Exhibit 4.1
EXECUTION COPY
PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT ("Agreement") is made as of the 16th
day of February, 2007 by and among Ibis Technology Corporation, a Massachusetts
corporation (the "Company"), and the Investors set forth on the signature pages
affixed hereto (each an "Investor" and collectively the "Investors").
Recitals
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended; and
B. The Investors wish to purchase from the Company, and the
Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this Agreement, (i) an aggregate of 3,378,377 shares (the "Shares") of
the Company's Common Stock, par value $0.008 per share (together with any
securities into which such shares may be reclassified the "Common Stock"), at
purchase price of $1.57375 per share, and (ii) warrants to purchase an aggregate
of 2,533,781 shares of Common Stock (subject to adjustment) at an exercise price
of $1.50 per share (subject to adjustment) in the form attached hereto as
Exhibit A (the "Warrants"); and
C. Subject to the terms and conditions set forth herein, (i)
1,400,000 shares of Common Stock (the "Initial Shares") and Warrants (the
"Initial Warrants") to purchase an aggregate of 1,050,000 shares of Common Stock
(subject to adjustment) (the "Initial Warrant Shares" and, collectively with the
Initial Shares and the Initial Warrants, the "Initial Securities") will be
issued and sold to the Investors on the First Closing Date (as defined below)
for an aggregate purchase price of $2,203,250 (the "Initial Purchase Price").
D. Subject to the terms and conditions set forth herein, (i)
1,978,377 shares of Common Stock (the "Remaining Shares") and Warrants (the
"Remaining Warrants") to purchase an aggregate of 1,483,781 shares of Common
Stock (subject to adjustment) (the "Remaining Warrant Shares" and, collectively
with the Remaining Shares and the Remaining Warrants, the "Remaining
Securities") will be issued and sold to the Investors on the Second Closing Date
(as defined below) for an aggregate purchase price of $3,113,472.97 (the
"Remaining Purchase Price").
E. Contemporaneous with the sale of the Initial Shares and the
Initial Warrants, the parties hereto will execute and deliver a Registration
Rights Agreement, in the form attached hereto as Exhibit B (the "Registration
Rights Agreement"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly through one or more intermediaries Controls,
is controlled by, or is under common control with, such Person.
"Business Day" means a day, other than a Saturday or Sunday,
on which banks in New York City are open for the general transaction of
business.
"Company's Knowledge" means the actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company,
after due inquiry.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Control" (including the terms "controlling", "controlled by"
or "under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Effective Date" means the date on which the initial
Registration Statement is declared effective by the SEC.
"Effectiveness Deadline" means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.
"Intellectual Property" means all of the following: (i)
patents, patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
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"Material Adverse Effect" means a material adverse effect on
(i) the assets, liabilities, results of operations, condition (financial or
otherwise), business, or prospects of the Company and its Subsidiaries taken as
a whole, or (ii) the ability of the Company to perform its obligations under the
Transaction Documents.
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Permitted Liens" means (i) mechanics', carriers', or
workmen's, repairmen's or similar liens arising or incurred in the ordinary
course of business, (ii) liens for taxes, assessments and other governmental
charges that are not due and payable or which may hereafter be paid without
penalty or which are being contested in good faith by appropriate proceedings
and (iii) other imperfections of title or encumbrances, if any, that do not,
individually or in the aggregate, materially impair the use or value of the
property to which they relate.
"Person" means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.
"Proposals" has the meaning set forth in Section 7.9.
"Purchase Price" means Five Million Three Hundred Sixteen
Thousand Seven Hundred Twenty-Two Dollars and Ninety-Seven Cents
($5,316,722.97).
"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"SEC Filings" has the meaning set forth in Section 4.6.
"Securities" means the Initial Securities and the Remaining
Securities.
"Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
"Transaction Documents" means this Agreement, the Warrants and
the Registration Rights Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon the exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
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"1934 Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.
2. Purchase and Sale of the Shares and Warrants.
(a) Subject to the terms and conditions of this Agreement, on
the First Closing Date, each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Initial
Shares and the Initial Warrants in the respective amounts set forth opposite the
Investors' names on the signature pages attached hereto in exchange for the
Initial Purchase Price as specified in Section 3(a) below.
(b) Subject to the terms and conditions of this Agreement, on
the Second Closing Date, each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Remaining
Shares and the Remaining Warrants in the respective amounts set forth opposite
the Investors' names on the signature pages attached hereto in exchange for the
Remaining Purchase Price as specified in Section 3(b) below.
3. Closing.
(a) Upon confirmation that the other conditions to the First
Closing specified herein have been satisfied or duly waived by the Investors,
the Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate,
representing the Initial Shares and the Initial Warrants, with instructions that
such certificates are to be held for release to the Investors only upon payment
in full of the Initial Purchase Price to the Company by all the Investors. Upon
such receipt by Lowenstein Sandler PC of the certificates, each Investor shall
promptly, but no more than one Business Day thereafter, cause a wire transfer in
same day funds to be sent to the account of the Company as instructed in writing
by the Company, in an amount representing such Investor's pro rata portion of
the Initial Purchase Price as set forth on the signature pages to this
Agreement. On the date (the "First Closing Date") the Company receives the
Initial Purchase Price, the certificates evidencing the Initial Shares and the
Initial Warrants shall be released to the Investors (the "First Closing"). The
First Closing shall take place at the offices of Lowenstein Sandler PC, 1251
Avenue of the Americas, 18th Floor, New York, New York 10020, or at such other
location and on such other date as the Company and the Investors shall mutually
agree.
(b) Upon confirmation that the other conditions to the Second
Closing specified herein have been satisfied or duly waived by the Investors,
the Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate,
representing the Remaining Shares and the Remaining Warrants, with instructions
that such certificates are to be held for release to the Investors only upon
payment in full of the Remaining Purchase Price to the Company by all the
Investors. Upon such receipt by Lowenstein Sandler PC of the certificates, each
Investor shall promptly, but no more than one Business Day thereafter, cause a
wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor's
pro rata portion of the Remaining Purchase Price as set forth on the signature
pages to this Agreement. On the date (the "Second Closing Date") the Company
receives the Second Purchase Price, the certificates evidencing the Remaining
Shares and the Remaining Warrants shall be released to the Investors (the
"Second Closing"). The Second Closing shall take place at the offices of
Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New
York 10020, or at such other location and on such other date as the Company and
the Investors shall mutually agree.
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4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4.1 Organization, Good Standing and Qualification. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not had and would not reasonably
be expected to have a Material Adverse Effect. The Company's Subsidiaries are
listed on Schedule 4.1 hereto.
4.2 Authorization. The Company has full power and authority
and, except for approval of the Proposals by its stockholders as contemplated in
Section 7.9, has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of the Transaction Documents, (ii) the authorization of
the performance of all obligations of the Company hereunder or thereunder, and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Securities. The Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. Schedule 4.3 sets forth as of the date
hereof (a) the authorized capital stock of the Company; (b) the number of shares
of capital stock issued and outstanding; (c) the number of shares of capital
stock issuable pursuant to the Company's stock plans; and (d) the number of
shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Securities) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. All of the issued
and outstanding shares of the Company's capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. Except as described on Schedule
4.3, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Except as described on Schedule 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
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with respect to any securities of the Company. Except as described on Schedule
4.3, there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind. Except as described on Schedule 4.3 and except
for the Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
Schedule 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.
Except as described on Schedule 4.3, the issuance and sale of
the Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other Person (other than the Investors) and
will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.
Except as described on Schedule 4.3, the Company does not have
outstanding stockholder purchase rights or "poison pill" or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. The Warrants have been duly and validly
authorized. Upon the due exercise of the Warrants, the Warrant Shares will be
validly issued, fully paid and non-assessable, free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investors. The Company has reserved a sufficient number
of shares of Common Stock for issuance upon the exercise of the Warrants, free
and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws and except for those created by the Investors.
4.5 Consents. Except for approval of the Proposals by its
stockholders as contemplated in Section 7.9, the execution, delivery and
performance by the Company of the Transaction Documents and the offer, issuance
and sale of the Securities require no consent of, action by or in respect of, or
filing with, any Person, governmental body, agency, or official other than
filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws which
the Company undertakes to file within the applicable time periods. Subject to
the accuracy of the representations and warranties of each Investor set forth in
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Section 5 hereof, the Company has taken all action necessary to exempt (i) the
issuance and sale of the Securities, (ii) the issuance of the Warrant Shares
upon due exercise of the Warrants, and (iii) the other transactions contemplated
by the Transaction Documents from the provisions of any stockholder rights plan
or other "poison pill" arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company's Restated Articles of Organization or Amended and Restated Bylaws that
is or could reasonably be expected to become applicable to the Investors as a
result of the transactions contemplated hereby, including without limitation,
the issuance of the Securities and the ownership, disposition or voting of the
Securities by the Investors or the exercise of any right granted to the
Investors pursuant to this Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made
available to the Investors through the EDGAR system, true and complete copies of
the Company's most recent Annual Report on Form 10-K for the fiscal year ended
December 31, 2005 (the "10-K"), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-K and prior to the date
hereof (collectively, the "SEC Filings"). The SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period.
4.7 Use of Proceeds. The net proceeds of the sale of the
Shares and the Warrants hereunder shall be used by the Company for working
capital and general corporate purposes.
4.8 No Material Adverse Change. Since December 31, 2005,
except as identified and described in the SEC Filings or as described on
Schedule 4.8, there has not been:
(i) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2006, except for changes in the
ordinary course of business which have not had and would not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or
any authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company
or its Subsidiaries;
(iv) any waiver, not in the ordinary course of
business, by the Company or any Subsidiary of a material right or of a material
debt owed to it;
(v) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company or a Subsidiary,
except in the ordinary course of business and which is not material to the
assets, properties, financial condition, operating results or business of the
Company and its Subsidiaries taken as a whole (as such business is presently
conducted and as it is proposed to be conducted);
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(vi) any change or amendment to the Company's
Restated Articles of Organization or Amended and Restated Bylaws, or material
change to any material contract or arrangement by which the Company or any
Subsidiary is bound or to which any of their respective assets or properties is
subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any
Subsidiary;
(viii) any material transaction entered into by the
Company or a Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or
material change in the composition or duties of the senior management of the
Company or any Subsidiary;
(x) the loss or threatened loss of any customer which
has had or would reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character
that has had or would reasonably be expected to have a Material Adverse Effect.
4.9 SEC Filings; S-3 Eligibility.
(a) At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment
thereto filed by the Company since January 1, 2004 pursuant to the 1933 Act and
the rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed pursuant to
Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of
any sale of securities pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company is eligible to use Form S-3 to
register the Registrable Securities (as such term is defined in the Registration
Rights Agreement) for sale by the Investors as contemplated by the Registration
Rights Agreement.
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4.10 No Conflict, Breach, Violation or Default. Subject to the
approval of the Proposals by its stockholders as contemplated in Section 7.9,
the execution, delivery and performance of the Transaction Documents by the
Company and the issuance and sale of the Securities will not conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company's Restated Articles of Organization
or the Company's Amended and Restated Bylaws, both as in effect on the date
hereof (true and complete copies of which have been made available to the
Investors through the EDGAR system), or (ii)(a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject, other than, in
the case of clause (ii) only, a conflict, breach or default that would not
reasonably be expected to have a Material Adverse Effect.
4.11 Tax Matters. The Company and each Subsidiary has timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate governmental agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges, accruals and reserves
on the books of the Company in respect of taxes for all fiscal periods are
adequate in all material respects, and there are no material unpaid assessments
against the Company or any Subsidiary. All taxes and other assessments and
levies that the Company or any Subsidiary is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or, to the Company's Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property. Except as described on
Schedule 4.11, there are no outstanding tax sharing agreements or other such
arrangements between the Company and any Subsidiary or other corporation or
entity.
4.12 Title to Properties. Except as disclosed in the SEC
Filings, the Company and each Subsidiary has good and marketable title to all
real properties and all other properties and assets owned by it, in each case
free from liens, encumbrances and defects other than Permitted Liens; and except
as disclosed in the SEC Filings, the Company and each Subsidiary holds any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or currently
planned to be made thereof by them.
4.13 Certificates, Authorities and Permits. The Company and
each Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it except as would not reasonably be expected to have a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, would reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
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4.14 Labor Matters.
(a) Except as set forth on Schedule 4.14, the Company is not a
party to or bound by any collective bargaining agreements or other agreements
with labor organizations. The Company has not violated in any material respect
any laws, regulations, orders or contract terms, affecting the collective
bargaining rights of employees, labor organizations or any laws, regulations or
orders affecting employment discrimination, equal opportunity employment, or
employees' health, safety, welfare, wages and hours.
(b) (i) There are no labor disputes existing, or to the
Company's Knowledge, threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes, lockouts or any other disruptions of or by the Company's
employees, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the Company's employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company's Knowledge, the Company enjoys
good labor and employee relations with its employees and labor organizations.
(c) The Company is in compliance in all material respects with
all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization. There are no claims pending against the Company before the
Equal Employment Opportunity Commission or any other administrative body or in
any court asserting any violation of Title VII of the Civil Rights Act of 1964,
the Age Discrimination Act of 1967, 42 U.S.C. ss.ss. 1981 or 1983 or any other
federal, state or local Law, statute or ordinance barring discrimination in
employment.
(d) Except as disclosed in the SEC Filings or as described on
Schedule 4.14, the Company is not a party to, or bound by, any employment or
other contract or agreement that contains any severance, termination pay or
change of control liability or obligation, including, without limitation, any
"excess parachute payment," as defined in Section 2806(b) of the Internal
Revenue Code.
(e) Except as specified in Schedule 4.14, each of the
Company's employees is a Person who is either a United States citizen or a
permanent resident entitled to work in the United States. To the Company's
Knowledge, the Company has no liability for the improper classification by the
Company of such employees as independent contractors or leased employees prior
to the Closing.
4.15 Intellectual Property.
(a) To the Company's Knowledge, all Intellectual
Property of the Company and its Subsidiaries is currently valid and enforceable.
No Intellectual Property of the Company or its Subsidiaries which is necessary
for the conduct of Company's and each of its Subsidiaries' respective businesses
as currently conducted or as currently proposed to be conducted has been or is
now involved in any cancellation, dispute or litigation, and, to the Company's
Knowledge, no such action is threatened. No issued patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
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(b) All of the licenses and sublicenses and consent,
royalty or other agreements concerning Intellectual Property which are necessary
for the conduct of the Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted to
which the Company or any Subsidiary is a party or by which any of their assets
are bound (other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition price of
less than $10,000 per license) (collectively, "License Agreements") are valid
and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company's Knowledge, the other parties thereto, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally, and there exists no event or condition which will result in a
material violation or breach of or constitute (with or without due notice or
lapse of time or both) a default by the Company or any of its Subsidiaries under
any such License Agreement.
(c) The Company and its Subsidiaries own or have the
valid right to use all of the Intellectual Property that is necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted and for the
ownership, maintenance and operation of the Company's and its Subsidiaries'
properties and assets, free and clear of all liens, encumbrances, adverse claims
or obligations to license all such owned Intellectual Property and Confidential
Information, other than licenses entered into in the ordinary course of the
Company's and its Subsidiaries' businesses. To the Company's Knowledge, the
Company and its Subsidiaries have a valid and enforceable right to use all third
party Intellectual Property and Confidential Information used or held for use in
the respective businesses of the Company and its Subsidiaries.
(d) To the Company's Knowledge, the conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with (collectively, "Infringe") any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company's Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation or order pending or outstanding or, to the Company's Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company's
and its Subsidiaries' use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.
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(e) The consummation of the transactions contemplated
hereby and by the other Transaction Documents will not result in the loss,
material impairment of or material restriction on the Company's or any of its
Subsidiaries' ownership or right to use any of the Intellectual Property or
Confidential Information which is necessary for the conduct of Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted.
(f) The Company and its Subsidiaries have taken
reasonable steps to protect the Company's and its Subsidiaries' rights in their
Intellectual Property and Confidential Information. Each employee, consultant
and contractor who has had access to Confidential Information which is necessary
for the conduct of Company's and each of its Subsidiaries' respective businesses
as currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof. To the Company's Knowledge, except under
confidentiality obligations, or in connection with non-disclosure agreements
with third parties entered into in the ordinary course of business, there has
been no material disclosure of any of the Company's or its Subsidiaries'
Confidential Information to any third party.
4.16 Environmental Matters. Neither the Company nor any
Subsidiary is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or would reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company's Knowledge,
threatened investigation that might lead to such a claim.
4.17 Litigation. Except as disclosed in SEC Filings or as
described on Schedule 4.17, there are no pending actions, suits or proceedings
against or affecting the Company, its Subsidiaries or any of its or their
properties; and to the Company's Knowledge, no such actions, suits or
proceedings are threatened. Except as in disclosed in SEC Filings, neither the
Company nor any Subsidiary, nor any director or officer thereof, is or since
January 1, 2004 has been the subject of any action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the Company's Knowledge,
there is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company. The SEC has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the 1933 Act
or the 1934 Act.
4.18 Financial Statements. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
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as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The financial statements included in each SEC Filing present
fairly, in all material respects, the consolidated financial position of the
Company as of the dates shown and its consolidated results of operations and
cash flows for the periods shown, and such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as may be disclosed
therein or in the notes thereto, and, in the case of quarterly financial
statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth
in the financial statements of the Company included in the SEC Filings filed
prior to the date hereof or as described on Schedule 4.18, neither the Company
nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary
maintains in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted and properties
owned or leased by the Company and each Subsidiary.
4.20 Compliance with Nasdaq Continued Listing Requirements.
The Company is in compliance with applicable Nasdaq continued listing
requirements. There are no proceedings pending or, to the Company's Knowledge,
threatened against the Company relating to the continued listing of the Common
Stock on Nasdaq and the Company has not received any notice of, nor to the
Company's Knowledge is there any basis for, the delisting of the Common Stock
from Nasdaq.
4.21 Brokers and Finders. No Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in Schedule 4.21.
4.22 No Directed Selling Efforts or General Solicitation.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
4.23 No Integrated Offering. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.
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4.24 Private Placement. The offer and sale of the Securities
to the Investors as contemplated hereby is exempt from the registration
requirements of the 1933 Act.
4.25 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former directors, officers, employees, agents or other Persons acting on behalf
of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary
or in connection with their respective businesses: (a) used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity; (b) made any direct or indirect unlawful
payments to any governmental officials or employees from corporate funds; (c)
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; (d) made any false or fictitious entries on the books and records
of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any nature.
4.26 Transactions with Affiliates. Except as disclosed in the
SEC Filings or as disclosed on Schedule 4.26, none of the officers or directors
of the Company and, to the Company's Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company's Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.27 Internal Controls. The Company is in material compliance
with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to
the Company. The Company has established disclosure controls and procedures (as
defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company, including the Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company's most recently filed periodic report under the 1934
Act, as the case may be, is being prepared. The Company's certifying officers
have evaluated the effectiveness of the Company's disclosure controls and
procedures as of the end of the period covered by the most recently filed
periodic report under the 1934 Act (such date, the "Evaluation Date"). The
Company presented in its most recently filed periodic report under the 1934 Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item 308
of Regulation S-K) or, to the Company's Knowledge, in other factors that could
significantly affect the Company's internal controls. The Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP and the applicable requirements of the 1934
Act.
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4.28 Disclosures. Neither the Company nor any Person acting on
its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information, other than the terms of the transactions contemplated hereby. The
representations and warranties of the Company contained herein do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
5. Representations and Warranties of the Investors. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 Organization and Existence. Such Investor is a validly
existing corporation, limited partnership or limited liability company and has
all requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by
such Investor of the Transaction Documents to which such Investor is a party
have been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be
received by such Investor hereunder will be acquired for such Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part of such Securities in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so registered.
5.4 Investment Experience. Such Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. Such Investor has had an
opportunity to receive all information related to the Company requested by it
and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings.
Neither such inquiries nor any other due diligence investigation conducted by
such Investor shall modify, limit or otherwise affect such Investor's right to
rely on the Company's representations and warranties contained in this
Agreement.
15
5.6 Restricted Securities. Such Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:
(a) "The securities represented hereby may not be
transferred unless (i) such securities have been registered for sale pursuant to
the Securities Act of 1933, as amended, (ii) such securities may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification under applicable
state securities laws."
(b) If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.
5.8 Accredited Investor. Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.
5.9 No General Solicitation. Such Investor did not learn of
the investment in the Securities as a result of any general solicitation or
general advertising.
5.10 Brokers and Finders. No Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.
5.11 Prohibited Transactions. During the last thirty (30) days
prior to the date hereof, neither such Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Investor's investments or trading or
information concerning such Investor's investments, including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's investments or trading (collectively, "Trading Affiliates") has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any "put equivalent position" (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a "Prohibited
Transaction"). Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction. Such Investor acknowledges
that the representations, warranties and covenants contained in this Section
5.11 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.11.
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6. Conditions to Closing.
6.1 Conditions to the Investors' Obligations - First Closing.
The obligation of each Investor to purchase the Initial Shares and the Initial
Warrants at the First Closing is subject to the fulfillment to such Investor's
satisfaction, on or prior to the First Closing Date, of the following
conditions, any of which may be waived by such Investor (as to itself only):
(a) The representations and warranties made by the
Company in Section 4 hereof qualified as to materiality shall be true and
correct at all times prior to and on the First Closing Date, except to the
extent any such representation or warranty expressly speaks as of a specific
date, in which case such representation or warranty shall be true and correct as
of such date, and, the representations and warranties made by the Company in
Section 4 hereof not qualified as to materiality shall be true and correct in
all material respects at all times prior to and on the First Closing Date,
except to the extent any such representation or warranty expressly speaks as of
a specific date, in which case such representation or warranty shall be true and
correct in all material respects as of such specific date. The Company shall
have performed in all material respects all obligations and covenants herein
required to be performed by it on or prior to the First Closing Date.
(b) The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Initial Securities and the
consummation of the other transactions contemplated by the Transaction Documents
to be consummated on or prior to the First Closing Date, all of which shall be
in full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) The Company shall have received confirmation from
Nasdaq to the effect that the Initial Shares and the Initial Warrant Shares have
been approved for inclusion in the Nasdaq Global Market upon official notice of
issuance.
(e) No judgment, writ, order, injunction, award or
decree of or by any court, or judge, justice or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(f) The Company shall have delivered a Certificate,
executed on behalf of the Company by its Chief Executive Officer or its Chief
Financial Officer, dated as of the First Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b), (d), (e) and
(i) of this Section 6.1.
17
(g) The Company shall have delivered a Certificate,
executed on behalf of the Company by its Clerk, dated as of the Closing Date,
certifying the resolutions adopted by the Board of Directors of the Company
approving the transactions contemplated by this Agreement and the other
Transaction Documents, the calling of the Stockholders Meeting (as defined
below) and the issuance of the Initial Securities, certifying the current
versions of the Restated Articles of Organization and Amended and Restated
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(h) The Investors shall have received an opinion from
Choate, Hall & Stewart LLP, the Company's counsel, dated as of the First Closing
Date, in form and substance reasonably acceptable to the Investors and
addressing such legal matters as the Investors may reasonably request.
(i) No stop order or suspension of trading shall have
been imposed by Nasdaq, the SEC or any other governmental or regulatory body
with respect to public trading in the Common Stock.
6.2 Conditions to Obligations of the Company - First Closing.
The Company's obligation to sell and issue the Initial Shares and the Initial
Warrants at the First Closing is subject to the fulfillment to the satisfaction
of the Company on or prior to the First Closing Date of the following
conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the
Investors in Section 5 hereof, other than the representations and warranties
contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the First Closing Date
with the same force and effect as if they had been made on and as of said date.
The Investment Representations shall be true and correct in all respects when
made, and shall be true and correct in all respects on the First Closing Date
with the same force and effect as if they had been made on and as of said date.
The Investors shall have performed in all material respects all obligations and
covenants herein required to be performed by them on or prior to the First
Closing Date.
(b) The Investors shall have executed and delivered
the Registration Rights Agreement.
(c) The Investors shall have delivered the Initial
Purchase Price to the Company.
6.3 Conditions to the Investors' Obligations - Second Closing.
The obligation of each Investors to purchase the Remaining Shares and the
Remaining Warrants at the Second Closing is subject to the fulfillment to such
Investor's satisfaction, on or prior to the Second Closing Date, of the
following conditions, any of which may be waived by such Investor (as to itself
only):
18
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct on the
date hereof and at all times prior to and on the Second Closing Date, except to
the extent any such representation or warranty expressly speaks as of a specific
date, in which case such representation or warranty shall be true and correct on
the date hereof and as of such date, and, the representations and warranties
made by the Company in Section 4 hereof not qualified as to materiality shall be
true and correct in all material respects on the date hereof and at all times
prior to and on the Second Closing Date, except to the extent any such
representation or warranty expressly speaks as of a specific date, in which case
such representation or warranty shall be true and correct in all material
respects on the date hereof and as of such date. The Company shall have
performed in all material respects all obligations and covenants herein required
to be performed by it on or prior to the Second Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers (including, without limitation,
approval of the Proposals by its stockholders in accordance with applicable law
and applicable Nasdaq requirements) necessary or appropriate for consummation of
the purchase and sale of the Remaining Securities and the consummation of the
other transactions contemplated by the Transaction Documents to be consummated
on or prior to the Second Closing Date, all of which shall be in full force and
effect.
(c) The First Closing shall have been consummated in
accordance with the terms of this Agreement.
(d) No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(e) The Remaining Shares and the Remaining Warrant Shares
shall have been approved for inclusion in the Nasdaq Global Market upon official
notice of issuance.
(f) The Company shall have delivered a Certificate, executed
on behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Second Closing Date, certifying to the fulfillment of
the conditions specified in subsections (a), (b), (d), (e) and (i) of this
Section 6.3.
(g) The Company shall have delivered a Certificate, executed
on behalf of the Company by its Clerk, dated as of the Second Closing Date,
certifying the resolutions adopted by the Board of Directors of the Company
approving the transactions contemplated by this Agreement and the other
Transaction Documents, the calling of the Stockholders Meeting (as defined
below), and the issuance of the Remaining Securities, certifying the current
versions of the Restated Articles of Organization and Amended and Restated
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
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(h) The Investors shall have received an opinion from Choate,
Hall & Stewart LLP, the Company's counsel, dated as of the Second Closing Date,
in form and substance reasonably acceptable to the Investors and addressing such
legal matters as the Investors may reasonably request.
(i) No stop order or suspension of trading shall have been
imposed by Nasdaq, the SEC or any other governmental or regulatory body with
respect to public trading in the Common Stock.
6.4 Conditions to Obligations of the Company - Second Closing.
The Company's obligation to sell and issue the Remaining Shares and the
Remaining Warrants at the Second Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Second Closing Date of the
following conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors
in Section 5 hereof, other than the Investment Representations, shall be true
and correct in all material respects when made, and shall be true and correct in
all material respects on the Second Closing Date with the same force and effect
as if they had been made on and as of said date. The Investment Representations
shall be true and correct in all respects when made, and shall be true and
correct in all respects on the Second Closing Date with the same force and
effect as if they had been made on and as of said date. The Investors shall have
performed in all material respects all obligations and covenants herein required
to be performed by them on or prior to the Second Closing Date.
(b) The Investors shall have delivered the Remaining Purchase
Price to the Company.
(c) The Company shall have obtained the approval of the
Proposals by its stockholders at a meeting of stockholders (the "Stockholders
Meeting") in accordance with applicable law and applicable Nasdaq requirements.
6.5 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand,
and the Investors, on the other hand, to effect any Closing shall terminate as
follows:
(i) Upon the mutual written consent of the
Company and the Investors;
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(ii) By the Company if any of the conditions
set forth in Section 6.2 or 6.4, respectively, shall have become incapable of
fulfillment, and shall not have been waived by the Company;
(iii) By an Investor (with respect to itself
only) if any of the conditions set forth in Section 6.1 or 6.3, respectively,
shall have become incapable of fulfillment, and shall not have been waived by
the Investor;
(iv) By an Investor (with respect to itself
only) if the Company delivers one or more supplements to the Disclosure
Schedules pursuant to Section 7.10 that reflect any events, facts or conditions
which, in such Investor's good faith judgment constitute, individually or in the
aggregate, constitute a Material Adverse Effect from the information contained
in the Disclosure Schedules delivered at the time of the execution of this
Agreement; or
(iv) By either the Company or any Investor
(with respect to itself only) if the First Closing has not occurred on or prior
to February 28, 2007 or the Second closing has not occurred on or prior to the
earlier of (i) the third Business Day after the Company's stockholders approve
the Proposals or (ii) June 30, 2007;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
(b) In the event of termination by the Company or any Investor
of its obligations to effect a Closing pursuant to this Section 6.5, written
notice thereof shall forthwith be given to the other Investors and the other
Investors shall have the right to terminate their obligations to effect such
Closing upon written notice to the Company and the other Investors. Nothing in
this Section 6.5 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.
(c) A termination of the obligation to effect the Second
Closing pursuant to the terms of this Section 6.5 shall not affect this
Agreement or the other Transaction Documents which shall otherwise continue in
full force and effect.
7. Covenants and Agreements of the Company.
7.1 Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of providing for the exercise of the
Warrants, such number of shares of Common Stock as shall from time to time equal
the number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.
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7.2 [reserved]
7.3 No Conflicting Agreements. The Company will not take any
action, enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the Company's obligations to the
Investors under the Transaction Documents.
7.4 Insurance.The Company shall not materially reduce the
insurance coverages described in Section 4.19.
7.5 Compliance with Laws. The Company will comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities.
7.6 Listing of Underlying Shares and Related Matters. Promptly
following the date hereof, the Company shall take all necessary action to cause
(i) the Initial Shares and the Initial Warrant Shares to be listed on the Nasdaq
Global Market no later than the First Closing Date and (ii) the Remaining Shares
and the Remaining Warrant Shares to be listed on the Nasdaq Global Market no
later than the Second Closing Date. Further, if the Company applies to have its
Common Stock or other securities traded on any other principal stock exchange or
market, it shall include in such application the Shares and the Warrant Shares
and will take such other action as is necessary to cause such Common Stock to be
so listed. The Company will use commercially reasonable efforts to continue the
listing and trading of its Common Stock on the Nasdaq Global Market and, in
accordance, therewith, will use commercially reasonable efforts to comply in all
respects with the Company's reporting, filing and other obligations under the
Amended and Restated Bylaws or rules of such market or exchange, as applicable.
7.7 Termination of Covenants. The provisions of Sections 7.2
through 7.5 shall terminate and be of no further force and effect on the date on
which the Company's obligations under the Registration Rights Agreement to
register or maintain the effectiveness of any registration covering the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.
7.8 Removal of Legends. Upon the earlier of (i) registration
for resale pursuant to the Registration Rights Agreement or (ii) Rule 144(k)
becoming available, the Company shall (A) deliver to the transfer agent for the
Common Stock (the "Transfer Agent") irrevocable instructions that the Transfer
Agent shall reissue a certificate representing shares of Common Stock without
legends upon receipt by such Transfer Agent of the legended certificates for
such shares, together with either (1) a customary representation by the Investor
that Rule 144(k) applies to the shares of Common Stock represented thereby or
(2) a statement by the Investor that such Investor has sold the shares of Common
Stock represented thereby in accordance with the Plan of Distribution contained
in the Registration Statement, and (B) cause its counsel to deliver to the
Transfer Agent one or more blanket opinions to the effect that the removal of
such legends in such circumstances may be effected under the 1933 Act. From and
after the earlier of such dates, upon an Investor's written request, the Company
shall promptly cause certificates evidencing the Investor's Securities to be
replaced with certificates which do not bear such restrictive legends, and
22
Warrant Shares subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to such Warrant
Shares. When the Company is required to cause unlegended certificates to replace
previously issued legended certificates, if unlegended certificates are not
delivered to an Investor within five (5) Business Days of submission by that
Investor of legended certificate(s) to the Transfer Agent as provided above (or
to the Company, in the case of the Warrants), the Company shall be liable to the
Investor for liquidated damages in an amount equal to 1.5% of the aggregate
purchase price of the Securities evidenced by such certificate(s) for each
thirty (30) day period (or portion thereof) beyond such three (3) Business Day
that the unlegended certificates have not been so delivered.
7.9 Proxy Statement; Stockholders Meeting. (a) Promptly
following the execution and delivery of this Agreement the Company shall take
all action necessary to call a meeting of its stockholders (the "Stockholders
Meeting"), which shall occur not later than May 15, 2007 (the "Stockholders
Meeting Deadline"), for the purpose of seeking approval of the Company's
stockholders for (i) the issuance and sale to the Investors of the Remaining
Securities and (ii) the full adjustment of the Warrants in accordance with the
provisions of Section 8(f)(8) thereof (collectively, the "Proposals"). In
connection therewith, the Company will promptly prepare and file with the SEC
proxy materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company. Each Investor shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Proxy
Statement, which information shall not contain any untrue statement of material
fact or omit to state any material fact necessary in order to make the
statements made therein not false or misleading. The Company will comply with
Section 14(a) of the 1934 Act and the rules promulgated thereunder in relation
to any proxy statement (as amended or supplemented, the "Proxy Statement") and
any form of proxy to be sent to the stockholders of the Company in connection
with the Stockholders Meeting, and the Proxy Statement shall not, on the date
that the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein not false or misleading,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies or the
Stockholders Meeting which has become false or misleading. If the Company should
discover at any time prior to the Stockholders Meeting, any event relating to
the Company or any of its Subsidiaries or any of their respective affiliates,
officers or directors that is required to be set forth in a supplement or
amendment to the Proxy Statement, in addition to the Company's obligations under
the 1934 Act, the Company will promptly inform the Investors thereof.
(b) Subject to their fiduciary obligations under applicable
law (as determined in good faith by the Company's Board of Directors after
consultation with the Company's outside counsel), the Company's Board of
Directors shall recommend to the Company's stockholders that the stockholders
(and, subject to their fiduciary obligations, not revoke or amend such
recommendation) vote in favor of the Proposals (the "Company Board
23
Recommendation") and shall cause the Company to take all commercially reasonable
action (including, without limitation, the hiring of a proxy solicitation firm
of nationally recognized standing) to solicit the approval of the stockholders
for the Proposals unless the Board of Directors shall have modified, amended or
withdrawn the Company Board Recommendation pursuant to the provisions of the
immediately succeeding sentence. Whether or not the Company's Board of Directors
determines at any time after the date hereof that, due to its fiduciary duties,
it must revoke or amend its recommendations to the Company's stockholders, the
Company shall take all commercially reasonable action necessary to convene the
Stockholders Meeting as promptly as practicable, but no later than the
Stockholders Meeting Deadline, to consider and vote upon the approval of the
Proposals.
7.10 Update of Disclosure Schedules. During the period
commencing immediately after the First Closing and ending on the earlier of the
Second Closing Date or the termination of this Agreement in accordance with its
terms (the "Updating Period"), the Company shall promptly notify the Investors
in writing if the Company becomes aware of the occurrence or non-occurrence of
any event during the Updating Period or the existence of any fact or condition
arising during the Updating Period that would cause or constitute a breach of
any of its representations or warranties contained herein had such
representation or warranty been made as of the time of the Company's discovery
of such event, fact or condition. Should any such event, fact or condition
require any change to the Disclosure Schedules, the Company shall promptly, and
in any event prior to the Second Closing Date deliver to the Investors a
supplement to the Disclosure Schedules specifying such change. In the event that
the Company delivers one or more supplements to the Disclosure Schedules
pursuant to this Section 7.10 that reflect any events, facts or conditions
which, in the good faith judgment of an Investor, constitute a Material Adverse
Effect, individually or in the aggregate, such Investor shall have the right to
terminate its obligations to effect the Second Closing in accordance with the
provisions of Section 6.5 hereof. Any Investor that does not exercise its right
to terminate this Agreement on the basis of such supplemental Disclosure
Schedules shall be deemed to have accepted such supplemented Disclosure
Schedules and the delivery of any such supplement will be deemed to have cured
any misrepresentation or breach of representation, warranty or covenant that
otherwise might have existing hereunder by reason of such events, fact or
condition, but only with respect to the Second Closing. In no event shall any
updating of the Disclosure Schedules cure or be deemed to cure any breach of a
representation or warranty existing as of the First Closing Date.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.
8.2 Indemnification. The Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, "Losses") to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such Person; provided
however that any Losses relating to the transactions contemplated by the
Registration Rights Agreement and covered by the indemnification contained
therein shall be indemnified in accordance with the Registration Rights
Agreement.
24
8.3 Conduct of Indemnification Proceedings. Promptly after
receipt by any Person (the "Indemnified Person") of notice of any demand, claim
or circumstances which would or might give rise to a claim or the commencement
of any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned
by a party hereto without the prior written consent of the Company or the
Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party acquiring some or all of its Securities in a private
transaction without the prior written consent of the Company or the other
Investors, after notice duly given by such Investor to the Company provided,
that no such assignment or obligation shall affect the obligations of such
Investor hereunder. The provisions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
25
9.2 Counterparts; Faxes. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.
9.3 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days' advance written notice to the other party:
If to the Company:
Ibis Technology Corporation
32 Cherry Hill Drive
Danvers, Massachusetts 01293
Attention:
Fax:
With a copy to:
Choate, Hall & Stewart LLP
Two International Place
100-150 Oliver Street
Boston, Massachusetts 02110
Attention: Lawrence H. Gennari
Fax: (617) 248-4000
If to the Investors:
to the addresses set forth on the signature pages hereto.
26
9.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Lowenstein Sandler PC not to exceed $35,000 in
the aggregate. Such expenses shall be paid not later than the First Closing or
Second Closing, as applicable. The Company shall reimburse the Investors upon
demand for all reasonable out-of-pocket expenses incurred by the Investors,
including without limitation reimbursement of attorneys' fees and disbursements,
in connection with any amendment, modification or waiver of this Agreement or
the other Transaction Documents. In the event that legal proceedings are
commenced by any party to this Agreement against another party to this Agreement
in connection with this Agreement or the other Transaction Documents, the party
or parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys' fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party in
such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such Securities, and the Company.
9.7 Publicity. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day immediately following the First Closing Date, the
Company shall issue a press release disclosing the transactions contemplated by
this Agreement. No later than the fourth trading day following the First Closing
Date, the Company will file a Current Report on Form 8-K attaching the press
release described in the foregoing sentence as well as copies of the Transaction
Documents. In addition, the Company will make such other filings and notices in
the manner and time required by the SEC or Nasdaq.
9.8 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
27
9.9 Entire Agreement. This Agreement, including the Exhibits
and the Disclosure Schedules, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
9.10 Further Assurances. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent Nature of Investors' Obligations and Rights.
The obligations of each Investor under any Transaction Document are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
28
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
[signature page follows]
29
IN WITNESS WHEREOF, the parties have executed this Agreement
or caused their duly authorized officers to execute this Agreement as of the
date first above written.
The Company: IBIS TECHNOLOGY CORPORATION
By: /s/ WILLIAM SCHMIDT
--------------------------------
Name: William Schmidt
Title: Chief Financial Officer
30
The Investors: SPECIAL SITUATIONS FUND III QP, L.P.
By: /s/ AUSTIN W. MARXE
-------------------
Name: Austin W. Marxe
Title: General Partner
Initial Purchase Price: $1,101,625
Number of Initial Shares: 700,000
Number of Initial Warrants: 525,000
Remaining Purchase Price: $1,556,736.49
Number of Remaining Shares: 989,189
Number of Remaining Warrants: 741,891
Address for Notice:
527 Madison Avenue
Suite 2600
New York, NY 10022
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Telephone: 973.597.2500
Facsimile: 973.597.2400
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By: /s/ AUSTIN W. MARXE
-------------------
Name: Austin W. Marxe
Title: General Partner
Initial Purchase Price: $440,650
Number of Initial Shares: 280,000
Number of Initial Warrants: 210,000
Remaining Purchase Price: $622,694.59
31
Number of Remaining Shares: 395,675
Number of Remaining Warrants: 296,756
Address for Notice:
527 Madison Avenue
Suite 2600
New York, NY 10022
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Telephone: 973.597.2500
Facsimile: 973.597.2400
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By: /s/ AUSTIN W. MARXE
-------------------
Name: Austin W. Marxe
Title: General Partner
Initial Purchase Price: $94,739.75
Number of Initial Shares: 60,200
Number of Initial Warrants: 45,150
Remaining Purchase Price: $133,879.34
Number of Remaining Shares: 85,070
Number of Remaining Warrants: 63,802
Address for Notice:
527 Madison Avenue
Suite 2600
New York, NY 10022
32
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Telephone: 973.597.2500
Facsimile: 973.597.2400
SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.
By: /s/ AUSTIN W. MARXE
-------------------
Name: Austin W. Marxe
Title: General Partner
Initial Purchase Price: $566,235.25
Number of Initial Shares: 359,800
Number of Initial Warrants: 269,850
Remaining Purchase Price: $800,162.55
Number of Remaining Shares: 508,443
Number of Remaining Warrants: 381,332
Address for Notice:
527 Madison Avenue
Suite 2600
New York, NY 10022
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Telephone: 973.597.2500
Facsimile: 973.597.2400
33