FIFTH ADDITIONAL ISSUANCE AGREEMENT,
EXHIBIT
99.9
AMENDMENT
AND WAIVER
This
Fifth Additional Issuance Agreement (this “Agreement”), dated February
28, 2007, is made pursuant to that certain Securities Purchase Agreement, dated
as of June 30, 2006, as amended (the “Purchase Agreement”), by and
between Arkados Group, Inc. (formerly ▇▇▇▇▇▇.▇▇▇, Inc., the “Company”),
Bushido Capital Master Fund, LP (“Bushido”), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Family
Limited Partnership (“Typaldos LP” and together with Bushido, the “New
Purchasers”), ▇▇▇▇▇▇ Diversified Strategy Master Fund, LLC – Series BUS
(“▇▇▇▇▇▇”) and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (“Typaldos”) for the purchase of
the Company’s 6% Secured Convertible Debenture due December 28, 2008 (the
“Debenture”) and the Common Stock purchase warrant issued in connection
therewith (the “Warrant”). Capitalized terms used and
not otherwise defined herein that are defined in the Purchase Agreement shall
have the meanings given such terms in the Purchase
Agreement.
For
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Issuance
of New Debenture and New Warrants. The Company hereby agrees to issue
against payment to the New Purchasers (a) a debenture of the Company in the
aggregate principal amount of $327,000 in the amounts set forth on the signature
page hereto, which debenture shall be in the form of Exhibit A attached
hereto (a “New Debentures”), (b) Warrants to purchase an aggregate of up
to 153,883 shares of Common Stock, which warrant shall be in the form of
Exhibit B attached hereto (the “Long Term Warrants”) and (c)
Warrants to purchase an aggregate of up to 153,883 shares of Common Stock,
which
warrant shall be in the form of Exhibit C attached hereto (the “Short
Term Warrants” and together with the Long Term Warrant, the “New
Warrants”). The total purchase price to the New Purchaser for the
purchase of the New Debenture and the New Warrants is $327,000 (the “New
Subscription Amount”). The Company shall promptly deliver to each
New Purchaser the New Debenture, the New Warrants and opinion of counsel
required pursuant to Section 5. The Company hereby acknowledges its
receipt of the New Subscription Amount from each New Purchaser.
2. Documents. The
rights and obligations of the New Purchasers and of the Company with respect
to
the New Debentures, the New Warrants and the shares of Common Stock issuable
under the New Debentures and New Warrants (the “New Underlying Shares”)
shall be identical in all respects to the rights and obligations of such New
Purchaser and of the Company with respect to the Debentures, the Warrants and
the Underlying Shares issued and issuable pursuant to the Purchase
Agreement. Any rights of a New Purchaser or covenants of the Company
which are dependant on such New Purchaser holding securities of the Company
or
which are determined in magnitude by such New Purchaser’s purchase of securities
pursuant to the Purchase Agreement shall be deemed to include any securities
purchased or issuable hereunder. The Purchase Agreement is hereby amended so
that the term “Debentures” includes the New Debenture issued hereunder and
“Underlying Shares” includes the New Underlying Shares. The
Registration Rights Agreement entered into in connection with the Purchase
Agreement
is
hereby
amended so that the term “Registrable Securities” includes in the calculation
thereof the New Underlying Shares. The Security Agreement is hereby
amended so that the term “Debentures” includes the New Debenture. The
Inter-Creditor and Waiver Agreement, dated as of June 30, 2006, is hereby
amended so that the term “New Creditors” includes the New Purchaser and the term
“New Debentures” (as defined in the Inter-Creditor and Waiver Agreement)
includes the New Debenture (as defined herein).
3. Waivers
and Amendment.
(a) Each
Purchaser hereby waives compliance by the Company with the obligations imposed
by Section 4.13 of the Purchase Agreement regarding such Purchaser’s right to
participate in the purchase of the New Debenture, as well as any advance made
to
the Company prior to the Closing that is either repaid from the proceeds or
is
given as full or partial consideration by the New Purchasers under this
Agreement. This Waiver shall not effect the rights set forth in
Section 4.13 with respect to future financing.
(b) Each
Purchaser hereby waives the Company’s compliance with the restrictions imposed
by Section 4.14 of the Purchase Agreement with respect to (i) the issuance
of
the New Debentures and New Warrants under the Additional Issuance Agreement,
(ii) the issuance of 240,000 options under the Company’s 2004 Stock Option Plan
(“Plan Options”) to ▇▇▇▇▇ ▇▇▇▇▇, principal of a consulting firm, exercisable for
four years at $0.40 per share which vest 40,000 on the first of each month
commencing March 1, 2007; and (iii) 300,000 Plan Options to ▇▇▇▇▇ ▇▇▇▇▇▇▇
exercisable for seven years at an exercise price of $0.405. Each
Purchaser acknowledges that issuances of additional Debentures, Warrants and
the
Plan Options will not constitute transactions which result in an adjustment
of
the respective conversion or exercise prices of the Debentures or
Warrants.
(c) The
Purchasers hereby agree to amend and restate the definition of “Exempt Issuance
set forth in Section 1.1 of the Purchase Agreement to read as follows in its
entirety:
‘Exempt
Issuance’ means the issuance of (a) shares of Common Stock or options to
employees, officers, directors or bona fide consultants of the Company
(including shares of Common Stock issued pursuant to the exercise of such
options) pursuant to any stock or option plan duly adopted by a majority of
the
non-employee members of the Board of Directors of the Company or a majority
of
the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or securities exercisable or exchangeable for
or
convertible into shares of Common Stock issued and outstanding on the date
of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of any such securities, (c)
securities issued in lieu of cash payments for engineering or design services,
materials, production management or similar services, provided that such
securities are not and will not
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be
registered on a registration statement, or (d) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors, provided any such issuance shall only be to a Person
which is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.”
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4.
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Representations
and Warranties of the Company. The Company hereby makes to
the New Purchaser the following representations and
warranties:
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(a) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
this
Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, its board of directors
or its stockholders in connection therewith other than in connection with the
Required Approvals. This Agreement has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium
and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar
as
indemnification and contribution provisions may be limited by applicable
law.
(b) No
Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not: (i) conflict with or violate any
provision of the Company’s certificate or articles of incorporation, bylaws or
other organizational or charter documents; or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become
a
default) under, result in the creation of any Lien (except as contemplated
by
the Security Documents) upon any of the properties or assets of the Company
in
connection with, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any material agreement, credit facility, debt or other material instrument
(evidencing Company debt or otherwise) or other material understanding to which
such Company is a party or by which any property or asset of the Company is
bound or affected; or (iii) subject to the Required Approvals, conflict with
or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
the
Company is subject (including federal and state securities laws and
regulations), or by which
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any
property or asset of the Company is bound or affected, except, in the case
of
each of clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.
(c) Issuance
of the New Debenture. The New Debenture and New Warrants are duly
authorized and, upon the execution of this Agreement by a New Purchaser, will
be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company other than restrictions on transfer provided for
in
the Transaction Documents. The New Underlying Shares, when issued in
accordance with the terms of the New Debenture and New Warrants, will be validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by
the
Company. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the New Underlying
Shares at least equal to the Required Minimum on the date hereof.
(d) Equal
Consideration. Except as set forth in this Agreement, no
consideration has been offered or paid to any person to amend or consent to
a
waiver, modification, forbearance or otherwise of any provision of any of the
Transaction Documents.
(e) Affirmation
of Prior Representations and Warranties. The Company hereby
represents and warrants to each New Purchaser that the Company’s representations
and warranties listed in Section 3.1 of the Purchase Agreement are true and
correct as of the date hereof, provided that the Company’s representation in
Section 3.1(h) of the Purchase Agreement is qualified by the Company’s late
filing of the 2006 Form 10-KSB on October 10, 2006.
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5.
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Representations
and Warranties of the New Purchaser. The New Purchaser
hereby represents and warrants as of the date hereof to the Company
as
follows:
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(a) Authority. The
execution, delivery and performance by such New Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such New Purchaser. This
Agreement has been duly executed by such New Purchaser and, when delivered
by
such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such New Purchaser, enforceable against it
in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other
laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(b) Own
Account. Such New Purchaser (i) understands that the New
Debentures and New Warrants are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law,
(ii)
is acquiring the Additional Debenture and New Warrants as principal for its
own
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account
and not with a view to or for distributing or reselling such Additional
Debentures or New Warrants or any part thereof in violation of the Securities
Act or any applicable state securities law, (iii) has no present intention
of
distributing any of such Securities in violation of the Securities Act or any
applicable state securities law and (iv) has no arrangement or understanding
with any other persons regarding the distribution of such New Debentures and
New
Warrants (this representation and warranty not limiting such New Purchaser’s
right to sell the New Underlying Shares pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws)
in
violation of the Securities Act or any applicable state securities
law. Such New Purchaser is acquiring the Additional Debentures and
New Warrants hereunder in the ordinary course of its business. Such New
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the New Debenture, New Warrants or New
Underlying Shares.
(c) Purchaser
Status. Such New Purchaser is an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act. Such New Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) General
Solicitation. Such New Purchaser is not purchasing the New
Debenture or New Warrants as a result of any advertisement, article, notice
or
other communication regarding the New Debenture or New Warrants published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(e) Affirmation
of Prior Representations and Warranties. Such New Purchaser
hereby represents and warrants to the Company that its representations and
warranties listed in Section 3.2 of the Purchase Agreement are true and correct
as of the date hereof.
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6.
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Delivery
of Opinion. Concurrently herewith, the Company shall
deliver to the New Purchaser an opinion of outside counsel regarding
this
Agreement and the issuance of the New Debenture and New Warrants
in form
and substance reasonably acceptable to the New
Purchasers.
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7.
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Public
Disclosure. The Company shall, on the Trading Day following
the date of payment of the New Subscription Amounts, issue a Current
Report on Form 8-K, reasonably acceptable to the New Purchaser, disclosing
the material terms of the transactions contemplated hereby and attaching
this Agreement as an exhibit thereto. The Company shall consult
with the New Purchaser in issuing any other press releases with respect
to
the transactions contemplated
hereby.
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8.
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Other
Purchaser Consent. The other Purchasers hereby consent to
the execution by the Company of this Agreement and the issuance of
the New
Debenture and New Warrants to the New
Purchaser.
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9.
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Effect
on Transaction Documents. Except as expressly set forth
above, all of the terms and conditions of the Transaction Documents
shall
continue in full force and effect after the execution of this Agreement
and shall not be in any way changed, modified or superseded by the
terms
set forth herein, including, but not limited to, any other obligations
the
Company may have to the New Purchaser under the Transaction
Documents. Notwithstanding the foregoing, this Agreement shall
be deemed for all purposes as an amendment to any Transaction Document
as
required to serve the purposes hereof, and in the event of any conflict
between the terms and provisions of the Debentures, the Registration
Rights Agreement or any other Transaction Document, on the one hand,
and
the terms and provisions of this Agreement, on the other hand, the
terms
and provisions of this Agreement shall
prevail.
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10.
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Expenses. The
Company agrees to pay to each New Purchaser upon demand any and all
reasonable out-of-pocket costs or expenses (including, without limitation,
reasonable legal fees and disbursements) incurred or sustained by
such New
Purchaser, in connection with the preparation of this Agreement and
related matters.
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11.
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Amendments
and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and
signed by
the Company and each New Purchaser.
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12.
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Notices. Any
and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth
in the
Purchase Agreement.
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13.
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Successors
and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each
of the
parties and shall inure to the benefit of each Purchaser. The Company
may
not assign (except by merger) its rights or obligations hereunder
without
the prior written consent of all of the New Purchasers of the
then-outstanding Securities. Each New Purchaser may assign
their respective rights hereunder in the manner and to the Persons
as
permitted under the Purchase
Agreement.
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14.
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Execution
and Counterparts. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party,
it being
understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party
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executing
(or on whose behalf such signature is executed) with the same force
and
effect as if such facsimile or “.pdf” signature page were an original
thereof.
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15.
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Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined
in
accordance with the provisions of the Purchase
Agreement.
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16.
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Severability. If
any term, provision, covenant or restriction of this Agreement is
held by
a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and
restrictions set forth herein shall remain in full force and effect
and
shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and
employ
an alternative means to achieve the same or substantially the same
result
as that contemplated by such term, provision, covenant or restriction.
It
is hereby stipulated and declared to be the intention of the parties
that
they would have executed the remaining terms, provisions, covenants
and
restrictions without including any of such that may be hereafter
declared
invalid, illegal, void or
unenforceable.
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17.
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Headings. The
headings in this Agreement are for convenience only, do not constitute
a
part of the Agreement and shall not be deemed to limit or affect
any of
the provisions hereof.
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[SIGNATURE
PAGE FOLLOWS]
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Executed
as of February 28, 2007 by the undersigned duly authorized representatives
of
the Company, Bushido, ▇▇▇▇▇▇ and Typaldos LP and by Typaldos:
By:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇▇
Title: VP
Finance and Controller
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Family Limited Partnership
Signature
of Authorized signatory for Typaldos: /s/ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
Name
of
Authorized Signatory: ▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title
of
Authorized Signatory: Managing
Partner
Amount
of
Debenture: $127,000
Long
and
Short Term Warrants, each 59,765
Payment
$107,000 received 2/15/07, $20,000 check dated 2/28/07, subject to
collection.
Bushido
Capital Master Fund, LP
Signature
of Authorized Signatory of Bushido: /s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇
Name
of
Authorized Signatory: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇
Title
of
Authorized
Signatory: Director
Amount
of
Debenture: $200,000
Long
and
Short Term Warrants, each 94,118
As
to
Section 1 and Section 7 only:
▇▇▇▇▇▇
Diversified Strategy Master Fund, LLC – Series BUS
Signature
of Authorized Signatory of ▇▇▇▇▇▇: /s/ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Name
of
Authorized Signatory: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title
of
Authorized Signatory:
Attorney-In-Fact
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
/s/
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
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