EXHIBIT 10.41
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
RIGHT TO PURCHASE
-------------------------------
4,285,714 shares of Common
Stock, par value $.000125 per
share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Invest Inc. ("Invest"), or its
registered assigns, is entitled to purchase from Breakaway Solutions, Inc., a
Delaware corporation (the "Company"), at any time or from time to time during
the period specified in Paragraph 2 hereof, Four Million Two Hundred Eighty Five
Thousand Seven Hundred Fourteen (4,285,714) fully paid and nonassessable shares
of the Company's Common Stock, par value $.000125 per share (the "Common Stock")
subject to adjustment as provided in Section 1 below. The exercise price for the
shares of Common Stock issuable hereunder (the "Exercise Price) shall be the
lesser of: (i) $0.70 and (ii) the average Closing Bid Price of the Company's
Common Stock for the five (5) Trading Days immediately prior to January 31,
2002.
The term "Warrant Shares," as used herein, refers to the shares of Common
Stock purchasable hereunder. The Warrant Shares and the Exercise Price are
subject to adjustment as provided in Paragraph 5 hereof. The term "Warrant" or
"Warrants" means this Warrant. The term "Securities Purchase Agreement," as used
herein, refers to that certain Securities Purchase Agreement, dated December 11,
2000, by and among the Company, regardless of any subsequent rescission or
modification thereof.
This Warrant is subject to the following terms, provisions, and conditions:
1. ADJUSTMENT TO NUMBER OF SHARES ISSUABLE. In the event the Exercise Price
is less than the purchase price for the Purchased Shares (as such purchase price
has been modified by that certain Settlement Agreement and Mutual Release of
Claims, date as of February 6, 2001)
(the "Settlement Agreement"), the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted upward by an amount equal to the
percentage of adjustment made to the Exercise Price. By way of illustration, if
the purchase price for the Purchased Shares was $0.70 per share on the date of
the Settlement Agreement, and the average Closing Bid Price of the Company's
Common Stock for the five (5) Trading Days immediately prior to January 31, 2002
was $0.50 per share, the number of shares of Common Stock issuable hereunder
would be increased by a factor of 28.57%, for an aggregate adjusted amount of
5,142,800 shares of Common Stock issuable under this Warrant.
2. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
a) Subject to the provisions hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 2(b) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares (or
an election to effect a Cashless Exercise has been made) as set forth above.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding three (3) Trading Days,
after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
b) CASHLESS EXERCISE. Notwithstanding anything to the contrary contained in
this Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised by presentation and surrender of this Warrant
to the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of
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Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
3. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time
to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement (the "Issue Date"),
subject to the increase in the Company's authorized shares of Common Stock
provided in Section 4(b) below and before 5:00 p.m., New York City time, on the
fourth (4th) anniversary of the Issue Date (the "Exercise Period").
4. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(b) RESERVATION OF SHARES. The Company shall use its best efforts, as
soon as practicable, to increase the number of shares of Common Stock
authorized for issuance under its Third Amended and Restated Certificate of
Incorporation to allow the Company to reserve a sufficient number of such
shares of Common Stock to provide for the exercise of this Warrant, and the
Company shall thereafter reserve an appropriate number of shares at all
times to fulfill its obligations hereunder.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant 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 upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all such action
as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against
dilution or other impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the
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Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition
of all or substantially all the Company's assets.
5. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 5.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
COMMON STOCK. Except as otherwise provided in Paragraphs 5(c) and) 5(e)
hereof, if and whenever on or after the Issue Date of this Warrant, the
Company issues or sells, or in accordance with Paragraph 5(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith) less than the Market Price (as hereinafter
defined) on the date of issuance (or deemed issuance) of such Common Stock
(a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the sum of (x)
the number of shares of Common Stock actually outstanding immediately prior
to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 5(b) hereof, received
by the Company upon such Dilutive Issuance divided by the Market Price in
effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding
(as defined below) immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 5(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Market Price on the date of issuance or grant of such Options, then
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or
grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company
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for such price per share. For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise
of such Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the exercise of
such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than the
Market Price on the date of issuance of such Convertible Securities,
then the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities will, as
of the date of the issuance of such Convertible Securities, be deemed
to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon such
conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration
for the issuance or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange of any Convertible Securities; or
(iii) the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock, the Exercise Price in effect at
the time of such change will be readjusted to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold.
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(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and the
rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise
Price then in effect will be readjusted to the Exercise Price which
would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant
will be the amount received by the Company therefor, before deduction
of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Company in
connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof
as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value
of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant and accurately reflected in the
Company's last filing with the SEC and on the Company's most recent
financial statements; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be adopted in the
future, provided that the issuance of such stock or options (x) is
approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee
of independent directors established for such purpose and (y) if such
grant or issuance is pursuant to an employee benefit plan to be
adopted in the future, such plan is adopted in accordance with Rule
16-3 under the Securities Exchange Act of 1934, as amended; and (z)
does not exceed 20,000,000 shares in the aggregate;(iii) upon the
exercise of the Warrants; or (iv) upon the issuance of Common Stock
pursuant to the Securities Purchase Agreement (including additional
shares of Common Stock issuable thereunder at the option of the holder
of this Warrant) and the Settlement Agreement (including additional
shares of Common Stock issuable thereunder at the option of the holder
of any further warrant issued pursuant to such Settlement Agreement).
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(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any
time on or after the Issue Date of this Warrant subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassification
or otherwise) the shares of Common Stock acquirable hereunder into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time on
or after the Issue Date of this Warrant combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price
in effect immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 5, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of the
Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of
the Company other than in connection with a plan of complete liquidation of
the Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such
case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 5 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company will
not effect any consolidation, merger or sale or conveyance unless, prior to
the consummation thereof, the successor or acquiring entity (if other than
the Company) and, if an entity different from the successor or acquiring
entity, the entity whose capital stock or assets the holders of the Common
Stock of the Company are entitled to receive as a result of such
consolidation, merger or sale or conveyance assumes by written instrument
the obligations under this Warrant (including under this Paragraph 5(e))
and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or make
any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders
entitled to such distribution, but prior to the date of distribution, the
holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares
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of Common Stock subject hereto, to receive the amount of such assets which
would have been payable to the holder had such holder been the holder of
such shares of Common Stock on the record date for the determination of
stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares purchasable at
such price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such
calculation shall be certified by the chief financial officer of the
Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be
made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to not less
than 1% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained
earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its
assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this
Warrant (a) notice of the date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common
Stock entitled to receive any such dividend, distribution, or subscription
rights or for determining the holders of Common Stock entitled to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up
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and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice
of the date (or, if not then known, a reasonable approximation thereof by
the Company) when the same shall take place. Such notice shall also specify
the date on which the holders of Common Stock shall be entitled to receive
such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on
which the Company's books are closed in respect thereto. Failure to give
any such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 5 but not expressly provided
for by such provisions, the Company will give written notice of such event
to the holder of this Warrant, which notice shall state the Exercise Price
resulting from such adjustment and the increase or decrease in the number
of Warrant Shares purchasable at such price upon exercise, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, including a certification thereof by the chief
financial officer of the Company, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of
shares of Common Stock acquirable upon exercise of this Warrant so that the
rights of the holder of this Warrant shall be neither enhanced nor
diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) pursuant
to Paragraph 5(b)(i) hereof, the maximum total number of shares of
Common Stock issuable upon the exercise of Options, as of the date of
such issuance or grant of such Options, if any, and (y) pursuant to
Paragraph 5(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible
Securities, as of the date of issuance of such Convertible Securities,
if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of the
last reported sale prices for the shares of Common Stock on the Nasdaq
for the five (5) trading days immediately preceding such date as
reported by Bloomberg Financial Markets or an equivalent reliable
reporting service mutually acceptable to and hereafter designated by
the holder of this Warrant and the Company ("Bloomberg"), or (ii) if
the Nasdaq is not the principal trading market for the shares of
Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period
as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good
faith by (a) the Board of Directors of the Company or (b) at the
option of a majority-in-interest of the holders of the outstanding
Warrants, an independent investment bank of nationally recognized
standing in the
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valuation of businesses similar to the business of the Company. The
manner of determining the Market Price of the Common Stock set forth
in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must
be made hereunder.
(iii) "COMMON STOCK," for purposes of this Paragraph 5, includes
the Common Stock, par value $.000125 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable
pursuant to this Warrant shall include only shares of Common Stock,
par value $.000125 per share, in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character
referred to in Paragraph 5(e) hereof, the stock or other securities or
property provided for in such Paragraph.
(iv) "CLOSING BID PRICE" means, for any security as of any date,
the closing bid price on Nasdaq as reported by Bloomberg or, if Nasdaq
is not the principal trading market for such security, the closing bid
price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by
Bloomberg, or, if no closing bid price of such security is available
in any of the foregoing manners, the average of the bid prices of any
market makers for such security that are listed in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date in the manner provided
above, the Closing Bid Price shall be the fair market value as
mutually determined by the Company and the holder of this Warrant.
(v) "TRADING DAY" means any day on which the Common Stock is
traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then
being traded.
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6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company, except as set forth herein or in the Securities Purchase
Agreement and/or Registration Rights Agreement (as defined below). No provision
of this Warrant, in the absence of affirmative action by the holder hereof to
purchase Warrant Shares, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
8. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Paragraph 8(e) below; provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 8(f) hereof and
to the applicable provisions of the Securities Purchase Agreement and the
Settlement Agreement. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered holder
hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights
described in Paragraph 9 are assignable only in accordance with the
provisions of that certain Registration Rights Agreement, dated as of
December 11, 2000, by and among the Company and Invest, as amended by that
certain Settlement Agreement and Mutual Release of Claims, dated as of
February 6, 2001 (the "Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 8(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase
the number of shares of Common Stock which may be purchased hereunder, each
of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation
of this Warrant 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 this Warrant, the Company, at its expense,
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
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(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 8, this Warrant shall be promptly canceled by
the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any,
incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 8.
(e) REGISTER. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise,
the Warrant Shares issuable hereunder), shall not be registered for resale
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such exercise,
transfer, or exchange, (i) that the holder or transferee of this Warrant,
as the case may be, furnish to the Company a written opinion of counsel,
which opinion and counsel are acceptable to the Company, to the effect that
such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company and (iii) that the
transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter
or status as an "accredited investor" shall be required in connection with
a transfer pursuant to Rule 144 under the Securities Act. The first holder
of this Warrant, by taking and holding the same, represents to the Company
that such holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
9. REGISTRATION RIGHTS. The initial holder of this Warrant (and all
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
10. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 2 Seaport Lane, Boston,
Massachusetts 02210, Attention: President, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the Company.
Any such notice, request,
-12-
or other communication may be sent by facsimile, but shall in such case be
subsequently confirmed by a writing personally delivered or sent by certified or
registered mail or by recognized overnight mail courier as provided above. All
notices, requests, and other communications shall be deemed to have been given
either at the time of the receipt thereof by the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 10, or, if
mailed by registered or certified mail or with a recognized overnight mail
courier upon deposit with the United States Post Office or such overnight mail
courier, if postage is prepaid and the mailing is properly addressed, as the
case may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE STATE COURTS LOCATED IN
NEW YORK, NEW YORK WITH RESPECT TO ANY SUIT OR PROCEEDING BASED ON OR ARISING
UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL
CLAIMS IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER.
12. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions
hereof.
(c) REMEDIES CUMULATIVE. The remedies provided in this Warrant shall
be cumulative and in addition to all other remedies available under this
Warrant, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy contained herein shall be deemed
a waiver of compliance giving rise to such remedy and nothing herein
-13-
shall limit holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Warrant. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable
harm to holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees, in the event of any such breach
or threatened breach, holder shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security
being required.
[Remainder of Page Intentionally Left Blank]]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
BREAKAWAY SOLUTIONS, INC.,
a Delaware corporation
By:/S/ Gordon Brooks
---------------------------------
Gordon Brooks,
President and Chief Executive Officer
Dated as of February 6, 2001
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FORM OF EXERCISE AGREEMENT
Dated:_____, 200_
To: Breakaway Solutions, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 2(b) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
Signature:
Address:
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
-16-
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _______, 200_
In the presence of:
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Name:
Signature:
Title of Signing Officer or Agent (if any):
Address:
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.