Delaware | 7371 | 04-3512883 | ||
(State or Other Jurisdiction
of
Incorporation or Organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
John J.
Egan III, Esq.
Edward A. King, Esq. Goodwin Procter LLP Exchange Place Boston, Massachusetts 02109 (617) 570-1000 |
Paul D. Tutun, Esq. Vice President and General Counsel 2000 West Park Drive Westborough, Massachusetts 01581 (508) 389-7300 |
John A. Burgess, Esq.
James R. Burke, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000 |
Title of Each
Class of
|
Proposed Maximum
Aggregate
|
Amount of
|
||||
Securities to be Registered | Offering Price (1)(2) | Registration Fee (2) | ||||
Common Stock, par value
$0.01 per share
|
$92,000,000 | $2,825 | ||||
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act. | |
(2) | Calculated pursuant to Rule 457(o) under the Securities Act based on an estimate of the proposed maximum aggregate offering price and includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities, and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
|
|
||||
Per share | Total | |||
|
||||
Initial public offering price
|
$ | $ | ||
Underwriting discounts and
commissions
|
$ | $ | ||
Proceeds to Virtusa, before
expenses
|
$ | $ | ||
|
JPMorgan |
Bear, Stearns & Co. Inc. |
Cowen and Company |
William Blair & Company |
1
2
| our revenue is highly dependent on a small number of clients and the loss of any one of our major clients could significantly harm our results of operations and financial condition |
| the IT services market is highly competitive and our competitors may have advantages that may allow them to compete more effectively than we do to secure client contracts and attract skilled IT professionals |
| if we cannot attract and retain highly-skilled IT professionals, our ability to obtain, manage and staff new projects and continue to expand existing projects may result in loss of revenue and an inability to expand our business |
| our quarterly financial position, revenue, operating results and profitability are difficult to predict and may vary from quarter to quarter, which could cause our share price to decline significantly |
3
Common stock offered by us | shares | |
Common stock to be outstanding after this offering | shares | |
Use of proceeds | We expect to use approximately $30 million of the net proceeds from this offering to fund the construction and build-out of a new facility on our planned campus in Hyderabad, India. The balance of the net proceeds will be used for working capital and other general corporate purposes, including to finance the expansion of our global delivery centers in Chennai, India and Colombo, Sri Lanka, the hiring of additional personnel, sales and marketing activities, capital expenditures, the costs of operating as a public company and possible strategic alliances or acquisitions. See Use of proceeds. | |
Over-allotment option | The underwriters have an option for a period of up to 30 days to purchase up to additional shares of common stock from us to cover over-allotments. | |
Risk factors | See Risk factors and other information in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. | |
Proposed NASDAQ Global Market symbol | VRTU |
| 10,052,476 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2007, at a weighted average exercise price of $1.13 per share |
| 614,235 shares of common stock issuable after this offering upon the exercise of stock appreciation rights outstanding as of March 31, 2007, reduced by the weighted average exercise price of $1.29 per stock appreciation right |
| 2,193,138 shares of common stock reserved as of March 31, 2007 for future issuance under our incentive plans |
| 116,882 shares of common stock issuable upon the exercise of warrants that will remain outstanding after this offering, at an exercise price of $1.75 per share |
4
|
||||||||||||||||||||
Nine months
ended
|
||||||||||||||||||||
Fiscal year ended March 31, | December 31, | |||||||||||||||||||
(in thousands, except per share amounts) | 2004 | 2005 | 2006 | 2005 | 2006 | |||||||||||||||
|
||||||||||||||||||||
Revenue
|
$ | 42,822 | $ | 60,484 | $ | 76,935 | $ | 53,740 | $ | 89,388 | ||||||||||
Costs of revenue
|
22,648 | 31,813 | 43,417 | 31,015 | 48,578 | |||||||||||||||
Gross profit
|
20,174 | 28,671 | 33,518 | 22,725 | 40,810 | |||||||||||||||
Operating expenses
|
20,309 | 27,838 | 32,925 | 23,847 | 30,583 | |||||||||||||||
Income (loss) from operations
|
(135 | ) | 833 | 593 | (1,122 | ) | 10,227 | |||||||||||||
Other income (expense)
|
73 | 376 | 1,564 | 661 | 1,206 | |||||||||||||||
Income (loss) before income tax
expense (benefit)
|
(62 | ) | 1,209 | 2,157 | (461 | ) | 11,433 | |||||||||||||
Income tax expense (benefit)
|
146 | 99 | 176 | 164 | (4,080 | ) | ||||||||||||||
Net income (loss)
|
$ | (208 | ) | $ | 1,110 | $ | 1,981 | $ | (625 | ) | $ | 15,513 | ||||||||
Net income (loss) per share of
common stock
|
||||||||||||||||||||
Basic
|
$ | (0.01 | ) | $ | 0.07 | $ | 0.11 | $ | (0.04 | ) | $ | 0.83 | ||||||||
Diluted
|
$ | (0.01 | ) | $ | 0.02 | $ | 0.04 | $ | (0.04 | ) | $ | 0.27 | ||||||||
Weighted average number of common
shares outstanding
|
||||||||||||||||||||
Basic
|
17,407 | 17,052 | 17,571 | 17,441 | 18,713 | |||||||||||||||
Diluted
|
17,407 | 53,562 | 54,341 | 17,441 | 56,761 | |||||||||||||||
5
(1) | On a pro forma basis to give effect to the conversion of all of our shares of preferred stock outstanding as of December 31, 2006 into 35,762,836 shares of common stock upon the completion of this offering | |
(2) | On a pro forma as adjusted basis to give effect to the sale of shares of common stock in this offering at an assumed public offering price of $ per share, the midpoint of the expected price range, after deducting estimated underwriting discounts and commissions and our estimated offering expenses. |
6
7
| offshore IT outsourcing firms |
| consulting and systems integration firms |
8
| the number, timing, scope and contractual terms of IT projects in which we are engaged |
| delays in project commencement or staffing delays due to immigration issues or assignment of appropriately skilled or experienced personnel |
| the accuracy of estimates of resources, time and fees required to complete fixed-price projects and costs incurred in the performance of each project |
| changes in pricing in response to client demand and competitive pressures |
| the mix of onsite and offshore staffing |
| the mix of leadership and senior technical resources to junior engineering resources staffed on each project |
| our ability to have the client reimburse us for travel and living expenses, especially the airfare and related expenses of our Indian and Sri Lankan offshore personnel traveling and working onsite in the United States or the United Kingdom |
| seasonal trends, primarily our hiring cycle and the budget and work cycles of our clients |
| the ratio of fixed-price contracts to time-and-materials contracts in process |
| employee wage levels and increases in compensation costs, including timing of promotions and annual pay increases, particularly in India and Sri Lanka |
| unexpected changes in the utilization rate of our IT professionals |
| unanticipated contract or project terminations |
| the timing of collection of accounts receivable |
| the continuing financial stability of our clients |
| general economic conditions |
9
As a result, our revenue and our operating results for a particular period are difficult to predict and may decline in comparison to corresponding prior periods regardless of the strength of our business. Our future revenue is also difficult to predict because we derive a substantial portion of our revenue from fees for services generated from short-term contracts that may be terminated or delayed by our clients without penalty. In addition, a high percentage of our operating expenses, particularly related to personnel and facilities, are relatively fixed in advance of any particular quarter and are based, in part, on our expectations as to future revenue. If we are unable to predict the timing or amounts of future revenue accurately, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall and fail to meet our forecasts. Unexpected revenue shortfalls may also decrease our gross margins and could cause significant changes in our operating results from quarter to quarter. As a result, and in addition to the factors listed above, any of the following factors could have a significant and adverse impact on our operating results, could result in a shortfall of revenue and could result in losses to us: |
| a clients decision not to pursue a new project or proceed to succeeding stages of a current project |
| the completion during a quarter of several major client projects could require us to pay underutilized employees in subsequent periods |
| adverse business decisions of our clients regarding the use of our services |
| our inability to transition employees quickly from completed projects to new engagements |
| our inability to manage costs, including personnel, infrastructure, facility and support services costs |
| exchange rate fluctuations |
10
| client financial difficulties |
| a change in a clients strategic priorities, resulting in a reduced level of IT spending |
| a clients demand for price reductions |
| a change in a clients outsourcing strategy that shifts work to in-house IT departments or to our competitors |
| replacement by our client of existing software to packaged software supported by licensors |
11
12
13
14
15
| significant currency fluctuations between the U.S. dollar and the U.K. pound sterling (in which our revenue is principally denominated) and the Indian and Sri Lankan rupees (in which a significant portion of our costs are denominated) |
| legal uncertainty owing to the overlap of different legal regimes and problems in asserting contractual or other rights across international borders |
| potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate, potential tariffs and other trade barriers |
| difficulties in staffing, managing and supporting operations in multiple countries |
| potential fluctuations in foreign economies |
| unexpected changes in regulatory requirements |
| government currency control and restrictions on repatriation of earnings |
| the burden and expense of complying with the laws and regulations of various jurisdictions |
| domestic and international economic or political changes, hostilities, terrorist attacks and other acts of violence or war |
16
| earthquakes, tsunamis and other natural disasters in regions where we currently operate or may operate in the future |
| recruit, hire, train, motivate and retain highly-skilled IT services and management personnel |
| adequately and timely staff personnel at client locations in the United States and Europe due to increasing immigration and related visa restrictions and intense competition to hire and retain these skilled IT professionals |
| adhere to our global delivery process and execution standards |
| maintain and manage costs to correspond with timeliness of revenue recognition |
| develop and improve our internal administrative infrastructure, including our financial, operational and communication systems, processes and controls |
| provide sufficient operational facilities and offshore global delivery centers to accommodate and satisfy the capacity needs of our growing workforce on reasonable commercial terms, or at all, whether by leasing, buying or building suitable real estate |
| preserve our corporate culture, values and entrepreneurial environment |
| maintain high levels of client satisfaction |
17
18
19
| add additional global delivery centers |
| procure additional capacity and facilities |
| hire additional personnel |
| enhance our operating infrastructure |
| acquire businesses or technologies |
| otherwise respond to competitive pressures |
20
| difficulties in integrating operations, technologies, accounting and personnel |
| difficulties in supporting and transitioning clients of our acquired companies or strategic partners |
| diversion of financial and management resources from existing operations |
| risks of entering new markets |
| potential loss of key employees |
| inability to generate sufficient revenue to offset transaction costs |
| our clients perception of our ability to add value through our services |
| the introduction of new services or products by us or our competitors |
| the pricing policies of our competitors |
| general economic conditions |
21
A number of factors affect our utilization rate, including: |
| our ability to transition employees quickly from completed or terminated projects to new engagements |
| our ability to maintain continuity of existing resources on existing projects |
| our ability to obtain visas for offshore personnel to commence projects at a client site for new or existing engagements |
| the amount of time spent by our employees on non-billable training activities |
| our ability to forecast demand for our services and thereby maintain an appropriate number of employees |
| our ability to manage employee attrition |
| seasonal trends, primarily our hiring cycle, holidays and vacations |
| the number of campus hires |
22
23
24
25
26
27
|
||||
Days after date of prospectus | Shares eligible for resale | Comment | ||
|
||||
Date of prospectus
|
Freely tradable shares saleable under Rule 144(k) that are not subject to lock-up | |||
90 days
|
Shares resaleable under Rules 144 and 701 that are not subject to lock-up | |||
180 days
|
Lock-up released; shares saleable under Rules 144, 144(k) and 701 | |||
Thereafter
|
Restricted securities held for one year or less | |||
28
| a classified board of directors |
| limitations on the removal of directors |
| advance notice requirements for stockholder proposals and nominations |
| the inability of stockholders to act by written consent or to call special meetings |
| the ability of our board of directors to make, alter or repeal our by-laws |
29
| actual or anticipated variations in our quarterly operating results or the quarterly financial results of companies perceived to be similar to us |
| announcements of technological innovations or new services by us or our competitors |
| changes in estimates of our financial results or recommendations by market analysts |
| announcements by us or our competitors of significant projects, contracts, acquisitions, strategic alliances or joint ventures |
| changes in our capital structure, such as future issuances of securities or the incurrence of additional debt |
| regulatory developments in the United States, the United Kingdom, Sri Lanka, India or other countries in which we operate or have clients |
| litigation involving our company, our general industry or both |
| additions or departures of key personnel |
| investors general perception of us |
| changes in general economic, industry and market conditions |
| changes in the market valuations of other IT service providers |
30
31
| our dependence on a limited number of clients |
| our ability to expand our business or effectively manage growth |
| restrictions on immigration |
| increasing competition in the IT services outsourcing industry |
| our ability to hire and retain enough sufficiently trained IT professionals to support our operations |
| quarterly fluctuations in our earnings |
| our ability to attract and retain clients and meet their expectations |
| negative public reaction in the United States or the United Kingdom to offshore IT outsourcing |
| our ability to sustain profitability or maintain profitable engagements |
| technological innovation |
| our ability to effectively manage our facility, infrastructure and capacity needs |
| regulatory, legislative and judicial developments in our operations areas |
| political or economic instability in India or Sri Lanka |
| telecommunications or technology disruptions |
| worldwide economic and business conditions |
| our ability to successfully consummate strategic acquisitions |
32
33
| approximately $30 million of these net proceeds, over the next three fiscal years, to construct and build out a facility on our planned campus in Hyderabad, India |
| the remainder of these net proceeds for working capital and other general corporate purposes, including to finance the expansion of our global delivery centers or capacity in Chennai, India and Colombo, Sri Lanka, the hiring of additional personnel, sales and marketing activities, capital expenditures and the costs of operating as a public company |
34
on an actual basis
on a pro forma basis to give effect to the conversion of all
outstanding shares of our preferred stock into an aggregate of
35,762,836 shares of our common stock and the filing of our
seventh amended and restated certificate of incorporation
on a pro forma as adjusted basis to give further effect to the
sale in this offering
of shares of our common stock
at an assumed initial public offering price of
$ per share, after deducting
the estimated underwriting discounts and commissions and
estimated offering expenses payable by us
December 31,
2006
Pro
forma
(in thousands,
except share and per share amounts)
Actual
Pro
forma
as
adjusted
$
32,207
$
32,207
$
$
24
$
24
$
13,499
15,131
12,229
19,997
60,856
203
61,059
(442
)
(442
)
7,130
7,130
(53
)
(53
)
(2,725
)
(2,725
)
(402
)
(402
)
3,711
64,567
64,567
64,567
$
64,591
$
64,591
$
(1)
Each share of our series A
preferred stock is convertible into 1.402 shares of our
common stock upon the closing of this offering.
(2)
Each share of our series B
preferred stock is convertible into 1.136 shares of our
common stock upon the closing of this offering.
(3)
Each share of our series C and
series D preferred stock is convertible into one share of
our common stock upon the closing of this offering.
35
Table of Contents
10,206,926 shares of common stock issuable upon the
exercise of options outstanding as of December 31, 2006, at
a weighted average exercise price of $1.12 per share
634,027 shares of common stock issuable after this offering
upon the exercise of SARs outstanding as of December 31,
2006, reduced by the weighted average exercise price of $1.26
per SAR
2,066,058 additional shares of common stock reserved as of
December 31, 2006, for future issuance under our incentive
plans
116,882 shares of common stock issuable upon the exercise
of warrants that will remain outstanding after this offering, at
an exercise price of $1.75 per share
36
Table of Contents
57
62
$
$
$
37
Table of Contents
Shares
purchased
Total
consideration
Average price
Number
Percentage
Amount
Percentage
per
share
%
$
%
$
100.0%
$
100.0%
$
10,052,476 shares of common stock issuable upon the
exercise of options outstanding as of March 31, 2007, at a
weighted average exercise price of $1.13 per share
614,235 shares of common stock issuable after this offering
upon the exercise of SARs outstanding as of March 31, 2007,
reduced by the weighted average exercise price of $1.29 per
SAR
2,193,138 additional shares of common stock reserved as of
March 31, 2007 for future issuance under our equity
incentive plans
116,882 shares of common stock issuable upon the exercise
of warrants that will remain outstanding after this offering, at
an exercise price of $1.75 per share
the percentage of shares of common stock held by existing
stockholders will decrease to approximately % of the
total number of shares of our common stock outstanding after
this offering
the number of shares held by new investors will increase
to ,
or approximately % of the total number of shares of
our common stock outstanding after this offering
38
Table of Contents
39
Table of Contents
Nine months
ended
Fiscal year ended
March 31,
December 31,
(in thousands,
except per share amounts)
2002
2003
2004
2005
2006
2005
2006
$
16,681
$
24,724
$
42,822
$
60,484
$
76,935
$
53,740
$
89,388
10,780
13,026
22,648
31,813
43,417
31,015
48,578
5,901
11,698
20,174
28,671
33,518
22,725
40,810
14,545
14,123
20,309
27,838
32,925
23,847
30,583
(8,644
)
(2,425
)
(135
)
833
593
(1,122
)
10,227
(176
)
(35
)
73
376
1,564
661
1,206
(8,820
)
(2,460
)
(62
)
1,209
2,157
(461
)
11,433
(60
)
27
146
99
176
164
(4,080
)
$
(8,760
)
$
(2,487
)
$
(208
)
$
1,110
$
1,981
$
(625
)
$
15,513
$
(0.57
)
$
(0.15
)
$
(0.01
)
$
0.07
$
0.11
$
(0.04
)
$
0.83
$
(0.57
)
$
(0.15
)
$
(0.01
)
$
0.02
$
0.04
$
(0.04
)
$
0.27
15,426
16,265
17,407
17,052
17,571
17,441
18,713
15,426
16,265
17,407
53,562
54,341
17,441
56,761
March 31,
December 31,
(in
thousands)
2002
2003
2004
2005
2006
2006
$
3,834
$
12,687
$
30,361
$
28,406
$
30,237
$
32,207
5,152
15,496
33,043
35,436
41,696
55,067
13,331
23,276
47,141
50,085
58,719
80,632
28,540
40,628
60,701
60,758
60,814
60,856
(18,786
)
(21,321
)
(20,916
)
(17,899
)
(13,610
)
3,711
40
Table of Contents
financial condition and results of operations
41
Table of Contents
42
Table of Contents
43
Table of Contents
the estimate is complex in nature or requires a high degree of
judgment
the use of different estimates and assumptions could have a
material impact on the consolidated financial statements
44
Table of Contents
45
Table of Contents
46
Table of Contents
47
Table of Contents
48
Table of Contents
Nine months
ended
December 31,
(dollars
in thousands)
2005
2006
$
Change
%
Change
$
53,740
$
89,388
$
35,648
66.3%
31,015
48,578
17,563
56.6
22,725
40,810
18,085
79.6
23,847
30,583
6,736
28.2
(1,122
)
10,227
11,349
1,011.5
661
1,206
545
82.5
(461
)
11,433
11,894
2,580.0
164
(4,080
)
(4,244
)
2,587.8
$
(625
)
$
15,513
$
16,138
2,582.1%
49
Table of Contents
50
Table of Contents
51
Table of Contents
Fiscal year
ended
March 31,
(dollars
in thousands)
2005
2006
$
Change
%
Change
$
60,484
$
76,935
$
16,451
27.2%
31,813
43,417
11,604
36.5
28,671
33,518
4,847
16.9
27,838
32,925
5,087
18.3
833
593
(240
)
(28.8)
376
1,564
1,188
316.0
1,209
2,157
948
78.4
99
176
77
77.8
$
1,110
$
1,981
$
871
78.5%
52
Table of Contents
53
Table of Contents
Fiscal year
ended
March 31,
(dollars
in thousands)
2004
2005
$
Change
%
Change
$
42,822
$
60,484
$
17,662
41.2%
22,648
31,813
9,165
40.5
20,174
28,671
8,497
42.1
20,309
27,838
7,529
37.1
(135
)
833
968
717.0
73
376
303
415.1
(62
)
1,209
1,271
2,050.0
146
99
(47
)
(32.2
)
$
(208
)
$
1,110
$
1,318
633.7%
54
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55
Table of Contents
Three Months
ended
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
(in
thousands)
2005
2005
2005
2006
2006
2006
2006
$
15,357
$
17,285
$
21,098
$
23,195
$
25,625
$
30,090
$
33,673
9,493
10,078
11,444
12,402
13,986
16,231
18,361
5,864
7,207
9,654
10,793
11,639
13,859
15,312
7,731
7,766
8,350
9,078
9,167
10,173
11,243
(1,867
)
(559
)
1,304
1,715
2,472
3,686
4,069
101
75
485
903
681
237
288
(1,766
)
(484
)
1,789
2,618
3,153
3,923
4,357
68
57
39
12
107
130
(4,317
)
$
(1,834
)
$
(541
)
$
1,750
$
2,606
$
3,046
$
3,793
$
8,674
56
Table of Contents
Three Months
ended
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
2005
2005
2005
2006
2006
2006
2006
100%
100%
100%
100%
100%
100%
100%
62
58
54
53
55
54
55
38
42
46
47
45
46
45
50
45
40
39
36
34
33
(12
)
(3
)
6
8
9
12
12
1
2
3
3
1
1
(12
)
(3
)
8
11
12
13
13
(13
)
(12
)
(3
)
8
11
12
13
26
Table of Contents
Nine months
ended
(in
thousands)
2004
2005
2006
2005
2006
$
2,604
$
(296
)
$
1,892
$
(1,500
)
$
5,476
(3,995
)
(3,112
)
(865
)
(486
)
(4,102
)
19,118
1,447
659
(157
)
388
(30
)
6
145
(61
)
208
17,697
(1,955
)
1,831
(2,204
)
1,970
12,664
30,361
28,406
28,406
30,237
$
30,361
$
28,406
$
30,237
$
26,202
$
32,207
58
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59
Table of Contents
Payments due by
period
Less than
1-3
3-5
(in
thousands)
Total
1 year
years
years
5+
years
$
10,788
$
2,364
$
4,527
$
3,202
$
695
1,735
63
207
413
1,052
47
39
8
$
12,570
$
2,466
$
4,742
$
3,615
$
1,747
(1)
Our obligations under our operating
leases consist of future payments related to our real estate
leases.
(2)
We contribute to benefit funds
covering our employees in India and Sri Lanka.
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Nine months
ended
Fiscal year ended
March 31,
December 31,
(in
thousands, except per share data)
2004
2005
2006
2005
2006
$
(208
)
$
1,110
$
1,981
$
(625
)
$
15,513
(4,956
)
$
(208
)
$
1,110
$
1,981
$
(625
)
$
10,557
$
(0.01
)
$
0.07
$
0.11
$
(0.04
)
$
0.56
$
(0.01
)
$
0.02
$
0.04
$
(0.04
)
$
0.19
$
(0.01
)
$
0.07
$
0.11
$
(0.04
)
$
0.83
$
(0.01
)
$
0.02
$
0.04
$
(0.04
)
$
0.27
17,407
17,052
17,571
17,441
18,713
17,407
53,562
54,341
17,441
56,761
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65
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Assessment
and
planning services
Architecture
and design services
Governance-related
services
business/technology
alignment analysis
IT
strategic planning
quality
assurance process consulting
enterprise
architecture analysis
technology
roadmaps
product
evaluation and selection
business
process analysis and design
program
governance and change management
program
management office planning
IT
process/methodology consulting
Data
Development
services
Legacy
asset management services
warehousing
services
Testing
services
package implementation and integration
software product engineering
Business Process Management implementations
systems
consolidation and rationalization
technology
migration and porting
web-enablement
of legacy applications
data
management and transformation
business
intelligence, reporting and decision support
testing
frameworks
automation
of test data and cases
test
cycle execution
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Application
and platform
Infrastructure
Quality
assurance
management
services
management
services
management
services
maintenance
and enhancement of custom-built and package-based
applications
ongoing
software engineering services for software companies
systems
administration
database
administration
monitoring
outsourcing
of quality assurance planning
preparation
of test cases, scripts and data
execution
of test cases, scripts and data
developing a roadmap for the evolution of applications into
platforms
establishing an ongoing planning and governance process for
managing change
analyzing applications for common patterns and service
identifying application components that can be extended or
enhanced as core components
integrating new functions, features and technologies into the
target architecture
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71
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72
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73
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outsourcing of product catalog, sales, sales support, order
management and trouble ticketing applications used to manage
large customers, including ongoing support, delivery of new
functionality, re-architecting and program management of new
releases
design, development, iterative release and management of a
web-based self-service portal through which all services are
delivered to competitive service providers
strategy, planning and validation for the separation of numerous
applications under a restructuring program
development and management of an automated messaging platform
that reduces customer service costs and increases responsiveness
to the clients retail customers
outsourcing of ongoing product development and quality assurance
for numerous software product vendors
development and management of a flexible-capacity solutions
center that provides rapid turnaround and global support for IT
projects, priced and performed on a utility basis
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development of an IT strategy and roadmap for upgrading plan
administration engines, including a multi-year roadmap, resource
plan and cost-benefit analysis to consolidate numerous redundant
interfaces and peripheral applications into a common platform
design and development of an online enrollment platform for
retirement services participants
building and operating a Linux migration factory and
migrating a suite of brokerage applications
software quality assurance outsourcing for health insurance
sales, rating, quoting and channel management applications
development and ongoing support for a retail and commercial
banking platform used by mid-tier banks in both service bureau
and licensed models
application outsourcing for distributed retirement services
applications
implementation of an enterprise marketing management information
platform at more than 20 companies
development and support of an
e-learning
platform used by colleges and universities
consolidation of a collection of online products that provide
patent, literature and business information to the scientific
community into a unified product with a common platform, using
open-source technologies
re-platforming of a legacy suite of applications used by
publishers to manage customer care, distribution,
e-commerce,
product information, fulfillment and rights and royalties
consolidation of five authentication and entitlement subsystems,
used by more than 750,000 health care practitioners, into a
unified system used to support access to a host of healthcare
information services
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offshore IT outsourcing firms, such as Cognizant Technology
Solutions Corporation, HCL Technologies Ltd., Infosys
Technologies Limited, Patni Computer Systems Limited, Satyam
Computer Services Limited, Tata Consultancy Services Limited,
Tech Mahindra Limited and Wipro Limited
consulting and systems integration firms, such as Accenture
Ltd., BearingPoint, Inc., Cap Gemini S.A., Computer
Sciences Corporation, Deloitte Consulting LLP, Electronic Data
Systems Corporation, IBM Global Services Consulting and Sapient
Corporation
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providing team members with opportunities to handle challenging
technical and organizational problems and learn our platforming
approach
providing team members with clear career paths, rotation
opportunities across clients and domains and opportunities to
advance rapidly
providing team members opportunities to interact with our
clients and help shape their IT strategy and solutioning
creating a strong peer group work environment that pushes our
team members to succeed
creating a climate where there is a free exchange of ideas
cutting across organizational hierarchy
creating a family-oriented work environment that is fun and
engaging
recognizing team performance through highly-visible team
recognition awards
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Name
Age
Position
41
Chairman and Chief Executive
Officer
46
President and Chief Operating
Officer
and Director
44
Executive Vice President of
Finance and
Chief Financial Officer
42
Executive Vice President and
Managing DirectorAsian Operations
41
Senior Vice President and Global
Head of
Human Resources
58
Director
39
Director
43
Director
64
Director
72
Director
60
Director
(1)
Member of the audit committee
(2)
Member of the compensation committee
(3)
Member of the nominating and
corporate governance committee
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two class I directors (Messrs. Davoli and Goldfarb),
whose initial terms will expire at the annual meeting of
stockholders in 2008
three class II directors (Messrs. Armony, Trust and
Moriarty) whose initial terms will expire at the annual meeting
of stockholders in 2009
three class III directors (Messrs. Canekeratne, Smith
and Maheu), whose initial terms will expire at the annual
meeting of stockholders held in 2010
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appointing, approving the compensation of, and assessing the
independence of our independent registered public accounting firm
pre-approving auditing and permissible non-audit services, and
the terms of such services, to be provided by our independent
registered public accounting firm
reviewing the overall audit plan with the independent registered
public accounting firm and members of management responsible for
preparing our financial statements
reviewing and discussing with management and the independent
registered public accounting firm our annual and quarterly
financial statements and related disclosures as well as critical
accounting policies and practices used by us
coordinating the oversight and reviewing the adequacy of our
internal control over financial reporting
establishing policies and procedures for the receipt and
retention of accounting-related complaints and concerns
recommending based upon the audit committees review and
discussions with management and the independent registered
public accounting firm whether our audited financial statements
shall be included in our Annual Report on
Form 10-K
preparing the audit committee report required by Securities and
Exchange Commission rules to be included in our annual proxy
statement
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reviewing all related person transactions for potential conflict
of interest situations and approving all such transactions
reviewing quarterly earnings releases and scripts
annually reviewing and approving corporate goals and objectives
relevant to the compensation of our chief executive officer
evaluating the performance of our chief executive officer in
light of such corporate goals and objectives and determining the
compensation of our chief executive officer
reviewing and approving the compensation of our other executive
officers
reviewing and establishing our overall management compensation,
philosophy and policy
overseeing and administering our compensation, welfare, benefit
and pension and similar plans
reviewing and approving our policies and procedures for the
grant of equity-based awards
reviewing and making recommendations to the board of directors
with respect to director compensation
reviewing and discussing with management the compensation
discussion and analysis to be included in our annual proxy
statement or Annual Report on
Form 10-K
developing and recommending to the board of directors criteria
for board and committee membership
establishing procedures for identifying and evaluating board of
director candidates, including nominees recommended by
stockholders
reviewing the size and composition of the board of directors to
ensure that it is composed of members containing the appropriate
skills and expertise to advise us
identifying individuals qualified to become members of the board
of directors
recommending to the board of directors the persons to be
nominated for election as directors and to each of the
boards committees
developing and recommending to the board of directors a code of
business conduct and ethics and a set of corporate governance
guidelines
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developing a mechanism by which violations of the code of
business conduct and ethics can be reported in a confidential
manner
overseeing the evaluation of the board of directors and
management
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attract and retain talented and experienced executives
motivate and reward executives whose knowledge, skills and
performance are critical to our success
provide a competitive compensation package that aligns the
interests of our executive officers and stockholders by
including a significant variable component which is weighted
heavily toward performance-based rewards, based upon achievement
of certain measurable operating results such as revenue and
operating profit margin
ensure fairness among the executive management team by
recognizing the contributions each executive makes to our success
foster a shared commitment among executives by aligning the
companys and their individual goals
compensate our executives to manage our business to meet our
near-term and long-term objectives
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market compensation levels
the contributions made by each executive officer
the performance of each executive officer
the increases or decreases in responsibilities and roles of each
executive officer
the business needs for each executive officer
the relevance of each executive officers experience to
other potential employers
the readiness of each executive officer to assume a more
significant role within the organization
our understanding of the amount of compensation generally paid
by similarly situated companies to their executives with similar
roles and responsibilities
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the roles and responsibilities of our executives
the individual experience and skills of, and expected
contributions from, our executives
the amounts of compensation being paid to our other executives
our executives historical compensation at our company
the provisions of applicable employment agreements
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the number of shares subject to, and exercise prices of,
outstanding options, both vested and unvested, held by our
executives
the vesting schedule of the unvested stock options held by our
executives
the amount and percentage of our total equity on a diluted basis
held by our executives
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Change in
pension
value and
nonqualified
Non-equity
deferred
Option
incentive plan
compensation
All other
Name and
Salary
awards
compensation
earnings
compensation
Total
principal
position
Year
($)
($)(1)
($)(2)
($)
($)
($)
Chairman and Chief Executive Officer
2007
225,000
77,000
302,000
Executive Vice President of Finance and Chief Financial Officer
2007
190,000
37,042
26,400
253,442
President and Chief Operating Officer
2007
250,000
1,038,232
(3)
88,000
(3)
1,376,232
Executive Vice President and Managing DirectorAsian
Operations(4)
2007
128,836
62,416
18,466
1,365
(5)
29,232
(6)
240,315
Senior Vice President and Global Head of Human Resources(7)
2007
118,720
30,719
9,336
895
(8)
159,670
(1)
All stock options were granted at
the fair market value on the date of grant under our 2000 Stock
Option Plan, except for Mr. Smiths options, which
were granted outside of the 2000 Stock Option Plan. We account
for stock option-based compensation under the provisions of
SFAS 123R. The value reported above for each named
executive officer is the amount of SFAS 123R compensation
expense expected to be recognized for financial statement
reporting purposes for the fiscal year ended March 31,
2007, assuming no option award forfeitures. Our consolidated
financial statements for the fiscal year ended March 31,
2007 have not yet been audited. The consolidated financial
statements for our fiscal year ended March 31, 2007 are
expected to be prepared in May 2007. For a discussion of the
assumptions used for SFAS 123R valuations and compensation
expense for the fiscal year ended March 31, 2006 and
nine months ended December 31, 2006, see Note 3
to our notes to consolidated financial statements included
elsewhere in this prospectus.
(2)
The non-equity incentive plan
compensation amounts are the semi-annual payouts under our VCCP
award program approved by our compensation committee and the
board of directors, based upon the 40% weighed factor for
semi-annual payouts. The final payout amounts will be determined
by May 2007 in connection with the audit of our
consolidated financial statements for the fiscal year ended
March 31, 2007.
(3)
In November 2005, our board of
directors approved the repricing of Mr. Smiths stock
option award from the original $2.20 per share price to
$0.76 per share, the fair market value of our common stock
at that time. The cumulative amount of additional compensation
to be recognized due to this option repricing over the remaining
service period is $501,546, of which $181,145 is included in the
table above. In connection with this repricing, we amended
Mr. Smiths eligible performance-based bonus to reduce
the target of $250,000 per year to $150,000 in fiscal year
ended March 31, 2006 and $200,000 in each of the fiscal
years ending March 31, 2007 and 2008.
(4)
All cash amounts are paid and
recorded in Sri Lankan rupees and were translated into
U.S. dollars using the fiscal year ended March 31,
2007 average exchange rate of $0.0095 per rupee.
(5)
Represents the
year-over-year
change in the value of accumulated pension benefits to be paid
under the government-mandated Sri Lanka Defined Benefit Gratuity
Plan.
(6)
Includes the value of the following
perquisites: imputed interest at 8.5% on a $29,000 non-interest
bearing loan ($2,260), company-paid life insurance premium
($5,270), golf and athletic club memberships ($1,359); employee
provident fund and employee trust fund contributions ($10,260)
and company-owned auto expenses ($10,083). Mr. Modder
repaid the loan in full in March 2007.
(7)
All cash amounts are paid and
recorded in Indian rupees and were translated into U.S. dollars
using the fiscal year ended March 31, 2007 average exchange
rate of $0.02216.
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(8)
Represents the year-over-year
change in the value of accumulated pension benefits to be paid
under the government-mandated Virtusa (India) Private Limited
Employee Gratuity Scheme.
All other
option
awards:
Exercise
Estimated
possible payouts
number of
or base
Grant date
under non-equity
incentive plan
securities
price of
fair value
awards
underlying
option
of option
Threshold
Target
Maximum
options
awards
awards(1)
Name
Grant
date
($)
($)
($)
(#)
($/Share)
($)
131,250
175,000
192,500
8/7/06
45,000
60,000
66,000
75,000
1.34
59,108
150,000
200,000
220,000
8/7/06
32,250
43,000
47,300
75,000
1.34
59,108
8/7/06
15,000
20,000
22,000
220,000
1.34
173,382
(1)
The amounts reported in this column
reflect the grant date fair value of all options awards computed
under SFAS 123R.
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a merger, reorganization or consolidation between us and another
entity (other than a holding company or parent or subsidiary of
us) as a result of which the holders of our outstanding voting
stock immediately prior to the transaction hold less than a
majority of the outstanding voting stock of the surviving entity
immediately after the transaction
the sale, transfer, or other disposition of all or substantially
all of our assets to one or more persons (other than any
wholly-owned subsidiary) in a single transaction or series of
related transactions
the direct or indirect sale or exchange in a single or series of
related transactions by our stockholders of more than 50% of our
common stock to an unrelated person or entity as a result of
which the holders of our outstanding voting stock immediately
prior to the transaction hold less than a majority of the
surviving entity immediately after the transaction
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a merger, reorganization or consolidation between us and another
entity (other than a holding company or parent or subsidiary of
us) as a result of which the holders of our outstanding voting
stock immediately prior to the transaction hold less than a
majority of the outstanding voting stock of the surviving entity
immediately after the transaction
the sale, transfer, or other disposition of all or substantially
all of our assets to one or more persons (other than any
wholly-owned subsidiary) in a single transaction or series of
related transactions
the direct or indirect sale or exchange in a single or series of
related transactions by the stockholders of us of more than 50%
of all of our common stock to an unrelated person or entity as a
result of which the holders of our outstanding voting stock
immediately prior to the transaction hold less than a majority
of the surviving entity immediately after the transaction
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Number of
Number of
securities
securities
underlying
underlying
Option
unexercised
unexercised
exercise
Option
options (#)
options (#)
price
expiration
Name
exercisable
unexercisable
($)
date
74,777
4,986
(1)
0.50
5/21/2013
20,000
60,000
(2)
1.75
4/28/2014
9,375
65,625
(3)
1.34
8/7/2016
1,562,500
937,500
(4)
0.76
9/22/2014
150,000
0.50
1/24/2011
50,000
0.50
8/22/2011
86,140
0.50
4/17/2012
114,568
7,638
(1)
0.10
5/21/2013
45,500
136,500
(2)
1.75
4/28/2014
9,375
65,625
(3)
1.34
8/7/2016
55,000
165,000
(5)
1.34
8/7/2016
(1)
6.25% of the shares in this grant
vested on August 21, 2003, and the remaining shares vest
6.25% every 3 months thereafter through May 21, 2007.
(2)
10% of the shares in this grant
vested one year from date of grant or April 28, 2005,
and the remaining shares vest 15% on the second anniversary
date, 20% on the third anniversary date, 25% on the fourth
anniversary date, and the remaining 30% on the fifth anniversary
date or April 28, 2009.
(3)
6.25% of the shares in this grant
vested on November 7, 2006, and the remaining shares vest
6.25% every 3 months thereafter through August 7, 2010.
(4)
25% of the shares in this grant
vested on September 13, 2005, and the remaining shares vest
6.25% every 3 months thereafter through September 13,
2008.
(5)
25% of the shares in this grant
vested on August 7, 2006 and the remaining shares vested
6.25% every 3 months thereafter through August 7, 2010.
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Stock
Awards
Number of
shares
acquired
Value realized
on vesting
on vesting
Name
#
$(1)
5,383
6,460
(1)
Represents the value of the vested
shares without regard to the payment of the exercise price of
$0.50 per share.
Present value
of
Number of
years
accumulated
Payments
during
credited
service
benefits
last fiscal
year
Name
Plan
name
(#)
($)(1)
($)
Sri Lanka Benefit
Gratuity Plan
7
19,165
(2)
Virtusa (India) Private Limited
Employees Gratuity Scheme
1
895
(3)
(1)
Under the plan, an employees
pension (gratuity) benefits vest after five years of credited
service, and are payable in a lump sum amount upon retirement or
separation of employment from the company in an amount equal to
one-half of an
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employees basic monthly
salary times the number of years of credited service. The amount
reflected in the table represents the accumulated benefits
payable at the end of fiscal 2007.
(2)
Amounts are recorded in Sri Lankan
rupees and were translated into U.S. dollars using the fiscal
year 2007 average exchange rate of $0.0095 per rupee.
(3)
Amounts are recorded in Indian
rupees and were translated into U.S. dollars using the fiscal
year 2007 average exchange rate of $0.02216 per rupee.
100% of Messrs. Canekeratnes and Smiths annual
base salary and 50% of the annual base salary of each other
executive officer
a prorated share of the annual bonus, if any, which the
executive officer would have earned in the year in which the
termination of employment occurs
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200% of Messrs. Canekeratnes and Smiths annual
base salary and 50% of the annual base salary of each other
executive officer
200% in the case of Messrs. Canekeratne and Smith, and 100% in
the case of each other executive officer of the prorated share
of the annual bonus, if any, which the executive officer would
have earned in the year in which the termination of employment
occurs
Termination by
the
company for
other
than cause or
voluntary
Executive
benefits
Voluntary
Termination by
resignation for
good
Acceleration
and payments
upon
resignation
for
company for
other
reason
following
following
change
termination
good
reason
than
cause
change in
control
in
control
$
225,000
$
225,000
$
450,000
$
175,000
175,000
350,000
12,420
12,420
24,840
$
412,420
$
412,420
$
824,840
$
(1)
Assumes that corporate revenue and
operating profit margin targets are achieved at 100% under our
VCCP.
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Termination by
the
company for
other
than cause or
voluntary
Executive
benefits
Voluntary
Termination by
resignation for
good
Acceleration
and payments
upon
resignation
for
company for
other
reason
following
following
change
termination
good
reason
than
cause
change in
control
in
control
$
95,000
$
95,000
$
95,000
$
60,000
60,000
60,000
5,910
5,910
5,910
$
160,910
$
160,910
$
160,910
$
(1)
Assumes that corporate revenue and
operating profit margin targets are achieved at 100% under our
VCCP.
(2)
There was no public market for our
common stock at March 30, 2007. Accordingly, the value of
accelerated equity awards has been estimated based on an assumed
initial public offering price of
$ per share, the midpoint of
the range set forth on the cover page of this prospectus.
Termination by
the
company for
other
than cause or
voluntary
Executive
benefits
Voluntary
Termination by
resignation for
good
Acceleration
and payments
upon
resignation
for
company for
other
reason
following
following
change
termination
good
reason
than
cause
change in
control
in
control
$
250,000
$
250,000
$
500,000
$
200,000
200,000
400,000
12,420
12,420
24,840
$
462,420
$
462,420
$
924,840
$
(1)
Assumes that corporate revenue and
operating profit margin targets are achieved at 100% under our
VCCP.
(2)
There was no public market for our
common stock at March 30, 2007. Accordingly, the value of
accelerated equity awards has been estimated based on an assumed
initial public offering price of
$ per share, the midpoint of
the range set forth on the cover page of this prospectus.
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Termination by
the
company for
other
than cause or
voluntary
Executive
benefits
Voluntary
Termination by
resignation for
good
Acceleration
and payments
upon
resignation
for
company for
other
reason
following
following
change
termination
good
reason
than
cause
change in
control
in
control
$
66,000
$
66,000
$
66,000
$
43,000
43,000
43,000
3,163
3,163
3,163
$
112,163
$
112,163
$
112,163
$
(1)
Assumes that corporate revenue and
operating profit margin targets are achieved at 100% under our
VCCP.
(2)
There was no public market for our
common stock at March 30, 2007. Accordingly, the value of
accelerated equity awards has been estimated based on an assumed
initial public offering price of
$ per share, the midpoint of
the range set forth on the cover page of this prospectus.
Termination by
the
company for
other
than cause or
voluntary
Executive
benefits
Voluntary
Termination by
resignation for
good
Acceleration
and payments
upon
resignation
for
company for
other
reason
following
following
change
termination
good
reason
than
cause
change in
control
in
control
$
55,000
$
55,000
$
55,000
$
20,000
20,000
20,000
58
58
58
$
75,058
$
75,058
$
75,058
$
(1)
Assumes that corporate revenue and
operating profit margin targets are achieved at 100% under our
VCCP.
(2)
There was no public market for our
common stock at March 30, 2007. Accordingly, the value of
accelerated equity awards has been estimated based on an assumed
initial public offering price of
$ per share, the midpoint of
the range set forth on the cover page of this prospectus.
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Change in
pension value
Fees
Non-equity
and
nonqualified
earned
incentive
deferred
or paid
Stock
Option
plan
compensation
All other
in cash
awards
awards
compensation
earnings
compensation
Total
Name
($)
($)
($)(1)
($)
($)
($)
($)
22,825
(2)
22,825
73,660
(3)
73,660
49,411
(4)
49,411
102,000
(5)
102,000
(1)
All stock options were granted at
the fair market value on the date of grant under our 2000 Stock
Option Plan, except for options granted to Mr. Trust, which
were granted outside of our 2000 Stock Option Plan. We account
for stock option-based compensation under the provisions of
SFAS 123R. The value reported above for each named
executive officer is the amount of SFAS 123R compensation
expense expected to be recognized for financial statement
reporting purposes for the fiscal year ended March 31,
2007, assuming no option award forfeitures. Our consolidated
financial statements for the fiscal year ended March 31,
2007 have not yet been audited. The consolidated financial
statements for our fiscal year ended March 31, 2007 are
expected to be prepared in May 2007. For a discussion of the
assumptions used for SFAS 123R valuations and compensation
expense for the fiscal year ended March 31, 2006, see
note 3 to our notes to consolidated financial statements
included elsewhere in this prospectus.
(2)
Represents stock-based compensation
expense for fiscal 2007 for a stock option award, made on
September 3, 2004, to purchase 50,000 shares of common
stock at an exercise price of $2.20 per share, which vests
in equal quarterly installments over a three-year period. The
grant date fair value of this stock option award is $68,500.
(3)
Represents stock-based compensation
expense for fiscal 2007 for a stock option award, made on
April 28, 2004, to purchase 196,793 shares of common
stock at an exercise price of $1.75 per share, which vests
in equal quarterly installments over a three-year period. The
grant date fair value of this stock option award is $220,984.
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(4)
Represents stock-based compensation
expense for fiscal 2007 for a stock option award, made on
August 7, 2006, to purchase 222,757 shares of common
stock at an exercise price of $1.34 per share, which vests
in equal quarterly installments over a three-year period. The
grant date fair value of this stock option award is $175,555.
(5)
Represents stock-based compensation
expense for fiscal 2007 for a stock option award, made on
September 22, 2004, to purchase 220,144 shares of
common stock at an exercise price of $2.20 per share, which
vests in equal quarterly installments over a three-year period.
The grant date fair value of this stock option award is $305,843.
any breach of the directors duty of loyalty to us or our
stockholders
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law
any unlawful payments related to dividends or unlawful stock
repurchases, redemptions or other distributions
any transaction from which the director derived an improper
personal benefit
we will indemnify our directors, officers and, in the discretion
of our board of directors, certain employees to the fullest
extent permitted by the Delaware General Corporation Law
we will advance expenses, including attorneys fees, to our
directors and, in the discretion of our board of directors, to
our officers and certain employees, in connection with legal
proceedings, subject to limited exceptions
106
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107
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108
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109
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each named executive officer
each of our directors
all of our executive officers and directors as a group
each person known to us to be the beneficial owner of more than
five percent of our common stock
110
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Percentage
Number of
shares
beneficially
owned
Name
beneficially
owned
Prior
to offering
After
offering
14,165,074
24.6
%
%
9,319,953
16.2
9,014,960
15.6
8,374,269
14.5
1,562,500
2.7
492,316
*
504,308
*
55,000
*
14,480,869
25.1
9,014,960
15.6
9,361,619
16.2
247,663
*
1,760,512
3.0
850,394
1.5
46,704,410
77.3
*
Represents less than 1% of the
outstanding shares of common stock.
(1)
Consists of 11,059,544 shares
held by Sigma Partners V, L.P., 2,456,437 shares held
by Sigma Associates V, L.P. and 649,093 shares held by
Sigma Investors V, L.P. and Mr. Davoli. Mr. Davoli is a
managing director and the general partner of Sigma
Partners V, L.P., Sigma Associates V, L.P. and Sigma
Investors V, L.P. and may be deemed to share voting and
investment power with respect to all shares held by those
entities. Mr. Davoli disclaims beneficial ownership of the
shares held by each of the funds managed by Sigma Partners
Associates except to the extent of his pecuniary interest
therein, if any. The address for the Sigma entities is 1600
Camino Real, Suite 280, Menlo Park, California 94025.
(2)
Consists of 9,043,479 shares
held by Charles River Partnership XI, L.P.,
228,428 shares held by Charles River Friends XI-A,
L.P. and 48,046 shares held by Charles River
Friends XI-B, L.P. Mr. Armony is a general partner or
managing member, as applicable, of the general partner of each
of Charles River Partnership XI, L.P., Charles River
Friends XI-A, L.P. and Charles River Friends XI-B,
L.P. and may be deemed to share voting and investment power with
respect to all shares held by those entities. Mr. Armony
disclaims beneficial ownership of the shares held by each of the
entities managed by its respective general partnership of which
Mr. Armony is the general partner or managing member,
except to the extent of his pecuniary interest therein, if any.
The address for the Charles River Ventures entities is 1000
Winter Street, Suite 3300, Waltham, Massachusetts 02451.
(3)
Consists of 3,640,311 shares
held by JAFCO America Technology Fund III, L.P.,
3,321,726 shares held by JAFCO America Technology Cayman
Fund III, L.P., 1,606,623 shares held by JAFCO USIT
Fund III, L.P., 396,300 shares of JAFCO America
Technology Affiliates Fund III, L.P. and 50,000 shares
held by JAV Management Associates III, L.L.C., the general
partner of the JAFCO funds listed above. Mr. Goldfarb is
executive managing partner of Globespan Capital Management, LLC
and a managing member of JAV Management Associates III LLC,
the general partner of each of JAFCO America Technology
Fund III, L.P., JAFCO America Technology Cayman
Fund III, L.P., JAFCO USIT Fund III, L.P. and JAFCO
America Technology Affiliates Fund III, L.P. and may be
deemed to share voting and investment power with respect to all
shares held by those funds and JAV Management
Associates III, L.L.C. Mr. Goldfarb disclaims
beneficial ownership of the shares held by each of the funds
managed by Globespan, except to the extent of his pecuniary
interest therein, if any. The address for Globespan Capital
Partners is One Boston Place, Suite 2810, Boston,
Massachusetts 02108.
(4)
Consists of 5,011,770 shares
held by Mr. Canekeratne and 3,362,499 shares held by
Tushara Canekeratne, Mr. Canekeratnes wife and a
former executive officer of Virtusa. Excludes
1,103,386 shares held by Mr. Canekeratnes father
and 1,013,386 shares held by Mr. Canekeratnes
mother of which Mr. Canekeratne disclaims beneficial ownership.
111
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(5)
Consists of 1,562,500 shares
issuable to Mr. Smith upon exercise of options exercisable
within 60 days of March 31, 2007.
(6)
Includes 129,825 shares
issuable to Mr. Holler upon exercise of options exercisable
within 60 days of March 31, 2007.
(7)
Consists of 504,308 shares
issuable to Mr. Modder upon exercise of options exercisable
within 60 days of March 31, 2007.
(8)
Consists of 55,000 shares
issuable to Mr. Hari upon exercise of options exercisable
within 60 days of March 31, 2007.
(9)
Consists of 11,059,544 shares
held by Sigma Partners V, L.P., 2,456,437 shares held
by Sigma Associates V, L.P., 649,093 shares held by
Sigma Investors V, L.P. and 315,795 shares held by Mr.
Davoli. Mr. Davoli is a managing director and the general
partner of Sigma Partners V, L.P., Sigma Associates V,
L.P. and Sigma Investors V, L.P. and may be deemed to share
voting and investment power with respect to all shares held by
those entities. Mr. Davoli disclaims beneficial ownership
of the shares held by each of the funds managed by Sigma
Partners Associates except to the extent of his pecuniary
interest therein, if any.
(10)
Consists of 3,640,311 shares
held by JAFCO America Technology Fund III, L.P.,
3,321,726 shares held by JAFCO America Technology Cayman
Fund III, L.P., 1,606,623 shares held by JAFCO USIT
Fund III, L.P., 396,300 shares of JAFCO America
Technology Affiliates Fund III, L.P. and 50,000 shares
held by JAV Management Associates III, L.L.C., the general
partner of the JAFCO funds listed above. Mr. Goldfarb is
executive managing partner of Globespan Capital Management, LLC
and a managing member of JAV Management Associates III LLC,
the general partner of each of JAFCO America Technology
Fund III, L.P., JAFCO America Technology Cayman
Fund III, L.P., JAFCO USIT Fund III, L.P. and JAFCO
America Technology Affiliates Fund III, L.P. and may be
deemed to share voting and investment power with respect to all
shares held by those funds and JAV Management
Associates III, L.L.C. Mr. Goldfarb disclaims
beneficial ownership of the shares held by each of the funds
managed by Globespan, except to the extent of his pecuniary
interest therein, if any.
(11)
Consists of 9,043,479 shares
held by Charles River Partnership XI, L.P.,
228,428 shares held by Charles River Friends XI-A,
L.P., 48,046 shares held by Charles River
Friends XI-B, L.P. and 41,666 shares issuable upon exercise
of options held by Mr. Armony exercisable within
60 days of March 31, 2007. Mr. Armony is a general
partner or managing member, as applicable, of the general
partner of Charles River Partnership XI, L.P., Charles
River Friends XI-A, L.P. and Charles River
Friends XI-B, L.P. and may be deemed to share voting and
investment power with respect to all shares held by those
entities. Mr. Armony disclaims beneficial ownership of the
shares held by each of the funds managed by its respective
general partnership of which Mr. Armony is the general
partner or managing member, except to the extent of his
pecuniary interest therein, if any. Pursuant to the terms of the
Charles River Partnership XI, L.P. agreement, Mr. Armony is
obligated to transfer the stock options (or underlying shares or
proceeds) held by him to charity.
(12)
Includes 50,870 shares of our
common stock held by TNR Partnership, a limited partnership, of
which Mr. Maheus spouse is the general partner.
Mr. Maheu disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest therein, if any.
Also includes 196,793 shares issuable to Mr. Maheu
upon exercise of options exercisable within 60 days of
March 31, 2007.
(13)
Includes 1,577,059 shares of
our common stock held by the Martin Trust 2006 GRAT, a
trust. Mr. Trust disclaims beneficial ownership of the
shares held by the Martin Trust 2006 GRAT except to the
extent of his pecuniary interest therein, if any. Also includes
183,453 shares of issuable to Mr. Trust upon exercise of
options exercisable within 60 days of March 31, 2007.
(14)
Includes 55,689 shares
issuable to Mr. Moriarty upon exercise of options
exercisable within 60 days of March 31, 2007.
(15)
Includes an aggregate of
2,729,234 shares issuable to our executive officers and
directors upon exercise of options exercisable within
60 days of March 31, 2007.
112
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113
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114
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115
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116
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before the stockholder became interested, our board of directors
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder
upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also
officers and employee stock plans, in some instances
at or after the time the stockholder became interested, the
business combination was approved by our board of directors of
the corporation and authorized at an annual or special meeting
of the stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by
the interested stockholder
any merger or consolidation involving the corporation and the
interested stockholder
any sale, lease, exchange, mortgage, pledge, transfer or other
disposition involving the interested stockholder of 10% or more
of the assets of the corporation
subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder
subject to exceptions, any transaction involving the corporation
that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially
owned by the interested stockholder
the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation
117
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118
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Days
after date of
Shares
eligible
this
prospectus
for
sale
Comment
Shares sold in the offering
Freely tradable shares saleable
under Rule 144(k) that are not subject to
lock-up
Shares saleable under
Rules 144 and 701 that are not subject to
lock-up
Lock-up
released; shares saleable under Rules 144, 144(k) and 701
Restricted securities held for one
year or less
one percent of the number of shares of our common stock then
outstanding, which will equal
approximately shares
immediately after this offering, or
the average weekly trading volume in our common stock on the
NASDAQ Global Market during the four calendar weeks preceding
the date of filing of a Notice of Proposed Sale of Securities
Pursuant to Rule 144 with respect to the sale
119
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the person is not our affiliate and has not been our affiliate
at any time during the three months preceding the sale
the person has beneficially owned the shares proposed to be sold
for at least two years, including the holding period of certain
prior owners
120
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121
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an individual who is a citizen or resident of the United States
a corporation (including any entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States or any state thereof or
the District of Columbia
an estate the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source
a trust (1) if a U.S. court is able to exercise
primary supervision over the administration of the trust and one
or more U.S. persons have authority to control all
substantial decisions of the trust or (2) that has made a
valid election to be treated as a U.S. person for such
purposes
any state, local or foreign tax consequences
any tax consequences or computation of the alternative minimum
tax
any U.S. federal gift tax consequences
any U.S. federal tax considerations that may be relevant to
a
non-U.S. holder
in light of its particular circumstances or to
non-U.S. holders
that may be subject to special treatment under
122
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U.S. federal tax laws, including without limitation, banks
or other financial institutions, insurance companies, tax-exempt
organizations, certain trusts, pension plans, hybrid entities,
controlled foreign corporations, passive
foreign investment companies, certain former citizens or
residents of the U.S., holders subject to U.S. federal
alternative minimum tax, broker-dealers, dealers or traders in
securities or currencies and holders that hold our common stock
as part of a straddle, hedge,
conversion transaction, synthetic
security or other integrated investment
123
Table of Contents
the gain is effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States or, if an
applicable income tax treaty so requires, is attributable to a
permanent establishment maintained by the
non-U.S. holder
in the United States; in these cases, the
non-U.S. holder
generally will be taxed on its net gain derived from the
disposition at the regular graduated rates and in the manner
applicable to United States persons (as defined in the Code),
unless an applicable treaty provides otherwise, and, if the
non-U.S. holder
is a foreign corporation, the branch profits tax
described above may also apply
the
non-U.S. holder
is an individual present in the United States for 183 days
or more in the taxable year of the disposition and certain other
conditions are met, in which case, the
non-U.S. holder
will be subject to a 30% tax on the amount by which the gain
derived from the sale or other disposition of our common stock
and any other
U.S.-source
capital gains realized by the
non-U.S. holder
in the same taxable year exceed the
U.S.-source
capital losses realized by the
non-U.S. holder
in that taxable year unless an applicable income tax treaty
provides an exemption or a lower rate
we are or have been a United States real property holding
corporation for U.S. federal income tax purposes at
any time within the shorter of the five-year period ending on
the date of disposition or the period that the
non-U.S. holder
held our common stock. We do not believe that we have been, are,
or will become, a United States real property holding
corporation, although there can be no assurance in this regard.
If we are, or were to become, a United States real property
holding corporation at any time during the applicable period,
however, any gain recognized on a disposition of our common
stock by a
non-U.S. holder
that did not own (directly, indirectly or constructively) more
than five percent of our common stock at any time during the
applicable period generally would not be subject to
U.S. federal income tax, provided that, at the time of the
disposition, our common stock is regularly traded on an
established securities market (within the meaning of
Section 897(c)(3) of the Code)
124
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125
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F-4
F-7
F-9
F-10
F-39
F-43
Name
Number
of shares
126
Table of Contents
Without over-
With over-
allotment
exercise
allotment
exercise
$
$
$
$
127
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128
Table of Contents
the information set forth in this prospectus and otherwise
available to the representatives
our prospects and the history and prospects for the industry in
which we compete
an assessment of our management
our prospects for future earnings
the general condition of the securities markets at the time of
this offering
the recent market prices of, and demand for, publicly traded
common stock of generally comparable companies; and other
factors deemed relevant by the underwriters and us
129
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130
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Page
F-2
F-3
F-5
F-6
F-8
F-11
F-1
Table of Contents
Virtusa Corporation and Subsidiaries:
F-2
Table of Contents
December 31,
March 31,
2006
(In
thousands, except share and per share amounts)
2005
2006
(Unaudited)
$
28,406
$
30,237
$
32,207
10,435
16,339
26,913
662
1,624
3,479
4,192
4,896
3,181
30
1,345
1,803
42,350
52,775
70,624
6,877
4,810
7,012
57
40
41
701
701
773
1,775
100
393
407
$
50,085
$
58,719
$
80,632
$
1,901
$
1,728
$
2,264
2,757
4,561
5,617
1,901
3,487
4,760
58
784
1,038
68
274
737
229
39
3
206
879
259
6,914
11,079
15,557
48
8
24
264
428
484
7,226
11,515
16,065
F-3
Table of Contents
December 31,
March 31,
2006
(In
thousands, except share and per share amounts)
2005
2006
(Unaudited)
13,488
13,494
13,499
15,115
15,124
15,131
12,210
12,221
12,229
19,945
19,975
19,997
60,758
60,814
60,856
187
198
203
(442
)
(442
)
(442
)
3,146
5,470
7,130
(71
)
(49
)
(51
)
(53
)
(20,219
)
(18,238
)
(2,725
)
(451
)
(547
)
(402
)
(17,899
)
(13,610
)
3,711
$
50,085
$
58,719
$
80,632
Table of Contents
Consolidated statements of
operations
F-5
Table of Contents
Consolidated statements of changes in
stockholders equity
Notes
receivable
Accumulated
Total
Additional
from
other
Total
comprehensive
(In thousands
except
Common
stock
Treasury
stock
paid-in
Deferred
employee
Accumulated
comprehensive
stockholders
income
per share
amounts)
Shares
Amount
Shares
Amount
capital
compensation
stockholders
deficit
loss
equity
(loss)
16,486,786
$
165
$
$
931
$
$
(610
)
$
(21,121
)
$
(713
)
$
(21,348
)
1,248,245
12
112
124
(689,118
)
(379
)
379
(28
)
(28
)
(32
)
(32
)
241,214
2
119
(7
)
114
47
47
657
(497
)
160
179
179
$
179
(208
)
(208
)
(208
)
17,967,245
$
179
(689,118
)
$
(379
)
$
1,834
$
(497
)
$
(266
)
$
(21,329
)
$
(534
)
$
(20,992
)
$
(29
)
(624,123
)
(63
)
(63
)
(9
)
(9
)
226
226
(57
)
(57
)
675,438
7
1,479
1,486
78,608
1
39
40
197
35
232
45
45
(391
)
391
83
83
$
83
1,110
1,110
1,110
18,730,291
$
187
(1,313,241
)
$
(442
)
$
3,146
$
(71
)
$
(49
)
$
(20,219
)
$
(451
)
$
(17,899
)
$
1,193
(2
)
(2
)
(56
)
(56
)
832,808
8
758
766
253,273
3
106
109
F-6
Table of Contents
Notes
receivable
Accumulated
Total
Additional
from
other
Total
comprehensive
(In thousands
except
Common
stock
Treasury
stock
paid-in
Deferred
employee
Accumulated
comprehensive
stockholders
income
per share
amounts)
Shares
Amount
Shares
Amount
capital
compensation
stockholders
deficit
loss
equity
(loss)
1,516
71
1,587
(96
)
(96
)
$
(96
)
1,981
1,981
1,981
19,816,372
$
198
(1,313,241
)
$
(442
)
$
5,470
$
$
(51
)
$
(18,238
)
$
(547
)
$
(13,610
)
$
1,885
(2
)
(2
)
(42
)
(42
)
275,022
3
366
369
212,370
2
118
120
1,369
1,369
145
145
$
145
(151
)
(151
)
15,513
15,513
15,513
20,303,764
$
203
(1,313,241
)
$
(442
)
$
7,130
$
$
(53
)
$
(2,725
)
$
(402
)
$
3,711
$
15,658
Table of Contents
Consolidated statements of cash
flows
F-8
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Notes to consolidated financial statements (continued)
(d)
Derivative
Instruments and Hedging Activities
(e)
Cash and Cash
Equivalents, Restricted Cash and Investments
F-12
Table of Contents
Notes to consolidated financial statements (continued)
(f)
Fair Value of
Financial Instruments
(g)
Concentration
of Credit Risk and Significant Customers
F-13
Table of Contents
Notes to consolidated financial statements (continued)
(h)
Property and
Equipment
(j)
Internally-Developed
Software
F-14
Table of Contents
Notes to consolidated financial statements (continued)
(l)
Redeemable
Convertible Preferred Stock
F-15
Table of Contents
Notes to consolidated financial statements (continued)
(n)
Costs of
Revenue and Operating Expenses
F-16
Table of Contents
Notes to consolidated financial statements (continued)
F-17
Table of Contents
Notes to consolidated financial statements (continued)
Year ended
March 31,
2004
2005
$
(208
)
$
1,110
6
10
(272
)
(905
)
$
(474
)
$
215
$
(0.01
)
$
0.07
$
(0.01
)
$
0.02
$
(0.03
)
$
0.01
$
(0.03
)
$
0.00
Weighted
average fair
Nine
months ended
value options
pricing
Year ended
March 31,
December 31,
model
assumptions
2004
2005
2006
2005
2006
(Unaudited)
3
.00%
3
.57%
4
.24%
4
.20%
4
.76%
6
.24
6
.30
6
.44
6
.38
7
.00
70
.90%
66
.10%
60
.10%
61
.35%
50
.74%
F-18
Table of Contents
Notes to consolidated financial statements (continued)
F-19
Table of Contents
Notes to consolidated financial statements (continued)
Nine months
ended
Year ended
March 31,
December 31,
2004
2005
2006
2005
2006
(Unaudited)
17,406,840
17,052,470
17,570,755
17,441,030
18,713,179
746,851
1,007,660
2,285,195
35,762,836
35,762,836
35,762,836
17,406,840
53,562,157
54,341,251
17,441,030
56,761,210
$
$
0.05
$
0.07
$
$
0.56
F-20
Table of Contents
Notes to consolidated financial statements (continued)
F-21
Table of Contents
Notes to consolidated financial statements (continued)
Year ended
March 31,
December 31,
Estimated
Useful
2005
2006
2006
Life
(Years)
(Unaudited)
3
$
11,200
$
12,049
$
15,189
7
1,608
1,626
1,878
4
187
171
165
3
2,248
2,624
2,821
Lesser of
982
438
438
Estimated
Useful Life or
Lease Term
236
161
1,095
16,461
17,069
21,586
9,584
12,259
14,574
$
6,877
$
4,810
$
7,012
F-22
Table of Contents
Notes to consolidated financial statements (continued)
F-23
Table of Contents
Notes to consolidated financial statements (continued)
F-24
Table of Contents
Notes to consolidated financial statements (continued)
F-25
Table of Contents
Notes to consolidated financial statements (continued)
F-26
Table of Contents
Notes to consolidated financial statements (continued)
F-27
Table of Contents
Notes to consolidated financial statements (continued)
F-28
Table of Contents
Notes to consolidated financial statements (continued)
Number of
options
to purchase
common
Weighted
average
shares
exercise
price
3,446,457
$
0.50
2,018,459
0.53
(241,214
)
0.50
(1,073,573
)
0.50
4,150,129
0.52
3,046,106
1.91
(78,608
)
0.50
(404,898
)
1.05
6,712,729
1.11
1,378,150
0.91
(253,273
)
0.43
(649,327
)
1.28
(1,084,132
)
1.28
6,104,147
1.05
1,834,507
1.68
(212,370
)
0.57
(239,502
)
1.46
7,486,782
1.21
March 31,
December 31,
2006
2006
(Unaudited)
2,992,354
3,482,445
$
0.47
$
0.56
2,845,090
1,200,085
F-29
Table of Contents
Notes to consolidated financial statements (continued)
Options
outstanding
Options
exercisable
Weighted
average
Weighted
Weighted
remaining
average
average
Option
Number
contractual
exercise
Number
exercise
exercise
price
outstanding
life in
years
price
exercisable
price
172,206
7.14
$
0.10
102,766
$
0.10
2,628,476
5.65
0.50
2,325,860
0.50
73,800
9.62
0.76
10,000
0.76
642,000
9.83
0.92
20,000
0.92
544,700
9.00
0.99
26,670
1.37
81,702
8.88
1.70
17,170
1.70
1,113,808
8.08
1.75
226,885
1.75
306,235
8.25
2.00
82,676
2.00
443,420
8.43
2.20
168,297
2.20
97,800
8.69
2.30
12,030
2.30
6,104,147
7.34
1.06
2,992,354
0.74
F-30
Table of Contents
Notes to consolidated financial statements (continued)
Options
outstanding
Options
exercisable
Weighted
average
Weighted
Weighted
remaining
average
average
Option
Number
contractual
exercise
Number
exercise
exercise
price
outstanding
life in
years
price
exercisable
price
172,206
6.39
$
0.10
144,430
$
0.10
2,366,676
4.92
0.50
2,243,969
0.50
1,195,500
8.76
0.92
214,300
0.93
1,183,757
9.60
1.34
52,152
1.34
106,200
7.71
1.59
47,135
1.54
1,097,733
7.32
1.75
408,505
1.75
266,085
7.49
2.00
111,520
2.00
385,075
7.67
2.20
234,859
2.20
94,800
7.94
2.30
25,575
2.30
618,750
9.96
2.36
7,486,782
7.39
1.21
3,482,445
0.86
SAR Plan
activity
Weighted
average
Number of
exercise
SARs
price
$
649,327
1.28
36,550
0.87
(10,840
)
0.50
(103,924
)
1.53
571,113
1.23
157,157
1.42
(8,306
)
0.55
(85,937
)
1.42
634,027
1.26
F-31
Table of Contents
Notes to consolidated financial statements (continued)
March 31,
December 31,
2006
2006
(Unaudited)
269,564
286,433
$
0.74
$
2.66
928,887
865,973
SARs
outstanding
SARs
exercisable
Weighted
average
Weighted
Weighted
remaining
average
average
SAR
exercise
Number
contractual
exercise
Number
exercise
price
outstanding
life in
years
price
exercisable
price
243,427
5.95
$
0.50
208,909
$
0.50
54,000
9.10 9.83
0.86
21,633
7.90
1.45
11,185
1.45
33,290
8.88
1.70
4,726
1.70
31,173
8.08
1.75
9,881
1.75
114,949
8.21
2.00
21,673
2.00
30,096
8.43
2.20
8,220
2.20
42,545
8.69
2.30
4,970
2.30
571,113
7.43
1.23
269,564
0.81
F-32
Table of Contents
Notes to consolidated financial statements (continued)
SARs
outstanding
SARs
exercisable
Weighted
average
Weighted
remaining
average
Weighted
SAR
exercise
Number
contractual
exercise
Number
average
price
outstanding
life in
years
price
exercisable
exercise
price
215,743
5.16
$0.50
200,937
$0.50
44,460
8.35 9.07
0.86
3,890
0.85
129,920
9.60
1.34
17,916
7.15
1.45
11,399
1.45
33,402
8.13
1.70
5,052
1.70
25,541
7.32
1.75
12,627
1.75
96,482
7.45
2.00
33,324
2.00
24,198
7.67
2.20
10,639
2.20
34,015
7.94
2.30
8,565
2.30
12,350
9.96
2.36
634,027
7.30
1.26
286,433
0.91
F-33
Table of Contents
Notes to consolidated financial statements (continued)
Stock
options
SARs
Weighted
Weighted
average
average
grant
grant
date fair
date fair
Shares
value
SARs
value
3,896,779
$
1.01
$
1,378,150
0.55
36,550
0.49
(369,421
)
0.64
369,421
1.04
(722,173
)
0.93
(498
)
1.04
(1,071,542
)
0.90
(103,924
)
0.98
3,111,793
0.88
301,549
1.03
1,834,507
0.97
157,157
0.83
(725,284
)
0.83
(43,649
)
0.95
(216,679
)
0.98
(67,847
)
0.98
4,004,337
0.93
347,210
0.97
F-34
Table of Contents
Notes to consolidated financial statements (continued)
Year ended
Nine months
ended
March 31,
December 31,
2004
2005
2006
2005
2006
(Unaudited)
$
(1,615
)
$
(924
)
$
(1,744
)
$
(2,332
)
$
4,384
1,553
2,133
3,901
1,871
7,049
$
(62
)
$
1,209
$
2,157
$
(461
)
$
11,433
F-35
Table of Contents
Notes to consolidated financial statements (continued)
Nine months
ended
Year ended
March 31,
December 31,
2004
2005
2006
2005
2006
(Unaudited)
$
127
$
99
$
97
$
118
$
170
19
24
8
152
55
38
554
$
146
$
99
$
176
$
164
$
876
$
1,307
$
343
$
(74
)
$
(56
)
$
1,721
339
(133
)
(24
)
(18
)
35
(1,307
)
(210
)
98
74
(7,051
)
$
146
$
99
$
176
$
164
$
(4,080
)
Year ended
Nine months
ended
March 31,
December 31,
2004
2005
2006
2005
2006
(Unaudited)
(34.0%
)
34.0%
34.0%
(34.0%
)
34.0%
3.6
3.7
(0.9
)
(0.9
)
3.9
(370.6
)
(58.4
)
(54.4
)
(54.4
)
(14.8
)
30.7
0.7
(1,717.9
)
(15.8
)
4.5
98.5
(61.9
)
637.5
44.0
26.5
26.5
3.1
1,686.2
(1.6
)
235.5%
8.2%
8.1%
35.7%
(35.7%
)
F-36
Table of Contents
Notes to consolidated financial statements (continued)
March 31,
December 31,
2005
2006
2006
(Unaudited)
$
8,155
$
7,242
$
4,365
35
139
218
107
240
177
31
72
220
329
531
580
535
1,104
24
20
20
8,681
8,779
6,684
(8,681
)
(8,779
)
(1,728
)
$
$
$
4,956
F-37
Table of Contents
Notes to consolidated financial statements (continued)
March 31,
December
31,
2004
2005
2006
2006
(Unaudited)
$
185
$
187
$
241
$
595
$
123
$
209
$
258
$
370
37
78
107
151
11
13
21
31
46
(31
)
17
363
(10
)
(9
)
(26
)
(39
)
2
(2
)
(7
)
(11
)
$
209
$
258
$
370
$
865
$
209
$
258
$
370
$
865
(35
)
7
(30
)
(387
)
34
17
$
208
$
282
$
340
$
478
F-38
Table of Contents
Notes to consolidated financial statements (continued)
March 31,
December
31,
2004
2005
2006
2006
(Unaudited)
$
37
$
78
$
107
$
151
11
13
21
31
(17
)
(17
)
(16
)
(2
)
$
31
$
72
$
112
$
182
8.5%
9.0%
9.0%
9.0%
5.0% every
5.0% every
5.0% every
6.5%-8.0%
four years
four years
four years
annually
to 8.0%
to 8.0%
to 8.0%
annually
annually
annually
Table of Contents
Notes to consolidated financial statements (continued)
F-40
Table of Contents
Notes to consolidated financial statements (continued)
Operating
leases
$
2,364
2,355
2,172
1,943
1,259
695
$
10,788
F-41
Table of Contents
Notes to consolidated financial statements (continued)
Year ended
March 31,
Nine months ended
December 31,
2004
2005
2006
2005
2006
(Unaudited)
$
42,822
$
58,540
$
66,020
$
48,600
$
67,377
32
288
157
389
1,912
10,627
4,983
21,622
$
42,822
$
60,484
$
76,935
$
53,740
$
89,388
F-42
Table of Contents
Notes to consolidated financial statements (continued)
March 31,
December 31,
2005
2006
2006
(Unaudited)
$
1,696
$
1,090
$
1,184
3,677
2,703
3,777
1,500
1,005
1,964
4
12
87
$
6,877
$
4,810
$
7,012
Table of Contents
Notes to consolidated financial statements (continued)
F-44
Table of Contents
JPMorgan
Bear,
Stearns & Co. Inc.
Cowen
and Company
William
Blair & Company
Table of Contents
Item 13.
Other expenses
of issuance and distribution.
Amount
$
2,825
9,700
100,000
*
*
*
*
*
*
$
*
*
To be filed by amendment.
II-1
Table of Contents
II-2
Table of Contents
Item 15.
Recent sales
of unregistered securities.
II-3
Table of Contents
II-4
Table of Contents
Item 16.
Exhibits and
Financial Statement Schedule.
II-5
Table of Contents
Schedule IIValuation and Qualifying Accounts
For the years ended March 31, 2004, 2005 and 2006 and the
nine months
ended December 31, 2005 and 2006
(in thousands)
Balance at
Charged to
Balance at
beginning of
costs and
Deductions/
end of
Description
period
expenses
other
period
$
76
$
31
$
31
$
76
$
76
$
110
$
97
$
89
$
89
$
326
$
$
415
$
89
$
320
$
$
409
$
415
$
168
$
185
$
398
Item 17.
Undertakings.
II-6
Table of Contents
II-7
Table of Contents
By:
Chief Executive Officer and
Chairman of the Board of Directors (Principal Executive Officer)
President, Chief Operating Officer
and Director
Executive Vice President of
Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
II-8
Table of Contents
Director
Director
Director
Director
Director
Director
II-9
Table of Contents
1
.1*
Form of Underwriting Agreement
3
.1
Form of Sixth Amended and Restated
Certificate of Incorporation of the Registrant
3
.2
Amended and Restated By-laws of
the Registrant
3
.3
Form of Seventh Amended and
Restated Certificate of Incorporation of the Registrant (to be
filed following the closing of this offering)
4
.1*
Specimen Certificate evidencing
shares of common stock
4
.2
Fourth Amended and Restated
Registration Rights Agreement by and among the Registrant and
the Investors named therein, dated as of March 29, 2007
5
.1*
Opinion of Goodwin Procter LLP
10
.1*
Warrant by and between Registrant
and Silicon Valley Bank, dated as of April 9, 2001, as
amended
10
.2*
Warrant by and between Registrant
and Silicon Valley Bank, dated as of February 27, 2002, as
amended
10
.3
Lease Agreement by and between the
Registrant and W9/TIB Real Estate Limited Partnership, dated
June 2000, as amended by a First Amendment thereto, dated
November 2000, and a Second Amendment and Extension of Lease
thereto, dated December 30, 2003
10
.4
Amended and Restated 2000 Stock
Option Plan and forms of agreements thereunder
10
.5
2005 Stock Appreciation Rights
Plan and form of agreement thereunder
10
.6*
Material Service Provider
Agreement by and between the Registrant and JPMorgan Chase Bank,
N.A. dated December 6, 2004
10
.7
Form of Indemnification Agreement
between the Registrant and each of its directors
10
.8*
Provision of IT Services for BT
Contract by and between the Registrant and British
Telecommunications plc, dated March 29, 2007
10
.9
Amended and Restated Credit
Agreement between Registrant and Citizens Bank of Massachusetts,
dated as of September 29, 2006, including Amended and
Restated Revolving Credit Note, Amended and Restated Security
Agreement, Negative Pledge Agreement and Stock Pledge Agreement,
each dated as of September 29, 2006
10
.10
Executive Agreement between the
Registrant and Kris Canekeratne dated as of April 5, 2007
10
.11
Executive Agreement between the
Registrant and Danford F. Smith, dated as of April 5, 2007
10
.12
Executive Agreement between the
Registrant and Thomas R. Holler, dated as of April 5, 2007
10
.13*
Executive Agreement between the
Registrant and Roger Keith Modder, dated as of April 5, 2007
10
.14*
Executive Agreement between the
Registrant and T.N. Hari, dated as of April 5, 2007
10
.15*
Co-Developer Agreement and Lease
Deed between the Registrant and APIICL, a state government
agency in India, dated as of March 2007
21
.1
Subsidiaries of Registrant
23
.1
Consent of KPMG LLP
23
.2*
Consent of Goodwin Procter LLP
(included in Exhibit 5.1)
24
.1
Power of Attorney (included on
signature page)
*
To be filed by amendment.
II-10
Exhibit 3.1
SIXTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VIRTUSA CORPORATION
Virtusa Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Virtusa Corporation. The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was April 19, 2000 (the "Original Certificate"). The name under which the Corporation filed the Original Certificate was eRunway, inc.
2. A Second Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on December 21, 2000 under the name eRunway, inc.
3. The Second Amended and Restated Certificate of Incorporation of the Corporation was amended by a Certificate of Amendment filed with the office of the Secretary of State of Delaware on April 25, 2002 under the name Virtusa, Inc. and was corrected by a Certificate of Correction filed with the Secretary of State of Delaware on on May 2, 2002 to correct the Corporation's name to Virtusa Corporation.
4. A Third Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on November 2, 2002.
5. A Fourth Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on February 27, 2003.
6. A Fifth Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on February 5, 2004.
7. This Sixth Amended and Restated Certificate of Incorporation (the "Certificate") amends, restates and integrates the provisions of the Fifth Amended and Restated Certificate of Incorporation, and was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law (the "DGCL").
4. The text of the Fifth Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to provide as herein set forth in full.
ARTICLE I
The name of the Corporation is Virtusa Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall have authority to issue is one hundred eighty-seven million, seventy-five thousand, six hundred and thirty-eight (187,075,638) shares, of which (i) one hundred twenty million (120,000,000) shares shall be a class designated as common stock, par value $0.01 per share (the "Common Stock"), (ii) sixty-two million, seventy-five thousand six hundred and thirty-eight (62,075,638) shares shall be a class designated as pre-IPO preferred stock, par value $.01 per share (the "pre-IPO Preferred Stock"), and (iii) five million (5,000,000) shares shall be a class designated as undesignated preferred stock, par value $0.01 per share (the "Undesignated Preferred Stock" and, together with the pre-IPO Preferred Stock, the "Preferred Stock").
The number of authorized shares of the class of Common Stock and Undesignated Preferred Stock may from time to time be increased or decreased (but not below the number of shares outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote, without a vote of the holders of the Preferred STOCK (subject to the terms of the pre-IPO Preferred Stock and except as otherwise provided in any certificate of designations of any series of Undesignated Preferred Stock).
The powers, preferences and rights of, and the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or as set forth below in, this Article IV.
A. COMMON STOCK
Subject to all the rights, powers and preferences of the Preferred Stock and except as provided by law or in this Article IV (or in any certificate of designations of any series of Undesignated Preferred Stock):
(a) the holders of the Common Stock shall have the exclusive right to vote for the election of directors of the Corporation (the "Directors") and on all other matters requiring stockholder action, each outstanding share entitling the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to
vote on any amendment to this Certificate (or on any amendment to a certificate of designations of any series of Undesignated Preferred Stock) that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of Undesignated Preferred Stock if the holders of such affected series are entitled to vote, either separately or together with the holders of one or more other such series, on such amendment pursuant to this Certificate (or pursuant to a certificate of designations of any series of Undesignated Preferred Stock) or pursuant to the DGCL;
(b) dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock.
B. PRE-IPO PREFERRED STOCK
1. Designation. A total of 4,043,582 shares of the Corporation's pre-IPO Preferred Stock shall be designated as a series known as Series A Convertible Participating Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), a total of 8,749,900 shares of the Corporation's pre-IPO Preferred Stock shall be designated as a series known as Series B Convertible Participating Preferred Stock, $.01 par value per share (the "Series B Preferred Stock"), a total of 12,807,624 shares of the Corporation's pre-IPO Preferred Stock shall be designated as a series known as Series C Convertible Participating Preferred Stock, par value $.01 per share (the "Series C Preferred Stock") and a total of 7,458,494 shares of the Corporation's pre-IPO Preferred Stock shall be designated as a series known as Series D Convertible Participating Preferred Stock, par value $.01 per share (the "Series D Preferred Stock" and, together with the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, the "Convertible Preferred Stock").
2. Voting. Each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to the number of votes equal to the largest number of full shares of Common Stock into which their shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock taken together in the aggregate could be converted pursuant to Section B.6 hereof on the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, on the date such vote is taken or any written consent of stockholders is effected. Each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the by-laws of the Corporation and shall vote with holders of the Common Stock, voting together as a single class, upon all matters submitted to a vote of stockholders, excluding those matters required to be submitted to a class or Series vote pursuant to the terms hereof (including, without limitation, Section B.8) or by law.
3. Dividends. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to receive, out of funds legally available therefor, any dividends declared on the Common Stock (treating each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock as being entitled to the number of shares of Common Stock into which each of such holder's shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock would be converted if they were converted pursuant to the provisions of Section B.6 hereof with such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend). This Section 3 shall not apply to dividends on the Common Stock payable solely in Common Stock. In addition, the holders of the then outstanding Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to receive, out of the funds legally available therefor, such other dividends as may be declared from time to time by the Board of Directors of the Corporation on a pro-rata, as-if converted basis.
4. Liquidation and Extraordinary Transactions.
(a) Liquidation Preference. Upon (i) any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a "Liquidation Event"), or (ii) (x) a merger or consolidation of the Corporation with or into another corporation (except for a merger or consolidation in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least a majority of the outstanding voting power of such surviving corporation; or (ii) any consolidation or merger effected exclusively to change the domicile of the Corporation), (y) the sale or transfer of all or substantially all of the properties and assets of the Corporation or (z) any purchase of shares of capital stock of the Corporation (either through a negotiated stock purchase or a tender for such shares) in one or more transactions by any party or group that did not beneficially own a majority of the voting power of the outstanding shares of capital stock of the Corporation immediately prior to such purchase, the effect of which is that such party or group beneficially owns at least a majority of such voting power immediately after such purchase (except any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Corporation or any successor, or indebtedness of the Corporation is cancelled or converted, or any combination thereof) (each an "Extraordinary Transaction"), each holder of outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, whether such assets are capital, surplus or earnings:
(i) Before any amount shall be paid or distributed to the holders of Common Stock or of any other stock ranking on liquidation junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock (w) each holder of outstanding shares of Series A Preferred Stock shall be paid an amount in cash (to the extent that cash is available, as described below) equal to (i) $3.3386 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like with respect to the Series A Preferred Stock) (the "Series A Base Liquidation Amount") plus (ii) any declared but unpaid dividends per share not paid pursuant to Section 6(a) below (the sum of clauses (i) and (ii) being referred to herein as the "Series A Convertible Liquidation Amount"), (x) each holder of outstanding shares of Series B Preferred Stock shall be paid an amount in cash (to the extent
cash is available, as described below) equal to (i) $1.75 per share (adjusted
appropriately for stock splits, stock dividends, recapitalizations and the like
with respect to the Series B Preferred Stock) (the "Series B Base Liquidation
Amount") plus (ii) any declared but unpaid dividends per share not paid pursuant
to Section 6(a) below (the sum of clauses (i) and (ii) being referred to herein
as the "Series B Convertible Liquidation Amount"), (y) each holder of
outstanding shares of Series C Preferred Stock shall be paid an amount per share
in cash (to the extent cash is available, as described below) equal to (i)
$0.9549 per share (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Series C Preferred Stock)
(the "Series C Base Liquidation Amount") plus (ii) any declared but unpaid
dividends not paid pursuant to Section 6(a) below (the sum of clauses (i) and
(ii) being referred to herein as the "Series C Convertible Liquidation Amount"
and (z) each holder of outstanding shares of Series D Preferred Stock shall be
paid an amount per share in cash (to the extent cash is available, as described
below) equal to (i) $2.681507 per share (adjusted appropriately for stock
splits, stock dividends, recapitalizations and the like with respect to the
Series D Preferred Stock) (the "Series D Base Liquidation Amount") plus (ii) any
declared but unpaid dividends not paid pursuant to Section 6(a) below (the sum
of clauses (i) and (ii) being referred to herein as the "Series D Convertible
Liquidation Amount"); provided that if, upon any Liquidation Event or
Extraordinary Transaction, the assets to be distributed to the holders of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock shall be insufficient to permit the
payment to such stockholders of the full preferential amounts aforesaid, then
all of the assets of the Corporation shall be distributed ratably to the holders
of the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock on the basis of the Series A
Convertible Liquidation Amount payable with respect to such Series A Preferred
Stock, the Series B Convertible Liquidation Amount payable with respect to the
Series B Preferred Stock, the Series C Convertible Liquidation Amount payable
with respect to the Series C Preferred Stock and the Series D Convertible
Liquidation Amount payable with respect to the Series D Preferred Stock if each
such liquidation preference was paid in full; and
(ii) After the payment of the Series A Convertible Liquidation Amount, Series B Convertible Liquidation Amount, Series C Convertible Liquidation Amount and Series D Convertible Liquidation Amount, any assets remaining available for distribution shall be distributed ratably among the holders of the Common Stock, the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock based upon the number of shares of Common Stock (i) then held by each holder of Common Stock, and (ii) issuable upon conversion of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock held by a holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock pursuant to Section B.6 immediately prior to the occurrence of any such Liquidation Event or Extraordinary Transaction (such amount with respect to each share of Series A Preferred Stock, Series B Preferred Stock Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as the case may be, the "Residual Convertible Liquidation Amount"). The Residual Convertible Liquidation Amount with respect to the Series A Preferred Stock together with the Series A Convertible Liquidation Amount shall be deemed the "Total Series A Convertible Liquidation Amount," the Residual Convertible Liquidation Amount with respect to the Series B Preferred Stock together with the Series B Convertible Liquidation Amount shall be deemed the "Total Series B Convertible Liquidation Amount", the Residual Convertible
Liquidation Amount with respect to the Series C Preferred Stock together with the Series C Convertible Liquidation Amount shall be deemed the "Total Series C Convertible Liquidation Amount") and the Residual Convertible Liquidation Amount with respect to the Series D Preferred Stock together with the Series D Convertible Liquidation Amount shall be deemed the "Total Series D Convertible Liquidation Amount"). Notwithstanding anything to the contrary contained herein, in no event (i) shall the aggregate per share amount distributed to the holders of shares of Series A Preferred Stock as the Total Series A Convertible Liquidation Amount pursuant to this Section B.4, in connection with any such Liquidation Event or Extraordinary Transaction exceed two and one-half (2 1/2) times the Series A Base Liquidation Amount, (ii) shall the aggregate per share amount distributed to the holders of shares of Series B Preferred Stock as the Total Series B Convertible Liquidation Amount pursuant to this Section B.4, in connection with any such Liquidation Event or Extraordinary Transaction exceed two and one-half (2 1/2) times the Series B Base Liquidation Amount, (iii) shall the aggregate per share amount distributed to the holders of shares of Series C Preferred Stock as the Total Series C Convertible Liquidation Amount pursuant to this Section B.4, in connection with any such Liquidation Event or Extraordinary Transaction exceed two and one-half (2 1/2) the Series C Base Liquidation Amount nor (iv) shall the aggregate per share amount distributed to the holders of shares of Series D Preferred Stock as the Total Series D Convertible Liquidation Amount pursuant to this Section B.4, in connection with any such Liquidation Event or Extraordinary Transaction exceed two and one-half (2 1/2) times the Series D Base Liquidation Amount. Notwithstanding the foregoing, the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall not be entitled to receive the Residual Convertible Liquidation Amount pursuant to this Section B.4(a)(ii) if the aggregate gross proceeds paid to the stockholders of the Corporation in connection with any such Liquidity Event or Extraordinary Transaction exceed $285,000,000 (a "Qualified Transaction"); thereafter, upon the occurrence of any such Qualified Transaction (and except as set forth in Section B.4(b) below), the holders of Series A Preferred Stock shall be entitled to receive only the Series A Convertible Liquidation Amount pursuant to this Section B.4, the holders of Series B Preferred Stock shall be entitled to receive only the Series B Convertible Liquidation Amount pursuant to this Section B.4, the holders of Series C Preferred Stock shall be entitled to receive only the Series C Convertible Liquidation Amount pursuant to this Section B.4 and the holders of Series D Preferred Stock shall be entitled to receive only the Series D Convertible Liquidation Amount pursuant to this Section B.4.
For the purposes of this Section B.4, the holders of the Convertible Preferred Stock, by majority vote, upon the occurrence of a Liquidation Event or Extraordinary Transaction, may elect for all holders of Convertible Preferred Stock to have any transaction or event that would otherwise be deemed a Liquidation Event or Extraordinary Transaction to not be deemed to be a Liquidation Event or Extraordinary Transaction.
(b) Conversion Rights Not Impaired. Nothing in this Section B.4 shall with respect to any Liquidation Event or Extraordinary Transaction in any way limit the right of each holder of a Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock to elect to have the conversion rights of Section B.6 govern such Liquidation Event or Extraordinary Transaction.
(c) Non-Cash Consideration. Notwithstanding the provisions of
Section B.4(a), in connection with any Liquidation Event or Extraordinary
Transaction, the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall, on the effective
date of such Liquidation Event or Extraordinary Transaction, be paid by the
Corporation or by a third party, as applicable, the Series A Convertible
Liquidation Amount, Series B Convertible Liquidation Amount, Series C
Convertible Liquidation Amount or Series D Convertible Liquidation Amount, as
applicable, in cash solely to the extent that cash is paid in such Liquidation
Event or Extraordinary Transaction and then (or alternatively if no cash
payments are involved, as applicable), in such other consideration as is
delivered in such Liquidation Event or Extraordinary Transaction an amount equal
to the remaining Series A Convertible Liquidation Amount, Series B Convertible
Liquidation Amount, Series C Convertible Liquidation Amount or Series D
Convertible Liquidation Amount, as applicable. The Residual Convertible
Liquidation Amount shall be paid in the same combination of cash and other
consideration as remains payable to pay to the holders of the Common Stock and
the holders entitled to the Residual Convertible Liquidation Amount (after
payment of Series A Convertible Liquidation Amount, Series B Convertible
Liquidation Amount, Series C Convertible Liquidation Amount or Series D
Convertible Liquidation Amount, as applicable, if any) based upon the number of
shares of Common Stock (i) then held by each holder of Common Stock and (ii)
issuable upon conversion of the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock held by a
holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock pursuant to Section B.6 immediately prior to
the occurrence of any such Liquidation Event or Extraordinary Transaction.
(d) Surrender of Certificates. On the effective date of any Liquidation Event or Extraordinary Transaction (or thereafter, if so provided in accordance with the terms of such Liquidation Event or Extraordinary Transaction), the Corporation (or third party, as applicable) shall pay all cash and other consideration to which the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be entitled under this Section B.4. Each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall surrender the certificate or certificates representing such shares, duly assigned or endorsed for transfer (or accompanied by duly executed stock powers relating thereto) to the Corporation (or third party, as applicable) at the principal executive office of the Corporation or the offices of the transfer agent for the Corporation (or third party, as applicable), or shall notify the Corporation or any transfer agent that such certificates have been lost, stolen or destroyed and shall execute an affidavit or agreement reasonably satisfactory to the Corporation (or third party, as applicable) to indemnify the Corporation from any loss incurred by it in connection therewith (an "Affidavit of Loss"), and each surrendered certificate shall be canceled and retired.
(e) Notice. Prior to the occurrence of any Liquidation Event or Extraordinary Transaction, the Corporation will furnish each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock notice in accordance with Section B.9 hereof, together with a certificate prepared by the chief financial officer of the Corporation describing the facts of such Liquidation Event or Extraordinary Transaction, stating in reasonable detail the amount(s) per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock each holder of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock would receive pursuant to the provisions of Section B.4(a) hereof and stating in reasonable detail the facts upon which such amount was determined and, in connection with any Extraordinary Transaction, describing in reasonable detail all material terms of such Extraordinary Transaction, including without limitation the consideration to be delivered in connection with such Extraordinary Transaction, the valuation of the Corporation, as determined by the other party to the Extraordinary Transaction at the time of such Extraordinary Transaction, and the identities of the parties to the Extraordinary Transaction.
5. Redemption.
(a) Convertible Preferred Stock Redemption. On February 5, 2007 (the "Redemption Date"), at the election of the holders of a majority of the then outstanding shares of Convertible Preferred Stock, the Corporation shall redeem up to the Redemption Percentage (as set forth below) of the shares of Convertible Preferred Stock held by all holders of Convertible Preferred Stock at the applicable Redemption Price specified in Section 5(b) herein. The foregoing election shall be made by such holders giving the Corporation written notice of requested redemption not less than thirty (30) days prior to the Redemption Date. Within ten (10) days after receipt of such notice, the Corporation shall provide written notice to all other holders of Convertible Preferred Stock notifying all such holders of the request for redemption. The "Redemption Percentage" for each holder of Convertible Preferred Stock shall equal the following cumulative percentage of each such holder's Convertible Preferred Stock upon the applicable date set forth below, in each case reduced by the cumulative percentage of each such holder's Convertible Preferred Stock previously redeemed pursuant to this Section 5:
Redemption Date Percentage ---- ---------- February 5, 2007 33.3% February 5, 2008 66.7% February 5, 2009 100.0% |
(b) Upon the proper election of the Convertible Preferred Stock in accordance with Section B.5(a), on the Redemption Date and two subsequent anniversaries thereof, the Corporation shall redeem such number of shares of Convertible Preferred Stock as is equal to the appropriate Redemption Percentage of shares of Convertible Preferred Stock for a per share redemption price equal to the Series A Convertible Liquidation Amount with respect to the shares of Series A Preferred Stock, the Series B Convertible Liquidation Amount with respect to the shares of Series B Preferred Stock, the Series C Convertible Liquidation Amount with respect to the shares of Series C Preferred Stock and the Series D Convertible Liquidation Amount with respect to the shares of Series D Preferred Stock (the "Redemption Price"). On the Redemption Date, each holder of shares of Convertible Preferred Stock shall surrender the certificate evidencing such shares to the Corporation and shall thereupon be entitled to receive payment of the applicable Redemption Price.
(c) From and after the Redemption Date, upon payment in full of the Redemption Price for each share redeemed, all rights of the holders with respect to such
redeemed shares of Convertible Preferred Stock (except the right to receive the Redemption Price shall cease and such shares shall not thereafter be transferred on the books of this Corporation or be deemed outstanding for any purposes whatsoever.
(d) If the funds of the Corporation legally available for redemption of shares of Convertible Preferred Stock on the Redemption Date are insufficient to pay the full applicable Redemption Price, for each redeemed share, the Corporation shall pay those funds which are legally available ratably among the holders of such shares to be redeemed, based on the full Redemption Price which they are otherwise entitled to receive. At any time thereafter when additional funds of the Corporation are legally available for payment of the applicable Redemption Price, such funds will immediately be used to pay the balance of the amount which the Corporation has become obligated to pay on the Redemption Date but which has not been paid together with any accrued interest thereon as provided below.
6. Conversion. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall have the following conversion rights:
(a) Voluntary Conversion. Each holder of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may elect at any time to convert all or a portion of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock then held by such holder into a number of shares of Common Stock computed by multiplying the number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock to be converted by their applicable per share Conversion Value and dividing the result by the per share Conversion Price then in effect. The "Conversion Value" of the Series A Preferred Stock shall be $3.3386 per share (appropriately adjusted for stock splits, stock dividends, recapitalizations and the like with respect to the Series A Preferred Stock). The "Conversion Price" for the Series A Preferred Stock shall initially be $2.3807 per share (which price reflects an adjustment due to the Corporation's issuance of Series B Preferred Stock, and Series C Preferred Stock), and may be subject to further adjustment as hereinafter provided. The "Conversion Value" of the Series B Preferred Stock shall be $1.75 per share (appropriately adjusted for stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock). The "Conversion Price" for the Series B Preferred Stock shall initially be $1.54 per share (which price reflects an adjustment due to the Corporation's issuance of shares of Series C Preferred Stock), and may be subject to further adjustment as hereinafter provided. The "Conversion Value" of the Series C Preferred Stock shall be equal to $0.9549 per share (appropriately adjusted for stock splits, stock dividends, recapitalizations and the like with respect to the Series C Preferred Stock). The "Conversion Price" for the Series C Preferred Stock shall initially be equal to the Series C Conversion Value, subject to adjustment as hereinafter provided. The "Conversion Value" of the Series D Preferred Stock shall be equal to $2.681507 per share (appropriately adjusted for stock splits, stock dividends, recapitalizations and the like with respect to the Series D Preferred Stock). The "Conversion Price" for the Series D Preferred Stock shall initially be equal to the Series D Conversion Value, subject to adjustment as hereinafter provided. Additionally, each share of Convertible Preferred Stock outstanding shall automatically be converted into the number of shares of Common Stock into which such shares are convertible according to the formula set forth above at the then effective
Conversion Price upon the date specified by the holders of not less than a majority of the shares of Convertible Preferred Stock then outstanding. Except as otherwise provided in this Section B.6(a) hereof, if shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock are converted pursuant to this Section B.6(a) at a time when there are any declared and unpaid dividends or other amounts due on such shares, before any amount shall be paid or distributed to the holders of Common Stock, or of any other stock ranking on liquidation junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, such dividends and other amounts shall be paid in full by the Corporation in connection with such conversion; provided, however, that in the event shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock are so converted into shares of Common Stock in connection with an Extraordinary Transaction or a Liquidation Event, the Corporation shall pay, before any amount shall be paid to the holders of Common Stock, or of any other stock ranking on liquidation junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, to each holder of such shares, any declared and unpaid dividends or other amounts due on such shares.
(b) Automatic Conversion Upon Qualified Public Offering. Each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock outstanding shall automatically be converted into the number of shares of Common Stock into which such shares are convertible as computed according to the formula set forth in Section B.6(a) hereof at the then effective Series A Conversion Price, Series B Conversion Price, Series C Conversion Price or Series D Conversion Price, as applicable, as of, and in all cases subject to, the closing of the Corporation's first underwritten offering to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), provided that (i) such registration statement covers the offer and sale of Common Stock of which the aggregate gross proceeds attributable to sales for the account of the Corporation exceed $25,000,000 and (ii) at a pre-money valuation of the Corporation (on a fully diluted basis) of at least $325,000,000 (a "QPO" or a "Qualified Public Offering"); provided, that if a closing of a QPO occurs, all outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be deemed to have been converted into shares of Common Stock immediately prior to such closing. If the holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are required to convert the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock pursuant to this Section B.6(b) at a time when there are any declared but unpaid dividends or other amounts due on or in respect of such shares, before any amount shall be paid or distributed to the holders of Common Stock, or of any other stock ranking on liquidation junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, such dividends and other amounts shall be paid in full in cash by the Corporation in connection with such conversion.
(c) Procedure for Voluntary Conversion. Upon conversion pursuant to
Section B.6(a), the relevant holder or holders of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall surrender the certificate or certificates representing the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock being converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation or the offices of the transfer agent for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or such office or offices in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock by the Corporation, or in the event the certificate or certificates are lost, stolen or missing, shall deliver an Affidavit of Loss with respect to such certificates. The issuance by the Corporation of Common Stock upon a conversion of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock upon election to convert pursuant to Section B.6(a) hereof shall be effective as of the surrender of the certificate or certificates for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock to be converted, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), or as of the delivery of an Affidavit of Loss. Upon surrender of a certificate representing Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock for conversion, or delivery of an Affidavit of Loss, the Corporation shall issue and send by hand delivery, by courier or by first class mail (postage prepaid) to the holder thereof or to such holder's designee, at the address designated by such holder, certificates for the number of shares of Common Stock to which such holders shall be entitled upon conversion, plus a cash payment in the amount of any accrued but unpaid dividends and other amounts as contemplated by this Section B.6 in respect of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock which are converted. Notwithstanding the foregoing, in the event of an automatic conversion pursuant to Section B.6(a), the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares or an Affidavit of Loss are surrendered to the Corporation or its transfer agent and all rights with respect to such applicable Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall terminate, except any of the rights of the holders thereof upon surrender of their certificate or certificates therefore or delivery of an Affidavit of Loss thereof to receive certificates for the number of shares of Common Stock into which such shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock have been converted plus all declared but unpaid dividends and other amounts as contemplated by this Section B.6 in respect of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock which are converted. The issuance of certificates for Common Stock upon conversion of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be made without charge to the holders of such shares for any costs incurred by the Corporation in connection with such conversion and the related issuance of such stock.
(d) Procedure for Automatic Conversion on Qualified Public Offering. As of, and in all cases subject to, the closing of a Qualified Public Offering (the "Automatic Conversion Date"), all outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be converted automatically into shares of Common Stock as set forth in Section B.6(b) hereof and without any further action by the holders of such shares and whether or not the certificates representing such shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
or Affidavit of Loss relating thereto are surrendered to the Corporation or its transfer agent. On the Automatic Conversion Date, all rights with respect to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock so converted shall terminate, except any of the rights of the holders thereof upon surrender of their certificate or certificates therefor or delivery of an Affidavit of Loss thereof to receive certificates for the number of shares of Common Stock into which such shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock have been converted plus all accrued but unpaid dividends and other amounts as contemplated by Section B.6(b). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. Upon surrender of such certificates or Affidavit of Loss, the Corporation shall issue and deliver to such holder, promptly at such office and in its name as shown on such surrendered certificate or certificates or Affidavit of Loss, a certificate or certificates for the number of shares of Common Stock into which the shares of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock surrendered are convertible on the Automatic Conversion Date and shall pay all declared but unpaid dividends and other amounts as contemplated by Section B.6(b) in respect of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock which are converted.
(e) Fractional Shares. The Corporation shall not be obligated to deliver to holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock any fractional shares of Common Stock issuable upon any conversion of such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, but in lieu thereof shall make a cash payment in respect thereof for the then-fair market value thereof as determined in good faith by the Board of Directors.
(f) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, the Corporation will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.
(g) No Closing of Transfer Books. The Corporation shall not close its books against the transfer of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock in any manner which would interfere with the timely conversion of any shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
7. Adjustments. The Conversion Price in effect from time to time shall be subject to adjustment from time to time as follows:
(a) Dividends and Stock Splits. If the number of shares of Common Stock outstanding at any time after February 5, 2004 is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, on the date such payment is made or such change is effective, the applicable Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of any shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall be increased in proportion to such increase of outstanding shares of Common Stock.
(b) Reverse Stock Splits. If the number of shares of Common Stock outstanding at any time after February 5, 2004 is decreased by a combination or reverse split of the outstanding shares of Common Stock, then, on the effective date of such combination or reverse split, the applicable Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
(c) Sale of Common Stock. In the event the Corporation shall at any time after February 5, 2004, or from time to time, issue, sell or exchange any shares of Common Stock (including shares held in the Corporation's treasury but excluding (i) up to 11,770,000 shares of Common Stock (as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like) issued (pursuant to the exercise of options or otherwise) to the Corporation's employees, directors and consultants pursuant to employee stock and option plans approved by the Corporation's Board of Directors, (ii) any additional shares of Common Stock issued (pursuant to the exercise of options or otherwise) to the Corporation's employees, directors, and consultants, provided that each such issuance is unanimously approved by the Board of Directors, (iii) shares of Series D Preferred Stock issued pursuant to that certain Series D Convertible Participating Preferred Stock Purchase Agreement dated as of or around February 5, 2004 and any Common Stock which may be issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, (iv) shares issued for consideration other than cash in connection with a merger, consolidation, acquisition, or similar business combination approved by the Board of Directors including each of the representatives elected by the holders of Series A Preferred Stock and Series B Preferred Stock, (v) shares of Common Stock issued (pursuant to the exercise of warrants or otherwise) in connection with any capital lease arrangement or debt financing from a bank or similar financial institution, provided that the transaction is approved by the Board of Directors, including each of the representatives elected by the holders of Series A Preferred Stock and Series B Preferred Stock, and that the primary purpose of such transaction is other than equity financing, (vi) any shares of Common Stock issued (pursuant to the exercise of warrants or otherwise) in connection with strategic transactions involving the Corporation and other entities involving joint ventures, marketing or distribution arrangements or technology transfer or development agreements, provided that such strategic transactions and the issuance of such Common stock has been approved by a majority of the Board of Directors including each of the representatives elected by the holders of the Series A Preferred Stock and Series B Preferred
Stock; and (vii) and any Common Stock issued or issuable by reason of a stock
split, stock dividend or other distribution shares of Common Stock that is
covered by Sections B.7(a) and (b) hereof (the securities referred to in clauses
(i) through (vii) shall collectively be referred to as the "Excluded Shares"))
for a consideration per share (the "Purchase Price") less than the applicable
Conversion Price in effect immediately prior to the issuance, sale or exchange
of such shares (any such issuance, sale or exchange is hereafter referred to as
a "Dilutive Transaction"), then, and thereafter successively upon each such
Dilutive Transaction each applicable Conversion Price shall forthwith be reduced
to an amount determined by multiplying the Conversion Price by a fraction: (i)
the numerator of which shall be (X) the number of shares of Common Stock of all
classes outstanding immediately prior to the Dilutive Transaction (excluding
treasury shares but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding Preferred Stock, options, warrants,
rights or other convertible securities) plus (Y) the number of shares of Common
Stock which the net aggregate consideration received by the Corporation for the
total number of such additional shares of Common Stock so issued in the Dilutive
Transaction would purchase at the applicable Conversion Price (prior to such
adjustment); and (ii) the denominator of which shall be (X) the number of shares
of Common Stock of all classes outstanding immediately prior to the Dilutive
Transaction (excluding treasury shares but including all shares of Common Stock
issuable upon conversion or exercise of any outstanding Preferred Stock,
options, warrants, rights or other convertible securities), plus (Y) the
aggregate number of such additional shares of Common Stock so issued in the
Dilutive Transaction; provided, however, that if the Purchase Price is less than
or equal to $0.875 (as adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like) then the Conversion Price for the Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
reduced to the Purchase Price.
(d) Sale of Options, Rights or Convertible Securities. In the event the Corporation shall at any time after February 5, 2004, issue options, warrants or rights to subscribe for shares of Common Stock, or issue any securities convertible into or exchangeable for shares of Common Stock (other than any options, warrants, rights or securities for or representing Excluded Shares), for a Purchase Price (determined by dividing the Net Aggregate Consideration (as determined below) by the aggregate number of shares of Common Stock that would be issued if all such options, warrants, rights or other convertible securities were exercised or converted to the fullest extent permitted by their terms) less than the applicable Conversion Price in effect immediately prior to the issuance of such options, warrants or rights or other convertible or exchangeable securities, each Conversion Price shall forthwith be reduced to an amount determined by multiplying the Conversion Price by a fraction: (i) the numerator of which shall be (X) the number of shares of Common Stock of all classes outstanding immediately prior to the issuance of such options, warrants, rights or other convertible securities (excluding treasury shares but including all shares of Common Stock issuable upon conversion or exercise of any outstanding Preferred Stock, options, warrants, rights or other convertible securities), plus (Y) the number of shares of Common Stock which the total amount of consideration received by the Corporation for the issuance of such options, warrants, rights or convertible securities plus the minimum amount set forth in the terms of such security as payable to the Corporation upon the exercise or conversion thereof (the "Net Aggregate Consideration") would purchase at the Conversion Price prior to adjustment; and (ii) the denominator of which shall be (X) the number of shares of Common Stock of all classes outstanding immediately prior to the issuance of such options, warrants, rights or other convertible securities (excluding treasury shares but including
all shares of Common Stock issuable upon conversion or exercise of any outstanding Preferred Stock, options, warrants, rights or other convertible securities), plus (Y) the aggregate number of shares of Common Stock that would be issued if all such options, warrants, rights or other convertible securities were exercised or converted; provided, however, that if the Purchase Price is less than or equal to $0.875 (as adjusted appropriately for stock splits, stock dividends, recapitalizations and the like) then the Conversion Price for the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be reduced to the Purchase Price.
(e) Expiration or Change in Price. If the consideration per share provided for in any options, warrants, convertible securities or any other rights to subscribe for shares of Common Stock or any securities exchangeable for or convertible into shares of Common Stock (other than any such options, warrants, or other convertible securities for Excluded Shares), changes at any time, each Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such options, warrants, convertible securities or other rights provided for such changed consideration per share (determined as provided in Section B.7(d) hereof), at the time initially granted, issued or sold; provided, that such adjustment of each Conversion Price will be made only as and to the extent that such Conversion Price effective upon such adjustment remains less than or equal to such Conversion Price that would be in effect if such options, warrants, rights or securities had not been issued. No adjustment of a Conversion Price shall be made under this Section B.7 upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any convertible securities if an adjustment shall previously have been made upon the issuance of such warrants, options or other rights. Any adjustment of a Conversion Price shall be disregarded if, as, and when the rights to acquire shares of Common Stock upon exercise or conversion of the warrants, options, rights or convertible securities which gave rise to such adjustment expire or are canceled without having been exercised, so that the applicable Conversion Price effective immediately upon such cancellation or expiration shall be equal to the applicable Conversion Price in effect at the time of the issuance of the expired or canceled warrants, options, rights or convertible securities, with such additional adjustments as would have been made to the applicable Conversion Price had the expired or canceled warrants, options, rights or convertible securities not been issued.
(f) Other Adjustments. In the event the Corporation shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event lawful and adequate provision shall be made so that the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the number of securities of the Corporation which they would have received had their Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section B.7 as applied to such distributed securities.
(g) Reorganization, etc. If the Common Stock issuable upon the conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall be changed into the same or different number of shares of any class or classes of stock, whether by reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section B.7), then and in each such event the holder of each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall have the right to receive upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.
(h) Mergers and Other Reorganizations. If at any time or from time
to time there shall be a capital reorganization of the Common Stock (other than
a subdivision, combination or reclassification provided for elsewhere in this
Section B.7) or a merger or consolidation of the Corporation with or into
another corporation or the sale of all or substantially all of the Corporation's
properties and assets to any other person, then, as part of and as a condition
to the effectiveness of such reorganization, merger, consolidation or sale,
lawful and adequate provision shall be made so that the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock the number of shares of stock or other securities or
property of the Corporation or of the successor corporation resulting from such
merger or consolidation or sale, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate provisions shall be made
with respect to the rights of the holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section B.7 (including, without limitation, provisions for
adjustment of the applicable Conversion Price and the number of shares
purchasable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock) shall thereafter
be applicable, as nearly as may be, with respect to any shares of stock,
securities or assets to be deliverable thereafter upon the conversion of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.
The holders of a majority-in-interest of Convertible Preferred
Stock, shall, upon the occurrence of a capital reorganization, merger or
consolidation of the Corporation or the sale of all or substantially all of its
assets and properties as such events are more fully set forth in the first
paragraph of this Section B.7(h), have the option of electing treatment of all
shares of Convertible Preferred Stock under either this Section B.7(h) or
Section B.4 hereof.
(i) Calculations. All calculations under this Section B.7 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.
(j) Certificate. Upon the occurrence of each adjustment or readjustment pursuant to this Section B.7, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon written request at any time of any holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the applicable Conversion Price before and after such adjustment or readjustment, and (iii) the number of shares of Common Stock, if applicable, and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
(k) Adjustments for Failure of Participation. Notwithstanding anything contained in Section 7(c) or 7(d) to the contrary, the holder of any shares of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall not be entitled to the anti-dilution benefits of Section 7(c) or 7(d) as a result of any future financing (or any subsequent financing) of any class or Series of capital stock, or warrants, options, subscriptions or other purchase rights with respect thereto), which would otherwise result in an adjustment to an amount less than or equal to $0.875 (as adjusted appropriately for stock splits, stock dividends, recapitalizations and the like) (a "Dilutive Offering"), if such holder has failed to purchase its pro rata share of such financing by acquiring in such Dilutive Offering such number of shares such stockholder was entitled to purchase in accordance with the terms of Section 3 of that certain Third Amended and Restated Stockholders Agreement dated February 5, 2004, by and among the Corporation and certain of its stockholders, as amended from time to time.
The Corporation and the Board of Directors shall take all necessary actions to designate a new Series of Preferred Stock on any occasion that any holder of Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall fail to fully participate in any Dilutive Offering. Each share of such holder's Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock shall be automatically converted into one share of the newly created Series of Preferred Stock, provided however, that the Conversion Price and the Conversion Value for such newly-created Series of Preferred Stock shall be the Conversion Price and Conversion Value for the Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock, as applicable, in effect immediately prior to such Dilutive Offering. Such new Series of Preferred Stock shall otherwise be identical in all respects to the Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as applicable. Except as otherwise required by law, any newly created Series of Preferred Stock shall vote together as a class with the Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as applicable, on all matters submitted to the stockholders for a vote or a written consent.
8. Protective Provisions.
(a) Series A Preferred Stock and Series B Preferred Stock. So long
as (i) at least 1,500,000 shares of Series A Preferred Stock are outstanding or
(ii) at least 750,000 shares of Series B Preferred Stock are outstanding, the
Corporation shall not, (whether by merger,
consolidation, amendment or otherwise), without first having obtained the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A Preferred Stock and a majority of the outstanding shares of Series B Preferred Stock, each voting as a separate class:
(i) take any action or enter into any agreement to create, designate or authorize any new class or Series of securities which has a preference over the Series A Preferred Stock or Series B Preferred Stock with respect to the distribution of assets or other amounts in connection with a Liquidation Event or an Extraordinary Transaction or as to dividends or redemption rights or voting rights, or any increase in the authorized or designated number of any such new class or series;
(ii) effect any (x) Liquidation Event or (y) Extraordinary Transaction;
(iii) declare or pay dividends or make any distributions of cash, property or securities of the Corporation with respect to any shares of its Common Stock or any other capital stock of the Corporation other than dividends payable solely in Common Stock;
(iv) repurchase, redeem or otherwise acquire any of the outstanding capital stock of the Corporation, except for (x) the repurchase of shares from employees, directors or consultants pursuant to agreements permitting the Corporation to repurchase such shares upon termination of such employee's, director's, or consultant's relationship with the Corporation or in exercise of the Corporation's right of first refusal upon a proposed transfer, and (y) the redemption of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock pursuant to and as provided in Section 5 of this Certificate of Incorporation; or
(v) amend, alter, repeal or waive any provision of, or add any provision to, this Certificate of Incorporation (whether by merger, consolidation or otherwise), including any filing of a Certificate of Designation, in a manner that affects the rights, preferences or privileges of the Series A Preferred Stock or Series B Preferred Stock in a manner different than any other outstanding class or Series of the Corporation's capital stock.
(b) Series C Preferred Stock. So long as at least 750,000 shares of Series C Preferred Stock are outstanding, the Corporation shall not, (whether by merger, consolidation, amendment or otherwise), without first having obtained the affirmative vote or written consent of the holders of not less than a two-thirds majority-in-interest of the outstanding shares of Series C Preferred Stock, amend, alter, repeal or waive any provision of, or add any provision to, this Certificate of Incorporation (whether by merger, consolidation or otherwise), including any filing of a Certificate of Designation, (i) in a manner that materially adversely affects the rights, preferences or privileges of the holders of Series C Preferred Stock or (ii) that otherwise materially adversely affects the holders of Series C Preferred Stock, in each case in a manner that is disproportional to the effect on the holders of Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock.
(c) Series D Preferred Stock. So long as at least 500,000 shares of Series D Preferred Stock are outstanding, the Corporation shall not, (whether by merger, consolidation,
amendment or otherwise), without first having obtained the affirmative vote or written consent of the holders of not less than a two-thirds majority-in-interest of the outstanding shares of Series D Preferred Stock, amend, alter, repeal or waive any provision of, or add any provision to, this Certificate of Incorporation in a manner that materially adversely affects the rights, preferences or privileges of the holders of Series D Preferred Stock or that otherwise materially adversely affects the holders of Series D Preferred Stock in a manner that is disproportional to the effect on the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.
The vote required by this Section 8 shall be in addition to any other vote required by this Certificate of Incorporation or under applicable law.
9. Notice.
(a) Liquidation Events, Extraordinary Transactions, Etc. In the
event (i) the Corporation establishes a record date to determine the holders of
any class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event, Extraordinary Transaction or QPO becomes reasonably
likely to occur, the Corporation shall mail or cause to be mailed by first class
mail (postage prepaid) to each holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock at least
ten (10) days (or as soon as practicable after the Corporation becomes aware of
the possibility of such transaction) prior to such record date specified therein
or the expected effective date of any such transaction, whichever is later, a
notice specifying (A) the date of such record date for the purpose of such
dividend or distribution or meeting or consent and a description of such
dividend or distribution or the action to be taken at such meeting or by such
consent, (B) the date on which any such Liquidation Event, Extraordinary
Transaction or QPO is expected to become effective, and (C) the date on which
the books of the Corporation shall close or a record shall be taken with respect
to any such event.
(b) Waiver of Notice. The holder or holders of not less than a majority of the outstanding shares of Series A Preferred Stock, with respect to the Series A Preferred Stock, the holders of not less than a majority of the outstanding shares of Series B Preferred Stock, with respect to the Series B Preferred Stock, the holders of not less than a majority of the outstanding shares of Series C Preferred Stock, with respect to the Series C Preferred Stock and the holders of not less than sixty six and two thirds percent (66 2/3%) of the outstanding shares of Series D Preferred Stock, with respect to the Series D Preferred Stock, may, at any time upon written notice to the Corporation, waive any notice provisions specified herein for the benefit of such holders, and any such waiver shall be binding upon all holders of such securities.
(c) General. In the event that the Corporation provides any notice, report or statement to any holder of Common Stock or any other class or Series of Preferred Stock, the Corporation shall at the same time provide a copy of any such notice, report or statement to each holder of outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
10. No Reissuance of Preferred Stock. No share or shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock acquired
by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue.
C. UNDESIGNATED PREFERRED STOCK
The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide for the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof.
ARTICLE V
STOCKHOLDER ACTION
1. Action without Meeting. Except as otherwise provided herein, any action required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders and may not be taken or effected by a written consent of stockholders in lieu thereof.
2. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation.
ARTICLE VI
DIRECTORS
1. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided herein or required by law.
2. Election of Directors. Election of Directors need not be by written ballot unless the By-laws of the Corporation (the "By-laws") shall so provide.
3. Number of Directors; Term of Office. The number of Directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors. The Directors, except as otherwise provided for those who may be elected by the holders of any series of Preferred Stock, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal in number as reasonably possible. The initial Class I Directors of the Corporation shall be Robert E. Davoli and Andrew P. Goldfarb; the initial Class II Directors of the Corporation shall be Izhar Armory, Rowland Moriarty and Martin Trust; and the initial Class III Directors of the Corporation shall be Krishan A. Canekeratne, Ronald T. Maheu and Danford F. Smith. The initial Class I Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2008, the initial Class II Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2009, and the initial Class III Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2010. At each annual meeting of stockholders, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Notwithstanding the foregoing, the Directors elected to each class shall hold office until their successors are duly elected and qualified or until their earlier resignation, death or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of Article IV of this Certificate, the holders of any one or more series of Preferred Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate and any certificate of designations applicable thereto.
4. Vacancies. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors, and not by the stockholders. Any Director appointed in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been duly elected and qualified or until his or her earlier resignation, death or removal. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect Directors, when the number of Directors is increased or decreased, the Board of Directors shall, subject to Article VI.3 hereof, determine the class or classes to which the increased or decreased number of Directors shall be apportioned; provided, however, that no decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, shall exercise the powers of the full Board of Directors until the vacancy is filled.
5. Removal. Subject to the rights, if any, of any series of Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (i) only with cause and (ii) only by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of Directors. At least forty-five (45) days prior to any meeting of stockholders at which it is proposed that any Director be removed from office, written notice of such proposed removal and the alleged grounds thereof shall be sent to the Director whose removal will be considered at the meeting.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (a) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL or (d) for any transaction from which the Director derived an improper personal benefit. If the DGCL is amended after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, shall not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a person serving as a Director at the time of such repeal or modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
1. Amendment by Directors. Except as otherwise provided by law, the By-laws of the Corporation may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Directors then in office.
2. Amendment by Stockholders. The By-laws of the Corporation may be amended or repealed at any annual meeting of stockholders, or special meeting of stockholders called for such purpose as provided in the By-laws, by the affirmative vote of at least 75% of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Certificate in the manner now or hereafter prescribed by statute and this Certificate, and all rights conferred upon stockholders herein are granted subject to this reservation. Whenever any vote of the holders of voting stock is required to amend or repeal any provision of this Certificate, and in addition to any other vote of holders of voting stock that is required by this Certificate or by law, such amendment or repeal shall require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of the majority of the outstanding shares of
each class entitled to vote thereon as a class, at a duly constituted meeting of stockholders called expressly for such purpose; provided, however, that the affirmative vote of not less than 75% of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of not less than 75% of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any provision of Article V, Article VI, Article VII, Article VIII or Article IX of this Certificate.
[End of Text]
THIS SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed
as of this ____ day of __________, 2007.
VIRTUSA CORPORATION
By:__________________________
Krishan A. Canekeratne
Chief Executive Officer
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
VIRTUSA CORPORATION
(the "Corporation")
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders (any such meeting being referred to in these By-laws as an "Annual Meeting") shall be held at the hour, date and place within or without the United States which is fixed by the Board of Directors, which time, date and place may subsequently be changed at any time by vote of the Board of Directors. If no Annual Meeting has been held for a period of thirteen months after the Corporation's last Annual Meeting, a special meeting in lieu thereof may be held, and such special meeting shall have, for the purposes of these By-laws or otherwise, all the force and effect of an Annual Meeting. Any and all references hereafter in these By-laws to an Annual Meeting or Annual Meetings also shall be deemed to refer to any special meeting(s) in lieu thereof.
SECTION 2. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an Annual Meeting (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote at the meeting, who is present (in person or by proxy) at the meeting and who complies with the notice procedures set forth in this By-law. In addition to the other requirements set forth in this By-law, for any proposal of business to be considered at an Annual Meeting, it must be a proper subject for action by stockholders of the Corporation under Delaware law.
(2) For nominations or other business to be properly brought before
an Annual Meeting by a stockholder pursuant to clause (c) of paragraph
(a)(1) of this By-law, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's Annual Meeting;
provided, however, that in the event
that the date of the Annual Meeting is advanced by more than 30 days before or delayed by more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th day prior to such Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Notwithstanding anything to the contrary provided herein, for the first Annual Meeting following the initial public offering of common stock of the Corporation, a stockholder's notice shall be timely if delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to the scheduled date of such Annual Meeting or the 10th day following the day on which public announcement of the date of such Annual Meeting is first made or sent by the Corporation. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and the names and addresses of other stockholders known by the stockholder proposing such business to support such proposal, and the class and number of shares of the Corporation's capital stock beneficially owned by such other stockholders; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner; (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner; (iii) a description of all arrangements or understanding between such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made; and (iv) a representation whether the beneficial owner intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock requirement to elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such nomination.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this By-law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees
for director or specifying the size of the increased Board of Directors
made by the Corporation at least 85 days prior to the first anniversary of
the preceding year's Annual Meeting, a stockholder's notice required by
this By-law shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the
Corporation.
(b) General.
(1) Only such persons who are nominated in accordance with the provisions of this By-law shall be eligible for election and to serve as directors and only such business shall be conducted at an Annual Meeting as shall have been brought before the meeting in accordance with the provisions of this By-law. The Board of Directors or a designated committee thereof shall have the power to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the provisions of this By-law. If neither the Board of Directors nor such designated committee makes a determination as to whether any stockholder proposal or nomination was made in accordance with the provisions of this By-law, the presiding officer of the Annual Meeting shall have the power and duty to determine whether the stockholder proposal or nomination was made in accordance with the provisions of this By-law. If the Board of Directors or a designated committee thereof or the presiding officer, as applicable, determines that any stockholder proposal or nomination was not made in accordance with the provisions of this By-law, such proposal or nomination shall be disregarded and shall not be presented for action at the Annual Meeting.
(2) Except as otherwise required by law, nothing in this Section 2 shall obligate the Corporation or the Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the Corporation or the Board of Directors information with respect to any nominee for director submitted by a stockholder.
(3) Notwithstanding the foregoing provisions of this Section 2, except as otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2, to be considered a qualified representative of the stockholder, a person must be authorized by a written instrument executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such written instrument or electronic transmission, or a reliable reproduction of the written instrument or electronic transmission, at the meeting of stockholders.
(4) For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(5) Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be deemed to affect any rights of (i) stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) the holders of any series of Undesignated Preferred Stock to elect directors under specified circumstances.
SECTION 3. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation.
SECTION 4. Notice of Meetings; Adjournments. A notice of each Annual Meeting stating the hour, date and place, if any, of such Annual Meeting shall be given not less than ten (10) days nor more than sixty (60) days before the Annual Meeting, to each stockholder entitled to vote thereat by delivering such notice to such stockholder or by mailing it, postage prepaid, addressed to such stockholder at the address of such stockholder as it appears on the Corporation's stock transfer books.
Notice of all special meetings of stockholders shall be given in the same manner as provided for Annual Meetings, except that the notice of all special meetings shall state the purpose or purposes for which the meeting has been called.
Notice of an Annual Meeting or special meeting of stockholders need not be given to a stockholder if a waiver of notice is executed before or after such meeting by such stockholder or if such stockholder attends such meeting, unless such attendance is for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened.
The Board of Directors may postpone and reschedule any previously scheduled Annual Meeting or special meeting of stockholders and any record date with respect thereto, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 2 of this Article I of these By-laws or otherwise. In no event shall the public announcement of an adjournment, postponement or rescheduling of any previously scheduled meeting of stockholders commence a new time period for the giving of a stockholder's notice under Section 2 of this Article I of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting if (a) no quorum is present for the transaction of business, (b) the Board of Directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders, or (c) the Board of Directors determines that adjournment is otherwise in the best interests of the Corporation. When any Annual Meeting or special meeting of stockholders is adjourned to another hour, date or place, notice need not be given of the adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the hour, date and
place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting; provided, however, that if the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote thereat and each stockholder who, by law or under the Certificate of Incorporation of the Corporation (as the same may hereafter be amended and/or restated, the "Certificate") or these By-laws, is entitled to such notice.
SECTION 5. Quorum. A majority of the shares entitled to vote, present in
person or represented by proxy, shall constitute a quorum at any meeting of
stockholders. If less than a quorum is present at a meeting, the holders of
voting stock representing a majority of the voting power present at the meeting
or the presiding officer may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in
Section 4 of this Article I. At such adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. The stockholders present at a duly constituted
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 6. Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to the stock ledger of the Corporation, unless otherwise provided by law or by the Certificate. Stockholders may vote either (i) in person, (ii) by written proxy or (iii) by a transmission permitted by Section 212(c) of the Delaware General Corporation Law ("DGCL"). Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission permitted by Section 212(c) of the DGCL may be substituted for or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Proxies shall be filed in accordance with the procedures established for the meeting of stockholders. Except as otherwise limited therein or as otherwise provided by law, proxies authorizing a person to vote at a specific meeting shall entitle the persons authorized thereby to vote at any adjournment of such meeting, but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them.
SECTION 7. Action at Meeting. When a quorum is present at any meeting of stockholders, any matter before any such meeting (other than an election of a director or directors) shall be decided by a majority of the votes properly cast for and against such matter, except where a larger vote is required by law, by the Certificate or by these By-laws. Any election of directors by stockholders shall be determined by a plurality of the votes properly cast on the election of directors.
SECTION 8. Stockholder Lists. The Secretary or an Assistant Secretary (or the Corporation's transfer agent or other person authorized by these By-laws or by law) shall prepare and make, at least 10 days before every Annual Meeting or special meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for a period of at least ten (10) days prior to the meeting in the manner provided by law. The list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law.
SECTION 9. Presiding Officer. The Chairman of the Board, if one is elected, or if not elected or in his or her absence, the President, shall preside at all Annual Meetings or special meetings of stockholders and shall have the power, among other things, to adjourn such meeting at any time and from time to time, subject to Sections 4 and 5 of this Article I. The order of business and all other matters of procedure at any meeting of the stockholders shall be determined by the presiding officer.
SECTION 10. Inspectors of Elections. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer shall appoint one or more inspectors to act at the meeting. Any inspector may, but need not, be an officer, employee or agent of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall perform such duties as are required by the DGCL, including the counting of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. The presiding officer may review all determinations made by the inspectors, and in so doing the presiding officer shall be entitled to exercise his or her sole judgment and discretion and he or she shall not be bound by any determinations made by the inspectors. All determinations by the inspectors and, if applicable, the presiding officer, shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors. The directors shall hold office in the manner provided in the Certificate.
SECTION 3. Qualification. No director need be a stockholder of the Corporation.
SECTION 4. Vacancies. Vacancies in the Board of Directors shall be filled in the manner provided in the Certificate.
SECTION 5. Removal. Directors may be removed from office only in the manner provided in the Certificate.
SECTION 6. Resignation. A director may resign at any time by giving written notice to the Chairman of the Board, if one is elected, the President or the Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides.
SECTION 7. Regular Meetings. The regular annual meeting of the Board of Directors shall be held, without notice other than this Section 7, on the same date and at the same place as the Annual Meeting following the close of such meeting of stockholders. Other regular meetings of the Board of Directors may be held at such hour, date and place as the Board of Directors may by resolution from time to time determine and publicize by means of reasonable notice given to any director who is not present at the meeting at which such resolution is adopted.
SECTION 8. Special Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the request of a majority of the directors, the Chairman of the Board, if one is elected, or the President. The person calling any such special meeting of the Board of Directors may fix the hour, date and place thereof.
SECTION 9. Notice of Meetings. Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each director by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the Chairman of the Board, if one is elected, or the President or such other officer designated by the Chairman of the Board, if one is elected, or the President. Notice of any special meeting of the Board of Directors shall be given to each director in person, by telephone, or by facsimile, electronic mail or other form of electronic communication, sent to his or her business or home address, at least 24 hours in advance of the meeting, or by written notice mailed to his or her business or home address, at least 48 hours in advance of the meeting. Such notice shall be deemed to be delivered when hand delivered to such address, read to such director by telephone, deposited in the mail so addressed, with postage thereon prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or when delivered to the telegraph company if sent by telegram.
A written waiver of notice signed before or after a meeting by a director and filed with the records of the meeting shall be deemed to be equivalent to notice of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened. Except as otherwise required by law, by the Certificate or by these By-laws, neither
the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
SECTION 10. Quorum. At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business, but if less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 9 of this Article II. Any business which might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present. For purposes of this section, the total number of directors includes any unfilled vacancies on the Board of Directors.
SECTION 11. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of the directors present shall constitute action by the Board of Directors, unless otherwise required by law, by the Certificate or by these By-laws.
SECTION 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the records of the meetings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Such consent shall be treated as a resolution of the Board of Directors for all purposes.
SECTION 13. Manner of Participation. Directors may participate in meetings of the Board of Directors by means of conference telephone or other communications equipment by means of which all directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for purposes of these By-laws.
SECTION 14. Committees. The Board of Directors, by vote of a majority of the directors then in office, may elect one or more committees, including, without limitation, a Compensation Committee, a Nominating and Corporate Governance Committee and an Audit Committee, and may delegate thereto some or all of its powers except those which by law, by the Certificate or by these By-laws may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these By-laws for the Board of Directors. All members of such committees shall hold such offices at the pleasure of the Board of Directors. The Board of Directors may abolish any such committee at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors.
SECTION 15. Compensation of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the Board of Directors, or a designated
committee thereof, provided that directors who are serving the Corporation as employees and who receive compensation for their services as such, shall not receive any salary or other compensation for their services as directors of the Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration. The officers of the Corporation shall consist of a Chief Executive Officer, a President, a Treasurer, a Secretary and such other officers, including, without limitation, a Chairman of the Board of Directors, a Chief Financial Officer and one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board of Directors following the Annual Meeting, the Board of Directors shall elect the Chief Executive Officer, the President, the Treasurer and the Secretary. Other officers may be elected by the Board of Directors at such regular annual meeting of the Board of Directors or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director. Any person may occupy more than one office of the Corporation at any time.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by these By-laws, each of the officers of the Corporation shall hold office until the regular annual meeting of the Board of Directors following the next Annual Meeting and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her written resignation to the Corporation addressed to the President or the Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of Directors may remove any officer with or without cause by the affirmative vote of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or disability of any officer, the Board of Directors may designate another officer to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors.
SECTION 9. Chairman of the Board. The Chairman of the Board, if one is elected, shall preside, when present, at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers and shall perform such other duties as the Board of Directors may from time to time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall perform such duties as the Board of Directors may from time to time designate. If there is no Chairman of the Board or if he or she is absent, the Chief Executive Officer shall preside, when present, at all meetings of stockholders and of the Board of Directors.
SECTION 11. President. The President shall, subject to the direction of the Board of Directors, have such powers and shall perform such duties as the Board of Directors may from time to time designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior Vice President) and any Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors and except as the Board of Directors or the Chief Executive Officer may otherwise provide, have general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer shall have custody of all funds, securities, and valuable documents of the Corporation. He or she shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the stockholders and the Board of Directors (including committees of the Board) in books kept for that purpose. In his or her absence from any such meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation). The Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or that of an Assistant Secretary. The Secretary shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, any Assistant Secretary may perform his or her duties and responsibilities. Any Assistant Secretary shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such limitations as the Board of Directors may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer.
ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. The Corporation seal and the signatures by the Corporation's officers, the transfer agent or the registrar may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. Notwithstanding any other provision in these By-laws, the Corporation may adopt a system of issuance, recordation and transfer of its shares by electronic or other means not involving any issuance of certificates, including provisions for notice to purchasers in substitution for any required statements on certificates, and as may be required by applicable corporate securities laws, which system has been approved by the United States Securities and Exchange Commission. Any system so adopted shall not become effective as to issued and outstanding certificated securities until the certificates therefor have been surrendered to the Corporation.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock may be transferred only on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate theretofore properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by the Certificate or by these By-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws.
SECTION 4. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting and (b) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.
ARTICLE V
Indemnification
SECTION 1. Definitions. For purposes of this Article:
(a) "Corporate Status" describes the status of a person who is serving or has served (i) as a Director of the Corporation, (ii) as an Officer of the Corporation, or (iii) as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, foundation, association, organization or other legal entity which such person is or was serving at the request of the Corporation. For purposes of this Section 1(a), an Officer or Director of the Corporation who is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation. Notwithstanding the foregoing, "Corporate Status" shall not include the status of a person who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction with the Corporation with respect to such person's activities prior to said transaction, unless specifically authorized by the Board of Directors or the stockholders of the Corporation;
(b) "Director" means any person who serves or has served the Corporation as a director on the Board of Directors of the Corporation or any committee thereof;
(c) "Disinterested Director" means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the Corporation who is not and was not a party to such Proceeding;
(d) "Expenses" means all attorneys' fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding;
(e) "Liabilities" means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement;
(f) "Non-Officer Employee" means any person who serves or has served as an employee or agent of the Corporation, but who is not or was not a Director or Officer;
(g) "Officer" means any person who serves or has served the Corporation as an officer of the Corporation appointed by the Board of Directors of the Corporation;
(h) "Proceeding" means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; and
(i) "Subsidiary" shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity.
SECTION 2. Indemnification of Directors and Officers.
(a) Subject to the operation of Section 4 of this Article V of these By-laws, each Director and Officer shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment) and to the extent authorized in this Section 2.
(1) Actions, Suits and Proceedings Other than By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held harmless by the Corporation against any and all Expenses and Liabilities that are incurred or paid by such Director or Officer or on such Director's or Officer's behalf in connection with any Proceeding or any claim, issue or matter therein (other than an action by or in the right of the Corporation), which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director's or Officer's Corporate Status, if such
Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(2) Actions, Suits and Proceedings By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held harmless by the Corporation against any and all Expenses that are incurred by such Director or Officer or on such Director's or Officer's behalf in connection with any Proceeding or any claim, issue or matter therein by or in the right of the Company, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director's or Officer's Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful; provided, however, that no indemnification shall be made under this Section 2(a)(2) in respect of any claim, issue or matter as to which such Director or Officer shall have been finally adjudged by a court of competent jurisdiction to be liable to the Company, unless, and only to the extent that, the Court of Chancery or another court in which such Proceeding was brought shall determine upon application that, despite adjudication of liability, but in view of all the circumstances of the case, such Director or Officer is fairly and reasonably entitled to indemnification for such Expenses that such court deem proper.
(3) The rights of indemnification provided by this Section 2 shall continue as to a Director or Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding was authorized in advance by the Board of Directors of the Corporation, unless such Proceeding was brought to enforce an Officer or Director's rights to indemnification or, in the case of Directors, advancement of Expenses under these By-laws in accordance with the provisions set forth herein.
SECTION 3. Indemnification of Non-Officer Employees. Subject to the operation of Section 4 of this Article V of these By-laws, each Non-Officer Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses and Liabilities that are incurred by such Non-Officer Employee or on such Non-Officer Employee's behalf in connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee's Corporate Status, if such Non-Officer Employee acted in good faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 3 shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the
benefit of his or her heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non-Officer Employee only if such Proceeding was authorized in advance by the Board of Directors of the Corporation.
SECTION 4. Good Faith. Unless ordered by a court, no indemnification shall be provided pursuant to this Article V to a Director, to an Officer or to a Non-Officer Employee unless a determination shall have been made that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal Proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (b) a committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though less than a quorum), (c) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final Disposition.
(a) The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such Director is involved by reason of such Director's Corporate Status within thirty (30) days after the receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing, the Corporation shall advance all Expenses incurred by or on behalf of any Director seeking advancement of expenses hereunder in connection with a Proceeding initiated by such Director only if such Proceeding was (i) authorized by the Board of Directors of the Corporation, or (ii) brought to enforce Director's rights to indemnification or advancement of Expenses under these By-laws.
(b) If a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within thirty (30) days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such advancement of Expenses under this Article V shall not be a defense to the action and shall not create a presumption that such advancement is not permissible. The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.
(c) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Director has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.
(a) The Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses incurred by or on behalf of any Officer or any Non-Officer Employee in connection with any Proceeding in which such is involved by reason of the Corporate Status of such Officer or Non-Officer Employee upon the receipt by the Corporation of a statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer and Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer Employee is not entitled to be indemnified against such Expenses.
(b) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 7. Contractual Nature of Rights.
(a) The foregoing provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and Officer entitled to the benefits hereof at any time while this Article V is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
(b) If a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within 60 days after receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification under this Article V shall not be a defense to the action and shall not create a presumption that such indemnification is not permissible. The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.
(c) In any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director or Officer has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and to advancement of Expenses set forth in this Article V shall not be exclusive of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision of the Certificate or these By-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee, or arising out of any such person's Corporate Status, whether or not the Corporation would have the power to indemnify such person against such liability under the DGCL or the provisions of this Article V.
SECTION 10. Other Indemnification. The Corporation's obligation, if any, to indemnify any person under this Article V as a result of such person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, employee benefit plan or enterprise.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors.
SECTION 2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without director action may be executed on behalf of the Corporation by the Chairman of the Board, if one is elected, the Chief Executive Officer, the President, the Chief Financial Officer (if any) or the Treasurer or any other officer, employee or agent of the Corporation as the Board of Directors may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise provides, the Chairman of the Board, if one is elected, the President or the Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or
attorney in fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the Certificate, By-laws and records of all meetings of the incorporators, stockholders and the Board of Directors and the stock transfer books, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each, may be kept outside the State of Delaware and shall be kept at the principal office of the Corporation, at the office of its counsel or at an office of its transfer agent or at such other place or places as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-laws to the Certificate shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
(a) Amendment by Directors. Except as provided otherwise by law, these By-laws may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the directors then in office.
(b) Amendment by Stockholders. These By-laws may be amended or repealed at any Annual Meeting, or special meeting of stockholders called for such purpose, by the affirmative vote of at least 75% of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class. Notwithstanding the foregoing, stockholder approval shall not be required unless mandated by the Certificate, these By-laws, or other applicable law.
SECTION 9. Notices. If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.
SECTION 10. Waivers. A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice
required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver.
Adopted __________ _____, 2007 and effective as of __________ ____, 2007.
Exhibit 3.3
SEVENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VIRTUSA CORPORATION
Virtusa Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Virtusa Corporation. The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was April 19, 2000 (the "Original Certificate"). The name under which the Corporation filed the Original Certificate was eRunway, inc.
2. A Second Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on December 21, 2000 under the name eRunway, inc.
3. The Second Amended and Restated Certificate of Incorporation of the Corporation was amended by a Certificate of Amendment filed with the office of the Secretary of State of Delaware on April 25, 2002 under the name Virtusa, Inc. and was corrected by a Certificate of Correction filed with the Secretary of State of Delaware on May 2, 2002 to correct the Corporation's name to Virtusa Corporation.
4. A Third Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on November 2, 2002.
5. A Fourth Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on February 27, 2003.
6. A Fifth Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on February 5, 2004.
7. A Sixth Amended and Restated Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of Delaware on ________ ___, 2007.
8. This Seventh Amended and Restated Certificate of Incorporation (the "Certificate") amends, restates and integrates the provisions of the Sixth Amended and Restated Certificate of Incorporation, and was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law (the "DGCL").
9. The text of the Sixth Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to provide as herein set forth in full.
ARTICLE I
The name of the Corporation is Virtusa Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is one hundred twenty-five million (125,000,000) shares,
of which (i) one hundred twenty million (120,000,000) shares shall be a class
designated as common stock, par value $0.01 per share (the "Common Stock") and
(ii) five million (5,000,000) shares shall be a class designated as undesignated
preferred stock, par value $0.01 per share (the "Undesignated Preferred Stock").
The number of authorized shares of the class of Common Stock and Undesignated Preferred Stock may from time to time be increased or decreased (but not below the number of shares outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote, without a vote of the holders of the Undesignated Preferred Stock (except as otherwise provided in any certificate of designations of any series of Undesignated Preferred Stock).
The powers, preferences and rights of, and the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or as set forth below in, this Article IV.
A. COMMON STOCK
Subject to all the rights, powers and preferences of the Undesignated Preferred Stock and except as provided by law or in this Article IV (or in any certificate of designations of any series of Undesignated Preferred Stock):
(a) the holders of the Common Stock shall have the exclusive right to vote for the election of directors of the Corporation (the "Directors") and on all other matters requiring stockholder action, each outstanding share entitling the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to
vote on any amendment to this Certificate (or on any amendment to a certificate of designations of any series of Undesignated Preferred Stock) that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of Undesignated Preferred Stock if the holders of such affected series are entitled to vote, either separately or together with the holders of one or more other such series, on such amendment pursuant to this Certificate (or pursuant to a certificate of designations of any series of Undesignated Preferred Stock) or pursuant to the DGCL;
(b) dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock.
B. UNDESIGNATED PREFERRED STOCK
The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide for the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof.
ARTICLE V
STOCKHOLDER ACTION
1. Action without Meeting. Except as otherwise provided herein, any action required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders and may not be taken or effected by a written consent of stockholders in lieu thereof.
2. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation.
ARTICLE VI
DIRECTORS
1. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided herein or required by law.
2. Election of Directors. Election of Directors need not be by written ballot unless the By-laws of the Corporation (the "By-laws") shall so provide.
3. Number of Directors; Term of Office. The number of Directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors. The Directors, except as otherwise provided for those who may be elected by the holders of any series of Undesignated Preferred Stock, shall be classified, with respect to the term for which they severally hold office, into three classes, as nearly equal in number as reasonably possible. The initial Class I Directors of the Corporation shall be Robert E. Davoli and Andrew P. Goldfarb; the initial Class II Directors of the Corporation shall be Izhar Armory, Rowland Moriarty and Martin Trust; and the initial Class III Directors of the Corporation shall be Kris A. Canekeratne, Ronald T. Maheu and Danford F. Smith. The initial Class I Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2008, the initial Class II Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2009, and the initial Class III Directors shall serve for a term expiring at the annual meeting of stockholders to be held in 2010. At each annual meeting of stockholders, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Notwithstanding the foregoing, the Directors elected to each class shall hold office until their successors are duly elected and qualified or until their earlier resignation, death or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of Article IV of this Certificate, the holders of any one or more series of Undesignated Preferred Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate and any certificate of designations applicable thereto.
4. Vacancies. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors, and not by the stockholders. Any Director appointed in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until
such Director's successor shall have been duly elected and qualified or until his or her earlier resignation, death or removal. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors, when the number of Directors is increased or decreased, the Board of Directors shall, subject to Article VI.3 hereof, determine the class or classes to which the increased or decreased number of Directors shall be apportioned; provided, however, that no decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, shall exercise the powers of the full Board of Directors until the vacancy is filled.
5. Removal. Subject to the rights, if any, of any series of Undesignated Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (i) only with cause and (ii) only by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of Directors. At least forty-five (45) days prior to any meeting of stockholders at which it is proposed that any Director be removed from office, written notice of such proposed removal and the alleged grounds thereof shall be sent to the Director whose removal will be considered at the meeting.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (a) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL or (d) for any transaction from which the Director derived an improper personal benefit. If the DGCL is amended after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, shall not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a person serving as a Director at the time of such repeal or modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
1. Amendment by Directors. Except as otherwise provided by law, the By-laws of the Corporation may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Directors then in office.
2. Amendment by Stockholders. The By-laws of the Corporation may be amended or repealed at any annual meeting of stockholders, or special meeting of stockholders called for such purpose as provided in the By-laws, by the affirmative vote of at least 75% of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Certificate in the manner now or hereafter prescribed by statute and this Certificate, and all rights conferred upon stockholders herein are granted subject to this reservation. Whenever any vote of the holders of voting stock is required to amend or repeal any provision of this Certificate, and in addition to any other vote of holders of voting stock that is required by this Certificate or by law, such amendment or repeal shall require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of the majority of the outstanding shares of each class entitled to vote thereon as a class, at a duly constituted meeting of stockholders called expressly for such purpose; provided, however, that the affirmative vote of not less than 75% of the outstanding shares entitled to vote on such amendment or repeal, and the affirmative vote of not less than 75% of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any provision of Article V, Article VI, Article VII, Article VIII or Article IX of this Certificate.
[End of Text]
THIS SEVENTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed
as of this ____ day of __________, 2007.
VIRTUSA CORPORATION
By:__________________________
Krishan A. Canekeratne
Chief Executive Officer
Exhibit 4.2
FOURTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Fourth Amended and Restated Registration Rights Agreement (this "Agreement") is made as of this 29th day of March, 2007 by and among Virtusa Corporation, a Delaware corporation (together with any successor thereto, the "Company"), the Investors and the Stockholders (each as defined below).
WHEREAS, this Agreement amends and restates in its entirety that certain Third Amended and Restated Registration Rights Agreement, dated February 5, 2004, among the Company and the parties identified therein (the "Original Agreement");
WHEREAS, certain Investors have previously acquired shares of the Company's Series A Convertible Participating Preferred Stock, par value $.01 per share ("Series A Preferred Stock"), Series B Convertible Participating Preferred Stock, par value $.01 per share ("Series B Preferred Stock"), Series C Participating Preferred Stock, par value $.01 per share ("Series C Preferred Stock") and Series D Participating Preferred Stock, par value $.01 per share ("Series D Preferred Stock").
WHEREAS, the Company and BT Americas Inc. (together with its Affiliates, "BT") are simultaneously entering into a certain Stock Purchase Agreement, dated as of the date hereof (the "Common Stock Purchase Agreement"), pursuant to which BT has agreed to purchase shares of Common Stock, $.01 par value per share (the "Common Stock"), from the Company in accordance with the terms and conditions contained therein; and
WHEREAS, the execution of this Agreement is a condition precedent to the purchase by BT of the Common Stock under the Common Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:
"Affiliates" of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the first mentioned Person. A Person shall be deemed to control another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise. In addition, for any Person that is a venture capital fund, the term "Affiliate" shall also mean other venture capital funds with the same management company.
"Commission" shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act and the Exchange Act.
"Common Stock" shall mean (i) Common Stock and (ii) any other securities into which or for which any of the securities described in clause (i) above may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Conversion Shares" shall mean shares of Common Stock issued or issuable upon conversion of the Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Focus" means Focus Ventures II, L.P., V Investors II QP, L.P., FV Investors II A, L.P., and their Affiliates.
"Globespan" means JAFCO America Technology Fund III, L.P., JAFCO America Technology Cayman Fund III, L.P., JAFCO USIT Fund III, L.P. and JAFCO America Technology Affiliates Fund III, L.P. and their Affiliates.
The "Investors" shall mean the investors listed under the heading "Investors" on the signature pages hereto (including BT).
"Person" shall mean an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated organization, a limited liability company, a government and any agency or political subdivision thereof.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.
"Registrable Securities" shall mean (i) any shares of Common Stock now held, or hereafter acquired, by the Investors or Stockholders, (ii) the Conversion Shares, and (iii) any other Common Stock issued and issuable with respect to any such shares described in clauses (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected); provided, however, that notwithstanding anything to the contrary contained herein, "Registrable Securities" shall not at any time include any securities (i) registered and sold pursuant to the Securities Act or (ii) which may be sold to the public pursuant to Rule 144 promulgated under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Sigma" means Sigma Partners V, L.P., Sigma Associates V, L.P., and Sigma Investors V, L.P. and their Affiliates.
"Stockholders" shall mean the stockholders listed under the heading "Stockholders" on the signature pages hereto.
2. PIGGYBACK REGISTRATIONS. If at any time or times after the date hereof the Company shall seek to register any shares of its Common Stock under the Securities Act for sale to the public for its own account or on the account of others (except with respect to registration statements on Form S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public but including any registrations initiated pursuant to Section 3 hereof), the Company will promptly give written notice thereof to all holders of Registrable Securities (the "Holders"). If within twenty (20) days after their receipt of such notice one or more Holders request the inclusion of some or all of the Registrable Securities owned by them in such registration, the Company will use commercially reasonable efforts to include such Registrable Securities in such registration. In the case of the registration of shares of capital stock by the Company in connection with any underwritten public offering, if the underwriter(s) determines that marketing factors require a limitation on the number of Registrable Securities to be offered, subject to the following sentence, the Company shall not be required to register Registrable Securities of the Holders in excess of the amount, if any, of shares of the capital stock which the principal underwriter of such underwritten offering shall reasonably and in good faith agree to include in such offering in addition to any amount to be registered for the account of the Company.
If any limitation of the number of shares of Registrable Securities to
be registered by the Holders is required in the good faith judgment of the
managing underwriter of such public offering pursuant to this Section 2, in
connection with an initial public offering, the number of shares to be excluded
shall be determined in the following sequence: (i) first, securities held by any
Persons not having any such contractual, incidental "piggy back" registration
rights, (ii) second, securities held by any Persons (other than the Holders)
having such contractual, incidental "piggy back" rights pursuant to an agreement
which is not this Agreement, (iii) third, Registrable Securities sought to be
included by the Holders who are Stockholders as determined on a pro rata basis
(based upon the respective holdings of securities by such Holders) and (iv)
fourth, Registrable Securities sought to be included by the Holders who are
Investors as determined on a pro rata basis (based upon the respective holdings
of securities by such Holders). If any limitation of the number of shares of
Registrable Securities to be registered by the Holders is required pursuant to
this Section 2, in a registration that is not an initial public offering, the
number of shares to be excluded shall be determined in the following sequence:
(i) first, securities held by any Persons not having any such contractual,
incidental "piggy back" registration rights, (ii) second, securities held by any
Persons (other than the Holders) having such contractual, incidental "piggy
back" rights pursuant to an agreement which is not this Agreement, and (iii)
third, Registrable Securities sought to be included by the Holders as determined
on a pro rata basis (based upon the respective holdings of securities by such
Holders); provided, that, if such registration was initiated pursuant to Section
3 hereof and the Holders initiating such registration have the number of
Registrable Securities they sought to have registered cut back hereunder, such
registration shall not be deemed a demand registration under Section 3 by such
Holders. No such reduction shall reduce the amount of securities of the selling
Investors included in the registration below twenty-five percent (25%) of the
total amount of securities included in such registration, unless such offering
is the Company's initial public offering and such registration does not include
shares of any other selling stockholders, in which
event any or all of the Registrable Securities of the Investors may be excluded in accordance with the provisions of this Section 2.
3. REQUIRED REGISTRATIONS.
(A) SERIES A DEMAND REGISTRATION. At any time after the date that is
six (6) months after the initial public offering of Common Stock by the Company
pursuant to an effective registration statement under the Securities Act (an
"Initial Public Offering'), on not more than one (1) occasion, Investors holding
at least fifty percent (50%) of the Registrable Securities issued or issuable
upon conversion of the Series A Preferred Stock may request that the Company
register under the Securities Act all or a portion of the Registrable Securities
held by such requesting Investors so long as the public offering is anticipated
to have an aggregate gross offering price to the public of at least $15,000,000;
provided, however, that the provisions of this Section 3(a) shall not be
available to the Investors if such Registrable Securities may be immediately
registered on Form S-3 pursuant to a request made pursuant to the provisions of
Section 3(f) below. A registration will not count as a requested registration
under this Section 3(a) until the registration statement relating to such
registration has been declared effective by the Commission at the request of the
requesting Investors.
(B) SERIES B DEMAND REGISTRATION. At any time after the date that is six (6) months after an Initial Public Offering, on not more than one (1) occasion, Investors holding at least twenty-five percent (25%) of the Registrable Securities issued or issuable upon conversion of the Series B Preferred Stock may request that the Company register under the Securities Act all or a portion of the Registrable Securities held by such requesting Investors so long as the public offering is anticipated to have an aggregate gross offering price to the public of at least $15,000,000; provided, however, that the provisions of this Section 3(b) shall not be available to the Investors if such Registrable Securities may be immediately registered on Form S-3 pursuant to a request made pursuant to the provisions of Section 3(g) below. A registration will not count as a requested registration under this Section 3(b) until the registration statement relating to such registration has been declared effective by the Commission at the request of the requesting Investors.
(C) SERIES C DEMAND REGISTRATION. At any time after the date that is six (6) months after an Initial Public Offering, on not more than one (1) occasion, Investors holding at least twenty-five percent (25%) of the Registrable Securities issued or issuable upon conversion of the Series C Preferred Stock may request that the Company register under the Securities Act all or a portion of the Registrable Securities held by such requesting Investors so long as the public offering is anticipated to have an aggregate gross offering price to the public of at least $15,000,000; provided, however, that the provisions of this Section 3(c) shall not be available to the Investors if such Registrable Securities may be immediately registered on Form S-3 pursuant to a request made pursuant to the provisions of Section 3(h) below. A registration will not count as a requested registration under this Section 3(c) until the registration statement relating to such registration has been declared effective by the Commission at the request of the requesting Investors.
(D) SERIES D DEMAND REGISTRATION. At any time after the date that is six (6) months after an Initial Public Offering, on not more than one (1) occasion, Investors holding at
least twenty-five percent (25%) of the Registrable Securities issued or issuable
upon conversion of the Series D Preferred Stock may request that the Company
register under the Securities Act all or a portion of the Registrable Securities
held by such requesting Investors so long as the public offering is anticipated
to have an aggregate gross offering price to the public of at least $15,000,000;
provided, however, that the provisions of this Section 3(d) shall not be
available to the Investors if such Registrable Securities may be immediately
registered on Form S-3 pursuant to a request made pursuant to the provisions of
Section 3(i) below. A registration will not count as a requested registration
under this Section 3(d) until the registration statement relating to such
registration has been declared effective by the Commission at the request of the
requesting Investors.
(E) BT DEMAND REGISTRATION. At any time after the date that is six (6)
months after an Initial Public Offering, on not more than one (1) occasion, BT
may request that the Company register under the Securities Act all or a portion
of the Registrable Securities held by BT so long as the public offering is
anticipated to have an aggregate gross offering price to the public of at least
$15,000,000; provided, however, that the provisions of this Section 3(e) shall
not be available to BT if such Registrable Securities may be immediately
registered on Form S-3 pursuant to a request made pursuant to the provisions of
Section 3(j) below. A registration will not count as a requested registration
under this Section 3(e) until the registration statement relating to such
registration has been declared effective by the Commission at the request of BT.
(F) SERIES A FORM S-3. After an Initial Public Offering, the Company
shall use commercially reasonable efforts to qualify and remain qualified to
register securities on Form S-3 (or any successor form) under the Securities
Act. So long as the Company is qualified to register securities on Form S-3 (or
any successor form), on not more than two (2) occasions during any given twelve
(12) month period, Investors holding at least twenty-five percent (25%) of the
Registrable Securities issued or issuable upon conversion of the Series A
Preferred Stock shall have the right to request registration on Form S-3 (or any
successor form) for the Registrable Securities held by such requesting Investors
so long as the public offering is anticipated to have a gross aggregate offering
price to the public of at least $5,000,000. Such requests shall be in writing
and shall state the number of shares of Registrable Securities to be registered
and the intended method of disposition of such shares by such requesting
Investors.
(G) SERIES B FORM S-3. After an Initial Public Offering, the Company
shall use commercially reasonable efforts to qualify and remain qualified to
register securities on Form S-3 (or any successor form) under the Securities
Act. So long as the Company is qualified to register securities on Form S-3 (or
any successor form), on not more than two (2) occasions during any given twelve
(12) month period, Investors holding at least twenty-five percent (25%) of the
Registrable Securities issued or issuable upon conversion of the Series B
Preferred Stock shall have the right to request registration on Form S-3 (or any
successor form) for the Registrable Securities held by such requesting Investors
so long as the public offering is anticipated to have a gross aggregate offering
price to the public of at least $5,000,000. Such requests shall be in writing
and shall state the number of shares of Registrable Securities to be registered
and the intended method of disposition of such shares by such requesting
Investors.
(H) SERIES C FORM S-3. After an Initial Public Offering, the Company shall
use commercially reasonable efforts to qualify and remain qualified to register securities on Form S-3 (or any successor form) under the Securities Act. So long as the Company is qualified to register securities on Form S-3 (or any successor form), on not more than two (2) occasions during any given twelve (12) month period, Investors holding at least twenty-five percent (25%) of the Registrable Securities issued or issuable upon conversion of the Series C Preferred Stock shall have the right to request registration on Form S-3 (or any successor form) for the Registrable Securities held by such requesting Investors so long as the public offering is anticipated to have a gross aggregate offering price to the public of at least $5,000,000. Such requests shall be in writing and shall state the number of shares of Registrable Securities to be registered and the intended method of disposition of such shares by such requesting Investors.
(I) SERIES D FORM S-3. After an Initial Public Offering, the Company
shall use commercially reasonable efforts to qualify and remain qualified to
register securities on Form S-3 (or any successor form) under the Securities
Act. So long as the Company is qualified to register securities on Form S-3 (or
any successor form), on not more than two (2) occasions during any given twelve
(12) month period, Investors holding at least twenty-five percent (25%) of the
Registrable Securities issued or issuable upon conversion of the Series D
Preferred Stock shall have the right to request registration on Form S-3 (or any
successor form) for the Registrable Securities held by such requesting Investors
so long as the public offering is anticipated to have a gross aggregate offering
price to the public of at least $5,000,000. Such requests shall be in writing
and shall state the number of shares of Registrable Securities to be registered
and the intended method of disposition of such shares by such requesting
Investors.
(J) BT FORM S-3. After an Initial Public Offering, the Company shall use commercially reasonable efforts to qualify and remain qualified to register securities on Form S-3 (or any successor form) under the Securities Act. So long as the Company is qualified to register securities on Form S-3 (or any successor form), on not more than two (2) occasions during any given twelve (12) month period, if BT holds at least twenty-five percent (25%) of the Registrable Securities purchased by BT pursuant to the Common Stock Purchase Agreement, BT shall have the right to request registration on Form S-3 (or any successor form) for all or a portion of the Registrable Securities held by BT so long as the public offering is anticipated to have a gross aggregate offering price to the public of at least $5,000,000. Such requests shall be in writing and shall state the number of shares of Registrable Securities to be registered and the intended method of disposition of such shares by BT.
(K) REGISTRATION REQUIREMENTS. Following a request pursuant to Section
3(a), (b), (c), (d), (e), (f), (g), (h), (i) or (j) above, the Company will
promptly notify all of the other Holders of Registrable Securities and such
Holders of Registrable Securities shall then have 20 days to notify the Company
of their desire to participate in the registration. Thereupon, the Company will
use commercially reasonable efforts to include such Registrable Securities in
the registration in accordance with the terms of this Section 3. If the request
for registration contemplates an underwritten public offering, the Company shall
state such in the written notice and in such event the right of any Person to
participate in such registration shall be conditioned upon their participation
in such underwritten public offering and the inclusion of their securities in
the underwritten public offering to the extent provided herein.
(L) UNDERWRITTEN OFFERING. If a requested registration involves an
underwritten public offering and the managing underwriter of such offering
determines in good faith that the number of securities sought to be offered
should be limited due to market conditions, then the number of securities to be
included in such registration and such underwritten public offering shall be
reduced to a number deemed satisfactory by such managing underwriter, provided
that the shares to be excluded shall be determined in the following sequence:
(i) first, securities held by any Persons not having any contractual, incidental
"piggy back" registration rights to include such securities on the registration
statement, (ii) second, securities held by any other Persons (other than the
Holders) having contractual, incidental "piggy back" rights to include such
securities in the registration statement pursuant to an Agreement which is not
this agreement, (iii) third, Registrable Securities held by the Stockholders
(based upon the respective holdings of securities by such Stockholders), (iv)
fourth, Registrable Securities of Investors who did not make the original
request for registration (based upon the respective holdings of securities by
such Investors), and (v) fifth, Registrable Securities of Investors who
requested such registration (based on the respective holdings of securities by
all such Investors). With respect to a request for registration pursuant to
Section 3(a), (b), (c), (d), (e), (f), (g), (h), (i) or (j) which is for an
underwritten public offering, the managing underwriter shall be chosen by the
Company and shall be reasonably acceptable to the requesting Investors. If the
managing underwriter has not limited the number of Registrable Securities or
other securities to be underwritten, the Company may include securities for its
own account in such registration if the managing underwriter so agrees and if
the number of Registrable Securities and other securities which would otherwise
have been included in such registration and underwriting will not thereby be
limited; provided, however, that the number of shares of Registrable Securities
of the Investors to be included in such underwriting and registration shall not
be reduced unless all other securities of the Company are first entirely
excluded from the underwriting and registration.
(M) POSTPONEMENT. The Company may postpone the filing of any registration statement required hereunder for a reasonable period of time, not to exceed one hundred twenty (120) days in the aggregate during any twelve-month period, if the Company furnishes to the Holders requesting registration a certificate signed by the Chairman of the Company's Board of Directors stating that the Board of Directors has determined reasonably and in good faith it would not be in the best interest of the Company or its stockholders for such registration to be effected at such time. The Company shall not be required to cause a registration statement requested pursuant to this Section 3 to become effective prior to one hundred eighty (180) days following the effective date of a registration statement on Form S-1 initiated by the Company for an initial public offering of its Common Stock; or ninety (90) days following the effective date of any other registration statement initiated by the Company; provided, however, that the Company shall use commercially reasonable efforts to achieve such effectiveness promptly following such period.
4. BLACK-OUT PERIOD.
(A) Following the effectiveness of a registration statement and filings with any state securities commissions, the Holders agree that they will not effect any sales of the Registrable Securities pursuant to a registration statement or any such filings at any time after they have received notice from the Company to suspend sales (i) as a result of the occurrence or
existence pending negotiations relating to, or consummation of, a transaction or
the occurrence of an event that would require additional disclosure of material
information by the Company in the registration statement, or (ii) so that the
Company may correct or update the registration statement or such filing pursuant
to Sections 3(a), (b), (c), (d), (e), (f), (g), (h), (i) or (j); provided that
the Company shall not delay a request for registration more than twice in any
twelve (12) month period and in each such instances for not more than ninety
(90) days. The Holders may recommence effecting sales of the Registrable Shares
pursuant to the registration statement or such filings following further written
notice to such effect from the Company, which notice shall be given by the
company not later than five (5) business days after the conclusion of any such
event.
(B) Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus and, if so directed by the Company, such Holder shall deliver to the Company all copies other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when sellers of such Registrable Securities under such registration statement shall have received the copies of the supplemented or amended prospectus.
5. FURTHER OBLIGATIONS OF THE COMPANY. Whenever the Company is required hereunder to register any Registrable Securities, it agrees that it shall also do the following:
(A) Pay all expenses of such registrations and offerings (exclusive of underwriting discounts and commissions and fees and expenses of counsel for the Holders) in connection with any registrations pursuant to Sections 2 or 3 hereof;
(B) Use commercially reasonable efforts to diligently prepare and file with the Commission a registration statement and such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the Holder or Holders have completed the distribution described in the registration statement relating thereto (but for no more than 180 days) and to comply with the provisions of the Securities Act with respect to the sale of securities covered by such registration statement for such period;
(C) Furnish to each selling Holder such copies of each preliminary and final prospectus and such other documents as such Holder may reasonably request to facilitate the public offering of its Registrable Securities;
(D) Enter into any reasonable underwriting agreement required by the proposed underwriter, if any, in such form and containing such terms as are customary; provided, however, that each Holder shall be required to make such representations or warranties as
required by the managing underwriter;
(E) Use commercially reasonable efforts to register or qualify the securities covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as any selling Holder may reasonably request; provided, that, the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to execute a general consent to service of process in effecting such registration or qualification unless the Company is already subject to service in such jurisdiction;
(F) Immediately notify each selling Holder, at any time when a prospectus relating to his, her or its Registrable Securities is required to be delivered under the Securities Act, of the happening of any event as a result of which such prospectus contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading, and, at the request of any such selling Holder, prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading;
(G) Cause all such Registrable Securities to be listed on each securities exchange or quotation system on which similar securities issued by the Company are then listed or quoted;
(H) Make available to each selling Holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling Holder or underwriter (collectively, the "Inspectors"), all financial records and pertinent corporate documents, as shall be reasonably necessary to enable them to exercise their due diligence responsibility;
(I) Otherwise use commercially reasonable efforts to comply with the securities laws of the United States and other applicable jurisdictions and all applicable rules and regulations of the Commission and comparable governmental agencies in other applicable jurisdictions and make generally available to its holders, in each case as soon as practicable, but not later than 45 days after the close of the period covered thereby, an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act;
(J) Otherwise cooperate with the underwriter or underwriters, the Commission and other regulatory agencies and take all actions and execute and deliver or cause to be executed and delivered all documents necessary to effect the registration of any Registrable Securities hereunder; and
(K) Use commercially reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any.
6. INDEMNIFICATION; CONTRIBUTION.
(A) Incident to any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each underwriter, each Holder who offers or sells any such Registrable Securities in connection with such registration statement (including its partners (including partners of partners and stockholders of any such partners), and directors, officers, employees, representatives and agents of any of them (a "Selling Holder"), and each person who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (a "Controlling Person"), from and against any and all losses, claims, damages, expenses and liabilities, joint or several (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, as the same are incurred), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement (including any related preliminary or definitive prospectus, or any amendment or supplement to such registration statement or prospectus) or (ii) any omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; provided, however, that the Company will not be liable to the extent that such loss, claim, damage, expense or liability arises from and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Company by such underwriter, Selling Holder or Controlling Person expressly for use in such registration statement. With respect to such untrue statement or omission or alleged untrue statement or omission in the information furnished in writing to the Company by such Selling Holder expressly for use in such registration statement, such Selling Holder will indemnify and hold harmless each underwriter, the Company (including its directors, officers, employees, representatives and agents), each other Selling Holder (including its partners (including partners of partners and stockholders of such partners) and directors, officers, employees, representatives and agents of any of them, and each person who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, expenses and liabilities, joint or several, to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise to the same extent provided in the immediately preceding sentence; provided, however, that the indemnity agreement of such Selling Holder contained in this Section 6(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 such Selling Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity by a Selling Holder under this Section 6(a) exceed the net proceeds from the offering received by such Selling Holder.
(B) If the indemnification provided for in Section 6(a) above for any reason is held by a court of competent jurisdiction to be unavailable to an indemnified party in respect of any losses, claims, damages, expenses or liabilities referred to therein, then each indemnifying party under this Section 6, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Company, the Selling Holders and the underwriters from the offering of the Registrable Securities and (ii) the relative fault of the Company, the Selling Holders and the underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the Selling Holders and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and the Selling Holders and the underwriting discount received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company, the Selling Holders and the underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Holders or the underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Selling Holder hereunder exceed the net proceeds from the offering received by such Selling Holder.
(C) The amount paid by an indemnifying party or payable to an indemnified party as a result of the losses, claims, damages and liabilities referred to in this Section 6 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim, payable as the same are incurred. The indemnification and contribution provided for in this Section 6 will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified parties or any officer, director, employee, agent or controlling person of the indemnified parties. No indemnifying party, in the defense of any such claim or litigation, shall enter into a consent of entry of any judgment or enter into a settlement without the consent of the indemnified party, which consent will not be unreasonably withheld.
7. RULE 144 AND RULE 144A REQUIREMENT. In the event that the Company becomes subject to Section 13 or Section 15(d) of the Exchange Act, the Company shall use commercially reasonable efforts to take all action as may be required as a condition to the availability of Rule 144 or Rule 144A under the Securities Act (or any successor or similar exemptive rules hereafter in effect). The Company shall furnish to any Holder, within 15 days of a written request, a written statement executed by the Company as to the steps it has taken to comply with the current public information requirement of Rule 144 or Rule 144A or such successor rules.
8. TRANSFERABILITY OF REGISTRATION RIGHTS. The registration rights set forth in this Agreement are transferable to any transferee of Registrable Securities who receives an aggregate of at least 100,000 shares of Registrable Securities. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.
9. RIGHTS WHICH MAY BE GRANTED TO SUBSEQUENT INVESTORS. Other than transferees of Registrable Securities under Section 8 hereof, the Company shall not, without the prior written consent of Investors holding a majority of the outstanding Registrable Securities
held by all Investors, grant any other registration rights to any third parties which are pari passu or senior to the rights of the Holders hereunder.
10. MISCELLANEOUS.
(A) AMENDMENTS. For the purposes of this Agreement and all agreements executed pursuant hereto, no course of dealing between or among any of the parties hereto and no delay on the part of any party hereto in exercising any rights hereunder or thereunder shall operate as a waiver of the rights hereof and thereof. This Agreement may not be amended or modified or any provision hereof waived without the joint written consent of the Company and the holders of not less than a majority of the outstanding Registrable Securities; provided that any amendment to this Agreement which does not affect a party in the same fashion as the other parties hereto shall require the consent of such affected party.
(B) NOTICES AND DEMANDS. Any notice or demand which, by any provision of this Agreement or any agreement, document or instrument executed pursuant hereto or thereto, except as otherwise provided therein, is required to be given shall be deemed to have been sufficiently given or served and received for all purposes when delivered by hand, telecopy, telex or other method of facsimile or five (5) days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, or two (2) days after being sent by overnight delivery providing receipt of delivery, to the following addresses:
(I) If to the Company, Virtusa Corporation 2000, West Park Drive, Westborough, MA 01581 or at such other address designated by the Company to the Investors in writing, with a copy to John J. Egan III, P.C., Goodwin Procter LLP, Exchange Place, Boston, Massachusetts 02109.
(II) If to the Investors, at the mailing addresses as shown on the signature pages hereto, or at such other address designated by an Investor to the Company in writing, and, (i) if to Sigma or Focus, with a copy to Mark P. Tanoury, Esq., Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, CA 94306-2155, and (ii) if to Globespan, with a copy to William J. Schnoor, Jr., Esq., Goodwin Procter LLP, Exchange Place, Boston, Massachusetts 02109; and (iii) if to BT, with a copy to Toby S. Myerson, Esq., Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019.
(III) If to the Stockholders, at the mailing addresses as shown on Exhibit A hereto.
(C) REMEDIES; SEVERABILITY. It is specifically understood and agreed that any breach of the provisions of this Agreement by any person subject hereto will result in irreparable injury to the other parties hereto, that the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any other remedies which they may have, such other parties may enforce their respective rights by actions for specific performance (to the extent permitted by law). Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be deemed prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the remainder of such provision or the other provisions of this Agreement.
(D) COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall constitute an original but all of which shall constitute but one and the same instrument. One or more counterparts of this Agreement may be delivered via telecopier, with the intention that they shall have the same effect as an original counterpart hereof.
(E) EFFECT OF HEADING. The Section headings herein are for convenience only and shall not affect the construction hereof.
(F) GOVERNING LAW. This Agreement shall be deemed a contract made under the laws of the State of Delaware and together with the rights and obligations of the parties hereunder, shall be construed under and governed by the laws of the State of Delaware, without giving effect to its conflicts of laws principles.
(G) JURISDICTION; WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, IN ACCORDANCE WITH, AND TO THE ADDRESSES SET FORTH ON THE SIGNATURE PAGE HERETO, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(H) INTEGRATION. This Agreement, including the exhibits, documents and instruments referred to herein or therein, constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. The Company and the parties hereto that are parties to the Original Agreement hereby agree that this Agreement replaces and supersedes the Original Agreement in its entirety and that the Original Agreement is hereafter null and void.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Fourth Amended and Restated Registration Rights Agreement as of the date first above written.
COMPANY:
VIRTUSA CORPORATION
By: /s/ Krishan A. Canekeratne ------------------------------------------- Name: Krishan A. Canekeratne Title: Chairman and Chief Executive Officer |
Address:
2000 West Park Drive
Westborough, MA 01581
INVESTORS:
SIGMA PARTNERS V, L.P.
By: Sigma Management V, L.L.C.
Its: General Partner
By: /s/ Robert E. Davoli ------------------------------------------- Name: Robert E. Davoli Title: Managing Director |
Address:
1600 El Camino Real, Suite 280
Menlo Park, CA 94025
SIGMA ASSOCIATES V, L.P.
By: Sigma Management V, L.L.C.
Its: General Partner
By: /s/ Robert E. Davoli ------------------------------------------- Name: Robert E. Davoli Title: Managing Director |
Address:
1600 El Camino Real, Suite 280
Menlo Park, CA 94025
SIGMA INVESTORS V, L.P.
By: Sigma Management V, L.L.C.
Its: General Partner
By: /s/ Robert E. Davoli ------------------------------------------- Name: Robert E. Davoli Title: Managing Director |
Address:
1600 El Camino Real, Suite 280
Menlo Park, CA 94025
JAFCO AMERICA TECHNOLOGY FUND III, L.P. JAFCO AMERICA TECHNOLOGY CAYMAN FUND III, L.P. JAFCO USIT FUND III, L.P. JAFCO AMERICA TECHNOLOGY AFFILIATES FUND III, L.P.
/s/ Andrew P. Goldfarb ----------------------------------------------- By: Andrew P. Goldfarb Title: Managing Member JAV Management Associates III, L.L.C. Its General Partner One Boston Place, Suite 2810 Boston, MA 02108 |
CHARLES RIVER PARTNERSHIP XI, LP
By: Charles River XI GP LP
Its General Partner
By: Charles River XI GP, LLC
Its General Partner
By: /s/ Izhar Armony ------------------------------ Authorized Manager |
Address: 1000 Winter Street, Suite 3300 Waltham, MA 02451
CHARLES RIVER FRIENDS XI-A, LP
By: Charles River XI GP, LLC
Its General Partner
By: /s/ Izhar Armony ----------------------------------- Authorized Manager |
Address: 1000 Winter Street, Suite 3300 Waltham, MA 02451
CHARLES RIVER FRIENDS XI-B, LP
By: Charles River XI GP, LLC
Its General Partner
By: /s/ Izhar Armony ----------------------------------- Authorized Manager |
Address: 1000 Winter Street, Suite 3300 Waltham, MA 02451
THE STORAGENETWORKS LIQUIDATING TRUST
Title:
BT AMERICAS INC.
By: /s/ Kristen Venderame ------------------------------------------- Name: Kristen Venderame Title: Secretary & Chief Counsel |
BBCP 104 LLC
By: Back Bay Venture 104 Nominee Trust
Title:
/s/ Robert Davoli ----------------------------------------------- Robert Davoli |
MWE INVESTORS
Title:
WASHINGTON MALL PARTNERS
Title:
FOCUS VENTURES II, L.P.
By: /s/ Kevin J. McQuillan ------------------------------------------- Name: Kevin J. McQuillan Title: General Partner |
Address:
525 University Avenue
Suite 1400
Palo Alto, CA 94301
FOCUS VENTURES II QP, L.P.
By: /s/ Kevin J. McQuillan ------------------------------------------- Name: Kevin J. McQuillan Title: General Partner |
Address:
525 University Avenue
Suite 1400
Palo Alto, CA 94301
FOCUS VENTURES II A, L.P.
By: /s/ Kevin J. McQuillan ------------------------------------------- Name: Kevin J. McQuillan Title: General Partner |
Address:
525 University Avenue
Suite 1400
Palo Alto, CA 94301
/s/ Rowland Moriarty ----------------------------------------------- Rowland Moriarty |
Martin Trust 2006 GRAT
By: /s/ Robert F. Wade ------------------------------------------- Name: Robert F. Wade Title: Trustee |
TNR Partnership
By: /s/ Jane A. Maheu ------------------------------------------- Name: Jane A. Maheu Title: General Partner |
MANAGEMENT STOCKHOLDERS:
By: /s/ Krishan A. Canekeratne ------------------------------------------- Krishan A. Canekeratne |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
By: /s/ Tushara Canekeratne ------------------------------------------- Tushara Canekeratne |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
By: /s/ Ranjan Canekeratne ------------------------------------------- Ranjan Canekeratne |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
By: /s/ Shireen Canekeratne ------------------------------------------- Shireen Canekeratne |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
By: /s/ John L. Gillis ------------------------------------------- John L. Gillis |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
By: /s/ Sandra L. Gillis ------------------------------------------- Sandra L. Gillis |
Address:
c/o Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
Exhibit 10.3
LEASE AGREEMENT BETWEEN
W9/TIB REAL ESTATE LIMITED PARTNERSHIP,
AS LANDLORD, AND
ERUNWAY, INC.,
AS TENANT
DATED AS OF JUNE __, 2000
WESTBOROUGH, MASSACHUSETTS
MASSACHUSETTS OFFICE LEASE FORM
VERSION 13 - LAST REVISED AUGUST 1999
BASIC LEASE INFORMATION
Lease Date: as of June ___, 2000. Landlord: W9/TIB REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership. Tenant: ERUNWAY, INC., a Delaware corporation. Premises: Suite No. 310, containing 10,499 rentable square feet, in the building (the "BUILDING"), whose street address is 2000 West Park Drive, Westborough, Massachusetts. The Premises are shown cross-hatched on the plan attached to the Lease as Exhibit A. The term "Building" includes the land (the "LAND") on which the Building is located, and the driveways, parking facilities, and similar improvements located thereon. Office Park: The buildings whose street address are 1500 West Park Drive, Westborough, Massachusetts, 1700 West Park Drive, Westborough, Massachusetts, 1800 West Park Drive, Westborough, Massachusetts, 1900 West Park Drive, Westborough, Massachusetts, and 2000 West Park Drive, Westborough, Massachusetts, and the land on which such buildings are located and all other buildings or improvements now or hereafter located on such land. The parcels of land which presently comprise the Office Park (the "OFFICE PARK LAND") are described on Exhibit B attached hereto. Term: Approximately 60 months, commencing on the Commencement Date and ending at 5:00 p.m. local time on the last day of the 60th full calendar month following the Commencement Date, subject to adjustment and earlier termination as provided in the Lease. Commencement Date: The earlier of (a) the date on which Tenant occupies any portion of the Premises and begins conducting business therein, or (b) July 1, 2000 (provided, that if Landlord is unable to deliver possession of the Premises to Tenant by such date, then, as provided in Section 3 of the Lease, Tenant shall accept possession of the Premises on the date Landlord tenders possession thereof to Tenant, which date will then be the "Commencement Date"). Basic Rent: Basic Rent shall be the following amounts for the following periods of time: Lease Month Monthly Basic Rent ----------- ------------------ 1 - 60 $21,872.92 As used herein, the term "LEASE MONTH" shall mean each calendar month during the Term (and if the Commencement Date does not occur on the first day of a calendar month, the period from the Commencement Date to the first day of the next calendar month shall be included in the first Lease Month for purposes of determining the duration of the Term and the monthly Basic Rent rate applicable |
for such partial month). Security Deposit: $262,475.04. Additional Security Deposit: $291,199.96 Rent: Basic Rent, Tenant's Proportionate Share of Taxes and Electrical Costs, Tenant's share of Additional Rent, and all other sums that Tenant may owe to Landlord or otherwise be required to pay under the Lease. Permitted Use: General office use. Tenant's Proportionate Share: 16.62%, which is the percentage obtained by dividing (a) the number of rentable square feet in the Premises as stated above by (b) 63,180, which is the number of rentable square feet in the Building. Landlord and Tenant stipulate that the number of rentable square feet in the Premises and in the Building set forth above shall be binding upon them. Expense Stop: Operating Costs per rentable square foot in the Building for the calendar year 2000 (grossed up as provided in Section 4.(b)(6) of the Lease). Base Tax Year: The fiscal year ending June 30, 2001. Initial Liability Insurance Amount: $3,000,000.00. |
Tenant's Prior to Commencement Date: Following Commencement Date: Address: eRunway, Inc. eRunvay, Inc. 176 East Main Street 2000 West Park Drive Westborough, Massachusetts 01581 Westborough, Massachusetts 01581 Attention: Chief Financial Officer Attention: Chief Financial Officer Telephone: 508-366-9955 Telephone: 508-366-9955 Telecopy: 508-366-9901 Telecopy: 508-366-9901 Landlord's For all Notices: With a copy to: Address: W9/TIB Real Estate Limited Partnership W9/TIB Real Estate Limited Partnership c/o Archon Group, L.P. c/o Archon Group, L.P. 1275 K Street, N. W., Suite 900 600 East Las Colinas Blvd., Suite 400 Washington, D.C. 20005 Irving, Texas 75039 Attention: Asset Manager Attention: General Counsel - 2000 Telephone: 202-216-5800 West Park Drive, Westborough, Massachusetts Telecopy: 202-216-5801 Telephone: 972-368-2200 Telecopy: 972-368-3199 |
The foregoing Basic Lease Information is incorporated into and made a part of the Lease identified above. If any conflict exists between any Basic Lease Information and the Lease, then the Lease shall control.
LANDLORD: W9/TIB REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership By: W9/TIB Gen-Par, Inc., a Delaware corporation, its general partner By: /s/ Stephen M. Abelman ------------------------------------ Name: Stephen M. Abelman Title: Assistant Vice President TENANT: ERUNWAY, INC, a Delaware corporation By: /s/ JACK STEINKRAUSS ------------------------------------ Name: JACK STEINKRAUSS Title: SVP |
TABLE OF CONTENTS
PAGE ---- 1. Definitions and Basic Provisions ..................................... 1 2. Lease Grant; Common Areas ............................................ 1 3. Tender of Possession ................................................. 2 4. Rent ................................................................. 2 (a) Payment .......................................................... 2 (b) Operating Costs; Taxes; Electrical Costs ......................... 2 (c) Tenant Inspection Right .......................................... 4 5. Delinquent Payment; Handling Charges ................................. 5 6. Security Deposit ..................................................... 5 7. Landlord's Obligations ............................................... 6 (a) Services ......................................................... 6 (b) Excess Utility Use ............................................... 7 (c) Restoration of Services .......................................... 7 (d) Alternate Service Provide ........................................ 7 8. Improvements; Alterations; Repairs; Maintenance ...................... 8 (a) Improvements; Alterations ........................................ 8 (b) Repairs; Maintenance ............................................. 8 (c) Performance of Work .............................................. 8 (d) Mechanic's Liens ................................................. 8 9. Use .................................................................. 9 10. Assignment and Subletting ........................................... 9 (a) Transfers ........................................................ 9 (b) Consent Standards ................................................ 9 (c) Request for Consent .............................................. 9 (d) Conditions to Consent ............................................ 10 (e) Cancellation ..................................................... 10 |
(f) Additional Compensation .......................................... 10 (g) Permitted Transfers .............................................. 10 11.Insurance; Waivers; Subrogation; Indemnity ........................... 11 (a) Tenant's Insurance ............................................... 11 (b) Landlord's Insurance ............................................. 12 (c) No Subrogation ................................................... 12 (d) Indemnity ........................................................ 12 12.Subordination; Attornment; Notice to Landlord's Mortgagee ............ 12 (a) Subordination .................................................... 12 (b) Attornment ....................................................... 13 (c) Notice to Landlord's Mortgagee ................................... 13 (d) Landlord's Mortgagee's Protection Provisions ..................... 13 13.Rules and Regulations ................................................ 13 14.Condemnation ......................................................... 13 (a) Total Taking ..................................................... 13 (b) Partial Taking-Tenant's Rights ................................... 13 (c) Partial Taking-Landlord's Rights ................................. 14 (d) Award ............................................................ 14 15.Fire or Other Casualty ............................................... 14 (a) Repair Estimate .................................................. 14 (b) Tenant's Rights .................................................. 14 (c) Landlord's Rights ................................................ 14 (d) Repair Obligation ................................................ 14 (e) Abatement of Rent ................................................ 15 16.Personal Property Taxes .............................................. 15 17.Events of Default .................................................... 15 (a) Payment Default .................................................. 15 (b) Abandonment ...................................................... 15 (c) Estoppel ......................................................... 15 (d) Other Defaults ................................................... 15 (e) Insolvency ....................................................... 15 (e) Additional Security Deposit ...................................... 16 18.Remedies ............................................................. 16 (a) Termination of Lease ............................................. 16 |
(b) Termination of Possession ........................................ 16 (c) Alteration of Locks .............................................. 16 19.Payment by Tenant; Non-Waiver; Cumulative Remedies ................... 16 (a) Payment by Tenant ................................................ 16 (b) No Waiver ........................................................ 17 (c) Cumulative Remedies .............................................. 17 20.Landlord's Lien ...................................................... 17 21.Surrender of Premises ................................................ 17 22.Holding Over ......................................................... 18 23.Certain Rights Reserved by Landlord .................................. 18 (a) Building Operations .............................................. 18 (b) Security ......................................................... 18 (c) Prospective Purchasers and Lenders ............................... 18 (d) Prospective Tenants .............................................. 18 24.[Intentionally Omitted] .............................................. 19 25.Miscellaneous ........................................................ 19 (a) Landlord Transfer ................................................ 19 (b) Landlord's Liability ............................................. 19 (c) Force Majeure .................................................... 19 (d) Brokerage ........................................................ 19 (e) Estoppel Certificates ............................................ 19 (f) Notices .......................................................... 19 (g) Separability ..................................................... 19 (h) Amendments; and Binding Effect ................................... 20 (i) Quiet Enjoyment .................................................. 20 (j) No Merger ........................................................ 20 (k) No Offer ......................................................... 20 (1) Entire Agreement ................................................. 20 (m) Waiver of Jury Trial ............................................. 20 (n) Governing Law .................................................... 20 (o) Recording ........................................................ 20 (p) Joint and Several Liability ...................................... 20 (q) Financial Reports ................................................ 20 (r) Landlord's Fees .................................................. 21 (s) Telecommunications ............................................... 21 (t) Confidentiality .................................................. 21 |
(u) Authority ........................................................ 21 (v) Hazardous Materials .............................................. 22 (w) List of Exhibits ................................................. 22 26.Other Provisions ..................................................... 22 |
LEASE
THIS LEASE AGREEMENT (this "LEASE") is entered into as of June _________________, 2000, between W9/TIB REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership ("LANDLORD"), and ERUNWAY, INC., a Delaware corporation ("TENANT").
1. DEFINITIONS AND BASIC PROVISIONS. The definitions and basic provisions set forth in the Basic Lease Information (the "BASIC LEASE INFORMATION") executed by Landlord and Tenant contemporaneously herewith are incorporated herein by reference for all purposes. Additionally, the following terms shall have the following meanings when used in this Lease: "AFFILIATE" means any person or entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the party in question; "BUILDING'S STRUCTURE" means the Building's exterior walls, roof, elevator shafts, footings, foundations, structural portions of load-bearing walls, structural floors and subfloors, and structural columns and beams; "BUILDING'S SYSTEMS" means the Building's HVAC, life-safety, plumbing, electrical, and mechanical systems; "INCLUDING" means including, without limitation; "LAWS" means all federal, state, and local laws, rules and regulations, all court orders, governmental directives, and governmental orders, and all restrictive covenants affecting the Building, and "LAW" shall mean any of the foregoing; and "TENANT PARTY" means any of the following persons: Tenant; any assignees claiming by, through, or under Tenant; any subtenants claiming by, through, or under Tenant; and any of their respective agents, contractors, employees, and invitees.
2. LEASE GRANT; COMMON AREAS. Subject to the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the Premises.
Tenant shall have the non-exclusive right during the Term to use the Common
Areas (as defined below) for itself, its employees, agents, customers, invitees
and licensees. The phrase "COMMON AREAS" as used herein shall mean the portions
of the Building which are from time to time designated and improved for common
use by or for the benefit of more than one tenant of the Building, including,
but not limited to, any of the following: the land and facilities used as
parking areas, access and perimeter roads, landscaping areas, exterior walks,
stairways, ramps, interior corridors, stairs, but excluding any portion thereof
when designated by Landlord for a non-common use. All Common Areas shall be
subject to the exclusive control and management of Landlord. Landlord shall have
the right to (i) to close, if necessary, all or any portion of the Common Areas
to such extent as may be legally necessary to prevent a dedication thereof or
the accrual of any rights of any person or of the public therein; (ii) to close
temporarily all or any portion of the Common Areas to discourage non-tenant use;
(iii) to use portions of the Common Areas while engaged in making additional
improvements or repairs or alterations to the Building; and (iv) to do and
perform such other acts in, to and with respect to the Common Areas as Landlord
shall determine to be appropriate for the Building. Landlord shall have the
right to increase the size of the Common Areas, including the expansion thereof
to adjacent property, to reduce the Common Area, to reconfigure the parking
spaces and improvements on the Common Areas, and to make such changes therein
and thereto from time to time which in Landlord's opinion are desirable and in
the best interests of all persons using the Common Areas. Any portion of the
Building not originally included within the Common Areas shall be so included if
and when so designated by Landlord for common use. Tenant shall use and shall
use reasonable efforts to cause its agents, employees, invitees, vendors,
suppliers and independent contractors to use such access roads and operate
trucks and trailers delivering merchandise to and from the Premises upon and
over such access roads as are designated by Landlord as a means of ingress to
and egress from the Premises. Landlord may establish a system or systems of
validation or other type of operation to control the parking areas within
the Common Areas. Nothing contained in this Lease shall prohibit or otherwise restrict Landlord from changing, from time to time, the location, layout or type of parking areas within the Common Areas.
3. TENDER OF POSSESSION. Landlord and Tenant presently anticipate that possession of the Premises will be tendered to Tenant (with the Work to be performed by Landlord therein, if any, Substantially Completed) on or about July 1, 2000 (the "ESTIMATED DELIVERY DATE"). If Landlord is unable to tender possession of the Premises in such condition to Tenant by the Estimated Delivery Date, then (a) Landlord shall not be in default hereunder or be liable for damages therefor, and (b) Tenant shall accept possession of the Premises when Landlord tenders possession thereof to Tenant. By occupying the Premises, Tenant shall be deemed to have accepted the Premises in their condition as of the date of such occupancy, subject to the performance of punch-list items that remain to be performed by Landlord, if any. Tenant shall execute and deliver to Landlord, within 10 days after Landlord has requested the same, a letter substantially in the form of Exhibit E hereto confirming (1) the Commencement Date and the expiration date of the initial Term, (2) that Tenant has accepted the Premises, and (3) that Landlord has performed all of its obligations with respect to the Premises (except for punch-list items specified in such letter). Occupancy of the Premises by Tenant prior to the Commencement Date shall be subject to all of the provisions of this Lease excepting only those requiring the payment of Basic Rent, Additional Rent, Taxes and Electrical Costs (each as defined herein).
4. RENT.
(a) PAYMENT. Tenant shall timely pay to Landlord Rent, without notice, demand, deduction or set off (except as otherwise expressly provided herein), at Landlord's address provided for in this Lease or as otherwise specified by Landlord and shall be accompanied by all applicable state and local sales or use taxes. Basic Rent, adjusted as herein provided, shall be payable monthly in advance. The first monthly installment of Basic Rent shall be payable contemporaneously with the execution of this Lease; thereafter, Basic Rent shall be payable on the first day of each month beginning on the first day of the second full calendar month of the Term. The monthly Basic Rent for any partial month at the beginning of the Term shall equal the product of 1/365 of the annual Basic Rent in effect during the partial month and the number of days in the partial month from and after the Commencement Date, and shall be due on the Commencement Date.
(b) OPERATING COSTS; TAXES; ELECTRICAL COSTS.
(1) Tenant shall pay to Landlord the amount (per each rentable square foot in the Premises) ("ADDITIONAL RENT") by which the annual Operating Costs (defined below) per rentable square foot in the Building exceed the Expense Stop (per rentable square foot in the Building). Landlord may make a good faith estimate of the Additional Rent to be due by Tenant for any calendar year or part thereof during the Term. During each calendar year or partial calendar year of the Term (after the base year, if the Expense Stop is calculated on a base year basis), Tenant shall pay to Landlord, in advance concurrently with each monthly installment of Basic Rent, an amount equal to the estimated Additional Rent for such calendar year or part thereof divided by the number of months therein. From time to time, Landlord may estimate and re-estimate the Additional Rent to be due by Tenant and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Additional Rent payable by Tenant shall be appropriately adjusted in accordance with the estimations so that, by the end of the calendar year in question, Tenant shall have paid all of the Additional Rent as estimated by Landlord. Any amounts paid based on such an estimate shall be subject to adjustment as herein provided when actual Operating Costs are available for each calendar year.
(2) The term "OPERATING COSTS" shall mean all expenses and disbursements (subject to the limitations set forth below) that Landlord incurs in connection with the ownership, operation, and maintenance of the Building, determined in accordance with sound accounting principles consistently applied, including the following costs: (A) wages and salaries (including management fees) of all on-site employees at or below the grade of senior building manager engaged in the operation, maintenance or security of the Building (together with Landlord's reasonable allocation of expenses of off-site employees at or below the grade of senior building manager who perform a portion of their services in connection with the operation, maintenance or security of the Building), including taxes, insurance and benefits relating thereto; (B) all supplies and materials used in the operation, maintenance, repair, replacement, and security of the Building; (C) costs for improvements made to the Building which, although capital in nature, are expected to reduce the normal operating costs (including all utility costs) of the Building, as amortized using a commercially reasonable interest rate over the time period reasonably estimated by Landlord to recover the costs thereof taking into consideration the anticipated cost savings, as determined by Landlord using its good faith, commercially reasonable judgment, as well as capital improvements made in order to comply with any Law hereafter promulgated by any governmental authority or any interpretation hereafter rendered with respect to any existing Law, as amortized using a commercially reasonable interest rate over the useful economic life of such improvements as determined by Landlord in its reasonable discretion; (D) cost of all utilities, except Electrical Costs and the cost of other utilities reimbursable to Landlord by the Building's tenants other than pursuant to a provision similar to this Section 4.(b); (E) insurance expenses; (F) repairs, replacements, and general maintenance of the Building; and (G) service or maintenance contracts with independent contractors for the operation, maintenance, repair, replacement, or security of the Building (including alarm service, window cleaning, and elevator maintenance).
Operating Costs shall also include the Building's pro rata share of the costs of operating, managing, maintaining and cleaning (including, without limitation, snow and ice removal) the common areas and facilities of the Office Park shared by the Building and other buildings in the Office Park, including, without limitation, the costs of landscaping, insurance, security, snow plowing/sanding; the cost of maintaining and repairing the entrance and side roads and sidewalks within the Office Park, the drainage system, the Office Park directory and signage, the irrigation system and the street lights: and the cost of providing electricity to the street lights. The Building's pro rata share (as referred to in the preceding sentence) shall be equal to a fraction, the numerator of which is the total number of rentable square feet of floor area in the Building and the denominator of which is the total number of rentable square feet of floor area in all the buildings in the Office Park, from time to time.
Operating Costs shall not include costs for (i) capital improvements
made to the Building, other than capital improvements described in Section
4.(b)(2)(C) and except for items which are generally considered maintenance
and repair items, such as painting of common areas, replacement of carpet
in elevator lobbies, and the like; (ii) repair, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third
parties; (iii) interest, amortization or other payments on loans to
Landlord; (iv) depreciation; (v) leasing commissions; (vi) legal expenses
for services, other than those that benefit the Building tenants generally
(e.g., tax disputes); (vii) renovating or otherwise improving space for
occupants of the Building or vacant space in the Building; (viii) Taxes;
and (ix) federal income taxes imposed on or measured by the income of
Landlord from the operation of the Building. If the Expense Stop is
calculated on a base year basis, Operating Costs for the base year only
shall not include market-wide labor-rate increases due to extraordinary
circumstances, including boycotts and strikes; utility rate increases due
to extraordinary circumstances, including conservation surcharges,
boycotts, embargos or other
shortages; or amortized costs relating to capital improvements.
(3) Tenant shall also pay its Proportionate Share of any increase in Taxes for each year and partial year falling within the Term over the Taxes for the Base Tax Year. Tenant shall pay its Proportionate Share of Taxes in the same manner as provided above for Additional Rent with regard to Operating Costs. "TAXES" shall mean taxes, assessments, and governmental charges or fees whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing or by others, subsequently created or otherwise, and any other taxes and assessments (including non-governmental assessments for common charges under a restrictive covenant or other private agreement that are not treated as part of Operating Costs) now or hereafter attributable to the Building (or its operation), excluding, however, penalties and interest thereon and federal and state taxes on income (if the present method of taxation changes so that in lieu of the whole or any part of any Taxes, there is levied on Landlord a capital tax directly on the rents received therefrom or a franchise tax, assessment, or charge based, in whole or in part, upon such rents for the Building, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term "Taxes" for purposes hereof). Taxes shall include the costs of consultants retained in an effort to lower taxes and all costs incurred in disputing any taxes or in seeking to lower the tax valuation of the Building. For property tax purposes, Tenant waives all rights to protest or appeal the appraised value of the Premises, as well as the Building, and all rights to receive notices of reappraisement.
(4) Tenant shall also pay to Landlord Tenant's Proportionate Share of the cost of all electricity used by the Building ("ELECTRICAL COSTS"). Such amount shall be payable in monthly installments on the Commencement Date and on the first day of each calendar month thereafter. Each installment shall be based on Landlord's estimate of the amount due for each month. From time to time during any calendar year, Landlord may estimate or re-estimate the Electrical Costs to be due by Tenant for that calendar year and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Electrical Costs payable by Tenant shall be appropriately adjusted in accordance with the estimations.
(5) By April 1 of each calendar year, or as soon thereafter as practicable, Landlord shall furnish to Tenant a statement of Operating Costs and Electrical Costs for the previous year, in each case adjusted as provided in Section 4.(b)(6), and of the Taxes for the previous year (the "OPERATING COSTS AND TAX STATEMENT"). If the Operating Costs and Tax Statement reveals that Tenant paid more for Operating Costs or Electrical Costs than the actual amount for the year for which such statement was prepared, or more than its actual share of Taxes for such year, then Landlord shall promptly credit or reimburse Tenant for such excess; likewise, if Tenant paid less than Tenant's actual Proportionate Share of Additional Rent or share of Taxes due, then Tenant shall promptly pay Landlord such deficiency.
(6) With respect to any calendar year or partial calendar year in which the Building is not occupied to the extent of 95% of the rentable area thereof, the Operating Costs and Electrical Costs for such period shall, for the purposes hereof, be increased to the amount which would have been incurred had the Building been occupied to the extent of 95% of the rentable area thereof.
(c) TENANT INSPECTION RIGHT. Provided no Event of Default then exists after receiving an annual Operating Costs and Tax Statement and giving Landlord 30 days' prior written notice thereof, Tenant may inspect or audit Landlord's records relating to Operating Costs for the period of time covered by such Operating Costs and Tax Statement in accordance with the following provisions.
If Tenant fails to object to the calculation of Operating Costs on an annual Operating Costs and Tax Statement within 30 days after the statement has been delivered to Tenant, or if Tenant fails to conclude its audit or inspection within 90 days after the statement has been delivered to Tenant, then Tenant shall have waived its right to object to the calculation of Operating Costs for the year in question and the calculation of Operating Costs set forth on such statement shall be final. Tenant's audit or inspection shall be conducted where Landlord maintains its books and records, shall not unreasonably interfere with the conduct of Landlord's business, and shall be conducted only during business hours reasonably designated by Landlord. Tenant shall pay the cost of such audit or inspection, including $150 per hour of Landlord's or the building manager's employee time devoted to such inspection or audit, to reimburse Landlord for its overhead costs allocable to the inspection or audit, unless the total Operating Costs for the period in question is determined to be in error by more than 5% in the aggregate, and, as a result thereof, Tenant paid to Landlord $1.00 per square foot in the Premises more than the actual Operating Costs due for such period, in which case Landlord shall pay the audit cost (not to exceed the amount Tenant was overcharged for the period in question). Tenant may not conduct an inspection or have an audit performed more than once during any calendar year. Tenant or the accounting firm conducting such audit shall, at no charge to Landlord, submit its audit report in draft form to Landlord for Landlord's review and comment before the final approved audit report is submitted to Landlord, and any reasonable comments by Landlord shall be incorporated into the final audit report. If such inspection or audit reveals that an error was made in the Operating Costs previously charged to Tenant, then Landlord shall refund to Tenant any overpayment of any such costs, or Tenant shall pay to Landlord any underpayment of any such costs, as the case may be, within 30 days after notification thereof. Provided Landlord's accounting for Operating Costs is consistent with the terms of this Lease, Landlord's good faith judgment regarding the proper interpretation of this Lease and the proper accounting for Operating Costs shall be binding on Tenant in connection with any such audit or inspection. Tenant shall maintain the results of each such audit or inspection confidential and shall not be permitted to use any third party to perform such audit or inspection, other than an independent firm of certified public accountants (1) reasonably acceptable to Landlord, (2) which is not compensated on a contingency fee basis or in any other manner which is dependent upon the results of such audit or inspection (and Tenant shall deliver the fee agreement or other similar evidence of such fee arrangement to Landlord upon request), and (3) which agrees with Landlord in writing to maintain the results of such audit or inspection confidential. Notwithstanding the foregoing, Tenant shall have no right to conduct an audit if Landlord furnishes to Tenant an audit report for the period of time in question prepared by an independent certified public accounting firm of recognized national standing (whether originally prepared for Landlord or another party). Nothing in this Section 4.(c) shall be construed to limit, suspend or abate Tenant's obligation to pay Rent, including Additional Rent, when due.
5. DELINQUENT PAYMENT; HANDLING CHARGES. All past due payments required of
Tenant hereunder shall bear interest from the date due until paid at the lesser
of 18% per annum or the maximum lawful rate of interest; additionally, Landlord
may charge Tenant a fee equal to 5% of the delinquent payment to reimburse
Landlord for its cost and inconvenience incurred as a consequence of Tenant's
delinquency. In no event, however, shall the charges permitted under this
Section 5 or elsewhere in this Lease, to the extent they are considered to be
interest under applicable Law, exceed the maximum lawful rate of interest.
Notwithstanding the foregoing, the late fee referenced above shall not be
charged with respect to the first occurrence (but not any subsequent occurrence)
during any 12-month period that Tenant fails to make payment when due, until 5
days after Landlord delivers written notice of such delinquency to Tenant.
6. SECURITY DEPOSIT. Contemporaneously with the execution of this Lease, Tenant shall pay to Landlord the Security Deposit, which shall be held by Landlord to secure Tenant's performance of its obligations under this Lease. The Security Deposit is not an advance payment of Rent or a measure or limit
of Landlord's damages upon an Event of Default (as defined herein). Landlord may, from time to time following an Event of Default and without prejudice to any other remedy, use all or a part of the Security Deposit to perform any obligation Tenant fails to perform hereunder. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. Provided that Tenant has performed all of its obligations hereunder, Landlord shall, within 30 days after the Term ends, return to Tenant the portion of the Security Deposit which was not applied to satisfy Tenant's obligations. The Security Deposit may be commingled with other funds, and no interest shall be paid thereon. If Landlord transfers its interest in the Premises and the transferee assumes Landlord's obligations under this Lease, then Landlord may assign the Security Deposit to the transferee and Landlord thereafter shall have no further liability for the return of the Security Deposit.
In lieu of a Security Deposit in immediately available funds, Tenant may
deliver to Landlord a standby, unconditional, irrevocable letter of credit in
the face amount of the Security Deposit, naming Landlord as beneficiary, issued
by any of the 5 largest national banking associations with banking offices in
Dallas, Texas, permitting partial draws thereon, and otherwise in the form of
Exhibit J attached hereto or another form reasonably acceptable to Landlord.
Tenant shall from time to time cause its letter of credit to be renewed no later
than 30 days prior to any expiration date thereof so that its letter of credit
remains in effect for 30 days after the scheduled expiration date of the Term or
any renewal Term; if Tenant fails timely to renew its letter of credit, then
Landlord shall have the right to draw thereon, and retain the amounts so drawn
as the Security Deposit. Landlord may draw upon the letter of credit and apply
the proceeds thereof to perform any of Tenant's unperformed obligations under
this Lease. After any such draw, Tenant shall pay to Landlord on demand the
amount so drawn to be held as part of the Security Deposit. Tenant hereby
irrevocably appoints Landlord its true and lawful attorney-in-fact, such power
of attorney being coupled with an interest, with full power of substitution, to
do any one or more of the following in its sole discretion upon the occurrence
of an Event of Default under the Lease: (a) demand, collect, receive, sue for,
compound and give acquittance for any and all amounts which may be or become due
or payable with respect to the letter of credit and all funds evidenced thereby,
(b) execute any and all withdrawal receipts or others orders for the payment of
monies drawn from the letter of credit, (c) endorse the name of Tenant on all
commercial paper given in payment or in partial payment of the letter of credit,
(d) file any claim or institute any proceeding with respect to the letter of
credit, (e) transfer the letter of credit into the name of Landlord or its
nominee, and (f) take any other action which Landlord may deem necessary or
appropriate to protect and preserve the right, title, and interest of Landlord
under the Lease. To further secure Tenant's obligations under the Lease, Tenant
hereby pledges to Landlord and grants to Landlord a security interest in, the
letter of credit, and all renewals and replacements thereof, and proceeds
therefrom.
7. LANDLORD'S OBLIGATIONS.
(a) SERVICES. Landlord shall use all reasonable efforts to furnish to Tenant (1) water at those points of supply provided for general use of tenants of the Building; (2) heated and refrigerated air conditioning ("HVAC") as appropriate, at such temperatures and in such amounts as are standard for comparable buildings in the vicinity of the Building; (3) janitorial service to the Premises on weekdays, other than holidays, for Building-standard installations and such window washing as may from time to time be reasonably required; (4) elevators for ingress and egress to the floor on which the Premises are located, in common with other tenants, provided that Landlord may reasonably limit the number of operating elevators during non-business hours and holidays; and (5) electrical current during normal business hours for equipment that does not require more than 110 volts and whose electrical energy consumption does not exceed normal office usage. Landlord shall maintain the common areas of the Building in reasonably good order and condition, except for damage caused by a Tenant Party. If Tenant desires any of the services specified in Section 7(a)(2): (A) at any time other than between 8:00 a.m. and 5:30 p.m. on weekdays
(other than holidays), or (B) on Saturdays, Sundays or holidays, then such services (i.e, after-hour HVAC services) shall be supplied to Tenant upon the written request of Tenant delivered to Landlord before 3:00 p.m. on the business day preceding such extra usage, and Tenant shall pay to Landlord the cost of such services within 30 days after Landlord has delivered to Tenant an invoice therefor. The costs incurred by Landlord in providing after-hour HVAC service to Tenant shall include costs for electricity, water, sewage, water treatment, labor, metering, filtering, and maintenance reasonably allocated by Landlord to providing such service.
(b) EXCESS UTILITY USE. Landlord shall not be required to furnish electrical current for equipment that requires more than 110 volts or other equipment whose electrical energy consumption exceeds normal office usage. If Tenant's requirements for or consumption of electricity exceed the electricity to be provided by Landlord as described in Section 7.(a), Landlord shall, at Tenant's expense, make reasonable efforts to supply such service through the then-existing feeders and risers serving the Building and the Premises, and Tenant shall pay to Landlord the cost of such service within 30 days after Landlord has delivered to Tenant an invoice therefor. Landlord may determine the amount of such additional consumption and potential consumption by any verifiable method, including installation of a separate meter in the Premises installed, maintained, and read by Landlord, at Tenant's expense. Tenant shall not install any electrical equipment requiring special wiring or requiring voltage in excess of 110 volts or otherwise exceeding Building capacity unless approved in advance by Landlord. The use of electricity in the Premises shall not exceed the capacity of existing feeders and risers to or wiring in the Premises. Any risers or wiring required to meet Tenant's excess electrical requirements shall, upon Tenant's written request, be installed by Landlord, at Tenant's cost, if, in Landlord's judgment, the same are necessary and shall not cause permanent damage to the Building or the Premises, cause or create a dangerous or hazardous condition, entail excessive or unreasonable alterations, repairs, or expenses, or interfere with or disturb other tenants of the Building. If Tenant uses machines or equipment in the Premises which affect the temperature otherwise maintained by the air conditioning system or otherwise overload any utility, Landlord may install supplemental air conditioning units or other supplemental equipment in the Premises, and the cost thereof, including the cost of installation, operation, use, and maintenance, shall be paid by Tenant to Landlord within 30 days after Landlord has delivered to Tenant an invoice therefor.
(c) RESTORATION OF SERVICES. Landlord shall use reasonable efforts to restore any service required of it that becomes unavailable; however, such unavailability shall not render Landlord liable for any damages caused thereby, be a constructive eviction of Tenant, constitute a breach of any implied warranty, or entitle Tenant to any abatement of Tenant's obligations hereunder.
(d) ALTERNATE SERVICE PROVIDER. Landlord has advised Tenant that presently Massachusetts Electric Company (the "ELECTRIC SERVICE PROVIDER") is the electric utility company selected by Landlord to provide electricity service for the Building. Notwithstanding the foregoing, Landlord reserves the right at any time and from time to time before or during the Term to either contract for electric service from a different company or companies providing electricity service (each such company shall hereinafter be referred to as an "ALTERNATIVE SERVICE PROVIDER") or continue to contact for electricity service from the Electric Service Provider. Tenant shall cooperate with Landlord, the Electric Service Provider and any Alternative Service Provider at all times and, as reasonably necessary, shall allow Landlord, the Electric Service Provider and any Alternative Service Provider reasonable access to the Building's electric lines, feeders, risers, wiring and other machinery within the Premises.
8. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE.
(a) IMPROVEMENTS; ALTERATIONS. Improvements to the Premises shall be
installed at Tenant's expense only in accordance with plans and specifications
which have been previously submitted to and approved in writing by Landlord,
which approval shall be governed by standards in the following sentence. No
alterations or physical additions in or to the Premises may be made without
Landlord's prior written consent, which shall not be unreasonably withheld or
delayed; however, Landlord may withhold its consent to any alteration or
addition that would adversely affect (in the reasonable discretion of Landlord)
(1) the Building's Structure or the Building's Systems (including the Building's
restrooms or mechanical rooms), (2) the exterior appearance of the Building, or
(3) the appearance of the Building's common areas or elevator lobby areas.
Tenant shall not paint or install lighting or decorations, signs, window or door
lettering, or advertising media of any type on or about the Premises without
the prior written consent of Landlord, which shall not be unreasonably withheld
or delayed; however, Landlord may withhold its consent to any such painting or
installation which, would affect the appearance of the exterior of the Building
or of any common areas of the Building. All alterations, additions, and
improvements shall be constructed, maintained, and used by Tenant at its risk
and expense, in accordance with all Laws; Landlord's consent to or approval of
any alterations, additions or improvements (or the plans therefor) shall not
constitute a representation or warranty by Landlord, nor Landlord's acceptance,
that the same comply with sound architectural and/or engineering practices or
with all applicable Laws, and Tenant shall be solely responsible for ensuring
all such compliance.
(b) REPAIRS; MAINTENANCE. Tenant shall maintain the Premises in a clean, safe, and operable condition, and shall not permit or allow to remain any waste or damage to any portion of the Premises. Tenant shall repair or replace, subject to Landlord's direction and supervision, any damage to the Building caused by a Tenant Party. If Tenant fails to make such repairs or replacements within 15 days after the occurrence of such damage, then Landlord may make the same at Tenant's cost. If any such damage occurs outside of the Premises, then Landlord may elect to repair such damage at Tenant's expense, rather than having Tenant repair such damage. The cost of all repair or replacement work performed by Landlord under this Section 8 shall be paid by Tenant to Landlord within 30 days after Landlord has invoiced Tenant therefor.
(c) PERFORMANCE OF WORK. All work described in this Section 8 shall be performed only by Landlord or by contractors and subcontractors approved in writing by Landlord. Tenant shall cause all contractors and subcontractors to procure and maintain insurance coverage naming Landlord as an additional insured against such risks, in such amounts, and with such companies as Landlord may reasonably require. All such work shall be performed in accordance with all Laws and in a good and workmanlike manner so as not to damage the Building (including the Premises, the Building's Structure and the Building's Systems). All such work which may affect the Building's Structure or the Building's Systems must be approved by the Building's engineer of record, at Tenant's expense and, at Landlord's election, must be performed by Landlord's usual contractor for such work. Tenant shall provide sworn statements, including the names, addresses and copies of contracts for all contractors, and upon completion of any work shall promptly furnish Landlord with sworn owner's and contractor's statements and full and final waivers of lien covering all labor and materials included in the work in question.
(d) MECHANIC'S LIENS. Tenant shall not permit any mechanic's liens to be filed against the Premises or the Building for any work performed, materials furnished, or obligation incurred by or at the request of Tenant. If such a lien is filed, then Tenant shall, within 10 days after Landlord has delivered notice of the filing thereof to Tenant (or such earlier time period as may be necessary to prevent the forfeiture of the Building or any interest of Landlord therein or the imposition of a civil or criminal fine
with respect thereto), either (1) pay the amount of the lien and cause the lien to be released of record, or (2) diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord. If Tenant fails to timely take either such action, then Landlord may pay the lien claim, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten days after Landlord has invoiced Tenant therefor. All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter contracting with Tenant or any contractor or subcontractor of Tenant for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Premises, at any time from the date hereof until the end of the Term, are hereby charged with notice that they look exclusively to Tenant to obtain payment for same. Nothing herein shall be deemed a consent by Landlord to any liens being placed upon the Building or Landlord's interest therein due to any work performed by or for Tenant.
9. USE. Tenant shall continuously occupy and use the Premises only for the
Permitted Use and shall comply with all Laws relating to the use, condition,
access to, and occupancy of the Premises. The population density within the
Premises as a whole shall at no time exceed one person for each 300 rentable
square feet in the Premises. Tenant shall not conduct second or third shift
operations within the Premises; however, Tenant may use the Premises after
normal business hours, so long as Tenant is not generally conducting business
from the Premises after normal business hours. The Premises shall not be used
for any use which is disreputable, creates extraordinary fire hazards, or
results in an increased rate of insurance on the Building or its contents, or
for the storage of any Hazardous Materials (other than typical office supplies
[e.g., photocopier toner] and then only in compliance with all Laws). Tenant
shall not use any substantial portion of the Premises for a "call center," any
other telemarketing use, or any credit processing use. If, because of a Tenant
Party's acts, the rate of insurance on the Building or its contents increases,
then such acts shall be an Event of Default, Tenant shall pay to Landlord the
amount of such increase on demand, and acceptance of such payment shall not
waive any of Landlord's other rights. Tenant shall conduct its business and
control each other Tenant Party so as not to create any nuisance or unreasonably
interfere with other tenants or Landlord in its management of the Building.
10. ASSIGNMENT AND SUBLETTING.
(a) TRANSFERS. Except as provided in Section 10.(g), Tenant shall not,
without the prior written consent of Landlord, (1) assign, transfer, or encumber
this Lease or any estate or interest herein, whether directly or by operation of
law, (2) permit any other entity to become Tenant hereunder by merger,
consolidation, or other reorganization, (3) if Tenant is an entity other than a
corporation whose stock is publicly traded, permit the transfer of an ownership
interest in Tenant so as to result in a change in the current control of Tenant,
(4) sublet any portion of the Premises, (5) grant any license, concession, or
other right of occupancy of any portion of the Premises, or (6) permit the use
of the Premises by any parties other than Tenant (any of the events listed in
Section 10.(a)(l)through 10.(a)(6) being a "TRANSFER").
(b) CONSENT STANDARDS. Landlord shall not unreasonably withhold its consent to any assignment or subletting of the Premises, provided that the proposed transferee (A) is creditworthy, (B) has a good reputation in the business community, (C) will use the Premises for the Permitted Use (thus, excluding, without limitation, uses for credit processing and telemarketing) and will not use the Premises in any manner that would conflict with any exclusive use agreement or other similar agreement entered into by Landlord with any other tenant of the Building, (D) is not a governmental entity, or subdivision or agency thereof, and (E) is not another occupant of the Building or person or entity with whom Landlord is negotiating to lease space in the Building; otherwise, Landlord may withhold its consent in its sole discretion.
(c) REQUEST FOR CONSENT. If Tenant requests Landlord's consent to a Transfer, then, at
least 15 business days prior to the effective date of the proposed Transfer, Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, and the following information about the proposed transferee: name and address; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed transferee's creditworthiness and character. Concurrently with Tenant's notice of any request for consent to a Transfer, Tenant shall pay to Landlord a fee of $1,000 to defray Landlord's expenses in reviewing such request, and Tenant shall also reimburse Landlord immediately upon request for its reasonable attorneys' fees incurred in connection with considering any request for consent to a Transfer.
(d) CONDITIONS TO CONSENT. If Landlord consents to a proposed Transfer, then the proposed transferee shall deliver to Landlord a written agreement whereby it expressly assumes Tenant's obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer for the period of the Transfer. No Transfer shall release Tenant from its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord's consent to any Transfer shall not waive Landlord's rights as to any subsequent Transfers. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so following the occurrence of an Event of Default hereunder. Tenant shall pay for the cost of any demising walls or other improvements necessitated by a proposed subletting or assignment.
(e) CANCELLATION. Landlord may, within 30 days after submission of Tenant's written request for Landlord's consent to an assignment or subletting, cancel this Lease as to the portion of the Premises proposed to be sublet or assigned as of the date the proposed Transfer is to be effective. If Landlord cancels this Lease as to any portion of the Premises, then this Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all Rent accrued through the cancellation date relating to the portion of the Premises covered by the proposed Transfer. Thereafter, Landlord may lease such portion of the Premises to the prospective transferee (or to any other person) without liability to Tenant.
(f) ADDITIONAL COMPENSATION. Tenant shall pay to Landlord, immediately upon receipt thereof, the excess of (1) all compensation received by Tenant for a Transfer less the costs reasonably incurred by Tenant with unaffiliated third parties in connection with such Transfer (i.e., brokerage commissions, tenant finish work, and the like) over (2) the Rent allocable to the portion of the Premises covered thereby.
(g) PERMITTED TRANSFERS. Notwithstanding Section 10.(a), Tenant may Transfer all or part of its interest in this Lease or all or part of the Premises (a "PERMITTED TRANSFER") to the following types of entities (a "PERMITTED TRANSFEREE") without the written consent of Landlord:
(1) an Affiliate of Tenant;
(2) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity in which or with which Tenant, or its corporate successors or assigns, is merged or consolidated, in accordance with applicable statutory provisions governing merger and consolidation of business entities, so long as (A) Tenant's obligations hereunder are assumed by the entity surviving such merger or created by such consolidation; and (B) the Tangible Net Worth of the surviving or created entity is not less than the Tangible Net Worth of Tenant as of the date hereof; or
(3) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Tenant's assets if such entity's Tangible Net Worth after such acquisition is not less than the Tangible Net Worth of Tenant as of the date hereof.
Tenant shall promptly notify Landlord of any such Permitted Transfer. Tenant shall remain liable for the performance of all of the obligations of Tenant hereunder, or if Tenant no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Tenant hereunder. Additionally, the Permitted Transferee shall comply with all of the terms and conditions of this Lease, including the Permitted Use, and the use of the Premises by the Permitted Transferee may not violate any other agreements, affecting the Premises, the Building, Landlord or other tenants of the Building. At least 30 days after the effective date of any Permitted Transfer, Tenant agrees to furnish Landlord with copies of the instrument effecting any of the foregoing Transfers and documentation establishing Tenant's satisfaction of the requirements set forth above applicable to any such Transfer. The occurrence of a Permitted Transfer shall not waive Landlord's rights as to any subsequent Transfers. "TANGIBLE NET WORTH" means the excess of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied ("GAAP"), excluding, however, from the determination of total assets all assets which would be classified as intangible assets under GAAP including goodwill, licenses, patents, trademarks, trade names, copyrights, and franchises. Any subsequent Transfer by a Permitted Transferee shall be subject to the terms of this Section 10.
11. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY.
(a) TENANT'S INSURANCE. Tenant shall maintain throughout the Term the following insurance policies: (1) commercial general liability insurance in amounts of $3,000,000.00 per occurrence or, following the expiration of the initial Term, such other amounts as Landlord may from time to time reasonably require (and, if the use and occupancy of the Premises include any activity or matter that is or may be excluded from coverage under a commercial general liability policy (e.g., the sale, service or consumption of alcoholic beverages], Tenant shall obtain such endorsements to the commercial general liability policy or otherwise obtain insurance to insure all liability arising from such activity or matter [including liquor liability, if applicable] in such amounts as Landlord may reasonably require), insuring Tenant, Landlord, Landlord's agents and their respective Affiliates against all liability for injury to or death of a person or persons or damage to property arising from the use and occupancy of the Premises, (2) insurance covering the full value of Tenant's property and improvements, and other property (including property of others) in the Premises, (3) contractual liability insurance sufficient to cover Tenant's indemnity obligations hereunder (but only if such contractual liability insurance is not already included in Tenant's commercial general liability insurance policy), (4) worker's compensation insurance, and (5) business interruption insurance. Tenant's insurance shall provide primary coverage to Landlord when any policy issued to Landlord provides duplicate or similar coverage, and in such circumstance Landlord's policy will be excess over Tenant's policy. Tenant shall furnish to Landlord certificates of such insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverages required hereunder, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least 30 days before cancellation or a material change of any such insurance policies. All such insurance policies shall be in form, and issued by companies, reasonably satisfactory to Landlord.
(b) LANDLORD'S INSURANCE. Throughout the Term of this Lease, Landlord shall maintain, as a minimum, the following insurance policies: (1) fire and extended risk insurance for the Building's replacement value and (2) commercial general liability insurance in an amount of not less than $3,000,000.00. The cost of all insurance carried by Landlord with respect to the Building shall be included in Operating Costs. The foregoing insurance policies and any other insurance carried by Landlord shall be for the sole benefit of Landlord and under Landlord's sole control, and Tenant shall have no right or claim to any proceeds thereof or any other rights thereunder.
(c) NO SUBROGATION. Landlord and Tenant each waives any claim it might have against the other for any injury to or death of any person or persons or damage to or theft, destruction, loss, or loss of use of any property (a "LOSS"), to the extent the same is insured against under any insurance policy that-covers the Building, the Premises, Landlord's or Tenant's fixtures, personal property, leasehold improvements, or business, or is required to be insured against under the terms hereof, REGARDLESS OF WHETHER THE NEGLIGENCE OF THE OTHER PARTY CAUSED SUCH LOSS. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other parry.
(d) INDEMNITY. Subject to Section 11.(c), Tenant shall defend, indemnify, and hold harmless Landlord and its representatives and agents from and against all claims, demands, liabilities, causes of action, suits, judgments, damages, and expenses (including attorneys' fees) arising from (1) any Loss arising from any occurrence on the Premises, except to the extent caused by the negligence or fault of Landlord or its agents, or (2) Tenant's failure to perform its obligations under this Lease. Subject to Section 11.(c), Landlord shall defend, indemnify, and hold harmless Tenant and its agents from and against all claims, demands, liabilities, causes of action, suits, judgments, and expenses (including attorneys' fees) for any Loss arising from any occurrence in the Building's common areas, except to the extent caused by the negligence or fault of Tenant or its agents. The indemnities set forth in this Section 11.(d) shall survive termination or expiration of this Lease and shall not terminate or be waived, diminished or affected in any manner by any abatement or apportionment of Rent under any provision of this Lease. If any proceeding is filed for which indemnity is required hereunder, the indemnifying party agrees, upon request therefor, to defend the indemnified party in such proceeding at its sole cost utilizing counsel satisfactory to the indemnified party.
12. SUBORDINATION; ATTORNMENT: NOTICE TO LANDLORD'S MORTGAGEE.
(a) SUBORDINATION. This Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (each, a "MORTGAGE"), or any ground lease, master lease, or primary lease (each, a "PRIMARY LEASE"), that now or hereafter covers all or any part of the Premises (the mortgagee under any such Mortgage, beneficiary under any such deed of trust, or the lessor under any such Primary Lease is referred to herein as a "LANDLORD'S MORTGAGEE"). Any Landlord's Mortgagee may elect, at any time, unilaterally, to make this Lease superior to its Mortgage, Primary Lease, or other interest in the Premises by so notifying Tenant in writing. The provisions of this Section shall be self-operative and no further instrument of subordination shall be required; however, in confirmation of such subordination, Tenant shall execute and return to Landlord (or such other party designated by Landlord) within ten days after written request therefor such documentation, in recordable form if required, as a Landlord's Mortgagee may reasonably request to evidence the subordination of this Lease to such Landlord's Mortgagee's Mortgage or Primary Lease (including a subordination, non-disturbance and attornment agreement) or, if the Landlord's Mortgagee so elects, the subordination of such Landlord's Mortgagee's Mortgage or Primary Lease to this Lease.
(b) ATTORNMENT. Tenant shall attorn to any party succeeding to Landlord's interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party's request, and shall execute such agreements confirming such attornment as such party may reasonably request.
(c) NOTICE TO LANDLORD'S MORTGAGEE. Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord's Mortgagee whose address has been given to Tenant, and affording such Landlord's Mortgagee a reasonable opportunity to perform Landlord's obligations hereunder.
(d) LANDLORD'S MORTGAGEE'S PROTECTION PROVISIONS. If Landlord's Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord's Mortgagee shall not be: (1) liable for any act or omission of any prior lessor (including Landlord); (2) bound by any rent or additional rent or advance rent which Tenant might have paid for more than the current month to any prior lessor (including Landlord), and all such rent shall remain due and owing, notwithstanding such advance payment; (3) bound by any security or advance rental deposit made by Tenant which is not delivered or paid over to Landlord's Mortgagee and with respect to which Tenant shall look solely to Landlord for refund or reimbursement; (4) bound by any termination, amendment or modification of this Lease made without Landlord's Mortgagee's consent and written approval, except for those terminations, amendments and modifications permitted to be made by Landlord without Landlord's Mortgagee's consent pursuant to the terms of the loan documents between Landlord and Landlord's Mortgagee; (5) subject to the defenses which Tenant might have against any prior lessor (including Landlord); and (6) subject to the offsets which Tenant might have against any prior lessor (including Landlord) except for those offset rights which (A) are expressly provided in this Lease, (B) relate to periods of time following the acquisition of the Building by Landlord's Mortgagee, and (C) Tenant has provided written notice to Landlord's Mortgagee and provided Landlord's Mortgagee a reasonable opportunity to cure the event giving rise to such offset event. Landlord's Mortgagee shall have no liability or responsibility under or pursuant to the terms of this Lease or otherwise after it ceases to own an interest in the Building. Nothing in this Lease shall be construed to require Landlord's Mortgagee to see to the application of the proceeds of any loan, and Tenant's agreements set forth herein shall not be impaired on account of any modification of the documents evidencing and securing any loan.
13. RULES AND REGULATIONS. Tenant shall comply with the rules and regulations of the Building which are attached hereto as Exhibit C. Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Building and related facilities, provided that such changes are applicable to all tenants of the Building, will not unreasonably interfere with Tenant's use of the Premises and are enforced by Landlord in a non-discriminatory manner. Tenant shall be responsible for the compliance with such rules and regulations by each Tenant Party.
14. CONDEMNATION.
(a) TOTAL TAKING. If the entire Building or Premises are taken by right of eminent domain or conveyed in lieu thereof (a "TAKING"), this Lease shall terminate as of the date of the Taking.
(b) PARTIAL TAKING - TENANT'S RIGHTS. If any part of the Building becomes subject to a Taking and such Taking will prevent Tenant from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Taking for a period of more than 180 days, then Tenant may terminate this Lease as of the date of such Taking by giving written notice to Landlord within 30 days after the Taking, and Basic Rent and Additional Rent shall be apportioned as of the
date of such Taking. If Tenant does not terminate this Lease, then Rent shall be abated on a reasonable basis as to that portion of the Premises rendered untenantable by the Taking.
(c) PARTIAL TAKING - LANDLORD'S RIGHTS. If any material portion, but less than all, of the Building becomes subject to a Taking, or if Landlord is required to pay any of the proceeds arising from a Taking to a Landlord's Mortgagee, then Landlord may terminate this Lease by delivering written notice thereof to Tenant within 30 days after such Taking, and Basic Rent and Additional Rent shall be apportioned as of the date of such Taking. If Landlord does not so terminate this Lease, then this Lease will continue, but if any portion of the Premises has been taken, Rent shall abate as provided in the last sentence of Section 14.(b).
(d) AWARD. If any Taking occurs, then Landlord shall receive the entire award or other compensation for the Land, the Building, and other improvements taken; however, Tenant may separately pursue a claim (to the extent it will not reduce Landlord's award) against the condemnor for the value of Tenant's personal property which Tenant is entitled to remove under this Lease, moving costs, loss of business, and other claims it may have.
15. FIRE OR OTHER CASUALTY.
(a) REPAIR ESTIMATE. If the Premises or the Building are damaged by fire or other casualty (a "CASUALTY"), Landlord shall, within 90 days after such Casualty, deliver to Tenant a good faith estimate (the "DAMAGE NOTICE") of the time needed to repair the damage caused by such Casualty.
(b) TENANT'S RIGHTS. If a material portion of the Premises is damaged by Casualty such that Tenant is prevented from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Casualty and Landlord estimates that the damage caused thereby cannot be repaired within 270 days after the Casualty (the "REPAIR PERIOD"), then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant.
(c) LANDLORD'S RIGHTS. If a Casualty damages the Premises or a material portion of the Building and (1) Landlord estimates that the damage to the Premises cannot be repaired within the Repair Period, (2) the damage to the Premises exceeds 50% of the replacement cost thereof (excluding foundations and footings), as estimated by Landlord, and such damage occurs during the last two years of the Term, (3) regardless of the extent of damage to the Premises, Landlord makes a good faith determination that restoring the Building would be uneconomical, or (4) Landlord is required to pay any insurance proceeds arising out of the Casualty to a Landlord's Mortgagee, then Landlord may terminate this Lease by giving written notice of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant.
(d) REPAIR OBLIGATION. If neither party elects to terminate this Lease following a Casualty, then Landlord shall, within a reasonable time after such Casualty, begin to repair the Premises and shall proceed with reasonable diligence to restore the Premises to substantially the same condition as they existed immediately before such Casualty; however, Landlord shall only be required to reconstruct the Premises to the extent of any improvements existing therein on the date of the damage that were installed by Landlord as part of the Work (if any) pursuant to Exhibit D ("LANDLORD'S CONTRIBUTION"), and Landlord's obligation to repair or restore the Premises shall be limited to the extent of the insurance proceeds actually received by Landlord for the Casualty in question. Tenant shall be responsible for repairing or replacing its furniture, equipment, fixtures, alterations and other improvements which Landlord is not obligated to restore, and shall use the proceeds of its insurance for such purpose. Tenant shall pay the difference
between the total cost of reconstructing the Premises and Landlord's Contribution ("TENANT'S CONTRIBUTION"). Prior to Landlord's commencement of reconstruction, Tenant shall place Landlord's estimate of Tenant's Contribution in escrow with Landlord (or furnish Landlord other commercially reasonable assurances of payment thereof)
(e) ABATEMENT OF RENT. If the Premises are damaged by Casualty, Rent for the portion of the Premises rendered untenantable by the damage shall be abated on a reasonable basis from the date of damage until the completion of Landlord's repairs (or until the date of termination of this Lease by Landlord or Tenant as provided above, as the case may be), unless a Tenant Party caused such damage, in which case, Tenant shall continue to pay Rent without abatement.
16. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes levied or assessed against personal property, furniture, or fixtures placed by Tenant in the Premises. If any taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and Landlord elects to pay the same, or if the assessed value of Landlord's property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, then Tenant shall pay to Landlord, within 30 days following written request, the part of such taxes for which Tenant is primarily liable hereunder; however, Landlord shall not pay such amount if Tenant notifies Landlord that it will contest the validity or amount of such taxes before Landlord makes such payment, and thereafter diligently proceeds with such contest in accordance with Law and if the non-payment thereof does not pose a threat of loss or seizure of the Building or interest of Landlord therein or impose any fee or penalty against Landlord.
17. EVENTS OF DEFAULT. Each of the following occurrences shall be an "EVENT OF DEFAULT":
(a) PAYMENT DEFAULT. Tenant's failure to pay Rent within 5 days after Landlord has delivered written notice to Tenant that the same is due; however, an Event of Default shall occur hereunder without any obligation of Landlord to give any notice if Tenant fails to pay Rent when due and, during the 12 month interval preceding such failure, Landlord has given Tenant written notice of failure to pay Rent on one or more occasions;
(b) ABANDONMENT. Tenant (1) abandons or vacates the Premises or any substantial portion thereof or (2) fails to continuously operate its business in the Premises;
(c) ESTOPPEL. Tenant fails to provide any estoppel certificate after Landlord's written request there for pursuant to Section 25.(e) and such failure shall continue for 5 days after Landlord's second written notice thereof to Tenant;
(d) OTHER DEFAULTS. Tenant's failure to perform, comply with, or observe any other agreement or obligation of Tenant under this Lease and the continuance of such failure for a period of more than 30 days after Landlord has delivered to Tenant written notice thereof;
(e) INSOLVENCY. The filing of a petition by or against Tenant (the term "TENANT" shall include, for the purpose of this Section 17.(e), any guarantor of Tenant's obligations hereunder) (1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any state or federal debtor relief law; (3) for the appointment of a liquidator or receiver for all or substantially all of Tenant's property or for Tenant's interest in this Lease; or (4) for the reorganization or modification of Tenant's capital structure; however, if such a petition is filed against Tenant, then such filing shall not be an Event of Default unless Tenant fails to have the proceedings initiated by such petition dismissed within 90 days after the filing thereof; and
(f) ADDITIONAL SECURITY DEPOSIT. Tenant's failure to pay the Additional Security Deposit within 5 days after Landlord has delivered written notice to Tenant that the same is due.
18. REMEDIES. Upon any Event of Default, Landlord may, in addition to all other rights and remedies afforded Landlord hereunder or by law or equity, take any one or more of the following actions:
(a) TERMINATION OF LEASE. Terminate this Lease by giving Tenant
written notice thereof, in which event Tenant shall pay to Landlord the sum of
(1) all Rent accrued hereunder through the date of termination, (2) all amounts
due under Section 19.(a), and (3) an amount equal to (A) the total Rent that
Tenant would have been required to pay for the remainder of the Term plus
Landlord's estimate of aggregate expenses of reletting the Premises, minus
(B) the then present fair rental rate value of the Premises for such period;
(b) TERMINATION OF POSSESSION. Terminate Tenant's right to possess the
Premises without terminating this Lease by giving written notice thereof to
Tenant, in which event Tenant shall pay to Landlord (1) all Rent and other
amounts accrued hereunder to the date of termination of possession, (2) all
amounts due from time to time under Section 19.(a), and (3) all Rent and other
net sums required hereunder to be paid by Tenant during the remainder of the
Term, diminished by any net sums thereafter received by Landlord through
reletting the Premises during such period, after deducting all costs incurred by
Landlord in reletting the Premises. If Landlord elects to proceed under this
Section 18.(b), Landlord may remove all of Tenant's property from the Premises
and store the same in a public warehouse or elsewhere at the cost of, and for
the account of, Tenant, without becoming liable for any loss or damage which may
be occasioned thereby. Landlord shall use reasonable efforts to relet the
Premises on such terms as Landlord in its sole discretion may determine
(including a term different from the Term, rental concessions, and alterations
to, and improvement of, the Premises); however, Landlord shall not be obligated
to relet the Premises before leasing other portions of the Building. Landlord
shall not be liable for, nor shall Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the Premises or to collect rent due for
such reletting. Tenant shall not be entitled to the excess of any consideration
obtained by reletting over the Rent due hereunder. Reentry by Landlord in the
Premises shall not affect Tenant's obligations hereunder for the unexpired Term;
rather, Landlord may, from time to time, bring an action against Tenant to
collect amounts due by Tenant, without the necessity of Landlord's waiting until
the expiration of the Term. Unless Landlord delivers written notice to Tenant
expressly stating that it has elected to terminate this Lease, all actions taken
by Landlord to dispossess or exclude Tenant from the Premises shall be deemed to
be taken under this Section 18.(b). If Landlord elects to proceed under this
Section 18.(b), it may at any time elect to terminate this Lease under Section
18.(a); or
(c) ALTERATION OF LOCKS. Additionally, with or without notice, and to the extent permitted by Law, Landlord may alter locks or other security devices at the Premises to deprive Tenant of access thereto, and Landlord shall not be required to provide a new key or right of access to Tenant.
Any and all remedies set forth in this Lease: (i) shall be in addition to any and all other remedies Landlord may have at law or in equity; (ii) shall be cumulative; and (iii) may be pursued successively or concurrently as Landlord may elect. The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude Landlord from exercising any other remedies in the future. Notwithstanding the foregoing, Landlord shall only recover its damages allowed hereunder once.
19. PAYMENT BY TENANT; NON-WAIVER; CUMULATIVE REMEDIES.
(a) PAYMENT BY TENANT. Upon any Event of Default, Tenant shall pay to Landlord all costs incurred by Landlord (including court costs and reasonable attorneys' fees and expenses) in
(1) obtaining possession of the Premises, (2) removing and storing Tenant's or any other occupant's property, (3) repairing, restoring, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant, (4) if Tenant is dispossessed of the Premises and this Lease is not terminated, reletting all or any part of the Premises (including brokerage commissions, cost of tenant finish work, and other costs incidental to such reletting), (5) performing Tenant's obligations which Tenant failed to perform, and (6) enforcing, or advising Landlord of, its rights, remedies, and recourses arising out of the Event of Default. To the full extent permitted by law, Landlord and Tenant agree the federal and state courts of the state in which the Premises are located shall have exclusive jurisdiction over any matter relating to or arising from this Lease and the parties' rights and obligations under this Lease.
(b) NO WAIVER. Landlord's acceptance of Rent following an Event of Default shall not waive Landlord's rights regarding such Event of Default. No waiver by Landlord of any violation or breach of any of the terms contained herein shall waive Landlord's rights regarding any future violation of such term. Landlord's acceptance of any partial payment of Rent shall not waive Landlord's rights with regard to the remaining portion of the Rent that is due, regardless of any endorsement or other statement on any instrument delivered in payment of Rent or any writing delivered in connection therewith; accordingly, Landlord's acceptance of a partial payment of Rent shall not constitute an accord and satisfaction of the full amount of the Rent that is due.
(c) CUMULATIVE REMEDIES. Any and all remedies set forth in this Lease:
(1) shall be in addition to any and all other remedies Landlord may have at law
or in equity, (2) shall be cumulative, and (3) may be pursued successively or
concurrently as Landlord may elect. The exercise of any remedy by Landlord shall
not be deemed an election of remedies or preclude Landlord from exercising any
other remedies in the future.
20. LANDLORD'S LIEN. In addition to any statutory landlord's lien, now or hereafter enacted, Tenant grants to Landlord, to secure performance of Tenant's obligations hereunder, a security interest in all goods (including equipment and inventory), fixtures, and other personal property of Tenant situated on the Premises, and all proceeds thereof (the "COLLATERAL"), and the Collateral shall not be removed from the Premises without the prior written consent of Landlord (other than in Tenant's ordinary course of business) until all obligations of Tenant have been fully performed. Upon the occurrence of an Event of Default, Landlord may, in addition to all other remedies, without notice or demand except as provided below, exercise the rights afforded to a secured parry under the Uniform Commercial Code of the state in which the Premises are located (the "UCC"). To the extent the UCC requires Landlord to give to Tenant notice of any act or event and such notice cannot be validly waived before a default occurs, then five-days' prior written notice thereof shall be reasonable notice of the act or event. Tenant grants to Landlord a power of attorney to execute and file any financing statement or other instrument necessary to perfect Landlord's security interest under this Section 20, which power is coupled with an interest and is irrevocable during the Term. Landlord may also file a copy of this Lease as a financing statement to perfect its security interest in the Collateral. Within ten days following written request therefor, Tenant shall execute financing statements to be filed of record to perfect Landlord's security interest in the Collateral.
21. SURRENDER OF PREMISES. No act by Landlord shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord. At the expiration or termination of this Lease, Tenant shall deliver to Landlord the Premises with all improvements located therein in good repair and condition, free of Hazardous Materials placed on the Premises during the Term, broom-clean, reasonable wear and tear (and condemnation and Casualty damage not caused by Tenant, as to which Sections 14 and 15 shall control) excepted, and shall deliver to Landlord all keys to the Premises. Provided that Tenant has performed all of its obligations hereunder, Tenant may remove all unattached trade fixtures, furniture, and personal property placed in the
Premises or elsewhere in the Building by Tenant (but Tenant may not remove any
such item which was paid for, in whole or in part, by Landlord or any wiring or
cabling unless Landlord requires such removal). Additionally, at Landlord's
option. Tenant shall remove such alterations, additions, improvements, trade
fixtures, personal property, equipment, wiring, cabling, and furniture as
Landlord may request; however, Tenant shall not be required to remove any
addition or improvement to the Premises if Landlord has specifically agreed in
writing that the improvement or addition in question need not be removed. Tenant
shall repair all damage caused by such removal. All items not so removed shall,
at Landlord's option, be deemed to have been abandoned by Tenant and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant and without any obligation to account for such items;
any such disposition shall not be considered a strict foreclosure or other
exercise of Landlord's rights in respect of the security interest granted under
Section 20. The provisions of this Section 21 shall survive the end of the Term.
22. HOLDING OVER. If Tenant fails to vacate the Premises at the end of the
Term, then Tenant shall be a tenant at sufferance and, in addition to all other
damages and remedies to which Landlord may be entitled for such holding over,
(a) Tenant shall pay, in addition to the other Rent, Basic Rent equal to the
greater of (1) 150% of the Basic Rent payable during the last month of the Term,
or (2) 125% of the prevailing rental rate in the Building for similar space, and
(b) Tenant shall otherwise continue to be subject to all of Tenant's obligations
under this Lease. The provisions of this Section 22 shall not be deemed to limit
or constitute a waiver of any other rights or remedies of Landlord provided
herein or at law. If Tenant fails to surrender the Premises upon the termination
or expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all loss, costs (including reasonable attorneys' fees) and
liability resulting from such failure, including any claims made by any
succeeding tenant founded upon such failure to surrender, and any lost profits
to Landlord resulting therefrom.
23. CERTAIN RIGHTS RESERVED BY LANDLORD. Provided that the exercise of such rights does not unreasonably interfere with Tenant's occupancy of the Premises, Landlord shall have the following rights:
(a) BUILDING OPERATIONS. To decorate, and to make inspections, repairs, alterations, additions, changes, or improvements, whether structural or otherwise, in and about the Building, or any part thereof; to enter upon the Premises (after giving Tenant reasonable notice thereof, which may be oral notice, except in cases of real or apparent emergency, in which case no notice shall be required) and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Building; to interrupt or temporarily suspend Building services and facilities; to change the name of the Building; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Building;
(b) SECURITY. To take such reasonable measures as Landlord deems advisable for the security of the Building and its occupants; evacuating the Building for cause, suspected cause, or for drill purposes; temporarily denying access to the Building; and closing the Building after normal business hours and on Sundays and holidays, subject, however, to Tenant's right to enter when the Building is closed after normal business hours under such reasonable regulations as Landlord may prescribe from time to time;
(c) PROSPECTIVE PURCHASERS AND LENDERS. To enter the Premises at all reasonable hours to show the Premises to prospective purchasers or lenders; and
(d) PROSPECTIVE TENANTS. At any time during the last 12 months of the Term (or earlier if Tenant has notified Landlord in writing that it does not desire to renew the Term) or at any time following the occurrence of an Event of Default, to enter the Premises at all reasonable hours to show the
Premises to prospective tenants.
24. [INTENTIONALLY OMITTED].
25. MISCELLANEOUS.
(a) LANDLORD TRANSFER. Landlord may transfer any portion of the Building and any of its rights under this Lease. If Landlord assigns its rights under this Lease, then Landlord shall thereby be released from any further obligations hereunder arising after the date of transfer, provided that the assignee assumes Landlord's obligations hereunder in writing.
(b) LANDLORD'S LIABILITY. The liability of Landlord (and its partners, shareholders or members) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Building shall be limited to Tenant's actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Building, and Landlord (and its partners, shareholders or members) shall not be personally liable for any deficiency.
(c) FORCE MAJEURE. Other than for Tenant's obligations under this Lease that can be performed by the payment of money (e.g., payment of Rent and maintenance of insurance), whenever a period of time is herein prescribed for action to be taken by either party hereto, such party shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations, or restrictions, or any other causes of any kind whatsoever which are beyond the control of such party.
(d) BROKERAGE. Neither Landlord nor Tenant has dealt with any broker or agent in connection with the negotiation or execution of this Lease, other than Trammell Crow Company and CB Richard Ellis/Whittier Partners L.P., whose commission shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys' fees, liens and other liability for commissions or other compensation claimed by any broker or agent claiming the same by, through, or under the indemnifying party.
(e) ESTOPPEL CERTIFICATES. From time to time, Tenant shall furnish to any party designated by Landlord, within 10 days after Landlord has made a request therefor, a certificate signed by Tenant confirming and containing such factual certifications and representations as to this Lease as Landlord may reasonably request. Unless otherwise required by Landlord's Mortgagee or a prospective purchaser or mortgagee of the Building, the initial form of estoppel certificate to be signed by Tenant is attached hereto as Exhibit F.
(f) NOTICES. All notices and other communications given pursuant to this Lease shall be in writing and shall be (1) mailed by first class, United States Mail, postage prepaid, certified, with return receipt requested, and addressed to the parties hereto at the address specified in the Basic Lease Information, (2) hand delivered to the intended address, (3) sent by a nationally recognized overnight courier service, or (4) sent by facsimile transmission during normal business hours followed by a confirmatory letter sent in another manner permitted hereunder. All notices shall be effective upon delivery to the address of the addressee. The parties hereto may change their addresses by giving notice thereof to the other in conformity with this provision.
(g) SEPARABILITY. If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws, then the remainder of this Lease shall not be affected thereby
and in lieu of such clause or provision, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid, and enforceable.
(h) AMENDMENTS; AND BINDING EFFECT. This Lease may not be amended except by instrument in writing signed by Landlord and Tenant. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord, and no custom or practice which may evolve between the parties in the administration of the terms hereof shall waive or diminish the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. The terms and conditions contained in this Lease shall inure to the benefit of and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. This Lease is for the sole benefit of Landlord and Tenant, and, other than Landlord's Mortgagee, no third party shall be deemed a third party beneficiary hereof.
(i) QUIET ENJOYMENT. Provided Tenant has performed all of its obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or any party claiming by, through, or under Landlord, but not otherwise, subject to the terms and conditions of this Lease.
(j) NO MERGER. There shall be no merger of the leasehold estate hereby created with the fee estate in the Premises or any part thereof if the same person acquires or holds, directly or indirectly, this Lease or any interest in this Lease and the fee estate in the leasehold Premises or any interest in such fee estate.
(k) NO OFFER. The submission of this Lease to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Lease unless Landlord executes a copy of this Lease and delivers it to Tenant.
(l) ENTIRE AGREEMENT. This Lease constitutes the entire agreement between Landlord and Tenant regarding the subject matter hereof and supersedes all oral statements and prior writings relating thereto. Except for those set forth in this Lease, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Lease or the obligations of Landlord or Tenant in connection therewith. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any exhibits or amendments hereto.
(m) WAIVER OF JURY TRIAL. To the maximum extent permitted by law, Landlord and Tenant each waive right to trial by jury in any litigation arising out of or with respect to this Lease.
(n) GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the state in which the Premises are located.
(o) RECORDING. Tenant shall not record this Lease without the prior written consent of Landlord, which consent may be withheld or denied in the sole and absolute discretion of Landlord.
(p) JOINT AND SEVERAL LIABILITY. If Tenant is comprised of more than one party, each such party shall be jointly and severally liable for Tenant's obligations under this Lease. All unperformed obligations of Tenant at the end of the Term shall survive.
(q) FINANCIAL REPORTS. Within 15 days after Landlord's request, Tenant will furnish Tenant's most recent audited financial statements (including any notes to them) to Landlord, or, if no such
audited statements have been prepared, such other financial statements (and
notes to them) as may have been prepared by an independent certified public
accountant or, failing those, Tenant's internally prepared financial statements.
If Tenant is a publicly traded corporation, Tenant may satisfy its obligations
hereunder by providing to Landlord Tenant's most recent annual and quarterly
reports. Tenant will discuss its financial statements with Landlord and,
following the occurrence of an Event of Default hereunder, will give Landlord
access to Tenant's books and records in order to enable Landlord to verify the
financial statements. Landlord will not disclose any aspect of Tenant's
financial statements that Tenant designates to Landlord as confidential except
(1) to Landlord's Mortgagee or prospective mortgagees or purchasers of the
Building, (2) in litigation between Landlord and Tenant, and (3) if required by
court order. Tenant shall not be required to deliver the financial statements
required under this Section 25.(q) more than once in any 12-month period unless
requested by Landlord's Mortgagee or a prospective buyer or lender of the
Building or an Event of Default occurs.
(r) LANDLORD'S FEES. Whenever Tenant requests Landlord to take any action not required of it hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord's reasonable, out-of-pocket costs payable to third parties and incurred by Landlord in reviewing the proposed action or consent, including reasonable attorneys', engineers' or architects' fees, within 30 days after Landlord's delivery to Tenant of a statement of such costs. Tenant will be obligated to make such reimbursement without regard to whether Landlord consents to any such proposed action.
(s) TELECOMMUNICATIONS. Tenant and its telecommunications companies, including local exchange telecommunications companies and alternative access vendor services companies, shall have no right of access to and within the Building, for the installation and operation of telecommunications systems, including voice, video, data, Internet, and any other services provided over wire, fiber optic, microwave, wireless, and any other transmission systems ("TELECOMMUNICATIONS SERVICES"), for part or all of Tenant's telecommunications within the Building and from the Building to any other location without Landlord's prior written consent. All providers of Telecommunications Services shall be required to comply with the rules and regulations of the Building, applicable Laws and Landlord's policies and practices for the Building. Tenant acknowledges that Landlord shall not be required to provide or arrange for any Telecommunications Services and that Landlord shall have no liability to any Tenant Party in connection with the installation, operation or maintenance of Telecommunications Services or any equipment or facilities relating thereto. Tenant, at its cost and for its own account, shall be solely responsible for obtaining all Telecommunications Services. However, nothing in this Section 25.(s) shall prohibit Tenant's employees from accessing areas solely within the Premises that do not contain any equipment serving other tenants of the Building or the Building's Systems.
(t) CONFIDENTIALITY. Tenant acknowledges that the terms and conditions of this Lease are to remain confidential for Landlord's benefit, and may not be disclosed by Tenant to anyone, by any manner or means, directly or indirectly, without Landlord's prior written consent. The consent by Landlord to any disclosures shall not be deemed to be a waiver on the part of Landlord of any prohibition against any future disclosure.
(u) AUTHORITY. Tenant (if a corporation, partnership or other business entity) hereby represents and warrants to Landlord that Tenant is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Tenant has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Tenant is authorized to do so. Landlord hereby represents and warrants to Tenant that Landlord is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Landlord has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Landlord is authorized to do so.
(v) HAZARDOUS MATERIALS. The term "HAZARDOUS MATERIALS" means any substance, material, or waste which is now or hereafter classified or considered to be hazardous, toxic, or dangerous under any Law relating to pollution or the protection or regulation of human health, natural resources or the environment, or poses or threatens to pose a hazard to the health or safety of persons on the Premises or in the Building. Tenant shall not use, generate, store, or dispose of, or permit the use, generation, storage or disposal of Hazardous Materials on or about the Premises or the Building except in a manner and quantity necessary for the ordinary performance of Tenant's business, and then in compliance with all Laws. If Tenant breaches its obligations under this Section 25.(v), Landlord may immediately take any and all action reasonably appropriate to remedy the same, including taking all appropriate action to clean up or remediate any contamination resulting from Tenant's use, generation, storage or disposal of Hazardous Materials. Tenant shall defend, indemnify, and hold harmless Landlord and its representatives and agents from and against any and all claims, demands, liabilities, causes of action, suits, judgments, damages and expenses (including reasonable attorneys' fees and cost of clean up and remediation) arising from Tenant's failure to comply with the provisions of this Section 25.(v). This indemnity provision shall survive termination or expiration of this Lease.
(w) LIST OF EXHIBITS. All exhibits and attachments attached hereto are incorporated herein by this reference.
Exhibit A - Plan Showing the Premises Exhibit A-1 - Plan Showing the Additional Premises
Exhibit B - Description of the Land Exhibit C - Building Rules and Regulations Exhibit D - Tenant Finish-Work Exhibit E - Form of Confirmation of Commencement Date Letter Exhibit F - Form of Tenant Estoppel Certificate Exhibit G - Parking Exhibit H - Renewal Option Exhibit I - Additional Premises Exhibit J - Form of Letter of Credit |
26. OTHER PROVISIONS.
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANTS INTENDED COMMERCIAL PURPOSE, AND TENANTS OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, DEMAND, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this Lease and for other good and valuable consideration, and intending to be legally bound, each party hereto has caused this Lease to be duly executed as a Massachusetts instrument under seal as of the day and year first above written.
LANDLORD: W9/TIB REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership By: W9/TIB Gen-Par, Inc., a Delaware corporation, its general partner By: /s/ Stephen M. Abelman ------------------------------------ Name: Stephen M. Abelman Title: Assistant Vice President TENANT: ERUNWAY, INC., a Delaware corporation By: /s/ JACK STEINKRAUSS ------------------------------------ Name: JACK STEINKRAUSS Title: SVP |
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (this "First Amendment") is hereby entered into as of the ______ day of November, 2000 by and between W9/TIB REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership having an address c/o Archon Group, L.P., 1275 K Street, N.W., Suite 900, Washington, D.C. 20005 ("Landlord"), and ERUNWAY, INC., a Delaware corporation having an address at 2000 West Park Drive, Westborough, Massachusetts 01581 ("Tenant").
WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Lease Agreement (the "Lease") dated as of June _______, 2000 by which Landlord leased to Tenant and Tenant leased from Landlord a portion of the building (the "Building") located at and numbered 2000 West Park Drive, Westborough, Massachusetts consisting of approximately 10,499 rentable square feet of floor area on the third floor of the Building, as more particularly described in the Basic Lease Information (as defined in the Lease) and as shown cross-hatched on the plan attached to the Lease as Exhibit A (the "Original Premises").
WHEREAS, the Term (as defined in the Lease) commenced on September 1, 2000 and expires on August 31, 2005.
WHEREAS, pursuant to Exhibit I attached to the Lease, Landlord shall lease to Tenant and Tenant shall lease from Landlord a portion of the third floor of the Building consisting of approximately 11,648 rentable square feet of floor area as shown cross-hatched on the plan attached to the Lease as Exhibit A-l (the "Additional Premises") commencing on the Additional Premises Commencement Date (as defined in the Lease).
WHEREAS, Landlord and Tenant have agreed to extend the Term beyond August 31, 2005 to expire on the Expiration Date (as defined below) in accordance with the terms and provisions of this First Amendment.
WHEREAS, Landlord now desires to lease to Tenant and Tenant now desires to lease from Landlord additional space on the first floor of the Building in accordance with the terms and provisions of this First Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in Lease, Landlord and Tenant hereby agree as follows:
1. The Term is hereby extended so as to expire on the last day of the sixtieth full calendar month following the later of (i) January 1, 2001 or (ii) the Additional Premises Commencement Date (the "Expiration Date"). Therefore, notwithstanding anything in the Lease to the contrary, the "Term" shall be defined as the period commencing on September 1, 2000 and ending at 5:00 p.m. local time on the Expiration Date, subject to adjustment and earlier termination as provided in the Lease or this First Amendment.
2. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord a portion of the first floor of the Building consisting of approximately 7,848 rentable square feet of floor area, as shown cross-hatched on the plan attached hereto as Exhibit A and incorporated herein by this reference (the "First Amendment Premises"), upon the same terms and conditions set forth in the Lease and this First Amendment for the Original Premises except as otherwise provided in this First Amendment, for a
term commencing on December 1, 2000 and expiring on the Expiration Date, unless terminated earlier as provided in the Lease or this First Amendment. Notwithstanding anything in the Lease to the contrary, for the period from and including December 1, 2000 to the day prior to the Additional Premises Commencement Date, the word "Premises", wherever such word appears in the Lease or this First Amendment, shall mean the Original Premises and the First Amendment Premises. Notwithstanding anything in the Lease to the contrary, effective on and after the Additional Premises Commencement Date, the word "Premises", wherever such word appears in the Lease or this First Amendment, shall mean, collectively, the Original Premises, the Additional Premises and the First Amendment Premises.
3. Notwithstanding anything in the Lease, to the contrary, effective on and after December 1, 2000 through the end of the Term, the Basic Rent due and payable by Tenant to Landlord under the Lease (as amended by this First Amendment) for the First Amendment Premises shall be as follows:
Period Monthly Basic Rent 110 160 ------ ------------------ -------- ------- December 1, 2000 - December 31, 2002 $18,639.00 15112.13 3526.87 January 1, 2003 - December 31, 2003 $19,293.00 15642.38 3650.62 January 1, 2004 - Expiration Date $19,947.00 16172.63 3774.37 |
Basic Rent for the First Amendment Premises shall be conditionally abated during the month of December 2000. Commencing with January 1, 2001, Tenant shall make Basic Rent payments for the First Amendment Premises as otherwise provided in the Lease and this First Amendment. Notwithstanding such abatement of Basic Rent for the First Amendment Premises (a) all other sums due under the Lease or this First Amendment shall be payable as provided in the Lease, and (b) any increases in Basic Rent for the First Amendment Premises set forth in the Lease and this First Amendment shall occur on the dates scheduled therefor.
4. Notwithstanding anything in the Lease to the contrary, effective on and after September 1, 2005 through the end of the Term, the Basic Rent due and payable by Tenant to Landlord under the Lease (as amended by this First Amendment) for the Original Premises and the Additional Premises shall be $56,290.91 per calendar month.
5. Notwithstanding anything in the Lease, including, without limitation, the definition of the phrase "Tenant's Proportionate Share" as set forth in the Basic Lease Information, to the contrary, effective on and after January 1, 2001, Tenant's Proportionate Share shall be 47.48%, which is the percentage obtained by dividing the rentable square feet in the Premises (29,995) by the rentable square feet in the Building (63,180). Landlord and Tenant stipulate that the number of rentable square feet in the Original Premises, the Additional Premises, the First Amendment Premises and the Building as set forth in the Lease and this First Amendment shall be binding upon them.
6. Tenant's taking possession of the First Amendment Premises shall be conclusive evidence that the First Amendment Premises were in good order and satisfactory condition when Tenant took possession thereof. No agreement of Landlord to alter, remodel, decorate, clean or improve the First Amendment Premises (or to provide Tenant with any credit or allowance for the same) and no representation or warranty regarding the condition of the First Amendment Premises or the suitability of the First Amendment Premises for Tenant's proposed use thereof, have been made by or on behalf of
Landlord or relied upon by Tenant in connection with this First Amendment, except as otherwise provided in Exhibit B attached hereto and incorporated by this reference.
7. Simultaneously with the execution and delivery of this First Amendment by Tenant, Tenant shall pay to Landlord $239,364.00, which shall be held by Landlord to secure Tenant's performance of its obligations under the Lease and this First Amendment pursuant to the terms and provisions of Section 6 of the Lease. Therefore, the Basic Lease Information is hereby amended by changing the amount of the Security Deposit (as defined in the Basic Lease Information) from "$553,675.00" to "793,039.00".
8. Tenant represents to Landlord that Tenant has not dealt with any brokers other than Trammel Crow Company and CB Richard Ellis/Whitter Partners L.P. (collectively, the "Brokers") in connection with this First Amendment and that, insofar as Tenant knows, no other broker negotiated this First Amendment or is entitled to any commission or fee in connection herewith. Tenant agrees to indemnify, defend and hold Landlord, its asset manager, its property manager and their respective employees harmless from and against any claim for a fee or commission made by any broker, other than the Brokers, claiming to have acted by or on behalf of Tenant in connection with this First Amendment.
9. Section 4.(b) of the Lease is hereby amended by deleting all of such
Section 4.(b). In addition, all references in the Lease to the phrase
"Electrical Costs" are hereby deleted. Section 7 of the Lease is hereby amended
by adding at the end thereof a new subsection (e) as follows:
10. "To the extent that the Premises are separately metered for electricity, Tenant shall pay (as hereinafter described) for the use of all electrical service to the Premises. Tenant shall be billed directly by the electric utility company and Tenant agrees to pay each bill promptly in accordance with its terms, and upon default in making such payment, Landlord may pay such charges and collect the same from Tenant. In the event for any reason Tenant cannot be billed directly, Landlord shall forward each bill received with respect to the Building to Tenant of which Tenant shall pay its proportionate share (as reasonably determined by Landlord based upon either square footage or level of use) promptly and in accordance with its terms. If the Premises are not separately metered for any reason, Tenant shall pay Landlord as further additional rent, in monthly installments at the time prescribed for monthly installments of Basic Rent, a pro rata share of the cost of electricity for the Premises as estimated by Landlord from time to time in Landlord's reasonable discretion. Initially, the cost estimate by Landlord shall be at the rate of $1.00 per rentable square foot of the Premises per annum. Landlord may require the purchase and installation of a meter and/or sub-meter, at Tenant's sole cost and expense, for the purpose of metering and/or sub-metering Tenant's consumption of electricity. Tenant shall keep such meter and/or sub-meter serving the Premises and their related installation equipment in good working order and repair."
The terms and provisions of this paragraph 9 shall take effect retroactive to September 1, 2000.
11. Given that the Additional Premises Work has already commenced and is proceeding, it is assumed herein that the Additional Premises Commencement Date will occur prior to January 1, 2001. However, if the Additional Premises Commencement Date occurs after January 1, 2001, then paragraph 5 of this First Amendment shall be modified to provide that, effective on and after the January 1, 2001 "Tenant's Proportionate Share" shall be 29.04%, and, effective on and after the Additional Premises Commencement Date, "Tenant Proportionate Share" shall be 47.48%.
12. Submission of this First Amendment for examination or signature by Tenant does not constitute a reservation of space or an option for lease, and this First Amendment shall not be effective unless and until execution and delivery thereof by both Landlord and Tenant.
13. In all other respects, Landlord and Tenant hereby reaffirm all of the covenants, agreements, terms, conditions and other provisions of the Lease except as modified hereby, and the Lease is hereby incorporated in full herein by reference. The terms and provisions of this First Amendment shall be effective as of the date first above written, except as may otherwise be expressly provided herein.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment to Lease as a sealed instrument as of the date first above written.
LANDLORD:
W9/TIB REAL ESTATE LIMITED PARTNERSHIP
By: W9/TIB GEN-PAR, INC.,
its General Partner
By: /s/ Stephen M. Abelman ------------------------------------ Name: Stephen M. Abelman Title: Assistant Vice President |
TENANT:
ERUNWAY, INC.
By: /s/ JACK STEINKRAUSS ------------------------------------ Name: JACK STEINKRAUSS Title: SVP |
SECOND AMENDMENT AND EXTENSION OF LEASE
THIS INSTRUMENT, dated as of December 30, 2003, by and between 2000 Westborough Office Park LLC, a Delaware limited liability company (the "Landlord") and Virtusa Corporation, a Delaware corporation formerly known as eRunway, Inc. (the "Tenant") is an amendment and extension of a certain lease by and between the Landlord and the Tenant.
Reference is made to the following facts:
A. W9/TIB Real Estate Limited Partnership, a Delaware limited partnership ("W9/TIB") and Tenant entered into a certain lease dated as of June, 2000, as amended by a First Amendment to Lease dated as of November, 2000 (as amended, the "Lease"), with respect to certain space (the "Premises") in the building at 2000 West Park Drive, Westborough, Massachusetts, containing 29,995 rentable square feet of floor area on the first and third floors of such building.
B. The Landlord is the successor-in-interest to W9/TIB under the Lease.
C. The Term of the Lease, as previously extended, is scheduled to expire on December 31, 2005.
D. The Landlord and Tenant are wiling to amend and to extend the Lease, upon the terms and conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows (Capitalized terms used but not defined herein shall have the meanings given in the Lease.):
1. The Term of the Lease is hereby extended until February 28, 2011.
2. The Tenant accepts the Premises in its "as is" condition as of the date of this Amendment and agrees that all obligations of the Landlord to perform any construction or other leasehold improvement work in the Premises have been performed in full.
3. Notwithstanding anything contained in the Lease to the contrary, effective January 1, 2004 (the "Restructure Date"), the Basic Rent shall be payable at the following rates (the period from January 1, 2004, through February 28, 2011, is hereinafter referred to as the "Restructure Term"):
(i) for the period from January 1, 2004, through December 31, 2004:
$614,897.50 per annum ($51,241.46 per month);
(ii) for the period from January 1, 2005, through December 31, 2005:
$633,344.43 per annum ($52,778.70 per month);
(iii) for the period from January 1, 2006, through December 31, 2006:
$652,344.76 per annum ($54,362.06 per month);
(iv) for the period from January 1, 2007, through December 31, 2007:
$671,915.10 per annum ($55,992.93 per month);
(v) for the period from January 1, 2008, through December 31, 2008:
$692,072.55 per annum ($57,672.71 per month);
(vi) for the period from January 1, 2009, through December 31, 2009:
$712,834.73 per annum ($59,402.89 per month);
(vii) for the period from January 1, 2010, through December 31, 2010:
$734,219.77 per annum ($61,184.98 per month); and
(viii) for the period from January 1, 2011, through February 28, 2011:
$756,246.36 per annum ($63,020.53 per month).
Notwithstanding the foregoing, no Basic Rent shall accrue or be payable for and with respect to the period from January 1, 2006, through February 28, 2006.
4. The Tenant may elect to extend the term of the Lease for one (1) five
(5) year period (the "Option Term"), by giving the Landlord notice of such
election (the "Election Notice") not earlier than twelve (12) months nor later
than nine (9) months before the expiration of the Restructure Term, provided the
Tenant is not in default on the date such notice is given or on the commencement
date of the Option Term. Such extension shall be upon the same terms, covenants,
and conditions contained in the Lease except that the Tenant shall have no
further right to extend the Term and except that the Basic Rent for the Option
Term shall be at a rate equal to the greater of $756,246.36 per annum or the
fair market rent for the Premises as of the commencement of the Option Term. If
the Landlord and the Tenant are unable to agree in writing on the amount of such
fair market rent by the date that is thirty (30) days after the date of the
Election Notice, then the fair market rent shall be determined as follows: On or
before the date that is forty (40) days after the date of the Election Notice,
the Landlord shall specify in writing the rent (the "Landlord's Rental Rate") at
which the Landlord is willing to lease the Premises for the Option Term and the
Tenant shall specify in writing the rent (the "Tenant's Rental Rate") which the
Tenant is willing to pay for the Option Term, the Landlord and the Tenant shall
each appoint one appraiser. The two appraisers so appointed shall endeavor to
determine the fair market rent. If such appraisers are unable to agree on the
amount of such fair market rent on or before the date that is seventy (70)
days after the date of the Election Notice, they shall appoint a third appraiser
on or before the date that is eighty (80) days after the date of the Election
Notice. The three appraisers shall stipulate the fair market rent within thirty
(30) days after the appointment of the third appraiser. The fair market rent
shall be the amount agreed upon in writing by any two of the three appraisers
and the fair market rent so determined shall be conclusive on the Landlord and
the Tenant. The total costs of such appraisal shall be split equally between the
parties;
5. Effective as of the date hereof, the Lease shall be amended as follows:
(a) the paragraph on page (ii) of the basic Lease information entitled "Landlord's Address" shall be deleted in its entirety and the following shall be substituted in its place:
"Landlord's For all Notices: With a copy to: Address: 1900 Westborough Office 1900 Westborough Office Park LLC Park LLC c/o General Investment & c/o General Investment & Development Co. Development Co. 600 Atlantic Ave., 600 Atlantic Ave., Suite 2000 Suite 2000 Boston, MA 02110 Boston, MA 02110 ATTN: Portfolio Manager ATTN: Legal Counsel Telephone: 617-973-9680 Telephone: 617-973-9680 Telecopy: 617-973-9646 Telecopy: 617-973-9679 |
6. As of the Effective Date, the Lease shall be amended as follows:
(i) in the paragraph of Basic Lease Information entitled "Expense Stop", delete "calendar year 2000" and insert in its place "calendar year 2004";
(ii) in the paragraph of Basic Lease Information entitled "Base Tax Year", delete "the fiscal year ending June 30, 2001" and insert in its place "Calendar year 2004 (For purposes of calculating the Taxes for calendar year 2004, such amount shall equal fifty percent (50%) of the Taxes payable for fiscal year 2004 (i.e., July 1, 2003, through June 30, 2004) plus fifty percent (50%) of the Taxes payable for fiscal year 2005 (i.e., July 1, 2004, through June 30, 2005);
It is understood that the expenses will be grossed up to reflect a 95% occupancy of the Building and/or Office Park, as applicable.
The foregoing changes shall not affect the calculation of additional rent payable under the Lease for the period prior to the commencement of the Restructure Term.
(iii) In Section 10(e), delete the first sentence thereof in its entirety and insert in its place the following:
"Landlord may, within 30 days after submission of Tenant's written request for Landlord's consent to an assignment or to a subletting that, collectively with all previous subleases, results in a subleasing of more than 40% of the rentable floor area of the Premises, cancel this Lease as to the portion of Premises proposed to be sublet or assigned as of the date the proposed Transfer is to be effective."
(iv) In Section 10(f), insert, in the second line thereof, between "thereof," and "the excess", the following:
"50% of".
(v) In Section 10(c), delete the last sentence thereof in its entirety.
(vi) In Section 22, delete the first sentence in its entirety and insert in its place the following:
"If Tenant fails to vacate the Premises at the end of the Term, then Tenant shall be a tenant at sufferance and, in addition to all other damages and remedies to which Landlord may be entitled for such holding over, (a) Tenant shall pay, in addition to the other Rent, Basic Rent equal to 150% of the Basic Rent payable during the last month of the Term, (provided, however, that if such holding over continues for more than sixty (60) days, then the Basic Rent shall increase to 200% of the Basic Rent payable during the last month of the Term (b) Tenant shall otherwise continue to be subject to all of Tenant's obligations under this Lease."
7. Each party hereto warrants and represents that it has dealt with no real estate broker or agent other than Spaulding and Slye LLC and Richards Barry Joyce & Partners (collectively, the "Broker") in connection with this transaction and agrees to defend, indemnify and save the other party harmless from and against any and all claims for commissions or fees resulting from a breach of the warranting party's warranties and representations. Landlord shall be responsible for any commissions or fees owed to the Broker in connection with this transaction in accordance with a separate agreement between Broker and Landlord.
8. Right of First Offer (a) If at any time prior to January 1, 2008, Landlord in its sole discretion determines that any separately demised leaseable area on the first floor of the Building (each such area, a "ROFO Space") has become "available for leasing" (as hereinafter defined), and provided that the conditions precedent set forth in Subsection (c) below are then satisfied, then prior to offering to lease such ROFO Space to any 3rd parties, Landlord shall deliver notice thereof to Tenant (the "ROFO Notice") setting forth a description of the ROFO Space in question (including the rentable area thereof), the Landlord's determination of the Basic Rent and Additional Rent for the ROFO Space, the other material business terms upon which Landlord is willing to lease the ROFO Space, and the date Landlord anticipates that the ROFO Space will become available for leasing (the "ROFO Space Availability Date"). Provided that all of the conditions precedent set forth in this Section 8 are fully satisfied by Tenant, Tenant shall have the option (the "ROFO Option"), exercisable by Tenant delivering written notice (the "Acceptance Notice") to Landlord within twenty (20) calendar days after delivery by Landlord of the ROFO Notice, to lease the ROFO Space upon all of the terms and conditions set forth in the ROFO Notice, including the Annual Fixed Rent, escalation rent, and Additional Rent for the ROFO Space designated by Landlord as set forth therein. Time shall be of the essence as to Tenant's giving of the Acceptance Notice with respect to any ROFO Space. If (a) Tenant fails to deliver an Acceptance Notice within such twenty (20) day period, or (b) if Tenant timely delivers an Acceptance Notice as aforesaid but does not execute and deliver a final fully executed amendment to this Lease with respect to the leasing of the ROFO Space, in form and substance reasonably satisfactory to Landlord within forty five (45) days after delivery of the Acceptance Notice, then Tenant shall be deemed to have rejected the option to lease the applicable ROFO Space (the "Rejected ROFO Space"). In such event, the Landlord shall be free for one hundred eighty (180) days after the date of the ROFO Notice to lease the ROFO Space to any party without again offering such space to the Tenant; provided, however, that if the Landlord offers the ROFO Space for a rental rate that is less than ninety (90%) percent of the rate set forth in the ROFO notice, then the Landlord shall first offer the ROFO Space to the Tenant on such terms. If Landlord does not lease the ROFO Space during such one hundred eighty (180) day period or if the Landlord proposes to lease the ROFO Space during such period at a rental rate below ninety (90%) percent of the effective rate, taking into consideration rental rate and concessions, set forth in the ROFO Notice, the terms of this Section 8 shall continue to apply to such space.
(b) For purposes of this Section 8, space shall be deemed "available for
leasing" when Landlord has determined in its discretion that (a) the space is
vacant, or (b) the respective existing tenant or occupant will not extend or
renew the term of its lease or other occupancy agreement for the ROFO Space and
that said existing tenant or occupant is not interested either in extending or
renewing its lease or other occupancy agreement for the ROFO Space or in
entering into a new lease for such ROFO Space. For purposes of this Section 8,
space shall not be deemed "available for leasing" if, at the time in question
(a) any person or entity holds any option or right to lease or occupy the ROFO
Space, or to renew its lease or right(s) of occupancy thereof, or any other
rights or claims thereto (including, without limitation, any rights of first
offer, rights of first refusal or
expansion rights) or (b) Landlord intends to occupy the ROFO Space. Without limitation, so long as a tenant or other occupant leases or occupies all or a portion of the ROFO Space, Landlord shall be free to extend or renew any such tenancy or occupancy, whether or not pursuant to a lease or other agreement, and such space shall not be deemed to be "available for leasing." In no event shall Landlord be liable to Tenant for any failure by any then existing tenant or occupant (the "Hold-Over Tenant") to vacate any ROFO Space by any particular date. However, if such Hold-Over Tenant continues to occupy such ROFO Space for 120 days after the ROFO Space Availability Date then Tenant may elect to terminate its agreement to lease the ROFO Space by giving Landlord written notice of such election at any time after the expiration of such 120-day period and before Landlord delivers possession of the ROFO Space, in which event Tenant's election to lease the ROFO Space shall become void on the date that is thirty (30) days after Tenant gives Landlord such termination notice, unless on or before the expiration of such 30-day period, Landlord delivers possession of the ROFO Space to Tenant, in which event such termination shall become void. Notwithstanding anything herein to the contrary, Tenant's Right of First Offer pursuant to this Section is subject and subordinate in all respects to the rights (whether such rights are designated as a right of first offer, right of first refusal, expansion option or otherwise) of any tenant or occupant of the Building existing on the date hereof.
(c) Tenant shall have no right to exercise the ROFO Option unless all of the following conditions have been satisfied both on the date of the Acceptance Notice and on the ROFO Space Commencement Date (as hereinafter defined): (a) no default or Event of Default shall exist at the time of the offer, (b) Landlord shall not have validly given Tenant more than (2) notices of monetary default under the Lease in the twelve (12) month period immediately preceding to the Acceptance Notice and (c) the named Tenant herein (i.e. Virtusa Corporation) shall occupy not less than seventy percent (70%) of the rentable floor area of the Premises.
(d) Effective as of the date on which Landlord delivers the ROFO Space to Tenant (the "ROFO Space Commencement Date"):
(i) The ROFO Space shall be added to and be deemed to be a part of the
Premises for all purposes under this Lease (except as otherwise provided in this
Section 8);
(ii) The ROFO Space shall be delivered in broom-clean condition, free of all tenants and occupants subject to improvement allowance, if any, offered in the ROFO Notice.
(iii) Basic Rent and Additional Rent (including a Base Year) for the ROFO Space shall be as set forth in the ROFO Notice; and
(iv) Tenant shall pay all Additional Rent payable under this Lease with respect to the applicable ROFO Space, except to the extent that any such Additional Rent is included in the amounts payable under clause (iii) above.
(e) If Tenant exercises the ROFO Option, upon request made by Landlord, Tenant will execute, acknowledge and deliver to Landlord an amendment to this Lease confirming the ROFO Space Commencement Date, the Annual Fixed Rent, the improvement allowance, if any, escalation rent and Additional Rent payable with respect to the ROFO Space, the incorporation of the ROFO Space into the Premises, and the modifications to this Lease resulting therefrom, as provided in Subsection (d) above. The failure of either party to execute and deliver such an amendment shall not affect the rights, liabilities or obligations of the parties with respect to the ROFO Space.
9. Security Deposit Reduction: Notwithstanding any other provision of the Lease to the contrary, the following provisions shall apply to the Security Deposit under the lease:
(a) As of the date of this Amendment, the Security Deposit being held by the Landlord equals $793,039.00. Subject to the following conditions, on the Effective Date the Security Deposit shall be reduced to $614,897.50. Such reduction, and any future reductions provided for in this Section 9, shall, so long as the Security Deposit is in the form of one or more letters of credit, be accomplished by the Tenant providing the Landlord with a substitute or replacement letter(s) of credit in the reduced amount of the security deposit, whereupon the Landlord shall forthwith return to the Tenant the letter(s) of credit for the previous amount of the Security Deposit.
The reduction permitted in this Subsection (a) is made on the condition that at all times from the Effective Date until December 31, 2005, the Tenant shall (i) timely make all payments of Basic Rent and Additional Rent and (ii) maintain a net worth of at least $15,000,000.00 and a cash balance of $5,500,000. If either such condition ceases to the satisfied at any time before December 31, 2005, then, forthwith upon demand therefor by the Landlord, the Tenant shall deliver to the Landlord an additional Security Deposit in the amount of $178,141.50 (i.e., $793,039.00 minus $614,897.50). Upon written request by Landlord, the Tenant shall deliver to the Landlord, within thirty (30) days after the close of each calendar quarter through December 31, 2005, a quarterly financial statement for the Tenant, as certified by the Tenant's Chief Financial Officer, for the most recently expired calendar quarter, showing the Tenant's financial condition in reasonable detail, including, without limitation, a balance sheet which outlines the Tenant's net worth and cash balance as of the close of such quarter.
(b) In addition to the reduction provided for in Subsection (a) above, and regardless of whether such reduction is in effect as of the first Reduction Date (defined below), if, as of any Reduction Date, as hereinafter defined, (i) there is no uncured Event of Default and (ii) in the twelve (12) months immediately preceding to the Reduction Date, Landlord shall not have validly given Tenant two (2) notices of monetary default under the Lease which monetary defaults remained uncured for more than thirty (30) days after the applicable notice (notwithstanding the cure period provided in the Lease, which shall be unaffected by this Amendment), then the amount of the Security Deposit shall be reduced to equal the amount set forth below opposite each Reduction Rate:
Reduction Date Security Deposit -------------- ---------------- January 1,2006 $489,258.56 January 1,2008 $346,036.28 January 1,2010 $183,554.94 |
10. The Tenant acknowledges and agrees that the Landlord's agreement to
reduce the Basic Rent payable for the period (the "Rent Reduction Period") from
January 1, 2004, through December 31,2005, is made in consideration of the
Tenant's agreement to extend the Term of the Lease as provided herein and on the
understanding that the Tenant will perform its obligations hereunder and under
the Lease as amended hereby. Accordingly, the Tenant agrees that throughout the
Rent Reduction Period, Basic Rent shall continue to accrue at the rates set
forth in the Lease without taking into account this Amendment (the "Previous
Rate"), provided that Basic Rent shall be payable at the rates set forth herein.
The amount, as of any date, by which the accrued Basic Rent (i.e., at the
Previous Rate) for the Rent Reduction Period exceeds the Basic Rent payable
hereunder (i.e., at the rates set forth in this Amendment) is hereinafter
referred to as the "Deferred Basic Rent". If before December 31,2005, (i) an
Event of Default occurs pursuant to Section 17 (a) the Lease which Event of
Default continues for more than twenty (20) days, i.e. thirty (30) days after
the giving of notice with respect to such default (notwithstanding the cure
period provided in the Lease, which shall be unaffected by this Amendment) or
(ii) an Event of Default occurs pursuant to Section 17(e) of the Lease (unless,
notwithstanding the occurrence of such Event of Default, Tenant continues to
make all required payments and performs all of its other obligations under the
Lease through December 31, 2005), then in the event that the Landlord terminates
the Lease or takes possession of the Premises under Section 18(b) of the Lease
as a result of such Event of Default, in addition to such damages as may be
payable under Article 19 of the Lease, (i) the Tenant shall also be liable to
Landlord in damages for the amount of the Deferred Basic Rent, as of the date of
such termination or taking of possession and (ii) for the balance of the Rent
Reduction Period, Basic Rent shall be payable at the Previous Rate for the
purposes of calculating the Landlord's damages on account of such Event of
Default. If no Event of Default has occurred by January 1,2006, then this
Section 11 shall automatically become void and of no further effect.
11. Tenant acknowledges that the rate currently charged by Landlord for after-hour HVAC services is $35.00 per hours and that the rate currently charged by Landlord for electric service is $1.25 per square foot per annum. Nothing contained herein shall affect Landlord's right to adjust such charges from time to time as provided in the Lease.
12. Except as expressly amended hereby, the Lease shall remain in full force and effect.
WITNESS the execution hereof under seal as of the date first set forth above.
LANDLORD:
2000 WESTBOROUGH OFFICE PARK LLC,
a Delaware limited liability company
By: Windsor Realty Fund IV-2002 L.P.,
its sole member and manager
By: Windsor Advisory IV LLC,
its general partner
By: Windsor Investment Company, Inc.,
its sole member and manager
By: /s/ Robert S. Farrington, Jr. ------------------------------------ Name: Robert S. Farrington, Jr. Title: Clerk |
TENANT:
VITUSA CORPORATION
By: /s/ Paul D. Tutun ------------------------------------ Name: Paul D. Tutun Title: Corporate Counsel |
Exhibit 10.4
VIRTUSA CORPORATION
2000 STOCK OPTION PLAN
AMENDED & RESTATED AS OF APRIL 17, 2002
1. PURPOSES OF THE PLAN.
The purposes of this 2000 Stock Option Plan of Virtusa Corporation, a Delaware corporation (the "Company"), are to promote the interests of the Company and its stockholders by strengthening the Company's ability and that of its Subsidiaries to attract, motivate, and retain employees, directors, Consultants and advisors of exceptional ability and to provide a means to encourage stock ownership and a proprietary interest in the Company to selected employees, directors, Consultants and advisors of the Company upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend.
2. DEFINITIONS.
(a) "Acquisition " means
(i) a merger, reorganization or consolidation between the Company and another person or entity (other than a holding company or Parent or Subsidiary of the Company) as a result of which the holders of the Company's outstanding voting stock immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving entity immediately after the transaction,
(ii) the sale, transfer, or other disposition of all or substantially all of the Company's assets to one or more persons (other than any wholly owned Subsidiary) in a single transaction or series of related transactions, or
(iii) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than 50% of all of the Common Stock of the Company to an unrelated person or entity as a result of which the holders of the Company's outstanding voting stock immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving entity immediately after the transaction.
(b) "Act" means the Securities Act of 1933, as amended.
(c) "Award" or "Awards" shall include Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, and Unrestricted Stock, or any combination of the forgoing.
(d) "Board" means the Board of Directors of the Company or its successor entity.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and related rules, regulations and interpretations.
(f) "Committee" means the Compensation Committee of the Board; provided, that the Board by resolution duly adopted may at any time or from time to time determine to assume any or all of the functions of the Committee under the Plan, and during the period of effectiveness of any such resolution, references herein to the "Committee" shall mean the Board acting in such capacity.
(g) "Common Stock" means the common stock of the Company, par value $.01 per share.
(h) "Company has the meaning specified in Section 1.
(i) "Consultant" means a person engaged to provide consulting or advisory services (other than as an employee or director) to the Company or its Subsidiaries, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Act.
(j) "Covered Employee " has the meaning specified in Section 4(b).
(k) "Eligible Person" means any person who is an employee (including officers and employee directors), director, Consultant or advisor of the Company or any Subsidiary.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended and in effect from time to time.
(m) "Fair Market Value" means the value of a share of Common Stock as of the relevant time of reference, as determined in good faith by the Committee without regard to any restriction other than a restriction which, by its terms, will never lapse; provided, however: (i) if the Common Stock is then traded on a national securities exchange, the Fair Market Value on any given date shall not be less than the last reported closing price of a share of Common Stock on such securities exchange; (ii) if the Common Stock is then traded on the Nasdaq National Market System, the Fair Market Value on any given date shall not be less than the last reported closing price of the Common Stock as reported on such system; or (iii) if the Common Stock is admitted to quotation on the Nasdaq National Market System, the Fair Market Value on any given date shall not be less than the average of the highest bid and lowest asked prices for the Common Stock reported for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported; provided further that, if the date for which the Fair Market Value is determined is the first
day when trading prices for the Common Stock are reported on the Nasdaq National Market System or trading on a national securities exchange, the Fair Market Value shall be the "Price to the Public" (or its equivalent) set forth on the cover page for the final prospectus relating to the Company's Initial Public Offering. After the Initial Public Offering, if the relevant date does not fall on a day on which the Common Stock has traded on the Nasdaq National Market System or on a national securities exchange or market, the date on which the Fair Market Value shall be established shall be the last day on which the Common Stock was so traded prior to the relevant Date, or such other appropriate day as shall be determined by the Committee, in its discretion.
(n) "Incentive Stock Option" means an option designated and intended to qualify as an "incentive stock option" under Section 422(b) of the Code.
(o) "Initial Public Offering" means the consummation of the first fully underwritten, firm commitment public offering pursuant to an effective registration statement under the Act, other than on Forms S-4 or S-8 or their then equivalents, covering the offer and sale by the Company of its equity securities or such other event as a result of or following which the stock shall be publicly held.
(p) "Nonqualified Stock Option" means an Option that is not designated as an Incentive Stock Option or which does not qualify as an Incentive Stock Option.
(q) "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
(r) "Option Agreement" means a written agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Option granted to the Participant and any shares of Common Stock acquired upon the exercise thereof. An Option Agreement may consist of a "Notice of Grant of Stock Option" and a form of "Stock Option Agreement" incorporated therein by reference, or such other form or forms as the Committee may approve from time to time.
(s) "Outside Director" has the meaning specified in Section 4(b).
(t) "Parent" means any parent of the Company as defined in Section 424(e) of the Code.
(u) "Participant" means any Eligible Person selected to receive an Option pursuant to Section 5 or any Permitted Transferee.
(v) "Permitted Transferee" means any member of a Participant's immediate family, a trust for the benefit of such family members, a partnership in which such family members are the only partners, or a limited liability company in which such family members are the only members.
(w) "Plan" means this 2000 Stock Option Plan as set forth herein and as amended and/or restated from time to time.
(x) "Restricted Stock" has the meaning specified in Section 7(a).
(y) "Restricted Stock Agreement" means a written agreement between the Company and a Participant setting forth the terms, conditions and restrictions of an award of Restricted Stock granted to the Participant and any shares of Common Stock subject thereto.
(z) "Section 260.140.45" has the meaning specified in Section 3(d).
(aa) "Service Relationship" means a Participant's employment or service with the Company or its Subsidiary, whether in the capacity of an employee, director or a Consultant. Unless otherwise determined by the Committee, a Participant's Service Relationship shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or a transfer between locations of the Company or its Subsidiaries or a transfer between the Company and any Subsidiary, provided that there is no interruption or other termination of the Service Relationship. Subject to the foregoing and Section 10 below, the Company, in its discretion, shall determine whether the Participant's Service Relationship has terminated and the effective date of such termination.
(bb) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f)of the Code.
(cc) "Unrestricted Stock" has the meaning specified in Section 8(a).
(dd) "10% Owner Optionee" means an individual who owns or is deemed to own (by reason of the attribution rules of Section 424(b) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Parent or Subsidiary.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) Subject to adjustment in accordance with the provisions of Section 11 below, the maximum aggregate number of shares of Common Stock reserved and available for issuance under the Plan shall be 6,000,000 shares.
(b) The shares of Common Stock to be delivered under the Plan will be made available, at the discretion of the Committee, from authorized but unissued shares of Common Stock and/or from previously issued shares of Common Stock reacquired by the Company.
(c) For purposes of the limitation set forth in Section 3(a) above, the shares of Common Stock underlying any Award which is forfeited, canceled, reacquired by the Company, satisfied without the issuance of Common Stock or otherwise terminated (other than by exercise) shall be added back to the shares of Common Stock available for issuance under the Plan.
(d) Notwithstanding the foregoing, at any time that the offer and sale
of securities pursuant to the Plan is subject to the compliance with
Section 260.140.45 of Title 10 of the California Code of Regulations
("Section 260.140.45"), the total number of shares of Common Stock issuable
upon the exercise of all outstanding Awards (together with options,
restricted stock or unrestricted stock outstanding under any other stock
option plan of the Company) and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed thirty percent (30%) (or such higher percentage limitation as may be
approved by the stockholders of the Company pursuant to Section 260.140.45)
of the then outstanding shares of the Company as calculated in accordance
with the conditions and exclusions of Section 260.140.45.
4. ADMINISTRATION OF THE PLAN.
(a) The Plan will be governed by and interpreted and construed in accordance with the internal laws of the State of Delaware (without reference to principles of conflicts or choice of law). The captions of sections of the Plan are for reference only and will not affect the interpretation or construction of the Plan.
(b) The Plan will be administered by the Committee, which shall
consist of not less than two directors; provided, however, that if each
member of the Committee is not a "Non-Employee Director" within the meaning
of Rule 16b-3(a)(3) of the Exchange Act, then any Awards granted to
individuals subject to the reporting requirements of Section 16 of the
Exchange Act shall be approved by the Board. Notwithstanding the foregoing,
after the end of the reliance period as defined in Treasury Regulation
1.162-27(f) following the Company's Initial Public Offering, Awards granted
to "Covered Employees" which might reasonably be anticipated to result in
the payment of employee remuneration that would otherwise exceed the limit
on employee remuneration deductible for income tax purposes pursuant to
Section 162(m) of the Code shall be approved by a Committee composed solely
of two or more "Outside Directors" (each within the meaning of Section
162(m) of the Code).
(c) The Committee has and may exercise such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. The Committee shall make all determinations required under the Plan, including the Eligible Persons to whom, and the time or times at which, Awards may be granted, the exercise price or purchase price (if any) of each Award, whether each Option is intended to qualify as an Incentive Stock Option or a Nonqualified Stock Option, and the number of shares subject to each Award. The Committee also has authority (i) to interpret the Plan, (ii) to determine the terms and provisions of the Awards, (iii) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and Participants, (iv) to approve the form of written agreements evidencing the Awards, and (v) to make all other determinations necessary or advisable for Plan administration. The Committee has authority to prescribe, amend, and
rescind rules and regulations relating to the Plan. All interpretations, determinations, and actions by the Committee will be final, conclusive, and binding upon all parties.
(d) No member of the Committee will be liable for any action taken or determination made in good faith by the Committee with respect to the Plan or any Awards granted under it.
(e) The Committee, in its discretion, may delegate to the Chief Executive Officer, President and/or the Chief Financial Officer of the Company all or part of the Committee's authority and duties with respect to the granting of Awards at Fair Market Value to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act or Covered Employees. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee's delegate or delegates that were consistent with the terms of the Plan.
5. GRANTS.
(a) The Committee shall determine and designate from time to time those Eligible Persons who are to be granted Awards, the type of Award to be granted and the number of shares covered thereby or issuable upon exercise thereof. Each Award will be evidenced by a written agreement which shall be in such form as the Committee may from time to time approve; provided that, agreements issued to Eligible Persons need not be identical.
(b) Awards may be granted to employees, directors, Consultants and advisors of the Company and its Subsidiaries (including prospective employees, directors, Consultants and advisors to whom Awards are granted in connection with written offers of employment or other service with the Company or its Subsidiaries) who are responsible for, or contribute to, the management, growth or profitability of the Company and its Subsidiaries as are selected from time to time by the Committee, in its sole discretion.
(c) No 10% Owner Optionee will be eligible for the grant of an Incentive Stock Option; provided that, if at the time such Incentive Stock Option is granted, its exercise price is at least 110% of the Fair Market Value of the Common Stock and, by its terms, it is not exercisable after the expiration of five years from the date of grant, then such 10% Owner Optionee may be granted an Incentive Stock Option.
(d) Incentive Stock Options may be granted only to employees of the Company or any Subsidiary; provided, however, an Incentive Stock Option may be granted to a prospective employee upon the condition that such person becomes an employee and such grant shall be deemed granted effective on the date that such person commences service with the Company or its Subsidiaries, with an exercise price determined as of such date in accordance with Sections 5(c) and 6(a).
(e) No Incentive Stock Options shall be granted under the Plan after May 4, 2010.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Subject to Section 5(c) and 5(d) above, the price at which Common Stock may be purchased by a Participant under an Option shall be determined by the Committee; provided, however, that the exercise price under an Incentive Stock Option shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant of such Option. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than the minimum exercise price per share set forth herein and in Sections 5(c) and 5(d) above if the Incentive Stock Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under Section 424(a) of the Code.
(b) Each Option shall be exercisable at such time or times, during such periods, and for such numbers of shares as shall be determined by the Committee and set forth in the applicable Option Agreement evidencing the Option. A Participant shall have no rights of a stockholder with respect to any shares covered by an Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights which the record date is prior to the date such certificate is issued, except as provided in Section 11 below. Subject to Section 5(c) above, the term of each Option shall expire no later than the 10th anniversary of its date of grant.
(c) Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares of Common Stock to be purchased. Payment of the exercise price may be made by one or more of the following methods to the extent provided in the Option Agreement:
(A) in cash, by certified or bank check, or other instrument acceptable to the Committee in U.S. funds payable to the order of the Company;
(B) if permitted by the Committee in its sole and absolute discretion (x) at the time of grant if the Option is an Incentive Stock Option or (y) at any time if the Option is a Nonqualified Stock Option, by the Participant delivering to the Company a promissory note (which may be recourse or partially recourse to the Participant) in a form approved by the Committee; provided that at least so much of the exercise price as represents the par value of the Common Stock shall be paid other than with a promissory note if otherwise required by state law;
(C) after the closing of the Company's Initial Public Offering, if permitted by the Committee, (x) through the delivery (or attestation to ownership) of shares of Common Stock held by the Participant for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the
exercise date, or (y) by the Participant delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the exercise price; provided that, in the event the Participant chooses such payment procedure, the Participant and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure; or
(D) any combination of the payment methods set forth in clauses (A), (B), and (C) above.
Payment instruments will be received subject to collection. No certificates for shares of Common Stock so purchased will be issued to the Participant until the Company has completed all steps required by law to be taken in connection with the issuance and sale of such shares, including, without limitation, obtaining from Participant payment or provision for all withholding taxes due as a result of the exercise of the Option. The delivery of certificates representing the shares of Common Stock to be purchased pursuant to the exercise of an Option will be contingent upon receipt from the Participant (or a purchaser acting in his or her stead in accordance with the provisions of the Option) by the Company of the full exercise price for such shares and the fulfillment of any other requirements contained in the Option Agreement or applicable provisions of law. If the Participant chooses to pay the exercise price by delivery of previously owned shares of Common Stock by the attestation method set forth in clause (C)(x) above, the shares of Common Stock transferred to the Participant upon the exercise of the Option shall be net of the number of the shares of Common Stock delivered.
(d) To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the number of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant in any calendar year (under all option plans of the Company, its Parent and/or its Subsidiaries) exceeds $100,000 (or such other limit as may be required by the Code) such Incentive Stock Options shall constitute Nonqualified Stock Options. For purposes of this Section 6(d), Incentive Stock Options shall be taken into account in the order in which they were granted. If pursuant to the above, an Incentive Stock Option is treated as an Incentive Stock Option in part and a Nonqualified Stock Option in part, the Participant may designate which portion of the Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first.
(e) No Option shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution and all Options shall be exercisable, during a Participant's lifetime, only by the Participant, or, in the event of the Participant's incapacity, by the Participant's legal representative or guardian. Notwithstanding the foregoing, the Committee, in its sole discretion, may provide in the Option Agreement
regarding a given Nonqualified Option that a Participant may transfer, without consideration for the transfer, his or her Nonqualified Stock Option to any Permitted Transferee; provided that such Permitted Transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option Agreement.
(f) Shares of Common Stock issued pursuant to Options may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Committee and set forth in the applicable Option Agreement. The Company shall have the right to assign to any person at any time any repurchase right it may have, whether or not such rights is then exercisable.
7. RESTRICTED STOCK AWARDS.
(a) The Company may, pursuant to an Award of Restricted Stock, sell, at par value or such greater purchase price as determined by the Committee, in its sole discretion, shares of Common Stock subject to such restrictions and conditions as the Committee may determine at the time of grant, which purchase price shall be payable in cash or, if permitted by the Committee at the time of grant of such Award, by promissory note (which may be recourse or partially recourse to the Participant), in a form approved by the Committee; provided that, at least so much of the purchase price as represents the par value of the Stock shall be paid other than with a promissory note if required by state law. Conditions may be based on continuation of a Service Relationship and/or achievement of pre-established performance goals and objectives or such other terms as may be determined by the Committee in its sole discretion. The grant of Restricted Stock is contingent on the Participant executing a Restricted Stock Agreement. The terms and conditions of each such Restricted Stock Agreement shall be determined by the Committee and such terms and conditions may differ among individual Awards and Participants.
(b) Upon execution of the Restricted Stock Agreement and payment of any applicable purchase price, a Participant shall have the rights of a stockholder with respect to the voting of the Restricted Stock, subject to any conditions contained in the Restricted Stock Agreement. Unless the Committee shall otherwise determine, certificates evidencing the Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the Participant shall be required, as a condition of the grant, to deliver to the Company a stock power endorsed in blank.
(c) Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Agreement. Shares of Common Stock issued pursuant to an award of Restricted Stock may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Committee and set forth in the applicable Restricted Stock Agreement. The Company shall have the right to assign to
any person at any time any repurchase right it may have, whether or not such right is then exercisable.
(d) The Committee at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as may be specified in the Restricted Stock Agreement.
(e) The Restricted Stock Agreement may require or permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted Stock..
8. UNRESTRICTED STOCK AWARDS.
(a) The Committee may, in its sole discretion, grant or sell an Unrestricted Stock Award to any Participant, pursuant to which such Participant may receive shares of Common Stock free of any vesting restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration.
(b) The right to receive shares of Unrestricted Stock on a deferred basis may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution.
9. TAX WITHOLDING.
(a) Each Participant shall, no later than the date as of which the value of an Award or of any Common Stock or other amounts received thereunder first becomes includable in the gross income of the Participant for federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any federal, state, foreign, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
(b) Subject to approval by the Committee, a Participant may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Common Stock owned by the Participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due. The Fair Market Value of any shares of Common Stock withheld or tendered to satisfy any such tax withholding obligation shall not exceed the amount determined by the applicable minimum statutory withholding rates.
10. LEAVE OF ABSENCE.
For purposes of the vesting and exercisability of Awards under the Plan an approved leave of absence for military service or sickness, or for any other purpose approved by the Company shall not be deemed a termination of the Service Relationship; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave, the Participant's Service Relationship shall be deemed to have terminated unless the Participant's right to return to service is guaranteed either by a statute or by contract. Further, an approved leave of absence for maternity or, in the Company's sole discretion, a medical reason, shall be treated as service for purposes of determining vesting under the Participant's Option Agreement or Restricted Stock Agreement; provided that, if any such leave exceeds 12 weeks, then beginning on the first day of the 13th week, such leave shall not be treated as service for purposes of vesting (i.e., the vesting schedule shall be tolled for the period of the leave of absence beyond 12 weeks). Notwithstanding anything stated herein, unless otherwise designated by the Company or required by law, any other leave of absence shall not be treated as service for purposes of vesting.
11. ADJUSTMENT PROVISIONS.
(a) Subject to Section 11(b), if the outstanding shares of Common Stock of the Company are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other distribution with respect to such shares of Common Stock, or other securities, an appropriate and proportionate adjustment shall be made in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the numbers and kinds of shares or other securities subject to the then outstanding Awards, (iii) the exercise price and/or repurchase price for each share subject to then outstanding Options (without change in the aggregate exercise price and/or repurchase price as to which such Options remain exercisable), and (iv) the repurchase price per share for each outstanding Restricted Stock Award); provided that, such exercise and/or repurchase price may not be less than the par value of the Common Stock.
(b) Upon the effectiveness of an Acquisition:
(i) except with respect to specific Awards as the Committee otherwise determines at the time of grant and as set forth therein, all shares subject to outstanding Awards not otherwise accelerated and vested under the terms of the original grant, to the extent not assumed by the acquiring entity or replaced by comparable options to purchase shares of the capital stock of the successor or acquiring entity or parent thereof (the determination of comparability to be made by the Committee, which determination shall be final, binding, and conclusive) (an "Assumption") shall, subject to and conditioned upon the effectiveness of the Acquisition, become vested and exercisable in full 10 days prior to the anticipated effective date of the Acquisition as determined by the Committee, except with
respect to specific Awards as the Committee otherwise determines at the time of grant; and
(ii) unless there is an Assumption, the Plan and all outstanding Options shall terminate upon the effectiveness of the Acquisition.
(c) In the event that Options are terminated pursuant to Section 1 l(b)(ii) above, each Participant shall be permitted to exercise for a period of at least 10 days prior to the anticipated effective date of such Acquisition all outstanding Options held by such Participant which are then vested and exercisable (after giving effect to the acceleration of vesting provided for in connection with the Acquisition); provided, however: (i) the exercise of the portion of such Options that became vested and exercisable in connection with the Acquisition shall be subject to and conditioned upon the effectiveness of the Acquisition, and (ii) the Participant may, but will not be required to, condition the exercise of any portion of an Option not described in (i) above upon the effectiveness of the Acquisition.
(d) Following the effectiveness of an Assumption, the unvested portion of all outstanding Awards, if any, shall continue to vest in accordance with the vesting schedule set forth in such Awards, in the same proportions and on the same dates as the shares of Common Stock would have vested had there been no acceleration of vesting (i.e. if 25% of the original shares of Common Stock subject to the Award would have vested on a specified date, then 25% of the original shares of Common Stock subject to the Award, less the number of shares of Common Stock that would have vested on that date but which accelerated in connection with the Acquisition, shall vest on such specified date) and all such Awards shall otherwise be adjusted as provided in Section 11(a) above.
(e) Adjustments under this Section 11 will be made by the Committee, whose determination as to what adjustments will be made and the extent thereof so as to effectuate the intent of this Section 11 will be final, binding, and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments, but the Committee, in its discretion, may either make a cash payment in lieu of fractional shares or round any resulting fractional share down to the nearest whole number.
(f) In the event of a dissolution or liquidation of the Company, any outstanding Options issued under the Plan shall be terminated if not exercised prior to such event.
(g) The Committee may grant Awards under the Plan in substitution for
stock and stock based awards held by employees, directors or consultants of
another company in connection with a merger or consolidation of such
company with the Company (or its Parent or any Subsidiary) or the
acquisition by the Company (or its Parent or any Subsidiary) of property or
stock of such company. The Committee may direct that the substitute Awards
be granted on such terms and conditions as the Committee considers
appropriate in the circumstances. Any substitute Awards granted under the
Plan shall not count against the share limitation set forth in Section 3
(a) above.
12. ADDENDUM A: CALIFORNIA GRANTEES.
Addendum A attached hereto shall be incorporated by reference in its entirety and shall only be applicable to the grant of Awards under the Plan to Participants who are located in or providing services to the Company or one of its Subsidiaries in the State of California.
13. GENERAL PROVISIONS.
(a) Nothing contained in this Plan shall prevent the Committee from adopting other or additional compensation arrangements and such arrangements as may be either generally applicable or applicable only in specific cases. Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon any Participant any right to continued employment or service with the Company or any of its Subsidiaries or affect the right of the Company or any Subsidiary to terminate the employment, directorship or consulting or advising relationship of any Participant at any time, with or without cause.
(b) The grant of Awards and the issuance of shares of Common Stock upon exercise of Awards shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Common Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed. In addition, no Option may be exercised unless: (a) a registration statement under the Act shall at the time of exercise of the Option be in effect with respect to the shares of Common Stock issuable upon exercise of the Award, or (b) in the opinion of legal counsel to the Company, the shares of Common Stock issuable upon exercise of the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Act. The inability of the Company to obtain from any regulatory body that has jurisdiction, the authority, if any, deemed by Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
(c) Stock certificates issued under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the Participant, at the Participant's last known address on file with the Company.
(d) Sale of Common Stock received pursuant to this Plan or upon exercise of an Award under the Plan shall be subject to any insider-trading-policy-related restrictions,
terms and conditions as may be established by the Committee, or in accordance with policies set by the Committee, from time to time.
(e) In the event of a conflict between the terms and provisions of this Plan and the terms and provisions of any Restricted Stock Agreement or Option Agreement, the terms and provisions of this Plan shall govern.
14. AMENDMENT AND TERMINATION.
(a) The Board shall have the power, in its discretion, to amend,
modify, suspend, or terminate the Plan at any time, subject to applicable
law and the rights of holders of outstanding Options on the date of such
action. No amendment, modification, suspension or termination of the Plan
shall affect any outstanding Award unless expressly provided hereunder or
as determined by the Board. Further, no such amendment, modification,
suspension or termination of the Plan, unless taken with the approval of
the stockholders of the Company, may: (a) increase the maximum number of
shares of Common Stock for which Awards granted under this Plan may be
issued (except by operation of Section 11(a)); (b) alter the class of
employees eligible to receive Incentive Stock Options under the Plan; or
(c) amend the Plan in any other manner which the Board, in its discretion,
determines would require approval of the stockholders under any applicable
law, rule or regulation to become effective even though such stockholder
approval is not expressly required by this Plan. Nothing in this Section
14(a) shall limit the Board's or Committee's authority to take any action
permitted pursuant to Section 11(b).
(b) No amendment, suspension or termination of the Plan will, without the consent of the Participant, adversely affect any right or obligation under any Award previously granted to such Participant under the Plan unless (i) required to ensure that an Option is treated as an Incentive Stock Option or (ii) to comply with applicable law.
15. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN.
The Plan became effective upon its adoption by the Board and by the
Company's stockholders on May 5, 2000. The Plan shall continue in effect until
the earlier of: (i) its termination by the Board, (ii) the date on which all of
the shares of Common Stock available for issuance under the Plan have been
issued and all restrictions on such shares under the terms of the Plan and the
applicable Option Agreements and Restricted Stock Agreements have lapsed, or
(iii) May 4, 2010.
FORM--US EMPLOYEE VERSION
STOCK OPTION AGREEMENT
UNDER THE
VIRTUSA CORPORATION 2000 STOCK OPTION PLAN
Pursuant to the Virtusa Corporation 2000 Stock Option Plan (the "Plan"), Virtusa Corporation, a Delaware corporation (together with its successors, the "Company"), hereby grants to the person (the "Grantee") named in the Notice of Grant of Stock Option attached hereto (the "Notice") to which this Stock Option Agreement (the "Option Agreement") is attached, an option (together with the Notice, referred to herein as the "Option") to purchase on or prior to the expiration date specified in the Notice (the "Expiration Date"), or such earlier date as is specified herein, all or any part of the number of shares of Common Stock of the Company indicated in the Notice (the "Option Shares" and such shares once issued shall be referred to as the "Issued Shares"), at the exercise price per share specified in the Notice (the "Exercise Price") and subject to the terms and conditions set forth in this Option Agreement, the Notice and the Plan, including the adjustment provision thereof. All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Notice and the Plan (as applicable).
If this Option is designated as an Incentive Stock Option in the Notice,
this Option is intended to qualify as an "incentive stock option" as defined in
Section 422(b) of the Code. To the extent that any portion of this Option does
not so qualify as an Incentive Stock Option or, if this Option is designated as
a Nonqualified Stock Option in the Notice, it shall be deemed a Nonqualified
Stock Option. The Grantee should consult with the Grantee's own tax advisor
regarding the tax effects of this Option (and any requirements necessary to
obtain favorable income tax treatment under Section 422 of the Code, including,
but not limited to, holding period requirements).
1. Vesting and Exercisability.
(a) No portion of this Option may be exercised until such portion shall have vested.
(b) Except as set forth below and in Section 5 hereof, this Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option as provided herein, in an amount not to exceed the number of Vested Shares (as determined in the Notice) less the number of shares previously acquired upon exercise of this Option. In no event shall this Option be exercisable for more than the Number of Option Shares (as designated in the Notice).
(c) In the event that the Grantee's Service Relationship terminates, this Option may thereafter be exercised, to the extent it was vested and exercisable on the date of such termination, until the date specified in Section 1(d) hereof. Any portion of this Option that is not exercisable on the date of termination of the Service Relationship shall immediately expire and be null and void.
(d) Subject to the provisions of Section 5 hereof, once any portion of
this Option becomes vested and exercisable, it shall continue to be exercisable
by the Grantee or his or her representatives and legatees as contemplated herein
at any time or times prior to the earliest of (i) the date which is (A) twelve
(12) months following the date on which the Grantee's Service Relationship
terminates due to death or disability, or (B) three (3) months following the
date on which the Grantee's Service Relationship terminates if the termination
is due to any other reason, or (ii) the Expiration Date set forth in the Notice;
provided that, notwithstanding the foregoing, if the Grantee's Service
Relationship is terminated for "Cause", this Option shall terminate immediately
and be null and void upon the date of the Grantee's termination and shall not
thereafter be exercisable. For purposes hereof, "Cause" means: (i) any material
breach by the Grantee of any agreement to which the Grantee and the Company are
parties, including breach of covenants not to compete and covenants relating to
the protection of confidential information and proprietary rights of the
Company, which breach is not cured pursuant to the terms of such agreements,
(ii) any act (other than retirement) or omission to act by the Grantee which
would reasonably be likely to have a material adverse effect on the business of
the Company, as the case may be, or on the Grantee's ability to perform services
for the Company, as the case may be, (iii) the Grantee's conviction (including
any pleas of guilty or nolo contendre) of any crime (other than ordinary traffic
violations) which impairs the Grantee's ability to perform his or her duties,
(iv) any material misconduct or willful and deliberate non-performance of duties
by the Grantee in connection with the business or affairs of the Company, as the
case may be, (v) the Grantee's theft, dishonesty or falsification of the
Company's documents or records, or (vi) the Grantee's improper use or disclosure
of the Company's confidential or proprietary information. For purposes of the
definition of "Cause" set forth herein, all references to the Company shall be
deemed to include the Company's Parent or any Subsidiary.
(e) If designated as an Incentive Stock Option in the Notice, the Grantee understands that in order to obtain the benefits of an incentive stock option under Section 422 of the Code, subject to any amendments thereof, no sale or other disposition may be made of Issued Shares for which incentive stock option treatment is desired within the one (l)-year period after the day of the issuance of such Issued Shares to him or her (i.e., the exercise date), nor within the two (2)-year period after the grant of this Option and further, that this Option must be exercised, if and to the extent permitted hereunder, within three (3) months after termination of employment (or twelve (12) months in the case of death or disability to qualify as an incentive stock option. If the Grantee disposes (whether by sale, gift, transfer or otherwise) of any such Issued Shares within either of these periods, he or she agrees to notify the Company within thirty (30) days after such disposition. The Grantee also agrees to provide the Company with any information concerning any such dispositions required by the Company for tax purposes. Further, to the extent that the aggregate Fair Market Value (determined as of the time that the applicable option is granted) of the shares of Common Stock with respect to which all Incentive Stock Options held by the Grantee are exercisable for the first time during any calendar year (under all option plans of the Company, its Parent and/or its Subsidiaries) exceeds $100,000, such Incentive Stock Options shall constitute Nonqualified Stock Options. For purposes of this Section l(e), Incentive Stock Options shall be taken into account in the order in which they were granted. If pursuant to the above, an Incentive Stock Option is treated as an Incentive Stock
Option in part and a Nonqualified Stock Option in part, the Grantee may designate which portion of the Stock Option the Grantee is exercising. In the absence of such designation, the Grantee shall be deemed to have exercised the Incentive Stock Option portion of the Option first.
2. Exercise of Option.
(a) The Grantee may exercise this Option only by delivering an Option exercise notice (an "Exercise Notice") in substantially the form of Appendix A attached hereto to the Company's Chief Financial Officer or, if none, the Chief Executive Officer, indicating his or her election to purchase some or all of the Option Shares with respect to which this Option has vested at the time of delivery of such Exercise Notice (which amount shall be specified in the Exercise Notice), accompanied by payment in full of the aggregate Exercise Price; provided that such exercise shall be effective only upon receipt by such officer of the Exercise Notice and the aggregate Exercise Price. Payment of the aggregate Exercise Price for the Option Shares elected to be purchased by the Grantee may be made by one or more of the following methods:
(i) in cash, by certified or bank check, or other instrument acceptable to the Committee in U.S. funds payable to the order of the Company in an amount equal to the aggregate Exercise Price of such Option Shares;
(ii) after the closing of the Company's Initial Public Offering, if permitted by the Committee at the discretion of the Committee at the time of exercise, (x) through the delivery (or attestation to ownership) of shares of Common Stock having a Fair Market Value equal to the aggregate Exercise Price of such Option Shares that have been purchased by the Grantee on the open market or that have been held by the Grantee for at least six (6) months and are not subject to restrictions under any plan of the Company, or (y) by the Grantee delivering to the Company a properly executed Exercise Notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the Exercise Price of such Option Shares; provided that, in the event the Grantee chooses such payment procedure, the Grantee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure; or
(iii) a combination of the payment methods set forth in clauses
(i) and (ii) above.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Grantee upon compliance to the satisfaction of the Committee
with all requirements under applicable laws or regulations in connection with
such issuance. Until the Grantee shall have complied with the requirements
hereof and of the Plan, including the withholding requirements set forth in
Section 6 hereof, the Company shall be under no obligation to issue the Option
Shares subject to this Option, and the determination of the Committee as to such
compliance shall be final and binding on the Grantee. The Grantee shall not be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any Issued Shares unless and until this Option shall have been
exercised pursuant to the terms hereof, the Company shall have issued
and delivered such Issued Shares to the Grantee, and the Grantee's name shall have been entered as a stockholder of record on the books of the Company. Thereupon, the Grantee shall have full dividend and other ownership rights with respect to such Issued Shares, subject to the terms of this Option Agreement.
(c) The Company shall not be required to issue fractional shares upon the exercise of this Option.
(d) Notwithstanding any other provision hereof or of the Plan, no
portion of this Option shall be exercisable after the earlier of the Expiration
Date or the termination of this Option as contemplated by Section l(d) and
Section 5 hereof.
3. Subject to Plan.
This Option is subject to all of the terms and conditions set forth in the Plan. Notwithstanding anything in this Option Agreement or the Notice to the contrary, to the extent of any conflict between the terms of the Plan, this Option Agreement, and the Notice, the terms of the Plan shall control.
4. Transferability.
This Option is personal to the Grantee and is not transferable by the
Grantee in any manner other than by will or by the laws of descent and
distribution; provided that if this Option is designated as a Nonqualified Stock
Option, such Option may be transferred by the Grantee to any Permitted
Transferee; provided that, the Permitted Transferee agrees in writing with the
Company to be bound by all of the terms and conditions of the Plan and this
Option Agreement. This Option may be exercised during the Grantee's lifetime
only by the Grantee (or by the Grantee's legal representative or guardian in the
event of the Grantee's incapacity) or by a Permitted Transferee pursuant to this
Section 4. The Grantee may elect to designate a beneficiary by providing written
notice of the name of such beneficiary to the Company, and may revoke or change
such designation at any time by filing written notice of revocation or change
with the Company; such beneficiary may exercise the Grantee's Option in the
event of the Grantee's death to the extent provided herein. If the Grantee does
not designate a beneficiary, or if the designated beneficiary predeceases the
Grantee, the executor of the Grantee may exercise this Option to the extent
permitted herein in the event of the Grantee's death.
5. Effect of Certain Acquisitions.
(a) Acquisitions. Upon the effectiveness of an Acquisition:
(i) twenty five percent (25%) of the total number of Option Shares which are not vested and exercisable as of the date of the Acquisition shall immediately become vested and exercisable;
(ii) to the extent not assumed by the acquiring entity or replaced by
comparable options to purchase shares of the capital stock of the successor or acquiring entity or parent thereof (the determination of comparability to be made by the Committee, which determination shall be final, binding, and conclusive) (an "Assumption") all remaining Option Shares shall, subject to and conditioned upon the effectiveness of the Acquisition, become vested and exercisable in full ten (10) days prior to the anticipated effective date of the Acquisition as determined by the Committee; and
(iii) unless there is an Assumption, this Option shall terminate upon the effectiveness of the Acquisition.
(b) Exercise in Connection with a Termination. In the event that the Option is terminated pursuant to Section 5(b)(iii) above, the Grantee shall be permitted to exercise, for a period of at least ten (10) days prior to the anticipated effective date of such Acquisition, this Option to the extent that it is then vested and exercisable (after giving effect to the acceleration of vesting provided for in connection with the Acquisition); provided that, the exercise of the portion of the Option that becomes vested and exercisable in connection with the Acquisition shall be subject to and conditioned upon the effectiveness of the Acquisition.
(c) Vesting following an Assumption. Following the effectiveness of an Assumption, the unvested portion of this Option, if any, shall continue to vest in accordance with the vesting schedule set forth in the Notice, in the same proportion and on the same dates as the shares of Common Stock would have vested had there been no acceleration of vesting (i.e. if twenty five percent (25%) of the original shares of Common Stock subject to this Option would have vested on a specified date, then twenty five percent (25%) of the original shares of Common Stock subject to this Option, less the number of shares of Common Stock that would have vested on that date but which accelerated in connection with the Acquisition, shall vest on such specified date) and all such Awards shall otherwise be adjusted as provided in Section 1 l(a) of the Plan.
6. Withholding Taxes.
(a) Payment by Grantee. The Grantee shall, no later than the date as of which the exercise of this Option (or, if applicable, the issuance, in whole or in part, of any Issued Shares upon the exercise of this Option, the operation of any law or regulation providing for the imputation of interest related to this Option, or the lapsing of any restriction with respect to any Issued Shares acquired upon exercise of this Option) gives rise to taxable income and subjects the Company to a tax withholding obligation, authorize the Company to withhold from payroll and any other amounts payable to the Grantee or pay to the Company or make arrangements satisfactory to the Committee for payment of any federal, state, foreign and local taxes required by law to be withheld with respect to such income.
(b) Payment in Common Stock. Subject to approval by the Committee, the Grantee may elect to have the minimum tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued a number
of shares of Common Stock with an aggregate Fair Market Value (as of the date
the withholding is effected) that would satisfy the withholding amount due, or
(ii) transferring to the Company shares of Common Stock owned by the Grantee
with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due. The Fair Market Value of any
shares of Common Stock withheld to satisfy any such tax withholding obligation
shall not exceed the amount determined by the applicable minimum statutory
withholding rates.
7. Company's Right of First Refusal.
(a) Exercise of Right. If the Grantee or any Permitted Transferee
desires to sell, exchange, transfer, pledge or otherwise dispose of all or any
part of the Issued Shares to any person or entity other than to the Company or a
Permitted Transferee (an "Offeror"), the Grantee or Permitted Transferee shall:
(i) obtain in writing an irrevocable and unconditional bona fide offer (the
"Offer") for the purchase thereof from the Offerer; and (ii) give written notice
(the "Offer Notice") to the Company setting forth the Grantee's or Permitted
Transferee's desire to transfer such shares, which Offer Notice shall be
accompanied by a photocopy of the Offer and shall set forth the name and address
of the Offeror and the price and terms of the Offer. In the event that the Offer
constitutes a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the Fair Market Value of such shares as determined
by the Committee in good faith. Upon receipt of the Offer Notice, the Company
shall have an assignable option to purchase any or all of such Issued Shares
(the "Offered Shares") specified in the Offer Notice, such option to be
exercisable by giving, within thirty (30) days after receipt of the Offer
Notice, a written counter notice to the Grantee or Permitted Transferee. If the
Company or its assigns elects to purchase any or all of such Offered Shares, it
shall be obligated to purchase, and the Grantee or Permitted Transferee shall be
obligated to sell to the Company or its assigns, such Offered Shares at the
price and terms indicated in the Offer within thirty (30) days from the date of
delivery by the Company of such counter notice (unless a longer period is
permitted by the Grantee or Permitted Transferee and the Offeror); provided,
however, that in the event that the Offer Notice provides for the payment for
the Offered Shares other than in cash, the Company shall have the option of
paying for the Offered Shares by the present value cash equivalent of the
consideration described in the Offer Notice as reasonably determined by the
Company. For purposes of the foregoing, cancellation of any indebtedness of the
Grantee or Permitted Transferee to the Company (or its Parent or any Subsidiary)
shall be treated as payment to the Grantee or Permitted Transferee in cash to
the extent the unpaid principal balance and any accrued interest is canceled.
The Company's exercise or failure to exercise its right of first refusal
pursuant to this Section 7(a) with respect to any proposed transfer described in
an Offer Notice shall not affect the Company's right to exercise its right of
first refusal with respect to any other proposed transfer thereafter.
(b) Sale of Offered Shares to Offeror. The Grantee or Permitted
Transferee may, for sixty (60) days after the expiration of such thirty (30)-day
option period (or, if applicable, such longer period) as set forth in Section
7(a), sell to the Offeror, pursuant to the terms of the Offer, any or all of
such Offered Shares not purchased or agreed to be purchased by the
Company or its assigns. All Offerors shall be required as a condition of purchasing such Offered Shares to agree in writing (in a form satisfactory to the Company) that the Offeror shall purchase and hold such Offered Shares subject to the Company's right of first refusal pursuant to this Section 7 with respect to any subsequent proposed transfer. Further, the Company shall have the right to demand further assurances from the Grantee or Permitted Transferee and the Offeror that the transfer of the Offered Shares was actually carried out in accordance with the terms and conditions of the Offer Notice. No transfer of the Offered Shares shall be effected on the books of the Company until the Company has received such assurances, if so demanded. Any proposed transfer on terms and conditions different from those described above in an Offer Notice shall be null and void. If any or all of such Offered Shares are not sold pursuant to the Offer Notice within the time permitted above, the unsold Offered Shares shall remain subject to the terms of this Section 7.
(c) Failure to Deliver Option Shares. If the Grantee or Permitted Transferee fails or refuses to deliver on a timely basis duly endorsed certificates representing the Offered Shares to be sold to the Company or its assigns pursuant to this Section 7, the Company shall have the right to deposit the purchase price for such Offered Shares in a special account with any bank or trust company, giving notice of such deposit to the Grantee or Permitted Transferee, whereupon such Offered Shares shall be deemed to have been purchased by the Company. All such monies shall be held by the bank or trust company for the benefit of the Grantee or Permitted Transferee. All monies deposited with the bank or trust company but remaining unclaimed for two (2) years after the date of deposit shall be repaid by the bank or trust company to the Company on demand, and the Grantee or Permitted Transferee shall thereafter look only to the Company for payment. The Company may place a legend on any certificate for Issued Shares delivered to the Grantee and Permitted Transferees reflecting the restrictions on transfer provided in this Section 7.
(d) Expiration of Company's Right of First Refusal. The first refusal rights of the Company set forth above shall remain in effect until the closing of an Initial Public Offering or upon the consummation of any Acquisition as a result of which shares of Common Stock are registered under Section 12 of the Exchange Act and publicly traded on NASDAQ/NMS or any national security exchange.
8. Compliance with Legal Requirements.
This Option may not be exercised if the issuance of shares of Common Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed. In addition, this Option may not be exercised unless: (a) a registration statement under the Act shall at the time of exercise of this Option be in effect with respect to the shares issuable upon exercise, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of this Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Act. The inability of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of this Option, the Company may require the Grantee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
9. Lock-up Provision.
The Grantee agrees, if requested by the Company and any underwriter engaged by the Company, not to sell, offer to sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any securities (including the right to acquire any Common Stock) of the Company (including, without limitation, pursuant to Rule 144 under the Act) held by him or her for such period following the effective date of any registration statement of the Company filed under the Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed one hundred eighty (180) days in the case of the Company's Initial Public Offering or ninety (90) days in the case of any other public offering.
10. Miscellaneous Provisions.
(a) Administration. All questions of interpretation concerning this Option Agreement shall be determined by the Committee. All determinations by the Committee shall be final and binding upon all persons having an interest in this Option.
(b) Employment Rights. The grant of this Option does not confer upon the Grantee any right to continued employment or service with the Company or its Parent or any Subsidiary or interfere in any way with the right of the Company or its Parent or any Subsidiary to terminate the Grantee's employment or service at any time.
(c) Equitable Relief. The parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Option Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Option Agreement.
(d) Change and Modifications. The Committee may terminate or amend the Plan or this Option at any time; provided that, except as provided in Section 11(b) of the Plan in connection with an Acquisition, no such termination or amendment may adversely affect this Option without the consent of the Grantee unless such termination or amendment is necessary to comply with any applicable law, rule or regulation or, to the extent that this Option is designated as an Incentive Stock Option, is required to enable this Option to continue to qualify as an Incentive Stock Option.
(e) Governing Law. This Option Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of laws principles thereof.
(f) Headings. The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Option Agreement and shall not be considered in the interpretation of this Option Agreement.
(g) Integrated Agreement. This Option Agreement, the Notice and the Plan constitute the entire understanding and agreement between the Grantee and the Company with respect to the subject matter contained herein and supersedes any prior agreements, understandings, restrictions, representations, or warranties among the Grantee and the Company with respect to such subject matter except as provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of this Option and shall remain in full force and effect.
(h) Saving Clause. If any provision(s) of this Option Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.
(i) Notices. All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission, or two (2) days after deposit in the mail if mailed by first class registered or certified mail, postage prepaid, or one (1) business day after deposit with a nationally recognized overnight carrier. Notices to the Company or the Grantee shall be addressed to such address or addresses as may have been furnished by such party in writing to the other.
(j) Benefit and Binding Effect. This Option Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, permitted assigns, and legal representatives. The Company has the right to assign this Option Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.
APPENDIX A
STOCK OPTION EXERCISE NOTICE
Virtusa Corporation 200 West Park Drive Westborough, MA 01581 Attention: Chief Financial Officer Date: __________________ Stock Option Grant No.: __________________ |
Pursuant to the terms of the Notice of Grant of Stock Option dated _______, and the Stock Option Agreement granted pursuant to the Virtusa Corporation 2000 Stock Option Plan and entered into by Virtusa Corporation (the "Company") and _____________________________________ on such date, I hereby exercise such Option for _________________ shares of common stock, all of which have vested in accordance with the Notice of Grant of Stock Option, by including herein payment in the amount of $_____________ representing the purchase price for such shares. I hereby authorize payroll withholding or otherwise will make adequate provision for federal, state, foreign and local tax withholding obligations of the Company, if any, that arise in connection with the Option.
I acknowledge that the shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Plan, the Notice of Grant of Stock Option, and the Option Agreement, copies of which I have received and carefully read and understand, including the Company's right of first refusal set forth therein, to all of which I hereby expressly assent. I acknowledge receipt of, and access to, the Company's Confidential Private Placement Memorandum (the "Memorandum") which Memorandum contains certain disclosures regarding the Company. I represent that I have read and am familiar with its provisions. By my signature below, I acknowledge and confirm that I have been provided access to, and the opportunity to review, the Memorandum, that I have reviewed the Memorandum and have had an opportunity to ask questions and receive answers regarding the Options, the Memorandum and the business, prospects and financial condition of the Company and such other information that I believe is necessary to evaluate the merits and risks of the Option and any investment in the common stock of the Company.
I hereby represent that I am purchasing the shares of common stock for my own account and not with a view to any sale or distribution thereof. I understand that Rule 144, promulgated under the Securities Act of 1933, as amended, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to such shares and, in any event, is available only if certain conditions are satisfied. I acknowledge that any sale of such shares that might be made in reliance on Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon my request. Finally, I agree that, if the Option is designated as an "incentive stock option" in the Notice of Grant of Stock Option, that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the shares acquired pursuant to the option within one (1) year from the date of exercise of all or part of the Option or within two (2) years of the date of grant of the Option.
Print Name: Signature: ------------------------ ------------------------------ Address: ----------------------------------------------------------------------- -------------------------------------------------------------------------------- Email: Phone: ----------------------------- ---------------------------------- |
NEITHER THE SECURITY REPRESENTED BY THIS OPTION AGREEMENT NOR THE SECURITIES FOR WHICH SUCH OPTION IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, NEITHER SUCH OPTION NOR THE SECURITIES FOR WHICH THE OPTION IS EXERCISABLE MAY BE OFFERED OR SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR ANY SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT LIMITATION ON THE FOREGOING, NEITHER SUCH OPTION NOR THE SECURITIES FOR WHICH SUCH OPTION IS EXERCISABLE MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT), EXCEPT IN TRANSACTIONS WHICH ARE IN COMPLIANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, HEDGING TRANSACTIONS INVOLVING EITHER THE OPTION OR THE SECURITIES FOR WHICH THE OPTION IS EXERCISABLE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
FORM--NON-U.S. EMPLOYEE VERSION
STOCK OPTION AGREEMENT
UNDER THE
VIRTUSA CORPORATION 2000 STOCK OPTION PLAN
Pursuant to the Virtusa Corporation 2000 Stock Option Plan (the "Plan"), Virtusa Corporation, a Delaware corporation (together with its successors, the "Company"), hereby grants to the person (the "Grantee") named in the Notice of Grant of Stock Option attached hereto (the "Notice'") to which this Stock Option Agreement (the "Option Agreement") is attached, an option (together with the Notice, referred to herein as the "Option") to purchase on or prior to the expiration date specified in the Notice (the "Expiration Date"), or such earlier date as is specified herein, all or any part of the number of shares of Common Stock of the Company indicated in the Notice (the "Option Shares" and such shares once issued shall be referred to as the "Issued Shares"), at the exercise price per share specified in the Notice (the "Exercise Price") and subject to the terms and conditions set forth in this Option Agreement, the Notice and the Plan, including the adjustment provision thereof. All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Notice and the Plan (as applicable).
If this Option is designated as an Incentive Stock Option in the Notice,
this Option is intended to qualify as an "incentive stock option" as defined in
Section 422(b) of the Code. To the extent that any portion of this Option does
not so qualify as an Incentive Stock Option or, if this Option is designated as
a Nonqualified Stock Option in the Notice, it shall be deemed a Nonqualified
Stock Option. The Grantee should consult with the Grantee's own tax advisor
regarding the tax effects of this Option (and any requirements necessary to
obtain favorable
income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements).
1. Vesting and Exercisability.
(a) No portion of this Option may be exercised until such portion shall have vested.
(b) Except as set forth below and in Section 5 hereof, this Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option as provided herein, in an amount not to exceed the number of Vested Shares (as determined in the Notice) less the number of shares previously acquired upon exercise of this Option. In no event shall this Option be exercisable for more than the Number of Option Shares (as designated in the Notice).
(c) In the event that the Grantee's Service Relationship terminates, this Option may thereafter be exercised, to the extent it was vested and exercisable on the date of such termination, until the date specified in Section 1(d) hereof. Any portion of this Option that is not exercisable on the date of termination of the Service Relationship shall immediately expire and be null and void.
(d) Subject to the provisions of Section 5 hereof, once any portion of
this Option becomes vested and exercisable, it shall continue to be exercisable
by the Grantee or his or her representatives and legatees as contemplated herein
at any time or times prior to the earliest of (i) the date which is (A) twelve
(12) months following the date on which the Grantee's Service Relationship
terminates due to death or disability, or (B) three (3) months following the
date on which the Grantee's Service Relationship terminates if the termination
is due to any other reason, or (ii) the Expiration Date set forth in the Notice;
provided that notwithstanding the foregoing, if the Grantee's Service
Relationship is terminated for "Cause", this Option shall terminate immediately
and be null and void upon the date of the Grantee's termination and shall not
thereafter be exercisable. For purposes hereof, "Cause" means: (i) any material
breach by the Grantee of any agreement to which the Grantee and the Company are
parties, including breach of covenants not to compete and covenants relating to
the protection of confidential information and proprietary rights of the
Company, which breach is not cured pursuant to the terms of such agreements,
(ii) any act (other than retirement) or omission to act by the Grantee which
would reasonably be likely to have a material adverse effect on the business of
the Company, as the case may be, or on the Grantee's ability to perform services
for the Company, as the case may be, (iii) the Grantee's conviction (including
any pleas of guilty or nolo contendre) of any crime (other than ordinary traffic
violations) which impairs the Grantee's ability to perform his or her duties,
(iv) any material misconduct or willful and deliberate non-performance of duties
by the Grantee in connection with the business or affairs of the Company, as the
case may be, (v) the Grantee's theft, dishonesty or falsification of the
Company's documents or records, or (vi) the Grantee's improper use or disclosure
of the Company's confidential or proprietary information.
For purposes of the definition of "Cause" set forth herein, all references to the Company shall be deemed to include the Company's Parent or any Subsidiary.
(e) If designated as an Incentive Stock Option in the Notice, the Grantee understands that in order to obtain the benefits of an incentive stock option under Section 422 of the Code, subject to any amendments thereof, no sale or other disposition may be made of Issued Shares for which incentive stock option treatment is desired within the one (l)-year period after the day of the issuance of such Issued Shares to him or her (i.e., the exercise date), nor within the two (2)-year period after the grant of this Option and further, that this Option must be exercised, if and to the extent permitted hereunder, within three (3) months after termination of employment (or twelve (12) months in the case of death or disability to qualify as an incentive stock option. If the Grantee disposes (whether by sale, gift, transfer or otherwise) of any such Issued Shares within either of these periods, he or she agrees to notify the Company within thirty (30) days after such disposition. The Grantee also agrees to provide the Company with any information concerning any such dispositions required by the Company for tax purposes. Further, to the extent that the aggregate Fair Market Value (determined as of the time that the applicable option is granted) of the shares of Common Stock with respect to which all Incentive Stock Options held by the Grantee are exercisable for the first time during any calendar year (under all option plans of the Company, its Parent and/or its Subsidiaries) exceeds $100,000, such Incentive Stock Options shall constitute Nonqualified Stock Options. For purposes of this Section l(e), Incentive Stock Options shall be taken into account in the order in which they were granted. If pursuant to the above, an Incentive Stock Option is treated as an Incentive Stock Option in part and a Nonqualified Stock Option in part, the Grantee may designate which portion of the Stock Option the Grantee is exercising. In the absence of such designation, the Grantee shall be deemed to have exercised the Incentive Stock Option portion of the Option first.
2. Exercise of Option.
(a) The Grantee may exercise this Option only by delivering an Option exercise notice (an "Exercise Notice") in substantially the form of Appendix A attached hereto to the Company's Chief Financial Officer or, if none, the Chief Executive Officer, indicating his or her election to purchase some or all of the Option Shares with respect to which this Option has vested at the time of delivery of such Exercise Notice (which amount shall be specified in the Exercise Notice), accompanied by payment in full of the aggregate Exercise Price; provided that such exercise shall be effective only upon receipt by such officer of the Exercise Notice and the aggregate Exercise Price. Payment of the aggregate Exercise Price for the Option Shares elected to be purchased by the Grantee may be made by one or more of the following methods:
(i) in cash, by certified or bank check, or other instrument acceptable to the Committee in U.S. funds payable to the order of the Company in an amount equal to the aggregate Exercise Price of such Option Shares;
(ii) after the closing of the Company's Initial Public Offering, if permitted by the Committee at the discretion of the Committee at the time of exercise, (x)
through the delivery (or attestation to ownership) of shares of Common Stock having a Fair Market Value equal to the aggregate Exercise Price of such Option Shares that have been purchased by the Grantee on the open market or that have been held by the Grantee for at least six (6) months and are not subject to restrictions under any plan of the Company, or (y) by the Grantee delivering to the Company a properly executed Exercise Notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the Exercise Price of such Option Shares; provided that, in the event the Grantee chooses such payment procedure, the Grantee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure; or
(iii) a combination of the payment methods set forth in clauses
(i) and (ii) above.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Grantee upon compliance to the satisfaction of the Committee
with all requirements under applicable laws or regulations in connection with
such issuance. Until the Grantee shall have complied with the requirements
hereof and of the Plan, including the withholding requirements set forth in
Section 6 hereof, the Company shall be under no obligation to issue the Option
Shares subject to this Option, and the determination of the Committee as to such
compliance shall be final and binding on the Grantee. The Grantee shall not be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any Issued Shares unless and until this Option shall have been
exercised pursuant to the terms hereof, the Company shall have issued and
delivered such Issued Shares to the Grantee, and the Grantee's name shall have
been entered as a stockholder of record on the books of the Company. Thereupon,
the Grantee shall have full dividend and other ownership rights with respect to
such Issued Shares, subject to the terms of this Option Agreement.
(c) The Company shall not be required to issue fractional shares upon the exercise of this Option.
(d) Notwithstanding any other provision hereof or of the Plan, no
portion of this Option shall be exercisable after the earlier of the Expiration
Date or the termination of this Option as contemplated by Section l(d) and
Section 5 hereof.
(e) Unless the issuance of shares have been registered under the U.S. Securities Act of 1933, certificates evidencing Issued Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITY UNDER
THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT LIMITATION ON THE FOREGOING, NEITHER THIS SECURITY MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT), EXCEPT IN TRANSACTIONS WHICH ARE IN COMPLIANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
(f) Grantee certifies and agrees as follows:
(i) Grantee is not a resident in the United States of America, including its territories and possessions, any State in the United States or the District of Columbia,
(ii) Grantee has not acquired this Option, and shall not acquire any Issued Shares for the account or benefit of any "U.S. Person" (as such term is defined in Regulation S),
(iii) Grantee shall resell Issued Shares only in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration,
(iv) Grantee shall not engage in hedging transactions with regard to this Option or Issued Shares unless in compliance with the U.S. Securities Act, and
(v) The Company shall refuse to register any transfer of the Option or Issued Shares not made in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration.
5. Unless the issuance of shares have been registered under the U.S. Securities Act, the Company shall implement administrative procedures designed to ensure, that the Option may not be exercised in, nor the Shares delivered upon exercise within, the United States of America, including its territories and possessions, any State in the United States or the District of Columbia.
3. Subject to Plan.
This Option is subject to all of the terms and conditions set forth in the Plan. Notwithstanding anything in this Option Agreement or the Notice to the contrary, to the extent of any conflict between the terms of the Plan, this Option Agreement, and the Notice, the terms of the Plan shall control.
4. Transferability.
This Option is personal to the Grantee and is not transferable by the
Grantee in any manner other than by will or by the laws of descent and
distribution; provided that if this Option is designated as a Nonqualified Stock
Option, such Option may be transferred by the Grantee to any Permitted
Transferee; provided that, the Permitted Transferee agrees in writing with the
Company to be bound by all of the terms and conditions of the Plan and this
Option Agreement. This Option may be exercised during the Grantee's lifetime
only by the Grantee (or by the Grantee's legal representative or guardian in the
event of the Grantee's incapacity) or by a Permitted Transferee pursuant to this
Section 4. The Grantee may elect to designate a beneficiary by providing written
notice of the name of such beneficiary to the Company, and may revoke or change
such designation at any time by filing written notice of revocation or change
with the Company; such beneficiary may exercise the Grantee's Option in the
event of the Grantee's death to the extent provided herein. If the Grantee does
not designate a beneficiary, or if the designated beneficiary predeceases the
Grantee, the executor of the Grantee may exercise this Option to the extent
permitted herein in the event of the Grantee's death.
5. Effect of Certain Acquisitions.
(a) Acquisitions. Upon the effectiveness of an Acquisition:
(i) twenty five percent (25%) of the total number of Option Shares which are not vested and exercisable as of the date of the Acquisition shall immediately become vested and exercisable;
(ii) to the extent not assumed by the acquiring entity or replaced by comparable options to purchase shares of the capital stock of the successor or acquiring entity or parent thereof (the determination of comparability to be made by the Committee, which determination shall be final, binding, and
conclusive) (an "Assumption") all remaining Option Shares shall, subject to and conditioned upon the effectiveness of the Acquisition, become vested and exercisable in full ten (10) days prior to the anticipated effective date of the Acquisition as determined by the Committee; and
(iii) unless there is an Assumption, this Option shall terminate upon the effectiveness of the Acquisition.
(b) Exercise in Connection with a Termination. In the event that the Option is terminated pursuant to Section 5(b)(iii) above, the Grantee shall be permitted to exercise, for a period of at least ten (10) days prior to the anticipated effective date of such Acquisition, this Option to the extent that it is then vested and exercisable (after giving effect to the acceleration of vesting provided for in connection with the Acquisition); provided that, the exercise of the portion of the Option that becomes vested and exercisable in connection with the Acquisition shall be subject to and conditioned upon the effectiveness of the Acquisition.
(c) Vesting following an Assumption. Following the effectiveness of an Assumption, the unvested portion of this Option, if any, shall continue to vest in accordance with the vesting schedule set forth in the Notice, in the same proportion and on the same dates as the shares of Common Stock would have vested had there been no acceleration of vesting (i.e. if twenty five percent (25%) of the original shares of Common Stock subject to this Option would have vested on a specified date, then twenty five percent (25%) of the original shares of Common Stock subject to this Option, less the number of shares of Common Stock that would have vested on that date but which accelerated in connection with the Acquisition, shall vest on such specified date) and all such Awards shall otherwise be adjusted as provided in Section 11(a) of the Plan.
6. Withholding Taxes.
(a) Payment by Grantee. The Grantee shall, no later than the date as of which the exercise of this Option (or, if applicable, the issuance, in whole or in part, of any Issued Shares upon the exercise of this Option, the operation of any law or regulation providing for the imputation of interest related to this Option, or the lapsing of any restriction with respect to any Issued Shares acquired upon exercise of this Option) gives rise to taxable income and subjects the Company to a tax withholding obligation, authorize the Company to withhold from payroll and any other amounts payable to the Grantee or pay to the Company or make arrangements satisfactory to the Committee for payment of any federal, state, foreign and local taxes required by law to be withheld with respect to such income.
(b) Payment in Common Stock. Subject to approval by the Committee, the Grantee may elect to have the minimum tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued a number of shares of Common Stock with an aggregate Fair Market Value (as of the date the withholding
is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Common Stock owned by the Grantee with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due. The Fair Market Value of any shares of Common Stock withheld to satisfy any such tax withholding obligation shall not exceed the amount determined by the applicable minimum statutory withholding rates.
7. Company's Right of First Refusal.
(a) Exercise of Right. If the Grantee or any Permitted Transferee
desires to sell, exchange, transfer, pledge or otherwise dispose of all or any
part of the Issued Shares to any person or entity other than to the Company or a
Permitted Transferee (an "Offeror"), the Grantee or Permitted Transferee 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 "Offer Notice") to the Company setting forth the Grantee's or Permitted
Transferee's desire to transfer such shares, which Offer Notice shall be
accompanied by a photocopy of the Offer and shall set forth the name and address
of the Offeror and the price and terms of the Offer. In the event that the Offer
constitutes a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the Fair Market Value of such shares as determined
by the Committee in good faith. Upon receipt of the Offer Notice, the Company
shall have an assignable option to purchase any or all of such Issued Shares
(the "Offered Shares") specified in the Offer Notice, such option to be
exercisable by giving, within thirty (30) days after receipt of the Offer
Notice, a written counter notice to the Grantee or Permitted Transferee. If the
Company or its assigns elects to purchase any or all of such Offered Shares, it
shall be obligated to purchase, and the Grantee or Permitted Transferee shall be
obligated to sell to the Company or its assigns, such Offered Shares at the
price and terms indicated in the Offer within thirty (30) days from the date of
delivery by the Company of such counter notice (unless a longer period is
permitted by the Grantee or Permitted Transferee and the Offeror); provided,
however, that in the event that the Offer Notice provides for the payment for
the Offered Shares other than in cash, the Company shall have the option of
paying for the Offered Shares by the present value cash equivalent of the
consideration described in the Offer Notice as reasonably determined by the
Company. For purposes of the foregoing, cancellation of any indebtedness of the
Grantee or Permitted Transferee to the Company (or its Parent or any Subsidiary)
shall be treated as payment to the Grantee or Permitted Transferee in cash to
the extent the unpaid principal balance and any accrued interest is canceled.
The Company's exercise or failure to exercise its right of first refusal
pursuant to this Section 7(a) with respect to any proposed transfer described in
an Offer Notice shall not affect the Company's right to exercise its right of
first refusal with respect to any other proposed transfer thereafter.
(b) Sale of Offered Shares to Offeror. The Grantee or Permitted
Transferee may, for sixty (60) days after the expiration of such thirty (30)-day
option period (or, if applicable, such longer period) as set forth in Section
7(a), sell to the Offeror, pursuant to the terms of the Offer, any or all of
such Offered Shares not purchased or agreed to be purchased by the
Company or its assigns. All Offerors shall be required as a condition of purchasing such Offered Shares to agree in writing (in a form satisfactory to the Company) that the Offeror shall purchase and hold such Offered Shares subject to the Company's right of first refusal pursuant to this Section 7 with respect to any subsequent proposed transfer. Further, the Company shall have the right to demand further assurances from the Grantee or Permitted Transferee and the Offeror that the transfer of the Offered Shares was actually carried out in accordance with the terms and conditions of the Offer Notice. No transfer of the Offered Shares shall be effected on the books of the Company until the Company has received such assurances, if so demanded. Any proposed transfer on terms and conditions different from those described above in an Offer Notice shall be null and void. If any or all of such Offered Shares are not sold pursuant to the Offer Notice within the time permitted above, the unsold Offered Shares shall remain subject to the terms of this Section 7.
(c) Failure to Deliver Option Shares. If the Grantee or Permitted Transferee fails or refuses to deliver on a timely basis duly endorsed certificates representing the Offered Shares to be sold to the Company or its assigns pursuant to this Section 7, the Company shall have the right to deposit the purchase price for such Offered Shares in a special account with any bank or trust company, giving notice of such deposit to the Grantee or Permitted Transferee, whereupon such Offered Shares shall be deemed to have been purchased by the Company. All such monies shall be held by the bank or trust company for the benefit of the Grantee or Permitted Transferee. All monies deposited with the bank or trust company but remaining unclaimed for two (2) years after the date of deposit shall be repaid by the bank or trust company to the Company on demand, and the Grantee or Permitted Transferee shall thereafter look only to the Company for payment. The Company may place a legend on any certificate for Issued Shares delivered to the Grantee and Permitted Transferees reflecting the restrictions on transfer provided in this Section 7.
(d) Expiration of Company's Right of First Refusal. The first refusal rights of the Company set forth above shall remain in effect until the closing of an Initial Public Offering or upon the consummation of any Acquisition as a result of which shares of Common Stock are registered under Section 12 of the Exchange Act and publicly traded on NASDAQ/NMS or any national security exchange.
8. Compliance with Legal Requirements.
This Option may not be exercised if the issuance of shares of Common Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed. In addition, this Option may not be exercised unless: (a) a registration statement under the Act shall at the time of exercise of this Option be in effect with respect to the shares issuable upon exercise, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of this Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Act. The inability of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of this Option, the Company may require the Grantee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
9. Lock-up Provision.
The Grantee agrees, if requested by the Company and any underwriter engaged by the Company, not to sell, offer to sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any securities (including the right to acquire any Common Stock) of the Company (including, without limitation, pursuant to Rule 144 under the Act) held by him or her for such period following the effective date of any registration statement of the Company filed under the Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed one hundred eighty (180) days in the case of the Company's Initial Public Offering or ninety (90) days in the case of any other public offering.
10. Miscellaneous Provisions.
(a) Administration. All questions of interpretation concerning this Option Agreement shall be determined by the Committee. All determinations by the Committee shall be final and binding upon all persons having an interest in this Option.
(b) Employment Rights. The grant of this Option does not confer upon the Grantee any right to continued employment or service with the Company or its Parent or any Subsidiary or interfere in any way with the right of the Company or its Parent or any Subsidiary to terminate the Grantee's employment or service at any time.
(c) Equitable Relief. The parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Option Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Option Agreement.
(d) Change and Modifications. The Committee may terminate or amend the Plan or this Option at any time; provided that, except as provided in Section 11(b) of the Plan in connection with an Acquisition, no such termination or amendment may adversely affect this Option without the consent of the Grantee unless such termination or amendment is necessary to comply with any applicable law, rule or regulation or, to the extent that this Option is designated as an Incentive Stock Option, is required to enable this Option to continue to qualify as an Incentive Stock Option.
(e) Governing Law. This Option Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of laws principles thereof.
(f) Headings. The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Option Agreement and shall not be considered in the interpretation of this Option Agreement.
(g) Integrated Agreement. This Option Agreement, the Notice and the Plan constitute the entire understanding and agreement between the Grantee and the Company with respect to the subject matter contained herein and supersedes any prior agreements, understandings, restrictions, representations, or warranties among the Grantee and the Company with respect to such subject matter except as provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of this Option and shall remain in full force and effect.
(h) Saving Clause. If any provision(s) of this Option Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.
(i) Notices. All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission, or two (2) days after deposit in the mail if mailed by first class registered or certified mail, postage prepaid, or one (1) business day after deposit with a nationally recognized overnight carrier. Notices to the Company or the Grantee shall be addressed to such address or addresses as may have been furnished by such party in writing to the other.
(j) Benefit and Binding Effect. This Option Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, permitted assigns, and legal representatives. The Company has the right to assign this Option Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.
APPENDIX A
STOCK OPTION EXERCISE NOTICE
Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
Attention: Chief Financial Officer Date: ______________
Pursuant to the terms of the Notice of Grant of Stock Option dated ________________________________ ____________, ____________ and the Stock Option Agreement granted pursuant to the Virtusa Corporation 2000 Stock Option Plan and entered into by Virtusa Corporation and ___________________________________ on such date, I hereby [Circle One] partially/fully exercise such Option by including herein payment in the amount of $__________________ representing the purchase price for _____________________ shares of common stock, all of which have vested in accordance with the Notice of Grant of Stock Option. I hereby authorize payroll withholding or otherwise will make adequate provision for federal, state, foreign and local tax withholding obligations of the Company, if any, that arise in connection with the Option.
I acknowledge that the shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Plan, the Notice of Grant of Stock Option, and the Option Agreement, copies of which I have received and carefully read and understand, including the Company's right of first refusal set forth therein, to all of which I hereby expressly assent.
I hereby represent that I am purchasing the shares of common stock for my own account and not with a view to any sale or distribution thereof. I understand that Rule 144, promulgated under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act), which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to such shares and, in any event, is available only if certain conditions are satisfied. I acknowledge that any sale of such shares that might be made in reliance on Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon my request.
In addition, without limitation of the foregoing, I hereby certify and agree as follows:
A. I am not a resident in the United States of America, including its territories and possessions, any State in the United States or the District of Columbia,
B. I shall not acquire the shares of common stock for the account or benefit of any "U.S. Person" (as defined in Exhibit A hereto),
C. I shall resell Shares only in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration,
D. I shall not engage in hedging transactions with regard to the common stock unless in compliance with the U.S. Securities Act, and
Sincerely yours,
Exhibit A
Definition of "U.S. Person"
1. "U.S. person" means:
i. Any natural person resident in the United States;
ii. Any partnership or corporation organized or incorporated under the laws of the United States;
iii. Any estate of which any executor or administrator is a U.S. person;
iv. Any trust of which any trustee is a U.S. person;
v. Any agency or branch of a foreign entity located in the United States;
vi. Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;
vii. Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
viii. Any partnership or corporation if:
A. Organized or incorporated under the laws of any foreign jurisdiction; and
B. Formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501 (a)) who are not natural persons, estates or trusts.
2. The following are not "U.S. persons":
i. Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer
or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;
ii. Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:
A. An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and
B. The estate is governed by foreign law;
iii. Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;
iv. An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;
v. Any agency or branch of a U.S. person located outside the United States if:
A. The agency or branch operates for valid business reasons; and
B. The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and
vi. The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.
ADDENDUM B TO THE VIRTUSA CORPORATION 2000 STOCK OPTION PLAN
RULES APPLYING TO STOCK OPTIONS GRANTED TO UK EMPLOYEES
1. ADOPTION OF THE UK ADDENDUM TO THE PLAN
1.1 The Committee, as that term is defined in the Virtusa Corporation 2000 Stock Option Plan (the "Plan"), has adopted the provisions of this Addendum B (the "UK Addendum" in order to comply with applicable laws with respect to certain options granted to optionees resident in the UK.
1.2 The provisions of this UK Addendum are not intended to qualify as an approved share option plan under Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 ("ITEPA").
1.3 If there is any conflict between the provisions contained in the UK Addendum and the provisions of the Plan, then the provisions of the UK Addendum will take precedence in respect of options granted under the UK Addendum.
1.4 References in these Rules to Sections are to sections of the Plan and capitalized terms not defined herein shall have the meaning set forth in the Plan.
1.5 No option shall be granted under the UK Plan after termination of the same.
2. PURPOSE - SECTION 1
2.1 The purpose of the UK Addendum to the Plan is to grant Nonqualified Stock Options to employees who are residents of the UK. No UK Option shall be granted to any person who is not an UK Employee on the date of grant.
3. DEFINITIONS
3.1 Capitalized terms used herein but not defined herein shall have the meanings set forth in the Plan. The following additional definitions shall apply for the purposes of options granted under the UK Addendum and Plan:
"Control" shall have the meaning ascribed by Section 840 of the Income and Corporation Taxes Act 1988. "UK Employee" shall mean any bona fide employee of the Company or any Subsidiary (as hereinafter defined) who is resident in the United Kingdom for tax purposes "Inland Revenue" shall mean the Board of Inland Revenue of the United Kingdom. "Rules" shall mean the rules of the UK Plan. "Subsidiary" shall mean any company of which the Company has Control. |
"UK Option" Shall mean an option granted under Plan, as modified by this Addendum B. "UK Stock Option Shall mean the form of agreement issued upon the Agreement" grant of an UK Option. 4. GRANTS - SECTION 5 |
4.1 Any reference to Consultants and advisors of the Company in section 5(b) shall not apply to grants of UK Options.
4.2 No "Incentive Stock Options" shall be granted under the Plan as modified by the UK Addendum.
5. TERMS AND CONDITIONS OF OPTIONS - SECTION 6
5.1 Section 6(c)(B) is hereby deleted.
5.2 Section 6(e) of the Plan shall not apply. A UK Option shall be personal to the UK Employee to whom it is granted and shall not be transferable or assignable during the Participant's lifetime. In the event of the death of the Participant, UK Options may be exercised only by the Participant's executor or by the administrator of the Participant's estate in accordance with the terms of the relevant UK Stock Option Agreement. An UK Option shall not be charged, pledged or otherwise encumbered and any purported assignment, charge, disposal or dealing with the rights and interest of the Participant otherwise than in accordance with the Plan, the UK Addendum or the relevant UK Stock Option Agreement shall render the UK Option void.
6. RESTRICTED STOCK AWARDS - SECTION 7
Section 7 of the Plan shall not apply to UK Employees.
7. UNRESTRICTED STOCK AWARDS - SECTION 8
Section 8 of the Plan shall not apply to UK Employees.
8. TAX WITHHOLDING - SECTION 9
8.1 Sections 9(a) and 9(b) of the Plan shall not apply.
8.2 If a liability arises in connection with the exercise of a UK Option under which the Company or any Subsidiary is obliged to account for income tax and/or primary social security contributions (otherwise known as employee's National Insurance contributions) and/or secondary social security contributions (otherwise known as employer's National Insurance contributions) (together an "Employee Tax Liability"), then unless:
(a) the relevant Participant has indicated in the form of exercise that he will make a payment to his or her employer or the Company of an amount equal to the Employee Tax Liability; and
(b) the Participant does, within seven days of being notified by his or her employer or the Company of the amount of the Employee Tax Liability, make such payment to his employer or the Company;
his or her employer may withhold from the salary of the Participant an amount equal to the Employee Tax Liability.
8.3 It is a condition of the exercise of an UK Option that the Participant agrees, if so requested by the Company, to enter into an election with his employer in respect of the liability for paying any secondary social security contributions (otherwise known as employer's National Insurance contributions) payable in connection with the exercise of a UK Option, provided that any such election has received prior approval from the Inland Revenue.
9. GENERAL PROVISIONS - SECTION 13
The following additional provisions shall apply in respect of UK Options. Notwithstanding any other provision of the Plan or UK Addendum:
9.1 the Plan and the UK Addendum shall not form any part of any contract of employment between the Company or any Subsidiary and any employees of any of those companies, and they shall not confer on any such employees any legal or equitable rights (other than those constituting the UK Options themselves) against the Company or any Subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against the Company or any Subsidiary;
9.2 the benefits to UK Employees under the Plan and the UK Addendum shall not form any part of their wages or remuneration or count as pay or remuneration for pension fund or other purposes; and
9.3 in no circumstances shall any UK Employee on ceasing to hold the office or employment by virtue of which he is or may be eligible to participate in the the Plan, as modified by the UK Addendum, be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan, as modified by the UK Addendum which he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise.
Exhibit 10.5
VIRTUSA CORPORATION
2005 STOCK APPRECIATION RIGHTS PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Virtusa Corporation 2005 Stock Appreciation Rights Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees, and other key persons (including consultants) of Virtusa Corporation (the "Company") and its Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business, to receive incentives directly tied to the success of the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
"Affiliate" of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the first mentioned Person. A Person shall be deemed to control another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.
"Bankruptcy" shall mean (i) the filing of a voluntary petition under any bankruptcy or insolvency law, or a petition for the appointment of a receiver or the making of an assignment for the benefit of creditors, with respect to the Holder or any Permitted Transferee, or (ii) the Holder or any Permitted Transferee being subjected involuntarily to such a petition or assignment or to an attachment or other legal or equitable interest with respect to the Holder's or such Permitted Transferee's assets, which involuntary petition or assignment or attachment is not discharged within 60 days after its date, and (iii) the Grantee or any Permitted Transferee being subject to a transfer of the Issued Shares by operation of law (including by divorce, even if not insolvent), except by reason of death.
"Board" means the Board of Directors of the Company or its successor entity. "Cause" means (i) any material breach by the Grantee of any agreement to |
which the Grantee and the Company are parties, including breach of covenants not to compete and covenants relating to the protection of confidential information and proprietary rights of the Company, which breach is not cured pursuant to the terms of such agreements, (ii) any act (other than retirement) or omission to act by the Grantee which would reasonably be likely to have a
material adverse effect on the business of the Company or its Subsidiaries, or its business relations or prospectus with any customer or prospect, or on the Grantee's ability to perform services for the Company, as the case may be, (iii) the Grantee's commission (including any pleas of guilty or nolo contendre) of any crime (other than ordinary traffic violations) which impairs the Grantee's ability to perform his or her duties, (iv) any material misconduct or willful and deliberate non-performance of duties by the Grantee in connection with the business or affairs of the Company or its Subsidiaries, (v) the Grantee's theft, dishonesty or malfeasance in connection with the Company's business, documents or records, or (vi) the Grantee's improper use or disclosure of the Company's confidential or proprietary information. For purposes of the definition of "Cause" set forth herein, all references to the Company shall be deemed to include the Company's parent or any Subsidiary.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Effective Date" means the date on which the Plan is approved by stockholders as set forth at the end of this Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Fair Market Value" of the Stock on any given date means the fair market value of the Stock determined in good faith by the Committee.
"Grantee" means the recipient of a Stock Appreciation Right hereunder.
"Holder" shall have the meaning given such term in Section 6(a) hereof.
"IPO" shall mean the closing of the Company's initial public offering pursuant to an effective registration statement under the Securities Act.
"Permitted Transferees" shall mean any of the following to whom the Holder may transfer Issued Shares hereunder (as set forth in Section 6(a)(i)): the Holder's spouse, children (natural or adopted), stepchildren or a trust for their sole benefit of which the Holder is the settlor; provided, however, that any such trust does not require or permit distribution of any Issued Shares during the term of this Agreement unless subject to its terms. Upon the death of the Holder (or a Permitted Transferee to whom shares have been transferred hereunder), the term Permitted Transferees shall also include such deceased Holder's (or such deceased Permitted Transferee's) estate, executions, administrations, personal representations, heirs, legatees and distributees, as the case may be.
"Person" shall mean any individual, corporation, partnership (limited or general), limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization or any similar entity.
"Sale Event" means (i) a merger, reorganization or consolidation between the Company and another person or entity (other than a holding company or Parent or Subsidiary of the Company) as a result of which the holders of the Company's outstanding voting stock immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving entity immediately after the transaction, (ii) the sale, transfer, or other disposition of all or substantially all of the Company's assets to one or more persons (other than any wholly owned Subsidiary) in a single transaction or series of related transactions, or (iii) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than 50% of all of the Common Stock of the Company to an unrelated person or entity as a result of which the holders of the Company's outstanding voting stock immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving entity immediately after the transaction.
"Section 409A" means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
"Stock" means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" or "SAR" means an award granted under the Plan pursuant to Section 5 hereof.
"Subsidiary" means any corporation or other entity (other than the Company) in which the Company has a controlling interest, either directly or indirectly.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT GRANTEES AND DETERMINE TERMS OF STOCK APPRECIATION RIGHTS
(a) Administration of Plan. The Plan shall be administered by the Board, or at the discretion of the Board, by a committee of the Board, comprised, except as contemplated by Section 2(c), of not less than two Directors. All references herein to the Committee shall be deemed to refer to the group then responsible for administration of the Plan at the relevant time (i.e., either the Board of Directors or a committee or committees of the Board, as applicable).
(b) Powers of Committee. The Committee shall have the power and authority to grant SARs consistent with the terms of the Plan, including the power and authority:
(i) to select the individuals to whom SARs may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of SARs granted to any one or more Grantees;
(iii) to determine the number of shares of Stock to be covered by any SAR and, subject to the provisions of Section 5 below, the exercise price and other terms relating thereto;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any SAR, which terms and conditions may differ among individual SARs and Grantees, and to approve the form of written instruments evidencing the SARs;
(v) to accelerate at any time the exercisability or vesting of all or any portion of any SAR;
(vi) to impose any limitations on SARs granted under the Plan, including limitations on transfers, repurchase provisions and the like and to exercise repurchase rights or obligations; and
(vii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any SAR (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all persons, including the Company and Plan Grantees.
(c) Indemnification. Neither the Board nor the Committee, nor any member of either or any delegatee thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegatee thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys' fees and expenses) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors' and officers' liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 1,500,000 shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the shares of Stock underlying any SARs that are forfeited, canceled, reacquired by the Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company and held in its treasury.
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, holding company formation, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company's capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger, consolidation or sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for a different number or kind of securities of the Company or any successor entity (or a parent or subsidiary thereof), the Committee shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to any then outstanding SARs under the Plan, and (iii) the exercise price for each share subject to any then outstanding SARs under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of SARs) as to which such SARs remain exercisable. The adjustment by the Committee shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Committee in its discretion may make a cash payment in lieu of fractional shares.
The Committee may also adjust the number of shares subject to outstanding SARs and the exercise price and the terms of outstanding SARs to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Committee that such adjustment is appropriate to avoid distortion in the operation of the Plan.
(c) Mergers and Other Transactions. Upon the effectiveness of a Sale Event, except with respect to any other specific SARs as the Committee otherwise expressly determines at the time of grant as being eligible for acceleration hereunder, (i) with respect only to SARs granted on or before August 4, 2005 ("Eligible SARs"), twenty five percent (25%) of the total number of shares subject to outstanding Eligible SARs not otherwise accelerated or vested under the terms of the original grant shall, 10 days prior to the anticipated effective date of the Sale Event as determined by the Committee, subject to and conditioned upon the effectiveness of the Sale Event, become vested subject to the exercise provisions in the applicable SAR Agreement of the SAR holder thereof; (ii) all shares subject to outstanding Eligible SARs not otherwise accelerated and vested under the terms of the original grant, to the extent not assumed by the acquiring entity or replaced by comparable SARs of the successor or acquiring entity or parent thereof (the determination of comparability to be made by the Committee, which determination shall be final, binding, and conclusive)(an "Assumption") shall, subject to and conditioned upon the effectiveness of the Sale Event, become vested in full 10 days prior to the anticipated effective date of the Sale Event as determined by the Committee subject to the exercise provisions in the applicable SAR Agreement of the SAR holder thereof, ; and (iii) unless there is an Assumption with respect to all issued and outstanding SARs, the Plan and all outstanding SARs shall terminate upon the effectiveness of the Sale Event subject to the terms herein. In the event that SARs are terminated pursuant to clause (iii) of the immediately prior sentence, each holder shall be permitted to exercise for a period of at least 10 days prior to the anticipated effective date of such Sale Event all outstanding SARs held by such holder which are then vested (and with respect to Eligible SARs only, after giving effect to the acceleration of vesting
provided for in connection with the Sale Event); provided, however: (a) the exercise of the portion of such SARs that became vested in connection with the Sale Event shall be subject to and conditioned upon the effectiveness of the Sale Event, and (b) the holder may, but will not be required to, condition the exercise of any portion of a SAR not described in clause (a) above upon the effectiveness of the Sale Event.
Notwithstanding anything to the contrary in this Section 3(c) or any applicable SAR Agreement of a SAR holder (including any provisions governing exercise of a SAR), in the event of a Sale Event pursuant to which holders of the Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the Sale Event, the Company shall have the obligation to make or provide for a cash payment to the Grantees holding SARs in exchange for the cancellation thereof, in an amount equal to the difference between (A) the value as determined by the Committee of the consideration payable per share of Stock pursuant to the Sale Event (the "Sale Price") times the number of shares of Stock subject to outstanding SARs (to the extent then vested at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding SARs.
(d) Substitute Stock Appreciation Rights. The Committee may grant SARs under the Plan in substitution for stock appreciation rights or other awards held by employees, directors or other key persons of another corporation in connection with a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Committee may direct that the substitute SARs be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Any substitute SARs granted under the Plan shall not count against the share limitation set forth in Section 3(a).
SECTION 4. ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and other employees, directors and key persons (including consultants) of the Company's foreign Subsidiaries as are selected from time to time by the Committee in its sole discretion.
SECTION 5. STOCK APPRECIATION RIGHTS
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
award entitling the recipient to receive shares of Stock or an equivalent cash
payment (in local currency) having a value equal to the excess of the Fair
Market Value of the Stock on the date of exercise over the exercise price of the
SAR multiplied by the number of shares of Stock with respect to which the SAR
shall have been exercised. Notwithstanding the foregoing, subject to Section 9
hereof, SARs exercised before the IPO, shall be settled only in cash (in local
currency of the recipient at the then current U.S. dollar exchange rate
determined by the Company), and SARs exercised on or after the IPO shall be
settled only in shares of Stock (subject to the fractional share provisions in
Section 4(b) of the applicable SAR Agreement of a SAR holder thereof).
(b) Terms and Conditions of Stock Appreciation Rights. SARs shall be subject to such terms and conditions as shall be determined from time to time by the Committee including the timing and extent to which an SAR may become exercisable, whether an SAR may be settled for cash or shares of Stock and the time after termination of employment during which an SAR may be exercised. Without limiting the foregoing, the payment of any cash settlement of a SAR may be delayed without interest for up to 180 days if the Committee determines in good faith that such a delay is in the best interest of the Company given its then current cash flow position. In addition, no SAR shall have a term of more than ten (10) years from the date of grant.
SECTION 6. RULES APPLICABLE TO ISSUED SHARES
(a) Restrictions on Transfer of Issued Shares. Prior to the IPO, none of the shares of Stock acquired upon exercise of an SAR (the "Issued Shares") shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law, unless such transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act, and with the terms and conditions of this Section 6), and such transfer does not cause the Company to become subject to the reporting requirements of the Exchange Act. In connection with any transfer of Issued Shares, the Committee may require the transferor of such Issued Shares (the "Holder") to provide at the Holder's own expense an opinion of counsel to the Holder, satisfactory to the Committee, that such transfer is in compliance with all foreign, federal and state securities laws (including, without limitation, the Securities Act). Any attempted disposition of Issued Shares not in accordance with the terms and conditions of this Section 6 shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Issued Shares as a result of any such disposition, shall otherwise refuse to recognize any such disposition and shall not in any way give effect to any such disposition of any Issued Shares. Subject to the foregoing general provisions, Issued Shares may be transferred pursuant to the following specific terms and conditions:
(i) Transfers to Permitted Transferees. The Holder may sell, assign, transfer or give away any or all of the Issued Shares to Permitted Transferees; provided, however, that following such sale, assignment, or other transfer, such Issued Shares shall continue to be subject to the terms of this Plan and such Permitted Transferee(s) shall, as a condition to any such transfer, deliver a written acknowledgment to that effect to the Company.
(ii) Transfers Upon Death. Upon the death of the Holder, any Issued Shares then held by the Holder at the time of such death and any Issued Shares acquired thereafter by the Holder's legal representative shall be subject to the provisions of this Plan, and the Holder's estate, executors, administrators, personal representatives, heirs, legatees and distributees shall be obligated to convey such Issued Shares to the Company or its assigns under the terms contemplated hereby.
(iii) Company's Right of First Refusal. In the event that the Holder
(or any Permitted Transferee holding Issued Shares subject to this Section 6(a))
desires to sell or otherwise transfer all or any part of the Issued Shares, the
Holder (or Permitted Transferee) first shall give written notice to the Company
of the Holder's (or Permitted Transferee's) intention to make such transfer.
Such notice shall state the number of Issued Shares which the Holder (or
Permitted Transferee) proposes to sell (the "Offered Shares"), the price and the
terms at which the proposed sale is to be made and the name and address of the
proposed transferee. At any time within 30 days after the receipt of such notice
by the Company, the Company or its assigns may elect to purchase all or any
portion of the Offered Shares at the price and on the terms offered by the
proposed transferee and specified in the notice. The Company or its assigns
shall exercise this right by mailing or delivering written notice to the Holder
(or Permitted Transferee) within the foregoing 30-day period. Unless the Company
has been advised by its legal counsel that a proposed transfer may be permitted
under the "no-action" guidance of the U.S. Securities and Exchange Commission
with respect to Section 12(g) of the Exchange Act, the Company shall exercise
its purchase rights with the respect to such proposed transfer. If the Company
or its assigns elect to exercise its purchase rights under this Section
6(a)(iii), the closing for such purchase shall, in any event, take place within
45 days after the receipt by the Company of the initial notice from the Holder
(or Permitted Transferee). In the event that the Company or its assigns do not
elect to exercise such purchase right, or in the event that the Company or its
assigns do not pay the full purchase price within such 45-day period, the Holder
(or Permitted Transferee) may, within 60 days thereafter, sell the Offered
Shares to the proposed transferee and at the same price and on the same terms as
specified in the SAR holder's (or Permitted Transferee's) notice. Any Shares
purchased by such proposed transferee shall no longer be subject to the terms of
the Plan. Any Shares not sold to the proposed transferee shall remain subject to
the Plan. Notwithstanding the foregoing, the restrictions under this Section
6(a)(iii) shall terminate in accordance with Section 6(e).
(b) Escrow Arrangement.
(i) Escrow. In order to carry out the provisions of Section 6(a) of this Agreement more effectively, the Company shall hold any Issued Shares in escrow together with separate stock powers executed by the Holder in blank for transfer, and any Permitted Transferee shall, as an additional condition to any transfer of Issued Shares, execute a like stock power as to such Issued Shares. The Company shall not dispose of the Issued Shares except as otherwise provided in this Agreement. In the event of any repurchase by the Company (or any of its assigns), the Company is hereby authorized by the Holder and any Permitted Transferee, as the Holder's and each such Permitted Transferee's attorney-in-fact, to date and complete the stock powers necessary for the transfer of the Issued Shares being purchased and to transfer such Issued Shares in accordance with the terms hereof. At such time as any Issued Shares are no longer subject to the Company's repurchase, first refusal and drag along rights, the Company shall, at the written request of the Holder, deliver to the Holder (or the relevant Permitted Transferee) a certificate representing such Issued Shares with the balance of the Issued Shares to be held in escrow pursuant to this Section 6(b).
(ii) Remedy. Without limitation of any other provision of this Agreement or other rights, in the event that a Holder, any Permitted Transferees or any other Person is required to sell a Holder's Issued Shares pursuant to the provisions of Section 6(a) hereof and in the further event that he or she refuses or for any reason fails to deliver to the Company or its designated purchaser of such Issued Shares the certificate or certificates evidencing such Issued Shares together with a related stock power, the Company or such designated purchaser may deposit the applicable purchase price for such Issued Shares with a bank designated by the Company, or with the Company's independent public accounting firm, as agent or trustee, or in
escrow, for such Holder, any Permitted Transferees or other Person, to be held by such bank or accounting firm for the benefit of and for delivery to him, her, them or it, and/or, in its discretion, pay such purchase price by offsetting any indebtedness then owed by such Holder as provided above. Upon any such deposit and/or offset by the Company or its designated purchaser of such amount and upon notice to the Person who was required to sell the Issued Shares to be sold pursuant to the provisions of Section 6(a), such Issued Shares shall at such time be deemed to have been sold, assigned, transferred and conveyed to such purchaser, such Holder shall have no further rights thereto (other than the right to withdraw the payment thereof held in escrow, if applicable), and the Company shall record such transfer in its stock transfer book or in any appropriate manner.
(c) Lockup Provision. A Holder agrees, if requested by the Company and any underwriter engaged by the Company, not to sell or otherwise transfer or dispose of any Issued Shares (including, without limitation, pursuant to Rule 144 under the Securities Act) held by him or her for such period following the effective date of any registration statement of the Company filed under the Securities Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed 180 days in the case of the Company's initial public offering or 90 days in the case of any other public offering.
(d) Termination. The terms and provisions of Section 6(a) and Section 6(b) shall terminate upon the Company's IPO or upon consummation of any Sale Event, but only if the Plan is not Assumed in such Sale Event.
(e) Adjustments for Changes in Capital Structure. If, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Common Stock, the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of shares of the Company's stock, the restrictions contained in this Section 6 shall apply with equal force to additional and/or substitute securities, if any, received by Holder in exchange for, or by virtue of his or her ownership of, Issued Shares.
SECTION 7. TAX WITHHOLDING
Each Grantee shall, no later than the date as of which the value of an SAR or of any Stock or other amounts received thereunder first becomes includable in the gross income of the Grantee for tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any taxes of any kind required by applicable law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. The Company's obligation to deliver stock certificates to any Grantee is subject to and conditioned on any such tax obligations being satisfied by the Grantee.
SECTION 8. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another Subsidiary; or
(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Committee, if the employee's right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.
SECTION 9. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Committee may, at any time, amend or cancel any outstanding SAR (or provide substitute SARs at the same or a reduced exercise price in a manner not inconsistent with the terms of the Plan, provided that such price, if any, must satisfy the requirements that would apply to the substitute or amended SAR if it were then initially granted under this Plan for the purpose of satisfying changes in law or for any other lawful purpose), but no such action shall adversely affect rights under any outstanding SAR without the holder's consent unless such action is, in the Committee's judgment, necessary to comply with any one or more applicable laws. In addition, if at any time after two (2) years from the Effective Date of this Plan or immediately prior to, upon, or following, the consummation of a Sale Event, the Board of the Company (or any successor company) determines that it is in the best interests of the Company (or any such successor company) to settle all SARs upon exercise in cash or Stock of the Company (or any such successor company) at its sole discretion, then, subject to compliance with applicable laws and regulations, the Board of the Company (or any such successor company) may amend this Plan (and each outstanding SAR Agreement shall be deemed so amended) such that all SARs issued and outstanding, as well as any other SARs to be granted under the Plan, shall be settled only in Stock under the terms of the applicable SAR Agreement and this Plan. Such amendment shall not be deemed to have an adverse effect on any right of any holder of an outstanding SAR which is effected by such amendment and no consent of any effected Grantee shall be required to effect the amendment. Nothing in this Section 9 shall limit the Committee's authority to take any action permitted pursuant to Section 3(c).
SECTION 10. STATUS OF PLAN
With respect to the portion of any SAR that has not been exercised and any payments in cash, Stock or other consideration not received by a Grantee, a Grantee shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly determine in connection with any SARs. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Stock or make payments with respect to SARs hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 11. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Committee may require each person acquiring Stock pursuant to an SAR to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. No shares of Stock shall be issued pursuant to an SAR until all applicable securities law and other legal requirements have been satisfied. The Committee may require the placing of restrictive legends on certificates for Stock and Stock Appreciation Right award agreements as it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to Grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the Grantee, at the Grantee's last known address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company shall have given to the Grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the Grantee, at the Grantee's last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic "book entry" records).
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of SARs do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
(d) Designation of Beneficiary. Each Grantee may designate a beneficiary or beneficiaries to exercise any SAR or receive any payment under any SAR payable on or after the Grantee's death. Any such designation shall be on a form provided for that purpose by the Committee and shall not be effective until received by the Committee. If no beneficiary has been designated by a deceased Grantee, or if the designated beneficiaries have predeceased the Grantee, the beneficiary shall be the Grantee's estate.
SECTION 12. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the Board and the stockholders in accordance with applicable law. Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior to such approval, SARs may be granted hereunder on and after adoption of this Plan by the Board.
SECTION 13. GOVERNING LAW
This Plan and all actions taken thereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: July 8, 2005
DATE APPROVED BY STOCKHOLDERS: July 8, 2005
NEITHER THE SECURITY REPRESENTED BY THIS AGREEMENT NOR THE SECURITIES FOR WHICH SUCH STOCK APPRECIATION RIGHT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, NEITHER SUCH STOCK APPRECIATION RIGHT NOR THE SECURITIES FOR WHICH THE STOCK APPRECIATION RIGHT IS EXERCISABLE MAY BE OFFERED OR SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR ANY SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT LIMITATION ON THE FOREGOING, UNLESS OTHERWISE APPROVED OR EXPRESSLY DETERMINED BY THE COMMITTEE OR BOARD WITH RESPECT TO ANY GRANTEE OR SAR GRANT AT THE TIME OF GRANT, NEITHER SUCH STOCK APPRECIATION RIGHT NOR THE SECURITIES FOR WHICH SUCH STOCK APPRECIATION RIGHT IS EXERCISABLE MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT), EXCEPT IN TRANSACTIONS WHICH ARE IN COMPLIANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, HEDGING TRANSACTIONS INVOLVING EITHER THE STOCK APPRECIATION RIGHT OR THE SECURITIES FOR WHICH THE STOCK APPRECIATION RIGHT IS EXERCISABLE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
UNDER VIRTUSA CORPORATION
2005 STOCK APPRECIATION RIGHTS PLAN
Pursuant to the Virtusa Corporation 2005 Stock Appreciation Rights Plan (the "Plan") as amended through the date hereof, Virtusa Corporation (the "Company") hereby grants to the person (the "Grantee") named in the Notice of Grant of Stock Appreciation Right attached hereto (the "Notice") to which this Stock Appreciation Right Agreement (the "SAR Agreement") is attached, the number of Stock Appreciation Rights set forth in the Notice (the "SARs"). Each of the SARs granted herein and pursuant to the Notice relates to one share of Common Stock, par value $0.01 per share (the "Stock") of the Company. This SAR Agreement and the Notice shall give the Grantee the right to exercise on or prior to the Expiration Date specified in the Notice all or part of the number of SARs specified in the Notice and to receive shares of Stock or an equivalent cash payment in excess of the Exercise Price per Share specified in the Notice as payment therefor in accordance with paragraph 2 of this SAR Agreement, subject to the terms and conditions set forth herein, the Notice and in the Plan. Capitalized terms used herein but not defined herein shall have the meanings set forth in the Plan or the Notice, as the case may be.
1. Vesting Schedule. No SARs may be exercised until they have become vested. The SARs shall vest on the schedule set forth in the Notice and this SAR Agreement.
2. Manner of Exercise.
(a) Prior to IPO. Subject to Section 3(c) and Section 9 of the Plan
and Section 12 hereof, prior to the Company's IPO, the Grantee may only exercise
the vested SARs during the 90 day period immediately following the Grantee's
termination of employment with the Company and its Subsidiaries, or, if earlier,
during the period following such termination of employment and ending on the
Expiration Date of the SARs. The Grantee shall give written notice to the
Company of his or her election to exercise some or all of the SARs exercisable
at the time of such notice by completion of the form attached hereto as Exhibit
A. This notice shall specify the number of SARs to be exercised.
(b) On or after IPO. Subject to Section 3(c) and Section 9 of the Plan and Section 12 hereof, on or after the Company's IPO, the Grantee may only exercise the vested SARs during the term of the Grantee's employment with the Company or its Subsidiaries and for the 90 day period following the Grantee's termination of employment with the Company and its Subsidiaries, provided that the Grantee may not exercise the vested SARs after the Expiration Date of the SARs. The Grantee shall give written notice to the Company of his or her election to exercise some or all of the SARs exercisable at the time of such notice by completion of the form attached hereto as Exhibit A. This notice shall specify the number of SARs to be exercised. Notwithstanding the foregoing, with respect to any SAR issued to a Grantee which would be subject to 409A of the Code as the SAR vests on or after the Company's IPO, such SAR shall be deemed exercised for all vested SARs which would be subject to US taxes, as of, and on, each vesting period of the SAR, and the SAR shall be settled under the terms hereunder. Such "deemed exercise provision" shall be in effect for so long as the SAR is subject to Section 409A of the Code.
3. Delivery of Cash or Certificates. The delivery of a cash payment or certificates will be contingent upon any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be delivered pursuant to the exercise of SARs under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations.
4. Settlement of SARs
(a) Prior to IPO. Upon exercise and satisfaction of the requirements specified herein and in the Plan, the Grantee shall receive a payment equal to the product of (i) the Fair Market Value of a share of Stock on the date of exercise less the Exercise Price per Share specified in this SAR Agreement, multiplied by (ii) the number of SARs exercised. Such payment shall be in the form of an equivalent amount of cash (in local currency of the recipient at the then current U.S. dollar exchange rate as determined by the Company). Without limiting the foregoing, the payment of any cash settlement of a SAR may be delayed without interest for up to 180 days if the Committee determines in good faith that such a delay is in the best interest of the Company given its then current cash flow position.
(b) On or After IPO. Upon exercise and satisfaction of the requirements specified herein and in the Plan, the Grantee shall receive a payment equal to the product of (i) the Fair Market Value of a share of Stock on the date of exercise less the Exercise Price per Share specified in this SAR Agreement, multiplied by (ii) the number of SARs exercised. Such payment shall be in the form of shares of Stock. Any fractional shares shall be paid in cash (in local currency of the recipient).
5. Issuance of Certificates. Certificates for shares of Stock shall be issued and delivered to the Grantee upon compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan. The determination of the Committee as to such compliance shall be final and binding on the Grantee. The Grantee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to the SARs unless and until such SARs shall have been exercised pursuant to the terms hereof, the Company shall have issued and delivered the shares to the Grantee, and the Grantee's name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Grantee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
6. Other Settlement Requirements
(a) The minimum number of SARs that may be exercised at any one time shall be 100, unless the number of SARs being exercised is the total number of SARs subject to exercise under this SAR Agreement at the time.
(b) Notwithstanding any other provision hereof or of the Plan, no SAR shall be exercisable after the Expiration Date thereof.
7. Termination of Employment for Cause. Notwithstanding the provisions of
Section 2 hereof, if the Grantee's employment terminates for Cause, any SARs
held by the Grantee shall terminate immediately and be of no further force and
effect. The Company's determination of the reason for termination of the
Grantee's employment shall be conclusive and binding on the Grantee and his or
her representatives or legatees.
8. Compliance of Regulation S. Pursuant to the Plan, the Company may require the Grantee to satisfy any qualification that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Accordingly, in order to satisfy compliance with provisions of Regulation S ("Regulation S") promulgated by the U.S. Securities and Exchange Commission, which sets forth conditions pursuant to which securities may be offered and sold to non-U.S. persons in transactions outside the United States without registration under the Securities Act, unless otherwise approved or expressly determined by the Committee or Board with respect to any Grantee or SAR grant, at the time of grant, the Company hereby adopts the following requirements with respect to the SARs:
(a) The following legend is hereby made part of each SAR:
NEITHER THE SECURITY REPRESENTED BY THIS STOCK APPRECIATION RIGHT
AGREEMENT NOR THE SECURITIES FOR
WHICH SUCH STOCK APPRECIATION RIGHT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, NEITHER SUCH STOCK APPRECIATION RIGHT NOR THE SECURITIES FOR WHICH THE STOCK APPRECIATION RIGHT IS EXERCISABLE MAY BE OFFERED OR SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR ANY SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT LIMITATION ON THE FOREGOING, NEITHER SUCH STOCK APPRECIATION RIGHT NOR THE SECURITIES FOR WHICH SUCH STOCK APPRECIATION RIGHT IS EXERCISABLE MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT), EXCEPT IN TRANSACTIONS WHICH ARE IN COMPLIANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, HEDGING TRANSACTIONS INVOLVING EITHER THE STOCK APPRECIATION RIGHT OR THE SECURITIES FOR WHICH THE STOCK APPRECIATION RIGHT IS EXERCISABLE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
(b) Certificates evidencing any shares of Common Stock issued upon exercise of each SAR shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE U.S. SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT LIMITATION ON THE FOREGOING, NEITHER THIS SECURITY MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, "U.S. PERSONS" (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT), EXCEPT IN TRANSACTIONS WHICH ARE IN COMPLIANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
(c) By the Grantee's signature below, the Grantee does certify, and upon any exercise or permitted transfer of each SAR, the Grantee shall certify, as follows:
A. Grantee has not been since the Grant Date and is not now a resident in the United States of America, including its territories and possessions, any State in the United States or the District of Columbia,
B. Grantee did not acquire the SAR, and shall not acquire any Issued Shares upon exercise of the SAR for the account or benefit of any "U.S. Person" (as defined below),
C. Grantee shall resell Issued Shares only in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the Securities Act, or pursuant to an available exemption from registration,
D. Grantee has not and shall not engage in hedging transactions with regard to the SAR or Issued Shares unless in compliance with the Securities Act, and
E. The Company shall refuse to register any transfer of the SAR or Issued Shares not made in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the Securities Act, or pursuant to an available exemption from registration; provided that such certification shall not be required in the sole discretion of the Company if the Grantee provides (or the Company otherwise receives) an opinion of counsel satisfactory to the Company in its sole discretion that the SAR and all Issued Shares for which it is
exercisable have been registered under the Securities Act or are exempt from registration thereunder.
(d) The Company shall implement administrative procedures designed to ensure that the SAR may not be exercised in, nor the Issued Shares delivered upon exercise within, the United States of America, including its territories and possessions, any State in the United States or the District of Columbia.
(e) Definition of "U.S. Person."
A. A U.S. Person means:
(A) Any natural person resident in the United States;
(B) Any partnership or corporation organized or incorporated under the laws of the United States;
(C) Any estate of which any executor or administrator is a U.S. person;
(D) Any trust of which any trustee is a U.S. person;
(E) Any agency or branch of a foreign entity located in the United States;
(F) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;
(G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
(H) Any partnership or corporation if:
(1) Organized or incorporated under the laws of any foreign jurisdiction; and
(2) Formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
B. The following are not "U.S. Persons":
(A) Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident
in the United States;
(B) Any estate of which any professional fiduciary acting as
executor or administrator is a U.S. person if:
(C) An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and
(D) The estate is governed by foreign law;
(E) Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;
(F) An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;
(G) Any agency or branch of a U.S. person located outside the United States if:
(1) The agency or branch operates for valid business reasons; and
(2) The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and
(3) The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans
9. Incorporation of Plan. Notwithstanding anything herein to the contrary, these SARs shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Committee set forth in Section 2(b) of the Plan. Capitalized terms in this SAR Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
10. Transferability. This SAR Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. These SARs are exercisable, during the Grantee's lifetime, only by the Grantee, and thereafter, only by the Grantee's legal representative or legatee.
11. Tax Withholding. The Grantee shall, not later than the date as of which the exercise of these SARs become a taxable event for tax purposes, pay to the Company or make arrangements satisfactory to the Committee for payment of any taxes required by applicable law to be withheld on account of such taxable event. The Grantee may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued, or (ii) transferring to the Company, a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.
12. Miscellaneous.
(a) Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Grantee at the address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing.
(b) This SAR Agreement does not confer upon the Grantee any rights with respect to continuance of employment by the Company or any Subsidiary.
(c) Pursuant and subject to Section 9 of the Plan, the Committee may at any time amend or cancel any outstanding portion of these SARs, but no such action may be taken which adversely affects the Grantee's rights under this SAR Agreement without the Grantee's consent unless such action is, in the Committee's judgment, necessary to comply with one or more applicable laws. In addition, if the Board of the Company (or any successor company) amends the Plan pursuant to Section 9 of the Plan to cause all SARs issued and outstanding, as well as any other SARs to be granted under the Plan, to be settled only in Stock as stated in therein, such amendment shall also be deemed to amend this SAR Agreement but such amendment shall not be deemed to have an adverse effect on any right of any Grantee of an outstanding SAR which is effected by such amendment and no consent of any such Grantee shall be required.
EXHIBIT A
STOCK APPRECIATION RIGHTS EXERCISE NOTICE
Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
Attn: Stock Administrator
Pursuant to the terms of the Notice of Grant of Stock Appreciation Rights ("Notice") dated _________________, and the Stock Appreciation Rights Agreement ("SAR Agreement") granted pursuant to the Virtusa Corporation 2005 Stock Appreciation Rights Plan ("Plan") and entered into by Virtusa Corporation (the "Company") and _________________ on such date, I hereby exercise _____ Stock Appreciation Rights (each, a "SAR"), all of which have vested in accordance with the terms and conditions of the Notice, to be settled in accordance with the terms of the Plan and SAR Agreement. I hereby authorize payroll withholding or otherwise will make adequate provision for federal, state, foreign, local and any other applicable tax withholding obligations of the Company, if any, that arise in connection with the exercise and settlement of the SAR.
I acknowledge that, if the Company settles all or any portion of the SAR in shares of common stock of the Company, I represent that I am acquiring the shares in accordance with and subject to the terms and conditions of the Plan, the Notice and the SAR Agreement, copies of which I have received and carefully read and understand, including the Company's right of first refusal and other restrictions on transfer as set forth in the Plan and SAR Agreement, to all of which I hereby expressly assent.
I hereby represent that, if the Company settles all or any portion of the SAR in shares of common stock of the Company, I am purchasing the shares of common stock for my own account and not with a view to any sale or distribution thereof. I understand that Rule 144, promulgated under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act), which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to such shares and, in any event, is available only if certain conditions are satisfied. I acknowledge that any sale of such shares that might be made in reliance on Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon my request.
In addition, without limitation of the foregoing, I hereby certify and agree as follows:
A. I am not a resident in the United States of America, including its territories and possessions, any State in the United States or the District of Columbia,
B. If the Company settles all or any portion of the SAR in shares of common stock of the Company, I shall not acquire the shares of common stock for the account or benefit of any "U.S. Person" (as defined in Exhibit A hereto),
C. If the Company settles all or any portion of the SAR in shares of common stock of the Company, I shall resell Shares only in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration,
D. If the Company settles all or any portion of the SAR in shares of common stock of the Company, I shall not engage in hedging transactions with regard to the common stock unless in compliance with the U.S. Securities Act, and
E. If the Company settles all or any portion of the SAR in shares of common stock of the Company, the Company shall refuse to register any transfer of the SAR or shares of common stock not made in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and Preliminary Notes), pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration.
Print Name: Signature: -------------------------------------------------- -------------------------------------- Address: -------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Email: Phone: ------------------------------------------------- ------------------------------------------ |
EXHIBIT A
DEFINITION OF "U.S. PERSON"
1. "U.S. person" means:
i. Any natural person resident in the United States;
ii. Any partnership or corporation organized or incorporated under the laws of the United States;
iii. Any estate of which any executor or administrator is a U.S. person;
iv. Any trust of which any trustee is a U.S. person;
v. Any agency or branch of a foreign entity located in the United States;
vi. Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;
vii. Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
viii. Any partnership or corporation if:
A. Organized or incorporated under the laws of any foreign jurisdiction; and
B. Formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
2. The following are not "U.S. persons":
i. Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;
ii. Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:
A. An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and
B. The estate is governed by foreign law;
iii. Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;
iv. An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;
v. Any agency or branch of a U.S. person located outside the United States if:
A. The agency or branch operates for valid business reasons; and
B. The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and
vi. The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.
Exhibit 10.7
INDEMNIFICATION AGREEMENT
This Agreement made and entered into this ____ day of _______ 2007, (the "Agreement"), by and between Virtusa Corporation, a Delaware corporation (the "Company," which term shall include, where appropriate, any Entity (as hereinafter defined) controlled directly or indirectly by the Company) and ____________ (the "Indemnitee"):
WHEREAS, it is essential to the Company that it be able to retain and attract as directors the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors to litigation risks and expenses, and the limitations on the availability of directors and officers liability insurance have made it increasingly difficult for the Company to attract and retain such persons;
WHEREAS, the Company's By-laws (the "By-laws") require it to indemnify its directors to the fullest extent permitted by law and permit it to make other indemnification arrangements and agreements;
WHEREAS, the Company desires to provide Indemnitee with specific contractual assurance of Indemnitee's rights to full indemnification against litigation risks and expenses (regardless, among other things, of any amendment to or revocation of the By-laws or any change in the ownership of the Company or the composition of its Board of Directors);
WHEREAS, the Company intends that this Agreement provide Indemnitee with greater protection than that which is provided by the Company's By-laws; and
WHEREAS, Indemnitee is relying upon the rights afforded under this Agreement in becoming or continuing as a director of the Company.
NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
1. Definitions.
(a) "Corporate Status" describes the status of a person who is serving or has served (i) as a director of the Company, (ii) in any capacity with respect to any employee benefit plan of the Company, or (iii) as a director, partner, trustee, officer, employee, or agent of any other Entity at the request of the Company. For purposes of subsection (iii) of this Section 1(a), if Indemnitee is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary, Indemnitee shall be deemed to be serving at the request of the Company.
(b) "Entity" shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.
(c) "Expenses" shall mean all fees, costs and expenses incurred by Indemnitee in connection with any Proceeding (as defined below), including, without limitation, attorneys' fees, disbursements and retainers (including, without limitation, any such fees, disbursements and retainers incurred by Indemnitee pursuant to Sections 11 and 12(c) of this Agreement), fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and "Indemnifiable Amounts" shall have the meanings ascribed to those terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.
(f) "Proceeding" shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, including a proceeding initiated by Indemnitee pursuant to Section 11 of this Agreement to enforce Indemnitee's rights hereunder.
(g) "Subsidiary" shall mean any corporation, partnership, limited liability company, joint venture, trust or other Entity of which the Company owns (either directly or through or together with another Subsidiary of the Company) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other Entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other Entity.
2. Services of Indemnitee. In consideration of the Company's covenants and commitments hereunder, Indemnitee agrees to serve or continue to serve as a director of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee's service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.
3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as follows:
(a) Proceedings Other Than By or In the Right of the Company. Subject to the exceptions contained in Section 4(a) and 4(c) below, if Indemnitee was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of Indemnitee's Corporate Status,
Indemnitee shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by Indemnitee in connection with such Proceeding (referred to herein as "Indemnifiable Expenses" and "Indemnifiable Liabilities," respectively, and collectively as "Indemnifiable Amounts").
(b) Proceedings By or In the Right of the Company. Subject to the exceptions contained in Section 4(b) and 4(c) below, if Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company by reason of Indemnitee's Corporate Status, Indemnitee shall be indemnified by the Company against all Indemnifiable Expenses.
(c) Conclusive Presumption Regarding Standard of Care. In making any determination required to be made under Delaware law with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee submitted a request therefor in accordance with Section 5 of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
4. Exceptions to Indemnification. Indemnitee shall be entitled to indemnification under Section 3 above in all circumstances other than with respect to any specific claim, issue or matter involved in the Proceeding out of which Indemnitee's claim for indemnification has arisen, as follows:
(a) Proceedings Other Than By or In the Right of the Company. If indemnification is requested under Section 3(a) and it has been finally adjudicated by a court of competent jurisdiction that, in connection with such specific claim, issue or matter, Indemnitee failed to act (i) in good faith and (ii) in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal Proceeding, Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder.
(b) Proceedings By or In the Right of the Company. If indemnification is requested under Section 3(b) and
(i) it has been finally adjudicated by a court of competent jurisdiction that, in connection with such specific claim, issue or matter, Indemnitee failed to act (A) in good faith and (B) in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, Indemnitee shall not be entitled to payment of Indemnifiable Expenses hereunder; or
(ii) it has been finally adjudicated by a court of competent jurisdiction that Indemnitee is liable to the Company with respect to such specific claim, Indemnitee shall not be entitled to payment
of Indemnifiable Expenses hereunder with respect to such claim, issue or matter unless the Court of Chancery or another court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such Indemnifiable Expenses which such court shall deem proper; or
(iii) it has been finally adjudicated by a court of competent jurisdiction that Indemnitee is liable to the Company for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, the rules and regulations promulgated thereunder and amendments thereto or similar provisions of any federal, state or local statutory law, Indemnitee shall not be entitled to payment of Indemnifiable Expenses hereunder.
(c) Insurance Proceeds. To the extent payment is actually made to the Indemnitee under a valid and collectible insurance policy in respect of Indemnifiable Amounts in connection with such specific claim, issue or matter, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder except in respect of any excess beyond the amount of payment under such insurance.
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Amounts for which Indemnitee seeks payment under Section 3 of this Agreement and the basis for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee promptly upon receipt of its request. At the request of the Company, Indemnitee shall furnish such documentation and information as are reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to indemnification hereunder.
6. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified against all Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, by reason of settlement, judgment, order or otherwise, shall be deemed to be a successful result as to such claim, issue or matter.
7. Effect of Certain Resolutions. Neither the settlement or termination of any Proceeding nor the failure of the Company to award indemnification or to determine that
indemnification is payable shall create a presumption that Indemnitee is not entitled to indemnification hereunder. In addition, the termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, had reasonable cause to believe that Indemnitee's action was unlawful.
8. Agreement to Advance Expenses; Undertaking. The Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding, including a Proceeding by or in the right of the Company, in which Indemnitee is involved by reason of such Indemnitee's Corporate Status within ten (10) calendar days after the receipt by the Company of a written statement from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. To the extent required by Delaware law, Indemnitee hereby undertakes to repay any and all of the amount of Indemnifiable Expenses paid to Indemnitee if it is finally determined by a court of competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification with respect to such Expenses. This undertaking is an unlimited general obligation of Indemnitee.
9. Procedure for Advance Payment of Expenses. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Expenses for which Indemnitee seeks an advancement under Section 8 of this Agreement, together with documentation evidencing that Indemnitee has incurred such Indemnifiable Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no later than ten (10) calendar days after the Company's receipt of such request.
10. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably by incurred by him or on his behalf in connection therewith.
11. Remedies of Indemnitee.
(a) Right to Petition Court. In the event that Indemnitee makes a request for payment of Indemnifiable Amounts under Sections 3 and 5 above or a request for an advancement of Indemnifiable Expenses under Sections 8 and 9 above and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the Court of Chancery to enforce the Company's obligations under this Agreement.
(b) Burden of Proof. In any judicial proceeding brought under
Section 11(a) above, the Company shall have the burden of proving
that Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. The Company agrees to reimburse Indemnitee in full for any Expenses incurred by Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by Indemnitee under Section
11(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith, whether or not Indemnitee is successful in whole or in part in connection with any such action.
(d) Failure to Act Not a Defense. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 11(a) above, and shall not create a presumption that such payment or advancement is not permissible.
12. Defense of the Underlying Proceeding.
(a) Notice by Indemnitee. Indemnitee agrees to notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding which may result in the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to receive payments of Indemnifiable Amounts or advancements of Indemnifiable Expenses unless the Company's ability to defend in such Proceeding is materially and adversely prejudiced thereby.
(b) Defense by Company. Subject to the provisions of the last
sentence of this Section 12(b) and of Section 12(c) below, the
Company shall have the right to defend Indemnitee in any Proceeding
which may give rise to the payment of Indemnifiable Amounts
hereunder; provided, however that the Company shall notify
Indemnitee of any such decision to defend within ten (10) calendar
days of receipt of notice of any such Proceeding under Section 12(a)
above. The Company shall not, without the prior written consent of
Indemnitee, consent to the entry of any judgment against Indemnitee
or enter into any settlement or compromise which (i) includes an
admission of fault of Indemnitee or (ii) does not include, as an
unconditional term thereof, the full release of Indemnitee from all
liability in respect of such Proceeding, which release shall be in
form and substance reasonably satisfactory to Indemnitee. This
Section 12(b) shall not apply to a Proceeding brought by Indemnitee
under Section 11(a) above or pursuant to Section 20 below.
(c) Indemnitee's Right to Counsel. Notwithstanding the provisions of
Section 12(b) above, if in a Proceeding to which Indemnitee is a
party by reason of Indemnitee's Corporate Status, (i) Indemnitee
reasonably concludes that he or she may have separate defenses or
counterclaims to assert with respect to any issue which may not be
consistent with the position of other defendants in such Proceeding,
(ii) a conflict of interest or potential conflict of interest exists
between Indemnitee and the Company, or (iii) if the Company fails to
assume the defense of such proceeding in a timely manner, Indemnitee
shall be entitled to be
represented by separate legal counsel of Indemnitee's choice at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee's choice, at the expense of the Company, to represent Indemnitee in connection with any such matter.
13. Representations and Warranties of the Company. The Company hereby represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company.
(b) Enforceability. This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors' rights generally.
14. Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with a reputable insurance company providing the Indemnitee with coverage for losses from wrongful acts. For so long as Indemnitee shall remain a director of the Company and with respect to any such prior service, in all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's officers and directors. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, or if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit. The Company shall promptly notify Indemnitee of any good faith determination not to provide such coverage.
15. Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights which Indemnitee may have at any time under applicable law, the Company's Certificate of Incorporation or By-laws, or any other agreement, vote of stockholders or directors (or a committee of directors), or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity as a result of Indemnitee's serving as a director of the Company.
16. Successors. This Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee. This Agreement shall continue for the benefit of Indemnitee and such heirs, personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.
17. Subrogation. In the event of any payment of Indemnifiable Amounts under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of Indemnitee against other persons, and Indemnitee shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
18. Change in Law. To the extent that a change in Delaware law (whether by statute or judicial decision) shall permit broader indemnification or advancement of expenses than is provided under the terms of the By-laws and this Agreement, Indemnitee shall be entitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.
19. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.
20. Indemnitee as Plaintiff. Except as provided in Section 11(c) of this Agreement and in the next sentence, Indemnitee shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by Indemnitee against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Board of Directors of the Company has consented to the initiation of such Proceeding. This Section shall not apply to counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee.
21. Modifications and Waiver. Except as provided in Section 18 above with respect to changes in Delaware law which broaden the right of Indemnitee to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver.
22. General Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by
hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(i) If to Indemnitee, to:
(ii) If to the Company, to:
Virtusa Corporation
2000 West Park Drive
Westborough, MA 01581
Facsimile No.:[__________]
Attn: Secretary
or to such other address as may have been furnished in the same manner by any party to the others.
23. Governing Law; Consent to Jurisdiction; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to its rules of conflict of laws. Each of the
Company and the Indemnitee hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the Court of Chancery of the State of
Delaware and the courts of the United States of America located in the State of
Delaware (the "Delaware Courts") for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum. Each of the parties
hereto agrees, (a) to the extent such party is not otherwise subject to service
of process in the State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of legal process, and (b)
that service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant to (a) or (b)
above shall have the same legal force and effect as if served upon such party
personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, each such party does hereby appoint The Corporation Trust
Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, as
such agent and each such party hereby agrees to complete all actions necessary
for such appointment.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
VIRTUSA CORPORATION
By:_______________________
Name:
Title:
INDEMNITEE
Exhibit 10.9
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of September 29, 2006, by and between VIRTUSA CORPORATION, a Delaware corporation, having its chief executive office at 2000 West Park Drive, Westborough, Massachusetts 01581 (the "Borrower"), and CITIZENS BANK OF MASSACHUSETTS, a Massachusetts chartered bank having its head office at 28 State Street, Boston, Massachusetts 02109 ("Citizens" or the "Lender").
The Borrower has requested the Lender to extend credit in the form of loans and letters of credit, and the Lender is willing to make loans to the Borrower and is willing to issue Letters of Credit, in each case on the terms and subject to the conditions set forth herein.
In consideration of the premises and for other goad and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS
1.1. Definitions
All capitalized terms used in this Agreement, in the Note, in the other Loan Documents or in any certificate, report or other document made or delivered pursuant to this Agreement (unless otherwise defined therein) shall have the meanings assigned to them below:
Accounts Receivable and Accounts. All rights of the Borrower to payment of
a monetary obligation (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services rendered or to
be rendered, (iii) for a secondary obligation incurred or to be incurred, or
(iv) arising out of the use of a credit or charge card or information contained
on or for use with the card; and all sums of money and other Proceeds due or
becoming due thereon, all notes, bills, drafts, acceptances, instruments,
documents and other debts, obligations and liabilities, in whatever form, owing
to the Borrower with respect thereto, all guarantees and security therefor, and
the Borrowers rights pertaining to and interests in such property, including the
right of stoppage in transit, replevin or reclamation; all chattel paper; all
amounts due from Affiliates of the Borrower; all insurance proceeds; all other
rights and claims to the payment of money, under contracts or otherwise; and all
other property constituting "accounts" as such term is defined in the Uniform
Commercial Code,
Affiliate. With reference to any Person, (i) any director, officer or employee of that Person, (ii) any other Person controlling, controlled by or under direct or indirect common control of that Person, (iii) any other Person directly or indirectly holding 10.0% or more of any class of the capital stock or other equity interests (including options, warrants, convertible securities and similar rights) of that Person and (iv) any other Person 10.0% more of any class of whose capital stock or other equity interests (including options, warrants, convertible
securities and similar rights) is held directly or indirectly by that Person.
Agreement. This Credit Agreement, including the Exhibits and Schedules hereto, as the same may be supplemented, amended or restated from time to time.
Assignee. Sec Section 9.1.
Borrower. See Preamble.
Borrower's Accountants. KPMG LLP, or such other independent certified public accountants as are selected by the Borrower and are reasonably acceptable to the Lender.
Borrowing Base. As at the date of any determination thereof, an amount equal to (a) 75.0% of the unpaid net amount of all Eligible Accounts, minus (b) FX Reserves.
Borrowing Base Report. A report signed by any Responsible Officer and in substantially the form of Exhibit E hereto.
Business Day. Any day, other than a Saturday, Sunday or legal holiday, on which banks in Boston, Massachusetts are open for the conduct of a substantial part of their commercial banking business.
Capital Expenditures. Without duplication, any expenditure for fixed or capital assets, leasehold improvements, capital leases, installment purchases of machinery and equipment, acquisitions of real estate and other similar expenditures including (i) in the ease of a purchase, the entire purchase price, whether or not paid during the fiscal period in question, (ii) in the case of a capital lease, the capitalized amount (as determined under GAAP) of the obligations under such lease to pay rent and other amounts, and (iii) expenditures respect to any construction in progress account of the Borrower.
Closing Date. The first date on which the conditions set forth in Sections 3.1 and 3.2 have been satisfied and any Loans are to be made hereunder.
Code. The Internal Revenue Code of 1986 and the rules and regulations thereunder, collectively, as the same may from time to time be supplemented or amended and remain in effect.
Collateral. All of the property, rights and interests of the Borrower and its Subsidiaries that are or are intended to be subject to the security interests and liens created by the Security Documents.
Commitment Fee. See Section 2.5.
Consolidated Current Liabilities. The aggregate amount of Indebtedness of the Borrower
and its Subsidiaries that may properly be classified as current liabilities in accordance with GAAP and in any event including, without limitation, any direct or indirect indebtedness and other liabilities of the Borrower and its Subsidiaries that are payable on demand or within one (1) year from the creation thereof:
Consolidated Net Income. For any fiscal period, the consolidated net income
of' the Borrower and its Subsidiaries for such period, as determined in
accordance with GAAP, except that in no event shall such consolidated net income
include: (i) any gain or loss arising from any write-up of assets, except to the
extent inclusion thereof shall be approved in writing by the Lender; (ii)
earnings of any Subsidiary accrued prior to the date it became a Subsidiary;
(iii) any extraordinary or nonrecurring gains; (iv) any deferred or other credit
representing any excess of the equity of any Subsidiary at the date of
acquisition thereof over the amount invested in such Subsidiary; (v) the net
earnings of any business entity (other than a Subsidiary) in which the Borrower
or any Subsidiary has an ownership interest, except to the extent such net
earnings shall have actually been received by the Borrower or such Subsidiary in
the form of cash distributions; (vi) the proceeds of any life insurance policy;
and (vii) any reversal of any contingency reserve, except to the extent that
provision for such contingency reserve shall be made from income arising during
such period.
Consolidated Tangible Net Worth. At any date as of which the amount thereof shall be determined, the consolidated total assets of the Borrower and its Subsidiaries, minus (a) Consolidated Total Liabilities, and minus (b) the sum of any amounts attributable to (i) the book value, net of applicable reserves, of all intangible assets of the Borrower and its Subsidiaries, including, without limitation, goodwill, trademarks, copyrights, patents and any similar rights, and unamortized debt discount and expense, (ii) all reserves not already deducted from assets or included in Consolidated Total Liabilities, (iii) any write-up in the book value of assets resulting from any revaluation thereof subsequent to the date of the Audited Financial Statement, (iv) the value of any minority interests in Subsidiaries, (v) intercompany accounts with Subsidiaries and Affiliates (including receivables due from Subsidiaries and Affiliates and loans or advances to employees), (vi) the value, if any, attributable to any capital stock or other equity interests of the Borrower or any Subsidiary held in treasury, and (vii) the value, if any, attributable to any notes or subscriptions receivable due from equity holders in respect of capital stock or other equity interests.
Consolidated Total Liabilities. At any date as of which the amount thereof shall be determined, all obligations that should, in accordance with GAAP, be classified as liabilities on the consolidated balance sheet of the Borrower and its Subsidiaries, including in any event all Indebtedness.
Contra Customer. Any customer or other Person with whom the Borrower has a contract or agreement of any kind (including an account payable) and in respect of which there is an Account included in Eligible Accounts.
Default. An Event of Default or any event or condition that, but for the requirement that time elapse or notice be given, or both, would constitute an Event of Default.
Drawdown Date. The Business Day on which any Loan is made or is to be made.
Eligible Account(s). An Account Receivable which:
(a) Is not unpaid 90 or more days after invoice date and is not more than 60 days past due under the original terms of sale;
(b) Arose in the ordinary course of business of the Borrower as a result of either (i) services which have been performed for the account debtor or (ii) the absolute sale of goods which have been shipped to the account debtor (and not on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-assignment, sale-on-approval, consignment or other repurchase or return basis);
(c) Is the legal, valid and binding obligation of the account debtor thereunder is assignable, is owned by the Borrower free and clear of all Encumbrances (except in favor of the Lender) and is subject to a valid, perfected first security interest of the Lender (and if the account debtor is the United States of America or any agency or instrumentality thereof, the right to payment has been assigned to the Lender in compliance with the Assignment of Claims Act of 1940, as amended) and is not evidenced by a promissory note or other instrument;
(d) Has not been materially reduced and is not subject to material reduction, as against the Borrower, its agents or the Lender, by any offset, counterclaim, adjustment, credit, allowance or other defense and as to which there is no (and no basis for any) return, rejection, loss or damage of or to the goods or services giving rise thereto, or any request for credit or adjustments known to the Borrower; provided, however, that if an Account Receivable, otherwise meeting the definition of Eligible Account, has been materially reduced or is subject to material reduction solely because of a failure of the Borrower to timely meet contract milestones and for no other reason (i.e. "retainage") or because of a warranty claim and for no other reason, such Account Receivable shall be an Eligible Account, to the extent it has not been so materially reduced or is not subject to material reduction;
(e) Is not in dispute or uncollectible for any reason, including, without limitation, return, rejection, repossession, loss of or damage to the goods or services giving rise thereto or other dispute, arty bankruptcy, insolvency, adverse credit rating or other financial difficulty of the account debtor, or any impediment to the assertion of a claim or commencement of an action against the account debtor (including as a consequence of the failure of the Borrower to be qualified or licensed in any jurisdiction where such qualification or licensing is required), all as determined by the Lender in its sole discretion;
(f) Is not owing from any Affiliate of the Borrower;
(g) Is owing from an account debtor located in the United States, or, if not located in the United States, whose Accounts Receivable are covered by credit insurance satisfactory to the Lender in its sole discretion or supported by a standby letter of credit in favor of the Lender satisfactory to the Lender in its sole discretion;
(h) Is owing from an account debtor at least 75.0% of whose accounts payable owing to the Borrower are Eligible Accounts;
(i) Is not owing from a Person who is the account debtor on more than 35.0% of all Eligible Accounts, unless consented to by the Lender in writing; provided, that the foregoing limitation shall not apply to account debtors (i) located in the United States with public debt issued and outstanding rated BBB- or better by Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and/or Bbb3 or better by Moody's Investor Services Inc. or (ii) if not located in the United States, whose Accounts Receivable are covered by credit insurance satisfactory to the Lender in its sole discretion or supported by a standby letter of credit in favor of the Lender satisfactory to the Lender in its sole discretion;
(j) If owing from any Contra Customer, will be eligible only to the extent it exceeds the amount of the Borrower's accounts payable, or other indebtedness permitted hereunder that is payable, to such Contra Customer; and
(k) Has not been designated by the Lender in its reasonable discretion by notice to the Borrower as unacceptable for any reason.
Encumbrances. See Section 7.3.
Environmental Laws. Any and all applicable federal, state and local environmental, health or safety statutes, laws, regulations, rules and ordinances (whether now existing or hereafter enacted or promulgated), and all applicable judicial, administrative and regulatory decrees, judgments and orders, including common law rulings and determinations, relating to injury to, or the protection of real or personal property or human health or the environment, including, without limitation, all requirements pertaining to reporting, licensing, permitting, investigation, remediation and removal of emissions, discharges, releases or threatened releases of Hazardous Materials into the environment or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of such Hazardous Materials.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules and regulations thereunder, collectively, as the same may from time to time be supplemented or amended and remain in effect.
ERISA Affiliate. Any trade or business, whether or not incorporated, that is treated as a single employer with the Borrower under Section 41 4(b) (c), (m) or (o) of the Code and Section 4001(a) (14) of ERISA.
ERISA Event. (a) Any "reportable event," as defined in Section 4043 of
ERISA or the regulations issued thereunder, with respect to a Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated finding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA,
whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower of any ERISA Affiliate from the PBGC or a plan administrator or any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability (as defined in Part I of Subtitle E of Title IV of ERISA) with respect to any Multiemployer Plan or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (ii) the occurrence of a "prohibited transaction" with respect to which the Borrower or any of the Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Subsidiary could otherwise be liable; and (i) any other event or condition with respect to a Plan or Multiemployer Plan that could reasonably be expected to result in liability of the Borrower.
Event of Default. Any event described in Section 8.1.
FX Documents. Any and all documents entered into by the Borrower in connection with FX Transactions.
FX Reserves. At anytime of determination of the Borrowing Base, an amount equal to 15.0% of the face amount (in United States Dollars) of all foreign exchange contracts entered into in connection with FX Transactions.
FX Transactions. Any transactions arranged or facilitated by Lender on behalf of Borrower or its Subsidiaries involving the purchase or sale of foreign currencies either on a current or deferred basis.
GAAP. Generally accepted accounting principles, consistently applied.
Guarantees. As applied to any Person (a "guarantor"), all guarantees, endorsements and other contingent or surety obligations with respect to Indebtedness or other obligations of any other Person (the "primary obligor"), whether or not reflected on the consolidated balance sheet of the guarantor, including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or other obligation.
Hazardous Materials. Any substance (i) the presence of which requires or may hereafter require notification, investigation, removal or remediation under any Environmental Law; (ii) which is or becomes defined as a "hazardous waste", "hazardous material" or "hazardous
substance" or "pollutant" or "contaminant" under any present or future
Environmental Law or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) and any applicable local statutes and the regulations
promulgated thereunder; (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is or becomes regulated pursuant to any Environmental Law by any
governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, any applicable state of the United States,
or any political subdivision thereof, or (iv) without limitation, which contains
gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated
biphenyls ("PCB's").
Indebtedness. As applied to the Borrower and its Subsidiaries, without duplication, (i) all obligations for borrowed money or other extensions of credit whether secured or unsecured, absolute or contingent, including, without limitation, unmatured reimbursement obligations with respect to letters of credit or guarantees issued for the account of or on behalf of the Borrower and its Subsidiaries and all obligations representing the deferred purchase price of property, other than accounts payable arising in the ordinary course of business, (ii) all obligations evidenced by bonds, notes, debentures or other similar instruments, (iii) all obligations secured by any mortgage, pledge, security interest or other lien on property owned or acquired by the Borrower or any of its Subsidiaries whether or not the obligations secured thereby shall have been assumed, (iv) that portion of all obligations arising under leases that is required to be capitalized on the consolidated balance sheet of the Borrower and its Subsidiaries, (v) all Guarantees, (vi) all obligations that are immediately due and payable out of the proceeds of or production from property now or hereafter owned or acquired by the Borrower or any of its Subsidiaries, and (vii) all other obligations which, in accordance with GAAP, would be included as a liability on the consolidated balance sheet of the Borrower and its Subsidiaries, but excluding anything in the nature of capital stock, capital surplus and retained earnings.
Audited Financial Statement. See Section 4.6.
Interest Expense. For any fiscal period, the consolidated interest expense (including imputed interest and capitalized lease obligations) and amortized debt discount on indebtedness of the Borrower and its Subsidiaries for such period.
Investment. As applied to the Borrower and its Subsidiaries, the purchase or acquisition of any share of capital stock, partnership interest, evidence of indebtedness or other equity security of any other Person (including any Subsidiary), any loan, advance or extension of credit (excluding Accounts Receivable arising in the ordinary course of business) to, or contribution to the capital of, any other Person (including any Subsidiary), any real estate held for sale or investment, any securities or commodities futures contracts held, any other investment in any other Person (including any Subsidiary), and the making of any commitment or acquisition of any option to make an Investment.
Lease. That certain lease, dated as of June, 2000, between the Borrower and W9/TIB Real Estate Limited Partnership in respect of the premises occupied by the Borrower in Westborough, Massachusetts, as amended to date by the First Amendment dated as of November
2000 and Second Amendment and Extension of Lease dated as of December 30, 2003.
Lease Letters of Credit. Any Letters of Credit issued for the purpose of securing the Borrower's obligations under the Lease, including, without limitation, any issued prior to the date hereof.
Lender. See Preamble.
Letter of Credit Applications. Applications for Letters of Credit in such form as may be required by the Lender from time to time which are executed and delivered by the Borrower to the Lender pursuant to Section 2A, as the same may be amended or supplemented from time to time.
Letter of Credit Fee. See Section 2.5.
Letter of Credit Pledge Agreement. See Section 2A.1(b).
Letter of Credit Sublimit. The sum of $1,500,000.00.
Letters of Credit. See Section 2A.1(a).
Loan Documents. This Agreement, the Note, the Letters of Credit, the Letter of Credit Applications, the Security Documents and the FX Documents, together with any agreements, instruments or documents now or hereafter executed and delivered pursuant to or in connection with any of the foregoing.
Loans. The loans made or to be made by the Lender to the Borrower pursuant to Section II of this Agreement, including Revolving Credit Loans and unpaid Reimbursement Obligations.
Maximum Drawing Amount. The maximum aggregate amount from time to time that beneficiaries may draw under outstanding Letters of Credit.
Multiemployer Plan. Any plan which is a Multiemployer Plan as defined in
Section 4001(a) (3) of ERISA.
Note Record. Any internal record, including a computer record, maintained by the Lender with respect to any Loan.
Note. See Section 2.2(a).
Notice of Borrowing. The notice, substantially in the form of Exhibit B hereto, to be given by the Borrower to the Lender to request a Revolving Credit Loan.
Obligations. The aggregate outstanding principal balance of and interest (and premium. if any) on the Loans (including, without limitation, interest accruing at the then applicable rate provided herein after the maturity of the Loans and interest accruing at the then applicable rate
provided herein after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and all other obligations of the Borrower to the Lender of every kind and description pursuant to or in connection with the Loan Documents and FX Transactions, deposit accounts, cash management accounts and services, hedging transactions, interest rate caps, collars and similar interest rate protection products, and all other banking products and services, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument, if any, in each case whether on account of principal interest, premium, reimbursement obligations, fees, indemnities, coats, expenses or otherwise (including, without limitation, all fees and disbursements of counsel that are required to be paid by the Borrower pursuant to any of the Loan Documents), and including obligations to perform acts and refrain from taking action as well as obligations to pay money.
Participant. See Section 9.2.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
Pension Plan. Any Plan which is an "employee pension benefit plan" (as defined in ERISA).
Permitted Encumbrances. See Section 7.3.
Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business or other legal entity, and any government or governmental agency or political subdivision thereof.
Plan. Any "employee pension benefit plan" or "employee welfare benefit plan" (each as defined in Section 3 of ERISA) maintained by the Borrower or any Subsidiary.
Pledge Agreement. That certain Pledge Agreement dated the date hereof pursuant to which Borrower shall pledge to Lender the capital stock of its subsidiary, Virtusa Securities Corporation.
Prime Rate. The rate of interest announced from time to time by the Lender at its head office as its "Prime Rate". The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Any change in the Prime Rate shall be effective from and including the effective date of such change.
Prohibited Transaction. Any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
Qualified Investments. As applied to the Borrower and its Subsidiaries, Investments in (1) notes, bonds or other obligations of the United States of America or any agency thereof that as to principal, and interest constitute direct obligations of or are guaranteed by the United States
of America and that have maturity dates not more than one year from the date of
acquisition, (ii) certificates of deposit, demand deposit accounts or other
deposit instruments or accounts maintained in the ordinary course of business
(x) with Silicon Valley Bank, (y) with banks or trust companies organized. under
the laws of the United States or any state thereof that have capital and surplus
of at least $500,000,000.00 which certificates of deposit and other deposit
instruments, if not payable on demand, have maturities of not more than 180 days
from the date of acquisition or (z) with respect to deposit accounts for the
purpose of funding ordinary course payroll obligations to the Borrower's or its
Subsidiaries' overseas employees, with banks or trust companies organized under
the laws of India or Sri Lanka known by the Borrower to be reputable for such
purposes, subject to the limitation set forth in Section 6.2(b), (iii)
commercial paper that, as of the date of acquisition, has the highest credit
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. or their successors, and in each
case maturing not more than 270 days from the date of acquisition, and (iv) any
repurchase agreement secured by any one or more of the foregoing.
Reimbursement Obligation. The Obligation of the Borrower to reimburse the
Lender on account of any drawing under any Letter of Credit as provided in
Section 2A.2
Responsible Officer. The chief financial officer of the Borrower and any other officer of the Borrower designated by the chief financial officer to sign Borrowing Base Reports and Notices of Borrowing.
Restricted Payment. Any dividend, distribution, loan, advance, guaranty, extension of credit or other payment (whether in cash, securities or other property) to or for the benefit of any Person who holds an equity interest in the Borrower or any of its Subsidiaries, whether or not such interest is evidenced by a security, and any other payment, whether in cash, securities or other property, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any capital stock of the Borrower or any of its subsidiaries, whether now or hereafter outstanding, or of any options, warrants or similar rights to purchase such capital stock or any security convertible into or exchangeable for such capital stock.
Revolving Credit Commitment. The maximum dollar amount of credit which the Lender has agreed to loan to the Borrower as Revolving Credit Loans or make available to the Borrower pursuant to Letters of Credit upon the terms and subject to the conditions of this Agreement, initially $3,000,000.00, as the Lender's Revolving Credit Commitment may be modified pursuant hereto and in effect from time to time. A portion of the Revolving Credit Commitment up to the Letter of Credit Sublimit shall be available to Borrower for issuance of Letters of Credit.
Revolving Credit Loans. See Section 2.1(a).
Revolving Credit Maturity Date. September 30, 2007.
Revolving Credit Outstandings. At any time, the outstanding principal balance of Revolving Credit Loans.
Security Documents. A security agreement, a negative pledge agreement with respect to intellectual property of the Borrower and the Letter of Credit Pledge Agreement the Pledge Agreement, and any subsequent pledge or security agreements granted by Borrower to Lender, each in favor of the Lender to secure Obligations, in each case as amended and/or restated and in effect from time to time, and any additional documents evidencing or perfecting the Lender's lien on the Collateral.
Subsidiary. With respect to any Person, any corporation, association, joint stock company, business trust, partnership, limited liability company or other similar organization of which more than 50.0% of the ordinary voting power for the election of a majority of the members of the board of directors or other governing body of such entity is held or controlled by such Person or a Subsidiary of such Person; or any other such organization the management of which is directly or indirectly controlled by such Person or a Subsidiary of such Person through the exercise of voting power or otherwise; or any joint venture, whether incorporated or not, in which such Person has more than a 50.0% ownership interest.
Total Revolving Credit Outstandings. At any time, the sum of (i) The aggregate outstanding principal balance of Revolving Credit Loans and (ii) The Maximum Drawing Amount of Letters of Credit at such time.
1.2. Rules of Interpretation.
(a) All terms of an accounting or financial character used herein but not
defined herein shall have the meanings assigned thereto by GAAP, as in effect
from time to time, and all calculations for the purposes of Section VI hereof
shall be made in accordance with GAAP; provided that if any time after the date
hereof there shall occur any change in respect of GAAP from that used in the
preparation of the audited financial statements referred to in Section 4.6(a) in
a manner that would have a material effect on any matter which is material to
Section VI, the Borrower and the Lender will, within 10 Business Days after
notice from the Lender or the Borrower, as the case may be to that effect, and
continue in good faith negotiations with a view towards making appropriate
amendments to the provisions hereof acceptable to the Lender to reflect as
narrowly possible the effect on Section VI as in effect on the date hereof;
provided, further, that until such notice shall have been withdrawn or the
relevant provisions amended in accordance herewith, Section VI shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective.
(b) Except as otherwise specifically provided herein, reference to any document or agreement shall include such document or agreement as amended modified or supplemented and in effect from time to time in accordance with its terms and the terms of this Agreement.
(c) The singular includes the plural and the plural includes the singular. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.
(d) A reference to any Person includes its permitted successors and permitted assigns,
(e) The words "include", "includes" and "including" are not limiting.
(f) The words "herein", "hereof', "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.
(g) All terms not specifically defined herein or by GAAP that arc defined in the Uniform Commercial Code as in effect in The Commonwealth of Massachusetts, shall have the meanings assigned to them in such Uniform Commercial Code.
SECTION II
DESCRIPTION OF CREDIT
2.1. Revolving Credit Loans.
(a) Upon the terms and subject to the conditions of this Agreement, and in reliance upon the representations, warranties and covenants of the Borrower herein, the Lender agrees to make revolving credit loans (the "Revolving Credit Loans") to the Borrower at the Borrower's request from time to time from and after the Closing Date and prior to the Revolving Credit Maturity Date, provided that Total Revolving Credit Outstandings (after giving effect to all requested Revolving Credit Loans and Letters of Credit) shall not at any time exceed the lesser of (i) the Borrowing Base and (ii) the Revolving Credit Commitment. Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay, prepay and reborrow amounts, up to the limits imposed by this Section 2.1, from time to time between the Closing Date and the Revolving Credit Maturity Date upon request given to the Lender pursuant to Section 2.3. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Sections 3.1 and 3.2 have been satisfied as of the date of such request.
(b) The Revolving Credit Commitment shall terminate at 5:00 p.m. Boston time on the Revolving Credit Maturity Date.
2.2. The Note.
(a) The Revolving Credit Loans shall be evidenced by a promissory note in the form of Exhibit A hereto, dated as of the Closing Date (the "Note").
(b) The Borrower irrevocably authorizes the Lender to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on the Note, an appropriate notation on its Note Record reflecting (as the case may be) the making of such Loan or the receipt of such payment. The outstanding amount of the Loans set forth on the Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on the Lender's Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Note to make payments of principal of or interest on the Note when due.
2.3. Notice and Manner of Borrowing. Whenever the Borrower desires to obtain a Revolving Credit Loan hereunder, the Borrower shall give the Lender a telephonic notice promptly confirmed by a written Notice of Borrowing, which notices shall be irrevocable and which must be received no later than 2:00 p.m. Boston time on the date the requested Revolving Credit Loan is to be made. Such Notice of Borrowing shall specify the effective date and amount of the Revolving Credit Loan. If the written confirmation of any telephonic notification differs in any material respect from the action taken by the Lender, the records of the Lender shall control absent manifest error. If the Lender receives a Notice of Borrowing after the time specified in subsection (a) above, such Notice shall not be effective.
2.4. Interest Rates and Payment of Interest.
(a) Each Revolving Credit Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Prime Rate minus 0.25%, which rate shall change contemporaneously with any change in the Prime Rate. Such interest shall be payable monthly in arrears on the first Business Day of each month.
(b) If a Default shall occur, then at the option of the Lender (i) the unpaid balance of Loans shall bear interest, to the extent permitted by law, compounded daily at an interest rate equal to 2.0% per annum above the interest rate applicable to each such Loan in effect on the day such Default occurs, until such Default is cured or waived, and (ii) the Borrower shall pay to the Lender a fee (in addition to the Letter of Credit Fee) equal to 1.0% per annum of the Maximum Drawing Amount of all Letters of Credit outstanding during the period from the occurrence of such Default until such Default is cured or waived.
(c) All agreements between the Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Obligations or otherwise, shall the amount paid
or agreed to be paid to the Lender for the use or the forbearance of the
Obligations exceed the maximum permissible under applicable law. As used in this
Section 2.4(c), the term "applicable law" shall mean the law of The Commonwealth
of Massachusetts in effect as of the date hereof provided, however, that in the
event there is a change in the law which results in a higher permissible rate of
interest, then the Loan Documents shall be governed by such new law as of its
effective date. In this regard, it is expressly agreed that it is the intent of
Borrower and the Lender in the execution, delivery and acceptance of the Loan
Documents to contract in strict compliance with the laws of The Commonwealth of
Massachusetts from time to time in effect. If, under or from. any circumstances
whatsoever, fulfillment of any provision of any of the Loan Documents at the
time of performance of such provision shall be due, shall involve transcending
the limit of such validity prescribed by applicable law, then the obligation, to
be fulfilled shall automatically be reduced to the limits of such validity, and
if under or from any circumstances whatsoever the Lenders should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance of the Obligations and not to payment of interest. This provision shall
control every other provision of all Loan Documents.
2.5. Fees and Charges.
(a) The Borrower shall pay to the Lender an annual commitment fee (the "Commitment Fee"), computed on a daily basis and payable quarterly in arrears on the first Business Day of each quarter, equal to (i) the excess of (x) the Revolving Credit Commitment at the time (without giving effect to any Letters of Credit or requested Letters of Credit) over (y) Revolving Credit Outstandings from time to time, multiplied by (ii) 0.1667%.
(b) The Borrower shall pay to the Lender a fee (the "Letter of Credit Fee") at a rate per annum equal to (i) the face amount of each outstanding Letter of Credit multiplied by (ii) 1.25% with respect to Letters of Credit which are not expressly cash-secured. The Letter of Credit Fee shall be 1.0% per annum with respect to any Letters of Credit which are expressly and fully secured by a pledge of cash on deposit with Citizens. The Letter of Credit Fee shall be paid quarterly in arrears on the first Business Day of each quarter. The Borrower shall also pay to the Lender on demand standard documentation charges for the issuance of each Letter of Credit and the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Lender in connection with any Letter of Credit.
(c) Without limiting any of the Lender's other rights hereunder or by law, if any Loan or any portion thereof or any interest thereon or any other amount payable hereunder or under any other Loan Document is not paid within ten days after its due date, the Borrower shall pay to the Lender on demand a late payment charge equal to 5.0% of the amount of the payment due.
(d) The Borrower authorizes the Lender to charge to its Note Record or to any deposit account which the Borrower may maintain with the Lender the interest, fees, charges, taxes and expenses provided for in this Agreement the other Loan Documents or any other document executed or delivered in connection herewith or therewith.
2.6. Payments and Prepayments of the Loans
(a) On the Revolving Credit Maturity Date, the Borrower shall pay in full the unpaid principal balance of all outstanding Revolving Credit Loans, together with all unpaid interest thereon and all fees and other amounts due with respect thereto,
(b) Revolving Credit Loans may be prepaid at any time, without premium or penalty. Any such notice of prepayment shall be irrevocable. Prepayments of Revolving Credit Loans may be reborrowed to the extent provided in Section 2.1.
(c) If at any time Revolving Credit Outstandings exceed the lesser of (i) the Borrowing Base and (ii) the Revolving Credit Commitment, the Borrower shall immediately pay the amount of any such excess to the Lender for application to the Revolving Credit Loans.
2.7. Method of Payments
(a) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made in lawful money of the United States at the Lender's head office or at such other location that the Lender may from time to time designate, in each case in immediately available
funds, and shall he deemed to have been made only when made in compliance with this Section. All such payments shall be made without set-off or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Lender such additional amount in United States Dollars as shall be necessary to enable the Lender to receive the same net amount which the Lender would have received on such clue date had no such obligation been imposed upon the Borrower, The Borrower will deliver promptly to the Lender certificates or other valid vouchers or other evidence of payment reasonably satisfactory to the Lender for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document, The Lender may, and the Borrower hereby authorizes the Lender to, debit the amount of any payment not made by such time to the demand deposit accounts of the Borrower with the Lender or to its Note Record.
(b) If the Revolving Credit Commitment shall have been terminated or the
Obligations shall have been declared immediately due and payable pursuant to
Section 8.2 all funds received from or on behalf of the Borrower (including as
proceeds of Collateral) by the Lender in respect of Obligations, shall be
applied by the Lender in the following manner and order: (i) first, to reimburse
the Lender for any amounts payable pursuant to Sections 10.2 and 11.3 hereof;
(ii) second, to the payment of Commitment Fees, Letter of Credit Fees and any
other fees payable hereunder; (iii) third, to the payment of interest due on the
Loans and the Reimbursement Obligations; (iv) fourth, to the payment of the
outstanding principal balance of the Loans and the Reimbursement Obligations,
pro rata to the outstanding principal balance of each, and to provide the Lender
with cash collateral for any issued and outstanding Letters of Credit in an
amount determined by Lender to be necessary to secure such Obligations; (v)
fifth, to the payment of any other Obligations payable by the Borrower, pro rata
to the outstanding principal balance of each; and (vi) any remaining funds shall
be paid to whoever shall be entitled thereto or as a court of competent
jurisdiction shall direct.
2.8. Computation of Interest and Fees; Due Date. Interest and all fees payable hereunder shall be computed daily on the basis of a year of 360 days and paid for the actual number of days for which due. If the due date for any payment of principal is extended by operation of law, interest shall be payable for such extended time. If any payment required by this Agreement becomes due on a day that is not a Business Day such payment may be made on the next succeeding Business Day, and such extension shall be included in computing interest and fees in connection with such payment.
2.9. Increased Costs. In case any change made after the Closing Date in any law, regulation, treaty or official directive or the interpretation or application thereof by any court or by any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law):
(a) Subjects the Lender to any tax with respect to payments of principal or interest or any other amounts payable hereunder by the Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of the Lender imposed by the United States of America or any political subdivision thereof), or
(b) Imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, the Lender, or
(c) Imposes upon the Lender any other condition with respect to its obligations or performance under this Agreement or in respect of any Letter of Credit, and the result of any of the foregoing is to increase the cost to the Lender, reduce the income receivable by the Lender or impose any expense upon the Lender with respect to any Loans or its obligations under this Agreement or in respect of any Letter of Credit, the Lender shall notify the Borrower thereof. The Borrower agrees to pay to the Lender the amount of such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by the Lender of a statement in the amount and setting forth in reasonable detail the Lender's calculation thereof and the assumptions upon which such calculation was based, which statement shall be deemed true and correct absent manifest error.
2.10. Capital Requirements. If after the date hereof the Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof (by any governmental authority charged with the administration thereof or (ii) compliance by the Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on the Lender's or such holding company's capital as a consequence of the Lender's Revolving Credit Commitment to make Loans hereunder or its obligations in respect of any Letter of Credit to a level below that which the Lender or such holding company could have achieved but for such adoption, change or compliance (taking into consideration the Lender's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by the Lender to be material, then the Lender shall notify the Borrower thereof. The Borrower agrees to pay to the Lender the amount of such reduction of return on capital as and when such reduction is determined, payable within 90 days after presentation by the Lender of a statement in the amount and setting forth in reasonable detail the Lender's calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error) unless within such 90 day period the Borrower shall have prepaid in full all Obligations to the Lender, in which event no amount shall be payable to the Lender under this Section. In determining such amount, the Lender may use any reasonable averaging and attribution methods.
SECTION 2A
LETTERS OF CREDIT
2A.1 Issuance.
(a) Upon the terms and subject to the conditions hereof, the Lender, in reliance upon the representations and warranties of the Borrower contained herein, agrees to issue letters of credit (the "Letters of Credit") prior to the Revolving Credit Maturity Date for the account of the Borrower in such form as may be requested from time to time by the Borrower and agreed to by the Lender, provided that the Maximum Drawing Amount of all Letters of Credit shall not at any time exceed the Letter of Credit Sublimit (after giving effect to all requested Letters of Credit) and the sum of the outstanding amount of Revolving Credit Loans and the Maximum Drawing Amount of all Letters of Credit shall not at any time exceed the Revolving Credit Commitment; provided, further that no Letter of Credit shall have an expiration date later than the Maturity Date (unless extended beyond such date by the Lender in its sole discretion).
(b) THE BORROWER HAS EXECUTED AND DELIVERED TO THE LENDER A LETTER OF CREDIT PLEDGE AGREEMENT, DATED JUNE 8, 2004 (THE "LETTER OF CREDIT PLEDGE AGREEMENT"), IN CONNECTION WITH A LETTER OF CREDIT ISSUED IN CONNECTION WITH THE LEASE (THE "LEASE LETTER OF CREDIT") AND HAS DELIVERED TO THE LENDER CASH COLLATERAL UNDER THE LETTER OF CREDIT PLEDGE AGREEMENT EQUAL TO 100% OF THE MAXIMUM DRAWING AMOUNT UNDER SUCH LEASE LETTER(s) OF CREDIT. The Lease Letter of Credit shall not be deemed to be issued under the Revolving Credit Commitment or Letter of Credit Sublimit. At least three (3) Business Days prior to the proposed issuance date of any other Letter of Credit, the Borrower shall deliver to the Lender (i) a Letter of Credit Application setting forth the Maximum Drawing Amount of all Letters of Credit (including the requested Letter Of Credit, but excluding the Lease Letter of Credit), the requested language of the requested Letter of Credit (which shall be reasonably acceptable to Lender) and such other information as the Lender shall require, and (ii) if the Letter of Credit is to be secured by cash collateral, a designation of cash collateral under the Letter of Credit Pledge Agreement equal to 100.0% of the Maximum Drawing Amount of the requested Letter of Credit. Each request for the issuance of a Letter of Credit hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Sections 3.1 and 3.2 have been satisfied as of the date of such request.
2A.2 Reimbursement Obligation of the Borrower. In order to induce the
Lender to issue, extend and renew each Letter of Credit, the Borrower hereby
agrees to reimburse or pay to the Lender, with respect to each Letter of Credit
issued, extended or renewed by the Lender hereunder on each date that any draft
presented under any Letter of Credit is honored by the Lender or the Lender
otherwise makes payment with respect thereto, the Borrower shall pay (i) the
amount paid by the Lender under or with respect to such Letter of Credit, and
(ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever (including standard documentation charges for the issuance of each
Letter of Credit) incurred by the Lender in connection with any payment made by
the Lender under, or with respect to, such Letter of Credit. Interest on any and
all amounts remaining unpaid by the Borrower under this Section 2A2 at any time
from the date such amounts become due and payable (whether as stated in this
Section 2A.2, by acceleration or otherwise) until payment in full (whether
before or after judgment) shall be payable to the Lender on demand at a rate per
annum equal to 2.0% above the interest rate applicable to Revolving Credit Loans
at the time in the absence of an Event of Default.
2A.3 Letter of Credit Payments. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Lender shall notify the Borrower of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. The responsibility of the Lender to the Borrower shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. Any unpaid Reimbursement Obligations with respect to Letters of Credit shall be deemed to be Revolving Credit Loans and shall be charged to Borrower's Loan account.
2A.4 Obligations Absolute
(a) The Borrower's Reimbursement Obligations shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any set-off; counterclaim or defense to payment which the Borrower may have or have had against the Lender or any beneficiary of a Letter of Credit. The Borrower further agrees that the Lender shall not be responsible for, and the Borrower's Reimbursement Obligations shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower, against the beneficiary of any Letter of Credit or any such transferee.
(b) The Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrower agrees that any action taken or omitted by the Lender under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrower and shall not result in any liability on the part of the Lender to the Borrower.
2A.5 Reliance by the Lender. To the extent not inconsistent with Section 2A.4, the Lender shall be entitled to rely on and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, electronic facsimile transmission, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Lender.
SECTION III
CONDITIONS OF LOANS AND LETTERS OF CREDIT
3.1. Conditions Precedent to Initial Loans. The obligation of the Lender to make the initial Loans and to issue the initial Letter of Credit is subject to the satisfaction of the following conditions precedent on or prior to the Closing Date:
(a) The Lender shall have received the following agreements, documents, certificates and opinions in form and substance satisfactory to the Lender and duly executed and delivered by the parties thereto:
(i) This Agreement;
(ii) The Note, substantially in the form of Exhibit A hereto;
(iii) The Security Documents;
(iv) a UCC-l Financing Statement covering the Collateral;
(v) UCC-3 Termination Statements to terminate Encumbrances (other than Permitted Encumbrances) of Persons ether than the Lender of record against the Collateral;
(vi) Certificates of insurance or insurance binders evidencing compliance with Section 5.3 hereof and the applicable provisions of the Security Documents;
(vii) Borrowing Base Report as of the Closing Date;
(viii) A certificate of the Secretary or an Assistant Secretary of the Borrower with respect to resolutions of its Board of Directors or other authorized Committee thereof, authorizing the execution and delivery of the Loan Documents and identifying the officer(s) authorized to execute, deliver and take all other actions required under this Agreement, and providing specimen signatures of such officer(s);
(ix) The Certificate of Incorporation of the Borrower and all amendments and supplements thereto, as flied in the office of the Secretary of State of its jurisdiction of formation, certified by said Secretary of State as being a true and correct copy thereof;
(x) The By-laws of the Borrower and all amendments and supplements thereto, certified by the Secretary or an Assistant Secretary of the Borrower as being a true and correct copy thereof;
(xi) A certificate of the Secretary of State of the Borrower's jurisdiction of incorporation as to legal existence and good standing of the Borrower in such state;
(xii) A certificate of the Secretaries of State of each state in which the Borrower is doing business as to the due qualification and good standing of the Borrower as a foreign, corporation in such states;
(xiii) An opinion addressed to the Lender from Goodwin, Procter, LLP , counsel to the Borrower;
(xiv) A certificate of the chief financial officer of the Borrower as to the solvency of the
Borrower, the accuracy of the Borrower's representations and warranties and such other matters as the Lender may request;
(xv) A report in substantially the form of Exhibit D hereto signed on behalf of the Borrower by its chief financial officer with respect to the financial statements required to be delivered pursuant to Section 4.6; and
(xvi) Such other documents, instruments, opinions and certificates, and completion of such other matters, as the Lender may reasonably deem necessary or appropriate.
(b) No litigation, arbitration, proceeding or investigation shall be pending or threatened which questions the validity or legality of the transactions contemplated by any Loan Document or seeks a restraining order, injunction or damages in connection therewith, or which, in the judgment of the Lender, might adversely affect the transactions contemplated hereby or might have a materially adverse affect on the assets, business financial condition or prospects of the Borrower.
(c) All necessary filings and recordings against the Collateral shall have been completed and the Lender's liens on the Collateral shall have been perfected, as contemplated by the Security Documents.
(d) The Borrower shall have paid to the Lender all fees to be paid hereunder on or prior to the Closing Date.
3.2. Conditions Precedent to all Loans and Letters of Credit. The obligation of the Lender to make any Loan, including the initial Loan, and to issue any Letter of Credit is further subject to the following conditions:
(a) Receipt by the Lender of a Borrowing Base Report, together with an Accounts Receivable aging report and such other information regarding Accounts Receivable as the Lender may require, all in form and substance satisfactory to the Lender, and the Notice of Borrowing with respect to any Revolving Credit Loan or the Letter of Credit Application and Agreement with respect to any Letter of Credit;
(b) The Borrower shall have satisfied the conditions set forth in Sections 2.1 and 2A.l hereof;
(c) The outstanding Loans and Letters of Credit do not and, after giving effect to any requested Loan or Letter of Credit, will not exceed the limitations set forth in Sections 2.1 and 2A.1(a) hereof;
(d) The representations and warranties contained in Section IV shall be true and accurate in all material respects on and as of the date of such Notice of Borrowing or Letter of Credit Application and on the effective date of the making of each Loan or issuance of each Letter of Credit as though made at and as of each such date (except to the extent that such representations and warranties expressly relate to an earlier date);
(e) No Default or Event of Default shall have occurred and be continuing at the time of and immediately after the making of such requested Loan or the issuance of such requested Letter of Credit;
(f) The resolutions referred to in Section 3.1 shall remain in full force and effect; and
(g) No change shall have occurred in any law or regulation or interpretation thereof that, in the reasonable opinion of counsel for the Lender, would make it illegal or against the policy of any governmental agency or authority for the Lender to make Revolving Credit Loans hereunder or to issue Letters of Credit hereunder (as the case may be).
The making of each Loan and the issuance of each Letter of Credit shall be deemed to be a representation and warranty by the Borrower on the date of the making of such Loan or the issuance of such Letter of Credit as to the accuracy of the facts referred to in subsection (c) of this Section 3.2 and of the satisfaction of all of the conditions set forth in this Section 3.2.
SECTION IV.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, the Borrower represents and warrants to the Lender that except as set forth on Exhibit C attached hereto:
4.1. Organization; Qualification; Business.
(a) Each of the Borrower and its Subsidiaries (all of which are listed in Exhibit C attached hereto) (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is duly qualified and in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction (all of which are listed on Exhibit C attached hereto) where the nature of its properties or business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, financial condition, assets or properties of the Borrower or of the Borrower and its Subsidiaries taken as a whole.
(b) Since the date of the Audited Financial Statement, the Borrower has continued to engage in substantially the same business as that in which it was then engaged and is engaged in no unrelated business.
4.2. Corporate Authority; No Conflicts. The execution, delivery and performance of the Loan Documents and the transactions contemplated thereby are within the power and authority of' the Borrower and have been authorized by all necessary corporate proceedings, and do not and will not (a) contravene any provision of the Certificate of Incorporation or By-Laws of the Borrower or any law, rule or regulation applicable to the Borrower, (b) contravene any
provision of, or constitute an event of default or event that, but for the requirement that time elapse or notice be given, or both, would constitute an event of default under, any other agreement, instrument, order or undertaking binding on the Borrower, or (c) result in or require the imposition of any Encumbrance on any of the properties, assets or rights of the Borrower, except in favor of the Lender.
4.3. Valid Obligations. The Loan Documents and all of their respective terms and provisions are the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally, and except as the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceeding therefore may be brought. The Security Documents have effectively created in favor of the Lender legal, valid and enforceable security interests in the Collateral and such security interests are fully perfected first priority security interests.
4.4. Consents or Approvals. The execution, delivery and performance of the Loan Documents and the transactions contemplated herein do not require any approval or consent of, or filing or registration with, any governmental or other agency or authority, or any other Person (including without limitation any lessor or lessee of Borrower's properties), except under or as contemplated by the Security Documents.
4.5. Title to Properties; Absence of Encumbrances. Each of the Borrower and its Subsidiaries has good and marketable title to all of the properties, assets and rights of every name and nature now purported to be owned by it, and good and valid leasehold title to all of the properties, assets and rights of every name and nature now purported to be leased by it, including, without limitation, such properties, assets and rights as are reflected in the Audited Financial Statements (except such properties, assets or rights as have been disposed of in the ordinary course of business since the date thereof), free from all Encumbrances except Permitted Encumbrances, and free from all defects of title that might materially adversely affect such properties, assets or rights, or Borrower's or its Subsidiaries' operations conducted with respect thereto, taken as a whole. All material leases under which Borrower or its Subsidiaries is the lessor or lessee are in full force and effect and there are no existing defaults or events that with the giving of notice or passage of time or both could ripen into defaults, by the Borrower or, to the Borrower's knowledge, the lessor thereunder. No third parties possess any rights with respect to any of Borrower's or its Subsidiaries owned or, to the Borrower's knowledge, leased properties, the exercise of which would have a material adverse effect on the Borrower or its Subsidiaries or their respective operations, taken as a whole. All real property owned or leased by the Borrower (other than short-term residential rentals) is described in Exhibit C hereto.
4.6. Financial Statements; Indebtedness,
(a) The Borrower has furnished to the Lender its audited consolidated financial statements for the years ended March 31, 2006, March 31, 2005 and March 31, 2004 (the "Audited Financial Statement"). All such financial statements are prepared in accordance with GAAP applied on a consistent basis throughout the periods specified and present fairly the
financial position of the Borrower and its Subsidiaries as of such dates and the results of the operations of the Borrower and its Subsidiaries for such periods in all material respects. The Borrower has also furnished to the Lender its pro forma consolidated balance sheet as of August 31, 2006 and projections of its future consolidated results of operations, all of which were reasonable when made and continue to be reasonable at the date hereof.
(b) At the date hereof, the Borrower has no Indebtedness or other material liabilities, debts or obligations, whether accrued, absolute, contingent or otherwise, and whether due or to become due, including, but not limited to, liabilities or obligations on account of taxes or other governmental charges, that are not set forth on the Audited Financial Statement, on Exhibit C hereto or accrued in the ordinary course of business consistent with past practices since the date of the Audited Financial Statement.
4.7. Changes. Since the date of the Audited Financial Statement, there have been no changes in the assets, liabilities, financial, condition, business or prospects of the Borrower or any of its Subsidiaries (including as a result of any applicable law or governmental regulation, ruling or policy) other than changes in the ordinary course of business, the effect of which has not, in the aggregate, been materially adverse to the Borrower and its Subsidiaries taken as a whole.
4.8. Solvency. The Borrower has and, after giving effect to the Loans, will have, assets (both tangible and intangible) having a fair saleable value in excess of the amount required to pay the probable liability on its then-existing debts (whether matured or unmatured, liquidated or unliquidated, fixed or contingent); the Borrower has and will have access to adequate capital for the conduct of its business and the discharge of its debts incurred in connection therewith as such debts mature; the Borrower was not insolvent immediately prior to the making of the Loans and immediately after giving effect thereto, the Borrower will not be insolvent.
4.9. Defaults. As of the date of this Agreement, no Default exists.
4.10. Taxes. The Borrower and its Subsidiaries have filed all federal, state and other tax returns required to be filed, and all taxes, assessments and other governmental charges due from any of them have been fully paid, except for such taxes, assessments or charges that are being contested in good faith by appropriate proceedings and with respect to which (a) adequate reserves have been established and are being maintained in accordance with GAAP and (b) no lien has been filed to secure such taxes, assessments or charges. All such contests at the date hereof are described on Exhibit C hereto. The Borrower and its Subsidiaries have not executed any waiver that would have the effect of extending the applicable statute of limitations in respect of tax liabilities. The federal and state income tax returns of the Borrower and its Subsidiaries have not been audited or, to the best of the Borrower's knowledge, otherwise examined by any federal or state taxing authority. The Borrower and its Subsidiaries have established on their books reserves adequate for the payment of all federal, state and other tax liabilities.
4.11. Litigation. There is no litigation, arbitration, proceeding or investigation pending, or, to the knowledge of the Borrower's or any Subsidiary's officers, threatened, against the Borrower or any Subsidiary that, if adversely determined, may reasonably be expected to result
in a material judgment not fully covered by insurance, may reasonably be expected to result in a forfeiture of all or any substantial part of the property of the Borrower or its Subsidiaries, or may reasonably be expected to have a material adverse effect on the assets, business or prospects of the Borrower and its Subsidiaries taken as a whole.
4.12. Subsidiaries. All the Subsidiaries of the Borrower are listed on Exhibit C hereto. The Borrower (or any Subsidiary, if applicable) is the owner, free and clear of all Encumbrances, of all of the issued and outstanding stock or other equity interest of each Subsidiary. All shares of such stock or other equity interest held by the Borrower have been validly issued and are fully paid and nonassessable, and no rights to subscribe to any additional shares have been granted, and no options, warrants or similar rights are outstanding
4.13. Investment Company Act. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended.
4.14. Compliance. The Borrower has all necessary permits, approvals, authorizations, consents, variances, licenses, franchises, registrations and other rights and privileges (including patents, trademarks, trade names and copyrights) to allow it to own and operate its business and properties without any violation of laws, regulations, authorizations and orders of public authorities (including without limitation Environmental Laws) or the rights of others, except to the extent that any such violation would not have a material adverse effect on the business, financial condition or operation of the Borrower and its Subsidiaries taken as a whole. The Borrower and each Subsidiary are duly authorized, qualified and licensed under, and the Borrower, its Subsidiaries and all real properties owned or leased by them are in compliance with, all applicable laws, regulations, authorizations and orders of public authorities, including, without limitation, Environmental Laws, except to the extent that any such failure to be so authorized, qualified, licensed or in compliance would not have a material adverse effect on the business, financial condition or operation of the Borrower and its Subsidiaries taken as a whole. The Borrower and each Subsidiary have performed all obligations required to be performed by it under, and is not in default under or in violation of its Certificate of Incorporation or By-laws or any other agreement, lease, mortgage, note, bond, indenture license or other instrument or undertaking to which it is a party or by which any of it or any of its properties are bound, except for violations none of which, either individually or in the aggregate, would have any material adverse effect on the business, condition (financial or otherwise) or assets of the Borrower and its Subsidiaries taken as a whole.
4.15. ERISA. The Borrower and its ERISA Affiliates are in compliance in all
material respects with ERISA and the provisions of the Code and the regulations
and published interpretations thereunder applicable to the Plans. No ERISA Event
has occurred or is reasonably expected to occur, including by reason of the
consummation of the transactions contemplated by this Agreement that when taken
together with all other such ERISA Events, could reasonably be expected to
result in material liability to the Borrower or any of its ERISA Affiliates.
None of the Plans had any "unfunded benefit liabilities" (within the meaning of
Section 4001(a)(18) of ERISA) as of the last annual valuation dates applicable
thereto.
4.16. Environmental Matters.
(a) The Borrower and each of its Subsidiaries are in compliance with the terms and conditions of all permits, licenses and authorizations required under any Environmental Law, and are also in compliance with all applicable orders, decrees, judgments and injunctions, issued, entered, promulgated or approved under any Environmental Law, except to the extent failure to comply would not have a material adverse effect on the business, financial condition or operations of the Borrower and it Subsidiaries.
(b) No written notice, notification, demand, request for information, citation, summons or order has been issued and is outstanding, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to the best of the Borrower's knowledge, threatened by any governmental or other entity (i) with respect to any alleged failure by the Borrower or any of its Subsidiaries to have any permit, license or authorization required in connection with the conduct of its business or to comply with any Environmental Laws, except to the extent such failure would not have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries or (ii) regarding the presence of any Hazardous Material at, on or under any property now or previously owned, or, to the Borrower's knowledge, leased or used, by the Borrower or any of its Subsidiaries or any other location to which Hazardous Materials generated or used by the Borrower or any of its Subsidiaries from such property had been transported or which they have been disposed of.
(c) No material oral or written notification of a release of a Hazardous Material has been filed by or on behalf of the Borrower or any of its Subsidiaries and no property now or previously owned, or, to the Borrowers knowledge, leased or used, by the Borrower or any of its Subsidiaries is listed or, to the best of the Borrower's knowledge, proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or on any similar state list of sites requiring investigation or clean-up.
(d) There are no Encumbrances arising under or pursuant to any Environmental Law on any of the real property or properties owned, or, to the Borrower's knowledge, leased or used, by the Borrower or any of its Subsidiaries and no governmental actions have been taken or, to the best of the Borrower's knowledge, are in process which could subject any of such properties to such liens or Encumbrances or, as a result of which the Borrower or any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any property owned by it in any deed to such property.
(e) Neither the Borrower nor any of its Subsidiaries nor, to the best knowledge of the Borrower, any previous owner, tenant, occupant or user of any property owned by the Borrower or any of its Subsidiaries has (i) engaged in or permitted any operations or activities upon or any use or occupancy of any owned, leased or used property, or any portion thereof, for the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping or disposal of any Hazardous Materials on, under, in or about such property, except to the extent commonly used in day-to-day operations of such property and in such case only in compliance in all material respects with all Environmental Laws, or (ii) transported any Hazardous Materials to, from or across such property except to the extent commonly used in day-to-day operations of
such property and, in such case, in compliance in all material respects with, all Environmental Laws; nor to the best knowledge of the Borrower have any Hazardous Materials migrated from other properties upon, about or beneath such property, nor, to the best knowledge of the Borrower, are any Hazardous Materials presently constructed, deposited, stored or otherwise located on, under, in or about such property except to the extent commonly used in day-to-day operations of such property and, in such case, in compliance in all material respects with all Environmental Laws.
4.17. Restrictions on the Borrower. The Borrower is not party to or bound by any contract, agreement or instrument, nor subject to any charter or other corporate restriction which will, under current or foreseeable conditions, materially and adversely affect the business, property, assets, operations or conditions, financial or otherwise of the Borrower or any of its Subsidiaries.
4.18. Labor Relations. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened, except for such complaints, grievances and arbitration proceedings which, if adversely decided, would not have a material and adverse effect on the condition (financial or otherwise), properties, business or results of operations of the Borrower or any of its Subsidiaries, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries, except for any such labor action as would not have a material and adverse effect on the condition (financial or otherwise) properties, business or results of operations of the Borrower or any of its Subsidiaries and (iii) to the best knowledge of the Borrower, no union representation question exists with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower, no union organizing activities are taking place, except for any such question or activities as would not have a material and adverse effect on the condition (financial or otherwise), properties, business or results of operations of the Borrower or any of its Subsidiaries.
4.19. Trade Relations. There exists no actual or, to the best knowledge of the Borrower, threatened termination, cancellation or limitation of, or any material modification or change in, the business relationship between the Borrower or any of its Subsidiaries and any customer or any group of customers whose purchases, individually or in the aggregate; are material to the business of the Borrower and its Subsidiaries, taken as a whole, or with any material vendor, except in each case, where the same could not reasonably be expected to have a material adverse effect on the business, financial condition, assets or properties of the Borrower and its Subsidiaries, taken as a whole.
4.20. Margin Rules. The Borrower does not own or have any present intention of purchasing or carrying, and no portion of any Loan shall be used for purchasing or carrying, any "margin security" or "margin stock" as such terms are used in Regulations T, U or X of the Board of Governors of the Federal Reserve System.
4.21. Disclosure. No representation or warranty made by the Borrower in any Loan Document and no document or information furnished to the Lender by or on behalf of or at the request of the Borrower in connection with any of the transactions contemplated by the Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained therein not misleading in light of the circumstances in which they are made.
SECTION V
AFFIRMATIVE COVENANTS
The Borrower covenants that so long as any Loan, Letter of Credit or other Obligation remains outstanding or the Lender has any obligation to lend or to issue any Letter of Credit hereunder:
5.1. Financial Statements. The Borrower shall furnish to the Lender:
(a) As soon as available to the Borrower, but in any event within 120 days after the end of each fiscal year commencing with the fiscal year ending March 31, 2007, the Borrower's consolidated and consolidating balance sheets as of the end of such fiscal year and related consolidated and consolidating statements of income, retained earnings and cash flow for such year, prepared in accordance with GAAP and audited and certified without qualification by the Borrower's Accountants in the case of such consolidated statements, and certified by the chief financial officer of the Borrower in the case of such consolidating statements; and, concurrently with such financial statements, a copy of the Borrower's Accountants management report.;
(b) As soon as available to the Borrower, but in any event within 45 days after the end of each fiscal quarter, the Borrower's consolidated and consolidating balance sheets as of the end of and related consolidated and consolidating statements of income, retained earnings and cash flow for, the fiscal quarter then ended and the portion of the year then ended prepared in accordance with GAAP and certified by the chief financial officer of the Borrower, except for lack of footnotes and subject to normal, recurring year-end adjustments that shall not in the aggregate be material in amount;
(c) Concurrently with the delivery of each financial statement pursuant to subsections (a) and (b) of this Section 5.1, a covenant compliance report in substantially the form of Exhibit D hereto signed on behalf of the Borrower by its chief financial officer;
(d) Deleted;
(e) So long as any Loan is outstanding, as soon as available, but in any event within 20 days after the end of each month, and so long as no Loan is outstanding, as soon as available, but in any event within 30 days after the end of each fiscal quarter, a Borrowing Base Report, together with an Accounts Receivable aging report and such other information regarding Accounts Receivable as the Lender may require;
(f) As soon as available to the Borrower, but in any event within 90 days after the beginning of each fiscal year, the Borrower's projections for such fiscal year, prepared on a quarterly basis and including consolidated balance sheets and statements of income, retained earnings and cash flows;
(g) Promptly after the receipt thereof by the Borrower, copies of any reports (including any so-called management letters) submitted to the Borrower by independent public accountants in connection with any annua1 or interim review of the accounts of' the Borrower made by such accountants;
(h)Deleted; and
(i) From time to time, such other financial data and information about the Borrower or its Subsidiaries as the Lender may reasonably request.
5.2. Conduct of Business. The Borrower and each of its Subsidiaries shall:
(a) Duly observe and comply in all material respects with all laws, regulations, decrees, orders, judgments and valid requirements of any governmental authorities applicable to its corporate existence, rights and franchises, to the conduct of its business and to its property and assets (including without limitation all Environmental Laws and ERISA), and shall maintain and keep in full force and effect and comply in all material respects with all licenses and permits necessary to the proper conduct of its business, except where the failure to comply in any instance would not have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole; and
(b) Maintain their existence (except to the extent permitted pursuant to
Section 7.4) and remain or engage substantially in the same business as that in
which they are now engaged and in no unrelated business.
5.3 Maintenance and Insurance.
(a) The Borrower and each of its Subsidiaries shall maintain their properties in good repair, working order and condition, ordinary wear and tear and damage by fire or other casualty excepted, as required for the normal conduct of their business.
(b) The Borrower and each of its Subsidiaries shall at all times maintain liability and casualty insurance on its properties (including all Collateral) with financially sound and reputable insurers in such amounts and with such coverages, endorsements, deductibles and expiration dates as the officers of the Borrower in the exercise of their reasonable judgment deem to be adequate, as are customary in the industry for companies of established reputation engaged in the same or similar business and owning or operating similar properties and as shall be reasonably satisfactory to the Lender. The Lender shall be named as loss payee only with respect to any insurance policy in Borrower's name, additional insured and/or mortgagee under such insurance as the Lender shall require from time to time, and the Borrower shall provide to the Lender lass payable endorsements in form and substance reasonably satisfactory to the
Lender. In addition, the Lender shall be given thirty (30) days advance notice of any cancellation of insurance. In the event of failure to provide and maintain insurance as herein provided, the Lender may, at its option, provide such insurance and charge the amount thereof to the Borrower as a Revolving Credit Loan. The Borrower shall furnish to the Lender certificates or other evidence satisfactory to the Lender of compliance with the foregoing insurance provisions. The Lender shall not, by the fact of approving, disapproving or accepting any such insurance, incur any liability for the form or legal sufficiency of insurance contracts, solvency of insurance companies or payment of law suits, and the Borrower hereby expressly assumes full responsibility therefore and liability, if any, thereunder.
5.4 Taxes. The Borrower shall pay or cause to be paid all taxes, assessments or governmental charges on or against it or any of its Subsidiaries or its or their properties on or prior to the time when they become due; except for any tax, assessment or charge that is being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established and are being maintained in accordance with GAAP if no Encumbrance shall have been flied to secure such tax, assessment or charge.
5.5. Inspection. The Borrower shall permit the Lender and its designees, at any reasonable time and at reasonable intervals of time, and upon reasonable notice (or if a Default shall have occurred and is continuing, at any time and without prior notice), to (i) visit and inspect the United States properties of the Borrower and its Subsidiaries, (ii) examine and make copies of and take abstracts from the United States books and records of the Borrower and its Subsidiaries, and (iii) discuss the affairs, finances, and accounts of the Borrower and its Subsidiaries with their appropriate officers, employees and independent accountants, all at the expense of the Borrower. Without limiting the generality of the foregoing, the Borrower will permit reviews, at least once annually (and semi-annually until such time as Borrower has provided audited fiscal financial statements to Lender as required pursuant to Section 5.1 of this Agreement) and during any period in which Loans have remained outstanding for at least thirty (30) days, of the United States books and records of the Borrower and its Subsidiaries to be carried out at the Borrower's expense by commercial finance examiners (whether employed by the Lender or by third parties) designated by the Lender. The Borrower shall also permit the Lender to arrange for verification of Accounts Receivable, under reasonable procedures, directly with any account debtors or by other methods.
5.6. Maintenance of Books and Records. The Borrower shall keep adequate books and records of account, in which true and complete entries will be made reflecting all of its and its Subsidiaries' business and financial transactions in accordance with GAAP and applicable law.
5.7. Use of Proceeds.
(a) The Borrower will use the proceeds of Revolving Credit Loans solely for the working capital needs of the Borrower, including the payment of the costs and expenses of the transactions contemplated hereby.
(b) No portion of any Loan shall be used for the "purpose of purchasing or carrying" any "margin stock" or "margin security" as such terms are used in Regulations T, U and X of the
Board of Governors of the Federal Reserve System, or otherwise in violation of such regulations.
5.8. Further Assurances. At any time and from time to time the Borrower shall execute and deliver such further documents and take such further action as may reasonably be requested by the Lender to affect the purposes of the Loan Documents.
5.9. Notification Requirements. The Borrower shall furnish to the Lender:
(a) Promptly upon becoming aware of the existence of any condition or event that constitutes a Default, written notice thereof specifying the nature and duration, thereof and the action being or proposed to be taken with respect thereto;
(b) Promptly upon becoming aware of any litigation or of any investigative proceedings by a governmental agency or authority commenced or threatened against the Borrower or any of its Subsidiaries of which they have notice, the outcome of which would or might have a materially adverse effect on the assets, business or prospects of the Borrower alone or the Borrower and its Subsidiaries on a consolidated basis, written notice thereof and the action being or proposed to be taken with respect thereto; and
(c) Promptly after any occurrence or after becoming aware of any condition affecting the Borrower or any Subsidiary which might constitute a material adverse change in or which might have a material adverse effect on the business, properties or condition (financial or otherwise) of the Borrower alone or the Borrower and its Subsidiaries, taken as a whole, written notice thereof.
5.10. ERISA Compliance and Reports.
(a) Each Plan shall comply in all material respects with ERISA and the Code, except to the extent failure to comply in any instance would not have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole.
(b) With respect to any Plan, the Borrower shall, or shall cause its ERISA Affiliates to furnish to the Lender promptly as soon as possible and in any event within 10 days after the Borrower or any of its ERISA Affiliates knows that any ERISA Event has occurred or expected to occur, a statement of the chief financial officer of the Borrower describing such ERISA Event, including copies of any notice concerning such ERISA Event received from the PBGC, a plan administrator, or from a Multiemployer Plan sponsor, and the action, if any, the Borrower or such ERISA Affiliate proposes to take with respect thereto promptly after the adoption of any Pension Plan, the Borrower shall notify the Lender of such adoption.
5.11. Environmental Compliance.
(a) The Borrower and its Subsidiaries will comply in all material respects with all applicable Environmental Laws in all jurisdictions in which any of them operates now or in the future, and the Borrower and its Subsidiaries will comply in all material respects with all such Environmental Laws that may in the future be applicable to the Borrower's or any Subsidiary's business, properties and assets.
(b) If the Borrower or any Subsidiary shall (i) receive notice that any material violation of any Environmental Law may have been committed or is about to be committed by the Borrower or any Subsidiary, (ii) receive notice that any administrative or judicial complaint or order has been filed or is about to be filed against the Borrower or any Subsidiary alleging a material violation of any Environmental Law requiring the Borrower or any Subsidiary to take any action in connection with the release of Hazardous Materials into the environment, (iii) receive any notice from a federal, state or local government agency or private party alleging that the Borrower or any Subsidiary may be liable or responsible for any material amount of costs associated with a response to or cleanup of a release of Hazardous Materials into the environment or any damages caused thereby, (iv) become aware of any investigative action or proceedings by a governmental agency or authority commenced or threatened against the Borrower or any of its Subsidiaries regarding any potential violation of Environmental Laws or any spill, release, discharge or disposal of any Hazardous Material or (v) notify any governmental agency or authority regarding any potential violation of Environmental Laws or any spill, release, discharge or disposal of any Hazardous Material by the Borrower or any Subsidiary, the Borrower shall promptly notify the Lender thereof (together with a copy of any such notice) and of any action being or proposed to be taken with respect thereto and thereafter shall continue to furnish to the Lender all further notices, demands, reports and other information regarding the foregoing.
5.12. Loss or Depreciation of Collateral. The Borrower shall, notify the Lender promptly of the occurrence at any time of the following events if, individually or in the aggregate, the amount involved in connection with such events exceeds $750,000.00: (i) rejection or return of any goods or services giving rise to an Eligible Account to the extent such rejection or return is not in the ordinary course of business, (ii) repossession, loss of or damage to any goods giving rise to any Eligible Account; (iii) any request by an account debtor for credit, adjustment, set off or counterclaim of or with respect to an Eligible Account; (iv) any adjustment by the Borrower of the amount owing on an Eligible Account; (v) any goods, services or other dispute; (vi) any material delay in the Borrower's performance of any of its obligations to any customer if the Borrower has an Eligible Account with such customer; and (vii) any other material event affecting Eligible Accounts or the value or amount thereof, including without limitation any event which would result in an Eligible Account no longer qualifying as an Eligible Account.
5.13. Operating Accounts. Borrower shall continue to use Lender as the primary depository bank for the Borrower's United States-based operating accounts.
SECTION VI
FINANCIAL COVENANTS
The Borrower covenants that so long as any Loan, Letter of Credit or other Obligation remains outstanding, or the Lender has any obligation to make any Loan or issue any Letter of Credit hereunder:
6.1. Consolidated Tangible Net Worth. The Borrower shall at all times maintain a
Consolidated Tangible Net Worth of not less than (a) $45,000,000.00 as of March 31, 2006, and (b) for each fiscal quarter thereafter, an amount equal to (i) the amount of Consolidated Tangible Net Worth required to be maintained for the preceding fiscal quarter, plus (ii) 50.0% of Consolidated Net Income for such preceding fiscal quarter (for purposes of this clause (ii), only positive Consolidated Net Income shall be included and any net losses shall be disregarded).
6.2. Cash Requirements.
(a) The Borrower and Virtusa Securities Corporation shall at all times maintain aggregate cash and cash equivalents in United States based accounts, or otherwise on hand in the United States, of not less than $10,000,000.00, net of any outstanding Loans or Reimbursement Obligations.
(b) The Borrower and its Subsidiaries shall at all times maintain cash and cash equivalents including both foreign-based accounts and United States-based accounts of at least $15,000,000.00.
(c) The Borrower and its Subsidiaries shall not at any time hold cash and cash equivalents in foreign-based accounts, or otherwise on hand outside the United States, in excess of $20,000,000.00.
6.3 Maximum Net Loss. The Borrower and its Subsidiaries shall not incur
(i) a consolidated net loss in an amount greater than $1,250,000.00 (plus
FAS123R charges) in any fiscal quarter, or (ii) a consolidated net loss in any
two consecutive fiscal quarters.
6.4. Capital Expenditures. The Borrower shall not make aggregate Capital Expenditures equal to or in excess of $7,500,000.00 during the fiscal year ending March 31, 2007 or any fiscal year thereafter.
SECTION VII
NEGATIVE COVENANTS
The Borrower covenants that so long as any Loan, Letter of Credit or other Obligation remains outstanding or the Lender has any obligation to make any Loan or to issue any Letter of Credit hereunder, without the prior written consent of the Lender:
7.1. Indebtedness. Neither Borrower nor Virtusa Securities Corporation shall create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness other than the following:
(a) Obligations;
(b) Indebtedness existing as of the date of this Agreement and disclosed on Exhibit C hereto but not any increase in the principal amounts thereof nor any renewals or refinancings thereof;
(c) Indebtedness for taxes, assessments or governmental charges to the extent that payment therefore shall at the time not be required to be made in accordance with Section 5.4;
(d) Current trade liabilities on open account for the purchase price of services, materials and supplies incurred by the Borrower in the ordinary course of business (not as a result of borrowing), so long as all of such open account Indebtedness shall be promptly paid and discharged when due or in conformity with customary trade terms and practices, except for any such open account Indebtedness which is being contested in good faith by the Borrower, as to which adequate reserves required by GAAP have been established and are being maintained and as to which no Encumbrance has been placed on any property of the Borrower;
(e) Intentionally Omitted;
(f) Other Indebtedness incurred in the ordinary course of business and renewals and refinancings thereof, provided that such Indebtedness does not exceed $1,000,000.00 in the aggregate at any time outstanding; and
(g) Guarantees permitted under Section 7.2 hereof.
7.2. Contingent Liabilities. Neither the Borrower nor Virtusa Securities Corporation shall create, incur, assume, guarantee or be or remain liable with respect to any Guarantees other than (i) Guarantees existing on the date of this Agreement and disclosed on Exhibit C hereto, (ii) Guarantees resulting from the endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (iii) Guarantees in an amount not to exceed $1,000,000.00 in the aggregate at any time outstanding, and (iv) Guarantees of employee loans and obligations in an amount not to exceed $1,000,000.00 in the aggregate at any time outstanding.
7.3. Encumbrances. Neither the Borrower nor Virtusa Securities Corporation shall create, incur, assume or suffer to exist any mortgage, pledge, security interest, lien or other charge or encumbrance of any kind, including the lien or retained security title of a conditional vendor, upon or with respect to any of its property or assets ("Encumbrances"), or assign or otherwise convey any right to receive income, including the sale or discount of Accounts Receivable with or without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of the Lender to secure Obligations;
(b) Encumbrances existing as of the date of this Agreement and disclosed in Exhibit C hereto;
(c) Intentionally Omitted;
(d) Encumbrances securing Indebtedness to the extent such Indebtedness is permitted by Section 7.1(f);
(e) Liens for taxes, fees, assessments and other governmental charges to the extent that
payment of the same may be postponed or is not required in accordance with the provisions of Section 5.4;
(f) Landlords' and lessors' liens in respect of rent not in default or liens in respect of pledges or deposits under workmen's compensation, unemployment insurance, social security laws, or similar legislation (other than ERISA) or in connection with appeal and similar bonds incidental to litigation; mechanics', warehouseman's, laborers' and materialmen's and similar liens, if the obligations secured by such liens are not then delinquent; liens securing the performance of bids, tenders, contracts (other than for the payment of money); and liens securing statutory obligations or surety, indemnity, performance or other similar bonds incidental to the conduct of the borrower's or a Subsidiary's business in the ordinary course and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business;
(g) Judgment liens securing judgments that (i) are not fully covered by insurance, and (ii) shall not have been in existence for a period longer than 30 days after the creation thereof or, if a stay of execution shall have been obtained, for a period longer than 30 days after the expiration of such stay;
(h) Rights of lessors under capital leases to the extent such capital leases are permitted hereunder;
(i) Easements, rights of way, restrictions and other similar charges or Encumbrances relating to real property and not interfering in a material way with the ordinary conduct of the Borrower's business; and
(j) Liens constituting a renewal, extension or replacement of any Permitted Encumbrance.
7.4. Merger: Purchase. Sale or Lease of Assets; Reorganization; Liquidation.
(a) The Borrower and its Subsidiaries shall not:
(i) Acquire the capital stock or other equity interests or all or substantially all of the assets of another Person, whether or not involving a merger or consolidation with such other Person, unless (w) such other Person is in substantially the same field of business as the Borrower and substantially all of the assets acquired in such acquisition are used or useful to the business of the Borrower by the Borrower, (x) the total purchase price far any single acquisition does not exceed $4,000,000.00 (unless a greater amount is consented to by the Lender), (y) if a merger, the Borrower or one of its Subsidiaries is the survivor of such merger and (z) both immediately before and after giving effect to such acquisition, no Default shall exist;
(ii) Merge or consolidate into or with any other Person, or commence a reorganization, other than (x) a merger of any Subsidiary with and into the Borrower, with the Borrower as the survivor of such merger, (y) a merger or consolidation into or with another Person, or a reorganization, in each case, where the holders of more than 50.0% of the ordinary voting power for the election of a majority of the members of the board of directors of the
Borrower prior to such transaction retain such power after the transaction, or
(z) a merger permitted by Section 7.4(a)(i) above; or
(iii) Liquidate or dissolve, except that any wholly-owned Subsidiary may liquidate or dissolve.
(b) The Borrower shall not sell, lease (as lessor) or otherwise dispose of any assets or properties, other than sales of Qualified investments and inventory and obsolete or worn out equipment, in each case in the ordinary course of business and consistent with past practices.
7.5. Subsidiaries. The Borrower shall not permit any of its Subsidiaries to issue any additional shares of its capital stock or other equity securities, any options therefore or any securities convertible thereto, other than to the Borrower. Neither the Borrower nor any of its Subsidiaries shall sell, transfer or otherwise dispose of any of the capital stock or other equity securities of a Subsidiary, except to the Borrower or any of its wholly-owned subsidiaries.
7.6. Restricted Payments. The Borrower shall not pay, make, declare or authorize any Restricted Payment other than:
(a) Compensation paid to employees, officers and directors in the ordinary course of business and consistent with prudent business practices;
(b) Dividends payable solely in common stock;
(c) Dividends paid by any Subsidiary to the Borrower; and
(d) Redemptions of shares of capital stock of the Borrower which are "restricted securities" (as defined in Rule 144 promulgated under the Securities Act of 1933) in an amount not to exceed 5.0% of the aggregate total voting stock of the Borrower issued and outstanding on a fully diluted basis.
7.7. Investments; Purchases of Assets. The Borrower shall not make or maintain any Investments or purchase or otherwise acquire any material amount of assets other than:
(a) Investments existing on the date hereof in Subsidiaries;
(b) Qualified Investments;
(c) Capital Expenditures to the extent permitted by Section 6.4;
(d) Normal trade credit extended in the ordinary course of business and consistent with prudent business practice;
(e) Advances to employees for business related expenses to be incurred in the ordinary course of business and consistent with past practices in an amount not to exceed $500,000.00 in the aggregate outstanding at any one time, provided that advances to any single employee shall
not exceed $50,000.00 in the aggregate;
(f) Investments in any Subsidiary of the Borrower in the ordinary course of business or any other investment in a Subsidiary which does not exceed $10,000,000 in the aggregate; and
(g) Loans to any Person (including employees) not in the ordinary course of business not to exceed $300,000.00 in the aggregate outstanding at any one time.
7.8. ERISA Compliance. Neither the Borrower nor any of its ERISA Affiliates nor any Plan shall (i) engage in any Prohibited Transaction which would have a material adverse effect on the business, financial condition or operations of the Borrower and its Subsidiaries taken as a whole, (ii) incur any "accumulated funding deficiency" (within the meaning of Section 412(a) of the Code and Section 302 of ERISA), whether or not waived, (iii) permit to exist any material amount of "unfunded benefit liabilities" (within the meaning of Section 4001.(a)(1 8) of ERISA), (iv) terminate any Pension Plan in a manner which could result in the imposition of a lien on any property of the Borrower or any of its Subsidiaries, (v) fail to make any required contribution to any Multiemployer Plan or (vi) completely or partially withdraw from a Multiemployer Plan if such complete or partial withdrawal will result in any material withdrawal liability under Title IV of ERISA.
7.9. Transactions with Affiliates. Except as otherwise provided herein, the Borrower will not directly or indirectly, enter into any purchase, sale, lease or other transaction with any Affiliate except (i) transactions in the ordinary course of business on terms that are no less favorable to the Borrower than those which might be obtained at the time in a comparable arm's length transaction with any Person who is not an Affiliate, including without limitation, any transfer pricing, service fee or similar agreements between or among Borrower and its Affiliates, (ii) employment contracts with senior management of the Borrower entered into in the ordinary course of business and consistent with prudent business practices and (iii) for the avoidance of doubt, transactions relating to Restricted Payments permitted under Section 7.6. Notwithstanding the foregoing, the Borrower will not directly or indirectly, pay any management, consulting, overhead, indemnity, guarantee or other similar fee or charge to any Affiliate; and
7.10. Fiscal Year. The Borrower and its Subsidiaries shall not change their March 31 fiscal year ends without the prior written consent of the Lender.
SECTION VIII
DEFAULTS
8.1. Events of Default. There shall be an Event of Default hereunder if any of the following events occurs:
(a) The Borrower or any Subsidiary shall fail to pay any principal of any Loan, any Reimbursement Obligation or any interest, fees or other amounts owing by it under any Loan Document or in respect of any Obligation when the same shall become due and payable, whether at maturity or at any accelerated date of maturity or at any other date fixed for payment; or
(b) The Borrower or any Subsidiary shall fail to perform or comply with any term., covenant or agreement applicable to it contained in Sections 5.1,5.2(b), 5.5, 5.6, 5.7, 5.9, 5.11, 6 and 7 of this Agreement; or
(c) The Borrower or any Subsidiary shall fail to perform or comply with any term, covenant or agreement applicable to it (other than as specified in subsections 8,1(a) or (b) hereof) contained in this Agreement or any other Loan Document and such default shall continue for ten (10) Business Days; or
(d) Any representation or warranty of the Borrower made in this Agreement or any other Loan Document or in any certificate, notice or other writing delivered hereunder or thereunder shall prove to have been false in any material respect upon the date when made or deemed to have been made; or
(e) The Borrower or any of its Subsidiaries shall fail to pay when due (after any applicable period of grace) any amount payable (i) under any Indebtedness exceeding $500,000.00 in principal amount or (ii) under any agreement for the use a real or personal property requiring aggregate payments in excess of $500,000.00 in any twelve month period, or fail to observe or perform any term, covenant or agreement evidencing or securing such indebtedness or relating to such agreement for the use of real or personal property; or
(f) The Borrower or any of its Subsidiaries shall (i) apply for or consent to the appointment of or the taking of possession by, a receiver, custodian, trustee, liquidator or similar official of itself or of all or a substantial part of its property, (ii) be generally not paying its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect), (v) take any action or commence any case or proceeding under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or any other law providing for the relief of debtors, (vi) fail to contest in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the United States Bankruptcy Code or other law, or (vii) take any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced against the Borrower or any of its Subsidiaries, without the application or consent of such Borrower or such Subsidiary in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets, or (iii) similar relief in respect of it, under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts or any other law providing for the relief of debtors, and such proceeding or case shall continue undismissed, or unstayed and in effect, for a period of 30 days; or an order for relief shall be entered in an involuntary case under the Federal Bankruptcy Code, against the Borrower or such Subsidiary; or action under the laws of the jurisdiction of incorporation or organization of the Borrower or any of its Subsidiaries similar to any of the foregoing shall be taken with respect to the Borrower or such Subsidiary and shall continue
unstayed and in effect for a period of 45 days; or
(h) A judgment or order for the payment of money shall be entered against the Borrower or any of its Subsidiaries by any court, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or such Subsidiary, that in the aggregate exceeds $500,000.00 in value, the payment of which is not fully covered by insurance in excess of any deductibles not exceeding $50,000.00 in the aggregate, and such judgment, order, warrant or process shall continue undischarged or unstayed for 30 days; or
(i) There shall occur a cessation of a substantial. part of the business of the Borrower for a period which materially adversely affects Borrower's capacity to continue its business on a profitable basis; or the Borrower shall suffer the loss or revocation of any material license or permit now held or hereafter acquired which is necessary to the continued or lawful operation of its business; or Borrower shall be enjoined, restrained or in any other way prevented by a court, governmental or administrative order from conducting all or any material part of its business; or
(j) The Borrower or any ERISA Affiliate shall fail to pay when due any material amount that they shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA, unless such liability is being contested in good faith by appropriate proceedings, the Borrower or the ERISA Affiliate, as the case may be, has established and is maintaining adequate reserves in accordance with GAAP and no lien shall have been filed to secure such liability; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or
(k) Any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the express terms thereof or with the express prior written agreement, consent or approval of the Lender, or any action at law or in equity or other legal proceeding to cancel, revoke or rescind any Loan Document shall be commenced by or on behalf of the Borrower, or any court or other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or shall issue a judgment, order, decree or ruling to the effect that, any one or mare of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof, or any Encumbrance in favor of the Lender created under any of the Loan Documents shall at any time (other than by reason of the Lender relinquishing such Encumbrance) cease in any material respect to constitute a valid and, to the extent applicable, perfected Encumbrance on any material portion of the Collateral.
8.2 Remedies. Upon the occurrence of an Event of Default described in subsections 8.1(f) and (g), immediately and automatically, and upon the occurrence of any other Event of Default, at any time thereafter while such Event of Default is continuing, at the option of the Lender and upon the Lender's declaration:
(a) The obligation of the Lender to make any further Loans and to issue any Letters of Credit hereunder shall terminate;
(b) The unpaid principal amount of the Loans together with accrued interest, all Reimbursement Obligations and all other Obligations shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived;
(c) The Borrower shall immediately pledge to Lender cash collateral in an amount determined by Lender to be sufficient to fully secure any Obligations of Borrower to Lender with respect to any issued Letters of Credit; and
(d) The Lender may exercise any and all rights it has under this Agreement, the other Loan Documents or at law or in equity, and proceed to protect and enforce its rights by any action at law or in equity or by any other appropriate proceeding.
No remedy conferred upon the Lender in the Loan Documents is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or by any other provision of law. Without limiting the generality of the foregoing or of any of the terms and provisions of any of the Security Documents, if and when the Lender exercises remedies under the Security Documents with respect to Collateral, the Lender may, in its sole discretion, determine which items and types of Collateral to dispose of and in what order and may dispose of Collateral in any order the Lender shall select in its sole discretion, and the Borrower consents to the foregoing and waives all rights of marshalling with respect to all Collateral.
SECTION IX
ASSIGNMENT AND PARTICIPATJON
9.1. Assignment.
(a) Citizens shall have the right to assign at any time any portion of its Commitment hereunder and its interests in the risk relating to any Loans to other banks or financial institutions (each an "Assignee") and to furnish from time to time to prospective Assignees copies of the Loan Documents and any information concerning the Borrower in its possession, provided that if no Default or Event of Default shall have occurred and be continuing, each Assignee which is not an Affiliate of Citizens or a Federal Reserve Bank shall be subject to prior approval by the Borrower (such approval not to be unreasonably withheld, conditioned or delayed). Each Assignee shall execute and deliver to Citizens and the Borrower a joinder agreement. Upon the execution and delivery of such joinder agreement, (a) such Assignee shall, on the date and to the extent provided in such joinder agreement, become a "Lender" party to this Agreement and the other Loan Documents for all purposes of this Agreement and the other Loan Documents and shall have all rights and obligations of a "Lender" with a Commitment as set forth in such joinder agreement, and Citizens shall, on the date and to the extent provided in such joinder agreement, be released prospectively from its obligations hereunder and under the other Loan Documents to a corresponding extent (and, in the case of an assignment covering all of the
remaining portion of Citizens' rights and obligations under this Agreement, Citizens shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 10.3 and to any fees accrued for its account hereunder and not yet paid); (b) the assigning Lender, if it holds the Note, shall promptly surrender the Note to the Borrower for cancellation, provided that if Citizens has retained any Commitment, the Borrower shall execute and deliver to Citizens a new Note in the amount of its retained Commitment; (c) the Borrower shall issue to such Assignee a Note in the amount of such Assignee's Commitment, dated the Closing Date or such other date as may be specified by such Assignee and otherwise completed in substantially the form of Exhibit A (d) this Agreement shall be deemed appropriately amended to reflect (i) the status of such Assignee as a party hereto and (ii) the status and rights of the Lender hereunder; and (e) the Borrower shall take such action as Citizens may reasonably request to perfect any security interests or mortgages in favor of the Lender, including any Assignee which becomes a party to this Agreement.
(b) If the Assignee, or any Participant pursuant to Section 9.2 hereof;
is organized under the laws of a jurisdiction other than the United States or
any state thereof: such Assignee shall execute and deliver to the Borrower,
simultaneously with or prior to such Assignee's execution and delivery of the
counterpart joinder described above in Section 9.1(a), and such Participant
shall execute and deliver to the Lender granting the participation, a United
Stares Internal Revenue Service Form W 8EC1 or W 8BEN (or any successor form),
appropriately completed, wherein such Assignee or Participant claims entitlement
to complete exemption from United States Federal Withholding Tax on all interest
payments hereunder and all fees payable pursuant to any of the Loan Documents,
The Borrower shall not be required to pay any increased amount to any Assignee
or other Lender on account of taxes to the extent such taxes would not have been
payable if the Assignee or Participant had furnished one of the Forms referenced
in this Section 9.1(b) unless the failure to furnish such a Form results from
(i) a condition or event affecting the Borrower or an act or failure to act of
the Borrower or (ii) the adoption of or change in any law, rule, regulation or
guideline affecting such Assignee or Participant occurring (x) after the date on
which any such Assignee executes and delivers the counterpart joinder, or (y)
after the date such Assignee shall otherwise comply with the provisions of
Section 9.1(a), or (z) after the date a Participant is granted its
participation.
(c) The Lender may at any time pledge all or any portion of its rights under the Loan Documents, including any portion of the Note, to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or any enforcement thereof shall release the Lender from its obligations under any of the Loan Documents.
9.2. Participations. The Lender shall have the right at any time and from time to time, without the consent of or notice to the Borrower, to grant participations to one or more banks or other financial institutions (each a "Participant") in all or any part of any Loans and Letter of Credit Participations owing to the Lender and the Note held by the Lender, and shall have the right to furnish from time to time to prospective Participants copies of the Loan Documents and any information concerning the Borrower in its possession. The Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents, provided that the documents evidencing any such
participation may provide that, except with the consent of such Participant, the Lender will not consent to (a) the reduction in or forgiveness of the stated principal of or rate of interest on or commitment fee with respect to the portion of any Loan subject to such participation, (b) the extension or postponement of any stated date fixed for payment of principal or interest or commitment fee with respect to the portion of any Loan subject to such participation, (a) the waiver or reduction of any right to indemnification o the Lender hereunder, or (d) except as otherwise permitted hereunder, the release of any Collateral. Notwithstanding the foregoing, no participation shall operate to increase the total Commitments hereunder or otherwise alter the substantive terms of this Agreement. In the event of any such sale by the Lender of participating interests to a Participant, the Lender's obligations under this Agreement shall remain unchanged, the Lender shall remain solely responsible for the performance thereof; the Lender shall remain the holder of such Note for all purposes under this Agreement and the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement.
SECTION X.
GENERAL
10.1. Notices. Unless otherwise specified herein, all notices hereunder to any party hereto shall be in writing and shall be deemed to have been given when delivered by hand, or when sent by electronic facsimile transmission, or on the first Business Day after delivery to any overnight delivery service, freight pre-paid, or five (5) days after being sent by certified or registered mail, return receipt requested, postage pre-paid, and addressed to such party at its address indicated below:
If to the Borrower, at
2000 West Park Drive
Westborough, Massachusetts 01581 Attention: Chief Financial Officer Facsimile: (508) 366-9901
with a copy (which shall not constitute notice) to:
Goodwin Procter
Exchange Place
Boston, Massachusetts 02109
Attention: John J. Egan III, PC.
Facsimile: (617) ______
If to the Lender, at
53 State Street, 8th Floor
Boston, Massachusetts 02109
Attention: Sharon Stone
Facsimile: (617) 742-9548
with a copy (which shall not constitute notice) to:
Bartlett Hackett Feinberg, P.C.
155 Federal Street
Boston, Massachusetts 02110
Attention: John L. Hackett, Esq.
Facsimile: (617) 422-0200
or at any other address specified by such parry in writing.
10.2. Expenses. Whether or not the transactions contemplated herein shall be consummated, the Borrower promises to reimburse the Lender for all reasonable out-of-pocket fees and disbursements (including all reasonable attorneys' fees and collateral evaluation costs) incurred or expended in connection with the preparation, filing or recording, interpretation or administration of this Agreement and the other Loan Documents, or any amendment, modification, approval, consent or waiver hereof or thereof, or in connection with the enforcement of any Obligations, the exercise, preservation or enforcement of any rights, remedies or options of the Lender or the satisfaction of any Obligations, or in connection with any litigation, proceeding or dispute in any way related to the credit hereunder, including, without limitation, fees and disbursements of outside legal counsel and the allocated costs of in house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses; all fees, charges (including the Lender's per diem charges) and expenses relating to any inspections, appraisals or examinations conducted in connection with the Loans or any Collateral; and all costs and expenses relating to any attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral, The amount of all such costs and expenses shall, until paid, bear interest at the rate applicable to Revolving Credit Loans and shall be an Obligation secured by the Collateral. The Borrower will pay any taxes (including any interest and penalties in respect thereof), other than the Lender's federal and state income taxes, payable on or with respect to the transactions contemplated by the Loan Documents (the Borrower hereby agreeing to indemnify the Lender with respect thereto).
10.3. Indemnification. The Borrower agrees to indemnify and hold harmless the Lender, as well as its respective shareholders, directors, officers, agents, attorneys, subsidiaries and affiliates, from and against all damages, losses, settlement payments, obligations, liabilities, claims, suits, penalties, assessments, citations, directives, demands, judgments, actions or causes of action, whether statutorily created or under the common law, all reasonable costs and expenses (including, without limitation, reasonable fees and disbursements of attorneys, experts and consultants) and all other liabilities whatsoever (including, without limitation, liabilities under Environmental Laws) which shall at any time or times be incurred, suffered, sustained or required to be paid by any such indemnified Person (except any of the foregoing which result from the gross negligence or willful misconduct of the indemnified Person) on account of or in relation to or any way in connection with any of the arrangements or transactions contemplated by, associated with or ancillary to this Agreement, the other Loan Documents or any other documents executed or delivered in connection herewith or therewith, all as the same may be
amended from time to time, or with respect to any Letters of Credit, whether or not all or part of the transactions contemplated by, associated with or ancillary to this Agreement, any of the other Loan Documents or any such other documents are ultimately consummated. In any investigation, proceeding or litigation, or the preparation therefore, the Lender shall select its own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. In the event of the commencement of any such proceeding or litigation, the Borrower shall be entitled to participate in such proceeding or litigation with counsel of its choice at its own expense, provided that such counsel shall be reasonably satisfactory to the Lender. The Borrower authorizes the Lender to charge any deposit account or Note Record which it may maintain with any of them for any of the foregoing. The covenants of this Section 10.3 shall survive payment or satisfaction of payment of all amounts owing with respect to the Note, any other Loan Document or any other Obligation.
10.4. Survival of Covenants. Etc. All covenants, agreements, representations and warranties made herein, in the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower pursuant hereto or thereto shall be deemed to have been relied upon by the Lender, notwithstanding any investigation heretofore or hereafter made by it, and shall survive the making by the Lender of the Loans as herein contemplated and the termination of the Commitment, and shall continue in full force and effect so long as any Obligation remains outstanding and unpaid or the Lender has any obligation to make any Loans hereunder or has any obligation to issue any Letter of Credit. Notwithstanding the foregoing, the provisions of Sections 10.2 and 10.3 shall continue in full force and effect after the payment in full of all Obligations. All statements contained in any certificate or other writing delivered by or on behalf of the Borrower pursuant hereto or the other Loan Documents or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder.
10.5. Set-Off. Regardless of the adequacy of any Collateral or other means of obtaining repayment of the Obligations, any deposits, balances or other sums credited by or due from the head office of the Lender or any of its branch offices to the Borrower may, at any time and from time to time without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by the Lender against any and all Obligations of the Borrower in such manner as the head office of the Lender or any of its branch offices in its sole discretion may determine, and the Borrower hereby grants the Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such Obligations.
ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL, WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHTS OF SETOFF WITH RESPECT TO SUCH DEPOSITS, BALANCES, OTHER SUMS AND PROPERTY OF THE BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
10.6. No Waivers. No failure or delay by the Lender in exercising any right, power or
privilege hereunder, under the Note or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver shall extend to or affect any Obligation not expressly waived or impair any right consequent thereon. No course of dealing or omission on the part of the Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. The rights and remedies herein and in the Note and the other Loan Documents are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.
10.7. Amendments, Waivers, etc. Neither this Agreement nor the Note nor any other Loan Document nor any provision hereof or thereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and also, in the case of amendments, by the Borrower.
10.8. Binding Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assignees provided that the Borrower may not assign or transfer its rights or obligations hereunder.
10.9. Lost Note, Etc. Upon receipt of an affidavit of an officer of the Lender as to the loss, theft, destruction or mutilation of the Note or any Security Document which is not a public record and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or Security Deposit, if available, the Borrower will issue, in lieu thereof, a replacement Note or other Security Document in the same principal amount thereof and otherwise of like tenor.
10.10. Captions; Counterparts. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for mare than one such counterpart signed by the party against whom enforcement is sought.
10.11. Entire Agreement. Etc. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby and supersede all prior agreements with respect to the subject matter hereof.
10.12. Waiver of Jury Trial. EACH OF THE BORROWER, THE LENDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE LENDER RELATING TO THE ADMIMSTRATION OR ENFORCEMENT
OF THE LOANS AND THE LOAN DOCUMENTS, AND AGREES THAT IT WILL NOT SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH OF THE BORROWER AND
THE LENDER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(b) ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS TO WHICH EACH IS A PARTY BECAUSE OF, AMONG OTHER
THINGS, THE BORROWER'S WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
10.13. Governing Law; Jurisdiction; Venue. THIS AGREEMENT AND EACH OF
THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE BORROWER CONSENTS TO THE JURISDICTION OF ANY OF
THE FEDERAL OR STATE COURTS LOCATED IN SUFFOLK COUNTY IN THE COMMONWEALTH OF
MASSACHUSETTS TN CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF THE LENDER
UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS AND CONSENTS TO SERVICE
OP PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
BORROWER'S ADDRESS SET FORTH HEREIN. THE BORROWER IRREVOCABLY WAIVES ANY
OBJECTION IN WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH ACTION BROUGHT IN THE COURTS REFERRED TO IN THIS SECTION AND IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH ACTION THAT SUCH ACTION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.14 Severability. The provisions of this Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.
10.15. Amendment and Restatement. This Agreement has been given by Borrower to Bank to amend and restate the terms of a certain Credit Agreement dated June 23,2004 between Borrower and Citizens (the "Original Agreement"). The Borrower does not intend for the
amendment and restatement of the Original Agreement by this Agreement to constitute, nor shall it be deemed to constitute, a novation or extinguishment of the obligations of Borrower evidenced by the Original Agreement and this Agreement shall in no event impair, limit, reduce or otherwise discharge the liability of Borrower under the Original Agreement provided that the Bank and the Borrower hereby agree that from and after the date hereof all such liability shall be evidenced by and governed by the terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement under seal as of' the date first above written.
WITNESS VIRTUSA CORPORATION /s/ Charles Speicher By: /s/ Kris Canekeratne -------------------- --------------------------- Charles Speicher Chairman and Chief Corporate Controller Executive Officer CITIZENS BANK By: /s/ Sharon A. Stone -------------------- -------------------------- Sharon A. Stone Senior Vice President |
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$3,000,000.00 September 29, 2006
FOR VALUE RECEIVED, the undersigned (the "Borrower") absolutely and unconditionally promises to pay to the order of CITIZENS BANK OF MASSACHUSETTS ("Payee") at 53 State Street, Boston, Massachusetts 02109:
(a) on the Revolving Credit Maturity Date, the principal amount of THREE MILLION DOLLARS ($3,000,000.00) or, if less, the aggregate unpaid principal amount of Revolving Credit Loans and Reimbursement Obligations owing to the Payee pursuant to the Credit Agreement of even date herewith, as amended or supplemented from time to time (the "Credit Agreement"), by and among the Borrower and the Payee; and
(b) interest on the principal balance hereof from time to time outstanding from the date hereof through and including the date on which such principal amount is paid in full, at the times and at the rates provided in the Credit Agreement.
This Note evidences borrowings under, is subject to the terms and conditions of and has been issued by the Borrower in accordance with the terms of the Credit Agreement and is the Note referred to therein. The Payee and any holder hereof is entitled to the benefits and subject to the conditions of the Credit Agreement and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof, This Note is secured by the Security Documents described in the Credit Agreement.
All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.
The Borrower has the right in certain circumstances and the obligation under certain other circumstances to repay or prepay the whole or part of the principal of this Note on the terms and conditions specified in the Agreement.
If any Event of Default shall occur, the entire unpaid principal amount at' this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.
The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waive presentment, demand, notice, protest and all other demands and notice in connection with the delivery, acceptance, performance, default or enforcement of this Note, assent to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or Person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under the laws of The Commonwealth of Massachusetts and for au purposes shall be construed in accordance with such laws (without regard to conflicts of laws rules).
This Note has been given by Borrower to Bank to amend and restate the terms of a certain Revolving Credit Note dated as of June 23, 2004 by Borrower to Lender (the "Original Note"). The Borrower does not intend for the amendment and restatement of the Original Note by this Note to constitute, nor shall it be deemed to constitute, a novation or extinguishment of the obligations of Borrower evidenced by the Original Note and this Note shall in no event impair, limit, reduce or otherwise discharge the liability of Borrower under the Original Note provided that the Bank and the Borrower hereby agree that from and after the date hereof all such liability shall be evidenced by and governed by the terms of this Note
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed under seal by its duly authorized officer as of the day and year first above written.
WITNESS VIRTUSA CORPORATION /s/ Paul D. Tutun By: /s/ Thomas Holler ------------------------- ------------------------- |
AMENDED AND RESTATED SECURITY AGREEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is made as of September 29, 2006 and is given to amend and restate the terms and conditions of and to confirm the grant of security interest granted by VIRTUSA CORPORATION, a corporation organized under the laws of the State of Delaware and having its chief executive office at 2000 West Park Drive, Westborough, Massachusetts 01581 (the "Borrower"), to CITIZENS BANK OF MASSACHUSETTS, a Massachusetts bank having a banking office at 28 State Street, Boston, Massachusetts 02109 (the "Lender") in that certain Security agreement dated June 23, 2004 (the "Original Agreement").
The Borrower has requested the Lender to enter into a certain Amended and Restated Credit Agreement of even date herewith (as the same may be amended, modified, supplemented, extended or restated from time to time, the "Credit Agreement") and to make loans and other credits to the Borrower upon the terms and subject to the conditions set forth therein.
Lender has required as a condition precedent to its entering the Credit Agreement that the Borrower execute and deliver this Agreement and to grant the security interests referenced herein and confirm its grant of security interests made in the Original Agreement.
In order to induce the Lender to enter into the Credit Agreement and to make or continue to make available to the Borrower loans and other extensions of credit upon the terms and subject to the conditions set forth therein, and in consideration thereof, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower agrees as follows:
Section 1. Definitions. All capitalized terms used herein or in any certificate, report or other document delivered pursuant hereto shall have the meanings assigned to them below or in the Credit Agreement (unless otherwise defined). Except as otherwise defined, terms defined in the Uniform Commercial Code and used herein shall have the meanings set forth in the Uniform Commercial Code; provided, however, that the term "instrument" shall be such term as defined in Article 9 of the Uniform Commercial Code rather than Article 3 of the Uniform Commercial Code.
Accounts. All rights of the Borrower to payment of monetary obligation (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a secondary obligation incurred or to be incurred, or (iv) arising out of the use of credit or charge card or information contained on or for use with the card; and all sums of money and other proceeds due or becoming due thereon, all notes, bills, drafts, acceptances, instruments, documents and other debts, obligations and liabilities, in whatever form, owing to the Borrower's rights pertaining to and interest in such property, including the right of stoppage in transit, replevin or reclamation; all chattel paper; all amounts due from Affiliates of the Borrower; all insurance proceeds; all other rights and claims to the payment of money, under contracts or otherwise; and all other property constituting "accounts" as such term is defined in the Uniform Commercial Code.
Collateral. All personal and fixture property belonging to the Borrower or in which the Borrower has any rights, of every kind and description, tangible and intangible, whether now owned or existing or hereafter arising or acquired; including, without limitation, all Accounts, Equipment, General Intangibles, Inventory and Investment Property, together with all goods, instruments (including promissory notes) documents of title, policies and certificates of insurance, commercial tort claims, chattel paper (whether tangible or electronic), deposit accounts, letter of credit rights (whether or not the letter of credit is evidenced by a writing) and other property owned by the Borrower or in which the Borrower has an interest and including, without limitation, any cash that is now or may hereafter be in the possession, custody, or control of the Lender or its participants or assigns for any purpose; any and all additions, substitutions, replacements and accessions to foregoing and all supporting obligations relating to the forgoing; and all Proceeds and Property and products of any of the foregoing; but excluding all Intellectual Property.
Encumbrance. Any mortgage, pledge, security interest, lien or other charge or encumbrance of any kind or nature (including, without limitation, the lien or retained security title of a conditional vendor) upon or with respect to any property.
Equipment. All machinery, equipment, and fixtures, furniture, furnishings, trade fixtures, specialty tools and parts, motor vehicles and materials handling equipment of the Borrower, together with the Borrower's interest in, and right to, any and all manuals, computer programs, data bases and other materials relating to the use, operation or structure of any of the foregoing; and all other property constituting 'equipment' as such term is defined in the Uniform Commercial Code.
General Intangibles. Except for the Intellectual Property, all rights of the Borrower under contracts to enjoy performance by others or to be entitled to enjoy rights granted by others, including without limitation any licenses; all payment intangibles; all obligations and indebtedness of any kind (other than Accounts) owning to the Borrower from whatever source arising; all contract rights; all rights of the Borrower as a bailor; all tax refunds; all right, title and interest of the Borrower in and to all software, documents, books, records, files and other information (on whatever medium recorded, and including without limitation computer programs, tapes, discs, punch cards, data processing software and related property and rights) maintained by the Borrower that reflect the conduct of the Borrower's business, such as financial records, marketing and sales records, research and development records, and design, engineering and manufacturing records; all rights under service bureau service contracts; all computer data and the concepts and ideas on which said data is based; all data bases, all customer lists, and all other property constituting "general tangibles" as such term is defined in the Uniform Commercial Code.
Intellectual Property. All of the following, to the extent owned by (and not licensed to) the Borrower (i) United States and foreign patents, patent applications and statutory invention registrations, including reissues, divisions, continuations, substitutions, renewals, continuations
in part, extensions and reexaminations thereof, and all improvements thereto,
(ii) software, databases, copyrightable works, websites, copyrights (registered,
renewed or otherwise) and registrations, renewals and applications for
registration or renewal thereof, (iii) trademarks, trademark applications,
service marks, service mark applications, trade dress, logos, slogans, symbols,
trade names, internet domain names, brand names, product names, fictitious
names, corporate names, and other source identifiers and all reissues,
extensions and renewals thereof and the goodwill of the business symbolized
thereby and associated therewith, (iv) trade secrets, know-how, technology,
inventions and discoveries and (v) any and all right, title, and interest in and
to the foregoing, including the right to sue for past, present, and future
infringement, in all of such cases (i) through (v), whether used, held for use,
supported, maintained, marketed or otherwise.
Inventory. All goods, merchandise and other personal property (including warehouse receipts and other negotiable and non-negotiable documents of title covering any such property) of the Borrower that are held for sale, lease or other disposition or to be furnished under contracts of service (or that are so furnished), or for display or demonstration, or leased or consigned, or that are raw materials, piece goods, work-in-process, finished goods or supplies or other materials used or consumed or to be used or consumed in the Borrower's business, whether in transit or in the possession of the Borrower or another, including without limitation all goods covered by purchase orders and contracts with suppliers and all goods billed and held by suppliers and goods located on the premises of any carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or other third parties; all plans, drawings, diagrams, schematics, assembly and display materials relating to any of the foregoing; and all other property constituting "inventory" as such term is defined in the Uniform Commercial Code.
Investment Property. All the securities (whether certificated or uncertificated) of the Borrower, including without limitation all stocks, bonds Treasury bills, certificates of deposits, mutual or money market fun shares, security entitlements, securities accounts, commodity contracts and commodity accounts; and all sums due or to become due on any of the foregoing, and all securities, instruments or other property purchased or acquired as a result of the investment and reinvestment thereof as hereinafter provided, and all other property constituting "investment property" as such term is defined in the Uniform Commercial Code; excluding any capital stock, or other equity interests of any Subsidiary of the Borrower.
Perfection Certificate. A certificate signed by a Responsible Officer of the Borrower in the form attached hereto as Exhibit A.
Proceeds. All proceeds received of and all other profits, rentals and receipts, in whatever form, or arising from any Collateral, including whatever is received or acquired upon the sale, lease, exchange, assignment, licensing or other disposition of any Collateral; whatever is received, collected on or distributed on account of any Collateral; all rights arising out of any Collateral; all claims arising out of the loss, nonconformity, interference with the use of defects or infringement of rights in, or damage to or destruction of, any Collateral; any insurance payable by reason of the loss a damage or nonconformity of, defects or infringement of rights in, or damage to or destruction of, any Collateral; any unearned premiums with respect to policies of insurance in respect of any Collateral; and condemnation or requisition payments with respect to
any Collateral; and all other property constituting "proceeds" as such term is defined in the Uniform Commercial Code; in each chase whether now or existing or hereafter arising.
Secured Obligations. All obligations of the Borrower under or in respect of the Loan Documents.
Security Interests The security interests and liens granted pursuant to
Section 2 hereof, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to this Agreement.
Uniform Commercial Code The Uniform Commercial Code as in effect in The Commonwealth of Massachusetts, provided, that if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of the Security Interests of any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Massachusetts, "Uniform Commercial Code" means the Uniform Commercial Code as in effect in such other jurisdiction for the purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection, as the case may be.
Section 2. Grant.
(a) To secure the full and punctual payment and performance of the Secured Obligations, the Borrower hereby assigns and pledges to the Lender all of its rights, title and interest in, and grants to the Lender a continuing security interest in, the Collateral of the Borrower. The Security Interests are granted as security only and shall not subject the Lender to, or transfer to the Lender or in any way affect or modify, any obligation or liability of the Borrower with respect to any of the Collateral, or any transaction in connection therewith.
(b) Upon the execution of this Agreement, and from time to time thereafter, the Borrower shall deliver to the Lender such Uniform Commercial Code financing statements, assignments, continuation statements, amendments, instruments and notices and assignments under the Assignment of Claims Act of 1940, as amended (collectively, the "Perfection Documents"), as may be reasonably required for the Lender to perfect its Security Interest in all Collateral. Any such financing statements, continuation statements or amendments may be prepared and filed by the Lender at any time in any jurisdiction.
Section 3. Representations, Warranties, and Covenants. The Borrower hereby makes the following representations and warranties, and agrees to the following covenants, each of which representations, warranties and covenants shall be continuing and in force so long as this Agreement is in effect:
3.1 Name; Location; Changes.
(a) The name of the Borrower set forth in Section 1(a) of the Perfection Certificate is the true and correct legal name of the Borrower, and except as otherwise disclosed to the Lender in the Perfection Certificate, the Borrower has not done business as or used any other name.
(b) The state of organization of the Borrower set forth in section 1(d) of the Perfection Certificate is the true and correct state of organization of the Borrower and the Borrower is duly organized and in good standing in such state on the date hereof.
(c) The address of the Borrower set forth in Section 2(a) of the Perfection Certificate is the Borrower's chief executive office and the place where its business records are kept. Except as disclosed on the Perfection Certificate, all tangible Collateral of the Borrower other than Investment Property is located at such chief executive office, and except as disclosed on the Perfection Certificate, such Collateral has remained located at its current location for the four consecutive months immediately prior to the date hereof.
(d) The Borrower will not change its name, identity or organizational structure, nature, or jurisdiction or organization, or chief executive office or place where its business records are kept, or move any tangible Collateral (other than Investment Property) to a location other than those set forth in the Perfection Certificate, or merge into or consolidate with any other entity, unless permitted under the Credit Agreement and unless the Borrower shall have given the Lender at least 30 days' prior written notice thereof and the Borrower shall have delivered to the Lender or authorized Lender to file such new Uniform Commercial Code financing statements or other documentation as may be necessary or required by the Lender to ensure the continued perfection and priority of the Security Interests.
(e) The Borrower delivered a Perfection Certificate to the Lender with the Original Agreement. All information set forth in such Perfection Certificate is true and correct in all material respects. The Borrower agrees to supplement the Perfection Certificate promptly after obtaining information which would require a correction.
3.2. Ownership of Collateral; Absence of Liens and Restrictions. The Borrower is, and in the case of property acquired after the date hereof, will be, the sole legal and equitable owner of the Collateral, holding good and marketable title to the same free and clean of all Encumbrances except for the Security Interests and Permitted Encumbrances, and has good right and legal authority to assign, deliver, and create a security interest in such Collateral in the manner herein contemplated. The Collateral is genuine and is what it is purported to be. The Collateral is not subject to any restriction that would prohibit or restrict the assignment, delivery or creation of the security interests contemplated hereunder.
3.3 First Priority Security Interest. This Agreement creates a valid and continuing lien on and security interest in the Collateral, and upon the filing of Uniform Commercial Code financing statements in the appropriate offices for the locations of Collateral listed in the Borrower's Perfection Certificate, the Security Interests will be perfected (except to the extent a security interest may not be perfected by filing under the Uniform Commercial Code), prior to all other Encumbrances other than as disclosed in the Credit Agreement as Permitted Encumbrances, and is enforceable as such against creditors of the Borrower, any owner of the real property where any of the Collateral is located, any purchaser of such real property and any present or future creditor obtaining a lien on such real property.
3.4 No Conflicts. Neither the Borrower nor any of its predecessors has performed any acts or is bound by any agreements which might prevent the lender from enforcing the Security Interest or any of the terms of this Agreement or which would limit the Lender in any such enforcement. Except as specifically disclosed in the Perfection Certificate, no financing statement under the Uniform Commercial Code of any state or other instrument evidencing a lien that names the Borrower as debtor is on file in any jurisdiction and the Borrower has not signed any such document or any agreement authorizing the filing of any such financing statement or instrument.
3.5 Sales and Further Encumbrances. The Borrower will not sell, grant, assign or transfer any interest in, or permit to exist any Encumbrances on, any of the Collateral, except the Security Interests as permitted by the Credit Agreement.
3.6 Fixture Conflicts: Required Waivers. The Borrower intends, to the extent not inconsistent with applicable law, that the Collateral shall remain personal property of the Borrower and shall not be deemed to be a fixture irrespective of the manner and its attachment to any real estate. The Borrower will deliver to the Lender such disclaimers, waivers or other documents as the Lender may request to confirm the foregoing, executed by each person having an interest in such real estate.
3.7 Validity of Accounts. Each Account constituting Collateral is and, to the best of the Borrower's knowledge, shall be a valid, legal and binding obligation of the party purported to be obligated thereon, enforceable in accordance with its terms and free of material set-offs, defenses or counterclaims. The Borrower has no knowledge of any fact that would materially impair the validity or collectibility of any of the Accounts constituting Collateral.
3.8 Inspection; Verification of Accounts. The Borrower shall keep complete and accurate books and records relating to the Collateral, and upon request of the Lender shall stamp or otherwise mark such books and records in such manner as the Lender may reasonably request in order to reflect the Security Interest. The Borrower will allow the Lender and its designees to examine, inspect and make extracts from or copies of the Borrower's books and records, inspect the Collateral and arrange for verification of Accounts constituting Collateral directly with any account debtors or by other methods, upon reasonable notice and under reasonable procedures established by the Lender after consultation with the Borrower.
3.9 Collection and Delivery of Proceeds; Lockboxes.
(a) The Borrowers will diligently collect all of its Accounts constituting Collateral until the Lender exercises its rights to collecting the Accounts pursuant to this Agreement. After the occurrence and during the continuance of an Event of Default, all Proceeds of Accounts, Inventory and other Collateral received by the Borrower, whether in the form of wire or ACH transfers, cash, checks, notes, or other instruments, shall be held in trust for the Lender and, upon request of the Lender, shall be delivered daily to the Lender, without commingling, in the identical form received (properly endorsed or assigned where required to enable the Lender to collect the same), for application to the Secured Obligations. If any Accounts are at any time evidenced by tangible chattel paper, promissory notes, trade
acceptances or other instruments, the Borrower will promptly deliver the same to the Lender appropriately endorsed to the Lender's order and, regardless of the form of such endorsement, the Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest, and all other notices with respect thereto.
(b) The Borrower shall, at the request of the Lender at any time, notify account debtors, and the Lender may itself, after the occurrence and during the continuance of a Default notify account debtors directly, of the Security Interest of the Lender in any Account and that payment thereof is to be made directly to the Lender for application to the Secured Obligations.
3.10 Insurance. The Borrower shall at all times maintain liability and casualty insurance on the Collateral with financially sound and reputable insurers in such amounts and with such coverages, endorsements, deductibles and expiration dates as the officers of the Borrower in the exercise of their reasonable judgment deem to be adequate, as are customary in the industry for companies of established reputation engaged in the same or similar business and owning or operating similar properties and as shall be reasonably satisfactory to the Lender. The Lender shall be named as loss payee, additional insured and/or mortgagee under such insurance as the Lender shall require from time to time, and the Borrower shall provide to the Lender lender's loss payable endorsements in form and substance reasonably satisfactory to the Lender. In addition, the Lender shall be given thirty (30) days advance notice of any cancellation of insurance. In the event of failure to provide and maintain insurance as herein provided, the Lender may, at its option, provide such insurance and charge the amount thereof to the Borrower as a Revolving Credit Loan. The Borrower shall furnish to the Lender certificates or other evidence satisfactory to the Lender of compliance with the foregoing insurance provisions. The Lender shall not, by the fact of approving, disapproving or accepting any such insurance, incur any liability for the form or legal sufficiency of insurance contracts, solvency of insurance companies or payment of lawsuits, and the Borrower hereby expressly assumes full responsibility therefor and liability, if any, thereunder.
3.11 Maintenance and Use Payment of Taxes. The Borrower will preserve, protect and keep the Collateral in good order and repair, ordinary wear and tear and damage by fire or other casualty excepted, will not use the same in violation of law or any policy of insurance thereon, and will pay promptly when due all taxes and assessments on such Collateral or on its use or operation, except as otherwise permitted by the Credit Agreement.
3.12 General Intangibles. The Borrower will use such measures as are appropriate to preserve its rights in its General Intangibles constituting Collateral.
3.13 Investment Property. Until the occurrence and continuance of an Event of Default hereunder, the Borrower shall retain the right to vote any of the Investment Property constituting Collateral in a manner not inconsistent with the terms of this Agreement and the Credit Agreement. If the Borrower, as registered holder of such Investment Property, receives (i) any dividend, or other distribution in cash or other property in connection with the liquidation or dissolution of the issuer of such Investment Property, or in connection with the redemption or payment of such Investment Property, or (ii) any stock certificate, option or right, or other distribution, whether as an addition to, in substitution of, or in exchange for, such Investment
Property, or otherwise, the Borrower agrees to accept the same in trust for the Lender and to deliver the same forthwith to the Lender or its designee, in the exact form received, with the Borrower's endorsement or reassignment when necessary, to be held by the Lender as Collateral. After the occurrence and during the continuance of an Event of Default, upon request of the Lender, the Borrower will (i) deliver all of its Investment Property constituting Collateral and represented by certificates, including without limitation all stock of its Subsidiaries, to the Lender to hold pursuant to the terms of this Agreement (ii) register in the name of the Lender or its designee any uncertificated Investment Property constituting Collateral or the Lender's security interest therein on the books maintained by or on behalf of the issuer thereof or the depository therefore and (iii) do all things necessary or desirable, as determined by the Lender, to transfer control over any Investment Property to the Lender including, but not limited to, registering the Lender as the holder of the securities entitlement or commodities contract as appropriate, and entering into any control agreement, in form designated by the Lender, pursuant to which the securities intermediary shall agree that it will comply with the entitlement orders originated by the Lender without further consent of the Borrower, and entering into any control agreement, in form designated by the Lender, pursuant to which the commodity intermediary shall agree that it will apply any value distributed on account of any commodity contract as direct by the Lender without further consent by the Borrower.
3.14 Electronic Chattel Paper and Transferable Records: For any interest in an electronic chattel paper or any "transferable record," as that term is defined in Section 201 of the federal electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any jurisdiction applicable to the Borrower, any Collateral or any transaction contemplated hereby, the Borrower shall take such action as the Lender may reasonably request to vest in the Lender control under Section 9-105 of the Uniform Commercial Code of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act of such transferable record. The Lender agrees that it will arrange, pursuant to procedures satisfactory to the Lender, so long as such procedures will not result in the Lender's loss of control, for the Borrower to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the Uniform Commercial Code or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the Borrower with respect to such electronic chattel paper or transferable record.
3.15 Bailments, Etc. If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of the Borrower's agents or processors, the Borrower shall, upon request of the Lender, (i) notify such warehouseman, bailee, agent or processor of the Security Interest and instruct such warehouseman, bailee, agent or processor to hold all such Collateral for the Lender's account subject to the Lender's instructions, (ii) arrange for such warehouseman, bailee, agent or processor to authenticate a record acknowledging that it holds possession of the Collateral for the Lender's benefit, (iii) deliver any negotiable warehouse receipt, bill of lading or other document of title issued with regard to the Collateral to the Lender appropriately endorsed to the Lender's order, and (iv) arrange for the issuance in the name of the
Lender, in form reasonably satisfactory to the Lender, any nonnegotiable document of title covering such Collateral.
3.16 Assignment of Claims Act. If at any time any Accounts of the Borrower arise from contracts with the United States of America or any department, agency or instrumentality thereof, the Borrower shall execute all assignments and take all steps reasonably requested by the Lender in order that all monies due to become due thereunder will be assigned and paid to the Lender under the Assignment of Claims Act of 1940.
3.17 Notes and Instruments. If at any time any amount payable under or in connection with any of the Collateral is evidenced by any promissory note or other instrument, such note or instrument shall be promptly delivered to the Lender, duly endorsed in a manner satisfactory to the Lender.
3.18 Further Assurances. Upon the reasonable request of the Lender, and the sole expense of the Borrower, the Borrower will promptly execute and deliver such further instruments and documents and take such further actions as the Lender may deem desirable to obtain the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, filing of any financing statement, continuation statement, amendment or notice under the Uniform Commercial Code or other applicable law. The Borrower authorizes the Lender to file such financing statements without the signature of the Borrower to the extent permitted by applicable law, and to file a copy this Agreement in lieu of a financing statement, and to take any and all actions required by any earlier versions of the Uniform Commercial Code or by other law, as applicable in any relevant Uniform Commercial Code jurisdiction, or by other laws applicable in any foreign jurisdiction. The Borrower shall provide the Lender with any information the Lender shall reasonably request in connection with the foregoing, including, without limitation, the type and jurisdiction of organization of the Borrower, and any organizational identification number issued to the Borrower. The Borrower shall also take all actions requested by the Lender in order to insure the continued perfection and priority of the Lender's security interest in any of the Collateral and of the preservation of its rights therein.
Section 4. Notices and Reports Pertaining to Collateral. The Borrower will, with respect to the Collateral:
(a) promptly furnish to the Lender, from time to time upon request, reports in form and detail reasonably satisfactory to the Lender;
(b) promptly notify the Lender of any Encumbrance (except Permitted Encumbrances) asserted against the Collateral, including any attachment, levy, execution or other legal process levied against any of the Collateral, and of any information received by the Borrower relating to the Collateral, including the Accounts, the account debtors, or other persons obligated in connection therewith, that may in any way adversely affect the value of the Collateral as a whole or the rights and remedies of the Lender with respect thereto;
(c) promptly notify the Lender when it obtains knowledge of actual or imminent bankruptcy or other insolvency proceeding of any material account debtor or issuer of
Investment property;
(d) concurrently with the reports required to be furnished under subsection (a), and immediately if material in amount, notify the lender of any return or adjustment, rejection, repossession, or loss or damage of or to merchandise represented by Accounts and of any credit, adjustment, or dispute arising in connection with the goods or services represented by Accounts or constituting Inventory;
(e) promptly after the Borrower establishes any Account with the United States of America or any department, agency or instrumentality thereof, notify the Lender thereof;
(f) promptly upon acquiring any commercial tort claim, notify the Lender in a writing signed by the Borrower, of the details thereof and grant to the Lender in such writing a security interest therein and in all the Proceeds thereof, such writing to be in form and substance satisfactory to the lender; and
(g) promptly upon receipt of any letter of credit issued to the Borrower as beneficiary thereunder or upon acquiring an interest in any electronic chattel paper or any "transferable record," as that term is defined in section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act, notify the Lender thereof.
Section 5. Lender's Rights and Remedies in General.
(a) So long as any Event of Default shall have occurred and is
continuing: (i)the Lender may, at its option, without notice or demand, cause
all of the Secured Obligations to become immediately due and payable and take
immediate possession of the Collateral, and for that purpose the Lender may, so
far as the Borrower can give authority therefore, enter upon any premises on
which any of the Collateral is situated and remove the same therefrom or remain
on such premises and in possession of such Collateral for purposes of conducting
a sale or enforcing the rights of the Lender; (ii) the Borrower will, upon
demand, assemble the Collateral, and make it available to the Lender at a place
and time designated by the Lender that is reasonably convenient to both parties;
(iii) the Lender may collect and receive all income and Proceeds in respect to
any Collateral and exercise all rights of the Borrower with respect thereto;
(iv) the Lender may sell, lease or otherwise dispose of any Collateral at a
public or private sale, with or without having such Collateral at the place of
sale, and upon such terms and in such manner as the Lender may determine, and
the Lender may purchase any Collateral at any such sale. Unless such Collateral
threatens to decline rapidly in value or is of the type customarily sold on a
recognized market, the Lender shall send to the Borrower prior written notice
(which, if given with in ten (10) days of any sale, shall be deemed to be
reasonable) of the time and place of any public sale of such Collateral or of
the time after which any private sale or other disposition thereof is to be
made. The Borrower agrees that upon any such sale such Collateral shall be held
by the purchaser free from all claims or rights of every kind and nature,
including any equity of redemption or similar rights, and all such equity of
redemption and similar rights are hereby expressly waived and released by the
Borrower. In the event any consent, approval or
authorization of any governmental agency is necessary to effectuate any such sale, the Borrower shall execute all applications or other instruments as may be required; and (v) in any jurisdiction where the enforcement of its rights hereunder is sought, the Lender shall have, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code and other applicable law.
(b) The Lender may perform any covenant or agreement of the Borrower contained herein that the Borrower has failed to perform and in so doing the Lender may expend such sums as it may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any taxes or insurance premiums, payment to obtain a release of Encumbrance or potential Encumbrance, expenditures made in defending against any adverse claim and all other expenditures which the Lender may make for the protection of Collateral or which it may be compelled to make by operation of law. All such sums and amounts so expended shall be repaid by the Borrower upon demand, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the rate per annum provided in the Credit Agreement to be paid on Revolving Credit Loans after the occurrence of an Event of Default. No such performance of any covenant or agreement by the Lender on behalf of the Borrower, and no such advance or expenditure therefore, shall relieve the Borrower of any Event of Default under the terms of this Agreement or the other Loan Documents
(c) Prior to any disposition of Collateral pursuant to this Agreement the Lender may, at its option, cause any of the Collateral to be repaired or reconditioned (but not upgraded unless mutually agreed) in such manner and to the extent as to make it saleable.
(d) The Lender is hereby granted a license or other right to use, without charge, the Borrower's labels, patents, copyrights, right of use of any name, trade secrets, trade names, trademarks, and advertising matter, or any property of a similar nature, relating to the Collateral, in completing production of, advertising for sale and selling any Collateral; and the Borrower's rights under all licenses and all franchise agreements shall inure to the Lender's benefit.
(e) The Borrower recognizes that the Lender may be unable to effect a public sale of all or a part of the Investment Property by reason of certain prohibitions contained in the Securities Act of 1933 (as amended from time to time, the "Securities Act") or the securities laws of various states (the "Blue Sky Laws"), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire the Investment Property for their own account, for investment and not with a view to the distribution or resale thereof. The Borrower acknowledges that private sales so made may be at prices and upon other terms less favorable to the seller than if the Investment Property were sold at public sales. The Borrower agrees that the Lender has no obligation to delay sale of any of the Investment Property for the period of time necessary to permit the Investment Property to be registered for public sale under the Securities Act or the Blue Sky Laws, and that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.
(f) The Lender shall be entitled to retain and to apply the Proceeds of any disposition of the Collateral, first, to its reasonable expenses provided for herein, including
attorneys' fees and other legal expenses incurred by it in connection therewith; and second, to the payment of the Secured Obligations in such order of priority as the Lender shall determine. Any surplus remaining after such application shall be paid to the Borrower or to whomever may be legally entitled thereto, provided that in no event shall the Borrower be credited with any part of the Proceeds of the disposition of the Collateral until such Proceeds shall have been received in cash from the Lender. The Borrower shall remain liable for any deficiency.
(g) The Borrower hereby appoints to the Lender and each of the Lender's designees or agents as attorney-in-fact of the Borrower, irrevocably and with power of substitution, with full authority in the name of the Borrower, the Lender or otherwise, for sole use and benefit of the Lender, but at the Borrower's expense, so long as an Event of Default is continuing, to take any and all of the actions specified above in this Section and elsewhere in this Agreement. This power of attorney is a power coupled with an interest and shall be irrevocable for so long as any of the Secured Obligations remain outstanding.
Section 6. Lender's Rights and Remedies with Respect to Collateral. The Lender may, at its option, at any time and from time to time after the occurrence and during the continuance of an Event of Default, without notice to or demand on the Borrower, take the following actions with respect to the Collateral:
(a) with respect to any Accounts (i) demand, collect, and receipt of any amounts relating thereto, as the Lender may determine; (ii) commence and prosecute any actions in any court for the purposes of collection any such Accounts and enforcing any other rights in respect thereof, (iii) defend, settle, or compromise any action brought and, in connection therewith, give such discharges or releases as the Lender may deem appropriate; (iv) receive, open and dispose of mail addressed to the Borrower and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to such Accounts or securing or relating to such Accounts, on behalf of and in the name of the Borrower; and (v) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any such Accounts or the goods or services which have given rise thereto, as fully and completely as though the Lender were the absolute owner there of for all purposes;
(b) with respect to any Equipment and Inventory (i) make, adjust and settle claims under any insurance policy related thereto and place and pay for appropriate insurance thereon; (iii) make repairs or provide maintenance with respect thereto; and (iv) pay any necessary filing fees and any taxes arising as a consequence of any such filing. The Lender shall not thereby relieve the Borrower of its obligation to make such expenditures; and
(c) with respect to any Investment Property (i) transfer it at any time to Lender, or to its nominee, and receive the income thereon and hold the same as Collateral hereunder or apply it to any matured Secured Obligations; and (ii) demand, sue for, collect or make any compromise or settlement it deems desirable.
Except as otherwise provided herein, the Lender shall have no duty as to the collection or protection of any Collateral nor as to the preservation of any rights pertaining
thereto, beyond the safe custody of any Collateral in its possession.
Section 7. Set-Off. Regardless of the adequacy of any Collateral or other means of obtaining repayment of the Secured Obligations, any deposits, balances or other sums credited by or due from the head office of the Lender or any of its branch offices to the Borrower and any property of the Borrower now or hereafter in the possession, custody, safekeeping or control of the Lender or in transit to the Lender may, at any time and from time to time after the occurrence of an Event of Default, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set -off, appropriated and applied by the Lender against any and all Secured Obligations of the Borrower in such manner as the head office of the Lender or any of its branch offices in its sole discretion may determine, and the Borrower hereby grants the Lender a continuing security interest in such deposits, balances, other sums and property for the payment and performance of all such Secured Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCIS ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE SECURED OBLIGATIONS PRIOR TO EXERCISING ITS RIGHTS OF SETOFF WITH RESPECT TO SUCH DEPOSITS, BALANCES, OTHER SUMS AND PROPERTY OF THE BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
Section 8. Waivers. The Borrower waives presentment, demand, notice, protest, notice of acceptance of this Agreement, notice of any loans made, credit or other extensions granted, Collateral received or delivered and any other action taken in reliance hereon and all other demands and notices of any description, except for such demands and notices as are expressly required to be provided to the Borrower under this Agreement or any other Loan Document. The Borrower waives, to the fullest extent permitted by law, the benefit of all appraisement, valuation, stay, extension and redemption laws now or hereafter in force and all rights of marshaling in the event of any sale or disposition of any of the Collateral with respect to both the Secured Obligations and any Collateral. The Borrower assents to any extension or postponement of the time of payment or any other forgiveness or indulgence, to any substitution, exchange or release of Collateral, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromise or adjustment of any thereof, all in such manner and at such time or times as the Lender may deem advisable. The Lender may exercise its rights with respect to the Collateral without resorting, or regard, to other collateral or sources of reimbursement for Secured Obligations. The Lender shall not be deemed to have waived any of its rights with respect to the Secured Obligations or the Collateral unless such waiver is in writing and signed by Lender. No delay or omission on part of the Lender in exercising any right and no course of dealing shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not bar or waive the exercise of any right on any future occasion. All rights and remedies of the Lender in the Secured Obligations or the Collateral, whether evidenced hereby or by any other instrument or papers, are cumulative and not exclusive of any remedies provided by law or any other agreement, and may be exercised separately or concurrently.
Section 9. Notices. All notices, approvals, request, demands
and other communications hereunder shall be given in accordance with
Section 10.1 of Credit Agreement.
Section 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and assigns, and shall be binding upon and inure to the benefit of and be enforceable by the Lender and its successor and assigns; provided that the Borrower may not assign or transfer its rights or obligations hereunder. Without limiting the generality of the foregoing sentence, the Lender may, in the manner and to the extent set forth in the Credit Agreement, assign or otherwise transfer any agreement or any note held by it evidencing, securing or otherwise executed in connection with the Secured Obligations, or sell participations in any interest therein, to any other person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to the Lender herein.
Section 11. Governing Law; Jurisdiction; Venue. THIS AGREEMENT IS A
CONTRACT UNDER THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF THE COMMONWEALTH
OF MASSACHUSETTS, SITTING IN SUFFOLK COUNTY, OR, AT THE LENDER'S OPTION, THE
UNITED STATES DISTRICT OF MASSACHUSETTS, SITTING IN BOSTON, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY SUIT TO ENFORCE THE RIGHTS OF THE LENDER
UNDER THIS AGREEMENT AND ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER, ON THE ONE
HAND, AND THE LENDER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. THE BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT AND CONSENTS TO SERVICE OF PROCESS IN ANY SUIT BEING
MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SET FORTH IN SECTION 10.1 OF THE
CREDIT AGREEMENT. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE THE LAYING OF VENUE OF ANY SUCH ACTION BROUGHT IN THE COURTS
REFERRED TO IN THIS SECTION AND IRREVOCABLY WAIVED AND AGREES NOT TO PLEAD OR
CLAIM ANY SUCH ACTION THAT SUCH ACTION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
Section 12. Waiver of Jury Trial. THE BORROWER AND THE LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, ANY RIGHTS OR SECURED OBLIGATIONS HEREUNDER, THE PERFORMANCE OF
SUCH RIGHTS AND SECURED OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHTHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING, WITHOUT LIMITAION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE LENDER RELATING TO THE ADMINISTRATION OR
ENFORCEMENT OF THIS AGREEMENT, AND AGREES THAT
IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CAN NOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE
BORROWER AND THE LENDER HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER
IN ANY LITIGATION REFERRED TO TN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(b) ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BECAUSE OF, AMONG OTHER THINGS, THE BORROWER'S WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
Section 13. General. This Agreement may not be amended or modified except by a writing signed by each of the Borrower and the Lender. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. Section headings are for convenience of reference only and are not a part of this Agreement. In the event that any Collateral or any deposit or other sum due from or credited by the Lender is held or stands in the name of the borrower and another or others jointly, the Lender may deal with the same for all purposes as if it belonged to or stood in the name of the Borrower alone.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly executed as an instrument under seal as of the date first written above.
VIRTUSA CORPORATION
By:/s/ Charles Speicher ____________________ Charles Speicher Corporate Controller |
ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN
CITIZENS BANK OF MASSACHUSETTS
By:/s/ Sharon A. Stone ______________________ Sharon A. Stone Senior vice President |
NEGATIVE PLEDGE AGREEMENT
THIS NEGATIVE PLEDGE AGREEMENT (this "Agreement") is made this 29 day of September, 2006 by VIRTUSA CORPORATION, a corporation organized under the laws of the State of Delaware and having its chief executive office at 2000 West Park Drive, Westborough, Massachusetts 01581 (the "Borrower"), in favor CITIZENS BANK OF MASSACHUSETTS, a Massachusetts bank having a banking office at 28 State Street, Boston, Massachusetts 02109 (the "Lender").
The Borrower has requested that the Lender enter into a certain Amended and Restated Credit Agreement with Borrower of even date herewith (as the same may be amended, modified, supplemented, extended or restated from time to time, the "Credit Agreement") and that Lender agree to make loans and other credits to the Borrower upon the terms and subject to the conditions set forth therein.
Lender has required that Borrower enter into this Agreement as a condition precedent to Lender's entering into the Credit Agreement.
In order to induce the Lender to enter into the Credit Agreement and to make or continue to make loans and other credits available to the Borrower upon the terms and subject to the conditions set forth therein, and in consideration thereof, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower agrees as follows:
Section 1. Definitions. All capitalized terms used herein or in any certificate, report or other document delivered pursuant hereto shall have the meanings assigned to them below or in the Credit Agreement (unless otherwise defined).
Intellectual Property. All of the following, to the extent owned by (and not licensed to) the Borrower: (i) United States and foreign patents, patent applications and statutory invention registrations, including reissues, divisions, continuations, substitutions, renewals, continuations in part, extensions and reexaminations thereof, and all improvements thereto, (ii) software, database, copyrightable works, websites, copyrights (registered, renewed or otherwise) and registrations, renewals and applications for registration or renewal thereof, (iii) trademarks, trademark applications, service marks, service mark applications, trade dress, logos, slogans, symbols, trade names, internet domain names, brand names, product names, fictitious names, corporate names, and other source identifiers and all reissues, extensions and renewals thereof, and goodwill of the business symbolized thereby and associated therewith, (iv) trade secrets, know-how, technology, inventions and discoveries, and (v) any and all right, title, and interest in and to the foregoing, including the right to sue for past, present and future infringement, in all of such cases (i) through (v), whether used, held for use, supported, maintained, marketed or otherwise.
Section 2. Negative Pledge. The Borrower hereby covenants that it shall not create, incur, assume or suffer to exist any Encumbrance, other than Permitted Encumbrances, or any other negative pledge, on or with respect to the Intellectual Property. The Borrower further
covenants and agrees that it shall not sell, transfer, assign or otherwise alienate the Intellectual Property, other than for fair consideration in the ordinary course of Borrower's business, without the prior written consent of Lender.
Section 3. Notices. All notices, approvals, requests, demands and other communications hereunder shall be given in accordance with Section 10.1 of the Credit Agreement.
Section 4. Governing Law: Jurisdiction; Venue. THIS AGREEMENT IS A
CONTRACT UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID
COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF THE COMMONWEALTH
OF MASSACHUSETTS, SITTING IN SUFFOLK COUNTY, OR AT THE LENDER'S OPTION, THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, SITTING IN
BOSTON, SHALL HAVE EXCLUSIVE JURIDRICTION TO HEAR AND DETERMINE ANY SUIT TO
ENFORCE THE RIGHTS OF THE LENDER UNDER THIS AGREEMENT AND ANY CLAIMS OR DISPUTES
BETWEEN THE BORROWER, ON THE ONE HAND, AND THE LENDER, ON THE OTHER HAND,
PERTAINING TO THIS AGREEMENT OR ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT AND CONSENTS TO
SERVICE OF THE PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT
THE ADDRESS SET FORTH IN SECTION 10.1 OF THE CREDIT AGREEMENT. THE BORROWER
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH ACTION BROUGHT IN THE COURT REFERRED TO IN THE
SECTION AND IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
ACTION SUCH ACTION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 5. Waiver of Jury Trail. THE BORROWER AND THE LENDER HEREBY
KNOWINGLY, VOLUNTARY AND INTENTIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT
LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF
THE LENDER RELATING TO THE ADMINISTRATION OR ENFORCEMENT OF THIS AGREEMENT, AND
AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CAN NOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE BORROWER AND THE LENDER HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE
ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE LENDER HAS REPRESENTED EXPRESSLY OR OTHERWISE, THAT THE LENDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(b) ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BECAUSE OF, AMONG OTHER THINGS, THE BORROWER'S WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
Section 6. General. This Agreement may not be amended or modified expect by a writing signed by each of the Borrower and Lender. This Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and assigns, and shall be shall be binding upon and inure to the benefit of and be enforceable by the Lender and its successors and assigns; provided that the Borrower may not assign or transfer its rights or obligations hereunder. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, but all of which together shall constitute one agreement. Section headings are for convenience of reference only and are not a part of this Agreement. In the event that any deposit or sum due from or credited by the Lender is held or stands in the name of the Borrower and another or others jointly, the Lender may deal with the same for all purposes as if it belonged to or stood in the name of the Borrower alone.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly executed as an instrument under seal as of the date first written above.
VIRTUSA CORPORATION
By:/s/ Kris Canekeratne ____________________ Kris Canekeratne Chairman and Chief Executive Officer |
ACCEPTED AS OF THE
DATE FIRST ABOVE WRITTEN
CITIZENS BANK OF MASSCHUSETTS
By:/s/ Sharon A. Stone ______________________ Sharon A. Stone Senior Vice President |
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement (this "Agreement") is made September 29, 2006 by and between VIRTUSA CORPORATION, a Delaware corporation having its principal offices at 2000 West Park Drive, Westborough, Massachusetts 01581 (hereinafter called the "Borrower"), and CITIZENS BANK OF MASSACHUSETTS, a Massachusetts bank with a banking office at 28 State Street, Boston, Massachusetts 02109 (hereinafter called the "Lender"). Borrower has executed and delivered a certain Amended and Restated Credit Agreement of even date herewith (the "Credit Agreement") to Lender pursuant to which Lender has agreed to make certain loans and other credits available to Borrower on the terms and conditions set forth in the Credit Agreement.
1. PLEDGE OF STOCK. The Borrower hereby represents and warrants that the Borrower owns on the date hereof, free and clear of any and all claims, liens or encumbrances, all of the issued and outstanding shares of the capital stock of VIRTUSA SECURITIES CORPORATION (the "Subsidiary"), and hereby agrees to pledge, assign, and deliver the same on the date hereof to the Lender, for benefit of the Lender, to be held by the Lender subject to the terms and conditions hereinafter set forth, together with stock powers appropriately executed in blank. The term "Stock" as used herein includes the shares of stock described above and any additional shares of stock which may from time to time be pledged with the Lender hereunder.
Any sums or property paid upon or with respect to any of the Stock upon the liquidation or dissolution of any issuer thereof shall be paid over to the Lender to be held by it as security for the Obligations. In case any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Lender to be held by it as security for the Obligations. All sums of money and property paid or distributed in respect of the Stock which are received by the Borrower shall, until paid or delivered to the Lender, be held by the Borrower in trust for the Lender as security for the Obligations.
2. WARRANTY OF TITLE. The Borrower warrants that it has good and marketable title to the Stock described in Section l hereof, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the security interest created by this Agreement, and that such Borrower has power, authority and legal right to pledge the Stock pursuant to this Agreement. The Borrower represents and warrants that the Stock represents 100.0% of the issued and outstanding capital stock of the Subsidiary, and that it will not permit any further shares or instruments convertible into or exchangeable for shares of stock in the Subsidiary to issue while this Agreement remains in effect. The Borrower covenants to defend the Lender's rights and security interest in the Stock against the claims and demands of all Persons whomsoever; and the Borrower covenants to have the like title to and right to pledge any other property at any time hereafter pledged to the Lender hereunder and to likewise
defend the Lender's rights and security interest therein.
The property at any time pledged with the Lender hereunder and all income therefrom and proceeds thereof, are collectively referred to herein as the "Collateral".
3. SECURITY FOR OBLIGATIONS. This Agreement and the pledge of the Collateral is made with the Lender to secure the payment in full and performance of any and all obligations, indebtedness and liabilities of the Borrower, now existing or hereafter arising, direct or indirect, absolute or contingent, due or to become due, matured or unmatured, liquidated or unliquidated, arising by contract, operation of law or otherwise including, but not limited to, those arising under or in connection with the Credit Agreement (the "Obligations").
4. DIVIDENDS, VOTING, ETC., WHILE NO EVENT OF DEFAULT. So long as no default by the Borrower in the full and punctual payment and performance of the Obligations is continuing, the Borrower, as to the Stock, shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock (to the extent otherwise entitled thereto) and to give consents, waivers and ratifications in respect of the Stock, provided, however, that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with or violate any provision of the Credit Agreement. All such rights of the Borrower to vote and give consents, waivers and ratifications with respect to the Stock shall, at Lender's option, as evidenced by Lender's notifying Borrower of such election, cease in case an Event of Default shall have occurred and be continuing.
5. REMEDIES FOLLOWING EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing, the Lender shall thereafter have the following rights and remedies in addition to the rights and remedies of a secured party under the Uniform Commercial Code, all such rights and remedies being cumulative, not exclusive, and enforceable alternatively successively or concurrently, at such time or times as the Lender thinks expedient:
(a) if the Lender so elects and gives notice of such election to the Borrower, the Lender may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) and give all consents, waivers and ratifications in respect of the stock and otherwise act with respect thereto as though it was the outright owner thereof (the Borrower hereby irrevocably constituting and appointing the Lender the proxy and attorney-in-fact of the Borrower with full power of substitution, to do so);
(b) the Lender may demand, sue for, collect or make any compromise or settlement the Lender deems suitable in respect of any Collateral held by it hereunder;
(c) the Lender may sell, resell, assign and deliver, or otherwise dispose of any or all of the Collateral, for cash and/or credit and upon such terms, at such place or places and at such time or times and to such Persons as the Lender thinks expedient, all without demand for performance by the Borrower or any notice or advertisement whatsoever except
such as may be required by law; and
(d) the Lender may cause all or any part of the Stock held by it to be transferred into its name or the name of its nominee or nominees.
The Lender may enforce its right hereunder without any other notice and without compliance with any other condition precedent now or hereafter imposed by statute, rule or law or otherwise (all of which are hereby expressly waived by the Borrower). If any of the Collateral is sold by the Lender upon credit or for future delivery, the Lender shall not be liable for the failure of the purchaser to pay for the same and in such event the Lender may resell such Collateral. The Lender may buy any part or all of the Collateral at any public sale and if any part or all of the Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Lender may buy at private sale and may make payments thereof by any means. The Lender may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, or reasonable attorneys' fees, and all legal expenses, travel and other expenses which may be incurred by the Lender in attempting to collect the Obligations or any of them, or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement; and then to the Obligations in such order as to principal or interest remaining unpaid, including interest thereon, and the balance of any expenses unpaid, as the Lender in its sole discretion may reasonably determine, and any surplus shall be paid to the Borrower.
The Borrower recognizes that the Lender may be unable to effect a public sale of the Stock by reason of certain prohibitions contained in the Securities Act of 1933, as amended, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. The Borrower agrees that any such private sales may be at prices and on other reasonable terms less favorable to the seller than if sold at public sales and that such private sales shall be deemed to have been made in a commercially reasonable manner. The Lender shall be under no obligation to delay a sale of any of the Stock for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended, even if the issuer would agree to do so.
6. MARSHALLING. The Lender shall not be required to marshall any present or future security for (including but not limited to this Agreement and the Collateral pledged hereunder), or guaranties of, the Obligations or any part of them, or to resort to such security or guaranties in any particular order; and all of its rights hereunder and in respect of such securities and guaranties shall be cumulative and in addition to all other rights, however existing or arising. To the extent that the Borrower lawfully may, the Borrower hereby agrees that it will not invoke any law which might cause delay in or impede the enforcement of the Lender's rights under this Agreement or under any other instrument evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured and guaranteed, and the Borrower hereby
irrevocably waives the benefits of all such laws.
7. BORROWER'S OBLIGATIONS NOT AFFECTED. The obligations of the Borrower hereunder shall remain in full force and effect without regard to, and shall not be impaired by (a) any insolvency, bankruptcy, arrangement of or involving the Borrower; (b) any exercise or non-exercise, or any waiver, by the Lender of any right, remedy, power or privilege under or in respect of any of the Obligations or any security therefor (including this Agreement); (c) any amendment or waiver of any of the terms of the Credit Agreement or any of the Obligations; (d) any amendment or waiver of any of the terms of any instrument (other than this Agreement) securing any of the Obligations or (e) the taking of additional security for or any guaranty of any of the Obligations or the release or discharge or termination of any security or guaranty for any of the Obligations; whether or not the Borrower shall have notice or knowledge of any of the foregoing.
8. TRANSFER, ETC. BY THE BORROWER. Without the prior written consent of the Lender, the Borrower will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber any of the Collateral or any interest therein, except for the pledge thereof provided for in this Agreement.
9. FURTHER ASSURANCES. The Borrower will do all such acts, and will furnish to the Lender all such financing statements, certificates, opinions and other documents and will do or cause to be done all such other things as the Lender may reasonable request from time to time in order to give full effect to this Agreement and to secure the rights of the Lender hereunder.
10. LENDER'S EXONERATION. Under no circumstances shall the Lender be deemed to assume any responsibility for or obligation or duty (except for safe custody) with respect to any part or all of the Collateral, of any nature or kind or any matter or proceedings arising out of or relating thereto, but the same shall be at the Borrower's sole risk at all times. The Lender shall not be required to take any action of any kind to collect, preserve or protect its or the Borrower's rights in the Collateral or against any parties thereto. The Borrower hereby releases the Lender from any claims, causes of action and demands at any time arising out of or with respect to this Agreement, the Obligations, the use of the Collateral and/or any actions reasonably taken or omitted to be taken by the Lender with respect thereto, and the Borrower hereby agrees to hold the Lender harmless from and with respect to any and all such claims, causes of action and demands. The Lender's prior recourse to any part or all of the Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of the Obligations.
11. NO WAIVER, ETC. No act, failure or delay by Lender shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Lender of any default or right or remedy which it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Borrower hereby waives presentment, notice of dishonor and protest of all instruments
included in or evidencing any of the Obligations or the Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein).
12. NOTICES, ETC. All notices, requests and other communications hereunder shall be in writing and shall be given as set forth in the Credit Agreement.
13. TERMINATION. Upon payment in full of all the Obligations in accordance with their terms and the performance by the Borrower of all of the Borrower's agreements under the Credit Agreement and this Agreement, this Agreement shall terminate and the Borrower shall be entitled to the return, at the Borrower's expense, of such of the Collateral in the possession or control of the Lender as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Lender hereunder.
14. MISCELLANEOUS PROVISIONS. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the party to be charged. This Agreement and all obligations of the Borrower hereunder shall be binding upon the successors in title and assigns of the Borrower, and shall, together with the rights and remedies of the Lender hereunder, inure to the benefit of the Lender, its successors in title and assigns. This Agreement and obligations of the Borrower hereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. The descriptive section headings have been inserted for convenience of reference only and do not define or limit the provisions hereof. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable terms had not been included herein. The Borrower acknowledges receipt of a copy of this Agreement. Words and expressions used herein without definition which are defined in the Uniform Commercial Code have such defined meanings herein, unless the context otherwise indicates or requires. This Agreement may be executed in several counterparts, each of which when executed and delivered shall be original, but all of which together shall constitute one instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart.
IN WITNESS WHEREOF, the Borrower has executed this Agreement as an instrument under seal on the date first above written.
WITNESS BORROWER VIRTUSA CORPORATION /s/ Charles Speicher By: /s/ Kris Canekeratne ---------------------------- ------------------------------------ Charles Speicher Kris Canekeratne Corporate Controller Chairman and Chief Executive Officer |
Exhibit 10.10
EXECUTIVE AGREEMENT
AGREEMENT made as of this 5th day of April, 2007 by and between Virtusa Corporation (the "Company"), and Kris A. Canekeratne (the "Executive").
1. Purpose. The Company considers it essential to the best interests of its stockholders to promote and preserve the continuous employment of key management personnel. The Board of Directors of the Company (the "Board") recognizes that, as is the case with many corporations, the possibility of a Change in Control (as defined in Section 2 hereof) exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's key management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. Nothing in this Agreement shall be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have occurred upon the occurrence of any one of the following events:
(a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Act") (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") (in such case other than as a result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the date hereof shall be considered an Incumbent Director if such person's election was approved by or such person was nominated for election by either (A) a vote of at least a majority of the Incumbent Directors or (B) a vote of at least a majority of the Incumbent Directors who are members of a nominating committee comprised, in the majority, of Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or
(c) the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company; or
(d) the approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred for purposes of the foregoing clause (a) solely as the result of an acquisition of securities by the Company that, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all then outstanding Voting Securities, then a "Change in Control" shall be deemed to have occurred for purposes of the foregoing clause (a).
3. Terminating Event. A "Terminating Event" shall mean any of the events provided in this Section 3:
(a) Termination by the Company. Termination by the Company of the employment of the Executive with the Company for any reason other than for Cause, death or Disability. For purposes of this Agreement, "Cause" shall mean:
(i) conduct by the Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; or
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury to the Company or any of its subsidiaries and affiliates if he were retained in his position; or
(iii) continued, willful and deliberate non-performance by the Executive of his duties to the Company (other than by reason of the Executive's physical
or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board; or
(iv) a violation by the Executive of the Company's employment policies which has continued following written notice of such violation from the Board; or
(v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials.
A Terminating Event shall not be deemed to have occurred pursuant to this
Section 3(a) solely as a result of the Executive being an employee of any direct
or indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (i), (iii) and (v) hereof, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive without reasonable belief that the Executive's act, or failure
to act, was in the best interests of the Company and its subsidiaries and
affiliates. For purposes hereof, the Executive will be considered "Disabled" if,
as a result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties to the Company on a full-time
basis for 180 calendar days in the aggregate in any 12-month period.
(b) Termination by the Executive for Good Reason. Termination by the Executive of the Executive's employment with the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following events:
(i) a substantial diminution or other substantial adverse change, not consented to by the Executive, in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Terminating Event; or
(ii) a material reduction in the Executive's annual base salary or targeted total annual cash compensation (i.e., base salary and targeted bonus) as in effect on the date hereof or as the same may be increased from time to time hereafter except for across-the-board reductions similarly affecting all or substantially all management employees; or
(iii) the relocation of the Company's offices at which the Executive is principally employed immediately prior to the date of a Terminating Event (the "Current Offices") to any other location more than 50 miles from the Current Offices, or the requirement by the Company for the Executive to be based anywhere other than the Current Offices, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Terminating Event; or
(iv) the failure by the Company to obtain an effective agreement from any successor to assume and agree to perform this Agreement, as required by Section 20.
4. Severance and Change in Control Payments.
(a) In the event a Terminating Event occurs within 24 months after a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to two
times the sum of (x) the Executive's annual base salary in effect
immediately prior to the Terminating Event (or the Executive's annual base
salary in effect immediately prior to the Change in Control, if higher) and
(y) provided that the Company achieves its corporate performance targets
for the period, a pro rated portion of the Executive's targeted annual
bonus for the period in which the Change in Control occurred, payable in
one lump-sum payment no later than three days following the Date of
Termination (provided that any pro rated bonus amount shall be payable no
later then three days following the date on which such bonus is payable to
other management employees);
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for 24 months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and
(iii) all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate and become exercisable or non-forfeitable as of the effective date of such Change in Control.
(b) In the event a Terminating Event occurs prior to a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to one times the sum of (x) the Executive's annual base salary in effect immediately prior to the Terminating Event and (y) provided that the Company achieves its corporate performance targets for the period, a pro rated portion of the Executive's targeted annual bonus for the period in which the Terminating Event occurred, payable in one lump-sum payment no later than three days following the Date of Termination (provided that any pro rated bonus amount shall be payable no later then three days following the date on which such bonus is payable to other management employees); and
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for 12 months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under COBRA.
(c) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, upon a Change in Control, all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate twelve (12) months so that the shares that would have vested in the one-year period following such Change in Control would become immediately vested and the remaining unvested shares would continue to vest in accordance with their terms but on a schedule that would be twelve (12) months earlier than had the Change in Control not transpired. The Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.
(d) Anything in this Agreement to the contrary notwithstanding, if at
the time of the Executive's termination of employment, the Executive is
considered a "specified employee" within the meaning of Section 409A(a)(2)(B)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), and if any
payment that the Executive becomes entitled to under this Agreement is
considered deferred compensation subject to interest and additional tax imposed
pursuant to Section 409A(a) of the Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable
prior to the date that is the earliest of (i) six months after the Executive's
Date of Termination, (ii) the Executive's death, or (iii) such other date as
will cause such payment not to be subject to such interest and additional tax,
and the initial payment shall include a catch-up amount covering amounts that
would otherwise have been paid during the first six-month period but for the
application of this Section 4(e).
5. ADDITIONAL LIMITATION.
(a) Additional Limitation. Anything in this Agreement to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Code, then the benefits payable under this Agreement shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, the Executive shall determine which method shall be followed; provided that if the Executive fails to make such determination within 15 business days after the Company has sent the Executive written notice of the need for such reduction, the Company may determine the amount of such reduction in its sole discretion.
For the purposes of this Section 5(a), "Threshold Amount" shall mean three times the Executive's "base amount" within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Executive with respect to such excise tax.
6. Term. This Agreement shall take effect on the date first set forth above and shall terminate upon the earlier of (a) the termination of the Executive's employment with the
Company for any reason other than the occurrence of a Terminating Event, or (b) the date which is 24 months after a Change in Control if the Executive is still employed by the Company.
7. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
8. Notice and Date of Termination.
(a) Notice of Termination. During the term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with this Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and the Date of Termination.
(b) Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment during the term of this Agreement, shall mean the date specified in the Notice of Termination. In the case of a termination by the Company following a Change in Control other than a termination for Cause (which may be effective immediately), the Date of Termination shall not be less than 30 days after the Notice of Termination is given. In the case of a termination by the Executive, the Date of Termination shall not be less than 30 days from the date such Notice of Termination is given. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
9. No Mitigation. The Company agrees that, if the Executive's employment by the Company is terminated during the term of this Agreement, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 4 hereof. Further, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or otherwise.
10. Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association ("AAA") in Boston, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 10 shall be specifically enforceable. Notwithstanding the
foregoing, this Section 10 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 10.
11. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 10 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
12. Integration. This Agreement shall constitute the sole and entire agreement among the parties with respect to the subject matter hereof, and supersedes and cancels all prior, concurrent and/or contemporaneous arrangements, understandings, promises, programs, policies, plans, practices, offers, agreements and/or discussions, whether written or oral, by or among the parties regarding the subject matter hereof, including, but not limited to, that certain Employment Agreement by and between the Company and the Executive, dated November 1, 2002 (and any amendments thereto) and those constituting or concerning employment agreements, change in control benefits and/or severance benefits; provided, however, that this Agreement is not intended to, and shall not, supersede, affect, limit, modify or terminate any of the following, all of which shall remain in full force and effect in accordance with their respective terms: (i) any written agreements, programs, policies, plans, arrangements or practices of the Company that do not relate to the subject matter hereof; (ii) any written stock or stock option agreements between the Executive and the Company (except as expressly modified hereby); and (iii) any written agreements between Executive and the Company concerning noncompetition, nonsolicitation, inventions and/or nondisclosure obligations.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive's death after a Terminating Event but prior to the completion by the Company of all payments due him under Section 4 of this Agreement, the Company shall continue such payments to the Executive's beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this
Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
16. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Executive at the last address the Executive has filed in writing with the Company, or to the Company at its main office, attention of the Board of Directors.
17. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
18. Effect on Other Plans. An election by the Executive to resign for Good Reason under the provisions of this Agreement shall not be deemed a voluntary termination of employment by the Executive for the purpose of interpreting the provisions of any of the Company's benefit plans, programs or policies. Nothing in this Agreement shall be construed to limit the rights of the Executive under the Company's benefit plans, programs or policies except as otherwise provided in Section 5 hereof, and except that the Executive shall have no rights to any severance benefits under any Company severance pay plan.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such Commonwealth. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of Appeals for the First Circuit.
20. Successors to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment.
21. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
22. Confidential Information. The Executive shall never use, publish or disclose in a manner adverse to the Company's interests, any proprietary or confidential information relating to (a) the business, operations or properties of the Company or any subsidiary or other affiliate of the Company, or (b) any materials, processes, business practices, technology, know-how, research, programs, customer lists, customer requirements or other information used in the manufacture, sale or marketing of any of the respective products or services of the Company or any subsidiary or other affiliate of the Company; provided, however, that no breach or alleged breach of this Section 22 shall entitle the Company to fail to comply fully and in a timely manner with any other provision hereof. Nothing in this Agreement shall preclude the Company from
seeking money damages, or equitable relief by injunction or otherwise without the necessity of proving actual damage to the Company, for any breach by the Executive hereunder.
23. Conditions of Benefits. The amounts payable to the Executive by the Company pursuant to Section 4 hereof shall be condition upon, and payable only if, the Executive: (a) executes a general release in a form and of a scope reasonably acceptable to the Company; (b) returns all property, equipment, confidential information and documentation of the Company; (c) has complied and continues to comply in all material respects with any noncompetition, inventions and/or nondisclosure obligations that the Executive may owe to the Company, whether pursuant to an agreement or applicable law; and (d) provides a signed, written resignation of Executive's status as an officer and director (if applicable) of the Company and, if applicable, its subsidiaries.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company by its duly authorized officer, and by the Executive, as of the date first above written.
VIRTUSA CORPORATION
By:/s/ Thomas R. Holler ------------------------------------ Name: Thomas R. Holler Title: Chief Financial Officer /s/ Kris A. Canekeratne ------------------------------------ KRIS A. CANEKERATNE CHIEF EXECUTIVE OFFICER |
Exhibit 10.11
EXECUTIVE AGREEMENT
AGREEMENT made as of this 5th day of April, 2007 by and between Virtusa Corporation (the "Company"), and Danford F. Smith (the "Executive").
1. Purpose. The Company considers it essential to the best interests of its stockholders to promote and preserve the continuous employment of key management personnel. The Board of Directors of the Company (the "Board") recognizes that, as is the case with many corporations, the possibility of a Change in Control (as defined in Section 2 hereof) exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's key management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. Nothing in this Agreement shall be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have occurred upon the occurrence of any one of the following events:
(a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Act") (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") (in such case other than as a result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the date hereof shall be considered an Incumbent Director if such person's election was approved by or such person was nominated for election by either (A) a vote of at least a majority of the Incumbent Directors or (B) a vote of at least a majority of the Incumbent Directors who are members of a nominating committee comprised, in the majority, of Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or
(c) the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company; or
(d) the approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred for purposes of the foregoing clause (a) solely as the result of an acquisition of securities by the Company that, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all then outstanding Voting Securities, then a "Change in Control" shall be deemed to have occurred for purposes of the foregoing clause (a).
3. Terminating Event. A "Terminating Event" shall mean any of the events provided in this Section 3:
(a) Termination by the Company. Termination by the Company of the employment of the Executive with the Company for any reason other than for Cause, death or Disability. For purposes of this Agreement, "Cause" shall mean:
(i) conduct by the Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; or
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury to the Company or any of its subsidiaries and affiliates if he were retained in his position; or
(iii) continued, willful and deliberate non-performance by the Executive of his duties to the Company (other than by reason of the Executive's physical
or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board; or
(iv) a violation by the Executive of the Company's employment policies which has continued following written notice of such violation from the Board; or
(v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials.
A Terminating Event shall not be deemed to have occurred pursuant to this
Section 3(a) solely as a result of the Executive being an employee of any direct
or indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (i), (iii) and (v) hereof, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive without reasonable belief that the Executive's act, or failure
to act, was in the best interests of the Company and its subsidiaries and
affiliates. For purposes hereof, the Executive will be considered "Disabled" if,
as a result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties to the Company on a full-time
basis for 180 calendar days in the aggregate in any 12-month period.
(b) Termination by the Executive for Good Reason. Termination by the Executive of the Executive's employment with the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following events:
(i) a substantial diminution or other substantial adverse change, not consented to by the Executive, in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Terminating Event; or
(ii) a material reduction in the Executive's annual base salary or targeted total annual cash compensation (i.e., base salary and targeted bonus) as in effect on the date hereof or as the same may be increased from time to time hereafter except for across-the-board reductions similarly affecting all or substantially all management employees; or
(iii) the relocation of the Company's offices at which the Executive is principally employed immediately prior to the date of a Terminating Event (the "Current Offices") to any other location more than 50 miles from the Current Offices, or the requirement by the Company for the Executive to be based anywhere other than the Current Offices, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Terminating Event; or
(iv) the failure by the Company to obtain an effective agreement from any successor to assume and agree to perform this Agreement, as required by Section 20.
4. Severance and Change in Control Payments.
(a) In the event a Terminating Event occurs within 24 months after a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to two
times the sum of (x) the Executive's annual base salary in effect
immediately prior to the Terminating Event (or the Executive's annual base
salary in effect immediately prior to the Change in Control, if higher) and
(y) provided that the Company achieves its corporate performance targets
for the period, a pro rated portion of the Executive's targeted annual
bonus for the period in which the Change in Control occurred, payable in
one lump-sum payment no later than three days following the Date of
Termination (provided that any pro rated bonus amount shall be payable no
later then three days following the date on which such bonus is payable to
other management employees);
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for 24 months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and
(iii) all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate and become exercisable or non-forfeitable as of the effective date of such Change in Control.
(b) In the event a Terminating Event occurs prior to a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to one times the sum of (x) the Executive's annual base salary in effect immediately prior to the Terminating Event and (y) provided that the Company achieves its corporate performance targets for the period, a pro rated portion of the Executive's targeted annual bonus for the period in which the Terminating Event occurred, payable in one lump-sum payment no later than three days following the Date of Termination (provided that any pro rated bonus amount shall be payable no later then three days following the date on which such bonus is payable to other management employees);
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for 12 months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under COBRA;
and
(iii) all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate twelve (12) months so that the shares that would have vested in the one-year period following such Terminating Event would become immediately vested and the remaining unvested shares would continue to vest in accordance with their terms but on a schedule that would be twelve (12) months earlier than had the Terminating Event not transpired. The Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.
(c) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, upon a Change in Control, all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate twelve (12) months so that the shares that would have vested in the one-year period following such Change in Control would become immediately vested and the remaining unvested shares would continue to vest in accordance with their terms but on a schedule that would be twelve (12) months earlier than had the Change in Control not transpired. The Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.
(d) Anything in this Agreement to the contrary notwithstanding, if at
the time of the Executive's termination of employment, the Executive is
considered a "specified employee" within the meaning of Section 409A(a)(2)(B)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), and if any
payment that the Executive becomes entitled to under this Agreement is
considered deferred compensation subject to interest and additional tax imposed
pursuant to Section 409A(a) of the Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable
prior to the date that is the earliest of (i) six months after the Executive's
Date of Termination, (ii) the Executive's death, or (iii) such other date as
will cause such payment not to be subject to such interest and additional tax,
and the initial payment shall include a catch-up amount covering amounts that
would otherwise have been paid during the first six-month period but for the
application of this Section 4(e).
5. ADDITIONAL LIMITATION.
(a) Additional Limitation. Anything in this Agreement to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Code, then the benefits payable under this Agreement shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, the Executive shall determine which method shall be followed; provided that if the Executive fails to make such determination within 15 business days after the Company has sent the
Executive written notice of the need for such reduction, the Company may determine the amount of such reduction in its sole discretion.
For the purposes of this Section 5(a), "Threshold Amount" shall mean three times the Executive's "base amount" within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Executive with respect to such excise tax.
6. Term. This Agreement shall take effect on the date first set forth above and shall terminate upon the earlier of (a) the termination of the Executive's employment with the Company for any reason other than the occurrence of a Terminating Event, or (b) the date which is 24 months after a Change in Control if the Executive is still employed by the Company.
7. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
8. Notice and Date of Termination.
(a) Notice of Termination. During the term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with this Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and the Date of Termination.
(b) Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment during the term of this Agreement, shall mean the date specified in the Notice of Termination. In the case of a termination by the Company following a Change in Control other than a termination for Cause (which may be effective immediately), the Date of Termination shall not be less than 30 days after the Notice of Termination is given. In the case of a termination by the Executive, the Date of Termination shall not be less than 30 days from the date such Notice of Termination is given. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
9. No Mitigation. The Company agrees that, if the Executive's employment by the Company is terminated during the term of this Agreement, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 4 hereof. Further, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or otherwise.
10. Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful
employment discrimination whether based on age or otherwise) shall, to the
fullest extent permitted by law, be settled by arbitration in any forum and form
agreed upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association ("AAA") in Boston,
Massachusetts in accordance with the Employment Dispute Resolution Rules of the
AAA, including, but not limited to, the rules and procedures applicable to the
selection of arbitrators. In the event that any person or entity other than the
Executive or the Company may be a party with regard to any such controversy or
claim, such controversy or claim shall be submitted to arbitration subject to
such other person or entity's agreement. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. This Section
10 shall be specifically enforceable. Notwithstanding the foregoing, this
Section 10 shall not preclude either party from pursuing a court action for the
sole purpose of obtaining a temporary restraining order or a preliminary
injunction in circumstances in which such relief is appropriate; provided that
any other relief shall be pursued through an arbitration proceeding pursuant to
this Section 10.
11. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 10 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
12. Integration. This Agreement shall constitute the sole and entire agreement among the parties with respect to the subject matter hereof, and supersedes and cancels all prior, concurrent and/or contemporaneous arrangements, understandings, promises, programs, policies, plans, practices, offers, agreements and/or discussions, whether written or oral, by or among the parties regarding the subject matter hereof, including, but not limited to, that certain Employment Letter by and between the Company and the Executive, dated August 16, 2004 (and any amendments thereto) and those constituting or concerning employment agreements, change in control benefits and/or severance benefits; provided, however, that this Agreement is not intended to, and shall not, supersede, affect, limit, modify or terminate any of the following, all of which shall remain in full force and effect in accordance with their respective terms: (i) any written agreements, programs, policies, plans, arrangements or practices of the Company that do not relate to the subject matter hereof; (ii) any written stock or stock option agreements between the Executive and the Company (except as expressly modified hereby); and (iii) any written agreements between Executive and the Company concerning noncompetition, nonsolicitation, inventions and/or nondisclosure obligations.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive's death after a Terminating Event but prior to the completion by the Company of all payments due him under Section 4 of this Agreement, the Company shall continue such payments to the Executive's beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
16. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Executive at the last address the Executive has filed in writing with the Company, or to the Company at its main office, attention of the Board of Directors.
17. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
18. Effect on Other Plans. An election by the Executive to resign for Good Reason under the provisions of this Agreement shall not be deemed a voluntary termination of employment by the Executive for the purpose of interpreting the provisions of any of the Company's benefit plans, programs or policies. Nothing in this Agreement shall be construed to limit the rights of the Executive under the Company's benefit plans, programs or policies except as otherwise provided in Section 5 hereof, and except that the Executive shall have no rights to any severance benefits under any Company severance pay plan.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such Commonwealth. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of Appeals for the First Circuit.
20. Successors to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment.
21. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
22. Confidential Information. The Executive shall never use, publish or disclose in a manner adverse to the Company's interests, any proprietary or confidential information relating to (a) the business, operations or properties of the Company or any subsidiary or other affiliate of the Company, or (b) any materials, processes, business practices, technology, know-how, research, programs, customer lists, customer requirements or other information used in the manufacture, sale or marketing of any of the respective products or services of the Company or any subsidiary or other affiliate of the Company; provided, however, that no breach or alleged breach of this Section 22 shall entitle the Company to fail to comply fully and in a timely manner with any other provision hereof. Nothing in this Agreement shall preclude the Company from seeking money damages, or equitable relief by injunction or otherwise without the necessity of proving actual damage to the Company, for any breach by the Executive hereunder.
23. Conditions of Benefits. The amounts payable to the Executive by the Company pursuant to Section 4 hereof shall be condition upon, and payable only if, the Executive: (a) executes a general release in a form and of a scope reasonably acceptable to the Company; (b) returns all property, equipment, confidential information and documentation of the Company; (c) has complied and continues to comply in all material respects with any noncompetition, inventions and/or nondisclosure obligations that the Executive may owe to the Company, whether pursuant to an agreement or applicable law; and (d) provides a signed, written resignation of Executive's status as an officer and director (if applicable) of the Company and, if applicable, its subsidiaries.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company by its duly authorized officer, and by the Executive, as of the date first above written.
VIRTUSA CORPORATION
By: /s/ Kris Canekeratne --------------------------------------- Name: Kris Canekeratne Title: Chief Executive Officer /s/ Danford F. Smith --------------------------------------- DANFORD F. SMITH PRESIDENT AND CHIEF OPERATING OFFICER |
Exhibit 10.12
EXECUTIVE AGREEMENT
AGREEMENT made as of this 5th day of April, 2007 by and between Virtusa Corporation (the "Company"), and Thomas R. Holler (the "Executive").
1. Purpose. The Company considers it essential to the best interests of its stockholders to promote and preserve the continuous employment of key management personnel. The Board of Directors of the Company (the "Board") recognizes that, as is the case with many corporations, the possibility of a Change in Control (as defined in Section 2 hereof) exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's key management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. Nothing in this Agreement shall be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have occurred upon the occurrence of any one of the following events:
(a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Act") (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") (in such case other than as a result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the date hereof shall be considered an Incumbent Director if such person's election was approved by or such person was nominated for election by either (A) a vote of at least a majority of the Incumbent Directors or (B) a vote of at least a majority of the Incumbent Directors who are members of a nominating committee comprised, in the majority, of Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or
(c) the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company; or
(d) the approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred for purposes of the foregoing clause (a) solely as the result of an acquisition of securities by the Company that, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all then outstanding Voting Securities, then a "Change in Control" shall be deemed to have occurred for purposes of the foregoing clause (a).
3. Terminating Event. A "Terminating Event" shall mean any of the events provided in this Section 3:
(a) Termination by the Company. Termination by the Company of the employment of the Executive with the Company for any reason other than for Cause, death or Disability. For purposes of this Agreement, "Cause" shall mean:
(i) conduct by the Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; or
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury to the Company or any of its subsidiaries and affiliates if he were retained in his position; or
(iii) continued, willful and deliberate non-performance by the Executive of his duties to the Company (other than by reason of the Executive's physical
or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board; or
(iv) a violation by the Executive of the Company's employment policies which has continued following written notice of such violation from the Chief Executive Officer; or
(v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials.
A Terminating Event shall not be deemed to have occurred pursuant to this
Section 3(a) solely as a result of the Executive being an employee of any direct
or indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (i), (iii) and (v) hereof, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive without reasonable belief that the Executive's act, or failure
to act, was in the best interests of the Company and its subsidiaries and
affiliates. For purposes hereof, the Executive will be considered "Disabled" if,
as a result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties to the Company on a full-time
basis for 180 calendar days in the aggregate in any 12-month period.
(b) Termination by the Executive for Good Reason. Termination by the Executive of the Executive's employment with the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following events:
(i) a substantial diminution or other substantial adverse change, not consented to by the Executive, in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Terminating Event; or
(ii) a material reduction in the Executive's annual base salary or targeted total annual cash compensation (i.e., base salary and targeted bonus) as in effect on the date hereof or as the same may be increased from time to time hereafter except for across-the-board reductions similarly affecting all or substantially all management employees; or
(iii) the relocation of the Company's offices at which the Executive is principally employed immediately prior to the date of a Terminating Event (the "Current Offices") to any other location more than 50 miles from the Current Offices, or the requirement by the Company for the Executive to be based anywhere other than the Current Offices, except for required travel on the Company's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Terminating Event; or
(iv) the failure by the Company to obtain an effective agreement from any successor to assume and agree to perform this Agreement, as required by Section 20.
4. Severance and Change in Control Payments.
(a) In the event a Terminating Event occurs within 12 months after a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to
the sum of (x) one-half of the Executive's annual base salary in effect
immediately prior to the Terminating Event (or the Executive's annual base
salary in effect immediately prior to the Change in Control, if higher) and
(y) provided that the Company achieves its corporate performance targets
for the period, a pro rated portion of the Executive's targeted annual
bonus for the period in which the Change in Control occurred, payable in
one lump-sum payment no later than three days following the Date of
Termination (provided that any pro rated bonus amount shall be payable no
later then three days following the date on which such bonus is payable to
other management employees);
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for six months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and
(iii) all stock options and other stock-based awards granted to the Executive by the Company shall immediately accelerate and become exercisable or non-forfeitable as of the effective date of such Change in Control.
(b) In the event a Terminating Event occurs prior to a Change in Control, the following shall occur:
(i) the Company shall pay to the Executive an amount equal to the sum of (x) one-half of the Executive's annual base salary in effect immediately prior to the Terminating Event and (y) provided that the Company achieves its corporate performance targets for the period, a pro rated portion of the Executive's targeted annual bonus for the period in which the Terminating Event occurred, payable in one lump-sum payment no later than three days following the Date of Termination (provided that any pro rated bonus amount shall be payable no later then three days following the date on which such bonus is payable to other management employees); and
(ii) subject to the Executive's copayment of premium amounts at
the active employees' rate, the Executive shall continue to participate in
the Company's group health, dental and vision program for six months;
provided, however, that the continuation of health benefits under this
Section shall reduce and count against the Executive's rights under COBRA.
(c) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, upon a Change in Control, all stock options and other stock-based awards granted to the Executive after the date of this Agreement by the Company shall immediately accelerate twelve (12) months so that the shares that would have vested in the one-year period following such Change in Control would become immediately vested and the remaining unvested shares would continue to vest in accordance with their terms but on a schedule that would be twelve (12) months earlier than had the Change in Control not transpired. The Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted.
(d) Anything in this Agreement to the contrary notwithstanding, if at
the time of the Executive's termination of employment, the Executive is
considered a "specified employee" within the meaning of Section 409A(a)(2)(B)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), and if any
payment that the Executive becomes entitled to under this Agreement is
considered deferred compensation subject to interest and additional tax imposed
pursuant to Section 409A(a) of the Code as a result of the application of
Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable
prior to the date that is the earliest of (i) six months after the Executive's
Date of Termination, (ii) the Executive's death, or (iii) such other date as
will cause such payment not to be subject to such interest and additional tax,
and the initial payment shall include a catch-up amount covering amounts that
would otherwise have been paid during the first six-month period but for the
application of this Section 4(e).
5. ADDITIONAL LIMITATION.
(a) Additional Limitation. Anything in this Agreement to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Severance Payments"), would be subject to the excise tax imposed by Section 4999 of the Code, then the benefits payable under this Agreement shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount. To the extent that there is more than one method of reducing the payments to bring them within the Threshold Amount, the Executive shall determine which method shall be followed; provided that if the Executive fails to make such determination within 15 business days after the Company has sent the Executive written notice of the need for such reduction, the Company may determine the amount of such reduction in its sole discretion.
For the purposes of this Section 5(a), "Threshold Amount" shall mean three times the Executive's "base amount" within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Executive with respect to such excise tax.
6. Term. This Agreement shall take effect on the date first set forth above and shall terminate upon the earlier of (a) the termination of the Executive's employment with the Company for any reason other than the occurrence of a Terminating Event, or (b) the date which is 12 months after a Change in Control if the Executive is still employed by the Company.
7. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
8. Notice and Date of Termination.
(a) Notice of Termination. During the term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with this Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and the Date of Termination.
(b) Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment during the term of this Agreement, shall mean the date specified in the Notice of Termination. In the case of a termination by the Company following a Change in Control other than a termination for Cause (which may be effective immediately), the Date of Termination shall not be less than 30 days after the Notice of Termination is given. In the case of a termination by the Executive, the Date of Termination shall not be less than 30 days from the date such Notice of Termination is given. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
9. No Mitigation. The Company agrees that, if the Executive's employment by the Company is terminated during the term of this Agreement, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 4 hereof. Further, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or otherwise.
10. Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive's employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association ("AAA") in Boston, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 10 shall be specifically enforceable. Notwithstanding the foregoing, this Section 10 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 10.
11. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 10 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
12. Integration. This Agreement shall constitute the sole and entire
agreement among the parties with respect to the subject matter hereof, and
supersedes and cancels all prior, concurrent and/or contemporaneous
arrangements, understandings, promises, programs, policies, plans, practices,
offers, agreements and/or discussions, whether written or oral, by or among the
parties regarding the subject matter hereof, including, but not limited to, that
certain Offer Letter by and between the Company and the Executive, dated April
20, 2001 (and any amendments thereto) and those constituting or concerning
employment agreements, change in control benefits and/or severance benefits;
provided, however, that this Agreement is not intended to, and shall not,
supersede, affect, limit, modify or terminate any of the following, all of which
shall remain in full force and effect in accordance with their respective terms:
(i) any written agreements, programs, policies, plans, arrangements or practices
of the Company that do not relate to the subject matter hereof; (ii) any written
stock or stock option agreements between the Executive and the Company (except
as expressly modified hereby); and (iii) any written agreements between
Executive and the Company concerning noncompetition, nonsolicitation, inventions
and/or nondisclosure obligations.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive's death after a Terminating Event but prior to the completion by the Company of all payments due him under Section 4 of this Agreement, the Company shall continue such payments to the Executive's beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
16. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Executive at the last address the Executive has filed in writing with the Company, or to the Company at its main office, attention of the Board of Directors.
17. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
18. Effect on Other Plans. An election by the Executive to resign for Good Reason under the provisions of this Agreement shall not be deemed a voluntary termination of employment by the Executive for the purpose of interpreting the provisions of any of the Company's benefit plans, programs or policies. Nothing in this Agreement shall be construed to limit the rights of the Executive under the Company's benefit plans, programs or policies except as otherwise provided in Section 5 hereof, and except that the Executive shall have no rights to any severance benefits under any Company severance pay plan.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such Commonwealth. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of Appeals for the First Circuit.
20. Successors to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment.
21. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
22. Confidential Information. The Executive shall never use, publish or disclose in a manner adverse to the Company's interests, any proprietary or confidential information relating to (a) the business, operations or properties of the Company or any subsidiary or other affiliate of the Company, or (b) any materials, processes, business practices, technology, know-how, research, programs, customer lists, customer requirements or other information used in the manufacture, sale or marketing of any of the respective products or services of the Company or any subsidiary or other affiliate of the Company; provided, however, that no breach or alleged
breach of this Section 22 shall entitle the Company to fail to comply fully and in a timely manner with any other provision hereof. Nothing in this Agreement shall preclude the Company from seeking money damages, or equitable relief by injunction or otherwise without the necessity of proving actual damage to the Company, for any breach by the Executive hereunder.
23. Conditions of Benefits. The amounts payable to the Executive by the Company pursuant to Section 4 hereof shall be condition upon, and payable only if, the Executive: (a) executes a general release in a form and of a scope reasonably acceptable to the Company; (b) returns all property, equipment, confidential information and documentation of the Company; (c) has complied and continues to comply in all material respects with any noncompetition, inventions and/or nondisclosure obligations that the Executive may owe to the Company, whether pursuant to an agreement or applicable law; and (d) provides a signed, written resignation of Executive's status as an officer and director (if applicable) of the Company and, if applicable, its subsidiaries.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company by its duly authorized officer, and by the Executive, as of the date first above written.
VIRTUSA CORPORATION
By: /s/ Kris Canekeratne --------------------------------------------- Name: Kris Canekeratne Title: Chief Executive Officer /s/ Thomas R. Holler --------------------------------------------- THOMAS R. HOLLER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER |
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EXHIBIT 21.1
SUBSIDIARIES OF VIRTUSA CORPORATION
SUBSIDIARY JURISDICTION OF INCORPORATION ------------------------------ ----------------------------- Virtusa (India) Private Limited India Virtusa Private Limited Sri Lanka Virtusa Securities Corporation Massachusetts Virtusa UK Limited United Kingdom |
Exhibit 23.1
REPORT AND CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Virtusa Corporation and Subsidiaries:
The audits referred to in our report dated August 25, 2006, except as to note 17, which is as of April 5, 2007, included the related financial statement schedule as of March 31, 2006, and for each of the years in the three-year period ended March 31, 2006, included in the registration statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in note 3 to the consolidated financial statements, the Company changed its method of accounting for share-based payments effective April 1, 2005.
We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP Boston, Massachusetts April 5, 2007 |