EXHIBIT 10.2
NEITHER THE WITHIN WARRANTS NOR THE UNDERLYING SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
BREAKAWAY SOLUTIONS, INC.
COMMON STOCK PURCHASE WARRANTS
THIS CERTIFIES THAT, for value received, ICG Holdings, Inc. a Delaware
corporation, or registered assigns (the "HOLDER"), is hereby issued 9,737,447
warrants ("WARRANTS") to purchase from Breakaway Solutions, Inc., a Delaware
corporation (the "COMPANY"), at any time until January 11, 2006 (the "Expiration
Date"), fully paid and non-assessable shares of the Company's Common Stock, par
value $.000125 per share ("COMMON STOCK"), at the exercise price of $0.6875 per
Warrant (the "EXERCISE PRICE"), subject to the provisions hereinafter set forth
and the provisions of the Loan and Security Agreement between ICG Holdings, Inc.
and the Company dated January 11, 2001 (the "LOAN AND SECURITY AGREEMENT");
provided, that if the average Closing Bid Price of the Common Stock for the five
trading days immediately prior to January 31, 2001, is less than $0.6875, then
the Exercise Price shall be reduced to such average Closing Bid Price; and
provided, further, that if the average Closing Bid Price of the Common Stock for
the five trading days immediately prior to January 31, 2002 is less than the
Exercise Price then in effect, the Exercise Price shall be reduced to such
average Closing Bid Price. "CLOSING BID PRICE" means (i) the closing bid price
on Nasdaq (ii) or, if the Common Stock is not trading on Nasdaq, on the OTC
Bulletin Board (iii) or, if there is no bid price for the Common Stock on the
OTC Bulletin Board on any relevant date, the price agreed by the Company and the
Holder for such date. Each Warrant is initially exercisable for one share of
Common Stock, subject to adjustment as set forth herein.
The Warrants are subject to the following terms and conditions:
1. METHOD OF EXERCISE: PAYMENT.
(a) CASH EXERCISE. Any number of Warrants may be exercised by the
Holder from time to time by the surrender of this instrument along with the
notice of exercise form attached hereto as EXHIBIT A (the "NOTICE OF EXERCISE")
at the principal office of the Company, and by payment to the Company of an
amount equal to the Exercise Price multiplied by the number of Warrants being
exercised, which amount may be paid in cash, by wire transfer, by certified
check payable to the order of the Company, or as set forth in Section 1(b)
below. The person or persons in whose name(s) any certificate(s) representing
Common Stock shall be issuable upon exercise of Warrants shall be deemed to have
become the holder(s) of record of,
and shall be treated for all purposes as the record holder(s) of, the Common
Stock represented thereby (and such Common Stock shall be deemed to have been
issued) immediately prior to the close of business on the day on which the
Holder either delivers this instrument and the Notice of Exercise to the Company
or delivers this instrument and the Notice of Exercise to a nationally
recognized courier service for next business day delivery to the Company (the
"EXERCISE DATE.")
(b) NET ISSUE EXERCISE. The Holder may elect to pay the Exercise
Price in Common Stock by surrender of this instrument at the principal office of
the Company along with the Notice of Exercise in which Alternative No. 2 is
elected by the Holder. In such event, the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock
to be issued to the Holder.
Y = the number of shares of Common Stock as
to which this instrument is being exercised.
A = the fair market value of one share of
Common Stock as of the date of exercise.
B = the Exercise Price
(c) FAIR MARKET VALUE. For purposes of this Section 1, the fair
market value of one Warrant Share shall mean:
(i) The highest sale price of a share of Common Stock over the
ten trading days immediately preceding the Exercise Date on the Nasdaq Stock
Market, the Over-The-Counter Market, or any other exchange on which the Common
Stock is listed, whichever is applicable; or
(ii) If the Company's Common Stock is not traded on the Nasdaq
Stock Market or Over-The-Counter or on an exchange, the fair market value of a
share of Common Stock shall be determined in good faith by the Company's Board
of Directors using similar diligence and valuation methods as applied by the
Company's Board of Directors in determining the fair market value of incentive
stock options.
(d) STOCK CERTIFICATES. In the event of any exercise of the rights
represented by this instrument, as promptly as practicable on or after the date
of exercise and in any event within ten business days thereafter, the Company at
its expense shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of shares of Common Stock
issuable upon such exercise. In the event this instrument is exercised in part,
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the Company at its expense will execute and deliver to the Holder a new
instrument of like tenor exercisable for the number of unexercised Warrants.
(e) TAXES. The issuance of Common Stock upon the exercise of this
instrument, and the delivery of certificates or other instruments representing
such Common Stock, shall be made without charge to the Holder for any tax or
other charge in respect of such issuance.
2. STOCK FULLY PAID: RESERVATION OF COMMON STOCK. The Company agrees
that (i) all of the Common Stock issuable upon the exercise of the rights
represented by this instrument will, upon issuance and receipt of the Exercise
Price therefor, be fully paid and nonassessable, and free from all preemptive
rights, rights of first refusal or first offer, share transfer taxes, liens and
charges with respect to the issuance thereof and (ii) the issuance of this
instrument is free from all preemptive rights, rights of first refusal or first
offer, share transfer taxes, liens and charges with respect to the issuance
hereof. During the period within which the rights represented by this instrument
may be exercised, the Company shall at all times have authorized and reserved
for issuance sufficient shares of Common Stock to provide for the exercise of
the rights represented by this instrument. The Company agrees that its issuance
of this instrument shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for Common Stock upon the exercise of this instrument.
The Company shall not take any action which results in a Conversion Price
adjustment if the fully-diluted number of shares of Common Stock outstanding
after the action would exceed the total number of shares of Common Stock
authorized for issuance by the Company's Certificate of Incorporation.
3. CONVERSION. The Holders of this instrument shall have exercise
rights as follows (the "EXERCISE RIGHTS"):
(a) RIGHT TO CONVERT. Each Warrant shall be exercisable in
accordance with Section 1, at the option of the Holder, at any time after the
date of issuance of this instrument, at the office of the Company or any
transfer agent for the Warrants, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $0.6875 (or
such lesser amount as equals the Exercise Price, if the Exercise Price is
reduced pursuant to the introductory provisions hereof which precede Section 1)
(the "ORIGINAL PRICE") by the conversion price (the "CONVERSION PRICE") at the
time in effect. The initial Conversion Price per Warrant shall be the Original
Price; PROVIDED, HOWEVER, that the Conversion Price shall be subject to
adjustment as set forth in Section 3(b) hereof; and PROVIDED, FURTHER, that the
Conversion Price shall be reduced to equal the Exercise Price upon a reduction
in the Exercise Price pursuant to the introductory provisions hereof which
precede Section 1 if such reduced Exercise Price is less than the Conversion
Price then in effect.
(b) CONVERSION PRICE ADJUSTMENTS. The Conversion Price shall be
subject to adjustment from time to time as follows:
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(i) (A) Upon each issuance (or deemed issuance pursuant to the
provisions hereof) by the Company of any Additional Stock (as defined in Section
3(b)(ii)) after the date of issuance of this instrument, without consideration
or for an Effective Price per share less than the Conversion Price in effect
immediately prior to the issuance (or deemed issuance) of such Additional Stock,
then the Conversion Price in effect immediately prior to each issuance (or
deemed issuance) shall be reduced to the Effective Price received by the Company
upon such issuance (determined in accordance with this Section 3(b)). The
"Effective Price" of shares of Additional Stock means the quotient determined by
dividing (i) the total number of such shares of Additional Stock issued or sold,
or deemed to have been issued or sold, by the Company under Section 3 hereof,
into (ii) the consideration received (or deemed received) by the Company under
Section 3 hereof for the issuance of such shares of Additional Stock.
(B) No adjustment of the Conversion Price shall be made in
an amount less than one-half of one cent ($0.005) per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be taken into account in any subsequent adjustment
to the Conversion Price.
(C) In the case of the issuance of securities of the
Company for cash, the amount of consideration received by the Company for such
securities shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by the Company for any underwriting or otherwise in connection with the issuance
and sale thereof.
(D) In the case of the issuance of securities of the
Company for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to have a dollar value equal to
the fair market value of such non-cash consideration as determined in good faith
by the Board of Directors, irrespective of any accounting treatment thereof.
(E) In the case of the issuance (whether before, on or
after the date of issuance of this instrument) of Options or Convertible
Securities, the following provisions shall apply for all purposes of this
Section 3(b)(i) and Section 3(b)(ii) hereof. "OPTION" means rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities. "CONVERTIBLE SECURITIES" means any debt or equity
security convertible into or exchangeable for Common Stock.
(1) With respect to Options to purchase Common Stock,
the aggregate maximum number of shares of Common Stock deliverable upon exercise
of such Options shall be deemed to have been issued at the time such Options
were issued and for a consideration equal to the consideration (determined in
the manner provided in Section 3(b)(i)(C) and Section 3(b)(i)(D) hereof), if
any, received by the Company for such Options plus the minimum exercise price
provided in such Options for Common Stock covered thereby.
(2) With respect to Convertible Securities and Options
to purchase Convertible Securities, the aggregate maximum number of shares of
Common Stock
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deliverable upon the conversion or exchange of any such Convertible Securities
and the aggregate maximum number of shares of Common Stock issuable upon the
exercise of such Options to purchase Convertible Securities and the subsequent
conversion or exchange of such Convertible Securities shall be deemed to have
been issued at the time such Convertible Securities or such Options were issued
and for a consideration equal to the consideration, if any, received by the
Company for any such Convertible Securities and Options, plus the minimum
additional consideration, if any, to be received by the Company upon the
conversion or exchange of such Convertible Securities or the exercise of such
Options and the conversion or exchange of the Convertible Securities issuable
upon exercise of such Options (the consideration in each case to be determined
in the manner provided in Section 3(b)(i)(C) and 3(b)(i)(D) hereof).
(3) In the event of any change in the number of shares
of Common Stock deliverable, or in the consideration payable to the Company,
upon exercise of such Options or upon conversion or exchange of such Convertible
Securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price, to the extent in any way
affected by or computed using such Options or Convertible Securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such Options or the conversion or exchange of such
Convertible Securities.
(4) Upon the expiration or termination of any such
Options or any such rights to convert or exchange Convertible Securities, the
Conversion Price, to the extent in any way affected by or computed using such
Options or Convertible Securities, shall be recomputed to reflect the issuance
of only the number of shares of Common Stock (and Options and Convertible
Securities which remain in effect) that were actually issued upon the exercise
of such Options or upon the conversion or exchange of such Convertible
Securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Section 3(b)(i)(E)(1) and
(2) hereof shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either Section 3(b)(i)(E)(3) or (4) hereof.
(ii) "ADDITIONAL STOCK" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to Section 3(b)(i)(E) hereof) by
the Company after the date of issuance of this instrument other than:
(A) Common Stock issued pursuant to a transaction
described in Section 3(b)(iii) hereof;
(B) Common Stock issued or issuable upon exercise of any
warrants issued pursuant to the terms of the Loan and Security Agreement;
(C) Common Stock, Options or Convertible Securities issued
under the terms of stock option plans approved by the Company's Board of
Directors, but not exceeding the number of shares available for new grants under
such plans on January 11, 2001,
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plus the number of shares subject to options outstanding under such plans on
such date which become available for new grants (e.g., due to cancellation,
forfeiture or expiration of the related options) plus 2,500,000 (in each case as
adjusted for any stock dividends, splits or combinations with respect to the
Common Stock) and not including any Options or Convertible Securities
outstanding under such plans on January 11, 2001, all of which are intended to
be excluded from the definition of Additional Stock by virtue of clause (D)
below;
(D) Common Stock issued upon conversion or exercise of any
Options or Convertible Securities described in the Company's filings made prior
to January 11, 2001 under the Securities Exchange Act of 1934, as amended; and
(E) Common Stock issued upon conversion or exercise of any
Options or Convertible Securities issued by the Company on or about December 11,
2000 to Invest, Inc.
(iii) In the event the Company at any time or from time to
time after the date of issuance of this instrument fixes a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of shares of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "COMMON STOCK EQUIVALENTS") without payment of any consideration
by such holder for the additional shares of Common Stock or Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend, distribution, split or subdivision if no record date is fixed),
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on exercise of each Warrant shall be increased
in proportion to such increase in the aggregate number of shares of Common Stock
or shares issuable with respect to Common Stock Equivalents, with the number of
shares issuable with respect to Common Stock Equivalents determined from time to
time in the manner provided for deemed issuances in Section 3(b)(i)(E) hereof.
(iv) If the number of shares of Common Stock outstanding at
any time after the date of issuance of this instrument is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on exercise of
each Warrant shall be decreased in proportion to such decrease in the
outstanding shares of Common Stock.
(c) OTHER DISTRIBUTIONS. In the event the Company shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Company or other persons, assets or options or rights not referred
to in Section 3(b)(iii) hereof, then, in each such case for the purpose of this
Section 3(c), the Holder shall be entitled to a proportionate share of any such
distribution as though it was the holder of the number of shares of Common Stock
for
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which the Warrants are exercisable as of the record date fixed for the
determination of the holders of shares of Common Stock entitled to receive such
distribution.
(d) RECLASSIFICATION, CONSOLIDATION OR MERGER. If while this
instrument, or any portion hereof, remains outstanding and unexpired there shall
be (i) a reorganization (other than a combination or subdivision of shares
otherwise provided for herein), (ii) a merger or consolidation of the Company
with or into another corporation in which the Company is not the surviving
entity, or a merger in which the Company is the surviving entity but the shares
of the Company's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash, or otherwise, or (iii) a sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this instrument shall
thereafter be entitled to receive upon exercise of this instrument, during the
period specified herein and upon payment of the Exercise Price then in effect,
the number of shares of stock or other securities or property of the successor
or purchasing corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable upon
exercise of this instrument would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this instrument had
been exercised immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
3. The foregoing provisions of this section shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this instrument. If the per share consideration payable to the
Holder in connection with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration shall be agreed upon
by the parties hereto, provided that if the parties cannot agree, the value
shall be determined in good faith by the Company's Board of Directors. In all
events, appropriate adjustment shall be made in the application of the
provisions of this instrument (including adjustment of the Exercise Price and
number of shares of Common Stock purchasable pursuant to the terms and
conditions of this instrument) with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this instrument
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this instrument.
(e) NO IMPAIRMENT. The Company will not in any manner avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Exercise Rights of the Holder against any manner of impairment.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 3,
the Company, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to the
Holder a certificate setting forth such adjustment or readjustment and
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showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of the Holder, furnish
or cause to be furnished to the Holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon exercise of a Warrant.
4. NOTICES.
(a) In the event that the Company shall propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this instrument) whether in cash, property, stock or other securities, whether
or not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock (or other stock or securities at the time receivable upon the
exercise of this instrument) outstanding involving a change in such securities;
or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to voluntarily liquidate, dissolve or wind up; then, in connection
with each such event, the Company shall send to the Holder (1) at least ten (10)
days' prior written notice of the date on which a record shall be taken for such
dividend, distribution or subscription rights (and specifying the date on which
the holders of Common Stock shall be entitled thereto) or for determining rights
to vote, if any; and (2) at least ten (10) days' prior written notice of the
date when the same shall take place, and the date, if any is to be fixed, on
which the holders of record of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event.
(b) Any written notice by the Company required or permitted
hereunder shall be given by hand delivery, by an overnight courier of national
reputation or first class mail, postage prepaid, addressed to the Holder at the
address shown on the books of the Company for the Holder.
5. LEGEND. Each certificate evidencing the Common Stock issued upon
exercise of this instrument, or upon transfer of such shares (other than a
transfer registered under the Act or any subsequent transfer of shares so
registered) shall be stamped or imprinted with a legend substantially in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
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HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
6. REMOVAL OF LEGEND. Upon request of a holder of a certificate with
the legends referred to in Section 5 hereof, the Company shall issue to such
holder a new certificate therefor free of any transfer legend, if, with such
request, the Company shall have received an opinion of counsel to the effect
that any transfer by such holder of the shares evidenced by such certificate
will not violate the Act.
7. FRACTIONAL SHARES. No fractional shares will be issued in
connection with any exercise hereunder. Any fraction of a share resulting from
any calculation will be rounded up to the next whole share.
8. TRANSFERABLITY. Subject to compliance with applicable federal and
state securities laws, this instrument and all rights hereunder are
transferable, in whole or in part, without charge to the Holder hereof (except
for transfer taxes), upon surrender of this instrument properly endorsed. The
Company shall register any such transfer upon surrender of this instrument and
the duly completed assignment form attached hereto as Exhibit B. In addition,
this instrument may be exchanged or combined at the option of the Holder for
another instrument of like tenor and representing in the aggregate a like number
of Warrants upon presentation thereof to the Company with written notice signed
by the Holder specifying the denominations in which the new Warrants are to be
issued. Upon surrender of this instrument pursuant to this Section 8, the
Company shall, without charge, execute and deliver a new instrument of like
tenor in the requested amounts and in the requested names and, if the Holder's
entire interest is not being transferred, in the name of the Holder with respect
to the portion not transferred, and the instrument(s) surrendered shall be
canceled.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder as follows:
(a) This instrument has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms.
(b) The shares of Common Stock issuable upon exercise hereof have
been duly authorized and reserved for issuance by the Company.
(c) The execution and delivery of this instrument are not, and the
issuance of Common Stock upon exercise of this instrument in accordance with the
terms hereof will not be, inconsistent with the Company's charter documents or
any agreement by which the Company is bound.
10. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder
represents and warrants to the Company as follows:
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(a) This instrument and the shares of Common Stock issuable upon
exercise hereof, are being acquired for its own account, for investment and not
with a view to any distribution thereof.
(b) The Holder understands that this instrument and the shares of
Common Stock issuable upon exercise hereof have not been registered under the
Act by reason of their issuance in a transaction exempt from the registration
and prospectus delivery requirements of the Act pursuant to Section 4(2)
thereof, and that they must be held by the Holder indefinitely, and that the
Holder must therefore bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Act or is
exempted from such registration.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this instrument and the shares of Common Stock issuable upon
exercise hereof purchasable pursuant to the terms of this instrument and of
protecting its interests in connection therewith.
11. RIGHTS OF STOCKHOLDERS. Except as otherwise provided herein, no
holder of this instrument shall be entitled, as such a holder, to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this instrument, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
instrument shall have been exercised and the shares of Common Stock issuable
upon exercise hereof purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. AUTHORIZED SHARES. If upon any exercise of this instrument the
Company does not have a sufficient number of shares of Common Stock authorized
and available for issuance upon such exercise, then the Company shall issue to
the Holder the maximum available number of shares of Common Stock and, in lieu
of the remaining shares of Common Stock as to which this instrument has been
exercised (the "REMAINING SHARES"), the Company shall pay the Holder a cash sum
equal to the product of (i) the Remaining Shares, and (ii) the difference
obtained by subtracting (A) the Conversion Price in effect on the Exercise Date
from (B) the Closing Bid Price on the Exercise Date. Notwithstanding the
foregoing, if the Holder effects such exercise prior to March 16, 2001, then the
Company may delay making any cash payment until the Payment Date; provided, that
if the Company has a sufficient number of authorized shares of Common Stock
prior to the Payment Date to issue to the Holder all the Remaining Shares, the
Company shall promptly issue to the Holder the Remaining Shares, and such
issuance shall relieve the Company of its obligation to make a cash payment in
accordance with the preceding sentence. "PAYMENT DATE" shall mean the first to
occur of (i) March 16, 2001, (ii) the date
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following a special meeting of the Company's stockholders held not later than
March 15, 2001 to vote upon an amendment (the "AMENDMENT") to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock to up to 160,000,000 shares (the "SPECIAL MEETING"), (iii) February
23, 2001, if the Company has not filed a preliminary proxy statement with the
Securities and Exchange Commission with respect to the Special Meeting by such
date, or (iv) March 5, 2001, if the Company has not mailed definitive proxy
materials to its stockholders for the Special Meeting by such date.
Notwithstanding the foregoing, the Company shall be under no obligation to make
a cash payment in lieu of issuing Remaining Shares (but shall remain obligated
to issue Remaining Shares) if (i) the Amendment is duly approved at the Special
Meeting and promptly thereafter the Company files the Amendment with the
Secretary of State of the State of Delaware or (ii) Internet Capital Group, Inc.
and its wholly-owned subsidiaries shall not have voted all shares of Common
Stock over which they have voting control in favor of the Amendment.
13. MISCELLANEOUS.
(a) This instrument shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware without regard to principles of conflicts of law.
(b) The headings in this instrument are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
(c) The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this instrument
shall survive the execution and delivery of this instrument.
(d) The terms of this instrument shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Common Stock issued or issuable upon the
exercise hereof.
(e) The Company shall not, by amendment of its charter documents,
or through any other means, directly or indirectly, avoid or seek to avoid the
observance or performance of any of the terms of this instrument and shall at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this instrument against impairment.
(f) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this instrument and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of such instrument,
the Company, at its expense, will execute and deliver to the holder of record,
in lieu thereof, a new instrument of like date and tenor.
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(g) This instrument and any provision hereof may be amended,
waived or terminated only by an instrument in writing signed by the Company and
the Holder.
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IN WITNESS WHEREOF, the Company has caused this instrument to be signed
by its duly authorized officer.
Issued this 19th day of January, 2001.
BREAKAWAY SOLUTIONS, INC.
By: /s/ Gordon Brooks
------------------------
Name: Gordon Brooks
Title: President and Chief Executive Officer
Acknowledged and Accepted:
ICG HOLDINGS, INC.
By: /s/ Henry Nassau
---------------------------
Name: Henry Nassau
Title: Vice President and Secretary
-13-
EXHIBIT A
NOTICE OF EXERCISE
TO: Breakaway Solutions, Inc.
Attention: General Counsel
Alternative No. 1. In lieu of exercising the attached instrument for cash or
check, the undersigned hereby elects to effect the net issuance provision of
Section 1(b) of this instrument. This exercise is for ____________ shares of
Common Stock.
Alternative No. 2. The undersigned hereby elects to purchase ________________
shares of Common Stock pursuant to the terms of this instrument, and tenders
herewith payment of the purchase price of such shares in full.
FOR EITHER ALTERNATIVE: Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is specified
below:
-----------------------------
(Name)
-----------------------------
-----------------------------
(Address)
-------------------------
(Signature and Date)
Title:
------------------
A-1
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Name
------------------------------------------------
(please typewrite or print in block letters)
Address
------------------------------------
Taxpayer Identification No.
----------------------------------
its right represented by this instrument to purchase ________________
shares of Common Stock and does hereby irrevocably constitute and appoint
_______________ attorney-in-fact to transfer the same on the books of
___________________ with full power of substitution in the premises.
Date:
-------------------------------
Signature/Title
----------------------------------------------
Note: The signature must conform in all respects to name of
the holder as specified on the face of this instrument.
- --------------------------------------------
Taxpayer Identification number of transferor
B-1