EXHIBIT 10.28
BREAKAWAY SOLUTIONS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Breakaway Solutions, Inc., a Delaware corporation (the "Company"),
hereby grants as of February 18, 1999 (the "Grant Date") to ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ (the "Optionee"), an option to purchase a maximum of 693,000 shares
(the "Option Shares") of its Common Stock, par value $.0001 per share ("Common
Stock"), at the price of $1.42 per share, on the following terms and conditions:
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 NON-QUALIFIED OPTION; OTHER OPTIONS. This option shall be
treated for federal income tax purposes as a Non-Qualified Option (rather than
an incentive stock option). This option is in addition to any other options
heretofore or hereafter granted to the Optionee 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 BUSINESS RELATIONSHIP CONTINUES. If the
Optionee has continued to serve the Company as a director on the following
dates, the Optionee may exercise this option for the number of shares of Common
Stock set opposite the applicable date:
On February 18, 2000 - 173,232 shares
On March 18, 2000 and each monthly - an additional 14,438 shares
anniversay thereafter
If the Optionee is a director of the Company upon the occurrence of any
of the following events (each, a "Triggering Event"): (a) the closing of a
public offering by the Company of shares of its Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
(b) a sale of all or substantially all of the Company's assets or all or
substantially all of the shares of its capital stock, (c) a consolidation or
merger of the Company in which a majority of outstanding shares of the Company's
capital stock are exchanged for securities, cash or other property of any other
corporation or business entity, (d) a consolidation or merger involving the
Company as a result of which the stockholders of the Company immediately prior
to such event do not own, immediately following the occurrence of such event, at
least a majority of the common stock and voting power of the entity resulting
from such consolidation or surviving such merger or (e) the liquidation or
dissolution of the Company, then the Optionee may, at that time or thereafter
(subject to the expiration or termination hereof) exercise this option with
respect to the maximum number of shares exercisable hereunder.
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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, so long as Optionee is a
director, 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 Optionee is no longer a director.
4. RESIGNATION OR REMOVAL AS MEMBER OF THE BOARD OF DIRECTORS.
(a) RESIGNATION OR REMOVAL. If the Optionee resigns, is not
re-elected to the Board of Directors or is removed from the Board of Directors
by a vote (or written consent in lieu thereof) of the stockholders, other than
by reason of death or disability as defined in Section 5, no further
installments of this option shall become exercisable, and this option shall
terminate on the earlier of (i) thirty (30) days after the resignation,
election, or removal vote, or (ii) the scheduled expiration date of this option.
In such a case, the Optionee's only rights hereunder shall be those which are
properly exercised before the termination of this option.
(b) TERMINATION FOR CAUSE. If the Optionee is removed from the
Board of Directors for Cause (as defined in Section 4(c)), this option shall
terminate upon the date of such removal and shall thereafter not be exercisable
to any extent whatsoever.
(c) DEFINITION OF CAUSE. "Cause" shall mean conduct involving
one or more of the following: (i) the substantial and continuing failure of the
Optionee, after notice thereof, to attend meetings of the Board of Directors and
render services to the Company as requested by the Board of Directors; (ii)
disloyalty, gross negligence, willful misconduct, dishonesty or breach of
fiduciary duty to the Company or Related Corporation; (iii) the commission of an
act of embezzlement or fraud; (iv) deliberate disregard of the rules or policies
of the Company or Related Corporation which results in direct or indirect loss,
damage or injury to the Company or Related Corporation; (v) the unauthorized
disclosure of any trade secret or confidential information of the Company or
Related Corporation; or (vi) the commission of an act which constitutes unfair
competition with the Company or Related Corporation or which induces any
customer or supplier to breach a contract with the Company or Related
Corporation.
5. DEATH; DISABILITY.
(a) DEATH. If the Optionee dies while a director of the
Company, 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) thirty
(30) days from the date of the Optionee's death.
(b) DISABILITY. If the Optionee is no longer able to serve as
a director of the Company due to his or her disability (as defined in Paragraph
10(B) of the Plan), the Optionee shall have the right to exercise this option on
the date of his resignation or removal, for
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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)
thirty (30) days from the date of his resignation or removal.
(c) EFFECT OF TERMINATION. At the expiration of the thirty
(30) 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 Optionee may exercise this option in part at
any time and from time to time within the above limits, except that the Optionee
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 Optionee 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 Optionee 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 Optionee and if the Optionee
requests in the notice exercising this option, shall be registered in the name
of the Optionee 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 Optionee, 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
Optionee's lifetime only the Optionee can exercise this option.
10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.
11. NO OBLIGATION ON STOCKHOLDER. Neither the Plan, this Agreement, nor
the grant of this option imposes any obligation on the stockholders of the
Company to maintain Optionee as a director.
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12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have no
rights as a stockholder with respect to the Option Shares until the date of
issuance of a stock certificate to the Optionee. 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 LEGENDS. The Company may place a legend or legends on any stock
certificate delivered to any holder of Option Shares reflecting the restrictions
on transfer provided in this Agreement.
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 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 Optionee hereby agrees that
the Company or any Related Corporation may withhold from the Optionee'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 Optionee on exercise
of this option. The Optionee further agrees that, if the Company or any Related
Corporation does not withhold an amount from the Optionee's wages or other
remuneration sufficient to satisfy the withholding obligation of the Company or
Related Corporation, the Optionee will make reimbursement on demand, in cash,
for the amount underwithheld.
16. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Optionee (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 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
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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 and 18 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 Optionee 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 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
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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 Optionee 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 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
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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 Optionee 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 OPTIONEE. By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.
20. 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.
21. 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.
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(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.
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IN WITNESS WHEREOF, the Company and the Optionee have caused this
instrument to be executed as of the date first above written.
Breakaway Solutions, Inc.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Optionee
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Print Name of Optionee Name:
Title:
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▇▇▇▇ ▇▇▇▇▇ Zip Code
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SCHEDULE A