EXHIBIT 10.63
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF ABSENT
REGISTRATION OF SUCH SECURITIES UNDER SAID ACT AND SAID LAWS UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. (Eastern Standard Time), on July 2, 2011
WARRANT
TO PURCHASE SERIES A PREFERRED STOCK OF
BREAKAWAY SOLUTIONS, INC.
THIS CERTIFIES that, SCP Private Equity Partners II, L.P. (herein
called "Holder"), or registered assigns, is entitled to purchase from Breakaway
Solutions, Inc., a corporation organized and existing under the laws of Delaware
(herein called the "Company"), at any time after the date hereof and until 5:00
p.m. (Eastern Standard Time) on July 2, 2011, (the "Expiration Date") 20,000
fully paid and non-assessable shares of Series A Preferred Stock of the Company,
par value $0.0001 per share (the "Preferred Stock"), at a purchase price per
share of $70.00 (the "Exercise Price").
The number of shares of Preferred Stock to be received upon the
exercise of this Warrant and the price to be paid for a share of Preferred Stock
are subject to limitation and adjustment from time to time as hereinafter set
forth.
DEFINITIONS
"ACT" means the Securities Act of 1933, as amended.
"BANK" shall mean Silicon Valley Bank.
"CAPITAL STOCK" means the Common Stock, the Preferred Stock and any
other stock of any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
"COMMON STOCK" means the Company's Common Stock, par value, $0.000125
per share.
"DEBT GUARANTEE" shall mean the Unconditional Guaranty, dated July 2,
2001, issued by SCP in favor of the Bank, pursuant to which SCP has guaranteed
payment by the Company of certain obligations of the Company to the Bank.
"INCREASE AMOUNT" means 2,500 shares of Preferred Stock, as adjusted
from time to time pursuant to Section 6 herein.
"INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement among
the Company, SCP, and ICG Holdings, Inc., dated as of April 6, 2001.
"SCP" shall mean SCP Private Equity Partners II, L.P., a Delaware
limited partnership.
"SERIES A AGREEMENT" means the Series A Preferred Stock Purchase
Agreement among the Company, SCP, and ICG Holdings, Inc., dated as of February
16, 2001.
"WARRANT SHARES" means the shares of Preferred Stock deliverable upon
exercise of this Warrant, as adjusted from time to time pursuant to Section 6
herein.
Section 1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part on any business
day (the "Exercise Date") and on or before the Expiration Date by presentation
and surrender hereof to the Company at its principal office at the following
address: 1000 River Rd., Suite 400, 4th Floor, Conshohocken, Pa 19428, or at the
office of its stock transfer or warrant agent, if any, (or at such other address
as the Company may hereafter notify the Holder in writing) with the Purchase
Form annexed hereto duly executed and accompanied by proper payment of the
Exercise Price in lawful money of the United States of America in the form of a
check, subject to collection, for the number of Warrant Shares specified in the
Purchase Form. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and such Purchase Form, together with proper payment of the Exercise
Price, at such office, the Holder shall be deemed to be the holder of record of
the Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that the certificates representing such Warrant Shares
shall not then be actually delivered to the Holder. The Company shall pay any
and all documentary stamp or similar issue or transfer taxes payable in respect
of the issue or delivery of the Warrant Shares.
(b) Notwithstanding the provisions of paragraph (a), the Holder may, at
its sole option, elect to exercise this Warrant in whole or in part by receiving
Warrant Shares equal to the value (as determined below) of this Warrant, or any
part hereof, upon surrender of the Warrant at the principal office of the
Company together with a duly executed Notice of Net Election in the form annexed
hereto, in which event the Company shall issue to the Holder a number of Warrant
Shares calculated on the basis of the following formula:
X = Y(A-B)
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A
Where: X = the number of Warrant Shares to be issued to the Holder
Y = the number of Warrant Shares to be exercised under this
Warrant
A = the current fair market value of one share of
Preferred Stock, which shall be deemed to equal the
current fair market value of one share of the Common
Stock calculated (determined in the manner set forth
in this Section) as of the last business day
immediately preceding the exercise of this Warrant;
provided, however, that if each share of Preferred
Stock is then convertible into more than or less than
one share of the Common Stock, then the current fair
market value of each share of Preferred Stock shall
be deemed to equal the current fair market value of
one share of the Common Stock multiplied by the
number of shares of the Common Stock into which each
share of Preferred Stock is then convertible.
B = the Exercise Price
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The current fair market value of a share of Common Stock for purposes
of this Section shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on The NASDAQ National Market, the current market
value shall be the last reported sale price of the Common Stock on such
exchange or Market on the last business day prior to the date of
exercise or conversion of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on such
exchange or Market; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by Pink Sheets LLC, on the
last business day prior to the date of exercise or conversion; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value per share shall be an amount
determined in such reasonable manner as may be prescribed in good faith
by the Board of Directors of the Company.
Section 2. RESERVATION OF SHARES. The Company shall reserve at all
times for issuance and delivery upon exercise or conversion of this Warrant all
shares of its Preferred Stock or other shares of Capital Stock of the Company
from time to time issuable upon exercise of this Warrant. All such shares shall
be duly authorized and, when issued upon the exercise or conversion of this
Warrant in accordance with the terms hereof, including payment of the applicable
Exercise Price in full, shall be validly issued, fully paid and nonassessable,
free and clear of all liens, security interests, charges and other encumbrances
or restrictions ("Liens") on sale (other than (i) restrictions pursuant to
applicable federal and state securities laws, and (ii) any Liens created by any
action or inaction of the Holder of the Warrant Shares) and free and clear of
all preemptive rights.
Section 3. FRACTIONAL INTEREST. The Company will not issue a fractional
share of Preferred Stock or scrip upon any exercise or conversion of this
Warrant. Instead, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current fair market value of such fractional
share as may be prescribed by the Board of Directors of the Company.
Section 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(a) Except as otherwise provided in SECTION 8, the Holder of this
Warrant shall be entitled, at its option, without expense and without obtaining
the consent of the Company, to assign its interest in this Warrant, or any of
the Warrant Shares, in whole or in part, upon presentation and surrender hereof
to the Company or its stock transfer agent, if any; PROVIDED, HOWEVER, that the
transferee, prior to any such transfer, agrees in writing, in form and substance
satisfactory to the Company, to be bound by the terms of this Warrant and
provides the Company with an opinion of counsel in such form reasonably
acceptable to the Company, that such transfer would not be in violation of the
Act or any applicable state securities or blue sky laws.
(b) Subject to the provisions of SECTION 8, upon surrender of
this Warrant to the Company or at the office of its stock transfer agent or
warrant agent, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
named in such
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instrument of assignment and, if the Holder's entire interest is not being
assigned, in the name of the Holder, and this Warrant shall promptly be
canceled.
(c) This Warrant may be divided by or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company or at the office of its stock transfer or warrant agent,
if any, together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any warrants into which this Warrant may be
divided or exchanged.
(d) This Warrant is exchangeable, upon the surrender thereof by
the Holder at the principal office of the Company, for new Warrants of like
tenor registered in the Holder's name and representing in the aggregate the
right to purchase the number of shares purchasable under the Warrant being
exchanged, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by the Holder at the time
of such surrender.
Section 5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those set forth in this
Warrant.
Section 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The
number and kind of securities purchasable upon the exercise of this Warrant
(including any Increase Amount) and the Exercise Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
(a) DEBT GUARANTEE. If the Debt Guarantee shall remain
outstanding on January 2, 2003, the number of shares of Preferred Stock issuable
upon exercises or conversion of this Warrant shall be increased by the Increase
Amount. In addition, for each consecutive six-month period following January 2,
2003, that the Debt Guarantee shall remain outstanding, the number of shares of
Preferred Stock issuable upon exercise or conversion of this Warrant shall be
increased by the Increase Amount, provided that the aggregate number of shares
of Preferred Stock issuable upon exercise or conversion of this Warrant shall
total no more than 40,000 Preferred Shares, unless otherwise adjusted as
provided in this Section 6.
(b) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities issuable upon exercise or
conversion of this Warrant (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination) or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is a continuing corporation and which does not
result in any reclassification or change, other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of outstanding securities issuable upon
the exercise of this Warrant), the Company, or such successor or purchasing
corporation, as the case may be, shall, without payment of any additional
consideration therefor, execute a new warrant providing that the Holder of the
Warrant shall have the right to exercise such new warrant (upon terms not less
favorable to the Holder than those then applicable to this Warrant) and to
receive upon such exercise, in lieu of each share of Preferred Stock theretofore
issuable upon exercise or conversion of this Warrant, the kind and amount of
shares of stock, other securities, money or property receivable upon such
reclassification, change, consolidation or merger by the Holder of one share of
Preferred Stock issuable upon exercise or conversion of this Warrant had the
Warrants been exercised or converted immediately prior to such reclassification,
change, consolidation, or merger. Such new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this SECTION 6. The provisions of this SUBSECTION 6(b) shall
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similarly apply to successive reclassifications, changes, consolidations, or
mergers.
(c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant remains outstanding and unexpired , shall subdivide or
combine its Preferred Stock, the Exercise Price shall be proportionately
reduced, in case of subdivision of shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Preferred
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier, or shall be proportionately increased, in the case of combination of
shares, as of the effective date of such combination, or, if the Company shall
take a record of holders of its Preferred Stock for the purpose of so combining,
as of such record date, whichever is earlier.
(d) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Company at any
time while this Warrant is outstanding and unexpired shall:
(i) STOCK DIVIDENDS. Pay a dividend in shares of, or make
another distribution of shares of, its Preferred Stock, then the
Exercise Price shall be adjusted, as of the date the Company shall take
a record of the holders of its Preferred Stock for the purpose of
receiving such dividend or other distribution (or if no such record is
taken, as at the date of such payment or other distribution), to that
price determined by multiplying that Exercise Price in effect
immediately prior to such payment or other distribution by a fraction
(a) the numerator of which shall be the total number of shares of
Preferred Stock (with respect to any convertible securities, on an
as-converted basis) outstanding immediately prior to such dividend or
distribution, and (b) the denominator of which shall be the total
number of shares of Preferred Stock outstanding immediately after such
dividend or distribution; or
(ii) LIQUIDATING DIVIDENDS, ETC. Make a distribution of its
assets to the holders of its Preferred Stock as a dividend in
liquidation or by way of return of capital or other than as a dividend
payable out of earnings or surplus legally available for dividends
under applicable law, the Holder shall, upon its exercise, be entitled
to receive, in addition to the number of shares of Preferred Stock
receivable thereupon, and without payment of any additional
consideration therefor, a sum equal to the amount of such assets as
would have been payable to it as owner of that number of shares of
Preferred Stock receivable by exercise or conversion of the Warrant had
it been the Holder of record of such Preferred Stock on the record date
for such distribution, or if no such record is taken, as of the date of
such distribution, and an appropriate provision therefor shall be made
a part of any such distribution.
(e) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Exercise Price pursuant to any provisions of this SECTION 6, the number of
shares of Preferred Stock purchasable hereunder shall be adjusted, to the
nearest one hundredth of a whole share, to the product obtained by multiplying
such number of shares purchasable immediately prior to such adjustment by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment and the denominator of which shall be the Exercise Price
immediately thereafter.
(f) OTHER ACTION AFFECTING CAPITAL STOCK. In case after the date hereof
the Company shall take any action affecting the Capital Stock, other than an
action described in any of the foregoing SUBSECTIONS (6)(b) to (6)(d) hereof,
inclusive, which in the opinion of the Company's Board of Directors would have a
materially adverse effect upon the rights of the Holder to purchase the Warrant
Shares, the Exercise Price shall be adjusted in such manner and at such time as
the Board of Directors may in good faith determine to be equitable in the
circumstances.
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(g) NOTICE OF CERTAIN ACTIONS. In the event that:
(i) the Company shall authorize the issuance to all holders of
its Common Stock or Preferred Stock of rights, warrants, options or
convertible securities to subscribe for or purchase shares of its
Common Stock, Preferred Stock or of any other subscription rights,
warrants, options or convertible securities; or
(ii) the Company shall authorize the distribution to all
holders of its Common Stock or Preferred Stock of evidences of its
indebtedness or assets (other than dividends paid in or distributions
of the Company's Capital Stock for which the Exercise Price shall have
been adjusted pursuant to SUBSECTION (6)(d) or cash dividends or cash
distributions payable out of consolidated current or retained earnings
as shown on the books of the Company and paid in the ordinary course of
business); or
(iii) the Company shall authorize any capital reorganization
or reclassification of the Common Stock or Preferred Stock (other than
a subdivision or combination of the outstanding Common Stock or
Preferred Stock and other than a change in par value of the Common
Stock or Preferred Stock) or of any consolidation or merger to which
the Company is a party and for which approval of any shareholders of
the Company is required (other than a consolidation or merger in which
the Company is the continuing corporation and that does not result in
any reclassification or change of the Common Stock or Preferred Stock
outstanding), or of the conveyance or transfer of the properties and
assets of the Company as an entirety or substantially as an entirety;
or
(iv) the Company is the subject of a voluntary or involuntary
dissolution, liquidation or winding-up procedure; or
(v) the Company proposes to take any action (other than
actions of the character described in SUBSECTIONS (6)(b), (6)(c), or
(6)(d) that would require an adjustment of the Exercise Price pursuant
to this SECTION 6; then the Company shall cause to be mailed by
first-class mail to the Holder, at least ten (10) days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date as of which the holders of Common Stock or
Preferred Stock of record to be entitled to receive any such rights,
warrants or distributions are to be determined, or (y) the date on
which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding-up is expected to become effective,
and the date as of which it is expected that holders of Common Stock or
Preferred Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon
such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up.
Section 7. OFFICERS' CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of SECTION 6, the Company shall forthwith
file in the custody of its secretary or an assistant secretary at its principal
office an officers' certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the chairman, president or chief financial
officer of the Company and by the secretary or any assistant secretary of the
Company. A copy of each such officers' certificate shall be promptly mailed, by
certified mail, to the Holder and the original shall be made available at all
reasonable times for inspection by any other holder of a Warrant executed and
delivered pursuant to SECTION 4 hereof.
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SECTION 8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933;
REGISTRATION RIGHTS; CO-SALE AGREEMENT. No sale, transfer, assignment,
hypothecation or other disposition of this Warrant or of the Warrant Shares
shall be made if such transfer, assignment or other disposition would result in
a violation of the Act, or any state securities laws. Upon exercise of this
Warrant, the Holder shall, if requested by the Company, confirm in writing, in a
form reasonably satisfactory to the Company, that the shares of Preferred Stock
so purchased are being acquired solely for the Holder's own account, and not as
a nominee thereof, for investment, and not with a view toward distribution or
resale, except as permitted by the Act, and shall provide such other information
to the Company as the Company may reasonably request. Any Warrant and any
Warrants issued upon exercise of, substitution for, or upon assignment or
transfer of this Warrant, as the case may be, and all shares of Preferred Stock
issued upon exercise hereof or conversion thereof shall bear legends (in
addition to any legend required by state securities laws) in substantially the
form set forth on the first page of this Warrant, unless and until such
securities have been transferred pursuant to an effective registration statement
under the Act or may be freely sold to the public pursuant to Rule 144 (or any
successor rule thereto) or otherwise.
SECTION 9. REGISTRATION RIGHTS. The Holder and any transferee of the
Warrant or the Warrant Shares issuable hereunder shall have the right to require
the Company to register the Common Stock issuable upon conversion of the Warrant
Shares with the Securities and Exchange Commission for resale as provided in the
Investor Rights Agreement.
SECTION 10. MODIFICATION AND WAIVER. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by the holder hereof.
SECTION 11. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder or the Company shall be
delivered or shall be sent by certified mail or documented overnight delivery
service, postage prepaid, or by telecopy, receipt acknowledged, to the Holder at
its address as shown on the books of the Company or to the Company at the
address indicated therefor in SECTION 1 of this Warrant.
SECTION 12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the Commonwealth of Pennsylvania.
SECTION 13. NO IMPAIRMENT. The Company will not knowingly avoid or seek
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by it, but will at all times in good faith assist in the
carrying out of all of the provisions of this Warrant.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of July 2, 2001
BREAKAWAY SOLUTIONS, INC.
By: /s/ William Loftus
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Name: William Loftus
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Title: President and Chief Executive Officer
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PURCHASE FORM
Dated _______________________
The undersigned hereby irrevocably elects to exercise the within
Warrant to purchase _____________ shares of Preferred Stock and hereby makes
payment of $____________________ in payment of the exercise price thereof.
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[PRINT OR TYPE NAME OF ENTITY]
By:
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Name:
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Title:
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ASSIGNMENT FORM
Dated ________________________
FOR VALUE RECEIVED, ___________________________________ hereby sells,
(please type or print in block letters)
assigns and transfers unto ___________________________________________ (the
(please type or print in block letters)
"Assignee"), of --------------------------------------------------------------
(Address)
its right to purchase up to _________ shares of Preferred Stock represented by
this Warrant and does hereby irrevocably constitute and appoint
_______________________________ Attorney, to transfer the same on the
books of the Company, with full power of substitution in the premises.
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[PRINT OR TYPE NAME OF ENTITY]
By:
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Name:
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Title:
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NET ISSUE ELECTION FORM
Dated _______________________
The undersigned hereby irrevocably elects to exercise the within
Warrant with respect to ______________ shares of Preferred Stock pursuant to the
net issuance provisions set forth in Section 1(b) of this Warrant.
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[PRINT OR TYPE NAME OF ENTITY]
By:
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Name:
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Title:
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