IRREVOCABLE TRANSFER AGENT INSTRUCTIONS February 28, 2006
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
February
28, 2006
|
Florida
Atlantic Stock Transfer, Inc.
|
|
▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇
|
|
Tamarac,
FL 33321
|
|
Attention:
Mr.
▇▇▇▇ ▇▇▇▇▇▇
|
RE:
ARIEL
WAY, INC.
Ladies
and Gentlemen:
Reference
is made to that certain Investment Agreement (the “Investment
Agreement”)
of
even date herewith by and between Ariel Way, Inc., a corporation organized
and
existing under the laws of the State of Florida (the “Company”)
and
▇▇▇▇▇▇▇▇▇▇ Equity Partners, Ltd and Cornell Capital Partners, LP
(individually referred to as “Cornell”
or
“▇▇▇▇▇▇▇▇▇▇”
and
individually referred to as the “Buyers”).
Pursuant to the Investment Agreement, the Company has sold to the Buyers, and
the Buyers have purchased from the Company Series A Preferred Shares (the
“Series
A Preferred Shares”)
in the
aggregate principal amount of One Million Six Hundred Four Thousand Nine Hundred
Sixty Six Thousand Dollars and Ninety Six Cents ($1,604,966.96) which is
convertible into shares of the Company’s common stock, no par value (the
“Common
Stock”),
at
the Buyers’ discretion. These instructions relate to the following stock or
proposed stock issuances or transfers:
| 1. |
one
hundred ninety four million five hundred thousand (194,500,000) Shares
of
Common Stock to be issued to the Buyers upon conversion of the Series
A
Preferred Shares (“Conversion
Shares”)
plus the shares of Common Stock to be issued to the Buyers upon conversion
of accrued interest and liquidated damages into Common Stock (the
“Interest
Shares”).
|
This
letter shall serve as our irrevocable authorization and direction to ▇▇▇▇▇▇▇▇
Stock Transfer Inc. (the “Transfer
Agent”)
to do
the following:
| 1. |
Conversion
Shares.
|
| a. |
Instructions
Applicable to Transfer Agent.
With respect to the Conversion Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares, and the Interest
Shares
to the Buyers from time to time upon delivery to the Transfer Agent
of a
properly completed and duly executed Conversion Notice (the “Conversion
Notice”)
in the form attached as Exhibit A to the Debentures, delivered to
the
Transfer Agent by the Escrow Agent on behalf of the Company. Upon
receipt
of a Conversion Notice the Transfer Agent shall within three (3)
Trading
Days thereafter (i) 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 designees,
for the
number of shares of Common Stock to which the Buyer shall be entitled
as
set forth in the Conversion Notice or (ii) provided the Transfer
Agent is
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock to
which
the Buyers shall be entitled to the Buyer’s or their designees’ 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. For purposes hereof “Trading
Day”
shall mean any day on which the Nasdaq Market is open for customary
trading.
|
| b. |
The
Company hereby confirms to the Transfer Agent and the Buyer that
certificates representing the Conversion Shares and the Warrant Shares
shall not bear any legend restricting transfer 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
counsel to the Company delivers (i) the Notice of Effectiveness set
forth
in Exhibit
I
attached hereto and (ii) an opinion of counsel in the form set forth
in
Exhibit
II
attached hereto, and that if the Conversion Shares, Warrant Shares
and the
Interest Shares are not registered for sale under the Securities
Act of
1933, as amended, then the certificates for the Conversion Shares,
Warrant
Shares and Interest 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.”
| c. |
In
the event that counsel to the Company fails or refuses to render
an
opinion as required to issue the Conversion Shares in accordance
with the
preceding paragraph (either with or without restrictive legends,
as
applicable), then the Company irrevocably and expressly authorizes
counsel
to the Buyer to render such opinion. The Transfer Agent shall accept
and
be entitled to rely on such opinion for the purposes of issuing the
Conversion Shares.
|
2
| d. |
Instructions
Applicable to Escrow Agent.
Upon the Escrow Agent’s receipt of a properly completed Conversion Notice
or Exercise Notice and the Aggregate Exercise Price (as defined in
the
Warrant), the Escrow Agent shall, within one (1) Trading Day thereafter,
send to the Transfer Agent the Conversion Notice or Exercise Notice
as the
case may be, which shall constitute an irrevocable instruction to
the
Transfer Agent to process such Conversion Notice or Exercise Notice
in
accordance with the terms of these
instructions.
|
| 2. |
All
Shares.
|
| a. |
The
Transfer Agent shall reserve for issuance to the Buyers a minimum
of one
hundred ninety four million five hundred thousand (194,500,000) Conversion
Shares. All such shares shall remain in reserve with the Transfer
Agent
until the Buyers provides the Transfer Agent instructions that the
shares
or any part of them shall be taken out of reserve and shall no longer
be
subject to the terms of these instructions.
|
| b. |
The
Transfer Agent shall rely exclusively on the Conversion Notice and
shall
have no liability for relying on such instructions. Any Conversion
Notice
delivered hereunder shall constitute an irrevocable instruction to
the
Transfer Agent to process such notice or notices in accordance with
the
terms thereof. Such notice or notices may be transmitted to the Transfer
Agent by facsimile or any commercially reasonable
method.
|
| c. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
no
instructions other than as contemplated herein will be given to Transfer
Agent by the Company with respect to the matters referenced herein.
The
Company hereby authorizes the Transfer Agent, and the Transfer Agent
shall
be obligated, to disregard any contrary instructions received by
or on
behalf of the Company.
|
Certain
Notice Regarding the Escrow Agent.
The
Company and the Transfer Agent hereby acknowledge that the Escrow Agent is
general counsel to the Buyers, a partner of the general partner of the Buyers
and counsel to the Buyers in connection with the transactions contemplated
and
referred herein. The Company and the Transfer Agent agree 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, the Escrow
Agent shall be permitted to continue to represent the Buyers and neither the
Company nor the Transfer Agent will seek to disqualify such
counsel.
3
The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the
Buyers.
Any
attempt by Transfer Agent to resign as the Company’s transfer agent hereunder
shall not be effective until such time as the Company provides to the Transfer
Agent 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 herby confirms and the Transfer Agent acknowledges that while any
portion of the Series A
Preferred Shares remain unpaid and unconverted the Company and the
Transfer Agent
shall
not, without the prior consent of the Buyers, (i) issue any Common Stock or
Preferred Stock without consideration or for a consideration per share less
than
closing bid price 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 the closing
bid
price of the Common Stock determined immediately prior to its issuance,
(iii)
issue any S-8
shares of the Company’s Common Stock.
The
Company and the Transfer Agent hereby acknowledge and confirm that complying
with the terms of this Agreement does not and shall not prohibit the Transfer
Agent from satisfying any and all fiduciary responsibilities and duties it
may
owe to the Company.
The
Company and the Transfer Agent acknowledge that the Buyers is relying on the
representations and covenants made by the Company and the Transfer Agent
hereunder and are a material inducement to the Buyers purchasing convertible
debentures under the Securities Purchase Agreement. The Company and the Transfer
Agent further acknowledge that without such representations and covenants of
the
Company and the Transfer Agent made hereunder, the Buyers would not purchase
the
Series A_ Preferred Shares.
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 Buyers
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 Buyers 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.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
4
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: President
|
||
|
CORNELL
CAPITAL PARTNERS, LP
|
||
| |
|
|
| By: |
Yorkville
Advisors, LLC
|
|
| Its: |
General
Partner
|
|
| By: | ||
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇
|
||
|
Its:
President and Portfolio
Manager |
||
|
▇▇▇▇▇▇▇▇▇▇
EQUITY PARTNERS, LTD.
|
||
| |
|
|
| By: |
Yorkville
Advisors, LLC
|
|
| Its: |
General
Partner
|
|
| By: | ||
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
|
||
|
Its:
Portfolio Manager
|
||
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
|
||
| Florida Atlantic Stock Transfer, Inc |
| By: | |||
| Name: | |||
| Title: |
5
SCHEDULE
I-1
EXHIBIT
I
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_________,
2006
________
Attention:
RE: ARIEL
WAY, INC.
Ladies
and Gentlemen:
We
are
counsel to Ariel Way, Inc., (the “Company”),
and
have represented the Company in connection with that certain Investment
Agreement, dated as of February 28, 2006 (the “Investment
Agreement”),
entered into by and among the Company and the Buyers set forth on Schedule
I
attached thereto (collectively the “Buyers”)
pursuant to which the Company has agreed to sell to the Buyers up to ________
of
Series A Preferred Shares, which shall be convertible into shares (the
“Conversion
Shares”)
of the
Company’s common stock, par value $.001 per share (the “Common
Stock”),
in
accordance with the terms of the Investment Agreement. Pursuant to the
Investment Agreement, the Company also has entered into a Registration Rights
Agreement, dated as of February 28, 2006, with the Buyers (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 _______, 2006, 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 the Transfer Agent 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 ____ P.M.
on __________, 2006 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.
The
Buyers 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, | ||
| |
|
|
| By: | ||
|
|
||
EXHIBIT
I-1
EXHIBIT
II
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF OPINION
VIA
FACSIMILE AND REGULAR MAIL
________
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 _________ ___, 2006. 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 __________ ___,
2006.
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
II-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 Transfer Agent specifically in connection with the
sale
or transfer of the Shares, and solely for your information and benefit. This
letter may not be relied upon by Transfer Agent 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,
EXHIBIT
II-2
EXHIBIT
A
(LIST
OF SELLING STOCKHOLDERS)
|
Name:
|
No.
of Shares:
|
|
EXHIBIT
A