the SEC a registration statement on Form
S-1
or SB-2 (or, if the Company is then eligible, on Form S-3) under the 1933 Act
(the “Subsequent
Registration Statement”)
for
the registration for the resale by the Investors of the shares of the Company’s
Common Stock to be issued upon conversion of the Series A Preferred Shares
issued pursuant to the Investment Agreement an amount equal to three (3) times
the number of Shares of the Company’s Common Stock necessary to effectuate
conversions of the then outstanding and unconverted Series A Preferred Shares.
The Company shall cause the Registration Statement to remain effective until
all
of the Registrable Securities have been sold. The Company shall use its best
efforts (i) to have the Registration Statement declared effective by the SEC
no
later than ninety (90) days after the filing thereof (the “Subsequent
Scheduled Effective Deadline”)
and
(ii) to insure that the Registration Statement and any Subsequent Registration
Statement remains in effect until all of the Registrable Securities have been
sold, subject to the terms and conditions of this Agreement. It shall be an
event of default hereunder if the Registration Statement or any Subsequent
Registration Statement is not declared effective by the SEC within ninety (90)
days after filing thereof.
3. RELATED
OBLIGATIONS.
(a) The
Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Investors shall have sold
all the Registrable Securities covered by such Registration Statement (the
“Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein, in light of the circumstances in
which
they were made, not misleading.
(b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company’s filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under
the
Securities Exchange Act of 1934, as amended (the “1934
Act”),
the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.
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(c) The
Company shall furnish to the Investors whose Registrable Securities are included
in any Registration Statement, without charge, (i) at least one (1) copy of
such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) ten (10) copies of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of
copies as such Investors may reasonably request) and (iii) such other documents
as the Investors may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such the
Investors.
(d) The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities
or
“blue sky” laws of such jurisdictions in the United States as the Investors
reasonably request, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be
required in connection therewith or as a condition thereto to (w) make any
change to its certificate of incorporation or by-laws, (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investors who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
(e) As
promptly as practicable after becoming aware of such event or development,
the
Company shall notify each Investor in writing of the happening of any event
as a
result of which the prospectus included in a Registration Statement, as then
in
effect, includes an untrue statement of a material fact or omission to state
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 (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor. The Company
shall also promptly notify each Investor in writing (i) when a prospectus or
any
prospectus supplement or post-effective amendment has been filed, and when
a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the
SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
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(f) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at
the earliest possible moment and to notify each Investors who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) At
the
reasonable request of any Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as
is
customarily given in an underwritten public offering, addressed to the
Investors.
(h) Upon
five
(5) days prior written notice by the Investors, which notice shall not be given
more than one (1) time per calendar quarter, the Company shall make available
for inspection by (i) any Investor and (ii) one (1) firm of accountants or
other agents retained by the Investors (collectively, the “Inspectors”)
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree,
and
each Investor hereby agrees, to hold in strict confidence and shall not make
any
disclosure (except to an Investor) or use any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c)
the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector and the Investors have knowledge. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
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(i) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
(j) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) to be listed on each
securities exchange on which securities of the same class or series issued
by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) the
inclusion for quotation on the National Association of Securities Dealers,
Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, to facilitate the timely preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
(l) The
Company shall use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by
such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
(m) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve (12) month period beginning
not
later than the first day of the Company’s fiscal quarter next following the
effective date of the Registration Statement.
(n) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
(o) Within
two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
II.
(p) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
6
4. OBLIGATIONS
OF THE INVESTORS.
The
Investors agree that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Investors will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investors’ receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt
of
notice that no supplement or amendment is required. Notwithstanding anything
to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Investment Agreement in connection with any
sale of Registrable Securities with respect to which an Investor has entered
into a contract for sale prior to the Investors’s receipt of a notice from the
Company of the happening of any event of the kind described in Section 3(f)
or
the first sentence of 3(e) and for which the Investors have not yet
settled.
5. EXPENSES
OF REGISTRATION.
All
expenses incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers, legal and accounting fees shall
be
paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a Registration Statement
under this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, their respective general partners,
the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act
or
the 1934 Act (each, an “Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation there under relating to the
offer or sale of the Registrable Securities pursuant to a Registration Statement
(the matters in the foregoing clauses (i) through (iii) being, collectively,
“Violations”).
The
Company shall reimburse the Investors and each such controlling person promptly
as such expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not
be
available to the extent such Claim is based on a failure of the Investors to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant
to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Notwithstanding
anything to the contrary herein or in any other agreement entered into between
the Company and the Investors, the Company acknowledges and agrees that it
is
solely responsible and shall indemnify each Indemnified Person for the contents
of any registration statement, prospectus or other filing made with the SEC
or
otherwise used in the offering of the Company’s securities (except as such
disclosure relates solely to the Investors and then only to the extent that
such
disclosure conforms with information furnished in writing by the Investors
to
the Company), even if the Investors or their agents as an accommodation to
the
Company participate or assist in the preparation of such registration statement,
prospectus or other SEC filing. The Company shall retain its own legal counsel
to review, edit, confirm and do all things such counsel deems necessary or
desirable to such registration statement, prospectus or other SEC filing to
ensure that it does not contain an untrue statement or alleged untrue statement
of material fact or omit or alleged to omit a material fact necessary to make
the statements made therein, in light of the circumstances under which the
statements were made, not misleading. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors.
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(b) In
connection with a Registration Statement, each Investor agrees to severally
and
not jointly indemnify, hold harmless and defend, to the same extent and in
the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person,
if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act
(each an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or is based upon any Violation, in each case
to
the extent, and only to the extent, that such Violation occurs in reliance
upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investors shall be liable under this Section 6(b) for only
that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investor . Notwithstanding anything to the contrary contained herein,
the
indemnification agreement contained in this Section 6(b) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the prospectus was corrected
and such new prospectus was delivered to each Investor prior to such Investor’s
use of the prospectus to which the Claim relates.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not
more than one (1) counsel for such Indemnified Person or Indemnified Party
to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any
settlement of any action, claim or proceeding effected without its prior written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for
which indemnification has been made. The failure to deliver written notice
to
the indemnifying party within a reasonable time of the commencement of any
such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
8
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from
any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any similar rule or regulation of the SEC that may at
any
time permit the Investors to sell securities of the Company to the public
without registration (“Rule
144”)
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Investment Agreement)
and the filing of such reports and other documents as are required by the
applicable provisions of Rule 144; and
9
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
a
copy of the most recent annual or quarterly report of the Company and such
other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. AMENDMENT
OF INVESTOR REGISTRATION RIGHTS .
Provisions
of this Agreement may be amended and the observance thereof 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 Investors
who then hold at least two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be
binding upon each Investor and the Company. No such amendment shall be effective
to the extent that it applies to fewer than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of
this
Agreement unless the same consideration also is offered to all of the parties
to
this Agreement.
10. MISCELLANEOUS.
(a) A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two (2) or more Persons
with
respect to the same Registrable Securities, the Company shall act upon the
basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
10
|
If
to Cornell, to:
|
Cornell
Capital Partners, LP
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxx Xxxxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
If
to Xxxxxxxxxx, to:
|
Xxxxxxxxxx
Equity Partners, Ltd.
|
|
0000
Xxxxxxxxx 000xx
Xxxxxx - Xxxxxxxxx XX
|
|
|
Xxxxxxxx,
XX 00000
|
|
|
Attention: Xxxxxx
X. Press
|
|
|
Portfolio
Manager
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile:
(000)
000-0000
|
|
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
If
to the Company, to:
|
Ariel
Way, Inc.
|
|
0000
Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
|
|
|
Xxxxxx,
XX 00000
|
|
|
Attention: Xxxx
Xxxxxx - Chief Executive Officer
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
|
|
|
With
a copy to:
|
000
Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
|
|
Xxxxx,
XX 00000-0000
|
|
|
Attention: Xxxxxxx
X. Xxxxxx, Esq.
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
Xxxxxx
Xxxx & Xxxxxx, LLP
|
|
|
0000
Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
|
|
|
Xxxxxx,
XX 00000
|
|
|
Attention: Xxx
Xxxxxxxxxx, Esq.
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
11
If
to the
Investors, to their address’ and facsimile numbers on the Schedule of Investors
attached hereto, with copies to such Investors’ representatives as set forth on
the Schedule of Investors or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to
the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(d) The
laws
of the State of New Jersey shall govern all issues concerning the relative
rights of the Company and the Investors as its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
of the Superior Courts of the State of New Jersey, sitting in Xxxxxx County,
New
Jersey and federal courts for the District of New Jersey sitting Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any
right to serve process in any manner permitted by law. If any provision of
this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
12
(e) This
Agreement, the Irrevocable Transfer Agent Instructions, the Investment
Agreement, and related documents of even date hereof by and among the Company,
the Investors constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to
herein and therein. This Agreement, the Irrevocable Transfer Agent Instructions,
the Investment Agreement and related documents supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(f) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
(j) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
[REMIANDER
OF PAGE INTENTIONALL LEFT BLANK]
13
IN
WITNESS WHEREOF,
the
parties have caused this Investor Registration Rights Agreement to be duly
executed as of day and year first above written.
|
COMPANY:
|
||
| |
|
|
| By: | ||
|
Name Xxxx
Xxxxxx
|
||
|
Title: Chief
Executive Officer
|
||
|
CORNELL
CAPITAL PARTNERS, LP
|
||
| |
|
|
| By: |
Yorkville
Advisors, LLC
|
|
| Its: |
General
Partner
|
|
| By: | ||
|
Name:
Xxxx X. Xxxxxx
|
||
|
Its:
President and Portfolio Manager
|
||
|
XXXXXXXXXX
EQUITY PARTNERS, LTD.
|
||
| |
|
|
| By: |
Yorkville
Advisors, LLC
|
|
| Its: |
General
Partner
|
|
| By: | ||
|
Name:
Xxxxxx X. Press
|
||
|
Its:
Portfolio Manager
|
||
14
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
INSERT
Attention:
|
Re:
|
ARIEL
WAY, INC.
|
Ladies
and Gentlemen:
We
are
counsel to Ariel Way, Inc., a corporation organized and existing under the
laws
of the State of Florida (the “Company”),
and
have represented the Company in connection with that certain Investment
Agreement (the “Investment
Agreement”)
entered into by and among the Company and the Investors named therein
(collectively, the “Investors”)
pursuant to which the Company issued to the Investors shares of its Series
A
Preferred Shares, no par value per share (the “Series
A Preferred Shares”).
Pursuant to the Investment Agreement, the Company also has entered into a
Investor Registration Rights Agreement with the Investors (the “Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Investor Registration Rights
Agreement) under the Securities Act of 1933, as amended (the “1933
Act”).
In
connection with the Company’s obligations under the Investor Registration Rights
Agreement, on ____________ ____, the Company filed a Registration Statement
on
Form ________ (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange SEC (the “SEC”)
relating to the Registrable Securities which names each of the Investors as
a
selling stockholder there under.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.
| Very truly yours, | ||
| [COMPANY COUNSEL] | ||
| |
|
|
| By: | ||
|
|
||
| cc: [LIST NAMES OF INVESTORS] | ||
