EXHIBIT 10.64
GUARANTEE ISSUANCE AGREEMENT
THIS GUARANTEE ISSUANCE AGREEMENT (this "Agreement") is made and
entered into this 2nd day of July, 2001, by and among BREAKAWAY SOLUTIONS, INC.,
a Delaware corporation (the "Company"), and SCP PRIVATE EQUITY PARTNERS II,
L.P., a Delaware limited partnership ("SCP").
W I T N E S S E T H:
WHEREAS, the Company has determined that it is advisable and in its
best interest to enter into a Loan and Security Agreement (the "Loan
Agreement"), dated as of the date hereof, with Silicon Valley Bank (the "Bank");
WHEREAS, SCP owns a substantial amount of the issued and outstanding
voting capital stock of the Company;
WHEREAS, it is a condition to the Bank's execution and delivery of the
Loan Agreement that SCP execute and deliver to the Bank a guarantee of the
Company's obligations under the Loan Agreement, such guarantee to be in the form
attached hereto as EXHIBIT A (the "Guarantee"); and
WHEREAS, SCP is willing to execute and deliver the Guarantee, all
subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, and intending to be legally bound, the
parties agree as follows:
1. GUARANTEE. Prior to or simultaneously with the execution and
delivery of the Loan Agreement by the Company and the Bank, SCP shall execute
and deliver the Guarantee to the Bank.
2. WARRANT. Promptly after the execution and delivery of the Loan
Agreement by the Company and the Bank and the execution and delivery of the
Guarantee by SCP, the Company will issue and deliver to SCP a Warrant (the
"Warrant") in substantially the form attached hereto as EXHIBIT B.
3. INVESTMENT REPRESENTATIONS OF SCP. In order to induce the Company to
issue the Warrant to SCP, SCP makes the following covenants, agreements,
representations and warranties:
a. SCP understands that the Warrant, the Series A Preferred
Stock of the Company underlying the Warrant (the "Underlying Preferred Stock"),
and the Common Stock of the Company into which shares of the Series A Preferred
Stock are convertible (the "Underlying
Common Stock") are not registered under the Securities Act of 1933, as amended
(the "Act"), and that the Warrant, the Underlying Preferred Stock, and the
Underlying Common Stock (together, the "Securities") are being issued pursuant
to an exemption which is applicable to transactions by an issuer not involving
any public offering, and that the Company's reliance on this exemption is based
in part on the representations made by SCP in this Section 3. SCP represents and
warrants that it is an "accredited investor" as that term is defined under Rule
501 promulgated under the Act.
b. SCP understands that the Securities are not registered
under the "Blue Sky" or securities laws of any jurisdiction and that the
Securities are being issued pursuant to exemptions contained in such laws, and
that the Company's reliance on these exemptions is based in part on the
representations made by SCP in this Section 3.
c. SCP has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of this
investment. SCP is aware that an investment in the Securities is highly
speculative and subject to substantial risks. SCP is capable of bearing the high
degree of economic risk and burdens of this investment, including but not
limited to the complete loss of all invested capital. The financial condition of
SCP is such that it is under no present or contemplated future need to dispose
of any portion of the Securities to satisfy any existing or contemplated
undertaking, need or indebtedness.
d. SCP hereby represents and warrants that it is acquiring the
Warrant for its own account for investment purposes only and not for, with a
view to, or in connection with, any resale or distribution thereof and that SCP
has no present plans or intentions to sell, transfer, pledge, hypothecate or
otherwise dispose of any portion of the Securities, other than an intention to
transfer a portion of the Warrant to ICG Holdings Group, Inc. or an affiliate
thereof in a transaction in compliance with this Agreement, the terms of the
Warrant, and applicable securities laws.
e. SCP understands and agrees that the Securities cannot be
resold or transferred unless they are registered under the Act and all
applicable state securities laws, or unless an exemption from registration is
available, in which case the Company may condition the transfer upon receipt of
an opinion of counsel (acceptable to the Company) that such registration is not
required.
f. SCP accepts the condition that the Company or its transfer
agent(s) will obtain "stop transfer" orders with respect to the Securities and
that each of the certificates for the Securities will bear conspicuous legends
in substantially the following form or another form reasonably determined by the
Company:
The securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933 or applicable state laws. Such securities may not be sold,
transferred, pledged or hypothecated unless the registration provisions
of said Act and laws have been complied with or unless an exemption
from registration is available, in which case the Corporation
may condition the transfer upon receipt of an opinion of counsel
(acceptable to the Corporation) that such registration is not required.
The Corportion will furnish to any shareholder upon request and without
charge a full statement of: (a) the designations, preferences,
limitations, and relative rights of the shares of each class or series
of shares authorized to be issued by the Corporation, (b) the
variations in the relative rights and preferences between the shares of
each such series, so far as the same have been fixed and determined,
and (c) the authority of the Board of Directors to fix and determine
the relative rights and preferences of subsequent series.
g. SCP hereby agrees to indemnify the Company against and hold
it harmless from any loss or expense the Company may incur by reason of any sale
or disposition of the Securities by it which involves the Company in a violation
of any securities laws, rules, regulation or orders.
h. SCP acknowledges that the Company has granted it access to
all information which SCP has requested and has offered SCP access to all
information which SCP might deem relevant to any investment decision with
respect to the Securities. SCP has investigated the Company and the business and
financial conditions concerning it and has knowledge of the Company's current
corporate activities and financial condition.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to SCP as of the date of
this Agreement as follows:
a. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized and validly existing under, and by virtue
of, the laws of the State of Delaware and is in corporate good standing
under such laws. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have
a material adverse effect on the Company or its business.
b. CORPORATE POWER. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and
deliver this Agreement and the Loan Agreement and to issue and sell the
Securities (as defined below), to carry out the provisions of this
Agreement and the Loan Agreement and to carry on its business as
presently conducted and as presently proposed to be conducted.
c. AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Loan Agreement, the
performance of all obligations of the Company hereunder and thereunder,
the authorization, sale, issuance and delivery of the Warrant, and the
authorization, sale, issuance and delivery of the Underlying Preferred
Stock and
the Underlying Common Stock, has been taken. This Agreement, the Loan
Agreement, and the Warrant, when executed and delivered, shall be valid
and binding obligations of the Company enforceable in accordance with
their terms. The sale of the Securities is not subject to any
preemptive rights or rights of first refusal.
d. CAPITALIZATION.
i. The authorized capital stock of the Company consists of
245,000,000 shares of Common Stock, $.000125 par value, and
5,000,000 shares of Preferred Xxxxx, x.0000 par value, of which
600,000 shares have been designated "Series A Preferred Stock".
ii. The Underlying Preferred Stock and the Underlying Common Stock
have been duly and validly reserved for issuance. When issued in
compliance with this Agreement and the Warrant, the Underlying
Preferred Stock will be validly issued, fully paid and nonassessable
and issued in compliance with applicable federal and state
securities laws and will be free of any liens or encumbrances, other
than any liens or encumbrances created by or imposed upon the
holders thereof through no action of the Company; and when issued
upon conversion of the Underlying Preferred Stock, the Underlying
Common Stock will be validly issued, fully paid and nonassessable
and issued in compliance with applicable federal and state
securities laws and shall be free of any liens or encumbrances,
other than any liens or encumbrances created by or imposed upon the
holders thereof through no action of the Company; provided, however,
that the Warrant, the Underlying Preferred Stock, and the Underlying
Common Stock will be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein.
5. PARTIES IN INTEREST, ETC. All covenants and agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors, assigns, heirs, executors,
administrators and personal representatives of the parties hereto whether so
expressed or not. This Agreement embodies the entire agreement and understanding
between the parties hereto with regard to the subject matter hereof and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one agreement.
6. NOTICES. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex,
telecopy and telegraphic communication) and shall be (as elected by the person
giving such notice) hand delivered by messenger or courier service (including
overnight courier such as Fed Ex), telecommunicated, or mailed (airmail if
international) by registered or certified mail (postage prepaid), return receipt
requested, addressed to the parties as specified below:
If to the Company:
Breakaway Solutions, Inc.
0000 Xxxxx Xx.,
Xxxxx 000, 0xx Xxxxx
Xxxxxxxxxxxx, Xx 00000
Attention: Xxxxxxx Xxxxxx
If to SCP:
SCP Private Equity Partners II, L.P.
000 Xxxxx Xxxx Xxxxx, Xxxxxxxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxx
or to such other address as any party may designate by notice complying with the
terms of this Section 6. Each such notice shall be deemed delivered: (a) on the
date delivered if by personal delivery; (b) on the date of confirmed
transmission if by telex, telecopy or other telegraphic communication; and (c)
on the date upon which the return receipt is signed or delivery is refused or
the notice if designated by the postal authorities as not deliverable, as the
case may be, if mailed.
7. INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement, dated as
of April 6, 2001, among the Company, SCP and ICG Holdings, Inc., a Delaware
corporation, is hereby amended to include the Underlying Common Stock as
"Registrable Securities" as defined in such agreement.
8. AMENDMENTS AND WAIVERS. The terms and provisions of this Agreement
may be amended or modified, and the observance of any term of this Agreement may
be waived, only with the prior written consent of all of the parties hereto.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania for contracts made
and wholly to be performed therein, without regard to its conflicts of laws
provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BREAKAWAY SOLUTIONS, INC.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
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Title: President and Chief Executive Officer
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SCP PRIVATE EQUITY PARTNERS II, L.P.
By: SCP Private Equity II General Partner, L.P.,
its General Partner
By: SCP Private Equity II, LLC, its Manager
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Manager
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EXHIBIT A
Form of Guarantee
[See Attached]
EXHIBIT B
Form of Warrant
[See Attached]
