EXHIBIT 10.39
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of December 11, 2000 (this
"AGREEMENT") is made 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, contemporaneously with the execution and delivery of this
Agreement the Company and the Investors have executed and delivered a Securities
Purchase Agreement, dated as of December 11, 2000 (the "PURCHASE AGREEMENT"),
pursuant to which the Company has this date issued and sold to the Investors (i)
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 (ii) a Stock Purchase Warrant, dated December 11,
2000 (the "WARRANT"), to acquire up to 921,053 shares, subject to a further
upward adjustment (the "WARRANT SHARES", the Warrant Shares and the Purchased
Shares are collectively referred to herein as the "Shares") of the Company's
Common Stock, upon the terms and conditions contained therein, and the Investors
have purchased the Purchased Shares and the Warrant;
WHEREAS, the parties' execution and delivery of this Agreement was a
condition of their respective obligations to close under the Purchase Agreement;
and
WHEREAS, the definitions of capitalized terms used herein without being
defined are set forth or referred to in Article IV of this Agreement.
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
REGISTRATION
1.1 MANDATORY REGISTRATION. The Company shall use its best efforts to
file with the SEC no later than February 5, 2001, a Registration Statement on
Form S-3 (or any such other appropriate form) registering the Registrable
Securities for unrestricted resale and filing on a public securities exchange
(the "REGISTRATION STATEMENT").
1.1.1 EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Company shall
use its best efforts to cause the Registration Statement to become or to be
declared effective by the SEC as soon as practicable after filing, and in any
event no later than February 19, 2000 (the "REQUIRED EFFECTIVE DATE"). The
Company's best efforts shall include, but will not be limited to,
promptly responding to all comments received from the staff of the SEC. If the
SEC notifies the Company that the Registration Statement will receive no action
or review from the SEC, the Company shall cause the Registration Statement to
become effective within five business days after receipt of such SEC
notification. Once the Registration Statement is declared effective by the SEC,
the Company will cause the Registration Statement to remain effective throughout
the Registration Period, except as permitted in accordance with Section 1.4.13
and Section 1.5 hereof.
1.1.2 DELAYED REGISTRATION. If the Registration Statement has not been
filed on or prior to February 5, 2000 or has not become or been declared
effective prior to February 19, 2000, the Company shall pay to each Investor, as
stipulated damages intended by the parties to compensate such Investor in part
for the incremental costs and investment risks associated with holding any of
the Registrable Securities as restricted securities, a fee (the "LATE
REGISTRATION FEE") for each day of such delay equal to 0.0333% of the aggregate
purchase price paid by such Investor for all Registrable Securities held by such
Investor on such day. The Company shall pay to such Investor the Late
Registration Fee in cash on the earlier of either (a) the end of each 30-day
period of such delay, or (b) the effective date of the Registration Statement.
Nothing herein shall limit any Investor's right to pursue actual damages for the
Company's failure to file the Registration Statement or to have such
Registration Statement become or be declared effective by the SEC on or prior to
the Required Effective Date in accordance with the terms of this Agreement.
1.1.3 RESALE RESTRICTED AFTER EFFECTIVENESS. If at any time after the
effectiveness of the Registration Statement either (a) any Investor cannot, for
reasons other than suspension of the effectiveness of the Registration Statement
as described in Section 1.4.12 hereof, the suspension of the effectiveness of
the Registration Statement as described in Section 1.4.13 hereof (but only to
the extent that the length of such suspension does not exceed 10 trading days),
or during a permitted Black-out Period as described in Section 1.5.1 hereof,
resell the Registrable Securities into the public market for any period of more
than 10 consecutive trading days or for any 30 trading days in the aggregate
during any period of 12 consecutive months, or (b) the shares are not listed or
included for quotation on the Nasdaq National Market ("NASDAQ"), the New York
Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") for any
period of more than 10 consecutive trading days, the Company shall pay to such
Investor, as stipulated damages intended by the parties to compensate such
Investor in part for the incremental costs and investment risks associated with
holding the Registrable Securities as Restricted securities, a fee (the "RESALE
RESTRICTION FEE") for each day of such period equal to 0.0333% of the aggregate
purchase price paid by such Investor for all Registrable Securities held by such
Investor on such day. The Resale Restriction Fee shall be payable in respect of
each such 10 consecutive trading day period or such 30 day period, as the case
may be, immediately following the conclusion of any such 10 day or 30 day
period. Nothing herein shall limit such Investor's right to pursue actual
damages for such Investor's inability to sell any of the Registrable Securities
into the public market for any reason described in this Section 1.1.3.
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1.2 PIGGYBACK REGISTRATIONS.
1.2.1 RIGHT TO PIGGYBACK. If at any time prior to the expiration of
the Registration Period a Registration Statement is not effective with
respect to all of the Registrable Securities and the Company proposes to
register any of its equity securities, the Investors shall be entitled to an
unlimited number of Piggyback Registrations for their Registrable Securities.
1.2.2 PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in the registration exceeds the number that
can be sold without materially and adversely affecting the marketability of the
offering, the Company shall include in the registration
FIRST, the securities that the Company proposes to sell,
SECOND, the shares of Common Stock requested to be included in
such registration by the holders thereof that have, prior to
the date hereof, been granted rights by the Company to
participate in a Piggyback Registration that are senior to the
holders of Registrable Securities;
THIRD, the Registrable Securities requested to be included in
the registration and any other shares of Common Stock
requested to be included in such registration by the holders
thereof that have prior to the date hereof been granted rights
by the Company to participate in a Piggyback Registration pari
passu with the holders of Registrable Securities, pro rata
among the holders of the Registrable Securities and the
holders of such other shares of Common Stock on the basis of
the number of Registrable Securities and other shares of
Common Stock requested to be included owned by each such
holder, and
FOURTH, any other securities requested to be included in
the registration.
1.2.3 PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in the registration exceeds the number that can be sold without adversely
affecting the marketability of the offering, the Company shall include in the
registration
FIRST, the securities requested to be included therein by the
holders requesting such registration, and
SECOND, the Registrable Securities requested to be included in
the registration, pro rata among the holders thereof on the
basis of the
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number of such securities and Registrable Securities owned by
each such holder, and
THIRD, any other securities requested to be included in the
registration.
1.2.4 OTHER REGISTRATIONS. If the Company has previously filed
a registration statement with respect to Registrable Securities, and if the
previous registration has not been withdrawn or abandoned, the Company shall not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for its
equity securities under the Securities Act (except on Form S-4 or Form S-8 or
any successor or similar forms), whether on its own behalf or at the request of
any holder or holders of its securities, until a period of at least 60 days has
elapsed from the effective date of the previous registration or, if shorter, a
period of at least 30 days has elapsed from the date all securities covered by
such registration have been disposed of.
1.3 HOLDBACK AGREEMENTS.
1.3.1 HOLDERS OF REGISTRABLE SECURITIES. No Investor shall
effect any public sale or distribution of equity securities of the Company, or
any securities convertible into or exchangeable or exercisable for equity
securities of the Company, during the seven days prior to and the 90-day period
beginning on the effective date of any underwritten Piggyback Registration in
which Registrable Securities are included (except as part of such underwritten
offering), unless the underwriters managing the registered public offering
otherwise agree.
1.3.2 COMPANY. The Company shall not effect any public sale
or distribution of its equity securities, or any securities convertible into
or exchangeable or exercisable for such securities, during such seven-day
period prior to and 120-day period following the effective date of any
underwritten Registration Statement covering Registrable Securities as the
Company and the underwriters managing the offering may agree.
1.4 REGISTRATION PROCEDURES.
With respect to any Registration Statement covering any Registrable
Securities:
1.4.1 NOTICE OF EFFECTIVENESS. The Company shall promptly
notify the Investors in writing of the effectiveness of each Registration
Statement filed under this Agreement and prepare and file with the SEC any
amendments and supplements to the Registration Statement and the prospectus that
may be necessary to keep the Registration Statement effective for the duration
of the Registration Period, and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such Registration Statement.
1.4.2 FURNISH COPIES. The Company shall furnish to the
Investors and to their legal counsel, the number of copies of the Registration
Statement, each amendment and
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supplement, the prospectus included in the Registration Statement (including
each preliminary prospectus) and any other documents that the Investors may
reasonably request in order to facilitate the disposition of the Investors'
Registrable Securities.
1.4.3 BLUE SKY. The Company shall use its best efforts to
register or qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions as any Investor reasonably requests and do
any and all other acts and things which may be reasonably necessary or advisable
to enable the Investors to consummate the disposition in those jurisdictions of
the Registrable Securities owned by the Investors (but the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, or (ii)
subject itself to taxation in any such jurisdiction in excess of Ten Thousand
Dollars ($10,000) annually.
1.4.4 PROSPECTUS SUPPLEMENT. The Company shall promptly notify
the Investors in writing, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements in the prospectus not misleading; and,
the Company shall timely prepare a supplement or amendment to the prospectus and
file such documents with the SEC, all pertinent exchanges, and all self
regulatory organizations, so that, when delivered to purchasers of the
Registrable Securities, the prospectus, as supplemented or amended, does not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements in the prospectus not misleading.
1.4.5 EXCHANGE LISTING. The Company shall cause all such
Registrable Securities to be quoted on Nasdaq and listed on any other exchange
on which the Company's shares of Common Stock are listed in accordance with the
terms contained herein, including without limitation, Section 3.2 below.
1.4.6 REGISTRATION OF TRANSFERS. The Company shall, at
Company's expense, provide a transfer agent (the "TRANSFER AGENT") and registrar
for all such Registrable Securities not later than the effective date of the
Registration Statement.
1.4.7 FACILITATION OF RESALE. The Company shall, at Company's
expense, enter into such customary agreements, including underwriting agreements
in customary form, and take all other actions that any Investor reasonably
requests in order to expedite or facilitate the disposition of the Registrable
Securities, including without limitation, effecting a stock split or a
combination of shares if requested by the underwriter and using its best efforts
to cause members of the management of the Company to participate on a reasonable
basis in customary "road show" activities to the extent required by the
underwriters with a view to maximizing the price of the Common Stock (including
the Registrable Securities) sold in such offering.
1.4.8 COLD COMFORT LETTER; OPINION. The Company shall, at
Company's expense and at the request of any Investor and on the date that
Registrable Securities are delivered to an underwriter for sale in connection
with the Registration Statement, furnish to such Investor and the underwriters
(i) a letter, dated such date, from the Company's independent
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certified public accountants, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters; and (ii) an opinion, dated such
date, from counsel representing the Company for purposes of the Registration
Statement, in form and substance as is customarily given in an underwritten
public offering, addressed to the underwriters and such Investor.
1.4.9 ACCESS TO INFORMATION. The Company shall make available
for inspection by each Investor, any underwriter participating in any
disposition pursuant to the Registration Statement and any attorney, accountant
or other agent retained by any Investor or any such underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, employees and independent accountants to
supply all information reasonably requested by any Investor or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement.
1.4.10 INVESTORS' REVIEW. The Company shall permit Xxxxx &
Xxxxxxx, counsel to the Investors, to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects, unless otherwise required by law in the opinion of the Company's
counsel. The sections of any such Registration Statement including information
with respect to the Investors, the Investors' beneficial ownership of securities
of the Company or the Investors' intended method of disposition of Registrable
Securities must conform to the information provided to the Company by the
Investors.
1.4.11 WITHDRAWAL OF STOP ORDER. The Company shall, in the
event of the issuance of any stop order suspending the effectiveness of a
Registration Statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any securities included in
the Registration Statement for sale in any jurisdiction, use its best efforts
promptly to obtain the withdrawal of such order.
1.4.12 POST-EFFECTIVE AMENDMENT. In the event that the Company
is required to file a post-effective amendment to the Registration Statement,
the Company shall use its best efforts to have the Registration Statement
declared effective as soon as possible after such filing.
1.5 PERMITTED SUSPENSION
1.5.1 BLACK-OUT PERIOD. Notwithstanding the Company's
obligations under this Agreement, if in the good faith judgment of the Company,
following consultation with the Investors, and legal counsel for both the
Company and the Investors, it would be detrimental to the Company and its
stockholders for resales of Registrable Securities to be made pursuant to the
Registration Statement due to (i) the existence of a material development or
potential material development involving the Company which the Company would be
obligated to disclose in the Registration Statement, which disclosure would be
premature or otherwise inadvisable at such time or would have a Material Adverse
Effect upon the Company and its stockholders, or (ii) in the good faith judgment
of the Company's Board of Directors, it would adversely affect or require
premature disclosure of the filing of a Company-initiated registration of any
class of its
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equity securities, the Company shall have the right to suspend the use of the
Registration Statement (the "BLACK-OUT PERIOD"); PROVIDED, HOWEVER, that the
Company may so defer or suspend the use of the Registration Statement for no
more than a total of 75 days in any twelve-month period and no Black-out Period
may begin within 30 days of the end of any prior Black-out Period.
1.5.2 SUSPENSION. Notwithstanding anything to the contrary
contained herein or in the Purchase Agreement, if the use of the Registration
Statement is suspended by the Company under Section 1.5.1 above (the Company not
having the right to otherwise suspend the Registration Statement), the Company
shall promptly give notice of the suspension to the Investors in writing and
shall promptly notify the Investors in writing as soon as the use of the
Registration Statement may be resumed. Notwithstanding anything to the contrary
contained herein or in the Purchase Agreement, the Company shall cause the
Transfer Agent to deliver unlegended shares of Common Stock to a transferee of
any Investor in accordance with the terms of the Purchase Agreement in
connection with any sale of Registrable Securities with respect to which such
Investor has entered into a contract for sale prior to receipt of notice of such
suspension and for which such Investor has not yet settled.
1.6 EXPENSES. The Company shall bear (i) all Registration Expenses,
(ii) all expenses incurred in connection with the negotiation, preparation,
execution and delivery of the Purchase Agreement and this Agreement, and (iii)
the reasonable fees and disbursements of Xxxxx & Lardner, counsel to the
Investors, in connection with any Registration Statement covering any
Registrable Securities. Notwithstanding the foregoing, the aggregate fees,
expenses and disbursements described in the foregoing clauses (ii) and (iii) to
be borne by the Company shall not exceed $50,000.
1.7 COOPERATION WITH UNDERWRITERS. No Person (within the meaning of the
Securities Act) may participate in any underwritten registration pursuant to
this Agreement unless that Person (i) agrees to sell securities on the
reasonable basis provided in the underwriting arrangements and (ii) completes
and executes all reasonable questionnaires, underwriting agreements and other
documents required under the terms of the underwriting arrangements; provided
however that no such underwriting arrangements shall be in conflict with any
term or condition contained herein; and PROVIDED further, that no Investor shall
be required to enter into any custody agreement or any power of attorney if it
has made arrangements for delivery of the Registrable Securities to the
underwriters and shall itself have executed the underwriting agreement. No
Investor shall in any event be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such Investor and such Investor's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters except as otherwise provided in Article II.
1.8 DISCONTINUANCE OF DISPOSITIONS. Upon receipt of notice from the
Company of the happening of any event of the kind described in Section 1.5.2
hereof, the Investors shall discontinue the disposition of their Registrable
Securities pursuant to the Registration Statement until the Investors receive
copies of a supplemented or amended prospectus as contemplated by such Section
1.4.4.
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ARTICLE II
INDEMNIFICATION
2.1 INDEMNIFICATION BY COMPANY. The Company agrees to indemnify, to the
extent permitted by law, each Investor, each Person who controls an Investor
(within the meaning of the Securities Act), and their respective partners,
shareholders, trustees, members, officers and directors against all losses,
claims, damages, liabilities and expenses caused by any Violation, except
insofar as the Violation is caused by or contained in any information furnished
in writing to the Company by the Investors, and not promptly corrected by the
Investors if initially inaccurate or incomplete, expressly for use in a
Registration Statement, prospectus, amendment, supplement or related document.
In connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent
provided in this Section 2.1 with respect to the indemnification of the
Investors. The indemnity agreement contained in this Section 2.1 shall not apply
to any amounts paid in settlement of any losses, claims, damages, liabilities
and expenses resulting from any Violation if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld or
delayed.
2.2 INDEMNIFICATION BY INVESTORS. In connection with any Registration
Statement pursuant to which an Investor is selling Registrable Securities, such
Investor shall furnish to the Company in writing such information and affidavits
as the Company reasonably requests for use in connection with the Registration
Statement or prospectus and, to the extent permitted by law, shall indemnify the
Company, its directors and any of its officers who signs such Registration
Statement and each Person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any violation to the extent that the violation is caused by or
contained in any information furnished in writing to the Company by such
Investor, and not promptly corrected by the Investors if initially inaccurate or
incomplete, expressly for use in such Registration Statement, prospectus,
amendment, supplement or related document. This obligation to indemnify shall be
individual, not joint and several, and shall be limited to the net amount of
proceeds received by such Investor from the sale of Registrable Securities
pursuant to the Registration Statement. The indemnity agreement contained in
this Section 2.2 shall not apply to amounts paid in settlement of any losses,
claims, damages, liabilities and expenses resulting from any violation if such
settlement is effected without the consent of such Investor, which consent shall
not be unreasonably withheld.
2.3 PROCEDURES. Any Person entitled to indemnification under this
Article II shall, promptly after the receipt of notice of the commencement of
any action, investigation, claim or other proceeding against such indemnified
party in respect of which indemnity may be sought from an indemnifying party
under this Article II, notify the indemnifying party in writing of the
commencement thereof. The omission of any indemnified party so to notify an
indemnifying party of any such action shall not relieve the indemnifying party
from any liability which it may have to such indemnified party under this
Article II unless, and only to the extent that, such omission results in the
indemnifying party's forfeiture of substantive rights or defenses or the
indemnifying party is otherwise irrevocably prejudiced in defending such
proceeding. In case
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any such action, claim or other proceeding shall be brought against any
indemnified party for which indemnification is claimed pursuant to Section 2.1,
and it shall notify the Company of the commencement thereof, the Company shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to the Company; PROVIDED, that any such indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action, claim or proceeding in which both
the Company, on the one hand, and an indemnified party, on the other hand, is,
or is reasonably likely to become, a party, such indemnified party shall have
the right to employ separate counsel at the Company's expense and to control its
own defense of such action, claim or proceeding if, (a) the Company has failed
to assume the defense and employ counsel as provided herein, (b) the Company has
agreed in writing to pay such fees and expenses of separate counsel or (c) in
the reasonable opinion of counsel to such indemnified party, a conflict or
likely conflict exists between the Company, on the one hand, and such
indemnified party, on the other hand, that would make such separate
representation advisable; PROVIDED, HOWEVER, that the Company shall not in any
event be required to pay the fees and expenses of more than one separate counsel
(and if deemed necessary by such separate counsel, appropriate local counsel who
shall report to such separate counsel). The Company shall not, without the prior
written consent of an indemnified party, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if such indemnified party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding. The rights accorded to indemnified parties
hereunder shall be in addition to any rights that any indemnified party may have
at common law, by separate agreement or otherwise.
2.4 SURVIVAL. The indemnification under this Article II shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of the
indemnified party (within the meaning of the Securities Act) and shall survive
the transfer of securities.
2.5 CONTRIBUTION. In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to this Article II is made
but it is found in a final judgment of a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provided for indemnification in
such case, then the Company, on the one hand, and the Investors, on the other
hand, shall contribute to the losses, claims, damages, liabilities or costs to
which the indemnified persons may be subject in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified parties in connection with the actions which resulted in any such
losses, claims, liabilities or costs, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined with reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities or
costs referred to above shall be deemed to include any legal or
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other fees or expenses reasonably incurred by such party in connection with any
investigation or proceedings.
ARTICLE III
COVENANTS
3.1 CURRENT PUBLIC INFORMATION. The Company shall timely file all
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder, and will take such
further action as any Investor may reasonably request, all to the extent
required to enable the Investors to sell Registrable Securities pursuant to Rule
144 adopted by the SEC under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
SEC and pursuant to Form S-3 or any similar short form registration statement.
Upon written request, the Company shall deliver to the Investors a written
statement as to whether it has complied with such requirements.
3.2 LISTING. On or before the tenth trading day after the date of this
Agreement, the Company shall secure the listing of the Purchased Shares and,
within 10 trading days of the exercise of the Warrant, the Warrant Shares, upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and, so long as any Investor owns any of the Shares, will maintain
such listing of the Shares. The Company shall use its best efforts to obtain
and, so long as any Investor owns any of the Shares, maintain the listing and
trading of its Common Stock on Nasdaq and shall comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers, Inc. and such exchanges, as
applicable. Until an Investor transfers, assigns or sells all of the Shares
owned by it, the Company will promptly provide to such Investor copies of any
notices it receives regarding the continued eligibility of the Common Stock for
listing on Nasdaq or other principal exchange or quotation system on which the
Common Stock is listed or traded.
3.3 NO INTEGRATION. The Company shall not make any offers or sales of
any security (other than the Shares) under circumstances that would cause the
offering of the Shares to be integrated with any other offering of securities by
the Company (i) for the purpose of any stockholder approval provision applicable
to the Company or its securities or (ii) for purposes of any registration
requirement under the Securities Act.
ARTICLE IV
DEFINITIONS
Capitalized terms which are used in this Agreement without being
defined have the same meanings that they are given in the Purchase Agreement. In
addition, the following terms have these meanings:
4.1 "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, assets or financial condition of the Company or (b)
the ability of the Company to perform its obligations pursuant to the
transactions contemplated by this Agreement, the
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Purchase Agreement, the Warrant, or under the agreements or instruments to be
entered into or filed in connection herewith or therewith.
4.2 "REGISTRABLE SECURITIES" means (A) the Purchased Shares issued and
sold pursuant to the Purchase Agreement, (B) the Warrant Shares (up to the
maximum number of Warrant Shares issuable pursuant to the Warrant), upon
exercise of the Warrant and (C) any shares of capital stock issued or issuable
from time to time (with any adjustments) in exchange for or otherwise with
respect to any of the foregoing.
4.3 "REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts, commissions and underwriters' counsel fees) and other
Persons (with the meaning of the Securities Act) retained by the Company.
4.4 "REGISTRATION PERIOD" means the period between the date of this
Agreement and the date which is the second anniversary of the date of this
Agreement.
4.5 "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the Securities Act.
4.6 "VIOLATION" means any of the following statements, omissions or
violations: (i) any untrue statement or alleged untrue statement of a material
fact contained or incorporated by reference in a Registration Statement pursuant
to this Agreement, including any related preliminary or final prospectus, any
amendment or supplement, or any document filed under state securities or "blue
sky" laws or any other document or thing filed with any governmental entity,
securities exchange or self regulatory organization, (ii) the omission or
alleged omission to state a material fact required to be stated in any such
registration statement, prospectus, amendment, supplement or document or
necessary to make the statements in any such registration statement, prospectus,
amendment, supplement or document not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law, or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law.
ARTICLE V
MISCELLANEOUS
5.1 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 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.
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5.2 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument.
5.3 HEADINGS. The headings in this Agreement have been inserted for
convenience of reference only and shall not alter or affect the meaning thereof.
5.4 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.
5.5 SURVIVAL OF COVENANTS. All covenants, agreements, representations
and warranties made herein or in the Purchase Agreement or in the 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.
5.6 ENTIRE AGREEMENT. This Agreement, the Purchase Agreement and the
Warrant (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.
5.7 AMENDMENTS. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investors.
5.8 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.
0 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: 000-000-0000
Attention: President
With a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxx, Xx., Esq.
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If to an Investor: To such Investor,
C/o Capital Investment Corporation, Inc.
000 Xxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxxxxxxx X. Xxxxxx
Fax: 000-000-0000
AND
CIC Ventures, Inc.
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xx. Xxxxx X. Xxxxxxx
With a copy to: Xxxxx & Lardner
Century Park East, 36th Fl
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxx and Xxxxx Xxxxx
or in each case to such other address as either party shall specify in writing
to the other party.
5.9 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) or a qualified institutional buyer
(within the meaning of Rule 144A) and agrees in writing to be bound by this
Agreement. This provision does not limit any Investor's right to transfer the
Shares pursuant to the terms of this Agreement or the Purchase Agreement or to
assign such Investor's rights hereunder to any such transferee pursuant to the
terms of this Agreement and the Purchase Agreement.
5.10 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.
5.11 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 Purchase Agreement and the
consummation of the transactions contemplated hereby and thereby.
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5.12 EQUITABLE RELIEF. The Company recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement or the Purchase
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.
5.13 TERMINATION. This Agreement and all rights hereunder shall
terminate on the second anniversary of the date of this agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
COMPANY:
BREAKAWAY SOLUTIONS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------------------
Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
INVESTORS:
INVEST INC.
By: /s/ Xxxxx Al-Rezaihan
----------------------------------------
Name: Xxxxx Al-Rezaihan
Title: President
Signature Page to Registration Rights Agreement
