EXHIBIT 10.9
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
September 30, 2004
Interwest Transfer Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
RE: ARIEL WAY, INC.
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), of even date herewith, by and between Ariel
Way, Inc., a Delaware corporation (the "Company"), and the Buyers set forth on
Schedule I attached thereto (collectively the "Buyer"), pursuant to which the
Company shall sell to the Buyer a minimum of Five Hundred Thousand Dollars
($500,000) of the Company's secured convertible debentures, which shall be
convertible into shares of the Company's common stock, par value $0.001 per
share (the "Common Stock"). The shares of Common Stock to be issued upon
conversion of the Convertible Debentures (the "Convertible Debentures") to be
issued pursuant to the Securities Purchase Agreement, including, without
limitation, any principal, interest or Liquidated Damages. All such Common Stock
to be issued are referred to as "Conversion Shares." Such Conversion Shares
shall also be deemed to include any Common Stock issued for Liquidated Damages
under the Investor Registration Rights Agreement of even date herewith between
the Company and the Buyer(s). This letter shall serve as our irrevocable
authorization and direction to you (provided you are the transfer agent of the
Company at such time) to issue the Conversion Shares in the event the Buyer has
elected to convert all or any portion of the Convertible Debentures, including,
without limitation, principal, interest or Liquidated Damages upon surrender to
you of a properly completed and duly executed Conversion Notice, in the form
attached hereto as Exhibit I, delivered on behalf of the Company by ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
Specifically, upon receipt by the Company or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. of a
copy of a Conversion Notice, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., on behalf of the Company,
shall as soon as practicable, but in no event later than one (1) Trading Day (as
defined below) after receipt of such Conversion Notice, send, via facsimile, a
Conversion Notice, which shall constitute an irrevocable instruction to you to
process such Conversion Notice in accordance with the terms of these
instructions. Upon your receipt of a copy of the executed Conversion Notice, you
shall use your best efforts to, within three (3) Trading Days following the date
of receipt of the Conversion Notice, (A) issue and surrender to a common carrier
for overnight delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Buyer or its designee, for the number
of shares of Common Stock to which the Buyer shall be entitled as set forth in
the Conversion Notice or (B) provided you are participating in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the
request of the Buyer, credit such aggregate number of shares of Common Stock to
which the Buyer shall be entitled to the Buyer's or its designee's balance
account with DTC through its Deposit Withdrawal At Custodian ("DWAC") system
provided the Buyer causes its bank or broker to initiate the DWAC transaction.
("Trading Day" shall mean any day on which the Nasdaq Market is open for
customary trading.)
The Company hereby confirms to you and the Buyer that certificates
representing the Conversion Shares shall not bear any legend restricting
transfer of the Conversion Shares thereby and should not be subject to any
stop-transfer restrictions and shall otherwise be freely transferable on the
books and records of the Company provided that the Company counsel delivers (i)
the Notice of Effectiveness set forth in Exhibit II attached hereto and (ii) an
opinion of counsel in the form set forth in Exhibit III attached hereto, and
that if the Conversion Shares are not registered for sale under the Securities
Act of 1933, as amended, then the certificates for the Conversion Shares shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
The Company and Interwest Transfer Co., Inc. hereby acknowledge that ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq. is general counsel to the Buyer, a partner of the general partner
of the Buyer and counsel to the Buyer in connection with the transactions
contemplated and referred herein. The Company and Corporate Stock Transfer
agrees that in the event of any dispute arising in connection with this
Agreement or otherwise in connection with any transaction or agreement
contemplated and referred herein, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. shall be permitted to
continue to represent the Investor(s) and the Company and/or and Corporate Stock
Transfer will not seek to disqualify such counsel.
The Company hereby confirms and Interwest Transfer Co., Inc. acknowledges
that in the event Counsel to the Company does not issue an opinion of counsel as
required to issue the Conversion Shares free of legend the Company authorizes
and Interwest Transfer Co., Inc will accept an opinion of Counsel from counsel
to the Buyer.
The Company herby confirms and Interwest Transfer Co., Inc. acknowledges
that while any portion of the Debenture remains unpaid and unconverted, the
Company and Interwest Transfer, Inc. shall not, without the prior consent of the
Holder, issue (i) any Common Stock or Preferred Stock without consideration or
for a consideration per share less than its fair market value determined
immediately prior to its issuance, (ii) issue any Preferred Stock, warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock without consideration or for a
consideration per share less than such Common Stock's fair market value
determined immediately prior to its issuance, (iii) issue any S-8 shares of the
Company's Common Stock.
2
The Company hereby confirms to you and the Buyer that no instructions
other than as contemplated herein will be given to you by the Company with
respect to the Conversion Shares. The Company hereby agrees that it shall not
replace Interwest Transfer Co., Inc as the Company's transfer agent without the
prior written consent of the Buyer.
Any attempt by you to resign as transfer agent hereunder shall not be
effective until such time as the Company provides to you written notice that a
suitable replacement has agreed to serve as transfer agent and to be bound by
the terms and conditions of these Irrevocable Transfer Agent Instructions.
The Company and Interwest Transfer Co., Inc hereby acknowledge and confirm
that complying with the terms of this Agreement shall be deemed to comply with,
and shall not be deemed to violate, any fiduciary responsibilities and duties
owed Interwest Transfer Co., Inc by to the Company.
The Company and Interwest Transfer Co., Inc acknowledge that the Buyer is
relying on the representations and covenants made by the Company and Interwest
Transfer Co., Inc hereunder and are a material inducement to the Buyer
purchasing convertible debentures under the Securities Purchase Agreement. The
Company and Interwest Transfer Co., Inc further acknowledge that without such
representations and covenants of the Company and Interwest Transfer Co., Inc
made hereunder, the Buyer would not enter into the Securities Purchase Agreement
and purchase convertible debentures pursuant thereto.
Each party hereto specifically acknowledges and agrees that in the event
of a breach or threatened breach by a party hereto of any provision hereof, the
Buyer will be irreparably damaged and that damages at law would be an inadequate
remedy if these Irrevocable Transfer Agent Instructions were not specifically
enforced. Therefore, in the event of a breach or threatened breach by a party
hereto, including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyer shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond or
other security, and/or to a decree for specific performance of the provisions of
these Irrevocable Transfer Agent Instructions.
* * * * *
3
IN WITNESS WHEREOF, the parties have caused this letter agreement
regarding Irrevocable Transfer Agent Instructions to be duly executed and
delivered as of the date first written above.
COMPANY:
ARIEL WAY, INC.
By: ________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
INTERWEST TRANSFER CO., INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
4
SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile
Name Signature Number of Buyer
----------------------------- ---------------------------------------- -----------------------------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
By: ____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Portfolio Manager
SCHEDULE I-1
EXHIBIT I
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF CONVERSION NOTICE
Reference is made to the Securities Purchase Agreement (the "Securities
Purchase Agreement") between Ariel Way, Inc. (the "Company"), and Cornell
Capital Partners, LP, dated September ____ 2004. In accordance with and pursuant
to the Securities Purchase Agreement, the undersigned hereby elects to convert
convertible debentures into shares of common stock, par value $0.001 per share
(the "Common Stock"), of the Company for the amount indicated below as of the
date specified below.
Conversion Date: _________________________
Amount to be converted: $________________________
Conversion Price: $________________________
Shares of Common Stock Issuable: _________________________
Amount of Debenture unconverted: $________________________
Amount of Interest Converted: $________________________
Conversion Price of Interest: $________________________
Shares of Common Stock Issuable: _________________________
Amount of Liquidated Damages: $________________________
Conversion Price of Liquidated Damages: $________________________
Shares of Common Stock Issuable: _________________________
Total Number of shares of Common Stock to be issued: _________________________
EXHIBIT I-1
Please issue the shares of Common Stock in the following name and to the
following address:
Issue to: _________________________
Authorized Signature: _________________________
Name: _________________________
Title: _________________________
Phone #: _________________________
Broker DTC Participant Code: _________________________
Account Number*: _________________________
* Note that receiving broker must initiate transaction on DWAC System.
2
EXHIBIT II
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
_________, 2004
Interwest Transfer Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
RE: ARIEL WAY, INC.
Ladies and Gentlemen:
We are counsel to Ariel Way, Inc., a Delaware corporation (the "Company"),
and have represented the Company in connection with that certain Securities
Purchase Agreement, dated as of September __, 2004 (the "Securities Purchase
Agreement"), entered into by and among the Company and the Buyers set forth on
Schedule I attached thereto (collectively the "Buyer") pursuant to which the
Company has agreed to sell to the Buyer a minimum of Five Hundred Thousand
Dollars ($500,000) of secured convertible debentures, which shall be convertible
into shares (the "Conversion Shares") of the Company's common stock, par value
$0.001 per share (the "Common Stock"), in accordance with the terms of the
Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement,
the Company also has entered into a Registration Rights Agreement, dated as of
September __, 2004, with the Buyer (the "Investor Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Conversion Shares under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, on _______, 2004, the
Company filed a Registration Statement (File No. ___-_________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the sale of the Conversion Shares.
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 5:00 P.M. on
__________, 2004 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 Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT II-1
The Buyer has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Conversion Shares.
Very truly yours,
[▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP]
By: _______________________________
EXHIBIT II-2
EXHIBIT III
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF OPINION
________________ 2004
VIA FACSIMILE AND REGULAR MAIL
Interwest Transfer Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
RE: ARIEL WAY, INC.
Ladies and Gentlemen:
We have acted as special counsel to Ariel Way, Inc. (the "Company"), in
connection with the registration of ___________shares (the "Shares") of its
common stock with the Securities and Exchange Commission (the "SEC"). We have
not acted as your counsel. This opinion is given at the request and with the
consent of the Company.
In rendering this opinion we have relied on the accuracy of the Company's
Registration Statement on Form SB-2, as amended (the "Registration Statement"),
filed by the Company with the SEC on _________ ___, 2004. The Company filed the
Registration Statement on behalf of certain selling stockholders (the "Selling
Stockholders"). This opinion relates solely to the Selling Shareholders listed
on Exhibit "A" hereto and number of Shares set forth opposite such Selling
Stockholders' names. The SEC declared the Registration Statement effective on
__________ ___, 2004.
We understand that the Selling Stockholders acquired the Shares in a
private offering exempt from registration under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Shareholders
is contained under the heading "Selling Stockholders" in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders. The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws of
the United States of America. We do not express any opinion concerning any law
of any state or other jurisdiction.
In rendering this opinion we have relied upon the accuracy of the
foregoing statements.
EXHIBIT III-1
Based on the foregoing, it is our opinion that the Shares have been
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and that ____________ may remove the restrictive legends
contained on the Shares. This opinion relates solely to the number of Shares set
forth opposite the Selling Stockholders listed on Exhibit "A" hereto.
This opinion is furnished to you specifically in connection with the
issuance of the Shares, and solely for your information and benefit. This letter
may not be relied upon by you in any other connection, and it may not be relied
upon by any other person or entity for any purpose without our prior written
consent. This opinion may not be assigned, quoted or used without our prior
written consent. The opinions set forth herein are rendered as of the date
hereof and we will not supplement this opinion with respect to changes in the
law or factual matters subsequent to the date hereof.
Very truly yours,
[▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP]
EXHIBIT III-2
EXHIBIT "A"
(LIST OF SELLING STOCKHOLDERS)
Name: No. of Shares:
-------------------------------------- --------------------------------------
EXHIBIT A-1