As filed with the Securities and Exchange Commission on August 6, 1997
Registration No. 333-31295
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ARI Network Services, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1388360
(State or other (I.R.S. Employer
jurisdiction of Identification No.
incorporation or
organization)
330 East Kilbourn Avenue
Milwaukee, Wisconsin 53202-3166
(414) 278-7676
(Address and telephone number of principal executive offices)
Mark L. Koczela Copies to:
330 East Kilbourn Avenue Larry D. Lieberman
Milwaukee, Wisconsin 53202-3166 Godfrey & Kahn, S.C.
(414) 278-7676 780 North Water Street
(Name, address, including zip Milwaukee, Wisconsin 53202
code, and telephone number, (414) 273-3500
including area code, of agent
for service)
Approximate date of commencement of proposed sale to
the public: As soon as practicable after the effective
date of this Registration Statement.
If any of the securities being registered on this Form
are being offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933,
check the following box. [X]
If the registrant elects to deliver its latest annual
report to security holders, or a complete and legible
facsimile thereof, pursuant to Item 11(a)(1) of this
Form, check the following box. [X]
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list
the Securities Act registration statement number of the
earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check
the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states that
this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Registration Statement Item and Heading
Location in Prospectus
1.Forepart of the Registration Statement
and Outside Front Cover Page of Prospectus Facing Page of
Registration
Statement;
Cross Reference
Sheet; Cover
Page of
Prospectus
2.Inside Front and Outside Back Cover
Pages of Prospectus Available
Information;
Incorporation
of Certain
Documents by
Reference;
Table of
Contents
3.Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges The Company;
Risk Factors
4.Use of Proceeds Use of Proceeds
5.Determination of Offering Price Not Applicable
6.Dilution Not Applicable
7.Selling Security Holders Not Applicable
8.Plan of Distribution Cover Page of
Prospectus
9.Description of Securities to be
Registered Description of
Common Stock
10.Interests of Named Experts
and Counsel Legal Matters
11.Information With Respect to the
Registrant The Company;
Incorporation
of Certain
Documents by
Reference
12.Incorporation of Certain Information
by Reference Incorporation
of Certain
Documents by
Reference
13.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Not Applicable
<PAGE>
PROSPECTUS
2,000,000 Shares
ARI Network Services, Inc.
Common Stock
This Prospectus relates to up to 2,000,000 shares
of common stock, $.001 par value per share (the "Common
Stock"), of ARI Network Services, Inc. (the "Company"
or "ARI"). Offers to purchase the Common Stock are
being solicited on a continuous basis on behalf of the
Company by certain of its directors or officers. No
additional compensation will be paid to such persons,
directly or indirectly, for their sales efforts. The
Common Stock will be offered at $1.00 per share and may
be sold from time to time in one or more transactions;
provided, however, that the Company reserves the right
to change the offering price. Any change in the
offering price will be reflected in a supplement or
amendment to this Prospectus. The Company reserves the
right to withdraw, cancel or modify the offering
contemplated hereby without notice. No termination date
for the offering of the Common Stock has been
established and no minimum amount of Common Stock is
required to be sold. The Company may reject any
subscription in whole or in part. Funds received will
not be held pursuant to any escrow, trust or similar
arrangement. The Company will receive all of the
proceeds from the sale of the shares of Common Stock
offered hereby, if any. The Company estimates the
total expenses of issuance and distribution to be
$40,000.
The Common Stock is quoted on the National Market
System of the National Association of Securities
Dealers Automated Quotation System (the "NASDAQ/NMS")
under the symbol "ARIS". On August 4, 1997, the last
sale price as reported on the NASDAQ/NMS was $1.00 per
share.
The 2,000,000 shares of Common Stock offered
hereby will represent 500,000 shares after giving
effect to the Company's proposed one-for-four reverse
stock split. See "Recent Developments."
See "Risk Factors" on page 3 for a discussion of
material risks which should be considered by
prospective purchasers of the Common Stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 6, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information
statements and other information with the Securities
and Exchange Commission (the "Commission"). The
Company has filed with the Commission a Registration
Statement under the Securities Act of 1933, as amended
("Securities Act") with respect to the Common Stock
offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement
and exhibits thereto, or amendments thereto, to which
reference is hereby made. Such reports, proxy and
information statements, Registration Statement and
exhibits and other information filed by the Company may
be inspected and, upon payment of prescribed fees,
copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission at 7 World Trade
Center, 7th Floor, New York, New York 10048, and at
Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials may
be obtained from the website that the Commission
maintains at http://www.see.gov.
No person has been authorized to give any
information or to make on behalf of the Company any
representations, other than those contained in this
Prospectus, in connection with the offer made hereby,
and, if given or made, such other information or
representation must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an
offer to buy, any security other than the securities
offered hereby, or an offer to sell or solicitation of
any offer to buy such securities in any jurisdiction in
which such offer or solicitation is not qualified or to
any person to whom such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances
create any implication that there has been no change in
the affairs of the Company since the date hereof or
that the information contained or incorporated by
reference herein is correct as of any date subsequent
to the date hereof.
TABLE OF CONTENTS
Page
Available Information 2
Risk Factors 3
Recent Developments 6
Incorporation of Certain Documents by Reference 8
The Company 9
Use of Proceeds 10
Description of Common Stock 10
Legal Matters 11
Experts 11
<PAGE>
RISK FACTORS
An investment in the Common Stock being offered
hereunder involves a high degree of risk. The
following factors, in addition to those discussed or
incorporated elsewhere in this Prospectus, should be
considered carefully in evaluating an investment in the
Common Stock.
CAUTIONARY NOTE: This Prospectus, certain of the
documents incorporated herein by reference, and other
written materials, future filings, releases and oral
statements issued by or on behalf of the Company
contain certain forward-looking statements, including,
but not limited to, statements about the future
performance of the Company and the Company's plans,
objectives, expectations, or intentions. These forward-
looking statements are based on management's
assumptions and beliefs in light of information
currently available to it and are subject to risks and
uncertainties. The Company's actual results may differ
significantly and materially from those projected or
suggested in the forward-looking statements. Factors
that might cause such differences to occur include, but
are not limited to, the Risk Factors described below.
Losses and Accumulated Deficit
Since its organization in 1981, the Company has
experienced net losses in each fiscal year resulting in
an accumulated deficit of $73,644,000 at April 30,
1997. For the years ended July 31, 1996, 1995, and
1994, the Company experienced net losses of $4,206,000,
$4,339,000 and $15,089,000, respectively. For the nine
months ended April 30, 1997, the Company experienced a
net loss of $2,989,000. The Company will require
significant increases in revenues to cover fixed
operating costs and to achieve a profitable level of
operations, and there can be no assurance as to when or
if such increases in revenues will be achieved. The
Company does not anticipate reporting net income for
the fiscal year ending July 31, 1998 and there can be
no assurance that profitability will be achieved
thereafter.
Negative Cash Flow
The Company continues to experience negative cash
flow from operations. For the fiscal years ended July
31, 1996, 1995 and 1994, net cash used in operating
activities were $2,518,000, $2,230,000 and $3,205,000,
respectively. For the nine months ended April 30,
1997, net cash used in operating activities was
$1,322,000. Management's goal for the Company is to
achieve positive cash flow from operations (excluding
changes in working capital items) in the quarter ended
July 31, 1998, but no assurances can be given that the
Company will be able to do so.
Additional Financing Requirements and Access to Capital
The Company's substantial historical network
development costs and negative cash flow from
operations have been funded principally from the sale
of securities. The Company's current line of credit
with WITECH Corporation ("WITECH") expires on September
30, 1997 with respect
<PAGE>
to $500,000 and on December 31,
1997 with respect to the $2.0 million balance. There
can be no assurance as to the Company's ability to
replace such line of credit. On July 28, 1997, WITECH
purchased $2.0 million of Series A Preferred Stock of
the Company, the full proceeds of which were used to
reduce borrowings under the line of credit. See
"Recent Developments." The Company will require
additional financing in order to meet its requirements
for operations and development activities during fiscal
1998, although there can also be no assurance that this
offering will raise any proceeds for the Company.
WITECH has previously indicated that it would
financially support the Company through fiscal 1997 and
has informally indicated its willingness to consider
purchasing a portion of the Common Stock offered
hereby, but no commitments have been made and no
assurance can be given that WITECH will purchase any of
the Common Stock. See Note 9 to the Company's
Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996. If this offering is
unsuccessful and additional financial support from
WITECH or other sources is unavailable, the Company
will be materially and adversely affected.
Competition
The network services industry is highly
competitive. Several companies, including GE
Information Services, AT&T, MCI, EDS, BT Tymnet, Inc.,
Sterling Commerce, Inc., Advantis Inc., Dun &
Bradstreet, Harbinger, Inc., and others offer
electronic commerce services that are similar to those
offered by the Company. There are also many companies,
including Sales Kit Software Corporation, Inc.,
Saratoga Systems, Inc. and Aurum Software, Inc. that
market sales force automation software that competes
with the Company's sales force automation products.
Many of these competing companies have substantially
greater resources than ARI. Sterling Commerce, Inc.'s
network service is established in the human
pharmaceutical sector, in which manufacturers overlap
with Animal Health product manufacturers. Sterling
Commerce, Inc. provides certain sales reporting
services to these companies, including services that
report sales activity on some Animal Health drugs.
Sales Technologies, Inc. sells its sales force
automation software to the pharmaceutical industry,
which overlaps with Animal Health. Certain
manufacturers of agricultural equipment operate their
own private computer networks for transacting business
with their dealers. Briggs and Stratton, through its
wholly-owned subsidiary, Powercomm 2000, offers a
competing network to dealers and equipment
manufacturers in the outdoor power equipment industry.
It is possible that companies within the Company's
target markets may develop and implement private
computer-to-computer networks, thereby reducing the
demand for the Company's network services. Powercomm
2000, as well as other companies such as Bell & Howell,
also offer electronic parts catalogs competitive to the
Company's products. The pace of technological change,
such as developments in Internet commerce, is so great
that new competitors may emerge quickly based on new
technologies.
New Product Development and Technological Change
The market for the Company's products and services
is characterized by technological advances, changes in
customer requirements and frequent new product
introductions and
<PAGE>
enhancements. The Company's growth
and future financial performance will depend in part
upon its ability to enhance existing products and
services and develop and introduce new products and
services that meet technological advances, respond to
evolving customer requirements, respond to competitive
products or announcements and achieve market
acceptance. There can be no assurance that the Company
will be successful in developing and marketing products
or services on a timely basis, or that its products and
services will adequately address the changing needs of
the marketplace and achieve market acceptance. The
electronic commerce industry in general is also
characterized by evolving standards and technology.
The Company's ability to anticipate or guide these
standards in its targeted sectors and to fund advances
in computer and telecommunications technology and
software will be a significant factor in the Company's
ability to grow and remain competitive.
Potential Fluctuations in Quarterly Results
A significant portion of the Company's network
services revenues over the next fiscal year is expected
to be derived from non-recurring fee income, which
consists principally of revenues from professional
services (such as software customization and training),
software sales and certain other one-time network
installation fees. The timing of receipt of such fee
income is not predictable and is dependent upon
purchases by third parties, over which the Company has
no direct influence and which may fluctuate greatly
from quarter to quarter. The time required to close
large license fee and development agreements can be
delayed due to, among other things, customer
requirements and decision-making processes. In
addition, revenues derived from usage of the Company's
network services by third parties may fluctuate as a
result of the seasonality of the sectors of the
agribusiness industry in which the Company operates, as
well as from increased competition, delays in the
introduction of new services and acceptance of such
services in the market.
Certain Factors Affecting Continued Revenue Growth
For the nine month period ended April 30, 1997,
total revenue increased $1,434,000 or 40% over the same
period last year. For the quarter ended April 30,
1997, total revenue increased $299,000 or 21% over the
same period last year. The Company's ability to
sustain significant revenue growth is affected by many
factors, including, but not limited to, the growth rate
of the Company's selected market segments, the
positioning of the Company's products in those
segments, variations in demand for and cost of customer
services and technical support, customer adoption of
Internet-enabled Windowsr applications and their
willingness to upgrade from DOS versions of software,
the Company's ability to release new software
applications and upgrades on a timely basis, the
Company's ability to establish and maintain strategic
alliances, and the Company's ability to implement its
acquisition strategy to increase growth. Perhaps most
important is the Company's ability to attract and
retain a high-performance sales team. The Company's
goal is to sustain annual revenue growth in the 30-40%
range, but no assurance can be given that the Company
will be able to do so.
<PAGE>
Fires and Other Natural Disasters
The Company's operations are dependent upon its
ability to protect its computer equipment and the
information stored in its data center against damage
that may be caused by fire, power loss,
telecommunication failures, unauthorized intrusion and
other similar events. The Company has taken
substantial precautions to protect itself and its
customers from any such events that could have a
negative effect upon the uninterrupted delivery of the
Company's network and on-line information services.
These precautions include off-location storage of
computer software backup data; off-site computer system
for use, if necessary; fire protection and physical
security systems consisting of magnetic badge readers,
key pad controlled combination locks; an early warning
detection and Halon fire extinguishing system.
Notwithstanding such precautions, there can be no
assurance that a fire or other natural disaster
including national or regional telecommunications
outages would not disable the network hub computer
system. Any significant damage to the hub computer
system could have a material adverse effect on the
Company.
Liquidity of Common Stock
Although the Common Stock is quoted on NASDAQ/NMS,
the spread between the bid and asked price of the
Common Stock tends to be large relative to the stock
price. As of August 4, 1997, the closing bid price was
$13/16 and the closing asked price was $1.00. The
Company's Board of Directors has approved a one-for-
four reverse stock split, subject to shareholder
approval, but no assurances can be given that a reverse
stock split would improve liquidity of the Common
Stock.
RECENT DEVELOPMENTS
Agreement for Sale of Preferred Stock
On July 28, 1997, WITECH purchased 20,000 shares
of Series A Preferred Stock of the Company for $100 per
share, or $2.0 million. The Preferred Stock is non-
voting (except as required by law) and not convertible
into Common Stock. The Preferred Stock has a
cumulative dividend rate of Prime plus 2% with an 10%
minimum and 14% maximum rate. Prior to August 1, 2002,
dividends on the Preferred Stock may be paid, at the
option of the Company, in additional shares of
Preferred Stock.
The Preferred Stock can be redeemed by the Company
at any time at $100 per share plus accrued dividends,
but without premium. The Preferred Stock would have a
priority over Common Stock in the event of a
liquidation of the Company to the extent of $100 per
share plus accrued dividends. So long as any Preferred
Stock is outstanding, the Company cannot pay dividends
on or repurchase any Common Stock, incur any
indebtedness for borrowed money (other than in favor of
WITECH or its affiliates), or issue any additional
Preferred Stock which is not junior to the Series A
Preferred Stock.
<PAGE>
The Company used the proceeds from the sale of the
Preferred Stock to reduce borrowings under the line of
credit with WITECH.
Reverse Stock Split
The Board of Directors of the Company has approved
a one-for-four reverse stock split (the "Reverse
Split"), subject to shareholder approval at the
Company's 1997 Annual Meeting of Shareholders. The
Reverse Split would decrease the number of shares of
Common Stock outstanding and presumably increase the
per share market price for the Common Stock after the
Reverse Split.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with
the Commission pursuant to the Exchange Act are
incorporated in this Prospectus by reference:
(1) the Company's Annual Report on Form 10-K
for the fiscal year ended July 31, 1996.
(2) the Company's Quarterly Reports on Form
10-Q for the quarters ended October 31, 1996,
January 31, 1997 and April 30, 1997, and Form 10-
Q/A filed May 6, 1997;
(3) the Company's Current Reports on Form 8-
K filed February 7, 1997, February 21, 1997, and
May 23, 1997; and
(4) the description of the Company's Common
Stock contained in the Company's Registration
Statement on Form 8-A filed with the Commission on
October 22, 1991.
The documents listed above are hereinafter
referred to as "Incorporated Documents."
The information relating to the Company contained
in this Prospectus summarizes, is based upon, or refers
to, information and financial statements contained in
one or more Incorporated Documents; accordingly, such
information contained herein is qualified in its
entirety by reference to Incorporated Documents and
should be read in conjunction therewith. Any
subsequently filed documents should also be read in
conjunction with this Prospectus.
This Prospectus is accompanied by the Company's
latest Annual Report on Form 10-K and Quarterly Report
on Form 10-Q. The Company will provide without charge
to each person to whom a copy of this Prospectus has
been delivered, upon the written or oral request of any
such person, a copy of any or all of the other
Incorporated Documents or subsequently filed documents,
other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference
into such documents). Requests for such copies should
be directed to Corporate Secretary, ARI Network
Services, Inc., 330 East Kilbourn Avenue, Milwaukee,
Wisconsin 53202, telephone (414) 278-7676.
<PAGE>
THE COMPANY
ARI Network Services, Inc. (the "Company" or
"ARI") provides standards-based Internet-enabled
electronic commerce services to companies in selected
industry sectors and distribution channels. These
services use telecommunications and computer technology
to help customers conduct business electronically,
computer to computer, with minimal changes to their
internal business systems.
Currently, the Company provides electronic
commerce services to three industry sectors: the U.S.
and Canadian Agribusiness industry ("Agribusiness"),
the U.S. and Canadian freight transportation industry
("Transportation"), and the U.S. non-daily newspaper
publishing industry ("Publishing"). The Agribusiness
sector includes Agricultural and Specialty Chemicals;
Farm, Outdoor Power, Marine, and other types of
equipment; and Livestock Pharmaceuticals, Feed and
Seed.
The Company's services include: telecommunication
networking, incompatible computer systems connectivity,
electronic mail messaging, electronic data interchange
translation, product and participant directories and
databases (on-line or on CD-ROM), information exchange
and retrieval, and a wide range of customer specified
electronic commerce and transaction processing
applications. ARI also provides end user application
software related to the electronic commerce services
and a range of professional services, including
consulting, customer application development,
installation, education and support.
The Company's electronic commerce services may be
broadly categorized as either transaction management or
data management services. Transaction management
services include the provision of applications where
transaction data are exchanged between participants
(e.g., manufacturers, distributors, dealers, and sales
representatives) in a distribution channel. Such
applications include product availability inquiries,
sales automation, sales reporting, warranty claim
processing, batch or immediate response product
ordering, and invoicing. Data management services
include the provision of reference data bases used in
electronic commerce. Such data bases include
directories of ship-to and bill-to locations, on-line
or CD-ROM product catalogs, and, in the case of the
Publishing sector, online newspaper articles. Where
possible, the Company seeks to provide integrated
solutions involving both types of services. Both
transaction and data management services are provided
to the Agribusiness sector, while only data management
services are provided to the Transportation and
Publishing sectors.
The Company focuses its marketing efforts on major
manufacturers and distributors that have the financial
resources and business motivation to convert their
distribution systems from paper-based to electronic
commerce, thereby reducing processing expenses and time
to market. In the Transportation sector, the data
management services are sold to the Association of
American Railroads under a long-term contract. In the
Publishing sector, the services are sold under an
exclusive long-term contract with the Associated Press.
The Company's executive offices are located at 300 East
Kilbourn Avenue, Milwaukee, Wisconsin 53202 and its
telephone number at that location is (414) 278-7676.
The Company is a Wisconsin corporation, incorporated in
1981. The Company maintains a website at
http://www.arinet.com.
<PAGE>
USE OF PROCEEDS
The proceeds received by the Company from the sale
of the Common Stock (net of expenses of the offering
estimated at $40,000) are estimated to be approximately
$1,960,000 assuming all of the Common Stock is sold for
$1.00 per share. There can be no assurance that the
Company will sell any shares of Common Stock in this
offering. See "Risk Factors - Additional Financing
Requirements and Access to Capital." The Company
intends to use the proceeds of the offering, if any,
for working capital purposes, to maintain and enhance
existing products, to hold as capital resources for
future use and for other general corporate purposes.
The Company may also use proceeds to repay
borrowings under the Company's existing revolving line
of credit with WITECH. The line of credit is for $2.5
million until September 30, 1997, and $2.0 million from
September 30, 1997 until such line expires on December
31, 1997. The line carries a floating interest rate of
2% above prime. As of August 5, 1997, the Company had
borrowed $645,000 under the line of credit.
DESCRIPTION OF COMMON STOCK
Holders of the Common Stock are entitled to one
vote for each share held on all matters submitted to a
vote of shareholders and do not have cumulative voting
rights. Holders of Common Stock are also entitled to
receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally
available therefor, subject to any preferential
dividend rights of outstanding Preferred Stock. Except
as otherwise required by applicable law, a majority
vote is sufficient for any action which requires the
vote or concurrence of shareholders. Upon the
liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to receive
ratably the net assets of the Company available after
the payment of all debts and other liabilities and
subject to the prior rights of holders of any
outstanding Preferred Stock. The holders of Common
Stock have no preemptive, subscription, redemption or
conversion rights. All shares of Common Stock
outstanding at the date of this Prospectus are, and the
shares in this offering will be upon issuance, fully
paid and non-assessable (except as provided in Section
180.0622(b) of the Wisconsin Statutes). Under Section
180.0622(b) of the Wisconsin Statutes, holders of
Common Stock are personally liable up to the amount
equal to the par value of the shares owned by them,
respectively, for all debts owing to Company employees
for services performed for the Company, but not
exceeding six months' service in any one case. Under
the substantially identical predecessor to Section
180.0622(b), "par value" has been judicially
interpreted to mean the full amount paid by the
original subscribers for shares upon the initial
issuance thereof. The rights, preferences and
privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock
which the Company may designate and issue in the
future.
The Company has an authorized class of Preferred
Stock (the "Preferred Stock") consisting of 1,000,000
shares at $.001 par value per share. None of the
Preferred Stock has been issued,
<PAGE>
except for 20,000
shares of non-voting, non-convertible Series A
Preferred Stock held by WITECH. The Agreement with
WITECH prohibits the Company from issuing any
additional Preferred Stock which is not junior to the
Series A Preferred Stock. See "Recent Developments."
The Board of Directors is authorized, subject to any
limitations prescribed by law, without further
shareholder approval, to issue from time to time up to
an aggregate of 1,000,000 shares of Preferred Stock in
one or more series. Each such series of Preferred
Stock shall have such number of shares, designation,
preferences, voting powers, qualifications and special
relative rights or privileges as shall be determined by
the Board of Directors, which may include, among
others, dividend rights, voting rights, redemption and
sinking fund provisions, liquidation preferences and
conversion rights. The issuances of Preferred Stock,
while providing desired flexibility in connection with
possible acquisitions and other corporate purposes,
could have the effect of making it more difficult for a
third party to acquire, or discouraging a third party
from acquiring, a majority of the outstanding voting
stock of the Company.
LEGAL MATTERS
The validity of the Common Stock offered hereby
has been passed upon by Godfrey & Kahn, S.C. Mr.
William H. Alverson is a shareholder of Godfrey & Kahn,
S.C. and a director of the Company.
EXPERTS
The consolidated financial statements of the
Company appearing in its Annual Report (Form 10-K) for
the year ended July 31, 1996, have been audited by
Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and
incorporated herein by reference. Such financial
statements are, and audited financial statements to be
included in subsequently filed documents will be,
incorporated herein in reliance upon the reports of
Ernst & Young LLP pertaining to such financial
statements (to the extent covered by consents filed
with the Securities and Exchange Commission) given upon
the authority of such firm as experts in accounting and
auditing.
<PAGE>
Part II Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated
expenses to be incurred by the Company in connection
with the offering:
SEC registration fee $ 625
NASDAQ/NMS listing fee 17,500
Accounting fees and expenses 3,000
Legal fees and expenses 7,000
Travel and Miscellaneous 11,875
Total $40,000
All of the above expenses other than the SEC
registration fee are estimates. All of the listed
expenses will be paid by the Company.
Item 15. Indemnification of Directors and Officers
Pursuant to Section 180.0828 of the Wisconsin
Business Corporation Law ("WBCL"), the Company's
directors are not personally liable to the Company, its
shareholders or any person asserting rights on behalf
of the Company or its shareholders, for monetary
damages and liabilities arising from a breach of or
failure to perform any duty resulting solely from the
director's status as a director, unless the person
asserting liability proves that the breach of failure
to perform constitutes (i) a willful failure to deal
fairly with the Company or its shareholders in
connection with a matter in which the director has a
material conflict of interest, (ii) a violation of
criminal law, unless the director had reasonable cause
to believe that his or her conduct was lawful or no
reasonable cause to believe that his or her conduct was
unlawful, (iii) a transaction from which the director
derived an improper personal profit or (iv) willful
misconduct.
In addition, the Company's By-Laws contain certain
provisions whereby directors, officers, employees and
agents of the Company generally are to be indemnified
against certain liabilities to the fullest extent
authorized by the WBCL, with certain exceptions. In
particular, Article VII of the Company's By-Laws
provides (i) that an individual shall be indemnified
unless it is proven by a final judicial adjudication
that indemnification is prohibited, (ii) payment or
reimbursement of expenses, subject to certain
limitations, will be mandatory rather than permissive,
and (iii) indemnification rights will also extend to
employees and certain agents of the Company, as
determined by the Company's Board of Directors or a
committee thereof. Article VII provides that it may
not be amended to limit the indemnification provided
for therein except by a vote of not less than 75% of
the Company's outstanding capital stock, and that any
such amendment may only be prospective and not
retroactive. The Board of Directors of the Company,
however, is expressly
<PAGE>
authorized in Article VII to
expand the indemnification permitted under Article VII
without an amendment to the Company's By-Laws.
The Registrant's officers and directors are
covered by officer's and director's liability
insurance.
Item 16. Exhibits
4.1 Articles of Incorporation, as amended
5.1 Opinion of Godfrey & Kahn, S.C.
10.1 Preferred Stock Purchase Agreement dated
July 15, 1997 by and between the Company and
WITECH Corporation *
23.1 Consent of Godfrey & Kahn, S.C. (included in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1 Powers of Attorney *
* Filed on July 15, 1997
Item 17. Undertakings
*(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) to include any prospectus required
by section 10(a)(3) of the Securities Act of
1933;
(ii) to reflect in the prospectus any
facts or events arising after the effective
date of the Registration Statement (or the
most recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar value
of securities offered would not exceed that
which was registered) and any deviation from
the low or high end of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no
more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in
the effective registration statement;
<PAGE>
(iii) to include any material
information with respect to the plan of
distribution not previously disclosed in the
Registration Statement or any material change
to such information in the Registration
Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
*(h) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
* Paragraph references correspond to those of Item 512
of Regulation S-K.
<PAGE>
Signatures
In accordance with the requirements of the
Securities Act of 1933, the Registrant certifies that
it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly
caused this Amendment to Registration Statement on Form
S-2 to be signed on its behalf by the undersigned in
the City of Milwaukee, State of Wisconsin on August 5,
1997.
ARI NETWORK SERVICES, INC.
By: /S/ Mark L. Koczela
--------------------------
Mark L. Koczela, Executive
Vice President of Business
Development
Pursuant to the requirements of the Securities Act
of 1933, this Amendment to Registration Statement on
Form S-2 was signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board August 5, 1997
- ------------------- and Director
Richard W. Weening
* President and Chief August 5, 1997
- ------------------- Executive Officer
Brian E. Dearing (acting Principal
Financial Officer and
Principal Accounting
Officer) and a Director
* Director August 5, 1997
- -------------------
William H. Alverson
Director
- -------------------
Gordon J. Bridge
* Director August 5, 1997
- -------------------
Francis Brzezinski
Director
- -------------------
George Dalton
Director
- -------------------
Eric P. Robison
* By Mark L. Koczela pursuant to a power of attorney
previously filed.
/s/ Mark L. Koczela
--------------------------
Mark L. Koczela
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ARI NETWORK SERVICES, INC.
These amended and restated Articles of
Incorporation are executed by the undersigned to
supersede and replace the heretofore existing Articles
of Incorporation of ARI Network Services, Inc., as
amended (the "Corporation"), a corporation organized
under Chapter 180 of the Wisconsin Statutes:
ARTICLE I
The name of the Corporation is ARI Network
Services, Inc.
ARTICLE II
The period of existence of the Corporation shall
be perpetual.
ARTICLE III
The Corporation is authorized to engage in any
lawful activity for which corporations may be organized
under Chapter 180 of the Wisconsin Statutes and any
successor provisions.
ARTICLE IV
4.1. Authorized Shares. The aggregate number of
shares which the Corporation shall have the authority
to issue, the designation of each class of shares, the
authorized number of shares of each class of par value
and the par value thereof per share shall be as
follows:
Designation Par Value Authorized
of Class Per Share Number of Shares
Common Stock $.001 16,525,200
Preferred Stock $.001 1,000,000
4.2. Rights of Classes. The preferences,
limitations and relative rights of shares of each class
of stock shall be as follows:
4.2.1. Common Stock.
(a) Voting. Except as otherwise provided by law
and except as may be provided with respect to shares of
Preferred Stock in accordance with subparagraph
4.2.2(a)(ii), below, only the holders of shares of
Common Stock shall be entitled to vote for the election
of directors of the Corporation and for all other
corporate purposes. Except as otherwise provided by
law, upon any such vote, each holder of Common Stock
shall be entitled to one vote for each share of Common
Stock held of record by such shareholder.
(b) Dividends. Subject to the provisions of
subparagraph 4.2.2(d), below, the holders of Common
Stock shall be entitled to receive such dividends as
may be declared thereon from time to time by the Board
of Directors, in its discretion, out of any funds of
the Corporation at the time legally available for
payment of dividends on Common Stock.
(c) Liquidation. In the event of the voluntary
or involuntary dissolution, liquidation or winding up
of the Corporation, after there have been paid to or
set aside for the holders of shares of Preferred Stock
the full preferential amounts to which they are
entitled as provided in subparagraph 4 2.2(e), below,
the holders of outstanding shares of Common Stock shall
be entitled to share ratably, according to the number
of shares held by each, in the remaining assets of the
Corporation available for distribution.
4.2.2. Preferred Stock.
(a) Series and Variations Between Series. The
Preferred Stock may from time to time as hereinafter
provided, be divided into and issued in one or more
series, and the Board of Directors is hereby expressly
authorized to establish one or more series, to fix and
determine the variations as among series and to fix and
determine, prior to the issuance of any shares of a
particular series, the following designations, terms,
limitations and relative rights and preferences of such
series:
(i) the designations of such series and the
number of shares which shall constitute such
series, which number may at any time, or from time
to time, be increased or decreased (but not below
the number of shares thereof then outstanding) by
the Board of Directors unless the Board of
Directors shall have otherwise provided in
establishing such series;
(ii) whether and to what extent the shares
of that series shall have voting rights, in
addition to the voting rights provided by law,
which might include the right to elect a specified
number of directors in any case or if dividends on
such series were not paid for a specified period
of time;
(iii) the yearly rate of dividends, if any,
on the shares of such series, the dates in each
year upon which such dividend shall be payable
and, the date or dates from which any such
cumulative dividend shall be cumulative;
(iv) the amount per share payable on the
shares of such series in the event of the
voluntary or involuntary liquidation, dissolution
or winding up of the Corporation;
(v) the terms, if any, on which the shares
of such series shall be redeemable, and, if
redeemable, the amount per share payable thereon
in the case of the redemption thereof (which
amount may vary for (i) shares redeemed on
different dates; and (ii) shares redeemed through
the operation of a sinking fund, if any,
applicable to such shares, from the amount payable
with respect to shares otherwise redeemed);
(vi) the extent to and manner in which a
sinking fund, if any, shall be applied to the
redemption or purchase of the shares of such
series, and the terms and provisions relative to
the operation of such fund;
(vii) the terms, if any, on which the shares
of such series shall be convertible into shares of
any other class or of any other series of the same
or any other class and, if so convertible, the
price or prices or the rate or rates of
conversion, including the method, if any, for
adjustments of such prices or rates, and any other
terms and conditions applicable thereto; and
(viii) such other terms, limitations and
relative rights and preferences, if any, of such
series as the Board of Directors may lawfully fix
and determine and as shall not be inconsistent
with the laws of the State of Wisconsin or these
Articles of Incorporation.
(b) Redemption Right. Shares of Preferred Stock
may be issued which are redeemable by the Corporation
at the price or prices determined by the Board of
Directors for shares of each series as provided in
subparagraph 4.2.2(a)(v), above.
(c) Conversion of Preferred Stock. Shares of
Preferred Stock may be issued which are convertible
into shares of Common Stock or shares of any other
series of Preferred Stock on the terms and conditions
determined by the Board of Directors for shares of each
series as provided in subparagraph 4.2.2(a)(vii),
above.
(d) Dividends. Shares of Preferred Stock may be
issued which entitle the holders thereof to cumulative,
noncumulative or partially cumulative dividends. The
holders of Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor,
dividends at the annual rate fixed by the Board of
Directors with respect to each series of shares and no
more. Such dividends shall be payable on such dates
and in respect of such periods in such year as may be
fixed by the Board of Directors to the holders of
record thereof on such date as may be determined by the
Board of Directors. Such dividends shall be paid or
declared and set apart for payment for each dividend
period before any dividend (other than a dividend
payable solely in Common Stock) for the same period
shall be paid upon or set apart for payment on the
Common Stock, and, if dividends on the Preferred Stock
shall be cumulative or partially cumulative, all unpaid
dividends thereon for any past dividend period shall be
fully paid or declared and set apart for payment, but
without interest, before any dividend (other than a
dividend payable solely in Common Stock) shall be paid
upon or set apart for payment on the Common Stock. The
holders of Preferred Stock shall not, however, be
entitled to participate in any other or additional
earnings or profits of the Corporation, except for such
premiums, if any, as may be payable in case of
redemption, liquidation, dissolution or winding up.
(e) Liquidation. In the event of liquidation,
dissolution or winding up (whether voluntary or
involuntary) of the Corporation, the holders of shares
of Preferred Stock shall be entitled to be paid the
full amount payable on such shares upon the
liquidation, dissolution or winding up of the
Corporation fixed by the Board of Directors with
respect to such shares as provided in subparagraph
4.2.2(a)(iv), above, before any amount shall be paid to
the holders of the Common Stock.
(f) Reissue of Shares. Shares of the Preferred
Stock which shall have been converted, redeemed,
purchased or otherwise acquired by the Corporation,
whether through the operation of a sinking fund or
otherwise, shall be retired and restored to the status
of authorized but unissued shares, but may be reissued
only as a part of the Preferred Stock other than the
series of which they were originally a part.
ARTICLE V
No holder of any stock of the Corporation shall
have any preemptive or subscription rights nor be
entitled, as of right, to purchase or subscribe for any
part of the unissued stock of this Corporation or of
any additional stock issued by reason of any increase
of authorized capital stock of this Corporation or
other securities whether or not convertible into stock
of this Corporation.
ARTICLE VI
A dividend payable in shares of any class of stock
of the corporation may be paid in shares of any other
class without specific approval of such issuance by the
shareholders of he class of stock to be issued.
ARTICLE VII
The address of the registered office of the
Corporation is 330 East Kilbourn Avenue, Milwaukee,
Wisconsin 53202 in Milwaukee County. The name or its
registered agent at such address is Michael R. Pelton.
ARTICLE VIII
8.1. Number of Directors. The number of
directors (exclusive of directors, if any, elected by
the holders of one or more series of Preferred Stock,
voting separately as a series pursuant to the
provisions of these Articles of Incorporation
applicable thereto) shall not be less than 3 nor more
than 11 directors, the exact number of directors to be
determined from time to time by resolution adopted by
the affirmative vote of a majority of the entire Board
of Directors then in office except that the number of
initial directors constituting the initial Board of
Directors shall be 10.
8.2. Classification. The directors shall be
divided into three classes, designated Class I, Class
II and Class III, and the term of office of directors
of each class shall be three years. Class I shall
consist of four directors; Class II shall consist of
three directors; and Class III shall consist of three
directors. If the number of directors is changed by
resolution of the Board of Directors pursuant to this
Article VIII, any increase or decrease shall be
apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as
possible, but in no case shall a decrease in the number
of directors shorten the term of any incumbent
director. The term of office for each director shall
be three years; provided, however, that the initial
term of office of Class I directors shall expire at the
first annual meeting of shareholders after their
election, that of the Class II directors shall expire
at the second annual shareholder meeting after their
election, and that of the Class III directors shall
expire at the third annual meeting after their
election.
8.3. Term of Office. A director shall hold
office until the annual meeting for the year in which
his or her term expires and until his or her successor
shall be elected and shall qualify. Any newly created
directorship resulting from an increase in the number
of directors and any other vacancy on the Board of
Directors, however caused, shall be filled by the vote
of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director.
Any director so elected to fill any vacancy in the
Board of Directors, including a vacancy created by an
increase in the number of directors, shall hold office
for the remaining term of directors of the class to
which he or she has been elected and until his or her
successor shall be elected and shall qualify.
8.4. Removal. Exclusive of directors, if any,
elected by the holders of one or more series of
Preferred Stock, no director of the Corporation may be
removed from office, except for Cause and by the
affirmative vote of seventy-five percent (75%) of the
outstanding shares of capital stock of the Corporation
entitled to vote at a meeting of shareholders duly
called for such purpose. As used in this Article VIII,
the term "Cause" shall mean solely malfeasance arising
from the performance of a director's duties which has a
materially adverse effect on the business of the
Corporation.
8.5. Nomination. No person, except those
nominated by or at the direction of the Board of
Directors, shall be eligible for election as a director
at any annual or special meeting of shareholders unless
a written request, in the form established by the
Corporation's by-laws, that a person's name be placed
in nomination is received from a shareholder of record
by the Secretary of the Corporation, together with the
written consent of such person to serve as a director,
(i) with respect to an election held at an annual
meeting of shareholders, not less than 90 nor more than
150 days prior to the meeting date fixed pursuant to
the Corporation's by-laws, or (ii) with respect to an
election held at a special meeting of shareholders for
the election of directors, not less than the close of
business on the eighth day following the date on which
notice of such meeting is given to shareholders.
ARTICLE IX
Notwithstanding any provision of these Articles of
Incorporation: (i) Sections 4.2.2, 8.1, 8.2, 8.3, 8.4
and Articles IX and X of these Articles of
Incorporation may be amended, altered or repealed only
by the affirmative vote of the holders of not less than
seventy-five percent (75%) of the outstanding total
shares of stock of the Corporation entitled to vote at
a meeting of shareholders duly called for such purpose
and by the affirmative vote of the holders of not less
than seventy-five percent (75%) of the shares of each
class or series, if any, entitled to vote thereon at
such meeting; and (ii) any other provisions of these
Articles of Incorporation may be amended, altered or
repealed by the affirmative vote of the holders of not
less than a majority of the shares of each class or
series, if any, entitled to vote thereon at such
meeting; provided, however, that this Article IX shall
not limit the power of the Corporation's Board of
Directors to make certain amendments to the Articles of
Incorporation under Chapter 180 of the Wisconsin
Statutes and any successor provisions without
shareholder approval.
ARTICLE X
Except as required by law, and notwithstanding any
other provision of these Articles of Incorporation or
the Corporation's By-laws, the Corporation's By-laws
may be amended, altered or repealed, and new By-laws
may be enacted only by a vote of not less than three-
quarters (3/4) of the entire Board of Directors then in
office, or by the affirmative vote of the holders of
not less than seventy-five percent (75%) of the
outstanding shares of stock of the Corporation entitled
to vote at a meeting of shareholders duly called for
such purpose.
CERTIFICATE
This is to certify that the foregoing Amended and
Restated Articles of Incorporation of ARI Network
Services, Inc. contain the amendments, briefly
described below, to the Articles of Incorporation. All
of these amendments were adopted in accordance with
Wisconsin Statute sec. 180.1003, by the Board of
Directors on September 19, 1991 and by the Shareholders
on September 20, 1991.
Articles IV, V, XII and XIII have been deleted in
their entirety.
Article VI, stating the number of authorized
shares and dividing such shares among seven classes of
common stock and three classes of preferred stock, is
amended as set forth in the new Section 4.1 of Article
IV to provide the same number of authorized shares
divided between a single class of common stock and a
single class of preferred stock. The provisions for
the reclassification of common stock and the conversion
of the preferred stock is set forth in Section 6.6 of
Article VI. The par value of all shares following the
amendment is $.001 per share. The number of authorized
shares is not changed by the amendment.
Article VII, stating the rights and preferences of
the various classes of preferred and common stock, is
amended as set forth in the new Section 4.2 of Article
IV.
Article VIII, stating the number and manner of
election of directors and dividing such directors among
five classes, is amended as set forth in the new
Article VIII, which divides the directors among three
classes.
Article X, providing preemptive rights to certain
shareholders upon certain issuances of securities, is
amended to eliminate all preemptive rights as set forth
in the new Article V.
Article XI, stating which matters require
shareholder approval in excess of a simple majority, is
amended as set forth in the new Article IX.
A portion of Section 11.4 of Article XI, relating
to the amendment of the By-laws of the Corporation, is
amended to provide that the By-laws may be amended by
the Board of Directors as set forth in the new Article
X.
Article IX is renumbered as new Article VII.
A new Article VI, providing for the payment of
dividends in shares of stock, has been added.
EXECUTED on behalf of the Corporation on
Tuesday, November 12, 1991 .
By:/s/ Edward D. Markham
-----------------------
Edward D. Markham,
President
This document was drafted by: An acknowledgment copy of
the filed document should
be sent to:
Ruth E. Booher Mark Koczela
330 East Kilbourn Avenue Godfrey & Kahn, S.C.
Milwaukee, W1 53202 780 North Water Street
(414) 283-4507 Milwaukee, W1 53202
(414) 273-3500
ARTICLES OF AMENDMENT
OF
ARI NETWORK SERVICES, INC.
On December 2, 1994, in accordance with Section
180.1003 of the Wisconsin Statutes, the following
resolution to amend the articles of incorporation of
ARI Network Services, Inc. was duly adopted:
BE IT RESOLVED, Paragraph 4.1 of the
Amended and Restated Articles of
Incorporation of ARI Network Services, Inc.
is hereby amended to read as follows:
4.1. Authorized Shares. The aggregate
number of shares which the Corporation shall
have the authority to issue, the designation
of each class of shares, the authorized
number of shares of each class of par value
and the par value thereof per share shall be
as follows:
Designation Par Value Authorized
of Class Per Share Number of Shares
Common Stock $.001 25,000,000
Preferred Stock $.001 1,000,000
Executed in duplicate this 4th day of
December, 1994.
ARI NETWORK SERVICES,
INC.
By:/s/ Don Knudsen
----------------------
Don Knudsen,
President and
Chief Executive
Officer
This instrument was drafted by:
Larry D. Lieberman
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
ARTICLES OF AMENDMENT
OF
ARI NETWORK SERVICES, INC.
Pursuant to Section 180.0602 of the Wisconsin Business
Corporation Law,
ARI Network Services, Inc., a corporation
organized and existing under the Wisconsin Business
Corporation Law (the "Company"), DOES HEREBY CERTIFY:
That (a) pursuant to the authority conferred upon
the Board of Directors by the Articles of Incorporation
of the Company and in accordance with Section 180.1002
of the Wisconsin Statutes, the Board of Directors on
July 17, 1997 adopted the resolution set forth below
creating a series of Preferred Stock, par value $.001
per share, designated as Series A Preferred Stock, (b)
shareholder action approving the creation of the Series
A Preferred Stock was not required, and (c) no shares
of Series A Preferred Stock have been issued:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to
the authority vested in the Board of Directors of this
Company in accordance with the provisions of its
Articles of Incorporation, a series of Preferred Stock,
par value $.001 per share, of the Company be and it
hereby is created, and that the designation and amount
and relative rights, limitations and preferences
thereof are as follows:
Section 1. Designation and Amount. The shares of
such series shall be designated as "Series A Preferred
Stock" (the "Series A Preferred Stock"); the number of
shares constituting such series shall be Forty Thousand
(40,000). Such number of shares may be increased or
decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the
number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities
issued by the Company into Series A Preferred Stock.
Section 2. Voting Rights. The holders of the
Series A Preferred Stock shall not, except as required
by law, have any right or power to vote on any question
or in any proceeding or to be represented at, or to
receive notice of, any meeting of the Company's
stockholders. On any matters in which the holders of
shares of the Series A Preferred Stock shall be so
entitled to vote under applicable law, they shall be
entitled to one (1) vote for each share held.
Section 3. Dividends.
(a) Each holder of a share of Series A Preferred
Stock shall be entitled to receive, when, as and if
declared by the Company's Board of Directors, out of
the funds of the Company legally available therefor,
cumulative dividends during each Quarterly Dividend
Period (as hereinafter defined) that such share of
Series A Preferred Stock is outstanding at a per annum
dividend rate equal to the product of (i) One Hundred
Dollars and (ii) two percent (2%) per annum above the
fluctuating per annum rate of interest published from
time to time in the Midwest Edition of The Wall Street
Journal under the "Money Rates" caption as the "Prime
Rate" (and if more than one such "Prime Rate" shall be
so published on any date, the highest of such rates for
such date), which rate shall change effective as of the
date of any published change in such published "Prime
Rate," but not less than a rate per annum equal to Ten
Dollars ($10.00) per share nor more than Fourteen
Dollars ($14.00) per share; provided, however, that
dividends for any period during which any shares of
Series A Preferred Stock shall be outstanding for less
than a full Quarterly Dividend Period (as defined
below) shall be paid pro rata based on the actual
number of days in such Quarterly Dividend Period. As
used herein, "Quarterly Dividend Period" means the
period from November 1 through the next January 31,
from February 1 through the next April 30, from May 1
through the next July 31 or from August 1 through the
next October 31; provided that the first Quarterly
Dividend Period shall be the period commencing on the
date of initial issuance of shares of the Series A
Preferred Stock (other than Additional Shares (as
defined below)) and ending on October 31, 1997.
(b) Except as provided below, each such dividend
shall be paid in cash on the first day of February,
May, August and November in each year (each a
"Quarterly Dividend Payment Date") commencing on
November 1, 1997, to the holders of record of shares of
Series A Preferred Stock as they appear on the stock
register of the Company on such record date as shall be
fixed by the Board of Directors of the Company or a
duly authorized committee thereof, which date shall be
at least ten (10) but no more than thirty (30) days
preceding the Quarterly Dividend Payment Date
immediately following the relevant Quarterly Dividend
Period. Notwithstanding anything to the contrary
herein, prior to August 1, 2002, all (but not less than
all) dividends payable on any particular Quarterly
Dividend Payment Date may be paid, at the option of the
Company, in lieu of cash, in additional shares of
Series A Preferred Stock ("Additional Shares") with a
Liquidation Preference (as defined below) equal to the
amount of such dividend. Such Quarterly Dividend
Payment Date shall be the original issuance date of
such Additional Shares for purposes of the accrual of
dividends. Prior to each issuance of any Additional
Shares as a dividend on any of the Series A Preferred
Stock, the Company will prepare and mail to each holder
of shares of the Series A Preferred Stock a certificate
setting forth the computation of the number of
Additional Shares issuable in payment of such dividend
to each holder of record of the Series A Preferred
Stock. A dividend payment in Additional Shares shall
not be considered paid if the Company, on the
applicable Quarterly Dividend Payment Date, has not
caused share certificates representing the Additional
Shares issuable in payment of such dividend to be
delivered to the holders of the Series A Preferred
Stock.
(c) The amount of any dividends "accrued" on any
share of the Series A Preferred Stock at any Quarterly
Dividend Payment Date shall be deemed to be the amount
of any unpaid dividends accumulated thereon to and
including such Quarterly Dividend Payment Date, whether
or not earned or declared. Dividends in arrears shall
bear dividends as if such dividends in arrears had been
declared and paid in Additional Shares as set forth
herein. Dividends on account of arrears for any past
Quarterly Dividend Periods may be declared and paid at
any time, without reference to any regular Quarterly
Dividend Payment Date, to holders of record on such
date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors of
the Company or a duly authorized committee thereof.
(d) So long as any shares of the Series A
Preferred Stock shall remain outstanding, no dividends
shall be paid or declared, or other distributions made
(upon dissolution or otherwise), whether in cash or
property or in obligations or shares of the Company, on
any shares of the Common Stock or stock of any other
series of Preferred Stock of the Company over which the
Series A Preferred Stock has a priority in the
distribution of assets in the event of any liquidation,
dissolution or winding up of the affairs of the Company
("Junior Preferred Stock") (other than dividends
payable solely in shares of Common Stock or Junior
Preferred Stock), nor shall any shares of the Common
Stock or Junior Preferred Stock be purchased, redeemed,
retired or otherwise acquired by the Company or any
corporation or other entity controlled by the Company
for any consideration of any kind (or any payment made
to or available for a sinking fund for the redemption
of any such securities), and neither the Company nor
any corporation or other entity controlled by the
Company shall incur any obligation for any of the
foregoing.
Section 4. Redemption.
(a) The Company may, at the election of its Board
of Directors, redeem outstanding shares of the Series A
Preferred Stock, in whole at any time or in part from
time to time, at the redemption price of One Hundred
Dollars ($100.00) per share, plus, in each case,
accrued and unpaid dividends through the day
immediately preceding the date fixed for the redemption
of shares of the Series A Preferred Stock (the
"Redemption Date"), but without premium.
(b) At least ten (10) days but not more than
sixty (60) days prior to the Redemption Date, written
notice of such redemption shall be mailed to each
holder of record of shares of the Series A Preferred
Stock to be redeemed, in a postage prepaid envelope
sent by first class mail and addressed to such holder
at its post office address as shown on the records of
the Company; provided, however, that no failure to mail
such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceeding for
the redemption of the shares of the Series A Preferred
Stock to be redeemed.
Each such notice shall state:
(1) the Redemption Date;
(2) the number of shares of the Series A
Preferred Stock to be redeemed and, if less than
all the shares held by such holder are to be
redeemed from such holder, the number of shares to
be redeemed from such holder and the method of
calculating such number;
(3) the cash redemption price (including the
amount of accrued dividends being paid);
(4) the place or places where certificates
for such shares are to be surrendered for payment
of the redemption price; and
(5) that dividends on the shares to be
redeemed shall cease to accrue on such Redemption
Date.
On or after the Redemption Date, each holder of shares
of the Series A Preferred Stock to be redeemed shall
present and surrender its certificate or certificates
for such shares (duly endorsed for transfer or
accompanied by appropriate stock powers) to the Company
at the place designated in such notice and thereupon
the redemption price of such shares shall be paid to or
on the order of the person whose name appears on such
certificate or certificates as the owner thereof. In
case fewer than all the shares represented by such
certificate are redeemed, a new certificate shall be
issued representing the shares that are not redeemed.
From and after the Redemption Date (unless the Company
shall default in payment of the redemption price), all
dividends on the shares of the Series A Preferred Stock
designated for redemption in such notice shall cease to
accrue and all rights of the holders thereof as
stockholders of the Company, except the right to
receive the redemption price thereof (including all
accrued and unpaid dividends up to the Redemption
Date), without interest, upon the surrender of
certificates representing the same, shall cease and
terminate and such shares shall not thereafter be
transferred (except with the consent of the Company) on
the books of the Company and such shares shall not be
deemed to be outstanding for any purpose whatsoever.
(c) If fewer than all of the shares of the Series
A Preferred Stock are to be redeemed, the Board of
Directors of the Company shall select the shares of the
Series A Preferred Stock to be redeemed pro rata (or as
nearly pro rata as practicable); provided, however,
that no fractional shares of the Series A Preferred
Stock shall be redeemed.
Section 5. Liquidation, Dissolution and Winding
Up. In the event of any liquidation, dissolution, or
winding up of the affairs of the Company, whether
voluntary or otherwise, after payment or provision for
payment of the debts and other liabilities of the
Company, the holders of shares of the Series A
Preferred Stock shall be entitled to receive, out of
the remaining net assets of the Company, the amount of
One Hundred Dollars ($100.00) in cash for each share of
the Series A Preferred Stock (the "Liquidation
Preference"), plus an amount equal to all accrued and
unpaid dividends on each such share to the date fixed
for distribution, before any distribution shall be made
to the holders of the Common Stock or any Junior
Preferred Stock. After such payment to the holders of
the Series A Preferred Stock, the holders of the Series
A Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution
or winding up of the affairs of the Company.
Section 6. Additional Issuances of Preferred
Stock. So long as any shares of Series A Preferred
Stock are outstanding, the Company shall not issue any
additional Preferred Stock, other than Junior Preferred
Stock (as defined in Section 3(d) hereof) or additional
shares of Series A Preferred Stock as provided in
Section 3(b) hereof.
* * *
Executed this 18th day of July, 1997.
ARI NETWORK SERVICES,
INC.
[Corporate Seal]
/s/ Brian E. Dearing
-----------------------
Brian E. Dearing,
President and
Chief Executive Officer
This instrument was drafted by
Larry D. Lieberman
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, Wisconsin 53202
GODFREY & KAHN, S.C.
ATTORNEYS AT LAW
780 North Water Street
Milwaukee, Wisconsin 53202
Phone (414) 273-3500 Fax (414) 273-5198
August 5, 1997
ARI Network Services, Inc.
330 E. Kilbourn Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as counsel to ARI Network Services,
Inc., a Wisconsin corporation (the "Company"), in
connection with the preparation of Amendment No. 1 to
Registration Statement on Form S-2 (Reg. No. 333-31295)
to be filed with the Securities and Exchange Commission
on or about August 6, 1997 (the "Registration
Statement"). The Registration Statement relates to the
offering of up to 2,000,000 shares of the Company's
common stock, $.001 par value (the "Shares").
In connection with this opinion we have examined:
(a) the Registration Statement, (b) copies of the
Company's Articles of Incorporation and By-laws, (c)
certain resolutions of the Company's Board of
Directors, and (d) such other proceedings, documents
and records as we have deemed necessary to enable us to
render this opinion.
Based upon the foregoing, we are of the opinion
that the Shares have been duly and validly authorized
for issuance. Upon issuance and payment for the Shares
in accordance with applicable stock purchase
agreements, the Shares will be fully paid and
nonassessable, subject to Section 180.0622(2)(b) of the
Wisconsin Statutes.
Section 180.0622(2)(b) of the Wisconsin Statutes
provides that shareholders of a corporation may be
assessed up to the par value of their shares to satisfy
the obligations of such corporation to its employees
for services rendered, but not exceeding six months
service in the case of any individual employee.
Certain Wisconsin courts have interpreted "par value"
to mean the full amount paid by the purchaser of shares
upon issuance thereof.
The foregoing opinion is limited to the laws of
the State of Wisconsin.
We consent to the use of this opinion as an
exhibit to the Registration Statement. In giving this
consent, however, we do not admit that we are "experts"
within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption
"Experts" in Amendment No. 1 to the Registration Statement
(Form S-2) and related Prospectus of ARI Network Services,
Inc. for the registration of 2,000,000 shares of its common
stock and to the incorporation by reference therein of our
report dated August 30, 1996, except for Note 10, as to which
the date is September 13, 1996, with respect to the consolidated
financial statements and schedule of ARI Network Services, Inc.
included in its Annual Report (Form 10-K) for the year ended
July 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 4, 1997
