CORIO, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is made and
entered into as of April 20, 2000, by and between Corio, Inc., a Delaware
corporation (the "COMPANY"), and the consulting services division of Ernst & Young LLP, as the same may hereafter be constituted as an entity separate from
Ernst & Young LLP (the "INVESTOR").
R E C I T A L S
A. The Investor desires to obtain from the Company, and the
Company has agreed to grant to the Investor, the right to acquire warrants (the
"WARRANTS") to purchase shares of the Company's Common Stock (the "WARRANT
SHARES") on the terms and conditions set forth in the Warrant Rights Agreement,
dated of even date herewith by and between the Company and the Investor (the
"WARRANT RIGHTS AGREEMENT").
B. The Company and the Investor are also entering into certain
commercial arrangements of mutual benefit, pursuant to the Alliance and
Co-Marketing Agreement referred to in the Warrant Rights Agreement (the "JOINT
MARKETING AGREEMENT," together with the Warrant Rights Agreement and this
Agreement, the "OPERATIVE AGREEMENTS").
C. The Warrant Rights Agreement provides that the Investor and
the Company shall each be granted certain rights, all as more fully set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. STANDSTILL AGREEMENT.
1.1 Standstill. The Investor agrees that the Investor (as
defined below) shall not acquire, or enter into discussions, negotiations,
arrangements or understandings with any third party to acquire, beneficial
ownership (as defined in Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended) of any Company Securities (as defined below) without
the prior written consent of the Board of Directors of the Company, except, in
any case, (i) shares issued upon the due exercise of the Warrants, and (ii)
shares issued by way of stock dividends or other distributions or offerings made
available to the Investor by the Company as a result of such distribution or
offering being made by the Company to all holders generally of the same class or
classes of Company Securities held by the Investor.
1.2 Company Securities Defined: As used in this Section 1,
the term "COMPANY SECURITIES" means shares of Preferred Stock or Common Stock of
the Company and any other securities issued by the Company having the ordinary
power to vote in the election of directors of the Company ("EQUITY SECURITIES"),
as well as any securities convertible into or exchangeable for Equity Securities
or any other right to acquire Equity Securities. The term Company Securities
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includes, without limiting the foregoing, securities and instruments issued by
the Company having such power only upon the happening of a contingency that has
not yet occurred. This provision shall not prevent, however, the due exercise of
the Warrants issued pursuant to the Warrant Rights Agreement in accordance with
the terms of such respective Warrants.
1.3 Additional Terms Defined: In this Agreement, the term
"PERSON" shall mean a person, partnership, trust or other entity and the term
"PERSONS" shall have a corresponding meaning, and the term "AFFILIATE" of a
Person shall mean any other Person directly or indirectly controlling,
controlled by or under common control with the first Person, where for the
purposes hereof "control" shall have the meaning ascribed under the Securities
Act of 1933, as amended, and the rules and regulations thereunder. In this
Agreement, the terms "WARRANTS", "WARRANT SHARES", "FIRST WARRANT", "SECOND
WARRANT", "THIRD WARRANT" and "FOURTH WARRANT" shall have the respective
meanings specified in the Warrant Rights Agreement. For the purposes of Sections
1 and 2, the "INVESTOR" shall refer to the Investor and any Affiliate of the
Investor (including any Person that may become an Affiliate of the Investor
hereafter), individually and collectively.
2. COMPANY FIRST REFUSAL ON SALE OF SHARES BY INVESTOR.
2.1 Company Right of First Refusal. The Investor may not
sell, transfer or otherwise dispose or attempt to sell, transfer or otherwise
dispose of any Company Securities (referred to as a "PROPOSED DISPOSITION")
without first providing written notice (the "NOTICE") of such intention to the
Company. Such Notice shall specify in reasonable detail the Company Securities
to be disposed, the identity of the proposed transferee, the proposed means and
timing of disposition, and the purchase price. The Company shall have sixty (60)
days from delivery of such Notice to elect to purchase all or any portion of
such Company Securities from the Investor at the Purchase Price (as defined
below) by delivering to the Investor an irrevocable written election by the
Company to purchase such Company Securities at such Purchase Price (the
"ELECTION"). In the event the Company delivers such Election, the Company shall
be obligated to purchase, and the Investor shall be obligated to sell, such
Company Securities at a closing to be held at such time and place as the Company
and the Investor shall agree, not more than thirty (30) days following the date
of the Company's Election.
2.2 Exception for Certain Transfers. The following
transactions shall be excluded from the provisions of Section 2.1:
(a) Investor may transfer Company Securities (i) to any
wholly-owned subsidiary of the Investor, in a transaction for no consideration,
and (ii) subject to prior written notice to the Company and compliance with
applicable securities, to individual constituent partners of the Investor
pursuant to compensatory arrangements, in an amount not exceeding 10,000 shares
of Company Securities to any individual constituent partner in any one year or
20,000 shares of Company Securities to any individual constituent partner in the
aggregate (subject in each case to appropriate adjustment for all stock splits,
dividends, combinations, recapitalizations and the like), provided in each case
that the transferee agrees to be bound by the provisions of this Agreement;
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(b) Subject to the restrictions herein, at such time as
the Company's Common Stock is publicly traded on a national securities exchange
or the Nasdaq National Market, the Investor may sell Common Stock in open market
transactions through a broker dealer, in an aggregate amount not to exceed in
any 90 day period 1% of the aggregate number of outstanding shares of Common
Stock of the Company; and
(c) Subject to the restrictions herein, at such time as
the Company's Common Stock is publicly traded on a national securities exchange
or the Nasdaq National Market, any individual constituent partner of the
Investor who receives shares pursuant to subparagraph 2.2(a)(ii) above may
resell such shares in open market transactions through a broker dealer.
2.3 Additional Exception. Notwithstanding Section 2.1, the
Investor may dispose of its Company Securities in response to a "SPECIFIED
TENDER OFFER." In this Section 2.3 a Specified Tender Offer shall mean (a) an
offer to purchase or exchange for cash or other consideration any Company
Securities which is made by another Person or Related Group of Persons pursuant
to a tender offer which is not opposed by the Board of Directors of the Company
within the time such Board is required by the applicable law to advise the
Company's stockholders of the Board's position on such offer; and (b) any other
offer made by another Person or Related Group of Persons to purchase or exchange
for cash or other consideration any Company Securities which, if successful,
would result in such Person or Related Group of Persons owning or having the
right to acquire Company Securities entitling the holders thereof to more than
ninety percent (90%) of the Total Voting Power of the Company (as defined
below).
2.4 Forfeiture of Company Right of First Refusal. If the
Company fails to deliver an Election within the sixty (60) day period specified
in Section 2.1, the Company shall forfeit its rights under Section 2.1 with
respect to such Proposed Disposition, provided the terms and conditions of such
Proposed Disposition are not subsequently modified. If the terms and conditions
of a Proposed Disposition are modified subsequent to the sixty (60) day period
within which the Company can deliver the Election referred to in Section 2.1,
such Proposed Disposition shall be deemed to be a new Proposed Disposition
subject to the rights of the Company contained in Section 2.1.
2.5 Investor Sale Right Upon Forfeiture. If the Company
forfeits its rights to acquire Company Securities under the terms of and in
accordance with Section 2.4, the member or members of the Investor that shall
have provided the Notice to the Company shall be free to Dispose all or a
portion of the Company Securities referenced in the Notice in the manner and at
the price provided in the Notice, provided that such Disposition must be made to
a Person who (together with any Related Group of Persons) would not, to the
Investor's knowledge, own or have the right to acquire 5% or more of the Company
Securities outstanding immediately after such Disposition. In other than an open
market sale of a block of shares representing less than 2% of the Total Voting
Power of the Company, the Investor shall obtain from the transferee a written
representation (on which the Company shall expressly be entitled to rely) to the
effect that the transferee together with any Related Group of Persons shall not
beneficially own following the Disposition 5% or more of the Total Voting Power
of the Company.
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2.6 Definitions. In this Section 2, the following terms shall
have these meanings:
(a) "PURCHASE PRICE" means the lesser of (i) the value of
the consideration to be received by the Investor in a Proposed Disposition of
Company Securities, as specified in the Notice, and (ii) the Market Price of
such Company Securities at the time of such Proposed Disposition. In this
Agreement, the term "MARKET PRICE" means, as to a Company Security, the average
of the closing prices of sales on all domestic securities exchanges and national
markets on which the Company Security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day the Company Security is not so listed, the average of the
representative bid and asked prices quoted in the Nasdaq National Market as of
4:00 P.M., New York time, on such day, or, if on any day the Company Security is
not quoted in the Nasdaq National Market, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of thirty (30)
Trading Days immediately preceding the date of the Proposed Disposition;
PROVIDED, HOWEVER, that if the Company Security is listed on any domestic
securities exchange the term "TRADING DAYS" as used in this sentence means days
on which such exchange is open for trading. If at any time the Company Security
is not listed on any domestic securities exchange or quoted in the Nasdaq
National Market or the domestic over-the counter market, the "MARKET PRICE"
shall be the fair value thereof determined jointly by the Company and the
Investor, PROVIDED, HOWEVER that if such parties are unable to reach agreement
within fifteen (15) business days following written notice from the Investor to
the Company setting forth the Investor's determination of such fair value, such
fair value shall be determined by an appraiser jointly selected by the Company
and the Investor. The determination of such appraiser shall be final and binding
on the Company and the Investor, and the Company and the Investor shall pay in
equal proportions the fees and expenses of such appraiser.
(b) "RELATED GROUP OF PERSONS". A person is "RELATED" to
another person if such person controls the other person, directly or indirectly,
in any manner whatsoever or if the person is so controlled by the other person.
A person is also related to another person if both are controlled, directly or
indirectly in any manner whatsoever, by the same person. Persons who are related
to the same person are related to one another. A "RELATED GROUP OF PERSONS" is a
group comprising Persons each one of whom is related to the other.
(c) "TOTAL VOTING POWER" of any Person means the total
number of votes that can be cast in the election of directors (or similar
managing authority) of such Person at any meeting of stockholders (or equity
owners) of such Person if all outstanding securities of such Person entitled to
vote in such election were present and voted at such meeting.
3. COMPANY RIGHT TO ACQUIRE WARRANT SHARES ON CERTAIN EVENTS.
3.1 Repurchase Right on Change in Control or Breach.
(a) Repurchase Right. The Company shall have the right to
repurchase certain Warrant Shares issued under the First Warrant at a purchase
price per share equal to the Per
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Share Purchase Price specified in such Warrant, subject to appropriate
adjustment for all stock splits, dividends, combinations, recapitalizations and
the like, upon the occurrence of any of the following events (herein, each
referred to as a "SPECIFIED EVENT"):
(i) Change in Control. Any transaction or series of
related transactions by which a Person or Related Group of Persons, other than
Ernst & Young LLP and its Affiliates and other than Cap Gemini S.A. or its
Affiliates (collectively, "CAP GEMINI"), acquires 40% or more of the equity
interest in or Total Voting Power of the Investor or the High Growth Middle
Market (as defined under the Joint Marketing Agreement) implementation business
of the Investor (or a similar transaction affecting a successor to any of the
foregoing businesses);
(ii) Failure to Assume by Cap Gemini. Any transaction or
series of related transactions by which Cap Gemini acquires 40% or more of the
equity interests in or Total Voting Power of the Investor or the High Growth
Middle Market implementation business of the Investor, unless Cap Gemini and Cap
Gemini Ernst & Young U.S. LLC, the entity organized by Cap Gemini to conduct the
business of the Investor, or such other entity organized for that purpose (each,
an "ONGOING ENTITY") assume all obligations of the Investor under the Operative
Agreements;
(iii) Formation of Competitor. The creation by the
Investor or any successor to the Investor (including, following any acquisition
by Cap Gemini of a controlling equity interest in the Investor, the Ongoing
Entity or Cap Gemini) of a High Growth Middle Market hosting business that the
Company reasonably concludes competes with the Company; or
(iv) Breach of Joint Marketing Agreement. The occurrence
of a material breach of the Joint Marketing Agreement by the Investor or any
successor to the Investor (including, following any acquisition by Cap Gemini of
a controlling equity interest in the Investor, the Ongoing Entity or Cap
Gemini), including, among others, a breach of Section 4 (concerning
exclusivity), of such agreement, which breach remains uncured for a period of
thirty (30) days after the giving of notice thereof.
(b) Number of Shares That May Be Purchased. (i) Except as
provided in paragraph (ii) hereof, the number of Warrant Shares issuable under
the First Warrant that the Company shall be entitled to repurchase from the
Investor upon the occurrence of a Specified Event shall be calculated as follows
(appropriately adjusted in each case for all stock splits, dividends,
combinations, recapitalizations and the like): (i) if the Specified Event occurs
within three (3) years from the date hereof, 4,666,666 Warrant Shares; (ii) if
the Specified Event occurs more than three (3) years but less than five (5)
years from the date hereof, 2,333,333 Warrant Shares; and (iii) if the Specified
Event occurs more than five (5) years but less than seven (7) years from the
date hereof, 1,666,667 Warrant Shares.
(c) Notwithstanding the foregoing, in the event that the
Company shall have repurchased Warrant Shares issuable under the First Warrant
pursuant to Section 3.2 hereof (or
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the total number of shares issuable under the First Warrant shall have been
reduced pursuant to Sections 3.2 and 3.3 hereof), then the number of Warrant
Shares that the Company shall have the right to repurchase pursuant to this
Section 3.1 shall be reduced. In such event, the number of Warrant Shares that
the Company may repurchase under this Section 3.1 shall be reduced
proportionately based on the ratio of the number of Warrant Shares repurchased
under Section 3.2 (or cancelled under Sections 3.2 and 3.3) to the total number
of Warrant Shares originally issuable under the First Warrant (in each case
appropriately adjusted for all stock splits, dividends, combinations,
recapitalizations and the like). As an example, if the Company repurchases
one-fourth of the Warrant Shares originally issuable under the First Warrant
pursuant to Section 3.2, then the number of Warrant Shares that otherwise may be
repurchased under this Section 3.1 shall be reduced by one-fourth.
3.2 Repurchase Rights on Investor Election of NonExclusivity.
(a) Investor Election. In the event that the Company shall
not have completed its initial underwritten offering of equity securities to the
public (a "QUALIFIED IPO") by December 31, 2000, then at any time prior to April
___, 2002 the Investor may elect, by written notice to the Company, to terminate
the exclusivity provisions set forth in Sections 4.1 and 4.2 of the Joint
Marketing Agreement. In such event, the Company shall have the right to
repurchase from the Investor 2,333,333 Warrant Shares issuable under the First
Warrant at a purchase price per share equal to the Per Share Purchase Price
specified in the First Warrant (subject to appropriate adjustment in the case of
such number and purchase price per share for all stock splits, dividends,
combinations, recapitalizations and the like). The Company shall effect such
repurchase by written notice to the Investor within ninety (90) days following
the date of notice from the Investor terminating exclusivity.
3.3 Cancellation of Warrant or Payment in Cash in Lieu of
Purchase of Shares. If upon the occurrence of any event specified in Section 3.1
or 3.2 and the election by the Company to repurchase Warrant Shares from the
Investor the Investor shall not have previously exercised the First Warrant for
a sufficient number of Warrant Shares to satisfy the obligation to sell Warrant
Shares to the Company, then the Company shall have the right to cancel the First
Warrant (for no consideration) for a number of shares equal to the shortfall in
the number of Warrant Shares to be so repurchased.
3.4 Repurchase Rights on Independence Issue and Accounting Issue.
(a) Independence Issue. The parties hereto acknowledge
that the U. S. Securities and Exchange Commission (the "SEC") continues to
review certain issues relating to the "INDEPENDENCE" of independent public
accountants and that this review could result in an assessment by the SEC of the
impact on independence of the transactions contemplated by the Operative
Agreements (collectively, the "OPERATIVE TRANSACTIONS"). The parties hereto
further acknowledge that the Operative Transactions could create an issue
regarding Ernst & Young LLP's independence ("INDEPENDENCE") under the SEC's
rules and interpretations relating to auditor independence, under any federal or
state governmental or regulatory rules or under professional guidelines
applicable to independent public accountants. The parties agree that in the
event that after
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the Company's initial public offering it becomes known to either party that the
Staff of the SEC shall have made any pronouncement or taken any action which, in
the reasonable, good faith judgment of Ernst & Young LLP or the Company
indicates that the Operative Transactions have or are reasonably likely to have
a material adverse effect on the Independence of Ernst & Young LLP, then such
party shall notify the other party of such pronouncement or action (each, an
"INDEPENDENCE ISSUE") by telephone and facsimile notice.
(b) Accounting Issue. The parties acknowledge that the SEC
continues to review the appropriate accounting treatment associated with
warrants issued by a corporation in connection with commercial relationships
such as those contemplated by the Joint Marketing Agreement and the Warrants
(collectively, the "COMMERCIAL WARRANT TRANSACTIONS"). In the event that the
Company shall determine that, as a result of SEC requirements or changes in
accounting principles, the Commercial Warrant Transactions require accounting
treatment that differs materially and adversely from the accounting for the
Commercial Warrant Transactions reflected in the Company's registration
statement on Form S-1 initially filed with the SEC in connection with the
Company's initial public offering (which accounting shall be reviewed with the
Investor for information purposes prior to the filing of such form), then the
Company shall notify Ernst & Young LLP of such accounting change (an "ACCOUNTING
ISSUE") by telephone and facsimile notice.
(c) Disposition and Termination of Rights. If the
Independence Issue or the Accounting Issue, as the case may be, shall not have
been satisfactorily resolved within ninety (90) business days following the date
of the notices referred to in Section 3.4(a) and 3.4(b) (deemed to be the date
of the telephone and facsimile transmission, which date is herein referred to as
the "PARTICULAR DATE") and, in the good faith and reasonable opinion of a
majority of the Board of Directors, the Independence Issue or Accounting Issue
is interfering with, or appears reasonably likely to interfere with, the ability
of the Company to conduct its business in the ordinary course or is resulting
in, or appears reasonably likely to result in a material and adverse impact on
the Company's business, financial condition or reported financial results, then:
(i) the Company may, at its election, by written
notice to the Investor, terminate the Investor's rights upon a proposed sale of
the Company specified in Section 7.1 hereof;
(ii) the Company may, at its election, by written
notice to the Investor: (A) terminate and cancel in their entirety all rights of
the Investor to receive Warrant Shares under the First Warrant to the extent the
First Warrant shall not previously have been exercised and (B) to the extent the
First Warrant shall previously have been exercised, the Company shall have the
right to acquire each Warrant Share issued upon such exercise and then held by
the Investor at a price of $6.50 per Warrant Share (subject to adjustment for
all stock splits, dividends, combinations, recapitablizations and the like);
provided, however, that a certain portion of the Warrant Shares which shall have
theretofore been issued on exercise of the First Warrant and described below as
the "FIRST WARRANT RETAINED SHARES" may not be so repurchased by the Company.
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The number of Warrant Shares issued under the First Warrant and which the
Company shall not be entitled to repurchase as provided in this Section
3.4(c)(ii) (such retained shares being referred to as the "FIRST WARRANT
RETAINED SHARES") shall be determined as follows:
a) If the Particular Date is before April 20, 2001,
the Investor's First Warrant Retained Shares shall be nil shares;
b) If the Particular Date is on or after April 20,
2001 and before April 20, 2002, the Investor's First Warrant Retained Shares as
of such Particular Date shall be 777,777 shares (subject to adjustment for all
stock splits, dividends, combinations, recapitablizations and the like);
c) If the Particular Date is on or after April 20,
2002 and before April 20, 2003, the Investor's First Warrant Retained Shares as
of such Particular Date shall be 1,555,555 shares (subject to adjustment for all
stock splits, dividends, combinations, recapitablizations and the like);
d) If the Particular Date is on or after April 20,
2003 and before April 20, 2004 the Investor's First Warrant Retained Shares
shall be 2,166,666 shares (subject to adjustment for all stock splits,
dividends, combinations, recapitablizations and the like);
e) If the Particular Date is on or after April 20,
2004 and before April 20, 2005 the Investor's First Warrant Retained Shares as
of such Particular Date shall be 2,333,333 shares (subject to adjustment for all
stock splits, dividends, combinations, recapitablizations and the like);
f) If the Particular Date is on or after April 20,
2005 and before April 20, 2006 the Investor's First Warrant Retained Shares as
of such Particular Date shall be 2,666,666 shares (subject to adjustment for all
stock splits, dividends, combinations, recapitablizations and the like);
g) If the Particular Date is on or after April 20,
2006 and before April 20, 2007 the Investor's First Warrant Retained Shares as
of such Particular Date shall be 2,999,999 shares (subject to adjustment for all
stock splits, dividends, combinations, recapitablizations and the like); and
h) If the Particular Date is on or after April 20,
2007, the Investor's First Warrant Retained Shares as of such Particular Date
shall be 4,666,666 shares (subject to adjustment for all stock splits,
dividends, combinations, recapitablizations and the like).
(iii) the Company may, at its election, by written
notice to the Investor require the Investor to sell to the Company, at a price
per share equal to the Market Price (determined as provided in Section 2 hereof)
all the Investor's First Warrant Retained Shares;
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(iv) the Company may at its election, by written
notice to the Investor, terminate and cancel in their entirety all rights of the
Investor to receive Warrant Shares, respectively, under the Second Warrant, the
Third Warrant and the Fourth Warrant and shall have the right to acquire at the
Market Price (determined as provided in Section 2 hereof) each Warrant Share
that shall have theretofore been issued upon the exercise of the Second Warrant,
the Third Warrant or the Fourth Warrant, respectively, and are then held by the
Investor; and
(v) to the extent that the Company has not acquired
from the Investor all of the Warrant Shares that it may elect to acquire under
Section 3.4(c)(iii) and Section 3.4(c)(iv), the Company may, at its election, by
written notice to the Investor require the Investor to sell such shares within
sixty (60) days to a "FINANCIAL INSTITUTION" acceptable to the Company. For the
purpose of this Section 3.4(c)(v), a "FINANCIAL INSTITUTION" shall mean a
financial institution such as a bank, investment company, broker-dealer or
similar institution, which is not an operating entity, acquires the shares
solely for passive investment purposes, and agrees in writing to the Company
that the Warrant Shares may only be resold in open market sales through a
broker-dealer or to a market maker.
3.5 Investor Election on Company Exercise of Disposition and
Termination Rights. If the Company elects under Sections 3.4(c) to terminate the
rights of the Investor specified therein and to require the Investor to dispose
of its Warrant Shares as specified therein, the Investor may, at its election,
by written notice to the Company, terminate the exclusivity provisions set forth
in Sections 4.1 and 4.2 of the Joint Marketing Agreement and terminate the
Company's right of first refusal on the sale of the Investor's Business
specified in Section 4 hereof.
3.6 No Sale of Shares Subject to Repurchase Rights. Neither
the Investor nor any Person to whom the First Warrant (or Warrant Shares
issuable on exercise of the First Warrant) may properly be transferred or
assigned under the terms of the Warrant Rights Agreement, this Agreement and the
First Warrant shall sell, assign or otherwise transfer any Warrant Shares issued
or issuable under the First Warrant to the extent that, and for so long as, such
Warrant Shares remain subject to any potential repurchase rights of the Company
under this Section 3.
4. COMPANY RIGHT OF FIRST REFUSAL ON SALE OF HGMM BUSINESS.
4.1 Company Right of First Refusal. The Investor may not
dispose or attempt to dispose of all or any material portion of its High Growth
Middle Market implementation business (such business, or the portion of such
business and assets, proposed to be sold is referred to as the "BUSINESS") (such
disposition or attempted disposition herein referred to as a "PROPOSED
DISPOSITION") without first providing written notice (the "NOTICE") of such
intention to the Company. Such Notice shall specify in reasonable detail the
Business proposed to be disposed, the identity of the proposed transferee, the
proposed means and timing of disposition, and the proposed purchase price (the
"BUSINESS PURCHASE PRICE"), and shall also include a copy of all due diligence
materials provided to the proposed purchaser of the Business. In addition, the
Investor shall promptly provide to the Company and its representatives the
opportunity to perform full due diligence (including without limitation
business, financial and legal due diligence) with respect to the Business. The
Company shall have fifteen (15) days from delivery of such Notice to elect to
purchase such
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Business from the Investor at the Business Purchase Price by delivering to the
Investor an irrevocable written election by the Company to purchase such
Business at such price (the "ELECTION"). In the event the Company delivers such
Election, the Company shall be obligated to purchase, and the Investor shall be
obligated to sell, such Business at a closing date mutually agreed by the
parties not more than sixty (60) days following the date of the Company's
Election (or as soon as practicable thereafter following completion of all
requisite regulatory procedures).
4.2 Forfeiture of Company Right of First Refusal. If the
Company fails to deliver an Election within the fifteen (15) day period
specified in Section 4.1, the Company shall forfeit its rights under Section 4.1
with respect to such Proposed Disposition, the Investor shall be free to dispose
of all or a portion of its Business, to the Person and on the terms described in
the Notice, provided the terms and conditions of such Proposed Disposition are
not subsequently modified. If the terms and conditions of a Proposed Disposition
are modified subsequent to the fifteen (15) day period within which the Company
can deliver the Election referred to in Section 4.1, such Proposed Disposition
shall be deemed to be a new Proposed Disposition subject to the rights of the
Company contained in Section 4.1.
4.3 Exception. Ernst & Young LLP has entered into an
agreement to sell its consulting services division, which division includes the
Business, to Cap Gemini, which intends to carry on the Business through an
Ongoing Entity. The Company shall not have a right of first refusal pursuant to
this Section 4 on any such transaction with Cap Gemini, provided that Cap
Gemini, on behalf of Cap Gemini and its Affiliates, and the Ongoing Entity each
agree to be bound by and subject to all of the terms and provisions of this
Agreement, the Warrant Rights Agreement and the Joint Marketing Agreement on the
same basis as the obligations of the Investor hereunder and thereunder.
5. LEGENDS; STOP TRANSFER RESTRICTIONS.
The Warrants and the certificates evidencing Warrant Shares
issued on exercise of the Warrants (as well as any securities issued in respect
thereof) shall bear restrictive legends referring to the restrictions set forth
in this Agreement. In addition, the Company shall be entitled to issue stop
transfer instructions to the transfer agent for the Warrants, Warrant Shares and
any other securities issued in respect thereof to ensure compliance with the
restrictions set forth in this Agreement.
6. INVESTOR BOARD REPRESENTATION.
(a) Subject to Section 6.1(b), until the Company's
Qualified IPO, and thereafter for so long as the Investor beneficially owns ten
percent (10%) or more of the Total Voting Power of the Company, the Board of
Directors of the Company shall include in the slate of nominees presented to the
stockholders of the Company for election one (1) nominee designated by the
Investor. Such director (herein referred to as the "INVESTOR DIRECTOR") shall
have the customary and usual rights of a member of the Company's Board of
Directors to participate in the management of Company affairs, PROVIDED,
HOWEVER, that in the event the Company's Board of Directors votes on an
acquisition, merger or other combination with and proposed by Arthur Anderson,
Andersen
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Consulting, PricewaterhouseCoopers, KPMG or Deloitte & Touch (a "STRATEGIC
ACQUISITION PROPOSAL"), the Investor Director shall at the request of the Board
of Directors recuse himself or herself from the deliberations of such proposal
and any vote thereon.
(b) The Board of Directors rights herein shall terminate
upon the first to occur of (i) termination of the Joint Marketing Agreement (ii)
the acquisition by any Person other than Ernst & Young LLP or Cap Gemini of 40%
or more of the equity interests in or Total Voting Power of the Investor. In
addition, following any acquisition by Cap Gemini of 40% or more of the equity
interests in or Total Voting Power of the Investor, and the assignment of this
Board of Director right to Cap Gemini, any director nominee of Cap Gemini other
than David Shpilberg must be an individual deemed acceptable by the Company.
7. INVESTOR RIGHTS UPON PROPOSED SALE OF COMPANY.
7.1 Right of First Refusal on Sale of Company. In the event
that the Company receives a Strategic Acquisition Proposal, the Company must
provide written notice (the "NOTICE") of such Strategic Acquisition Proposal to
the Investor specifying in reasonable detail the terms and conditions of such
proposal, including the identity of the proposed purchaser and the purchase
price. The Investor shall have fifteen (15) days from delivery of such Notice to
elect to undertake the acquisition described in the Notice (the "ACQUISITION")
on the same terms as specified in the Notice, by delivering to the Company an
irrevocable written election to undertake the Acquisition at such price so (the
"ELECTION"). In the event the Investor delivers such Election, the Investor
shall be obligated to undertake the Acquisition, and the Company shall be
obligated to undertake the Acquisition subject to applicable stockholder
approval requirements, at a closing date mutually agreed by the parties not more
than fifteen (15) days following the date of the Investor's Election (or as soon
as practicable thereafter following completion of all requisite regulatory
procedures).
7.2 Forfeiture of Right of First Refusal. If the Investor
fails to deliver an Election within the fifteen (15) day period specified in
Section 7.1, the Investor shall forfeit its rights under Section 7.1 with
respect to the proposed Acquisition, and the Company shall be free to undertake
the Acquisition with the Person and on the terms described in the Notice,
provided the terms and conditions of such proposed Acquisition are not
subsequently modified. If the terms and conditions of the proposed Acquisition
are modified subsequent to the fifteen (15) day period within which the Investor
can deliver the Election referred to in Section 7.1, the proposed Acquisition
shall be deemed to be a new Strategic Acquisition Proposal subject to the rights
of the Investor contained in Section 7.1.
7.3 Termination. The rights of the Investor pursuant to this
Section 7 shall terminate upon the Company's Qualified IPO.
8. REGISTRATION RIGHTS.
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8.1 Definitions. For purposes of this Section 8:
(a) The term "1934 ACT" means the Securities Exchange Act
of 1934, as amended.
(b) The term "ACT" means the Securities Act of 1933, as
amended.
(c) "COMMON STOCK" means the Company's common stock, par
value per share of $0.001.
(d) The term "FORM S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) The term "HOLDER" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 8.11 hereof.
(f) The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document by the SEC.
(g) The term "REGISTRABLE SECURITIES" means (i) Common
Stock of the Company issuable or issued upon exercise of the Warrants, and (ii)
any Common Stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of the shares referenced in
clause (i), excluding in all cases, however, any Registrable Securities sold by
a person in a transaction in which his rights under this Section 8 are not duly
assigned as provided herein or any Registrable Securities after such securities
have been sold to the public or sold pursuant to Rule 144 promulgated under the
Act.
8.2 Company Registration.
(a) Registration Rights. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration pursuant to a Rule 145 transaction, a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities or a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within fifteen (15) days after the date of such notice by the Company, the
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Company shall, subject to the provisions of paragraph 8.2(b) below, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
(b) Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 8.2 to include any of Holder's
securities in such underwriting unless the Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), provided such
terms are reasonable and customary in an underwriting of similar securities and
of a similar amount, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering, and the underwriters may exclude Registrable
Securities from the offering entirely if the underwriters make the determination
described above and no other stockholder's securities are included. Allocation
of securities to be sold in any such offering shall be made on a pro-rata basis
among the selling stockholders according to the total number of securities held
by each such selling stockholder and entitled to inclusion therein on the basis
of a registration rights agreement with the Company. For purposes of allocation
of securities to be included in any offering, for any selling stockholder which
is a partnership or corporation, the "affiliates" (as defined in Rule 405 under
the Act), partners, retired partners and stockholders of such holder (and in the
case of a partnership, any affiliated partnerships), or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
8.3 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration and all
such qualifications and compliance as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall
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not be obligated to effect any such registration, qualification or compliance,
pursuant to this Section 8.3: (1) if the Registrable Securities requested by all
Holders to be registered pursuant to this Section 8.3 have an anticipated
aggregate offering price to the public (before deducting any underwriter
discounts, concessions or commissions) of less than $2,000,000; (2) if Form S-3
is not available for such offering by the Holders; (3) if the Company shall
furnish to the Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 8.3; provided, however, that
the Company shall not utilize this right more than twice in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected a registration on Form S-3 for the
Holders pursuant to this Section 8.3; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
8.4 Obligations of the Company. Whenever required under this
Section 8 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to ninety (90) days or
until the distribution contemplated in the Registration Statement has been
completed; provided, however, that such 90-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
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(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) In the event of any underwritten public offering,
cooperate with the selling Holders, the underwriters participating in the
offering and their counsel in any due diligence investigation reasonably
requested by the selling Holders or the underwriters in connection therewith,
and participate, to the extent reasonably requested by the managing underwriter
for the offering or the selling Holder, in efforts to sell the Registrable
Securities under the offering (including, without limitation, participating in
"roadshow" meetings with prospective investors) that would be customary for
underwritten primary offerings of a comparable amount of equity securities by
the Company.
8.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 8.3 if, due to the operation of
Section 8.5(a), the number of shares or
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the anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section 8.3.
8.6 Expenses of Company or S-3 Registration. All expenses
(exclusive of underwriting discounts and commissions and stock transfer taxes)
incurred in connection with registrations, filings or qualifications pursuant to
this Section 8 including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
for all selling holders, including Holders of Registrable Securities, shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registrations effected pursuant to Section 8.3 if
the Company has already undertaken five (5) such registrations in the aggregate
under this and all other registration rights agreements.
8.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 8.
8.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 8:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the constituent partners and members,
or officers and directors of each Holder, any underwriter (as defined in the
Act) and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this subsection 8.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
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(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, severally but not jointly,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 8.8(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 8.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall a Holder's cumulative, aggregate liability
under this Section 8.8(b), under Section 8.8(d), or under such sections
together, exceed the net proceeds received by such Holder from the offering out
of which such Violation arises.
(c) Promptly after receipt by an indemnified party under this
Section 8.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 8.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with one counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 8.8 unless the failure to deliver notice is
materially prejudicial to its ability to defend such action. Any omission to so
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 8.8.
(d) If the indemnification provided for in this Section 8.8
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such
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proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and of the indemnified party on the other,
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 8.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 8, and otherwise.
8.9 Reports under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any ther rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any
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Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
8.10 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 8 may only
be assigned (but only with all related obligations), (i) upon prior written
notice to the Company, to an Affiliate of the Investor or to Cap Gemini, or (ii)
with the prior written consent of the Company.
8.11 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements;
(b) the Company uses all reasonable efforts to obtain from
persons who hold one percent (1%) or greater of the Company's outstanding
capital stock, a lock-up agreement similar to that set forth in this Section
8.11; and
(c) such market stand-off time period shall not exceed one
hundred eighty (180) days for the Company's initial public offering, and ninety
(90) days for any subsequent public offerings.
Each Holder agrees to provide to the other underwriters of any
public offering such further agreements as such underwriter may reasonably
request in connection with this market stand-off agreement, provided that the
terms of such agreements are substantially consistent with the provisions of
this Section 8.11. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 8.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction.
8.12 Termination of Registration Rights. The right of any Holder
to request registration or to include Registrable Securities in any registration
pursuant to this Section 8 shall terminate upon the earlier of (i) the date
which is five (5) years after the effective date of the first registration
statement for an initial public offering of securities of the Company (other
than a
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registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or SEC
Rule 145 transaction), or (ii) such date as a public trading market shall exist
for the Company's Common Stock and all shares of Registrable Securities
beneficially owned and subject to Rule 144 aggregation by such Holder may
immediately be sold under Rule 144 (without regard to Rule 144(k)) during any
90-day period, provided that such Holder is not then an "affiliate" of the
Company within the meaning of Rule 144 and such Holder owns less than 1% of the
then outstanding shares of capital stock.
9. GENERAL PROVISIONS.
9.1 Notices and Elections. Any notice or election required or
permitted under this Agreement will be given in writing, shall be effective when
received, and shall in any event be deemed received and effectively given upon
personal delivery to the party to be notified or three (3) business days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as FedEx for next business day delivery, or one
(1) business day after facsimile with copy delivered by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other address
as the Investor or the Company may designate by giving at least ten (10) days
advance written notice pursuant to this Section 9.1.
(a) If to the Investor, at:
Ernst & Young LLP
787 7th Avenue, 24th Floor
New York, New York 10019
Attention: Doug Galin
Telephone No.:_____________________
Facsimile No.:_____________________
with a copy to:
Foley Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attention: Adam Sonnenschein, Esq.
Telephone No.: (617) 832-1000
Facsimile No.: (617) 832-7000
(b) If to the Company, at:
Corio, Inc.
700 Bay Road, Suite 210
Redwood City, CA 94063
Telephone No.: (650) 298-4800
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Facsimile No.: (650) _________________
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Howard Zeprun
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
Any party hereto may by notice so given change its address for future notices
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner set forth
above.
9.2 Entire Agreement. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
9.3 Limitation on Liability. In the event of the occurrence of a
Specified Event (but without limiting any other liability that one party may
otherwise have to the other party for matters other than the occurence of a
Specified Event), the Company's sole recourse and the Investor's sole liability
or obligation arising out of such event, and the Investor's sole recourse and
the Company's sole liability or obligation arising out of such event, shall be
limited to repurchase or termination of the Warrants and Warrant Shares and
termination of certain provisions in the Joint Marketing Agreement and this
Agreement, as provided in Section 3 and 4 hereof (to the extent provided in such
sections). With respect to any such event (but only with respect to each event
and without limiting any liability that one party may otherwise have to the
other), neither party shall be liable to the other for compensation,
reimbursement or damages on account of lost profits or other expenses, or be
liable to the other party for any special, consequential, punitive, incidental
or indirect damages, howsoever caused, on any theory of liability. These limits
shall apply notwithstanding any failure of essential purpose of any limited
remedy.
9.4 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the General Corporation Law of the
State of Delaware, with respect to matters of corporate law, and, with respect
to matters of law other than corporate law, in accordance with the internal laws
of the State of California as they apply to agreements entered into and to be
performed entirely within the State of California by residents thereof.
9.5 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
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9.6 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any person, other than the parties hereto and their
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement.
9.7 Successors and Assigns. Neither this Agreement nor any of the
obligations or benefits specified herein may be assigned by the Investor except
as expressly provided herein or as the Company may otherwise agree in writing.
Notwithstanding the foregoing, it is expressly understood (i) that this
Agreement is being entered into by the consulting services division of Ernst & Young LLP, as the same may hereafter be constituted as an entity separate from
Ernst & Young LLP, (ii) that Ernst & Young LLP may transfer its consulting
services division into a limited liability company, corporation or other entity
separate from Ernst & Young LLP, (iii) that Ernst & Young LLP may thereafter
sell, transfer or otherwise assign its interest in such entity to Cap Gemini,
and (iv) that this Agreement may be assigned to any of the foregoing specified
entities as a successor to the business and assets of the consulting services
division of Ernst & Young LLP, upon written notice to the Company but without
any required consent by the Company, provided that such successor agrees to be
bound by all of the terms and conditions of the Warrant Rights Agreement, the
Joint Marketing Agreement and this Agreement. Subject to the foregoing, the
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the respective successors and assigns of the parties hereto.
9.8 Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
9.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written. CORIO, INC.
By:
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Name:
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Title:
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ERNST & YOUNG LLP, ON BEHALF OF
ITS CONSULTING SERVICE DIVISION AS THE
SAME MAY BE SEPARATELY CONSTRUED
By:
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Name:
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Title:
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Investor Rights Agreement - Corio Inc. and Ernst & Young LLP
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