EXHIBIT 10.34
BREAKAWAY SOLUTIONS, INC.
INCENTIVE STOCK OPTION AGREEMENT
1. GRANT UNDER 1998 STOCK PLAN.
This option is granted pursuant to and is governed by the Company's 1998
Stock Plan (the "Plan") and, unless the context otherwise requires, terms
used herein shall have the same meaning as in the Plan. Determinations made
in connection with this option pursuant to the Plan shall be governed by
the Plan as it exists on this date.
2. GRANT AS INCENTIVE STOCK OPTION; OTHER OPTIONS.
This option is intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
This option is in addition to any other options heretofore or hereafter
granted to the Employee by the Company or any Related Corporation (as
defined in the Plan), but a duplicate original of this instrument shall not
effect the grant of another option.
3. VESTING OF OPTION IF EMPLOYMENT CONTINUES.
If the Employee has continued to be employed by the Company or any Related
Corporation on the following dates, the Employee may exercise this option
for the number of shares of Common Stock set opposite the applicable date:
(attached as NOTICE OF GRANT OF STOCK OPTIONS AND OPTION AGREEMENT).
Notwithstanding the foregoing, in accordance with and subject to the
provisions of the Plan, the Committee may, in its discretion, accelerate
the date that any installment of this Option becomes exercisable. The
foregoing rights are cumulative and, while the Employee continues to be
employed by the Company or any Related Corporation, may be exercised on or
before the date which is ten (10) years from the date this option is
granted. All of the foregoing rights are subject to Sections 4 and 5, as
appropriate, if the Employee ceases to be employed by the Company and all
Related Corporations.
OPTION ACCELERATION UPON A CHANGE OF CONTROL
If, within twelve (12) months after a Change of Control, the Company
terminates Employee's employment other than for Cause (as defined in
Section 4 below) or materially reduces the Employee's duties or
responsibilities, then the vesting and excercisability of this option shall
automatically accelerate in full. For purposes of this section 3, "Change
of Control" shall mean the occurrence of any of the following events:
(i) the approval by shareholders of the Company of a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation;
(ii) any approval by the shareholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company; or
Page of 8
(iii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, or securities of the Company representing
50% or more of the total voting power represented by the
Company's then outstanding voting securities; PROVIDED HOWEVER
that this section shall not apply to any person or persons who,
either individually or jointly, on the date of this Agreement
beneficially owned securities of the Company representing 50% or
more of the total voting power represented by the Company's then
outstanding voting securities.
4. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OTHER THAN FOR CAUSE.
If the Employee ceases to be employed by the Company and all
Related Corporations, other than by reason of death or disability
as defined in Section 5 or termination for Cause as defined in
Section 4(c), no further installments of this option shall become
exercisable, and this option shall terminate on the earlier of (i)
ninety (90) days after the date of termination of the Employee's
employment, or (ii) the scheduled expiration date of this option.
In such a case, the Employee's only rights hereunder shall be
those which are properly exercised before the termination of this
option.
(b) TERMINATION FOR CAUSE.
If the employment of the Employee is terminated for Cause (as
defined in Section 4(c)), this option shall terminate upon the
Employee's receipt of written notice of such termination and shall
thereafter not be exercisable to any extent whatsoever.
(c) DEFINITION OF CAUSE.
For the purpose of this Agreement, "Cause" means: (1) Optionee's
substantial and continuing failure to perform Optionee's duties and
responsibilities as an employee of the company other than due to death
or disability; (2) Optionee's disloyalty, gross negligence, willful
misconduct, dishonesty or breach of fiduciary duty to the Company; (3)
Optionee's deliberate disregard of material rules, regulations,
instructions, personnel practices and policies of the Company (as
amended from time to time in the Company's sole discretion) which
results in direct or indirect loss, damage or injury to the Company;
(4) Optionee's material breach of any agreement not to compete with the
Company or solicit its customers, employees or contractors; or (5)
Optionee's conviction of any crime which constitutes a felony in the
jurisdiction involved.
5. DEATH; DISABILITY.
(a) DEATH.
If the Employee ceases to be employed by the Company and all Related
Corporations by reason of his or her death, this option may be
exercised, to the extent otherwise exercisable on the date of death, by
the estate, personal representative or beneficiary who has acquired
this option by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of this option or (ii)
\one hundred eighty (180) days from the date of the Employee's death.
Page of 8
(b) DISABILITY.
If the Employee ceases to be employed by the Company and all Related
Corporations by reason of his or her disability (as defined in
Paragraph 10(B) of the Plan), the Employee shall have the right to
exercise this option on the date of termination of employment, for the
number of shares for which he or she could have exercised it on that
date, until the earlier of (i) the specified expiration date of this
option or (ii) one hundred eighty (180) days from the date of the
termination of the Employee's employment.
(c) EFFECT OF TERMINATION.
At the expiration of the one hundred eighty (180) day period provided
in paragraph (a) or (b) of this Section 5 or the scheduled expiration
date, whichever is the earlier, this option shall terminate and the
only rights hereunder shall be those as to which the option was
properly exercised before such termination.
6. PARTIAL EXERCISE.
The Employee may exercise this option in part at any time and from time to
time within the above limits, except that the Employee may not exercise
this option for a fraction of a share unless such exercise is with respect
to the final installment of stock subject to this option and cash in lieu
of a fractional share must be paid, in accordance with Paragraph 13(G) of
the Plan, to permit the Employee to exercise completely such final
installment. Any fractional share with respect to which an installment of
this option cannot be exercised because of the limitation contained in the
preceding sentence shall remain subject to this option and shall be
available for later purchase by the Employee in accordance with the terms
hereof.
7. PAYMENT OF PRICE.
The option price shall be paid in United States dollars in cash or by
check.
8. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, this option may be
exercised by written notice to the Company at its principal executive
office, or to such transfer agent as the Company shall designate. Such
notice shall state the election to exercise this option and the number of
Option Shares for which it is being exercised and shall be signed by the
person or persons exercising this option. Such notice shall be accompanied
by payment of the full purchase price of such shares, and the Company shall
deliver a certificate or certificates representing such shares as soon as
practicable after the notice shall be received. Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option is exercised by the Employee and
if the Employee requests in the notice exercising this option, shall be
registered in the name of the Employee and another person jointly, with
right of survivorship). In the event this option is exercised, pursuant to
Section 5 hereof, by any person or persons other than the Employee, such
notice shall be accompanied by appropriate proof of the right of such
person or persons to exercise this option.
9. OPTION NOT TRANSFERABLE.
This option is not transferable or assignable except by will or by the laws
of descent and distribution. During the Employee's lifetime only the
Employee can exercise this option.
10. NO OBLIGATION TO EXERCISE OPTION.
Page of 8
The grant and acceptance of this option imposes no obligation on the
Employee to exercise it.
11. NO OBLIGATION TO CONTINUE EMPLOYMENT.
Neither the Plan, this Agreement, nor the grant of this option imposes any
obligation on the Company or any Related Corporation to continue the
Employee in employment.
12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.
The Employee shall have no rights as a stockholder with respect to the
Option Shares until the date of issuance of a stock certificate to the
Employee. Except as is expressly provided in the Plan with respect to
certain changes in the capitalization and stock dividends of the Company,
no adjustment shall be made for dividends or similar rights for which the
record date is before the date such stock certificate is issued.
13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS.
The Plan contains provisions covering the treatment of options in a number
of contingencies such as stock splits and mergers. Provisions in the Plan
for adjustment with respect to stock subject to options and the related
provisions with respect to successors to the business of the Company are
hereby made applicable hereunder and are incorporated herein by reference.
14. EARLY DISPOSITION.
The Employee agrees to notify the Company in writing immediately after the
Employee transfers any Option Shares, if such transfer occurs on or before
the later of (a) the date two years after the Grant Date or (b) the date
one year after the date the Employee acquired such Option Shares. The
Employee also agrees to provide the Company with any information concerning
any such transfer required by the Company for tax purposes.
15. WITHHOLDING TAXES.
If the Company or any Related Corporation in its discretion determines that
it is obligated to withhold any tax in connection with the exercise of this
option, the making of a Disqualifying Disposition (as defined in Paragraph
18 of the Plan), the vesting or transfer of Option Shares acquired on the
exercise of this option, or the making of a distribution or other payment
with respect to the Option Shares, the Employee hereby agrees that the
Company or any Related Corporation may withhold from the Employee's wages
or other remuneration the appropriate amount of tax. At the discretion of
the Company or Related Corporation, the amount required to be withheld may
be withheld in cash from such wages or other remuneration or in kind from
the Common Stock or other property otherwise deliverable to the Employee on
exercise of this option. The Employee further agrees that, if the Company
or any Related Corporation does not withhold an amount from the Employee's
wages or other remuneration sufficient to satisfy the withholding
obligation of the Company or Related Corporation, the Employee will make
reimbursement on demand, in cash, for the amount underwithheld.
16. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT.
If the Employee (or successor and assigns) or his or her legal
representative (the "Transferor") desires to transfer all or any part
of the Option Shares to any person other than the Company (an
"Offeror"), the Transferor shall: (i) obtain in writing an irrevocable
and unconditional bona fide offer (the "Offer") for the purchase
thereof from the Offeror; and (ii) give written notice (the "Option
Page of 8
Notice") to the Company setting forth the Transferor's desire to
transfer such shares, which Option Notice shall be accompanied by a
photocopy of the Offer and shall set forth at least the name and
address of the Offeror and the price and terms of the bona fide offer.
Upon receipt of the Option Notice, the Company shall have an assignable
option to purchase any or all of such shares (the "Company Option
Shares") specified in the Option Notice, such option to be exercisable
by giving, within 90 days after receipt of the Option Notice, a written
counter-notice to the Transferor (the "Counter-Notice"). If the Company
elects to purchase any or all of such Company Option Shares, it shall
be obligated to purchase, and the Transferor shall be obligated to sell
to the Company, such Company Option Shares that the Company elects to
purchase as set forth in the Counter-Notice at a per share price equal
to the lesser of (i) the per share price (and on the same terms)
indicated in the Offer; or (ii) the Fair Market value (as defined in
Section 17(b) and using the date of the Option Notice as the date of
determination of Fair Market Value) of such shares as determined under
Section 17(b), in any case within 30 days of the date of delivery by
the Company of the Counter-Notice. If the Company elects to purchase
any or all of such Company Option Shares, it may, in its sole
discretion, pay the purchase price for such Company option shares in
accordance with the terms of a promissory note, such terms to be
determined solely by the Company; provided, however, that the payment
term of such promissory note shall not exceed ten (10) years.
(b) SALE OF OPTION SHARES TO OFFEROR.
The Transferor may, for 60 days after the expiration of the 90-day
period during which the Company may give the Counter-Notice, sell,
pursuant to the terms of the Offer, any or all of such Company Option
Shares not purchased or agreed to be purchased by the Company or its
assignee; PROVIDED, HOWEVER, that the Transferor shall not sell such
Company Option Shares to the Offeror if the Offeror is a competitor of
the Company and the Company gives a written notice to the Transferor,
within 90 days of its receipt of the Option Notice, stating that the
Transferor shall not sell such Company Option Shares to such Offeror;
and PROVIDED, FURTHER, that prior to the sale of such Company Option
Shares to the Offeror, the Offeror shall execute an agreement with the
Company pursuant to which the Offeror agrees to be subject to the
restrictions set forth in Sections 16, 17, 18 and 20 hereof. If any or
all of such Company Option Shares are not sold pursuant to an Offer
within the time permitted above, the unsold Company Option Shares shall
remain subject to the terms of this Section 16 and any future proposed
transfer must again comply with the provisions set forth herein.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
If there shall be any change in the Common Stock of the Company through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like,
the restrictions contained in this Section 16 shall apply with equal
force to additional and/or substitute securities, if any, received by
the Employee in exchange for, or by virtue of his or her ownership of,
Option Shares.
(d) FAILURE TO DELIVER COMPANY OPTION SHARES.
If the Transferor fails or refuses to deliver on a timely basis duly
endorsed certificates representing Company Option Shares to be sold to
the Company or its assignee pursuant to this
Section 16, the Company shall have the right to deposit the purchase
price for such Company Option Shares in a special account with any bank
or trust company in the Commonwealth of Massachusetts, giving notice of
such deposit to the Transferor, whereupon such Company Option Shares
shall be deemed to have been purchased by the Company. All such moneys
shall be held by the bank or trust company for the benefit of the
Transferor. All moneys deposited with the bank or trust company
remaining unclaimed for two years after the date of deposit shall be
repaid
Page of 8
by the bank or trust company to the Company on demand, and the
Transferor shall thereafter look only to the Company for payment.
(e) EXPIRATION OF COMPANY'S RIGHT OF FIRST REFUSAL. The first refusal
rights of the Company set forth in this Section 16 shall remain in
effect until such time, if ever, as an underwritten public offering is
made of shares of the Company's Common Stock pursuant to a registration
statement filed under the Securities Act of 1933 or a successor
statute, at which time this Section 16 and the right of first refusal
set forth herein will automatically expire.
17. COMPANY'S RIGHT OF REPURCHASE.
(a) RIGHT OF REPURCHASE.
The Company shall have the right (the "Repurchase Right") to repurchase
from the holder of any Option Shares (each a "Holder") any or all of
the Option Shares then owned by such Holder at any time by giving such
Holder a written notice (the "Repurchase Notice") at least 30 days
prior to the date of repurchase. The Repurchase Notice shall set forth
the number of Option Shares to be repurchased (the "Repurchase
Shares"), the Fair Market Value per share (determined in accordance
with Section 17(b) below as of the date of the Repurchase Notice) of
the Repurchase Shares and the date (the "Repurchase Date") on which
such Repurchase Shares are to be repurchased by the Company (such date
not to be more than 120 nor less than 30 days after the date of the
Repurchase Notice). On the Repurchase Date, the Company shall tender to
the Holder an amount equal to the number of Repurchase Shares
multiplied by the Fair Market Value per share; provided, however, that
the Company may pay the repurchase amount, in its sole discretion, in
accordance with the terms of a promissory note, such terms to be
determined solely by the Company (provided further that the payment
term of such promissory note shall not exceed ten (10) years). The
Company may assign the Repurchase Right to one or more persons and may
utilize a promissory note to effect its Repurchase right. Upon timely
exercise of the Repurchase Right in the manner provided in this Section
17(a), the Holder shall deliver to the Company the stock certificate or
certificates representing the Repurchase Shares, duly endorsed and free
and clear of any and all liens, charges and encumbrances.
(b) FAIR MARKET VALUE.
For purposes of this Agreement, the Fair Market Value of an Option
Share shall be determined in good faith by the Board of Directors of
the Company after taking into account all relevant factors including,
without limitation, the absence of an active trading market for the
shares of Common Stock, the restrictions on transfer of Option Shares
set forth herein and the valuation attached to other recent issuances
of securities by the Company. The determination by the Board of
Directors of Fair Market value shall be conclusive and binding.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
If there shall be any change in the Common Stock of the Company through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like,
the restrictions contained in this Section 17 shall apply with equal
force to additional and/or substitute securities, if any, received by
the Employee in exchange for, or by virtue of his or her ownership of,
Option Shares.
(d) FAILURE TO DELIVER REPURCHASE SHARES.
If the Holder fails or refuses to deliver on a timely basis duly
endorsed certificates representing the Repurchase Shares to be
repurchased by the Company or its assignee pursuant to this
Page of 8
Section 17, the Company shall have the right to deposit the repurchase
price for such Repurchase Shares in a special account with any bank or
trust company in the Commonwealth of Massachusetts, giving notice of
such deposit to the Holder, whereupon such Repurchase Shares shall be
deemed to have been purchased by the Company. All such moneys shall be
held by the bank or trust company for the benefit of the Holder. All
moneys deposited with the bank or trust company remaining unclaimed for
two years after the date of deposit shall be repaid by the bank or
trust company to the Company on demand, and the Holder shall thereafter
look only to the Company for payment.
(e) EXPIRATION OF COMPANY'S REPURCHASE RIGHT.
The Repurchase Right of the Company set forth in this Section 17 shall
remain in effect until such time, if ever, as an underwritten public
offering is made of shares of the Company's Common Stock pursuant to a
registration statement filed under the Securities Act or any successor
statute, at which time this Section 17 and the Repurchase Right set
forth herein will automatically terminate.
18. LOCK-UP AGREEMENT.
The Employee agrees that in connection with an underwritten public offering
of Common Stock, upon the request of the Company or the managing or lead
underwriter for such public offering, this option and the Option Shares may
not be sold, offered for sale or otherwise disposed of without the prior
written consent of the Company or such underwriter, as the case may be, for
at least 180 days after the effectiveness of the registration statement
filed in connection with such offering, or such longer period of time as
the Board of Directors may determine if all of the Company's directors and
officers agree to be similarly bound. The lock-up agreement established
pursuant to this Section 18 shall have perpetual duration.
19. PROVISION OF DOCUMENTATION TO EMPLOYEE.
By signing this Agreement the Employee acknowledges receipt of a copy of
this Agreement and a copy of the Plan.
20. MISCELLANEOUS.
(a) NOTICES.
All notices hereunder shall be in writing and shall be deemed given
when sent by certified or registered mail, postage prepaid, return
receipt requested, to the address set forth below. The addresses for
such notices may be changed from time to time by written notice given
in the manner provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION.
This Agreement constitutes the entire agreement between the parties
relative to the subject matter hereof, and supersedes all proposals,
written or oral, and all other communications between the parties
relating to the subject matter of this Agreement. This Agreement may be
modified, amended or rescinded only by a written agreement executed by
both parties.
(c) SEVERABILITY.
The invalidity, illegality or unenforceability of any provision of this
Agreement shall in no way affect the validity, legality or
enforceability of any other provision.
Page of 8
(d) SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, subject to
the limitations set forth in Sections 9, 16, 17, and 20 hereof.
(e) GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to
the principles of the conflicts of laws thereof.
Page of 8
IN WITNESS WHEREOF, the Company and the Employee have caused this
instrument to be executed as of the date first above written.
Breakaway Solutions, Inc.
50 Rowes Wharf
Boston, MA 02110
/s/ Wayne Saunders
Employee Signature
By: /s/ Sam Spector
Print Name of Employee Name:
Title:
Street Address
City State Zip Code
- --------------------------------------------------------------------------------
BREAKAWAY SOLUTIONS, INC.
NOTICE OF GRANT OF STOCK OPTIONS ID: 04-3285165
AND OPTION AGREEMENT 50 Rowes Wharf
6th Floor
Boston, MA 02110
- --------------------------------------------------------------------------------
WAYNE B. SAUNDERS OPTION NUMBER: 00000251
40 BIRCHMONT STREET PLAN: 98
TYNGSBORO, MA 01879 ID: 9996
- --------------------------------------------------------------------------------
Effective 3/19/99 (the "Grant Date"), you (the "Employee") have been granted
a(n) Incentive Stock Option to 187,545 shares (the "Option Shares") of common
stock, par value $.0001 per share, of Breakaway Solution (the "Company"), at
$1.5675 per share.
The total option price of the shares granted is $293,976.79.
Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
------ --------- --------- ----------
36,454 On Vest Date 3/19/00 3/19/09
27,341 Monthly 12/19/00 3/19/09
55,000 Monthly 12/19/01 3/19/09
55,000 Monthly 12/19/02 3/19/09
13,750 Monthly 3/19/03 3/19/09
- --------------------------------------------------------------------------------
By your signature and the Company's signature below, you and the Company
agree that these options are granted under and governed by the terms and
conditions of the Company's Stock Option Plan as amended and the Option
Agreement, all of which are attached and made a part of this document.
- --------------------------------------------------------------------------------
/s/ Sam Spector April 1, 1999
- ------------------------- ---------------------
Breakaway Solutions, Inc. Date
/s/ Wayne B. Saunders April 1, 1999
- ------------------------- ---------------------
Wayne B. Saunders Date