EXHIBIT 10.37
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of December 11, 2000 (this
"AGREEMENT"), by and among Breakaway Solutions, Inc., a Delaware corporation
(the "COMPANY"), and Invest, Inc. a Cayman Islands corporation, together with
their respective permitted transferees (each, an "INVESTOR" and collectively,
the "INVESTORS").
RECITALS:
WHEREAS, the Company has authorized the issuance and sale to the
Investors of an aggregate of 2,631,579 shares (the "PURCHASED SHARES") of the
Company's common stock, par value $0.000125 per share (the "COMMON STOCK"), for
a purchase price of $1.90 per share, and the Investors desire to purchase such
shares of Common Stock for such purchase price, all in accordance with the terms
of this Agreement;
WHEREAS, the Company has authorized the issuance to the Investors of a
Stock Purchase Warrant, dated December 11, 2000 (the "WARRANT"; together with
the Purchased Shares, the "SECURITIES"), to acquire up to 921,053 shares (the
"WARRANT SHARES"; together with the Purchased Shares, the "SHARES") of the
Company's Common Stock, upon the terms and conditions contained therein, in the
form attached hereto as EXHIBIT A; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and the Investors are entering into a Registration Rights
Agreement, dated as of December 11, 2000 (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has undertaken to cause the resale of the
Purchased Shares and, upon exercise of the Warrant, the Warrant Shares, then
owned by the Investors to be registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the rules and regulations promulgated thereunder
and the applicable state securities laws, in the form attached hereto as EXHIBIT
B.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1. PURCHASE AND SALE OF THE SECURITIES. The Company shall sell to
each Investor and each Investor shall purchase from the Company, subject to the
terms and conditions hereof and in reliance upon the representations and
warranties contained herein, the number of Purchased Shares and Warrants set
forth opposite such Investor's name on SCHEDULE I hereto for the aggregate
purchase price of Five Million Dollars ($5,000,000), payable as follows: (i)
Three Million Dollars ($3,000,000) on the Closing Date (as defined below) and
(i) a Secured Promissory Note in the principal amount of Two Million Dollars
($2,000,000) issued in favor of the Company on the Closing Date and due and
payable on December 20, 2000. In addition to the
Securities purchased hereunder, the Company hereby covenant and agrees that, at
the Investor's option on or before December 31, 2000, the Company shall issue
and sell to the Investors up to $5,000,000 (at the discretion of the Investors)
of Securities on the same terms and conditions as set forth herein at a per
share price equal to the average closing price of the Company's Common Stock for
the five (5) day trading period prior to such issuance and sale. If the Company
has not, during the period from the date hereof to December 31, 2000, sold
shares of the Company's Common Stock in one or more private placements for an
aggregate purchase price of $20,000,000 or more (including the $5,000,000
payable hereunder), the Investors' option shall remain exercisable until the
first to occur of (a) the date on which the Company has sold shares of Common
Stock in one or more private placements for an aggregate purchase price of
$20,000,000 or more (including the $5,000,000 payable hereunder) or (b) February
15, 2001.
1.2. CLOSING. The closing of the purchase and sale of the Securities
(the "CLOSING") shall be held at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts, commencing at 10:00 a.m., local time, on December
11, 2000, or on such later date as may be mutually agreed by the Company and the
Investors (the "CLOSING DATE").
1.3. DELIVERY. At the time of Closing, the Company shall deliver (i) to
Boston Equiserve, LP, its transfer agent, an irrevocable instruction to issue
stock certificates representing the Purchased Securities, with a copy to each
Investor and (ii) to the Investor, this Agreement, the Warrant and the
Registrable Rights Agreement, duly executed by the Company. At the time of
Closing each Investor shall pay to the Company or its designee the purchase
price for the Securities purchased by such Investor by wire transfer of
immediately available funds to such account as the Company shall have designated
in writing prior to the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors as follows:
2.1. ORGANIZATION AND BUSINESS. The Company is a duly organized and
validly existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority adequate for owning its properties
and conducting its business as currently conducted and for making and performing
this Agreement, the Warrant and the Registration Rights Agreement. The Company
has taken all corporate action required to make all of the provisions of this
Agreement, the Warrant and the Registration Rights Agreement the legal, valid
and binding obligations they purport to be. Certified copies of the charter
documents and by-laws of the Company have previously been delivered to the
Investors and are true, accurate, complete and correct as of the date hereof.
Each of the Company's subsidiaries is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized. Each
of the Company and its subsidiaries is duly and legally qualified to do business
as a foreign corporation and is in good standing in each state or jurisdiction
where such qualification is required and is duly authorized, qualified and
licensed under all laws, regulations, ordinances or orders of public authorities
or otherwise to carry on its business in the places and in the manner currently
conducted, except where the failure to be so qualified, licensed or authorized
could not reasonably be expected to have a material adverse effect on the
Company.
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The investments of the Company and its subsidiaries in each of the Company's
subsidiaries are owned free and clear of any security interest, lien or other
encumbrance.
2.2. SEC FILINGS AND FINANCIAL STATEMENTS. The Company has furnished to
the Investors true, accurate and complete copies of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000, the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2000, the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2000, the Company's Current Report on Form 8-K dated April 14,
2000, the Company's Current Report on Form 8-K dated June 1, 2000 and the
Company's Current Report on Form 8-K dated November 13, 2000 (collectively, the
"SEC FILINGS"). On their respective dates of filing, the SEC Filings (a)
complied in all material respects to the requirements of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations of
the SEC thereunder, and (b) did not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading under the standards set by Section 12(a)(2) of the
Securities Act. All financial statements contained in the SEC Filings have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as otherwise stated therein or in the notes
thereto) and accurately present the financial condition of the several
corporations and entities covered thereby at the respective dates of such
statements, and the results of their operations for the periods covered thereby,
subject in the case of interim statements to normal year-end audit adjustments
and the absence of footnotes thereto. All liabilities, contingent and other, of
the Company and its subsidiaries, are set forth in the financial statements
included in the SEC Filings, excepting only liabilities incurred in the ordinary
course of business subsequent to September 30, 2000 not exceeding One Hundred
Thousand Dollars ($100,000), and liabilities of the type not required under
generally accepted accounting principles to be reflected in such financial
statements. Such liabilities incurred subsequent to September 30, 2000, are not,
in the aggregate, material to the financial condition or operating results of
the Company and its subsidiaries. Since November 13, 2000, the Company has
neither filed nor been required to file with the SEC a Current Report on Form
8-K.
2.3. MATERIAL TRANSACTIONS. Since September 30, 2000, except as set
forth in Schedule 2.3, neither the Company nor any subsidiary has (i) entered
into any material transaction outside the ordinary course of business, (ii)
declared, paid or made any dividend or distribution of any kind, (iii) incurred
any indebtedness for money borrowed or made any loans or advances to any person
in excess of $25,000 in the aggregate, other than ordinary advances for travel
expenses, or (iv) altered or amended, or made any promise to alter or amend, any
compensation package or plan to any Company executive. For purposes hereof, a
"material transaction" shall mean any agreement, understanding, instrument,
contract or proposed transaction to which the Company or any of its subsidiaries
is a party or by which it is bound that involve (i) obligations (contingent or
otherwise) of the Company or any of its subsidiaries in excess of, $25,000 in
any single transaction or $100,000 in the aggregate over one fiscal year, (ii)
the license of any patent, copyright, trade secret or other proprietary right to
or from the Company or any of its subsidiaries, which is material to the present
conduct of the Company's business or to the Company's business as presently
contemplated to be conducted, or (iii) the grant of material rights, not
terminable by the Company upon notice not in excess of 90 days.
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2.4. AUTHORIZED CAPITAL STOCK; PREEMPTIVE AND OTHER RIGHTS. The
authorized capital of the Company consists of 80,000,000 shares of Common Stock
and 5,000,000 shares of preferred stock. As of December 8, 2000, 46,249,349
shares of Common Stock and no shares of preferred stock were issued and
outstanding, and the Company had reserved no more than 25,500,000 shares of
authorized but unissued shares of Common Stock for issuance pursuant to
outstanding options, warrants and other commitments to acquire shares of Common
Stock or securities or obligations convertible into or exchangeable for shares
of Common Stock. All shares of Common Stock outstanding are validly issued,
fully paid and non-assessable and have been issued in compliance with applicable
law. The Shares have been duly authorized for issuance and sale to the Investors
pursuant to this Agreement, and when sold against payment therefor as provided
herein or in the Warrant, as applicable, the Shares will be validly issued,
fully paid and non-assessable. The issuance of the Purchased Shares is not, and
the issuance of the Warrant Shares will not, be subject to preemptive or other
similar rights. Except as set forth on SCHEDULE 2.4, none of the outstanding
shares of Common Stock are entitled to cumulative voting rights, preemptive
rights, anti-dilution rights or registration rights under the Securities Act.
Except as set forth on SCHEDULE 2.4, the Company has outstanding no option,
warrant or other commitment to issue or to acquire any shares of its capital
stock or the capital stock of any of its subsidiaries, or any security or
obligations convertible into or exchangeable for its capital stock or the
capital stock of any of its subsidiaries, nor has it given any person or entity
any right to acquire from the Company or sell to the Company any shares of its
capital stock or the capital stock of any of its subsidiaries. All outstanding
shares of the Company's Common Stock are registered under Section 12 of the
Exchange Act and listed on the Nasdaq National Market.
2.5. NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution and delivery
of this Agreement, the Warrant or the Registration Rights Agreement nor the
consummation of any transaction herein or therein referred to or contemplated
hereby or thereby nor the fulfillment of the terms hereof or thereof or of any
agreement or instrument referred to in this Agreement, the Warrant or in the
Registration Rights Agreement has constituted or resulted in or will constitute
or result in a breach of the provisions of any contract or agreement to which
the Company or any of its subsidiaries is a party or by which it is bound or of
the charter or by-laws of the Company, or the violation of any existing or
pending law, judgment, decree or governmental order, rule or regulation
applicable to the Company or any of its subsidiaries, or result in the creation
under any agreement or instrument of any lien, security interest, encumbrance or
other claim upon any of the assets of the Company or any of its subsidiaries, or
create in any person or entity any right to terminate any agreements with the
Company of any of its subsidiaries or otherwise exercise any rights against the
Company or any of its subsidiaries, or cause any payment or performance
obligation of the Company or any of its subsidiaries to be accelerated, or cause
the acceleration of any outstanding rights to purchase or convert any instrument
into capital stock of the Company. No approval, authorization or other action of
any court, governmental authority or agency or any securities exchange is
required to be obtained by the Company in connection with the execution,
delivery and performance of this Agreement, the Warrant or the Registration
Rights Agreement. The Company is not in violation of any of the listing
requirements of the Nasdaq National Market or any other applicable securities
exchange or self regulatory organization.
2.6. DEFAULTS. Neither the Company nor any of its subsidiaries is in
default under any provision of its charter or by-laws or other organizational
document or under any provision of
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any agreement or other instrument to which it is a party or by which it is bound
or of any law, governmental order, rule or regulation so as to affect adversely
in any material manner its business or assets or its condition, financial or
otherwise.
2.7. LITIGATION. Except as disclosed in the SEC Filings, neither the
Company or any of its subsidiaries is a party to any litigation or
administrative proceeding, nor, to the knowledge of the Company, is any such
litigation or administrative proceeding threatened against the Company or any of
its subsidiaries, which in either case (a) could reasonably be expected to have
a material adverse effect on the business condition, financial or otherwise, or
the assets, liabilities, earnings or business affairs of the Company (on an
individual basis) or the Company and its subsidiaries (on a consolidated basis),
or (b) could reasonably be expected to have a material adverse effect on the
timely consummation of the transactions contemplated by this Agreement, the
Warrant or the Registration Rights Agreement.
2.8. INVESTMENT COMPANY STATUS. Neither the Company nor any of its
subsidiaries is, nor upon consummation of the sale of the Securities will be, an
"investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
2.9. BLUE SKY LAWS. The Company is in compliance with all applicable
securities (or "blue sky") laws of the states of the United States in connection
with the issuance and sale of the Securities to the Investors and the issuance
of the other shares of its Common Stock, both past and present.
2.10. 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 in any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Investors. The issuance
of the Securities to the Investors will not be integrated with any other
issuance of the Company's securities (past, current or future) for purposes of
the Securities Act or any applicable rules of the Nasdaq National Market so as
to require registration of the SecuritieS under the Securities Act.
2.11. NO BROKERS. The Company has taken no action (nor has the Company
failed to take any action) which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments relating to this
Agreement, the Registration Rights Agreement, the Warrant, or the transactions
contemplated hereby.
2.12. USE OF PROCEEDS. The net proceeds to the Company from the
issuance of the Securities will be used by the Company for its general corporate
purposes.
2.13 INTELLECTUAL PROPERTY. The Company owns or possesses sufficient
legal rights to all patents, patent applications, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, know how, inventions, works of
authorship, information and other proprietary rights and processes necessary for
its business without, to the knowledge of the Company, any conflict with, or
infringement of, the rights of others. Except as set forth in Schedule 2.13, the
Company
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has not received any communications alleging that the Company has violated or,
by conducting its business, would violate any of the patents, trademarks,
service marks, tradenames, copyrights, trade secrets or other proprietary rights
or processes of any other person or entity. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business. Neither the execution or
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee is now obligated.
2.14 NO CONFLICT OF INTEREST. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees or as disclosed in the Financial Statements. Except as set
forth in Schedule 2.14 or in the SEC filings, to the Company's knowledge, none
of the Company's officers or directors, or any members of their immediate
families, are, directly or indirectly, indebted to the Company (other than in
connection with purchases of the Company's stock) or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company except that officers, directors of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with the Company.
To the Company's knowledge, none of the Company's officers or directors or any
members of their immediate families are, directly or indirectly, interested in
any contract with the Company. The Company is not a guarantor or indemnitor of
any indebtedness of any other person, firm or corporation.
2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any mortgages, liens, claims or encumbrances, provided that the
Company may use the proceeds of the sale of the Purchased Shares to pay December
rent for one of the Company's leases in the aggregate amount not in excess of
$420,000.
2.16 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plans as defined in the Employee Retirement Income Security Act of
1974 ("ERISA"), except for: 401k savings plans, group life insurance plans,
group disability insurance plans and group healthcare plans (each, a "Plan").
Each Plan is and has been maintained in compliance in all material respects
with applicable law, including but not limited to ERISA.
2.17 TAX RETURNS AND PAYMENTS. The Company has filed all material tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects.
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The Company has paid all material taxes and other assessments due before they
become delinquent. The Company has no knowledge of any liability of any tax to
be imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for. No federal or state tax returns of the Company
have been audited, and no controversy with respect to U.S. federal, state, local
or foreign taxes of any type is pending, or to the Company's actual knowledge,
is threatened. The Company has withheld or collected in all material respects
from each payment made to each of its employees, the amount of all taxes
required to be withheld or collected therefrom, and has paid the same as they
have become due and payable to the proper tax receiving officers or proper
depositaries.
2.18 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.19 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse affect, nor is the Company aware of any labor organization
activity involving its employees. The Company has complied in all material
respects with all applicable state and federal equal employment opportunity laws
and with other laws related to employment.
2.20 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS. Each
employee and officer of the Company (other than former employees or officers of
Eggrock Partners, Inc. who are now employees or officers of the Company) has
executed an agreement with the Company regarding confidentiality and proprietary
information substantially in the form or forms delivered to the counsel for the
Purchasers. The Company is not aware that any of its employees or consultants is
in violation thereof, and the Company will use its best efforts to prevent any
such violation.
2.21 PERMITS. The Company and each of its subsidiaries has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business, except for such permits, licenses and other similar
authority, the lack of which would not materially and adversely affect the
business, properties, prospects, or financial condition of the Company. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.22 ENVIRONMENTAL AND SAFETY LAWS. To the Company's actual knowledge,
the Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and no
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as follows:
3.1. ORGANIZATION AND QUALIFICATION OF INVESTOR. Such Investor is a
corporation duly organized and validly existing under the laws of the Cayman
Islands with full power and authority adequate for the making and performing of
this Agreement, the Warrant and the Registration Rights Agreement. Such Investor
has taken all corporate action required to make the provisions of this
Agreement, the Warrant and the Registration Rights Agreement the legal, valid
and enforceable obligations they purport to be No approval, authorization or
other action of any court, governmental authority or agency is required to be
obtained by such Investor in connection with the execution, delivery and
performance by such Investor of this Agreement, the Warrant and the Registration
Rights Agreement.
3.2. INVESTMENT REPRESENTATIONS. Such Investor is an "accredited
investor" as defined in Rule 501 of Regulation D under the Securities Act. Such
Investor is purchasing the Securities for its own account for investment and not
with a view to distribution, except pursuant to sales registered or exempted
from registration under the Securities Act; PROVIDED, HOWEVER, that by making
the foregoing representation, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from registration under the Securities
Act. Such Investor has been afforded the opportunity to ask questions of and
receive answers from the management of the Company concerning this investment.
Such Investor acknowledges that the offering of the Securities to such Investor
is not registered under the Securities Act and that the Securities are
restricted and cannot be resold unless they are registered under the Securities
Act or unless an exemption from registration is available.
ARTICLE IV
COMPLIANCE WITH SECURITIES LAWS; TRANSFERABILITY
4.1. SECURITIES FILINGS. The Company shall, if required, file a Notice
of Sale of Securities on Form D with respect to the Securities, as required
under Regulation D under the Securities Act, no later than 15 days following the
Closing Date, and shall provide a copy of such filing to the Investors. The
Company shall take all action required under applicable securities (or "blue
sky") laws of the states of the United States (or to obtain an exemption from
such qualification) to qualify the Securities for sale to the Investors and
shall provide evidence of any such action so taken to the Investors. The Company
shall file with the SEC a Current Report on Form 8-K disclosing this Agreement
and the transactions contemplated hereby within 10 days following the Closing
Date.
4.2. FORM S-3 ELIGIBILITY. The Company meets, and will use all
commercially reasonable efforts to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3
under the Securities Act as soon as possible to enable the registration of the
Registrable Securities (as defined in the Registration Rights Agreement).
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4.3. TRANSFERABILITY. No Investor shall transfer any of the Securities
without (a) an effective registration statement relating thereto, (b) an opinion
of Hale and Dorr LLP, counsel to the Company, or other counsel to such Investor
reasonably satisfactory to the Company that such registration is not required
under the Securities Act and applicable state law, or (c) written advice from
the SEC and applicable state securities agencies, or a member of the staff
thereof, that "no action" would be recommended if the proposed transfer were to
be made without the filing of a registration statement (or any combination of
the foregoing).
4.4. RESTRICTIVE LEGEND. Each Investor acknowledges that the Securities
delivered hereunder have not been registered under the Securities Act, or under
applicable state securities laws, and that the Company in issuing the Securities
will be relying upon, among other things, the Investors' representations and
warranties contained in Article III, in concluding that such issuance does not
require registration under the Securities Act and applicable state securities
laws. In addition, each Investor is aware that the certificates representing the
Shares shall contain the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY OTHER SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THESE SECURITIES UNDER SAID ACT AND ANY
OTHER APPLICABLE SECURITIES LAW, OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED
OR WRITTEN ADVICE FROM THE SECURITIES AND EXCHANGE COMMISSION AND
APPLICABLE STATE SECURITIES AGENCIES, OR A MEMBER OF THE STAFF THEREOF,
THAT "NO ACTION" WOULD BE RECOMMENDED IF THE PROPOSED TRANSFER WERE TO
BE MADE WITHOUT THE FILING OF A REGISTRATION STATEMENT (OR ANY
COMBINATION OF THE FOREGOING).
4.5. FEES OF COUNSEL. The Company shall pay (i) the reasonable fees and
disbursements of counsel for any holder of Securities and of counsel for the
Company in connection with all opinions rendered by such counsel pursuant to
Section 4.3 and Section 4.4 hereof, and (ii) Ten Thousand Dollars ($10,000) for
Investors due diligence and legal fees in connection with the consummation of
this transaction; provided however, that the Company shall not be obligated to
pay such $10,000 in the event the Investors do not consummate the transactions
contained herein for any reason. The payment set forth in (ii) above shall be
deducted from the aggregate purchase price for the Purchased Shares at the
Closing
ARTICLE V
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL SECURITIES
The obligation of the Company to issue and sell the Securities to the
Investors at the Closing shall be subject to compliance by the Investors with
their agreements contained herein and the satisfaction by the Investors, on or
before the Closing Date, of each of the following conditions:
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5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each Investor set forth in Article III shall be true and correct on and as of
the Closing Date as though made on and as of such date.
5.2. REGISTRATION RIGHTS AGREEMENT. Each Investor shall have executed
and delivered the Registration Rights Agreement.
5.3. PAYMENT OF PURCHASE PRICE. Each Investor shall have tendered the
purchase price for the Securities to the Company in accordance with this
Agreement.
5.4. LITIGATION. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Warrant or the Registration
Rights Agreement.
ARTICLE VI
CONDITIONS TO THE INVESTORS' OBLIGATION TO PURCHASE SHARES
The obligation of the Investors to purchase the Securities from the
Company at the Closing shall be subject to compliance by the Company with its
agreements contained herein and the satisfaction, on or before the Closing Date,
of each of the following conditions:
6.1. OFFICER'S CERTIFICATE. The representations and warranties of the
Company shall be true and correct on and as of the Closing Date as though made
on and as of such date; and the Investors shall have received on the Closing
Date a Certificate to this effect executed by the Chief Executive Officer or the
Chief Financial Officer of the Company.
6.2. REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement.
6.3. WARRANT. The Company shall have executed and delivered the
Warrant.
6.4. DELIVERY OF CERTIFICATES. The Company shall have delivered to the
Investors an irrevocable instruction letter to the Company's transfer agent
instructing the transfer agent to issue certificates representing the Purchased
Shares.
6.5. LITIGATION. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Warrant or the Registration
Rights Agreement.
6.6. LISTING. Trading and listing of the Common Stock on the Nasdaq
National Market shall not have been suspended by the SEC or the Nasdaq National
Market.
6.7. OPINION OF COUNSEL. The Investors shall have received an opinion
of the Company's counsel, dated as of the Closing Date, in the form attached
hereto as EXHIBIT C.
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ARTICLE VII
INDEMNIFICATION
The Company will indemnify, defend, protect, and hold harmless each
Investor and each other holder of the Securities and/or the Shares and all of
their respective stockholders, trustees, officers, directors, employees and
direct or indirect investors and any of their respective agents, counsel or
other representatives (collectively, the "INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (regardless of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), which may be incurred by any Indemnitee or
which may be asserted against any Indemnitee as a result of, or arising out of,
or relating to (a) any breach of any representation or warranty made by the
Company herein, the Warrant or in the Registration Rights Agreement or in any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained
herein, the Warrant or in the Registration Rights Agreement or in any other
certificate, instrument or document contemplated hereby or thereby, or (c) any
cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance, breach or
enforcement of this Agreement, the Warrant or the Registration Rights Agreement
by the Company. To the extent that the foregoing undertaking by the Company is
unenforceable for any reason, the Company will make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. The provisions of this Article VII shall
terminate as of the second anniversary of the Closing Date; PROVIDED, HOWEVER,
that such provisions shall remain in effect as to any claims of which written
notice has been given by an Investor to the Company prior to such termination
date.
ARTICLE VIII
MISCELLANEOUS
8.1. TERMINATION. Except for the Company's obligations under
Article VII above, the rights and obligations under this Agreement shall
terminate on the second anniversary of the date hereof. Any Investor may
terminate this Agreement by giving written notice to the Company if the
Closing has not occurred within ten days after the date hereof. If an
Investor terminates this Agreement, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other
party (except for any liability of a party then in breach).
8.2. PUBLIC STATEMENTS. The Company shall not issue any public
statement or press release, or otherwise disclose in any manner the identity of
any Investor or that any Investor has purchased the Securities or the Shares
without the prior written consent of such Investor; PROVIDED, HOWEVER, that the
Company may disclose such information in any registration statement filed with
the SEC pursuant to the Registration Rights Agreement.
8.3. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of New York without giving effect to
any conflict or choice of law provisions that would make applicable the domestic
substantive law of any other jurisdiction. Each of the Company and each Investor
hereby consents to the personal jurisdiction
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of the federal courts (or, if any such federal court is without jurisdiction, a
state court) located in New York, New York, in connection with any controversy
related to this Agreement and waives any argument that venue in any such forum
is inconvenient.
8.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument.
8.5. HEADINGS. The headings in this Agreement have been inserted for
convenience of reference only and shall not alter or affect the meaning thereof.
8.6. SEVERABILITY. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof.
8.7. SURVIVAL OF COVENANTS. All covenants, agreements, representations
and warranties made herein, the Warrant, or the Registration Rights Agreement
or in the Shares or certificates delivered pursuant hereto or thereto shall
be deemed to have been material and relied upon by the Investors,
notwithstanding any investigation made by the Investors or on the Investors'
behalf, and shall survive the execution and delivery to the Investors hereof
and thereof.
8.8. ENTIRE AGREEMENT. This Agreement, the Warrant and the Registration
Rights Agreement (including all schedules and exhibits thereto, if any)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
8.9. AMENDMENTS. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investors.
8.10. NOTICES. Any notice or other communication in connection with
this Agreement shall be deemed to be delivered if in writing (including
facsimile transmission) addressed as provided below and if either (a) actually
delivered at said address, (b) delivered by telephonic facsimile transmission,
with evidence of receipt thereof, or (c) in the case of a letter, three business
days shall have elapsed after the same shall have been deposited in the United
States mails, first-class postage prepaid and registered or certified:
If to the Company: Breakaway Solutions, Inc.
2 Seaport Lane
Boston, Massachusetts 02210
Fax: 617-275-3434
Attention: President
With a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Fax: 617-526-5000
Attention: Thomas L. Barrette, Jr., Esq.
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If to an Investor: To such Investor,
Capital Investment Corporation, Inc.
350 Park Ave., 19th Floor
New York, NY 10022
Attn: Mr. Christopher R. Conner
Fax: 212-583-1185
AND
CIC Ventures, Inc.
11111 Santa Monica Blvd., Suite 1120
Los Angeles, CA 90025
Fax: 310-575-9882
Attention: Mr. Scott V. Ogilvie
With a copy to: Foley & Lardner
2029 Century Park East, 36th Fl.
Los Angeles, CA 9067
Fax: 310-557-8475
Attn: James Nguyen and Susan Meyer
or in each case to such other address as either party shall specify in writing
to the other party.
8.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Investor, and no Investor may assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Company. Notwithstanding the foregoing, any Investor may assign
all or part of its rights and obligations hereunder to any of its "affiliates,"
as that term is defined under the Securities Act, without the consent of the
Company, so long as the affiliate is an accredited investor (within the meaning
of Regulation D under the Securities Act) and agrees in writing to be bound by
this Agreement. This provision does not limit any Investor's right to transfer
the Securities pursuant to the terms of this Agreement, the Warrant or the
Registration Rights Agreement or to assign such Investor's rights hereunder to
any such transferee pursuant to the terms of this Agreement, the Warrant and the
Registration Rights Agreement.
8.12. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.13. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby.
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8.14. EQUITABLE RELIEF. The Company recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement, the Warrant or
the Registration Rights Agreement, any remedy at law may prove to be inadequate
relief to the Investors. The Company therefore agrees that the Investors are
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company and the Investors have caused this
Securities Purchase Agreement to be duly executed as of the date first above
written.
COMPANY:
BREAKAWAY SOLUTIONS, INC.
By: /s/ Gordon Brooks
-----------------------------------------
Name: Gordon Brooks
Title: President and Chief Executive Officer
INVESTORS:
INVEST INC.
By: /s/ Bader Al-Rezaihan
------------------------------------------
Name: Bader Al-Rezaihan
Title: President
Signature Page to Securities Purchase Agreement
SCHEDULE I
INVESTORS
PURCHASED SHARES
Investor Shares of Common Stock
Invest Inc. 2,631,579 Shares
WARRANT
SHARES OF COMMON STOCK SUBJECT
INVESTOR TO WARRANT EXERCISE PRICE
Invest Inc. 921,053 Shares The Warrant Shares will
priced at the LOWEST of the
following amounts, assuming
that the exercise of the
Warrant Shares occurs
within the respective time
frames established below:
120% of the Purchase Price
for the transaction as
determined on the Closing
Date,
-OR-
The average closing price
of the Security for the
five trading days
immediately preceding
January 31, 2001,
-OR-
The average closing price
of the Security for the
five trading days
immediately preceding
January 31, 2002.
EXHIBIT A
STOCK PURCHASE WARRANT
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
LEGAL OPINION OF
HALE AND DORR LLP