AGREEMENT AND PLAN OF MERGER BY AND AMONG ARKADOS GROUP, INC. ARKADOS WIRELESS TECHNOLOGIES, INC. AND ASTER WIRELESS INC.
AGREEMENT
AND PLAN OF MERGER
BY
AND
AMONG
ARKADOS
WIRELESS TECHNOLOGIES, INC.
AND
ASTER
WIRELESS INC.
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of
February 13, 2007, among Arkados Group, Inc., a Delaware corporation (“Parent”),
Arkados Wireless Technologies, Inc., a Delaware corporation and a newly formed
wholly owned subsidiary of Parent (“Arkados”) and Aster Wireless Inc., a
Delaware corporation (“Aster”).
RECITALS
A. Upon
the
terms and subject to the conditions of this Agreement and in accordance with
the
Delaware General Corporation Law (“Delaware Law”), Parent, Arkados and Aster
intend to enter into a business combination transaction.
B. The
Board
of Directors of Arkados (i) has determined that the Merger (as defined in
Section 1.2 below) is consistent with and in furtherance of the long-term
business strategy of Arkados and fair to, and in the best interests of, Arkados
and its stockholders, (ii) has approved this Agreement, the Merger and the
other
transactions contemplated by this Agreement, and (iii) has adopted a resolution
declaring the Merger advisable.
C. The
Board
of Directors of Parent (i) has determined that the Merger is consistent with
and
in furtherance of the long-term business strategy of Parent and fair to, and
in
the best interests of, Parent and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(iii) has adopted a resolution declaring the Merger advisable and (iv) has
approved the issuance of shares of Parent Common Stock (as defined below)
pursuant to the Merger (the “Share Issuance”).
D. The
Board
of Directors of Aster (i) has determined that the Merger is consistent with
and
in furtherance of the long-term business strategy of Aster and fair to, and
in
the best interests of, Aster and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(iii) has adopted a resolution declaring the Merger advisable and (iv) has
determined to recommend that the stockholders of Aster adopt this
Agreement.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger.
At the
Effective Time (as defined in Section 1.2 hereof) and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of the
Delaware General Corporation Law (“Delaware Law”), Aster shall be merged with
and into Arkados (the “Merger”), the separate corporate existence of Aster shall
cease and Arkados shall continue as the surviving corporation and a wholly-owned
subsidiary of Parent. The surviving corporation after the Merger is sometimes
referred to hereinafter as the “ Surviving Corporation.”
1.2 Effective
Time.
Unless
this Agreement is earlier terminated pursuant to Article VII hereof, the closing
of the Merger and the other transactions contemplated by this Agreement
(the
“Closing”) will take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at a time and date
to be
specified by the parties, but in no event later than two (2) business days
following satisfaction or waiver of the conditions set forth in Article VI
hereof. The date upon which the Closing actually occurs is herein referred
to as
the “Closing Date.” On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger substantially in
the
form annexed hereto as Exhibit A (or like instrument, a “Certificate of Merger”)
with respect to the Merger with the Secretary of State of the State of Delaware,
in accordance with the relevant provisions of Delaware Law (the time at which
the Merger has become fully effective (or such later time as may be agreed
in
writing by Parent and specified in the Certificate of Merger) is referred to
herein as the “Effective Time”).
1.3 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, except as provided herein, all
the
property, rights, privileges, powers and franchises of Arkados and Aster shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Aster shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificates
of Incorporation; Bylaws.
(a)
Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time the Certificate of Incorporation of Arkados as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation at and after the Effective Time
until
thereafter amended in accordance with the Delaware Law and the terms of such
Certificate of Incorporation.
(b) Unless
otherwise determined by Parent prior to the Effective Time, (i) the Bylaws
of
Arkados as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation at and after the Effective Time, until thereafter
amended in accordance with Delaware Law and the terms of Certificate of
Incorporation of the Surviving Corporation and such By Laws.
1.5 Directors
and Officers.
(a)
Unless otherwise determined by Parent prior to the Effective Time, the directors
of Arkados immediately prior to the Effective Time shall be the directors of
the
Surviving Corporation and at and after the Effective Time, each to hold the
office of a director of the Surviving Corporation in accordance with the
provisions of Delaware Law and the Certificate of Incorporation and Bylaws
of
the Surviving Corporation until their successors are duly elected and
qualified.
(b) Unless
otherwise determined by Parent prior to the Effective Time, the officers of
Arkados immediately prior to the Effective Time shall be the officers of the
Surviving Corporation at and after the Effective Time, each to hold office
in
accordance with the provisions of the Bylaws of the Surviving
Corporation.
1.6 Effect
on Capital Stock.
Subject
to the terms and conditions of this Agreement, at the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Arkados, Aster
or
the holders of any of the following securities, the following shall
occur:
(a) Conversion
of Aster Capital Stock.
(i)
Common
Stock.
Each
share of Common Stock, par value $0.001 per share of Aster (the “Aster Common
Stock”) issued and
outstanding
immediately prior to the Effective Time (excluding any share of Aster Common
Stock to be canceled and extinguished pursuant to Section 1.6(b) will be
automatically converted (subject to Sections 1.6(d) and (e)) into 0.454545
shares of Common Stock, par value $0.0001 per share, of Parent (the “Parent
Common Stock”), such that the holders of Aster Common Stock will, in the
aggregate, receive 100,000 shares of Parent Common Stock. If any shares of
Aster
Common Stock outstanding immediately prior to the Effective Time are unvested
or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with
Aster, then the shares of Parent Common Stock issued in exchange for such shares
of Aster Common Stock will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock may accordingly be marked with appropriate
legends.
(ii) Series
A Preferred Stock.
Each
share of Series A Preferred Stock, par value $0.001 per share of Aster (the
“Aster Series A Stock”) issued and outstanding immediately prior to the
Effective Time (excluding any share of Aster Series A Stock to be canceled
and
extinguished pursuant to Section 1.6(b) will be automatically converted (subject
to Sections 1.6(d) and (e)) into 0.15342 shares of Parent Common Stock, such
that the holders of Aster Series A Stock will, in the aggregate, receive 100,000
shares of Parent Common Stock. If any shares of Aster Series A Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with Aster, then the
shares of Parent Common Stock issued in exchange for such shares of Aster Series
A Stock will also be unvested and subject to the same repurchase option, risk
of
forfeiture or other condition, and the certificates representing such shares
of
Parent Common Stock may accordingly be marked with appropriate
legends.
(iii) Series
A1 Preferred Stock.
Each
share of Series A1 Preferred Stock, par value $0.001 per share of Aster (the
“Aster Series A1 Stock”) issued and outstanding immediately prior to the
Effective Time (excluding any share of Aster Series A1 Stock to be canceled
and
extinguished pursuant to Section 1.6(b) will be automatically converted (subject
to Sections 1.6(d) and (e)) into 1.96230 shares of Parent Common Stock, such
that the holders of Aster Series A1 Stock will, in the aggregate, receive
800,000 shares of Parent Common Stock. If any shares of Aster Series A1 Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with Aster,
then the shares of Parent Common Stock issued in exchange for such shares of
Aster Series A1 Stock will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock may accordingly be marked with appropriate
legends. The Aster Common Stock, Aster Series A Stock and Aster Series A1 Stock
are collectively referred to as the “Aster Stock.” The holders of the Aster
Stock will receive, in the aggregate, 1,000,000 shares of Parent Common Stock
as
a result of the Merger and such shares are referred to herein as the “Merger
Consideration.”
(b) Cancellation
of Aster Stock.
Each
share of Aster Stock held by Aster immediately prior to the Effective Time
shall
be canceled and extinguished without any conversion thereof.
(c) Aster Stock
Options/Warrants.
Prior
to the Effective Time, all options and warrants to purchase Aster Common Stock
then outstanding shall be cancelled.
(d) Adjustments
to Merger Consideration.
The
Merger Consideration shall be adjusted to reflect appropriately the effect
of
any stock split, reverse stock split, stock dividend (including any dividend
or
distribution of securities convertible into or exercisable or exchangeable
for
Parent Common Stock), reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Parent
Common Stock, occurring or having a record date on or after the date hereof
and
prior to the Effective Time.
(e) Fractional
Shares.
No
fraction of a share of Parent Common Stock will be issued by virtue of the
Mergers. In lieu thereof any fractional share will be rounded to the nearest
whole share of Parent Common Stock (with .5 being rounded up).
1.7 Surrender
of Certificates. (a)
Parent
to Provide Common Stock.
Promptly after the Effective Time, Parent shall make available in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.6(a) in exchange for outstanding shares of Aster Stock.
(b) Exchange
Procedures.
Promptly after the Effective Time, Parent shall mail to each holder of record
(as of the Effective Time) of a certificate or certificates, which immediately
prior to the Effective Time represented outstanding shares of Aster Stock (the
“Certificates”) (i) a letter of transmittal in customary form (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Parent
and (ii) instructions for use in effecting the surrender of the Certificates
in
exchange for certificates representing shares of Parent Common Stock pursuant
to
Section 1.6(a). Upon surrender of Certificates for cancellation to the Parent,
together with such letter of transmittal, duly completed and validly executed
in
accordance with the instructions thereto, the holders of such Certificates
shall
be entitled to receive in exchange therefor certificates representing the number
of whole shares of Parent Common Stock into which their shares of Aster Stock
were converted pursuant to Section 1.6(a), and the Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding Certificates
will
be deemed, from and after the Effective Time, to evidence only the ownership
of
the number of whole shares of Parent Common Stock into which such shares of
Aster Stock shall have been so converted (including any voting, notice or other
rights associated with the ownership of such shares of Parent Common Stock
under
the Certificate of Incorporation or Bylaws of Parent or under Delaware
Law.
(c) Transfers
of Ownership.
If
certificates representing shares of Parent Common Stock are to be issued in
a
name other than that in which the Certificates surrendered in exchange therefor
are registered, it will be a condition of the issuance thereof that the
Certificates so surrendered will be properly endorsed and otherwise in proper
form for transfer (including the signature guaranty of an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee Medallion program,
pursuant to S.E.C. Rule 17Ad-15) and that the persons requesting such exchange
will have (i) paid to Parent or any agent designated by it any transfer fees
or
other taxes required by reason of the issuance of certificates representing
shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or (ii) established to the satisfaction
of Parent or any agent designated by it that such tax has been paid or is not
payable.
(d) Required
Withholding.
Each of
the Parent and the Surviving Corporation shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable
pursuant
to this Agreement to any holder or former holder of Aster Stock such amounts
as
may be required to be deducted or withheld therefrom under the Code or state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement
as
having been paid to the person to whom such amounts would otherwise have been
paid.
(e) No
Liability.
Notwithstanding anything to the contrary in this Section 1.10, neither the
Parent, the Surviving Corporation, nor any party hereto shall be liable to
a
holder of shares of Parent Common Stock, Aster Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.8 No
Further Ownership Rights in Aster Stock.
All
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of all rights pertaining
to
such shares of Aster Stock. After the Effective Time, there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Aster Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Article I.
1.9 Lost,
Stolen or Destroyed Certificates.
In the
event that any Certificates shall have been lost, stolen or destroyed, the
Parent shall issue and pay in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing the shares of Parent Common Stock into which
the shares of Aster Stock represented by such Certificates were converted
pursuant to Section 1.6(a); provided, however, that the Parent may, in its
discretion and as a condition precedent to the issuance of such certificates
representing shares of Parent Common Stock require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Surviving Corporation with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.10 Tax
Treatment.
It is
intended by the parties hereto that the Merger shall constitute reorganizations
within the meaning of Section 368(a) of the Code. Each of the parties hereto
adopt this Agreement as a “plan of reorganization” within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
Both prior to and after the Closing, each party’s books and records shall be
maintained, and all federal, state and local income tax returns and schedules
thereto shall be filed in a manner consistent with the Merger being qualified
as
a triangular merger under Section 368(a)(2)(D) of the Code (and comparable
provisions of any applicable state or local laws) and with the Merger being
qualified as a reorganization described in Section 368(a)(1)(A) of the Code
(and comparable provisions of any applicable state or local laws).
1.11 Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation (and/or their respective successors in interest) with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of Aster, the officers and directors of Parent and the Surviving
Corporation shall be fully authorized (in the name of Aster and otherwise)
to
take all such necessary action.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF ASTER
Except
as
set forth in the corresponding sections or subsections of the disclosure
schedule delivered to Arkados and Parent by Aster on or prior to entering into
this Agreement (the “Aster Schedule”), Aster hereby represents and warrants to
Arkados and Parent that (all references to “Schedules” in this Agreement, unless
otherwise specifically stated, are references to schedules attached to the
Aster
Schedule):
2.1 Organization
of Aster.
(a)
Aster is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware; has the corporate power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted; and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Aster Material Adverse Effect. As used in this Agreement, “Aster
Material Adverse Effect” means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of Aster
as
a whole, or on the ability of the Aster to consummate the transactions
contemplated by this Agreement; it being understood, however, that Aster’s
continuing to incur losses, as long as such losses are in the ordinary course
of
business and are comparable to those incurred by Aster prior to the date hereof,
shall not, alone, be deemed to be a Aster Material Adverse Effect and neither
shall any effect caused by (i) any adverse change, event or effect that is
demonstrated to be caused primarily by conditions generally affecting the United
States economy; (ii) any adverse change, event or effect that is demonstrated
to
be caused primarily by conditions generally affecting the electronics
industries, (iii) any adverse change, event or effect resulting from the
execution of this Agreement or the consummation or announcement of the
transactions contemplated hereby (except to the extent resulting from the breach
by Seller of a representation, warranty or covenant) or the taking of any action
permitted by this Agreement, (iv) any adverse change, event or effect resulting
from any changes in any applicable law, rule or regulation or generally accepted
accounting principles, or (v) any adverse change, event or effect resulting
from
the commencement, occurrence or continuation of any war, armed hostilities
or
acts of terrorism involving the United States of America or any part
thereof.
(b) Aster
does not have any subsidiaries and does not control, directly or indirectly,
or
have any equity participation or similar interest in any entity.
(c) Aster
has
delivered or made available to Arkados and Parent a true and correct copy of
the
Certificate of Incorporation and Bylaws of Aster as amended to date, and each
such instrument is in full force and effect. Aster is not in violation of any
of
the provisions of its Certificate of Incorporation or Bylaws or equivalent
governing instruments, subject only to the adoption by Aster’s stockholders of
this Agreement and an amendment to the Certificate of Incorporation of Aster
amending Section 5(a)(4)(C) of paragraph THIRD of the Certificate of
Incorporation of Aster to fix the distribution of the Merger
Consideration.
2.2 Aster
Capital Structure.
The
authorized capital stock of Aster consists of 3,000,000 shares of Common Stock,
par value $.001 per share, of which there were 220,000 shares issued and
outstanding as of December 31, 2006; 780,000 shares of Series A Preferred Stock,
par value $.001 per share, 651,799 of which are issued and outstanding as of
December 31, 2006; and 615,384 Series A1 Preferred Stock, par value $.001 per
share, 407,685 of which
are
issued and outstanding as of December 31, 2006. All outstanding shares of Aster
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are not subject to preemptive rights created by statute, the Certificate
of
Incorporation or Bylaws of Aster, or any agreement or document to which Aster
is
a party or by which it is bound. As of December 31, 2006, Aster had reserved
an
aggregate of 230,770 shares of Aster Common Stock for issuance to holders of
warrants to purchase shares of Aster Common Stock. Such warrants are set forth
in Schedule 2.2 and are referred to as the “Aster Warrants.” All shares of Aster
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued,
fully
paid and nonassessable.
2.3 Obligations
With Respect to Capital Stock.
Except
as set forth in Section 2.2, there are no equity securities, partnership
interests or similar ownership interests of any class of Aster, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments
or
agreements of any character to which Aster is a party or by which it is bound
obligating Aster to issue, deliver or sell, or cause to be issued, delivered
or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of Aster or obligating
Aster to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, partnership interest or similar ownership interest,
call, right, commitment or agreement. Except as set forth in Schedule 2.3,
there
are no registration rights and, to the knowledge of Aster there are no voting
trusts, proxies or other agreements or understandings with respect to any equity
security of any class of Aster.
2.4 Authority.
(a)
Assuming the adoption by Aster’s stockholders of this Agreement and an amendment
to the Certificate of Incorporation of Aster amending Section 5(a)(4)(C) of
paragraph THIRD of the Certificate of Incorporation of Aster to fix the
distribution of the Merger Consideration, (i)
Aster
has all requisite corporate power and authority to enter into this Agreement
and
to consummate the transactions contemplated hereby and thereby, (ii) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Aster, (iii) a vote of the holders of at least
a
majority of the outstanding shares of the Aster Common Stock is required for
Aster’s stockholders to approve and adopt this Agreement and approve the
Mergers, (iv) this Agreement has been duly executed and delivered by Aster
and,
assuming the due authorization, execution and delivery by Arkados and Parent
constitute the valid and binding obligations of Aster, enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws and general principles of equity, (v) the execution and
delivery of this Agreement by Aster does not, and the performance of this
Agreement by Aster will not, (x) conflict with or violate the Certificate of
Incorporation or Bylaws of Aster (the “Aster Charter Documents”) or the
equivalent organizational documents of any of its Subsidiaries, (y) subject
to
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Aster or any of its Subsidiaries or by which its or any of their respective
properties is bound or affected, or (z) except as set forth in Schedule 2.4,
result in any breach of, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or impair Aster’s rights
or alter the rights or obligations of any third party under, or to Aster’s
knowledge,
give
to
others any rights of termination, amendment, acceleration or cancellation of,
or
result in the creation of an Encumbrance on any of the properties or assets
of
Aster pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Aster is a party or by which Aster or its properties are bound or affected,
except to the extent such conflict, violation, breach, default, impairment
or
other effect would not, in the case of clause (y) or (z), individually or in
the
aggregate, reasonably be expected to have a Aster Material Adverse
Effect.
(b) No
consent, approval, order or authorization of, or registration, declaration
or
filing with any court, administrative agency or commission or other governmental
authority or instrumentality (“Governmental Entity”) is required by or with
respect to Aster in connection with the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby, except
for (i) the filing with the Secretary of State of Delaware of the Certificates
of Merger and the amendment to the Certificate of Incorporation of Aster
amending Section 5(a)(4)(C) of paragraph THIRD of the Certificate of
Incorporation of Aster to fix the distribution of the Merger Consideration,
(ii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, individually or in the aggregate,
would not be reasonably likely to have a Aster Material Adverse
Effect.
2.5 Aster
Financial Statements.
Attached
to Schedule 2.5 is the audited balance sheets of Aster as of November 30, 2006
together with the related consolidated statements of income and cash flows
for
the fiscal periods of Aster then ended, all certified by ▇▇▇▇▇▇▇▇▇ & Co.,
LLP, Aster’s independent public accountants whose audit reports thereon are
included therewith the “Aster Financial Statements”). The Aster Financial
Statements (including, in each case, any related notes thereto) was prepared
in
accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis throughout the periods involved, and each fairly presents
the
financial position of Aster as of the respective dates thereof and the
results
of its operations and cash flows and stockholder equity for the periods
indicated.
Except
as disclosed in the Aster Financial Statements, Aster does not have any
liabilities (absolute, accrued, contingent or otherwise) of a nature required
to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or
in the aggregate, material to the business, results of operations or financial
condition of Aster, except liabilities incurred since the date of the Aster
Financial Statements in the ordinary course of business consistent with past
practices and which would not reasonably be expected to have a Aster Material
Adverse Effect.
2.6 Absence
of Certain Changes or Events.
Other
than as set forth on Schedule 2.6, except as contemplated by this Agreement,
since
the
date of the Aster Financial Statements, Aster has conducted its business only
in, and have not engaged in any material transaction other than according to,
the ordinary and usual course of such businesses and there has not been
(i) any change that, individually or in the aggregate, has had or is
reasonably likely to have a Aster Material Adverse Effect; (ii) any material
damage, destruction or other casualty loss with respect to any material asset
or
property owned, leased or otherwise used by Aster or any of its Subsidiaries,
whether or not covered by insurance; (iii) any declaration, setting aside or
payment of any dividend or other distribution in cash, stock or property in
respect of the capital stock of Aster, except for dividends or other
distributions on its capital stock publicly announced prior to the date hereof
and except as expressly permitted hereby; (iv) any event that would constitute
a
violation
of Section 4.1 hereof if such event occurred after the date of this
Agreement and
prior
to the Effective Time; or (v) any change by Aster in accounting principles,
practices or methods.
Since
the date of the Aster Balance Sheet, except as set forth in Schedule 2.6, there
has not been any increase in the compensation payable or that could become
payable by Aster to officers or key employees or any amendment of the Aster
Option Plans other than increases or amendments in the ordinary course of
business consistent with past practice or (y) as required by any relevant
employment agreement, option agreement or (z) which, individually or in the
aggregate, would not reasonably be expected to have a Aster Material Adverse
Effect.
2.7 Taxes. (a)
For
purposes of this Agreement, (i) “Taxes” shall mean all Federal, state, local,
foreign, provincial, territorial or other taxes, imports, tariffs, fees, levies
or other similar assessments or liabilities and other charges of any kind,
including income taxes, profits taxes, franchise taxes, ad valorem taxes, excise
taxes, withholding taxes, stamp taxes or other taxes of or with respect to
gross
receipts, premiums, real property, personal property, windfall profits, sales,
use, transfers, licensing, employment, social security, workers’ compensation,
unemployment, payroll and franchises imposed by or under any law (meaning all
laws, statutes, ordinances and regulations of any governmental authority
including all decisions of any court having the effect of law); and any other
taxes, duties or assessments, together with all interest, penalties and
additions imposed with respect to such amounts; (ii) “Tax Returns” shall mean
any declaration, return, report, schedule, certificate, statement or other
similar document (including relating or supporting information) required to
be
filed with any Taxing Authority (as defined below), or where none is required
to
be filed with a Taxing Authority, the statement or other document issued by
the
applicable Taxing Authority in connection with any Tax, including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax; and (iii) “Taxing Authority” shall mean any
domestic, foreign, Federal, national, provincial, state, county or municipal
or
other local government or court, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising tax regulatory
authority.
(b) Aster
(i)
has timely filed all Tax Returns that are required to have been filed by it
with
all appropriate Taxing Authorities (and all such returns are true and correct
and fairly reflect in all material respects its operations for tax purposes);
and (ii) has timely paid all Taxes shown as owing on such Tax Returns or
assessed by any Taxing Authority (other than Taxes the validity of which are
being contested in good faith by appropriate proceedings). Between December
31,
2002 and the Closing Date, Aster has not incurred (or will incur) a Tax
liability other than a Tax liability in the ordinary course of business and
in
accordance with past custom and practice. The assessment of any additional
Taxes
for periods for which Tax Returns have been filed is not expected to exceed
reserves made in accordance with GAAP and reflected in the Aster Financial
Statements and, to Aster’s knowledge, there are no material unresolved questions
or claims concerning Aster’s tax liability. To Aster’s knowledge Aster’s Tax
Returns have been reviewed or audited by any Taxing Authority and no
deficiencies for any Taxes have been proposed, asserted or assessed either
orally or in writing against Aster that are not adequately reserved for in
accordance with GAAP. No Encumbrance exists for Taxes with respect to any of
the
assets or properties of Aster.
(c) Aster
does not have outstanding any agreements or waivers extending, or having the
effect of extending, the statute of limitations with respect to the assessment
or collection of any Tax or the filing of any Tax Return.
(d) Aster
is
not a party to or bound by any tax-sharing agreement, tax indemnity obligation
or similar agreement, arrangement or practice with respect to Taxes (including
any advance pricing agreement, closing agreement or other agreement relating
to
Taxes with any Taxing Authority).
(e) Except
as
set forth on Schedule 2.7, Aster shall not be required to include in a taxable
period ending after the Closing Date any taxable income attributable to income
that accrued in a prior taxable period but was not recognized in any prior
taxable period as a result of the installment method of accounting, the
long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or any comparable provision of state, local or foreign
Tax law, or for any other reason.
(f) Except
as
set forth on Schedule 2.7, Aster has not made with respect to Aster any consent
under Section 341 of the Code, no property of Aster is “tax exempt use property”
within the meaning of Section 168(h) of the Code, and none of the assets of
Aster is subject to a lease under Section 7701(h) of the Code or under any
predecessor section thereof.
(g) Aster
has
complied in all material respects with all applicable laws relating to the
payment and withholding of Taxes (including, without limitation, withholding
of
Taxes pursuant to Sections 1441, 1442, 3121, 3402 and 3406 of the Code or any
comparable provision of any state, local or foreign laws) and has, within the
time and in the manner prescribed by applicable law, withheld from and paid
over
to the proper Taxing Authorities all amounts required to be so withheld and
paid
over under applicable laws.
(h) To
Aster’s knowledge the net operating losses (“NOL”) of Aster are not, as of the
date hereof, subject to Section 382 or 269 of the Code, Regulation Section
1.1502-21(c), or any similar provisions or Regulations otherwise limiting the
use of the NOLs of Aster.
(i) Aster
is
not, and has not been for the five years preceding the Closing, a “United States
real property holding company” (as such term is defined in Section 897(c)(2) of
the Code).
(j) As
of the
date hereof, to the knowledge of Aster, Aster or its affiliates has not taken
or
agreed to take any action or failed to take any action that would prevent the
Mergers from constituting a reorganization within the meaning of Section 368(a)
of the Code.
(k) Any
deficiency resulting from any audit or examination relating to Taxes of Aster
by
any Taxing Authority has been timely paid.
(l) Except
as
set forth on Schedule 2.7, no power of attorney with respect to any Taxes has
been executed or filed with any Taxing Authority by or on behalf of
Aster.
2.8 Patents
and Trademarks.
As used
in this Agreement, “Intellectual Property” means (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, divisionals,
substitutions, continuations-in-part, provisionals, revisions, extensions and
re-examinations thereof, (ii) all trademarks, service marks, trade names, logos,
corporate names and Internet domain names, including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (iii) all copyrights and all applications, registrations and renewals
in connection therewith,
(iv) all
trade secrets and confidential business information (including ideas, research
and development, copyrights, know-how, formulas, compositions, manufacturing
and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (v) all computer programs and
software (including data and related documents), (vi) all know-how , research
information, research data and notebooks and (vii) all other proprietary rights.
Schedule 2.8 contains a complete list of all Intellectual Property
registered in Aster’s name and material to Aster’s business as conducted as of
the date hereof (collectively, the “Aster Registered Intellectual Property”).
Except as set forth on Schedule 2.8, Aster owns, free and clear of any
Encumbrances, all right, title and interest to the Aster Registered Intellectual
Property. With respect to Intellectual Property, other than the Aster Registered
Intellectual Property, used or held for use by Aster in its business as
conducted as of the date hereof (the “Other Intellectual Property”), Aster owns,
controls or has a right to use, to the extent necessary to conduct its business
in a manner generally consistent with its past practice, such Other Intellectual
Property which is material to Aster’s business. Except as set forth on Schedule
2.8, Aster is not a party to any outstanding options, licenses or agreements
of
any kind relating to (i) any Other Intellectual Property owned by any other
person or entity (other than agreements with respect to commercially available
“off-the-shelf” computer software) or (ii) the Aster Registered Intellectual
Property. Aster has not during the preceding three years received any
communications or claims nor, to Aster’s knowledge, is there any threatened
claim, alleging that Aster has infringed upon, or, by conducting its business
as
proposed, would infringe upon the intellectual property rights of any other
person which such infringement would have a Aster Material Adverse Effect.
Except as set forth on Schedule 2.8, to the knowledge of Aster, no third party
has interfered with, infringed upon or misappropriated any of Aster’s rights to
the Aster Registered Intellectual Property or Other Intellectual Property which
such interference, infringement or misappropriation would constitute a Aster
Material Adverse Effect.
2.9 Compliance;
Permits; Restrictions.
(a)
Except as disclosed on Schedule 2.9, to Aster’s knowledge Aster
is
not in default or violation of (i) any law, rule, regulation, order, judgment
or
decree applicable to Aster or by which its properties is bound or affected,
or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Aster is a party
or
by which Aster or its properties is bound or affected except for those defaults
or violations which would not be reasonably expected to have a Aster Material
Adverse Effect. Except as disclosed on Schedule 2.9 to the knowledge of Aster,
no investigation or review by any Governmental Entity is pending or threatened
against Aster, nor has any Governmental Entity indicated in writing an intention
to conduct the same other than those which would not reasonably be expected
to
have a Aster Material Adverse Effect. There is no agreement, judgment,
injunction, order or decree binding upon Aster which has or would reasonably
be
expected to have the effect of prohibiting or materially impairing any business
practice of Aster, any acquisition of material property by Aster or the conduct
of business by Aster as currently conducted.
(b) Aster
hold all permits, licenses, variances, exemptions, orders and approvals from
Governmental Entities which would be necessary to the conduct of the business
of
Aster except those the absence of which would not, individually or in the
aggregate, reasonably be likely to have a Aster Material Adverse Effect
(collectively, the “Aster Permits”). Aster is in compliance in all material
respects with the terms of the Aster Permits.
2.10 Litigation.
Except
as set forth on Schedule 2.10, as of the date of this Agreement, there is no
action, suit, proceeding, claim, arbitration or investigation pending, including
derivative suits brought by or on behalf of Aster or as to which Aster has
received any notice of assertion nor, to Aster’s knowledge, is there a
threatened action, suit, proceeding, claim, arbitration or investigation against
Aster seeking to delay, limit or enjoin the transactions contemplated by this
Agreement or which might reasonably be expected to have a Aster Material Adverse
Effect.
2.11 Brokers’
and Finders’ Fees.
Aster
has not incurred, nor will it incur, directly or indirectly, any liability
for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby.
2.12 Labor
Agreements and Actions; Employee Benefit Plans.
(a)
Aster
is
not bound by or subject to (and none of its assets or properties is bound by
or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of Aster, has sought to represent any of the employees,
representatives, or agents of Aster. There is no strike or other labor dispute
involving the Aster pending or, to the knowledge of Aster, threatened, nor
does
Aster have knowledge of any labor organization activity involving its
employees.
(b) Schedule
2.12(b) contains a complete list of each pension, profit-sharing or other
retirement, bonus, deferred compensation, employment agreement, severance
agreement, incentive compensation, stock purchase, stock option, severance
or
termination pay, hospitalization or other medical, life or other insurance,
long- or short-term disability, fringe benefit, sick pay, or vacation pay,
or
other employee benefit plan, program, agreement, or arrangement or policy,
whether formal or informal, funded or unfunded, written or unwritten, and
whether legally binding or not, sponsored, maintained, contributed to or
required to be contributed to by (i) Aster with respect to current or former
employees or any current or former director or consultant of Aster, and/or
(ii)
any trade or business, whether or not incorporated, that together with Aster
would be deemed a “single employer” that includes Aster within the meaning of
Section 4001(a)(14) of ERISA, and the rules and regulations promulgated
thereunder (collectively, “Aster Benefit Plans”); provided that each informal or
unwritten Aster Benefit Plan is described in summary form in Schedule 2.12(b).
(c) True
and
complete copies of all (i) Aster Benefit Plans, including but not limited to,
any trust instruments and insurance contracts forming a part of any Aster Plans,
and all amendments thereto and summaries of unwritten Aster Benefit Plans;
(ii)
the three (3) most recent actuarial valuations, if any, prepared for each
applicable Aster Benefit Plan; (iii) the three (3) most recent reports (Series
5500 and all schedules thereto), if any, required under ERISA or the Code in
connection with each applicable Aster Benefit Plan or related trust; (iv) the
most recent determination letters received from the Internal Revenue Service,
if
any, for each applicable Aster Benefit Plan and related trust which is intended
to satisfy the requirements of Section 401(a) of the Code; (v) the most recent
summary plan description, together with the most recent summary of material
modifications, if any, required under ERISA with respect to each applicable
Aster Benefit Plan; and (vi) all material communications to any Aster Employees
relating to each Aster Benefit Plan have been provided or made available to
Arkados and Parent.
(d) To
Aster’s knowledge, all Aster Benefit Plans that are “employee benefit plans”
within the meaning of Section 3(3) of ERISA, other than “multiemployer plans”
within
the
meaning of Section 3(37) of ERISA, covering Aster Employees, to the extent
subject to ERISA, are in substantial compliance with ERISA, the Code, and all
other applicable law. As of the date hereof, other than claims for benefits
submitted in the ordinary course by participants or beneficiaries under the
Aster Benefit Plans, no material claim against any Aster Benefit Plan, and
no
legal or regulatory proceeding (including any audit or voluntary compliance
resolution or closing agreement program proceeding) involving, any Aster Benefit
Plan, is pending, or to the knowledge of Aster, threatened.
(e) Aster
has
no obligations for retiree health and life benefits under any Aster Benefit
Plan
or has ever represented, promised or contracted (whether in oral or written
form) to any employee(s) that such employee(s) would be provided with retiree
health or life benefits which would have a material impact on Aster, except
as
required under §601 of ERISA.
(f) Except
as
set forth in Schedule 2.12(f), the consummation of the transactions contemplated
by this Agreement will not (x) entitle any employees of Aster to severance
pay,
(y) accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust other otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation pursuant
to, any of the Aster Benefit Plans or (z) result in any breach or violation
of, or a default under, any of the Aster Benefit Plans.
(g) Any
amount that could be received (whether in cash, property, or vesting of
property) as a result of the transaction contemplated by this Agreement by
any
officer, director, employee or independent contractor of Aster or any of its
Subsidiaries, who is a “disqualified individual” (as defined in proposed
Treasury Regulation Section 1.280G-1), under any employment arrangement or
Aster
Benefit Plan would not be characterized as an “excess parachute payment” (as
defined in Section 280G of the Code).
(h) Schedule
2.12(h) contains a complete and correct list of all employees of Aster
indicating their salary for 2005 and 2006.
2.13 Absence
of Liens and Encumbrances.
Aster
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used in its business, free and clear of any encumbrances,
charges, claims equitable interests, liens, options, pledges, security
interests, mortgages, rights of first refusal or restrictions of any kind and
nature except (i) as reflected in the Aster Financial Statements, (ii) for
liens
for taxes not yet due and payable and (iii) for such imperfections of title
and
encumbrances, if any, which would not be reasonably expected to have a Aster
Material Adverse Effect (collectively the “Encumbrances”).
2.14 Environmental
Matters.
(a)
Hazardous
Materials Activities.
Except
as would not reasonably be likely to result in an Aster Material Adverse Effect
(in any individual case or in the aggregate), (i) Aster has not transported,
stored, used, manufactured, disposed of, released or exposed its employees
or
others to pollutants, contaminants, wastes, any toxic, radioactive or otherwise
hazardous materials (“Hazardous Materials”) in violation of any law in effect on
or before the Closing Date, and (ii) Aster has not disposed of, transported,
sold, used, released, exposed its employees or others to or manufactured any
product containing a Hazardous Material (collectively, “Hazardous Materials
Activities”) in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(b) Environmental
Liabilities.
No
action, proceeding, revocation proceeding, amendment procedure, writ, injunction
or claim is pending, or to Aster’s knowledge, threatened concerning any Aster
Permit relating to any environmental matter, Hazardous Material or any Hazardous
Materials Activity of Aster. Aster does not have knowledge of any fact or
circumstance which could involve Aster in any environmental litigation or impose
upon Aster any environmental liability.
2.15 Agreements. (a)
Except
as set forth in Schedule 2.15(a), there are no written agreements between Aster
and any of its officers, directors, employees or shareholders or any affiliate
thereof.
(b) Except
as
set forth in Schedule 2.15(b), there are no written agreements, to which Aster
is a party or by which it is bound which (i) involve obligations (contingent
or
otherwise) of, or payments to, the Aster in excess of $5,000, (ii) are material
to the conduct and operations of the Aster’s business or properties (including,
without limitation, the license of any Intellectual Property to or from Aster),
(iii) restrict or materially adversely affect the development, manufacture,
sale, marketing or distribution of Aster’s products or services,
(iv) relating to the employment or compensation of any employee or
consultant, (v) of duration of six months or more and not cancelable
without penalty by Aster on 30 days or less notice or (vi) relating to the
sale, lease, pledge or other disposition of any material assets of or to
Aster.
(c) Except
as
set forth in Schedule 2.15(c), Aster, nor to Aster’s knowledge any other party
to a Aster Contract (as defined below), is in breach, violation or default
under, and Aster has not been notified that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which Aster or any of its Subsidiaries
is a party or by which it is bound that are required to be disclosed in
Schedules 2.15(a) or 2.15(b) (any such agreement, contract or commitment, a
“Aster Contract”) in such a manner as would permit any other party to cancel or
terminate any such Aster Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
(d) Each
of
the Aster Contracts are legal, valid, binding and enforceable and in full force
and effect with respect to the Aster and, to Aster’s knowledge with respect to
each other party thereto, in either case subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and except as the availability of equitable remedies
may be limited by general principles of equity; and the Aster Contracts will
continue to be legal, valid, binding and enforceable and in full force and
effect with respect to Aster immediately following the Closing in accordance
with the terms thereof as in effect prior to the Closing subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
(e) Aster
has
not been notified in writing that any party to any of the Aster Contracts
intends to cancel, terminate, proposes to amend, not renew or exercise an option
under any of Aster Contracts, whether in connection with the transactions
contemplated hereby or otherwise does Aster have any knowledge of any intention
by any party to any Aster Contract to effect any of the foregoing.
2.16 Board
Approval.
The
Board of Directors of Aster has, as of the date of this Agreement, (i)
determined that the Mergers are fair to and in the best interests of Aster
and
its stockholders, (ii) determined to recommend that the stockholders of Aster
adopt this Agreement and (iii) duly approved the Mergers, this Agreement and
the
transactions contemplated hereby.
2.17 Disclosure.
No
representation or warranty of the parties to this Agreement and no statement
in
the Schedules omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ARKADOS
Except
as
set forth in the corresponding sections or subsections of the disclosure letter
delivered to Aster by Arkados on or prior to entering into this Agreement (the
“Arkados Schedule”), each of Parent and Arkados hereby represents and warrants
to Aster that:
3.1 Organization.
Parent
and Arkados are corporations duly incorporated, validly existing and in good
standing under the laws of their jurisdiction of incorporation and have all
requisite power and authority to own, lease and operate their properties and
to
carry on their businesses as now being conducted. Parent is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the character of
the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure to be so qualified
or to be in good standing could not have a material adverse effect on the
business, results of operations or financial condition of Parent taken as a
whole, other than any effect caused by (i) any adverse change, event or
effect that is demonstrated to be caused primarily by conditions generally
affecting the United States economy; (ii) any adverse change, event or effect
that is demonstrated to be caused primarily by conditions generally affecting
the electronics industries, (iii) resulting from the execution of this Agreement
or the consummation or announcement of the transactions contemplated hereby
(except to the extent resulting from the breach by Parent or Arkados of a
representation, warranty or covenant) or the taking of any action permitted
by
this Agreement, (iv) resulting from any changes in any applicable law, rule
or
regulation or generally accepted accounting principles, or (v) resulting from
the commencement, occurrence or continuation of any war, armed hostilities
or
acts of terrorism involving the United States of America or any part thereof
(a
“Parent Material Adverse Effect”). There are no facts or circumstances with
respect to the existence, good standing, power, authority or qualification
of
any subsidiary of Parent that have had, or could, individually or in the
aggregate, have a Parent Material Adverse Effect.
3.2 Capitalization.
(a) (i)
The
authorized capital stock of Parent consists of 100,000,000 shares of Parent
Common Stock. Parent has no other class or series of capital stock outstanding.
As of January 6, 2007, there were 25,049,961 shares of Parent Common Stock
issued and outstanding. Except as contemplated by this Agreement or as described
in Parent Reports (defined below), as of the date hereof, there are no existing
options, warrants, calls subscriptions, convertible securities, or other rights,
agreements or commitments, other than pursuant to the Parent Option Plans,
which
obligate Parent to issue, transfer or sell any shares of capital stock of
Parent.
(ii) The
Merger Consideration, upon issuance on the terms and conditions specified in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
(b) The
authorized capital stock of Arkados consists of 100 shares of common stock,
no
par value per share (“Arkados Common Stock”), all of which shares are issued and
outstanding and owned by Parent. Notwithstanding any provisions to the contrary,
Parent may, in its sole discretion, increase or decrease the number of shares
of
authorized Arkados Common Stock and the number of shares of Arkados Common
Stock
issued and outstanding owned by Parent. Arkados has not engaged in any
activities other than in connection with the transactions contemplated by this
Agreement.
3.3 Authorization;
Binding Agreement.
Each of
Parent and Arkados has all requisite corporate power and authority to execute
and deliver this Agreement and all agreements and documents contemplated hereby.
The consummation by Parent and Arkados of the transactions contemplated hereby
has been approved by the board of directors of Parent, the board of Directors
of
Arkados and Parent as the sole stockholder of Arkados and duly and validly
authorized by all necessary corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute legal, valid and binding
obligations of Parent and Arkados, as the case may be, enforceable against
Parent and Arkados in accordance with their respective terms, except as such
enforcement may be limited by general principles of equity whether applied
in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws
affecting creditors’ rights and remedies generally.
3.4 Noncontravention.
Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificate of incorporation, articles of incorporation
or by-laws or equivalent governing instruments of Parent or Arkados, (b) require
any consent, approval or notice under or conflict with or result in a violation
or breach of, or constitute (with or without notice or lapse of time or both)
a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contracts and Other
Agreements to which the Parent is a party or by which it or any portion of
its
properties or assets may be bound or (c) violate any Legal Requirements
applicable to the Parent or any portion of Parent’s properties or assets, except
with respect to clauses (b) and (c) such matters that, individually or in the
aggregate, have not had and could not have a Parent Material Adverse
Effect.
3.5 SEC
Filings; Financial Statements.
(a) As
of
their respective dates, each registration statement, report, proxy statement
or
information statement (as defined in Regulation 14C under the Exchange Act)
of
Parent prepared by it since the initial registration of its shares (including,
without limitation, its Registration Statement on Form 10-SB), in the form
(including exhibits and any amendments thereto) filed with the U.S. Securities
and Exchange Commission (the “SEC”) (collectively, the “Parent Reports”) (i)
complied as to form in all material respects with the applicable requirements
of
the Securities Act, the Exchange Act, and the rules and regulations thereunder
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact
required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, except
that information as of a later date shall be deemed to modify information as
of
an earlier date. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents the consolidated financial position of Parent
as
of its date, and each of the consolidated statements of income, retained
earnings and cash flows included in or incorporated by reference into the Parent
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings or cash flows, as the case may be, of Parent
for the periods set forth therein (subject, in the case of unaudited statements,
to normal year-end audit adjustments), in each case in accordance with GAAP
consistently applied throughout the periods indicated, except as may be noted
therein. Since the date of the most recent Parent Report, there has not been
a
Parent Material Adverse Effect.
(b) As
of the
date of the balance sheet set forth in the Parent Reports, Parent had no
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) except (i) liabilities or obligations reflected on, or reserved
against in, a balance sheet of Parent or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied
and included in the Parent Reports and (ii) liabilities or obligations incurred
in the ordinary course of business which are not material in
amounts.
3.6 Governmental
Approvals.
No
consent, approval or authorization of, or declaration or filing with, any
Governmental Entity on the part of Parent that has not been obtained or made
is
required in connection with the execution or delivery by Parent or Arkados
of
this Agreement or the consummation by Parent or Arkados of the transaction
contemplated hereby, other than (a) the filing of the Certificate of Merger
with
the Secretary of State of the State of Delaware, (b) filings and other
applicable requirements under the Exchange Act, (c) such filings and
approvals as are required to be made or obtained under the securities or “blue
sky” laws of various states in connection with the issuance of Parent Common
Stock contemplated under this Agreement, and (d) consents, approvals,
authorizations, declarations or filings that, if not obtained or made, could
not, individually or in the aggregate, have a Parent Material Adverse Effect
or
prevent Parent or Arkados from consummating the transactions contemplated
hereby.
3.7 144;
Removal of Restrictive Legends.
(a) With
a
view to making available to holders of the Merger Consideration (each a
“Holder”) the benefits of certain rules and regulations of the SEC which may
permit the sale of the Merger Consideration to the public without registration,
the Parent agrees at all times to:
(i) use
its
best efforts to file with the Commission in a timely manner all reports and
other documents required of the Parent under the Securities Act and the
Securities Exchange Act, and
(ii) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 promulgated under the Securities Act.
(b) For
purposes of facilitating sales pursuant to Rule 144A, so long as the Parent
is
not subject to the reporting requirements of Section 13 or 15(d) of the ‘33 Act,
each Holder and
any
prospective purchaser of such Holder’s securities shall have the right to obtain
from the Parent, upon request of the Holder prior to the time of sale, a brief
statement of the nature of the business of the Parent and the products and
services it offers and the Parent’s most recent balance sheet and profit and
loss and retained earnings statements, and similar financial statements for
the
two (2) preceding fiscal years (the financial statements should be audited
to
the extent reasonably available).
(c) Upon
request of a Holder, the Parent shall remove any restrictive legend from the
certificates evidencing the Merger Consideration or issue to such Holder a
new
certificate therefor free of any transfer legend, if (i) there is an effective
registration statement covering the securities represented by such certificate,
or (ii) with such request, the Parent shall have received, at Holders expense
(A) an opinion of counsel reasonably satisfactory to the Parent to the effect
that the proposed sale, pledge, hypothecation or other transfer may be effected
without registration under the Securities Act, or (B) a “no action” letter from
the Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by the Parties.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to its terms or the Effective Time,
Aster shall carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and in substantial compliance with all
applicable laws and regulations, pay their respective debts and taxes when
due
subject to good faith disputes over such debts or taxes, pay or perform other
material obligations when due subject to good faith disputes over such
obligations, and use their commercially reasonable efforts consistent with
past
practices and policies to (i) preserve intact their present business
organization, (ii) keep available the services of each of their present officers
and employees, respectively, and (iii) preserve their relationships with
customers, suppliers, distributors, licensors, licensees and others with which
each party has business dealings material to their respective business.
4.2 Covenants
of Aster.
Except
as permitted by the terms of this Agreement (including, (i) seeking adoption
by
Aster’s stockholders of this Agreement and an amendment to the Certificate of
Incorporation of Aster amending Section 5(a)(4)(C) of paragraph THIRD of the
Certificate of Incorporation of Aster to fix the distribution of the Merger
Consideration, and (ii) causing all warrants for Aster’s common stock to be
cancelled), without the prior written consent of Parent, during the period
from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, Aster shall
not
do any of the following:
(a) Waive
any
stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprise options granted under
any employee, consultant, director or other stock plans or authorize cash
payments in exchange for any options granted under any of such
plans;
(b) Except
as
required by applicable law, grant any severance or termination pay to any
officer or employee except pursuant to written agreements outstanding, or
policies existing, on the date hereof and as previously disclosed in writing
or
made available to Parent, or adopt any new severance plan, or amend or modify
or
alter in any manner any severance plan, agreement or arrangement existing on
the
date hereof;
(c) Except
in
the ordinary course of business consistent with past practices, transfer or
license to any person or entity or otherwise extend, amend or modify any rights
to the Aster Registered Intellectual Property, or enter into grants to transfer
or license to any person future patent rights; provided that in no event shall
Aster license on an exclusive basis or sell any Aster Registered Intellectual
Property (other than in connection with the abandonment of immaterial Aster
Registered Intellectual Property after at least five business days’ written
notice to Parent);
(d) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(e) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of Aster, except (i) repurchases of unvested shares at cost in connection with
the termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof (or any such
agreements entered into in the ordinary course of business consistent with
past
practice by Aster with employees hired after the date hereof), (ii) for the
purpose of funding or providing benefits under any Aster Benefit Plans, Aster
Option Plans, any other stock option and incentive compensation plans, directors
plans, and stock purchase and dividend reinvestment plans in accordance with
past practice;
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber or propose any of the
foregoing with respect to any shares of capital stock or any securities
convertible into shares of capital stock, or subscriptions, rights, warrants
or
options to acquire any shares of capital stock or any securities convertible
into shares of capital stock, or enter into other agreements or commitments
of
any character obligating it to issue any such shares or convertible securities,
or any equity-based awards (whether payable in shares, cash or otherwise) other
than the issuance, delivery and/or sale of shares of Aster Common Stock (as
appropriately adjusted for stock splits and the like) pursuant to the exercise
of stock options or warrants outstanding as of the date of this Agreement.
(g) Cause,
permit or submit to a vote of Aster’s stockholders any amendments to the Aster
Charter Documents;
(h) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to enter into
any joint ventures, strategic partnerships or strategic investments; provided,
that Aster shall not be prohibited from entering into business development
deals
in the ordinary course of business;
(i) Sell,
lease, license, encumber or otherwise dispose of any properties or assets except
in the ordinary course of business consistent with past practice, except for
the
sale, lease, licensing, encumbering or disposition (other than through licensing
permitted by clause (c)) of property or assets which are not material,
individually or in the aggregate, to the business of Aster;
(j) Incur
any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or options, warrants, calls or other
rights to acquire any debt securities of Aster, enter into any “keep well” or
other agreement to maintain any financial statement condition or enter into
any
arrangement having the economic effect of any of the foregoing other than in
connection with the financing of working capital consistent with past
practice;
(k) Adopt
or
amend any Aster Benefit Plan or any employee stock purchase or employee stock
option plan; or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practice with employees who
are
terminable “at will”); pay any special bonus or special remuneration to any
director or employee; or increase the salaries, wage rates, compensation or
other fringe benefits (including rights to severance or indemnification) of
its
directors, officers, employees or consultants except, in each case, as may
be
required by law and except for (i) salary increases in the ordinary course
of
business consistent with past practice for non-officer employees, (ii) salary
increases for officers in an amount not exceeding 5% of such officer’s salary on
the date hereof and (iii) as set forth on Schedule 4.1(k);
(l) Pay,
discharge, settle or satisfy any litigation (whether or not commenced prior
to
the date of this Agreement) or any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than
the payment, discharge, settlement or satisfaction, in the ordinary course
of
business consistent with past practice or in accordance with their terms, of
liabilities recognized or disclosed in the Aster Balance Sheet or incurred
since
the date of such financial statements, or (ii) waive the benefits of, agree
to
modify in any manner, terminate, release any person from or knowingly fail
to
enforce the confidentiality or nondisclosure provisions of any agreement to
which Aster is a party or of which Aster is a beneficiary, in the case of both
(i) and (ii) of this Section 4.1(l), which payment, discharge, satisfaction,
waiver, termination, modification, release or failure to enforce has a value
to
Aster in excess of $5,000;
(m) Except
in
the ordinary course of business consistent with past practice, materially
modify, amend or terminate any Aster Contracts disclosed in Schedule 2.15 or
waive, delay the exercise of, release or assign any material rights or claims
thereunder without providing prior notice to Parent;
(n) Except
as
required by GAAP, revalue any of its assets or make any change in accounting
methods, principles or practices;
(o) Make
any
Tax election or accounting method change (except as required by GAAP)
inconsistent with past practice that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Aster or any of its Subsidiaries, settle or compromise any
material Tax liability or consent to any extension or waiver of any limitation
period with respect to Taxes; or
(p) Agree
in
writing or otherwise to take any of the actions described in Section 4.1 (a)
through (o) above.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Public
Disclosure.
Parent
and Aster will consult with each other, and to the extent practicable, agree,
before issuing any press release or otherwise making any public statement with
respect to the Mergers or this Agreement and will not issue any such press
release or make any such public statement prior to such consultation, except
as
may be required by law or any listing agreement with a national securities
exchange or Nasdaq, in which case reasonable efforts to consult with the other
party will be made prior to such release or public statement. The parties will
agree to the text of the joint press release announcing the signing of this
Agreement.
5.2 Commercially
Reasonable Efforts; Notification.
(a) Upon
the terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use commercially reasonable efforts to take, or cause to
be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to
consummate and make effective, in the most expeditious manner practicable,
the
Merger and the other transactions contemplated by this Agreement, including
to
accomplish the following: (i) causing the conditions precedent set forth in
Article VI to be satisfied; (ii) obtaining all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities; (iii) making all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental Entities,
if any); (iv) avoiding any suit, claim, action, investigation or proceeding
by any Governmental Entity challenging the Merger or any other transaction
contemplated by this Agreement; (v) obtaining all consents, approvals or waivers
from third parties required as a result of the transactions contemplated in
this
Agreement; (vi) defending any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement
or
the consummation of the transactions contemplated hereby, including seeking
to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (vii) executing or delivering
any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(b) Parent
shall give prompt notice to Aster upon obtaining knowledge that any
representation or warranty made by it, or Arkados contained in this Agreement
has become untrue or inaccurate, or of any failure of Parent or Arkados to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, where the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Aster
shall give prompt notice to Parent upon obtaining knowledge that any
representation or warranty made by it contained in this Agreement has become
untrue or inaccurate, or of any failure of Aster to comply with or satisfy
in
any material respect any
covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, where the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as a result thereof; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations
of
the parties under this Agreement.
5.3 Third
Party Consents.
On or
before the Closing Date, Parent and Aster will each use its commercially
reasonable efforts to obtain any consents, waivers and approvals under any
of
its or its Subsidiaries’ respective agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
5.4 Benefits;
Prior Service.
From
and after the Effective Time, Aster employees shall be provided with employee
benefits that are substantially similar to those provided to employees of
Arkados who are similarly situated. Arkados shall cause employees of Aster
to be
credited with service with Aster for purposes of eligibility and vesting under
each employee benefit plan maintained by Parent prior to the Effective Time.
Arkados shall have the absolute discretion to (i) cash-out Aster employees
accrued and unused vacation, personal and sick leave days or to (ii) carry
over Aster employees’ accrued but unused vacation, personal and sick leave days;
provided, that, such service shall not be recognized to the extent that such
recognition would result in duplication of benefits.
5.5 Non-Disclosure,
Invention Release and Non-Competition Agreements.
Aster
shall use its commercially reasonable efforts to cause employees of Aster who
will become employees of Arkados from and after the Effective Time to enter
into
Arkados’ standard form of Non-Disclosure, Invention Release and Non-Competition
Agreement prior to the Closing.
5.6 Conveyance
Taxes.
Parent,
Arkados and Aster shall cooperate in the preparation, execution and filing
of
all returns, questionnaires, applications, or other documents regarding
(i) any real property transfer gains, sales, use, transfer, value-added,
stock transfer and stamp Taxes, (ii) any recording, registration and other
fees,
and (iii) any similar Taxes or fees that become payable in connection with
the
transactions contemplated hereby.
5.7 No
Negotiation.
Until
the Effective Date, or such time, if any, as this Agreement is terminated
pursuant to Article VI below, Aster shall not, nor shall they permit any of
their respective affiliates, directors, officers, employees, investment bankers,
attorneys or other agents, advisors or representatives to, directly or
indirectly, (a) sell, offer or agree to sell its business, by sale of shares
or
assets, merger or otherwise (an “Acquisition Transaction”) other than pursuant
to this Agreement, (b) solicit or initiate the submission of any proposal for
an
Acquisition Transaction, or (c) participate in any discussions or negotiations
with, or furnish any information concerning its business to, any corporation,
person or other entity in connection with a possible Acquisition Transaction
other than pursuant to this Agreement.
5.8 Survival
after Closing.
All of
the covenants and obligations of the parties to this Agreement, which by their
terms are to be performed or will become effective after the Closing, including
without limitation, those contained in Section 3.7 shall survive the
Closing.
5.9 Medical
Coverage.
Arkados
and Parent shall take all steps necessary, and Parent shall cause its
subsidiaries to take all steps necessary, to permit each person set forth on
Schedule 6.2(d) and their eligible family members to obtain, immediately upon
consummation of the
Closing,
medical insurance coverage in accordance with, as applicable, the terms of
such
person’s offer letter in the form set forth as Exhibit B or the Consulting
Agreement, including without limitation payment of any applicable
premiums.
ARTICLE
VI
CONDITIONS
TO THE MERGERS
6.1 Conditions
to Obligations of Each Party to Effect the Mergers.
The
respective obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived if waived in writing by all
of
Parent, Arkados and Aster:
(a) Stockholder
Approval.
This
Agreement shall have been adopted and the Mergers shall have been duly approved
(i) by the requisite vote under applicable law and the Arkados Charter Documents
and (ii) by the unanimous written consent of the holders of shares of Aster
Stock under applicable law and the Aster Charter Documents. The Share Issuance
shall have been duly approved by the requisite vote under applicable law and
the
Certificate of Incorporation and Bylaws of Parent by the board of directors
of
Parent.
(b) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which
has the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Merger.
(c) Schedules.
Each of
the parties hereto shall have delivered to each other complete and accurate
Schedules to this Agreement and such Schedules shall have been approved by
the
recipient.
(d) Exhibits.
The
parties shall mutually agree upon the form and substance of all the agreement
attached as Exhibits to this Agreement, which agreements shall be executed
and
delivered to each other at the Closing Date.
6.2 Additional
Conditions to Obligations of Aster.
The
obligation of Aster to effect the Mergers shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Aster:
(a) Representations
and Warranties.
The
representations and warranties of Parent and Arkados set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as if made on and as of the Closing Date (except to the extent any such
representation and warranty expressly speaks as of an earlier date) and Aster
shall have received a certificate signed on behalf of Parent by the Chief
Executive Officer of Parent to such effect; provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall
be
deemed to have been satisfied even if such representations or warranties are
not
so true and correct unless the failure of such representations or warranties
to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, a Parent Material Adverse Effect.
(b) Agreements
and Covenants.
Each of
Parent and Arkados shall have performed or complied with, in all material
respects, all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date, and Aster
shall have received a certificate to such effect signed on behalf of each of
Parent and Arkados by an authorized officer of Parent.
(c) No
Closing Material Adverse Effect.
Since
the date hereof, there has not occurred a Parent or Arkados Material Adverse
Effect.
(d) Employees.
Arkados, Inc., a Delaware corporation and wholly owned subsidiary of Parent
(“AI”) shall have offered employment to the persons set forth on Schedule 6.2(d)
pursuant to the form of offer letter set forth as Exhibit B. Each person’s
compensation shall be as set forth on Schedule 6.2(d), provided nothing
contained herein shall restrict or limit the Surviving Corporation’s or AI’s
right to terminate any such employee or modify such employee’s.
(e) Consulting
Agreement.
AI shall
have entered into a consulting agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ substantially
in
the form annexed hereto as Exhibit C (the “Consulting Agreement”).
6.3 Additional
Conditions to the Obligations of Parent and Arkados.
The
obligations of Parent and Arkados to effect the Merger shall be subject to
the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations
and Warranties.
The
representations and warranties of Aster set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date
as
if made on and as of the Closing Date (except to the extent any such
representation and warranty expressly speaks as of an earlier date) and Parent
shall have received a certificate signed on behalf of Aster by the Chief
Executive Officer of Aster to such effect; provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall
be
deemed to have been satisfied even if such representations or warranties are
not
so true and correct unless the failure of such representations or warranties
to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, an Aster Material Adverse Effect.
(b) Agreements
and Covenants.
Aster
shall have performed or complied with, in all material respects, all agreements
and covenants required by this Agreement to be performed or complied with by
it
at or prior to the Closing Date, and Parent shall have received a certificate
to
such effect signed on behalf of Aster by an authorized officer of
Aster.
(c) No
Closing Material Adverse Effect.
Since
the date hereof, there has not occurred an Aster Material Adverse Effect.
(d) Conversion
of Debt and Loans.
Prior
to or at Closing, Aster shall provide satisfactory evidence to Parent that
except as disclosed on Schedule 6.3(d), any and all indebtedness (other than
trade indebtedness incurred in the ordinary course of business consistent with
past practices), promissory notes, shareholder and employee loans of Aster
shall
have been extinguished or converted into equity of Aster.
(e) Employees.
The
persons set forth on Schedule 6.2(d) shall have accepted Arkados’ employment
offer and have each entered into an agreement and general release in
substantially the form annexed hereto as Exhibit D, terminating their employment
relationship with Aster.
(f) Consulting
Agreement.
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall have executed and delivered the Consulting Agreement.
(g) Cancellation
of Warrants.
All
Aster Warrants shall have been cancelled or shall be cancelled upon consummation
of the Merger, by written instrument executed by the holders of the Aster
Warrants, reasonably acceptable to Parent.
(h) Financing.
Arkados
shall have completed a debt or equity financing or financings yielding aggregate
gross proceeds of $500,000.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.1 Termination.
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after the requisite approval of the stockholders of Arkados and
Aster:
(a) by
mutual
written consent duly authorized by the Boards of Directors of Parent and
Aster;
(b) by
either
Parent or Aster if the Merger shall not have been consummated by February 28,
2007 (such date, or such other date that may be agreed by mutual written
consent, being the “Outside Date”) for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal
cause
of or resulted in the failure of the Merger to occur on or before such date
if
such action or failure to act constitutes a breach of this
Agreement;
(c) by
either
Parent or Aster if a Governmental Entity shall have issued an order, decree
or
ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order, decree,
ruling or other action shall have become final and nonappealable or any law,
order, rule or regulation is in effect or is adopted or issued, which has the
effect of prohibiting the Merger;
7.2 Fees
and Expenses.
(a)
Except as set forth in this Section 7.2, all Expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by
the party incurring such Expenses whether or not the Merger are consummated:
As
used in this Agreement, “Expenses” shall include all reasonable out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and all other matters relating to the closing of the Merger and the
other transactions contemplated hereby.
(b) Aster’s
Expenses shall not exceed $35,000 and the holders of Aster Common Stock shall
bear any Aster Expense in excess of that amount.
7.3 Amendment.
This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective
Time;
provided, however, that, after the approval and adoption of this Agreement
by
the stockholders of Arkados and Aster, there shall not be any amendment that
by
law requires further approval by the stockholders of Arkados or Aster without
the further approval of such stockholders. This Agreement may not be amended
by
the parties hereto except by execution of an instrument in writing signed on
behalf of each of Parent, Arkados and Aster.
7.4 Extension;
Waiver.
At any
time prior to the Effective Time, any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be
valid only if set forth in an instrument in writing signed on behalf of such
party. Delay in exercising any right under this Agreement shall not constitute
a
waiver of such right.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given on the day of delivery if delivered personally or sent via telecopy
(receipt confirmed) or on the second business day after being sent if delivered
by commercial delivery service, to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party
as
shall be specified by like notice):
(a) if
to
Parent or Arkados:
▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to
Aster, to
Aster
Wireless Inc.
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
Telecopy
No.:
with
a
copy to
▇▇▇▇▇
Peabody LLP
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.2 Interpretation.
(a)
When a
reference is made in this Agreement to Exhibits, such reference shall be to
an
Exhibit to this Agreement unless otherwise indicated. When a reference is made
in this Agreement to a Section, such reference shall be to a Section of this
Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For
purposes of this Agreement, the term “knowledge” means with respect to a party
hereto, with respect to any matter in question, that any of the officers of
such
party has actual knowledge of such matter.
(c) For
purposes of this Agreement, the term “person” shall mean any individual,
corporation (including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental
Entity.
(d) For
purposes of this Agreement, an “agreement,” “arrangement,” “contract,”
“commitment” or “plan” shall mean a legally binding, written agreement,
arrangement, contract, commitment or plan, as the case may be.
8.3 Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
the
other party, it being understood that all parties need not sign the same
counterpart.
8.4 Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Parent
Schedule and the Aster Schedule constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements \
and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
With the
exception that (i) each stockholder of Aster shall be a third party beneficiary
of Sections 1.6, 1.7, 3.2(a)(ii) and 3.7, and (ii) each person set forth on
Schedule 6.2(d) shall be a third party beneficiary of Section 5.9, nothing
in
this Agreement, is intended or shall be construed to confer any right, remedy
or
claim under or by reason of this Agreement upon any Person other than the
parties and successors and assigns.
8.5 Severability.
In the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to
the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.6 Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this
being in addition to any other remedy to which t they are entitled at law or
in
equity. In any action at law or suit in equity to enforce this Agreement or
the
rights of any of the parties hereunder, the prevailing party in such action
or
suit shall be entitled to receive a reasonable sum for its attorneys’ fees and
all other reasonable costs and expenses incurred in such action or
suit.
8.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
8.8 Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
8.9 Assignment.
No party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties. Subject
to
the preceding sentence, this Agreement shall be binding upon and shall inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns.
8.10 Waiver
of Jury Trial.
EACH OF
PARENT, ARKADOS AND ASTER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, ARKADOS AND ASTER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed
by their duly authorized respective officers as of the date first written
above.
By:
/
▇▇▇▇
▇▇▇▇▇▇▇▇/
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
ARKADOS
WIRELESS TECHNOLOGIES, INC.
By:
/
▇▇▇▇
▇▇▇▇▇▇▇▇/
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
ASTER
WIRELESS INC.
By:
/▇▇▇▇▇
▇ ▇▇▇▇▇▇▇/
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
and CEO
EXHIBITS
AND SCHEDULES TO
AGREEMENT
AND PLAN OF MERGER
BY
AND
AMONG
ARKADOS,
INC.,
AND
ASTER
WIRELESS INC.
|
EXHIBIT
A:
|
Form
of Certificate of Merger
|
|
EXHIBIT
B:
|
Form
of Offer Letter
|
|
EXHIBIT
C:
|
Form
of Consulting Agreement
|
|
EXHIBIT
D:
|
Form
of Agreement and General Release
|
|
SCHEDULE
2.2
|
Aster
Warrants
|
|
SCHEDULE
2.3
|
Capital
Stock Obligations
|
|
SCHEDULE
2.4
|
Authority
|
|
SCHEDULE
2.5
|
Financial
Statements
|
|
SCHEDULE
2.6
|
Changes
or Events
|
|
SCHEDULE
2.7
|
Taxes
|
|
SCHEDULE
2.8
|
Patents
and Trademarks
|
|
SCHEDULE
2.9
|
Compliance
|
|
SCHEDULE
2.10
|
Litigation
|
|
SCHEDULE
2.12(b)
|
Labor
Agreements; Benefit Plans
|
|
SCHEDULE
2.12(f)
|
Severance;
vesting
|
|
SCHEDULE
2.12(h)
|
Employees
|
|
SCHEDULE
2.15(a)
|
Written
Agreements with employees, officers, directors, etc.
|
|
SCHEDULE
2.15(b)
|
Written
Agreements
|
|
SCHEDULE
2.15(c)
|
Breach
of Agreements or Contracts
|
|
SCHEDULE
4.1(k)
|
Benefit
Plan Changes
|
|
SCHEDULE
6.2(d)
|
Employees
|
EXHIBIT
A
Form
of Certificate of Merger
********************************
CERTIFICATE
OF MERGER
OF
ASTER
WIRELESS, INC.
a
Delaware corporation
with
and
into
ARKADOS
WIRELESS TECHNOLOGIES, INC.
a
Delaware corporation
**************************************
Pursuant
to Section 251 of the General
Corporation
Law of the State of Delaware
**************************************
Arkados
Wireless Technologies, Inc., a Delaware corporation (the “Corporation”) does
hereby certify:
FIRST:
The names and states of incorporation of the constituent corporations to this
merger are as follows:
Arkados
Wireless Technologies, Inc. - Delaware
Aster
Wireless,
Inc.
- Delaware
SECOND:
An Agreement and Plan of Merger, as amended (the “Merger Agreement”) has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 251 of the General
Corporation Law of the State of Delaware.
THIRD:
The name of the corporation surviving the merger is ARKADOS WIRELESS
TECHNOLOGIES, INC.
FOURTH:
The Certificate of Incorporation of Arkados Wireless Technologies, Inc. shall
be
the Certificate of Incorporation of the surviving corporation.
FIFTH:
The executed Merger Agreement is on file at the offices of the Corporation,
at
▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ A copy will be
provided, upon request and without cost, to any stockholder of either
constituent corporation.
IN
WITNESS WHEREOF, Arkados Wireless Technologies, Inc. has caused this Certificate
of Merger to be executed in its corporate name this ____ day of February,
2007.
ARKADOS
WIRELESS TECHNOLOGIES, INC.
By:______________________________
Name: ▇▇▇▇
▇▇▇▇▇▇▇▇
Title: CEO
and
President
EXHIBIT
B
Form
of Offer Letter
*************************************
ARKADOS,
INC.
▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
February
___, 2007
_____________
_____________
_____________
Re: Employment
Offer
Dear
_____________:
Arkados,
Inc. (the “Company”) is pleased to offer you employment, upon the following
terms as set forth in this letter agreement (the “Agreement”):
1. Your
employment shall be effective as of the date of the effective date of the Merger
( the “Effective Date”). Your position will be ______________, and your initial
annual base salary will be $________.
2. You
will
receive an
option
to acquire _______ shares of the common stock of Arkados Group, Inc., the
Company’s parent, (the “Stock Option Shares”) pursuant to the terms of the
Company’s stock option plan and the stock option grant agreement attached hereto
as Exhibit A. The exercise price of the option shall be the closing price of
the
Parent’s common stock on the business day immediately preceding the Effective
Date.
3. You
will
receive a signing bonus of $_____ which will be paid to you in equal
installments during each of the first 8 pay periods of your employment. Your
signing bonus will not be forfeit if your employment is terminated for any
reason prior to the completion of such 8 pay periods.
4. You
will
receive __ weeks of paid vacation in each of the first and second year of your
employment by the Company and thereafter __ weeks of paid vacation each year.
Such vacation days will not accumulate if not taken in the year earned. In
addition you may take paid Holidays as established by the Company.
5. You
will
be entitled to participate in all employment benefits (such as paid medical
and
dental insurance) and bonus plans equivalent to the benefits and plans that
the
Company provides, from time to time, in each case subject to the waiting periods
set forth in such plans; provided, however, the time during which you were
employed by Aster Wireless, Inc. shall be counted toward such waiting periods.
If you are not eligible for immediate enrollment and coverage under the
Company’s medical plan(s) in the Rochester, New York area and such other places
as coverage is provided under the Company’s medical plan(s), until such time as
you are eligible for, enrolled in and qualified to immediately receive such
medical coverage, the Company shall pay you in advance of the date such payment
is due (i) any amount required for you and your eligible family members to
obtain continuation coverage under any medical plan under which you and your
eligible family members were covered immediately preceding the Closing or (ii)
arrange for and pay all premiums for you and your eligible family members to
obtain medical insurance of comparable coverage to the Company’s medical plan,
in the Rochester, New York area and such other places as coverage is provided,
through any other medial insurance plan (the “Health Coverage Payment”). In
addition to the foregoing payment, the Company will pay you an amount equal
to
any income tax required to be paid by you due to the Company’s payment of the
Health Coverage Payment.
6. Your
employment will be “at will” and for no fixed term. Further, you agree that your
employment will be subject to the terms of the Company’s standard employee
invention, nondisclosure, and noncompetition agreements, copies of which will
be
provided to you prior to or upon commencement of employment. Execution of these
agreements will be a condition to the commencement of your employment.
7. Each
party hereby acknowledges that the terms of this letter agreement are
confidential and agrees not to discuss, publicize or otherwise disclose the
existence of, or any of the terms and conditions contained in, this letter
agreement without the express written consent of the other party; provided,
however, that each party may disclose the terms and conditions of this letter:
(a) as required by any court or other governmental body; (b) as required by
applicable law or regulation; (c) in confidence, to legal counsel, accountants,
banks, and potential financing sources and their respective advisors; (d) in
connection with the enforcement of this letter; or (e) in confidence, in
connection with an actual or proposed merger, acquisition, or similar
transaction.
8. This
letter agreement contains the entire agreement between us relating to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
arrangements, negotiations and understandings among the parties hereto, relating
to the subject matter hereof. No representations, warranties, covenants or
conditions, express or implied, whether by statute or otherwise, other than
as
set forth herein, have been made by any party hereto regarding the employment
offer which is the subject matter hereof. No supplement, modification, amendment
or waiver of any term, provision or condition of this letter agreement shall
be
binding or enforceable unless executed in writing by the parties hereto.
9. This
letter agreement is made in accordance with and shall be governed and construed
under the laws of the State of New York as applied to agreements executed and
performed entirely in New York by New York residents. In any legal action
relating to this letter agreement, each party consents to the exercise of
exclusive jurisdiction over it by a State Superior Court venued in or over
Monroe County, New York.
10. You
agree
that: (a) you have read this letter agreement; (b) you have the full legal
capacity, power and authority to enter into and carry out this letter agreement
and you are not under any prohibition or restriction, contractual, statutory
or
otherwise, against doing so, (c) you have been represented in the preparation,
negotiation, and execution of this letter agreement by legal counsel of your
own
choice or that you have voluntarily declined to seek such counsel; (d) you
understand the legal and binding effect of this letter agreement and of the
releases it contains; (e) you execute this letter agreement voluntarily and
without any duress or undue influence on the part or behalf of the parties
hereto; (f) there is a risk that subsequent to the execution of this letter
agreement, you will incur or suffer losses which are unknown and unanticipated
at the time this letter agreement is signed, and that you expressly assume
such
risks; and (g) this letter agreement shall be binding upon you and your
affiliates, agents, employees, managers, members, principals, representatives,
as well as the successors and assigns of all of such parties
11. You
acknowledge that we have entered into this agreement with you for the express,
intended benefit of our company, as well as our parent Arkados Group, and that
each of the foregoing is an intended third party beneficiary of this agreement
and as such, may enforce the terms and provisions of same that affect or relate
to such party.
12. This
offer is contingent on your termination of employment by Aster Wireless, Inc.
and the execution of a release.
We
look
forward to you joining us and your contribution. Please signify your agreement
to the foregoing by countersigning this letter in the space provided below
and
returning a fully executed original to me at the address listed above. We have
the right to revoke this offer at any time prior to your acceptance of
same.
Sincerely,
Arkados,
Inc.
___________________________________
By:
▇▇▇▇
▇▇▇▇▇▇▇▇, CEO
Agreed:
_________________________
Date:
________________________
Arkados
Group, Inc. hereby unconditionally and irrevocably guarantees the full and
prompt payment of all amounts required to be paid by the Company as set forth
in
this Agreement (collectively, the “Guaranteed Obligations”). The foregoing
constitutes a guarantee of payment, and not of collection. The liability of
Arkados Group hereunder is direct and unconditional, and may be enforced without
requiring you first to resort to any other right, remedy, or security. Arkados
Group waives all suretyship defenses and any right to seek contribution,
indemnification, subrogation or reimbursement from the Company, until all of
the
Guaranteed Obligations have been indefeasibly paid in full.
_________________________
By:
▇▇▇▇
▇▇▇▇▇▇▇▇, CEO
EXHIBIT
A
Stock
Option Grant
Agreement
********************************************
Employee
Stock Option Grant Agreement
Under
The
Arkados
Group, INC. 2004 Stock Option Plan
This
Grant Agreement (the “Agreement”) is entered into by and between Arkados Group,
Inc., a Delaware corporation (the “Company”), and the individual (the
“Optionee”) specified on the Notice of Grant of Stock Options attached hereto
and incorporated by reference herein (the “Notice of Grant of Stock Options”),
effective as of February ___, 2007 (the “Grant Date”).
1. Grant
of Option.
The
Company hereby grants to the Optionee, pursuant to the Arkados Group, Inc.
2004
Stock Option and Restricted Stock Plan (the “Plan”), an option (the “Option”) to
purchase the number of Shares set forth in the Notice of Grant attached hereto
as Exhibit 1, at the exercise price per Share set forth in the Notice of Grant
(the “Exercise Price”), and subject to the terms and conditions of the Plan,
which is incorporated herein by reference. Subject to Section 15(c) of the
Plan
(Effect of Amendment or Termination), in the event of a conflict between the
terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan shall prevail.
(a) This
Option is not intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code and shall be treated as a Nonqualified Stock Option
(“NQO”). The Notice of Grant of Stock Options sets forth the following terms of
the Option: (i) the Optionee, (ii) the number of shares of Stock
subject to the Option, (iii) the Strike Price per share, and (iv) the
date as of which the Option shall expire (the “Expiration Date”), at 5:00 p.m.
Eastern Time, unless fully exercised or earlier terminated. The information
provided on the Notice of Grant of Stock Options is in all respects subject
to
the terms of this Agreement.
2. Terminology.
Unless
stated otherwise in this Agreement, capitalized terms in this Agreement shall
have the meaning set forth in the Plan. Except where the context otherwise
requires, the term “Company” shall mean Arkados Group, Inc., a Delaware
corporation.
3. Exercise
of Option.
(a) Right
to Exercise.
Except
as otherwise provided in this Agreement, this Option may be exercised as to
its
vested portion at any time and from time to time, in whole or in part, on or
before the Expiration Date or earlier termination of the Option by executing
the
exercise notice in the form of Exhibit 2. To the extent not exercised, vested
shares shall accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the Expiration Date or other
termination of the Option. In the event of the Optionee’s death, disability, or
other termination of employment, the exercisability is governed by
Section 4 below.
(b) Vesting.
Unless
the Option has earlier terminated, Optionee shall vest in accordance with the
vesting schedule set forth in the Notice of Grant or as otherwise set forth
in
the Plan.
(c) Exercise
Procedure.
Subject
to the conditions set forth in this Agreement, this Option shall be exercised
by
delivery of written notice of exercise on any business day to the Corporate
Secretary of the Company in such form as the Administrator may require from
time
to time. Such notice shall specify the number of shares in respect of which
the
Option is being exercised and shall be accompanied by full payment of the Strike
Price for such shares in accordance with Section 3(d) of this Agreement.
The exercise shall be effective upon receipt by the Corporate Secretary of
the
Company of such written notice accompanied by the required payment. The Option
may be exercised only in multiples of whole vested shares and may not be
exercised at any one time as to fewer than one hundred (100) shares (or such
lesser number of shares as to which the Option is then exercisable). No
fractional shares shall be issued pursuant to this Option.
(d) Method
of Payment.
Payment
of the Strike Price shall be by any of the following, or a combination thereof,
as determined by the Administrator in its discretion at the time of
exercise:
i. By
delivery of cash, certified or cashier’s check, or money order;
ii. By
any
other method approved by the Administrator.
Subject
to such limitations as the Administrator may determine, at any time during
which
the Stock is publicly traded on a national securities exchange or NASDAQ, the
Strike Price shall be deemed to be paid, in whole or in part, if the Optionee
delivers a properly executed exercise notice, together with irrevocable
instructions: (A) to a brokerage firm approved by the Company to deliver
promptly to the Company the aggregate amount of sale or loan proceeds to pay
the
Strike Price and any withholding tax obligations that may arise in connection
with the exercise, and (B) to the Company to deliver the certificates for
such purchased shares directly to such brokerage firm.
(e) Issuance
of Shares upon Exercise.
Upon
due exercise of the Option, in whole or in part, in accordance with the terms
of
this Agreement, the Company shall issue to the Optionee, or such other person
exercising the Option, as the case may be, the number of shares of Stock so
paid
for, in the form of fully paid and nonassessable stock and shall deliver
certificates therefor as soon as practicable thereafter. The stock certificates
for any shares of Stock issued hereunder shall, unless such shares are
registered or an exemption from registration is available under applicable
federal and state law, bear a legend restricting transferability of such
shares.
4. Termination
of Employment.
(a) Exercise
Period Following Termination of Employment.
Unless
the Option has earlier terminated, if the Optionee’s employment with the Company
is terminated, other than as a result of the causes set forth in clauses (b),
(c) or (d) below: (i) this Option shall terminate immediately upon such
termination to the extent of any unvested shares, and all unvested shares shall
be forfeited, and (ii) this Option shall be exercisable during the 30-day
period following such termination of employment with respect to any vested
shares, but in no event after the
2
Expiration
Date. Unless sooner terminated, this Option shall terminate in its entirety
upon
the expiration of the applicable exercise period noted above in this Section
4(a).
(b) Permanent
Disability of Optionee.
Notwithstanding the provisions of Section 4(a) above,
if
the Optionee’s employment with the Company terminates as a result of his
Permanent Disability (as defined herein), (i) this Option shall terminate
immediately upon such termination of employment to the extent of any unvested
shares, and all unvested shares shall be forfeited, and (ii) this Option
shall be exercisable during the six-month period following such termination
of
employment with respect to any vested shares, but in no event after the
Expiration Date. Unless sooner terminated, this Option shall terminate in its
entirety upon the expiration of such six-month period. “Permanent Disability”
shall have the meaning set forth in Optionee’s existing Employment Agreement
with the Company. If no such Employment Agreement is in effect, then such term
shall have the same meaning as set forth in the last existing employment
agreement between Optionee and the Company or otherwise in accordance with
the
definition set forth in the Plan.
(c) Death
of Optionee.
If the
Optionee dies before the Expiration Date or other termination of the Option,
(i) this Option shall terminate immediately upon the Optionee’s death to
the extent of any unvested shares, and all unvested shares shall be forfeited,
and (ii) this Option shall be exercisable during the six-month period
following the date of death of the Optionee with respect to any vested shares,
but in no event after the Expiration Date, by the Optionee’s executor, personal
representative, or the person(s) to whom this Option is transferred by will
or
the laws of descent and distribution. Unless sooner terminated, this Option
shall terminate in its entirety upon the expiration of such six-month
period.
(d) Discharge
for Cause.
Notwithstanding anything to the contrary herein, this Option shall terminate
in
its entirety, regardless of whether the Option is vested in whole or in part,
immediately upon the Optionee’s discharge of employment for Cause. For purposes
of this Section, the term “Cause” shall have the meaning set forth in existing
Employment Agreement with the Company. If no such Employment Agreement is in
effect, then such term shall have the same meaning as set forth in the last
existing employment agreement between Optionee and the Company or as set forth
in the Plan.
5. Adjustments
and Business Combinations.
(a) Adjustments
for Events Affecting Stock.
In the
event of changes in the Stock of the Company by reason of any stock dividend,
spin-off, split-up, recapitalization, merger, consolidation, business
combination or exchange of shares and the like, the Administrator shall, in
its
discretion, make appropriate adjustments to the number, kind, and price of
shares covered by this Option, and shall, in its discretion and without the
consent of the Optionee, make any other adjustments in this Option, including
but not limited to reducing the number of shares subject to the Option or
providing or mandating alternative settlement methods such as settlement of
the
Option in cash or in shares of Stock or other securities of the Company or
of
any other entity, or in any other matters which relate to the Option as the
Administrator shall, in its sole discretion, determine to be necessary or
appropriate; in each and every case consistent with Section 12 of the
Plan.
(b) Adjustments
for Unusual Events.
The
Administrator is authorized to make, in its discretion and without the consent
of the Optionee, adjustments in the terms and conditions of,
3
and
the
criteria included in, the Option in recognition of unusual or nonrecurring
events affecting the Company, or the financial statements of the Company or
any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
consistent with the Plan and appropriate to prevent dilution or enlargement
of
the benefits or potential benefits intended to be made available to the Optionee
under the Option or the Plan.
(c) Binding
Nature of Adjustments.
Adjustments under this Section 5 will be made by the Administrator, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding, and conclusive. No fractional shares will be
issued pursuant to this Option on account of any such adjustments.
6. Confidential
Information.
In
consideration of the Option granted to the Optionee pursuant to this Agreement,
the Optionee agrees and covenants that, except as specifically authorized by
the
Company, the Optionee will keep confidential any trade secrets or confidential
or proprietary information of the Company which are now or which hereafter
may
become known to the Optionee as a result of the Optionee’s employment by the
Company, and shall not at any time, directly or indirectly, disclose any such
information to any person, firm, Company, or other entity, or use the same
in
any way other than in connection with the business of the Company, at all times
during and after the Optionee’s employment. The provisions of this
Section 6 shall not narrow or otherwise limit the obligations and
responsibilities of the Optionee set forth in any agreement of similar import
entered into between the Optionee and the Company.
7. Non-Guarantee
of Employment.
Nothing
in the Plan or this Agreement shall alter the at-will or other employment,
consultant, or director status of the Optionee, nor be construed as a contract
of employment between the Company and the Optionee, or as a contractual right
of
Optionee to continue in the employ of, the Company, or as a limitation of the
right of the Company to discharge the Optionee at any time with or without
cause
or notice.
8. No
Rights as a Stockholder.
The
Optionee shall not have any of the rights of a stockholder with respect to
the
shares of Stock that may be issued upon the exercise of the Option until such
shares of Stock have been issued to him or her upon the due exercise of the
Option. No adjustment shall be made for dividends or distributions or other
rights for which the record date is before the date such certificate or
certificates are issued.
9. Nonstatutory
Nature of the Option.
The
Optionee acknowledges that, upon exercise of this Option, the Optionee will
recognize taxable income in an amount equal to the excess of the then Fair
Market Value of the shares over the Strike Price and must comply with the
provisions of Section 10 of this Agreement with respect to any tax
withholding obligations that arise as a result of such exercise.
10. Withholding
of Taxes.
At the
time the NQO Option is exercised, in whole or in part, or at any time thereafter
as requested by the Company, the Optionee hereby authorizes withholding from
payroll or any other payment of any kind due the Optionee and otherwise agrees
to make adequate provision for foreign, federal, state, and local taxes required
by law to be withheld, if any, which arise in connection with the Option. The
Company may require the Optionee to make a cash payment to cover any withholding
tax obligation as a condition of exercise of the Option. If the Optionee does
not make such payment when requested, the Company may refuse to issue any Stock
certificate under the Plan until arrangements satisfactory to the Administrator
for such
4
payment
have been made. The Administrator may, in its sole discretion, permit the
Optionee to satisfy, in whole or in part, any withholding tax obligation which
may arise in connection with the Option either by electing to have the Company
withhold from the shares to be issued upon exercise that number of shares,
or by
electing to deliver to the Company already-owned shares, in either case having
a
Fair Market Value equal to the amount necessary to satisfy the statutory minimum
withholding amount due.
11. The
Company’s Rights.
The
existence of this Option shall not affect in any way the right or power of
the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any
issue of bonds, debentures, preferred, or other stocks with preference ahead
of
or convertible into, or otherwise affecting the Stock or the rights thereof,
or
the dissolution or liquidation of the Company, or any sale or transfer of all
or
any part of the Company’s assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
12. Optionee.
Whenever the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Administrator, to apply to the estate, personal representative, or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word “Optionee” shall be deemed to include such
person.
13. Nontransferability
of Option.
This
Option is nontransferable otherwise than by will or the laws of descent and
distribution and during the lifetime of the Optionee, the Option may be
exercised only by the Optionee or, during the period the Optionee is under
a
legal disability, by the Optionee’s guardian or legal representative. Except as
provided above, the Option may not be assigned, transferred, pledged,
hypothecated, or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process.
14. Notices.
All
notices and other communications made or given pursuant to this Agreement shall
be in writing and shall be sufficiently made or given if hand-delivered or
mailed by certified mail, addressed to the Optionee at the address contained
in
the records of the Company, or addressed to the Administrator, care of the
Company for the attention of its Corporate Secretary at its principal office
or,
if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be available
to the parties.
15. Entire
Agreement.
This
Agreement contains the entire agreement between the parties with respect to
the
stock option granted hereunder. Any oral or written agreements, representations,
warranties, written inducements, or other communications made before the
execution of this Agreement with respect to the stock option granted hereunder
shall be void and ineffective for all purposes.
16. Amendment.
This
Agreement may not be modified, except as provided in the Plan or in a written
document signed by each of the parties hereto.
17. Conformity
with Plan.
This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by reference.
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the
5
terms
of
the Plan. In the event of any ambiguity in this Agreement or any matters as
to
which this Agreement is silent, the Plan shall govern. A copy of the Plan is
available upon request to the Administrator.
18. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, other than the conflict of laws principles thereof. All
actions to enforce or interpret this Agreement shall be brought in an exclusive
forum in New Jersey determined by the Administrator.
19. Headings.
The
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer as of the date first above written.
ARKADOS
GROUP, INC.
By:
________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
The
undersigned hereby acknowledges that he/she has carefully read this Agreement
and the Plan and agrees to be bound by all of the provisions set forth in such
documents.
OPTIONEE:
____________________________
Date:
As
of February ___, 2007
6
EXHIBIT
1
NOTICE
OF GRANT OF STOCK OPTIONS
Optionee:
Grant
Date:
February
___, 2007
Number
of Shares Subject
To
The Option:
Strike
Price Per
Share:
$______
Vesting:
Date Number
February
___, 2008
February
___, 2009
February
___, 2010
Expiration
Date:
February
___, 2014
7
EXHIBIT
2
FORM
OF NOTICE OF EXERCISE
Administrator
of 2004 Stock Option and Restricted Stock Plan
c/o
Office of the Corporate Secretary
Arkados
Group, Inc.
▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Gentlemen:
I
hereby
exercise the Stock Option granted to me on February 9, 2007, by Arkados Group,
Inc. (the “Company”), subject to all the terms and provisions thereof and of the
Arkados Group, Inc. 2004 Stock Option and Restricted Stock Plan (the “Plan”),
and notify you of my desire to purchase ____________ shares of Common Stock
of
the Company at a price of $___________ per share pursuant to the exercise of
said Option. This will confirm my understanding with respect to the shares
to be
issued to me by reason of this exercise of the Option (the shares to be issued
pursuant hereto shall be collectively referred to hereinafter as the “Shares”),
unless such exercise occurs after a registration statement is filed and
effective, as follows:
(a) I
am
acquiring the Shares for my own account for investment with no present intention
of dividing my interest with others or of reselling or otherwise disposing
of
any of the Shares.
(b) The
Shares are being issued without registration under the Securities Act of 1933,
as amended (the “Act”), in reliance upon one or more exemptions contained in the
Act, and such reliance is based in part on the above
representation.
(c) The
certificates for the Shares to be issued to me will bear a legend substantially
as follows:
“The
securities represented by this stock certificate have not been registered under
the Securities Act of 1933 (the “Act”) or applicable state securities laws (the
“State Acts”), and shall not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for consideration) by the holder except
upon the issuance to the Company of a favorable opinion of its counsel and/or
submission to the Company of such other evidence as may be satisfactory to
counsel for the Company, to the effect that any such transfer shall not be
in
violation of the Act and the State Acts.
“The
shares of stock represented by this certificate are subject to restrictions
on
transfer and an option to purchase set forth in a certain Stock Restriction
Agreement between the Company and the registered owner of this certificate
(or
his predecessor in interest), and no transfer of such shares may be made without
compliance with that Agreement. A copy of that Agreement is available for
inspection at the office of the Company upon appropriate request and without
charge.”
Appropriate
stop transfer instructions will be issued by the issuer to its transfer
agent.
8
(d) Since
the
Shares have not been registered under the Act, they must be held indefinitely
until an exemption from the registration requirements of the Act is available
or
they are subsequently registered, in which event the representation in Paragraph
(a) hereof shall terminate. As a condition to any transfer of the shares, I
understand that the issuer will require an opinion of counsel satisfactory
to
the issuer to the effect that such transfer does not require registration under
the Act or any state securities law.
(e) The
issuer is not obligated to comply with the registration requirements of the
Act
or with the requirements for an exemption under Regulation A or Regulation
D
under the Act for my benefit.
Total
Amount Enclosed: $__________
Date:_______________________
_______________________________
(Optionee)
9
EXHIBIT
C
Form
of Consulting Agreement
******************************************
Consultant
Stock Option Grant Agreement
Under
The
Arkados
Group, INC. 2004 Stock Option Plan
This
Grant Agreement (the “Agreement”) is entered into by and between Arkados Group,
Inc., a Delaware corporation (the “Company”), and the individual (the
“Optionee”) specified on the Notice of Grant of Stock Options attached hereto
and incorporated by reference herein (the “Notice of Grant of Stock Options”),
effective as of February __, 2007 (the “Grant Date”).
1. Grant
of Option.
The
Company hereby grants to the Optionee, pursuant to the Arkados Group, Inc.
2004
Stock Option and Restricted Stock Plan (the “Plan”), an option (the “Option”) to
purchase the number of Shares set forth in the Notice of Grant attached hereto
as Exhibit 1, at the exercise price per Share set forth in the Notice of Grant
(the “Exercise Price”), and subject to the terms and conditions of the Plan,
which is incorporated herein by reference. Subject to Section 15(c) of the
Plan
(Effect of Amendment or Termination), in the event of a conflict between the
terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan shall prevail.
(a) This
Option is not intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code and shall be treated as a Nonqualified Stock Option
(“NQO”). The Notice of Grant of Stock Options sets forth the following terms of
the Option: (i) the Optionee, (ii) the number of shares of Stock
subject to the Option, (iii) the Strike Price per share, and (iv) the
date as of which the Option shall expire (the “Expiration Date”), at 5:00 p.m.
Eastern Time, unless fully exercised or earlier terminated. The information
provided on the Notice of Grant of Stock Options is in all respects subject
to
the terms of this Agreement.
2. Terminology.
Unless
stated otherwise in this Agreement, capitalized terms in this Agreement shall
have the meaning set forth in the Plan. Except where the context otherwise
requires, the term “Company” shall mean Arkados Group, Inc., a Delaware
corporation.
3. Exercise
of Option.
(a) Right
to Exercise.
Except
as otherwise provided in this Agreement, this Option may be exercised as to
its
vested portion at any time and from time to time, in whole or in part, on or
before the Expiration Date or earlier termination of the Option by executing
the
exercise notice in the form of Exhibit 2. To the extent not exercised, vested
shares shall accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the Expiration Date or other
termination of the Option. In the event of the Optionee’s death, disability, or
other termination of employment, the exercisability is governed by
Section 4 below.
10
(b) Vesting.
Unless
the Option has earlier terminated, Optionee shall vest in accordance with the
vesting schedule set forth in the Notice of Grant or as otherwise set forth
in
the Plan.
(c) Exercise
Procedure.
Subject
to the conditions set forth in this Agreement, this Option shall be exercised
by
delivery of written notice of exercise on any business day to the Corporate
Secretary of the Company in such form as the Administrator may require from
time
to time. Such notice shall specify the number of shares in respect of which
the
Option is being exercised and shall be accompanied by full payment of the Strike
Price for such shares in accordance with Section 3(d) of this Agreement.
The exercise shall be effective upon receipt by the Corporate Secretary of
the
Company of such written notice accompanied by the required payment. The Option
may be exercised only in multiples of whole vested shares and may not be
exercised at any one time as to fewer than one hundred (100) shares (or such
lesser number of shares as to which the Option is then exercisable). No
fractional shares shall be issued pursuant to this Option.
(d) Method
of Payment.
Payment
of the Strike Price shall be by any of the following, or a combination thereof,
as determined by the Administrator in its discretion at the time of
exercise:
i. By
delivery of cash, certified or cashier’s check, or money order;
ii. By
any
other method approved by the Administrator.
Subject
to such limitations as the Administrator may determine, at any time during
which
the Stock is publicly traded on a national securities exchange or NASDAQ, the
Strike Price shall be deemed to be paid, in whole or in part, if the Optionee
delivers a properly executed exercise notice, together with irrevocable
instructions: (A) to a brokerage firm approved by the Company to deliver
promptly to the Company the aggregate amount of sale or loan proceeds to pay
the
Strike Price and any withholding tax obligations that may arise in connection
with the exercise, and (B) to the Company to deliver the certificates for
such purchased shares directly to such brokerage firm.
(e) Issuance
of Shares upon Exercise.
Upon
due exercise of the Option, in whole or in part, in accordance with the terms
of
this Agreement, the Company shall issue to the Optionee, or such other person
exercising the Option, as the case may be, the number of shares of Stock so
paid
for, in the form of fully paid and nonassessable stock and shall deliver
certificates therefor as soon as practicable thereafter. The stock certificates
for any shares of Stock issued hereunder shall, unless such shares are
registered or an exemption from registration is available under applicable
federal and state law, bear a legend restricting transferability of such
shares.
4. Termination
of Employment.
(a) Exercise
Period Following Termination of Employment.
Unless
the Option has earlier terminated, if the Optionee no longer serves as a
consultant to the Company, other than as a result of the causes set forth in
clauses (b), (c) or (d) below: (i) this Option shall terminate immediately
upon such termination to the extent of any unvested shares, and all unvested
shares shall be forfeited, and (ii) this Option shall be exercisable until
the Expiration Date with respect to any vested shares, but in no event after
the
Expiration Date. Unless sooner terminated, this
11
Option
shall terminate in its entirety upon the expiration of the applicable exercise
period noted above in this Section 4(a).
(b) Permanent
Disability of Optionee.
Notwithstanding the provisions of Section 4(a) above,
if
the Optionee’s employment with the Company terminates as a result of his
Permanent Disability (as defined herein), (i) this Option shall terminate
immediately upon such termination of employment to the extent of any unvested
shares, and all unvested shares shall be forfeited, and (ii) this Option
shall be exercisable during the six-month period following such termination
of
employment with respect to any vested shares, but in no event after the
Expiration Date. Unless sooner terminated, this Option shall terminate in its
entirety upon the expiration of such six-month period. “Permanent Disability”
shall have the meaning set forth in Optionee’s existing Employment Agreement
with the Company. If no such Employment Agreement is in effect, then such term
shall have the same meaning as set forth in the last existing employment
agreement between Optionee and the Company or otherwise in accordance with
the
definition set forth in the Plan.
(c) Death
of Optionee.
If the
Optionee dies before the Expiration Date or other termination of the Option,
(i) this Option shall terminate immediately upon the Optionee’s death to
the extent of any unvested shares, and all unvested shares shall be forfeited,
and (ii) this Option shall be exercisable during the six-month period
following the date of death of the Optionee with respect to any vested shares,
but in no event after the Expiration Date, by the Optionee’s executor, personal
representative, or the person(s) to whom this Option is transferred by will
or
the laws of descent and distribution. Unless sooner terminated, this Option
shall terminate in its entirety upon the expiration of such six-month
period.
(d) Discharge
for Cause.
Notwithstanding anything to the contrary herein, this Option shall terminate
in
its entirety, regardless of whether the Option is vested in whole or in part,
immediately upon the Optionee’s discharge of employment for Cause. For purposes
of this Section, the term “Cause” shall have the meaning set forth in existing
Consulting Agreement with the Company. If no such Consulting Agreement is in
effect, then such term shall have the same meaning as set forth in the last
existing consulting agreement between Optionee and the Company or as set forth
in the Plan.
5. Adjustments
and Business Combinations.
(a) Adjustments
for Events Affecting Stock.
In the
event of changes in the Stock of the Company by reason of any stock dividend,
spin-off, split-up, recapitalization, merger, consolidation, business
combination or exchange of shares and the like, the Administrator shall, in
its
discretion, make appropriate adjustments to the number, kind, and price of
shares covered by this Option, and shall, in its discretion and without the
consent of the Optionee, make any other adjustments in this Option, including
but not limited to reducing the number of shares subject to the Option or
providing or mandating alternative settlement methods such as settlement of
the
Option in cash or in shares of Stock or other securities of the Company or
of
any other entity, or in any other matters which relate to the Option as the
Administrator shall, in its sole discretion, determine to be necessary or
appropriate; in each and every case consistent with Section 12 of the
Plan.
(b) Adjustments
for Unusual Events.
The
Administrator is authorized to make, in its discretion and without the consent
of the Optionee, adjustments in the terms and conditions of,
12
and
the
criteria included in, the Option in recognition of unusual or nonrecurring
events affecting the Company, or the financial statements of the Company or
any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
consistent with the Plan and appropriate to prevent dilution or enlargement
of
the benefits or potential benefits intended to be made available to the Optionee
under the Option or the Plan.
(c) Binding
Nature of Adjustments.
Adjustments under this Section 5 will be made by the Administrator, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding, and conclusive. No fractional shares will be
issued pursuant to this Option on account of any such adjustments.
6. Confidential
Information.
In
consideration of the Option granted to the Optionee pursuant to this Agreement,
the Optionee agrees and covenants that, except as specifically authorized by
the
Company, the Optionee will keep confidential any trade secrets or confidential
or proprietary information of the Company which are now or which hereafter
may
become known to the Optionee as a result of the Optionee’s employment by the
Company, and shall not at any time, directly or indirectly, disclose any such
information to any person, firm, Company, or other entity, or use the same
in
any way other than in connection with the business of the Company, at all times
during and after the Optionee’s employment. The provisions of this
Section 6 shall not narrow or otherwise limit the obligations and
responsibilities of the Optionee set forth in any agreement of similar import
entered into between the Optionee and the Company.
7. Non-Guarantee
of Employment.
Nothing
in the Plan or this Agreement shall alter the at-will or other employment,
consultant, or director status of the Optionee, nor be construed as a contract
of employment between the Company and the Optionee, or as a contractual right
of
Optionee to continue in the employ of, the Company, or as a limitation of the
right of the Company to discharge the Optionee at any time with or without
cause
or notice.
8. No
Rights as a Stockholder.
The
Optionee shall not have any of the rights of a stockholder with respect to
the
shares of Stock that may be issued upon the exercise of the Option until such
shares of Stock have been issued to him or her upon the due exercise of the
Option. No adjustment shall be made for dividends or distributions or other
rights for which the record date is before the date such certificate or
certificates are issued.
9. Nonstatutory
Nature of the Option.
The
Optionee acknowledges that, upon exercise of this Option, the Optionee will
recognize taxable income in an amount equal to the excess of the then Fair
Market Value of the shares over the Strike Price and must comply with the
provisions of Section 10 of this Agreement with respect to any tax
withholding obligations that arise as a result of such exercise.
10. Withholding
of Taxes.
At the
time the NQO Option is exercised, in whole or in part, or at any time thereafter
as requested by the Company, the Optionee hereby authorizes withholding from
payroll or any other payment of any kind due the Optionee and otherwise agrees
to make adequate provision for foreign, federal, state, and local taxes required
by law to be withheld, if any, which arise in connection with the Option. The
Company may require the Optionee to make a cash payment to cover any withholding
tax obligation as a condition of exercise of the Option. If the Optionee does
not make such payment when requested, the Company may refuse to issue any Stock
certificate under the Plan until arrangements satisfactory to the Administrator
for such
13
payment
have been made. The Administrator may, in its sole discretion, permit the
Optionee to satisfy, in whole or in part, any withholding tax obligation which
may arise in connection with the Option either by electing to have the Company
withhold from the shares to be issued upon exercise that number of shares,
or by
electing to deliver to the Company already-owned shares, in either case having
a
Fair Market Value equal to the amount necessary to satisfy the statutory minimum
withholding amount due.
11. The
Company’s Rights.
The
existence of this Option shall not affect in any way the right or power of
the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any
issue of bonds, debentures, preferred, or other stocks with preference ahead
of
or convertible into, or otherwise affecting the Stock or the rights thereof,
or
the dissolution or liquidation of the Company, or any sale or transfer of all
or
any part of the Company’s assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
12. Optionee.
Whenever the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Administrator, to apply to the estate, personal representative, or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word “Optionee” shall be deemed to include such
person.
13. Nontransferability
of Option.
This
Option is nontransferable otherwise than by will or the laws of descent and
distribution and during the lifetime of the Optionee, the Option may be
exercised only by the Optionee or, during the period the Optionee is under
a
legal disability, by the Optionee’s guardian or legal representative. Except as
provided above, the Option may not be assigned, transferred, pledged,
hypothecated, or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process.
14. Notices.
All
notices and other communications made or given pursuant to this Agreement shall
be in writing and shall be sufficiently made or given if hand-delivered or
mailed by certified mail, addressed to the Optionee at the address contained
in
the records of the Company, or addressed to the Administrator, care of the
Company for the attention of its Corporate Secretary at its principal office
or,
if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be available
to the parties.
15. Entire
Agreement.
This
Agreement contains the entire agreement between the parties with respect to
the
stock option granted hereunder. Any oral or written agreements, representations,
warranties, written inducements, or other communications made before the
execution of this Agreement with respect to the stock option granted hereunder
shall be void and ineffective for all purposes.
16. Amendment.
This
Agreement may not be modified, except as provided in the Plan or in a written
document signed by each of the parties hereto.
17. Conformity
with Plan.
This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by reference.
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the
14
terms
of
the Plan. In the event of any ambiguity in this Agreement or any matters as
to
which this Agreement is silent, the Plan shall govern. A copy of the Plan is
available upon request to the Administrator.
18. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, other than the conflict of laws principles thereof. All
actions to enforce or interpret this Agreement shall be brought in an exclusive
forum in New Jersey determined by the Administrator.
19. Headings.
The
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer as of the date first above written.
ARKADOS
GROUP, INC.
By:
________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
The
undersigned hereby acknowledges that he/she has carefully read this Agreement
and the Plan and agrees to be bound by all of the provisions set forth in such
documents.
OPTIONEE:
____________________________
▇▇▇▇▇
▇▇▇▇▇▇▇
Date:
As
of February ___, 2007
15
EXHIBIT
1
NOTICE
OF GRANT OF STOCK OPTIONS
Optionee:
▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇
Date:
February
___, 2007
Number
of Shares Subject
To
The
Option:
300,000
(NQO’s)
Strike
Price Per
Share:
$______
Vesting:
February
9, 2008
Expiration
Date:
February
8, 2014
16
EXHIBIT
2
FORM
OF NOTICE OF EXERCISE
Administrator
of 2004 Stock Option and Restricted Stock Plan
c/o
Office of the Corporate Secretary
Arkados
Group, Inc.
▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Gentlemen:
I
hereby
exercise the Stock Option granted to me on February 9, 2007, by Arkados Group,
Inc. (the “Company”), subject to all the terms and provisions thereof and of the
Arkados Group, Inc. 2004 Stock Option and Restricted Stock Plan (the “Plan”),
and notify you of my desire to purchase ____________ shares of Common Stock
of
the Company at a price of $___________ per share pursuant to the exercise of
said Option. This will confirm my understanding with respect to the shares
to be
issued to me by reason of this exercise of the Option (the shares to be issued
pursuant hereto shall be collectively referred to hereinafter as the “Shares”),
unless such exercise occurs after a registration statement is filed and
effective, as follows:
(a) I
am
acquiring the Shares for my own account for investment with no present intention
of dividing my interest with others or of reselling or otherwise disposing
of
any of the Shares.
(b) The
Shares are being issued without registration under the Securities Act of 1933,
as amended (the “Act”), in reliance upon one or more exemptions contained in the
Act, and such reliance is based in part on the above
representation.
(c) The
certificates for the Shares to be issued to me will bear a legend substantially
as follows:
“The
securities represented by this stock certificate have not been registered under
the Securities Act of 1933 (the “Act”) or applicable state securities laws (the
“State Acts”), and shall not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for consideration) by the holder except
upon the issuance to the Company of a favorable opinion of its counsel and/or
submission to the Company of such other evidence as may be satisfactory to
counsel for the Company, to the effect that any such transfer shall not be
in
violation of the Act and the State Acts.
“The
shares of stock represented by this certificate are subject to restrictions
on
transfer and an option to purchase set forth in a certain Stock Restriction
Agreement between the Company and the registered owner of this certificate
(or
his predecessor in interest), and no transfer of such shares may be made without
compliance with that Agreement. A copy of that Agreement is available for
inspection at the office of the Company upon appropriate request and without
charge.”
Appropriate
stop transfer instructions will be issued by the issuer to its transfer
agent.
17
(d) Since
the
Shares have not been registered under the Act, they must be held indefinitely
until an exemption from the registration requirements of the Act is available
or
they are subsequently registered, in which event the representation in Paragraph
(a) hereof shall terminate. As a condition to any transfer of the shares, I
understand that the issuer will require an opinion of counsel satisfactory
to
the issuer to the effect that such transfer does not require registration under
the Act or any state securities law.
(e) The
issuer is not obligated to comply with the registration requirements of the
Act
or with the requirements for an exemption under Regulation A or Regulation
D
under the Act for my benefit.
Total
Amount Enclosed: $__________
Date:________________________
____________________________________
(Optionee)
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EXHIBIT
D
Form
of Agreement and General Release
************************************************
AGREEMENT
AND GENERAL RELEASE
Agreement
and General Release (the “Agreement”) made as of __________, 2007 by and between
Aster Wireless, Inc., a Delaware corporation (the “Company”), which is located
at __________________________________________________________, and
_______________ (“Employee”), who is domiciled at
_________________________________________________.
WHEREAS,
the Company proposes to merge (the “Merger”) with and into Arkados, Inc., a
Delaware corporation (“Arkados”); and
WHEREAS,
Arkados has offered and Employee has accepted employment by Arkados commencing
on the effective date of the Merger; and
WHEREAS,
the parties desire to settle fully and finally any and all differences between
Employee and the Company, including, but not limited to, any differences that
might arise out of Employee’s employment with the Company and the termination
thereof;
NOW,
THEREFORE, IT IS AGREED THAT:
1. Employee’s
employment with the Company terminated or will terminate at the close of
business on the effective day of the Merger.
2. Employee
acknowledges and agrees that the Company has paid to Employee all of Employee’s
wages, commissions, bonuses, and accrued vacation pay, and that the Company
owes
Employee no other wages, commissions, bonuses, vacation pay, employee benefits,
or other
compensation or payments of any kind or nature, other than as provided in this
Agreement.
3. (a)
Employee
represents and warrants that Employee has returned to the Company any and all
documents, software, equipment (including, but not limited to, computers and
computer-related items), Company credit cards, and all other materials or other
things in Employee’s possession, custody, or control which are the property of
the Company, including, but not limited to, any Company identification, keys,
and the like, wherever such items may have been located; as well as all copies
(in whatever form thereof) of all materials relating to Employee’s employment,
or obtained or created in the course of his employment, with the
Company.
(b)
Employee
hereby represents that, other than those materials that Employee has returned
to
the Company pursuant to Paragraph 3(a) above, Employee has not copied or caused
to be copied, and has not printed-out or caused
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to
be
printed-out, any software, computer disks, or other documents other than those
documents generally available to the public, or retained any other materials
originating with or belonging to the Company, and that Employee will not do
so.
Employee further represents that Employee has not retained and will not retain
in his possession any software, documents or other materials in machine or
other
readable form, which are the property of the Company, originated with the
Company, were obtained or created in the course of Employee’s employment, or
relate to employment with the Company.
4. Employee,
in consideration of Arkados offer of employment and other valuable consideration
pursuant to Paragraph 4 of this Agreement, releases and forever discharges
the
Company and the Company’s current, former, and future controlling shareholders,
subsidiaries, affiliates, related companies, divisions, directors, trustees,
officers, employees, agents, attorneys, successors, and assigns (and the
current, former and future controlling shareholders, directors, trustees,
officers, employees, agents, and attorneys of such controlling shareholders,
subsidiaries, affiliates, related companies and divisions), and all persons
acting by, through, under, or in concert with any of them (the Company and
the
foregoing other persons and entities are hereinafter defined separately and
collectively as the “Releasees”), from all actions, causes of action, claims,
and demands whatsoever, whether known or unknown, in law or equity, whether
statutory or common law, whether federal, state, local, or otherwise, including,
but not limited to, any claims related to, or arising out of any aspect of
Employee’s employment with the Company, any agreement concerning such
employment, or the termination of such employment, including, but not limited
to, any and all claims of wrongful discharge or breach of contract, any and
all
claims for equitable estoppel, any and all claims for employee benefits,
including, but not limited to, any and all claims under the Employee Retirement
Income Security Act of 1974, as amended, the Family and Medical Leave Act of
1993, and any and all claims of employment discrimination on any basis or of
unlawful retaliation, including, but not limited to, any and all claims under
Title VII of the Civil Rights Act of 1964, as amended, under the Age
Discrimination in Employment Act of 1967, as amended (“ADEA”), under the Civil
Rights Act of 1866, 42 U.S.C. § 1981, as amended, under the Americans With
Disabilities Act of 1990, under the Civil Rights Act of 1991, under the
Immigration Reform and Control Act of 1986, as amended, under the New York
State
Human Rights Law, as amended, and under the New York City Human Rights Law,
as
amended; and any claim for attorneys’ fees, experts’ fees, disbursements or
costs; which against the Releasees, Employee, Employee’s heirs, executors,
administrators, or assigns ever had, now have, or hereafter may have, by reason
of any matter, cause, or thing whatsoever from the beginning of the world to
the
date of Employee’s execution of this Agreement.
5. Except
as
otherwise provided in Paragraph 14 of this Agreement, Employee represents and
warrants that Employee has never commenced or filed, and Employee covenants
and
agrees never to commence, file, aid, or in any way prosecute or cause to be
commenced or prosecuted any such claims or actions against the Releasees or
any
of them.
6. Employee
shall keep confidential, and shall not hereafter disclose to any person, firm,
corporation, governmental agency, or other entity, any trade secret, proprietary
information, or confidential information of the Company, including, but not
limited to, information relating to trade secrets, processes, methods, pricing,
pricing strategies, customer lists, customer contacts,
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marketing
plans, product introductions, advertising or promotional programs, sales, its
financial health, and other confidential business matters.
7. Employee
shall keep the terms, amount, and fact of this Agreement confidential, and
shall
not hereafter disclose any information concerning this Agreement to any person,
firm, corporation, governmental agency, or other entity, without the prior
written consent of the Company. This prohibition does not apply to any filing
or
related communication with any federal, state, or local taxing authority, or
to
communications with an immediate family member, counsel, or professional tax
advisor, who agrees, in advance, to be similarly bound. Employee will be
responsible for insuring that any such individuals keep the fact and terms
of
this Agreement confidential.
8.
Employee
and the Company mutually agree that the terms of her termination of employment
are amicable and mutually acceptable and each party agrees with the other that
neither shall malign, defame, blame, or otherwise disparage the other, either
publicly or privately regarding the past or future business or personal affairs
of the Company or the Employee, or any other officer, director or employee
of
the Company.
9. Employee
agrees to indemnify and hold harmless each and all of the Releasees from and
against any and all loss, cost, damage, or expense, including, but not limited
to, attorneys’ fees, incurred by the Releasees, or any of them, arising out of
any breach by Employee of this Agreement, or the fact that any representation
made by Employee in this Agreement was false when made.
10. Should
any provision of this Agreement be declared or determined by a court to be
illegal or invalid, the validity of the remaining provisions shall not be
affected thereby and said illegal or invalid provision shall be deemed not
to be
a part of this Agreement.
11. This
Agreement sets forth the entire agreement between the parties hereto, fully
supersedes any and all prior agreements or understandings between the parties
hereto, and may not be modified orally.
12. This
Agreement shall be deemed to have been made at New York, New York and shall
be
interpreted, construed, and enforced pursuant to the laws of the State of New
York.
13. This
Agreement shall not in any way be construed as an admission by the Company
of
any liability, or of any wrongful acts whatsoever against Employee or any other
person.
14. Notwithstanding
any other provision of this Agreement to the contrary:
(a)
The
Company and Employee agree that, by entering into this Agreement, Employee
does
not waive rights or claims that may arise after the date this Agreement is
executed.
(b)
The
Company and Employee agree that this Agreement shall not affect the rights
and
responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to
enforce
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the
ADEA
and other laws, and further agree that this Agreement shall not be used to
justify interfering with Employee’s protected right to file a charge or
participate in an investigation or proceeding conducted by the EEOC. The Company
and Employee further agree that Employee knowingly and voluntarily waives all
rights or claims (that arose prior to Employee’s execution of this Agreement)
Employee may have against the Releasees, or any of them, to receive any benefit
or remedial relief (including, but not limited to, reinstatement, back pay,
front pay, damages, and attorneys’ fees) as a consequence of any charge filed
with the EEOC, and of any litigation concerning any facts alleged in any such
charge.
(c)
The
Company and Employee agree that, for a period of seven (7) days following the
execution of this Agreement, Employee has the right to revoke this Agreement
by
written notice to ___________, Chief Executive Officer of the Company. The
Company and Employee further agree that this Agreement shall not become
effective or enforceable until the eighth (8th) day after the execution of
this
Agreement; and that in the event Employee revokes this Agreement prior to the
eighth (8th) day after the execution of this Agreement, this Agreement, and
the
promises contained in this Agreement, shall automatically be deemed null and
void.
(d)
The
Company hereby advises and urges Employee in writing to consult with an attorney
prior to executing this Agreement. Employee represents and warrants that the
Company gave Employee a period of twenty-one (21) days in which to consider
this
Agreement before executing this Agreement.
(e)
Employee’s
acceptance of salary from Arkados, at any time more than seven (7) days after
the execution of this Agreement shall constitute an admission by Employee that
Employee did not revoke this Agreement during the revocation period of seven
(7)
days; and shall further constitute an admission by Employee that this Agreement
has become effective and enforceable.
(f)
If
Employee executed this Agreement at any time prior to the end of the twenty-one
(21) day period that the Company gave Employee in which to consider this
Agreement, such early execution was a knowing and voluntary waiver of Employee’s
right to consider this Agreement for twenty-one (21) days, and was due to
Employee’s belief that Employee had ample time in which to consider and
understand this Agreement, and in which to review this Agreement with an
attorney.
15. This
Agreement shall not affect or be used to interfere with Employee's protected
right to test in any court, under the Older Worker Benefit Protection Act,
or
like statute or regulation.
16. EMPLOYEE
EXPRESSLY ACKNOWLEDGES, REPRESENTS, AND WARRANTS THAT EMPLOYEE HAS CAREFULLY
READ THIS AGREEMENT; THAT EMPLOYEE FULLY UNDERSTANDS THE TERMS, CONDITIONS,
AND
SIGNIFICANCE OF THIS AGREEMENT; THAT EMPLOYEE HAS HAD AMPLE TIME TO CONSIDER
AND
NEGOTIATE THIS AGREEMENT; THAT THE COMPANY HAS ADVISED AND URGED EMPLOYEE TO
CONSULT WITH AN ATTORNEY CONCERNING THIS AGREEMENT; THAT EMPLOYEE HAS HAD A
FULL
OPPORTUNITY TO REVIEW THIS
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AGREEMENT
WITH AN ATTORNEY; AND THAT EMPLOYEE HAS EXECUTED THIS AGREEMENT VOLUNTARILY,
KNOWINGLY, AND WITH SUCH ADVICE OF HIS ATTORNEY, AS EMPLOYEE DEEMED
APPROPRIATE.
ASTER
WIRELESS, INC.
By:
____________________________
Chief
Executive Officer
STATE
OF
NEW YORK )
:
ss.:
COUNTY
OF
NEW YORK )
On
_________________, 2006 before me personally came __________ to me known and
known to me to be the individual described in and who executed the foregoing
Agreement, and she duly acknowledged to me that she voluntarily and knowingly
executed the said Agreement, after having read and understood said
document.
_________________________________
Notary
Public
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