EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
NAVISITE, INC.,
as Parent,
LEXINGTON ACQUISITION CORP.,
as Buyer
and
SUREBRIDGE, INC.,
as the Seller
May 6, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE I - PURCHASE AND SALE OF ASSETS; CLOSING.............................1
Section 1.1. Purchase and Sale of Assets...............................1
Section 1.2. Consideration.............................................2
Section 1.3. Assumption of Liabilities.................................3
Section 1.4. Time and Place of Closing.................................4
Section 1.5. Deliveries at Closing.....................................4
Section 1.6. Working Capital Adjustment................................5
Section 1.7. Allocation................................................7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................7
Section 2.1. Existence; Good Standing; Authority.......................7
Section 2.2. Capitalization............................................8
Section 2.3. Subsidiaries..............................................9
Section 2.4. No Conflict, Consents.....................................9
Section 2.5. Financial Statements.....................................10
Section 2.6. Absence of Certain Changes...............................11
Section 2.7. Consents and Approvals...................................12
Section 2.8. Litigation...............................................12
Section 2.9. Taxes....................................................12
Section 2.10. Employee Benefit Plans...................................15
Section 2.11. Real and Personal Property...............................18
Section 2.12. Labor and Employment Matters.............................19
Section 2.13. Contracts and Commitments................................20
Section 2.14. Intellectual Property....................................22
Section 2.15. Environmental Matters....................................26
Section 2.16. Insurance................................................27
Section 2.17. Brokers..................................................27
Section 2.18. Compliance with Laws. Except as set forth on
Schedule 2.18:...........................................27
Section 2.19. Transactions with Affiliates.............................28
Section 2.20. [Intentionally Omitted.].................................28
Section 2.21. Books and Records........................................28
Section 2.22. Bank Accounts............................................28
Section 2.23. Securities Law Matters...................................29
Section 2.24. Rule 145 Compliance......................................30
Section 2.25. Disclaimer of Other Representations and Warranties;
Knowledge; Disclosure....................................30
ARTICLE III - INTENTIONALLY LEFT BLANK......................................30
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NAVISITE.....................31
Section 4.1. Existence; Good Standing; Authority......................31
Section 4.2. No Conflict..............................................31
Section 4.3. Consents and Approvals...................................32
Section 4.4. Litigation...............................................32
Section 4.5. Brokers..................................................32
Section 4.6. Securities Law Matters...................................32
Section 4.7. Absence of Material Changes..............................33
Section 4.8. Conduct of Business......................................33
Section 4.9. Compliance with Laws.....................................33
Section 4.10. Financial Statements.....................................34
Section 4.11. Nasdaq Listing...........................................34
Section 4.12. Contracts and Commitments of NaviSite....................34
ARTICLE V - CERTAIN COVENANTS OF THE PARTIES................................34
Section 5.1. Conduct of Business Prior to Closing.....................34
Section 5.2. Access to Information....................................37
Section 5.3. Confidentiality..........................................38
Section 5.4. Regulatory and Other Authorizations; Consents............38
Section 5.5. Further Action...........................................39
Section 5.6. Press Releases...........................................39
Section 5.7. No Solicitation..........................................39
Section 5.8. Notice of Breaches.......................................39
Section 5.9. Conveyance Taxes; Costs..................................40
Section 5.10. Books and Records........................................41
Section 5.11. Registration and Distribution of Parent Shares...........41
Section 5.12. Approval of Transactions; Fiduciary Out..................41
Section 5.13. Delivery of Financial Statements.........................41
Section 5.14. FIRPTA Certification.....................................42
Section 5.15. Use of Name..............................................42
Section 5.16. Endorsement of Checks, Etc...............................42
Section 5.17. Rule 145.................................................43
Section 5.18. Issuance of Parent Shares................................43
Section 5.19. Consents.................................................43
Section 5.20. Certain Tax Matters......................................44
Section 5.21. NaviSite Debt Financing..................................44
ARTICLE VI - EMPLOYEE MATTERS...............................................45
Section 6.1. Employees; Benefits......................................45
Section 6.2. Officers' and Directors' Indemnification.................47
ARTICLE VII - CONDITIONS TO CLOSING.........................................48
Section 7.1. Conditions to Obligations of the Company.................48
Section 7.2. Conditions to Obligations of NaviSite....................49
Section 7.3. Inability to Deliver Closing Certificates,...............50
ARTICLE VIII - TERMINATION..................................................50
Section 8.1. Termination..............................................50
Section 8.2. Effect of Termination....................................51
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Section 8.3. Waiver...................................................52
ARTICLE IX - SURVIVAL; INDEMNIFICATION......................................53
Section 9.1. Survival.................................................53
Section 9.2. Indemnification of NaviSite..............................53
Section 9.3. Procedure for Indemnification of NaviSite................54
Section 9.4. NaviSite's Remedies Exclusive............................55
Section 9.5. Priority of Escrow Account...............................55
ARTICLE X - GENERAL PROVISIONS..............................................55
Section 10.1. Notices..................................................55
Section 10.2. Fees and Expenses........................................56
Section 10.3. Certain Definitions......................................57
Section 10.4. Interpretation...........................................57
Section 10.5. Counterparts and Facsimile Signatures....................58
Section 10.6. Amendments and Waivers...................................58
Section 10.7. Entire Agreement; Severability...........................58
Section 10.8. Third Party Beneficiaries................................59
Section 10.9. Governing Law............................................59
Section 10.10. Assignment...............................................59
Section 10.11. Consent to Jurisdiction..................................59
Section 10.12. Mutual Drafting..........................................59
Section 10.13. Remedies.................................................59
Section 10.14. Bulk Sales Law...........................................59
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EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B-1 Form of Primary Note
Exhibit B-2 Form of Escrow Note
Exhibit C Form of Assignment and Assumption Agreement
Exhibit D Form of Xxxx of Sale
Exhibit E Form of Press Release
Exhibit F Registration Rights Agreement
SCHEDULES
Schedule 1.1(a) Permitted Liens
Schedule 1.1(b) Excluded Assets
Schedule 1.6 March Net Working Capital Calculation
Schedule 2.1 Organization and Good Standing
Schedule 2.2 Subsidiary Capitalization
Schedule 2.3 Subsidiaries
Schedule 2.4 Conflicts
Schedule 2.5 Financial Statements
Schedule 2.6 Absence of Certain Changes
Schedule 2.7 Consents and Approvals
Schedule 2.8 Litigation
Schedule 2.9 Taxes
Schedule 2.10 Employee Benefit Plans
Schedule 2.11(a) Leases
Schedule 2.11(b) Personal Property
Schedule 2.12 Labor and Employment Matters
Schedule 2.13 Material Contracts
Schedule 2.14 Intellectual Property
Schedule 2.16 Insurance
Schedule 2.18 Compliance with Laws
Schedule 2.19 Transactions with Affiliates
Schedule 2.22 Bank Accounts
Schedule 2.25 Knowledge of the Company
Schedule 4.2 Conflicts of NaviSite
Schedule 4.3 NaviSite Consents and Approvals
Schedule 4.4 Litigation of NaviSite
Schedule 4.12 Contracts and Commitments of NaviSite
Schedule 5.1 Conduct of Business
Schedule 5.1(h) Budget of the Company
Schedule 5.1(m) Bonuses
Schedule 6.1(e) Severance Arrangements
Schedule 7.2(f) Required Consents and Approvals
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is dated as of May 6,
2004 by and among NAVISITE, INC., a Delaware corporation ("PARENT"), LEXINGTON
ACQUISITION CORP., a Delaware corporation ("BUYER", and together with Parent,
"NAVISITE"), and SUREBRIDGE, INC., a Delaware corporation ("SUREBRIDGE", and
together with its Subsidiaries (as defined in Section 2.3), the "COMPANY").
WHEREAS, Surebridge desires to sell, and NaviSite desires to buy, all of
the assets of Surebridge, on the terms and conditions set forth herein; and
WHEREAS, as a condition and inducement to NaviSite to enter into this
Agreement and Buyer to assume the liabilities set forth herein, at the Closing
(as defined in Section 1.4), Parent, Surebridge and the escrow agent named
therein (the "ESCROW AGENT") shall enter into an escrow agreement substantially
in the form attached hereto as Exhibit A (with such changes as the Escrow Agent
may reasonably request, the "ESCROW AGREEMENT"), pursuant to which Parent shall
place the Escrow Note (as defined in Section 1.2(a)(ii)) in an escrow account to
secure certain indemnification obligations to NaviSite.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I - PURCHASE AND SALE OF ASSETS; CLOSING
SECTION 1.1. PURCHASE AND SALE OF ASSETS. Except as otherwise provided
below and subject to the terms and conditions of this Agreement, Surebridge
shall sell, convey, transfer, assign and deliver to Buyer at the Closing, free
and clear of all Liens (as hereinafter defined), except for the Permitted Liens
(as hereinafter defined), all of its assets and properties of every kind, nature
and description (all of such assets and properties being referred to herein as
the "PURCHASED ASSETS"), including, without limitation, the capital stock or
other equity interests of each Subsidiary.
As used herein, "Liens" mean liens, rights or options of a third party to
acquire assets, security interests, mortgages, encumbrances and restrictions of
any kind. As used herein, "Permitted Liens" means (i) such imperfections of
title, easements or Liens which do not materially impair the current use of the
Purchased Assets, (ii) materialmen's, mechanics', carriers', workmen's,
warehousemen's, repairmen's and other like Liens arising in the ordinary course
of business, or deposits to obtain the release of such Liens, (iii) Liens for
taxes not yet due and payable, or being contested in good faith, (iv) purchase
money Liens incurred in the ordinary course of business, and (v) the Liens
listed on SCHEDULE 1.1(A).
Notwithstanding the foregoing, the Company shall not transfer to Buyer,
and the Purchased Assets shall not include, (a) the charter, bylaws, minute
books, stock record books, stock option plans, tax identification numbers,
capital stock (other than the capital stock of the
Subsidiaries) and other organizational documents of Surebridge; (b) Surebridge's
rights under this Agreement and any other agreement, document or instrument
entered into pursuant to this Agreement; and (c) any of the assets listed on
SCHEDULE 1.1(B) (collectively, "Excluded Assets").
SECTION 1.2. CONSIDERATION.
(a) The consideration to be paid by Parent to Surebridge for
the Purchased Assets shall consist of:
(i) a promissory note in the form attached hereto as
Exhibit B-1 with an initial principal amount equal to (A)
$39,500,000 less (B) the initial principal amount of the Escrow Note
(as defined below) as determined in Section 1.2(a)(ii); provided,
that the initial principal amount of such promissory note as
determined in this Section 1.2(a)(i) may be adjusted pursuant to
Section 1.2(b) (the "PRIMARY NOTE");
(ii) a promissory note in the form attached hereto as
Exhibit B-2 with an initial principal amount equal to twelve and
one-half percent (12.5%) of the sum of (A) $40,000,000 plus (B) an
amount equal to (i) 3,000,000 multiplied by (ii) the average closing
price of the common stock of Parent on the Nasdaq SmallCap Market
for the three trading days immediately prior to and the three
trading days immediately following the date hereof; provided, that
the initial principal amount of such promissory note may be adjusted
pursuant to Section 1.2(b) (the "ESCROW NOTE" and together with the
Primary Note, the "NOTES"); and
(iii) Three Million (3,000,000) shares of Parent's
common stock, par value $.01 per share (the "PARENT SHARES").
(b) Subject to NaviSite's right to terminate this Agreement
pursuant to Article VIII, the initial principal of the Primary Note and
the Escrow Note payable pursuant to Sections 1.2(a)(i) and 1.2(a)(ii),
respectively, shall be: (i) increased on a pro rata basis (based on the
initial principal amounts of such notes determined pursuant to such
sections) by the total amount by which the Aggregate Net Worth of the
Company set forth on the audited consolidated financial statements of the
Company for the fiscal year ended December 31, 2003 (the "2003 AUDITED
FINANCIALS") is greater than the Aggregate Net Worth set forth on the Base
Balance Sheet (as defined in Section 2.5), or (ii) decreased on a pro rata
basis (based on the initial principal amounts of such notes determined
pursuant to such sections) by the total amount by which the Aggregate Net
Worth of the Company set forth on the 2003 Audited Financials is less than
the Aggregate Net Worth of the Company set forth on the Base Balance
Sheet; provided, however, that no adjustment shall be made pursuant to
this Section 1.2(b) if the difference between the Aggregate Net Worth set
forth in the 2003 Audited Financials and the Base Balance Sheet (whether
positive or negative) is less than or equal to $50,000. "AGGREGATE NET
WORTH" shall mean the current assets of the Company (net of provision for
bad debt) plus restricted cash (to the extent not duplicative) less, to
the extent not duplicative, (i) the current liabilities of the Company,
(ii) the obligations of the Company under capital leases and (iii) the
long-term liabilities of the Company. For example,
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assuming the initial principal of the Primary Note is $32,000,000, if the
Aggregate Net Worth set forth on the 2003 Audited Financials is $900,000
and the Aggregate Net Worth set forth on the Base Balance Sheet is
$1,000,000, then the initial principal shall be decreased by $100,000 to
$31,900,000. Conversely, assuming the initial principal of the Primary
Note is $32,000,000, if the Aggregate Net Worth set forth in the 2003
Audited Financials is $1,000,000 and the Aggregate Net Worth set forth on
the Base Balance Sheet is $900,000, then the initial principal shall be
increased by $100,000 to $32,100,000. In addition, an example with regard
to negative amounts is as follows: assuming the initial principal of the
Primary Note is $32,000,000, if the Aggregate Net Worth set forth on the
2003 Audited Financials is ($1,100,000) and the Aggregate Net Worth set
forth on the Base Balance Sheet is ($1,000,000), then the initial
principal shall be decreased by $100,000 to $31,900,000. Conversely,
assuming the initial principal of the Primary Note is $32,000,000, if the
Aggregate Net Worth set forth in the 2003 Audited Financials is
($1,000,000) and the Aggregate Net Worth set forth on the Base Balance
Sheet is ($1,100,000), then the initial principal shall be increased by
$100,000 to $32,100,000.
(c) Immediately upon Closing, the Escrow Note shall be
deposited by NaviSite into escrow (the "ESCROW ACCOUNT") pursuant to the
terms of the Escrow Agreement for the purpose of satisfying
indemnification claims pursuant to Article IX hereof. Any cash payment
made to Surebridge in respect of the Escrow Note prior to the twelve month
anniversary hereof shall be delivered to the Escrow Agent for depositing
in the Escrow Account on the day on which such amount is deemed paid in
respect of the Escrow Note. The Escrow Note and any cash paid pursuant
thereto (the "CASH ESCROW") shall be held in the Escrow Account until 5:00
p.m., Boston time, on that date which is the twelve month anniversary of
the Closing Date (as defined in Section 1.4) and shall be maintained and
used strictly in accordance with the terms of this Agreement and the
Escrow Agreement. At the twelve month anniversary of the Closing Date, the
Escrow Note and the Cash Escrow, with such adjustments as set forth in
Article IX, shall be distributed to Surebridge in accordance with the
Escrow Agreement. Notwithstanding the foregoing, in the event NaviSite has
delivered written notice to Surebridge of an indemnification claim as set
forth in Article IX prior to such anniversary, the amount necessary to
satisfy such claim shall not be distributed and shall continue to be held
by the Escrow Agent pursuant to the Escrow Agreement until such claim is
resolved as provided in Article IX.
SECTION 1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume
and agree to pay when due, perform and discharge in accordance with the terms
thereof all Liabilities (as defined in Section 2.9(b)(v) below) of the Company
of every kind and nature, whether absolute, contingent, accrued or otherwise and
whether due or to become due, and whether arising before or after the Closing
(the "ASSUMED LIABILITIES"). Notwithstanding the foregoing, neither Parent nor
Buyer shall have any liability for the following obligations of the Company
which shall not be included in "Assumed Liabilities": (a) obligations of
Surebridge relating to gain on the sale of the Purchased Assets; (b) the
obligations of Surebridge under this Agreement and any agreement, document or
instrument entered into by Surebridge in connection with this Agreement; (c)
obligations of Surebridge under that certain Personal Guaranty by and among
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XxxxxxxXxx.xxx, Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxx, dated April 11, 2002;
(d) obligations of Surebridge under the success bonus agreements; (e) any
Employee Plans (as defined in Section 2.10(a)) other than the Blue Cross Blue
Shield HMO Plan described in Schedule 1.1(b); and (f) obligations of Surebridge
not related to the assets or operations of Surebridge that arise or are incurred
after Closing including Delaware franchise taxes and any liabilities relating to
the distribution of assets of Surebridge to its shareholders or violations of
its charter or bylaws, in each case, occurring after Closing (collectively, the
"EXCLUDED LIABILITIES").
SECTION 1.4. TIME AND PLACE OF CLOSING. The closing (the "CLOSING") of the
purchase and sale of the Purchased Assets and the other transactions
contemplated by this Agreement shall be held at the offices of Xxxxxx Rosedale &
Xxxxxxxxx LLP, 00 Xx. Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxxxxx, on the
date that is two (2) business days following the date on which the conditions to
Closing set forth in Sections 7.1 and 7.2 of this Agreement have been satisfied
or waived in accordance with this Agreement (other than those conditions that
are contemplated to be satisfied prior to the Closing), or at such other time or
such other place as NaviSite and the Company may mutually determine. The date on
which the Closing actually occurs is sometimes referred to herein as the
"CLOSING DATE."
SECTION 1.5. DELIVERIES AT CLOSING.
(a) At the Closing, Surebridge will deliver or cause to be
delivered to NaviSite the following:
(i) executed copies of any Consents obtained, and the
Necessary Consents (as defined in Section 7.2(f));
(ii) executed copies of the Registration Rights
Agreement (as defined in Section 5.11(a)), the Escrow Agreement, an
assignment and assumption agreement in the form of Exhibit C (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT") and a xxxx of sale in the
form of Exhibit D (the "XXXX OF SALE") (collectively, the "ANCILLARY
AGREEMENTS");
(iii) resignations of the members of the board of
directors of each of the Subsidiaries;
(iv) all consents, approvals and authorizations of any
Governmental Authority (as defined herein) set forth in Schedule 2.7
or required to be set forth in the related sections of the Company
Disclosure Schedule shall have been obtained;
(v) minute books and stock transfer books of the
Subsidiaries as are in the Company's or its counsel's possession;
(vi) stock certificates and executed stock powers for
all of the outstanding equity securities in each direct Subsidiary
of Surebridge;
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(vii) each of the certificates, instruments and other
documents required to be delivered at the Closing pursuant to
Section 7.2 hereof.
(b) At the Closing, Buyer or Parent, as applicable, will
deliver or cause to be delivered to Surebridge the following:
(i) the executed Primary Note;
(ii) stock certificates evidencing all of the Parent
Shares;
(iii) executed copies of the Ancillary Agreements to
which it is a party; and
(iv) each of the certificates and other documents
required to be delivered at the Closing pursuant to Section 7.1
hereof.
(c) At the Closing, Parent will deliver or cause to be
delivered to the Escrow Agent the Escrow Note.
SECTION 1.6 WORKING CAPITAL ADJUSTMENT.(a) For purposes of this Agreement,
"NET WORKING CAPITAL" shall mean as of any particular date (i) the value
of all current assets, net of provision for bad debt, plus restricted cash
(to the extent not duplicative) of the Company as of that date, less (ii)
the amount of all current liabilities, including accrued current
liabilities not yet due, of the Company as of that date determined in each
case in accordance with GAAP (as defined in Section 10.3). A calculation
of the Net Working Capital as of March 31, 2004 based on the March Balance
Sheet, as adjusted for a decrease of $70,000 in current liabilities (i.e.
Net Working Capital of $3,565,212.51)(the "MARCH NET WORKING CAPITAL") is
attached hereto as Schedule 1.6. Notwithstanding the foregoing, the Net
Working Capital as of the Closing shall (i) exclude current liabilities
pursuant to Sections 10.3 and 6.2, (ii) exclude amounts for severance
triggered by the transactions contemplated by this Agreement, and (iii) to
the extent any liabilities that have not been accrued as of March 31, 2004
are paid prior to the Closing, such payments shall be added back to
current assets.
(b) Within twenty (20) days of the Closing Date, NaviSite
shall prepare a calculation of the Net Working Capital as of the Closing
Date in accordance with GAAP and applying the same accounting principles,
policies and practices that were used in the creation of the March Balance
Sheet and Schedule 1.6. NaviSite shall deliver to Surebridge a written
statement showing such calculation as of the Closing Date within
forty-five (45) days following the Closing Date (the "CLOSING STATEMENT").
NaviSite shall provide Surebridge and its representatives with reasonable
access to such books and records relating to the Company through the
Closing Date and NaviSite personnel as Surebridge reasonably requests in
order to permit Surebridge to analyze the Closing Statement.
(c) If within ten (10) days following delivery of the
Closing Statement to Surebridge, Surebridge has not given NaviSite written
notice of its objection as to the
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calculation of Net Working Capital as of the Closing Date as reflected on
the Closing Statement (which notice shall state the basis of Surebridge's
objection), then the Net Working Capital as of the Closing Date as so
reflected on the Closing Statement shall be binding and conclusive on the
parties and shall be the "CLOSING NET WORKING CAPITAL."
(d) If Surebridge timely gives NaviSite written notice of
objection to the calculation of the Net Working Capital as of the Closing
Date as reflected on the Closing Statement, NaviSite and Surebridge shall
attempt in good faith to agree upon the Net Working Capital as of the
Closing Date, and if such agreement is reached the Net Working Capital so
agreed upon shall be the Closing Net Working Capital. If Surebridge and
NaviSite fail to resolve the issues raised by such objection within ten
(10) days of NaviSite's receipt of such objection, Surebridge and NaviSite
shall submit the issues remaining in dispute to Xxxxx Xxxxxxxx (the
"INDEPENDENT ACCOUNTANTS") for resolution applying the principles,
policies and practices referred to in Section 1.6(b). If issues are
submitted to the Independent Accountants for resolution, (i) Surebridge
and NaviSite shall furnish or cause to be furnished to the Independent
Accountants and to the other party such work papers and other documents
and information relating to the disputed issues as the Independent
Accountants may request and are available to that party or its agents and
shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss
the issues with the Independent Accountants; (ii) the determination by the
Independent Accountants of the Net Working Capital as of the Closing Date,
as set forth in a notice to be delivered to both Surebridge and NaviSite
within sixty (60) days of the submission to the Independent Accountants of
the issues remaining in dispute, shall be final, binding and conclusive on
the parties and shall be the Closing Net Working Capital; and (iii)
NaviSite shall pay all of the fees and costs of the Independent
Accountants for such determination, unless Surebridge had no reasonable
basis for objecting to the Closing Statement, in which case the fees and
costs of the Independent Accountants shall be paid by the party that does
not prevail.
(e) If, after finally determination according to this
Section 1.6, the Closing Net Working Capital is greater than the March Net
Working Capital, then the principal amounts of the Primary Note and Escrow
Note shall be increased on a pro rata basis (based on the then outstanding
principal amounts of such notes) by the amount of such excess. If, after
finally determination according to this Section 1.6, the Closing Net
Working Capital is less than the March Net Working Capital, then the
principal amounts of the Primary Note and Escrow Note shall be decreased
on a pro rata basis (based on the then outstanding principal amounts of
such notes) by the amount of such shortfall. Notwithstanding the
foregoing, no adjustment shall be made to the principal amounts of the
Primary Note and Escrow Note pursuant to this Section 1.6 if the
difference between the March Net Working Capital and the Closing Net
Working Capital (whether positive or negative) is less than or equal to
$25,000.
(f) The parties agree to act in good faith and takes all
actions necessary to cause the cancellation of any existing Notes and the
issuance of replacement Notes reflecting the adjustments to the principal
amounts required by Section 1.6.
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SECTION 1.7 ALLOCATION. Within 30 days of the final determination of the
Closing Net Working Capital pursuant to Section 1.6, NaviSite and Surebridge
shall mutually allocate the purchase price (and all other capitalized costs)
among the Purchased Assets. Such allocation shall be made in accordance with the
provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the
"CODE"), and shall be binding upon NaviSite and Surebridge for all purposes
(including financial accounting purposes, financial and regulatory reporting
purposes and tax purposes). NaviSite and Surebridge also each agree to file IRS
Form 8594 consistent with the foregoing and in accordance with Section 1060 of
the Code. In the event that a dispute arises between Surebridge and NaviSite as
to the allocation of the purchase price under this Section 1.7, the parties
shall attempt in good faith to resolve such dispute. If such dispute is not
resolved within thirty (30) days thereafter, the parties shall submit the
dispute to the Independent Accountants for resolution, which resolution shall be
final, conclusive and binding on the parties. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Independent Accountants
shall be borne by NaviSite.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company Disclosure Schedule shall be arranged in sections and
subsections corresponding to the numbered and lettered sections and subsections
contained in this Article II. The disclosures in any section or subsection of
the Company Disclosure Schedule shall qualify other sections and subsections in
this Article II to the extent it is reasonably apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsections. Except as set forth in the Company Disclosure Schedule attached
hereto and delivered by the Company, the Company hereby represents and warrants
to NaviSite as of the date hereof (or, if made as of a specified date, as of
such date) and as of the Closing Date, as follows:
SECTION 2.1. EXISTENCE; GOOD STANDING; AUTHORITY.
(a) Surebridge is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
Surebridge has all requisite corporate power and authority and all
necessary governmental licenses, authorizations, consents and approvals to
own, operate, lease and encumber its properties and carry on its business
as currently operated and conducted. Surebridge is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of each other jurisdiction in which the character or
ownership of its properties or in which the transaction or character of
its business makes such qualification necessary, except where the failure
to be so licensed or qualified or in good standing would not, individually
or in the aggregate, have a Material Adverse Effect. Schedule 2.1 hereto
sets forth a true, correct and complete list of all foreign jurisdictions
in which Surebridge is so qualified or licensed and in good standing. The
copies of Surebridge's certificate of incorporation and by-laws, each as
amended to date and in full force and effect, have been provided or made
available to NaviSite's counsel, and are complete and correct, and no
amendments thereto are pending. Surebridge is not in violation of any
provision of its certificate of incorporation or by-laws. The books and
records, minute books, stock record books and
7
other similar records of Surebridge, all of which have been made available
to NaviSite's counsel and NaviSite, are true, correct and complete.
(b) Surebridge has the corporate power and authority to
execute and deliver this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of Surebridge
pursuant to this Agreement and the Ancillary Agreements and to carry out
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by Surebridge, the performance by Surebridge of
its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action on the part of Surebridge. This Agreement has been duly executed
and delivered by Surebridge and, assuming the due authorization, execution
and delivery of this Agreement by NaviSite, this Agreement constitutes a
legal, valid and binding obligation of Surebridge, enforceable against
Surebridge in accordance with its terms. No other corporate or similar
action on the part of the Company is necessary to authorize the execution
and delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby.
SECTION 2.2. CAPITALIZATION. As of the date of this Agreement, the
authorized, issued and outstanding capital stock of the Subsidiaries (as defined
in Section 2.3) are set forth on Schedule 2.2. All of the issued and outstanding
shares of capital stock of the Subsidiaries are duly authorized, validly issued,
fully paid and non-assessable and have been issued in compliance with applicable
federal, state and foreign securities laws and all requirements set forth in
contracts. As of the date of this Agreement, except as set forth on Schedule
2.2, there are no outstanding options, warrants or other rights of any kind to
acquire any outstanding or additional shares of capital stock of the
Subsidiaries or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any such additional
shares, including pursuant to anti-dilution provisions or covenants, nor are the
Subsidiaries committed to issue any such option, warrant, right or security.
Except as set forth on Schedule 2.2, there are no agreements, voting trusts,
proxies or understandings to which the Subsidiaries are a party or otherwise
aware with respect to the voting of any shares of capital stock of the
Subsidiaries or which restrict the transfer of any such shares. Except as set
forth on Schedule 2.2, there are no outstanding contractual obligations or
arrangements of the Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock, other equity interests or any other securities of the
Subsidiaries or to grant, extend, accelerate the vesting of, change the price
of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except as set forth on Schedule 2.2, all outstanding
shares of capital stock of each Surebridge Subsidiary have been granted and
issued in compliance with (x) all applicable securities laws and other
applicable legal requirements, and (y) all requirements set forth in applicable
contracts. Except as set forth in Schedule 2.2 hereto, there are no preemptive
rights or agreements, arrangements or understandings to issue preemptive rights
with respect to the issuance or sale of shares of capital stock of the
Subsidiaries to which the Subsidiaries are a party or to which they is bound.
The shares of the capital stock of the Subsidiaries are, and when delivered by
Surebridge to Buyer pursuant to this Agreement will be, free and clear of any
and all Encumbrances, other than Encumbrances resulting from this Agreement.
Except as set forth on Schedule 2.2, the Subsidiaries are not under any
obligation by reason of any agreement to
8
register the offer and sale or resale of any of its securities under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "SECURITIES ACT").
SECTION 2.3. SUBSIDIARIES.
(a) Surebridge owns directly or indirectly all of the
outstanding shares of capital stock of Surebridge Service Inc., a Delaware
corporation, Surebridge Acquisition Corp., a Delaware corporation,
ManagedOps, Inc., a Delaware corporation, and World Wide Underpants, LLC,
a New Hampshire limited liability company (each, a "SUBSIDIARY" and
collectively, the "SUBSIDIARIES"). Neither Surebridge nor any Subsidiary
owns directly or indirectly any interest or investment (whether equity or
debt) in any other Person (other than investments in short-term
investment-grade securities).
(b) Each of the Subsidiaries is a corporation or limited
liability company validly existing and in good standing under the laws of
the state of its organization and has all requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on
its business as currently conducted. Each Subsidiary is duly licensed or
qualified to do business as a foreign corporation or limited liability
company, and is in good standing in each other jurisdiction in which the
character or ownership of its properties or in which the transaction or
character of its business makes such qualification necessary, except where
the failure to be so licensed or qualified would not, individually or in
the aggregate, have a Material Adverse Effect. The copies of the
organizational documents of each such Subsidiary, in each case as amended
to date and in full force and effect and made available to NaviSite's
counsel, are true, complete and correct, and no amendments thereto are
pending. Except as set forth on Schedule 2.3, no Subsidiary is in
violation of any provision of its certificate of incorporation or by laws
(or other similar charter documents or operating agreement). The books and
records, minute books, stock record books and other similar records of
each Subsidiary, all of which have been made available to NaviSite's
counsel and NaviSite, are true, correct and complete.
SECTION 2.4. NO CONFLICT, CONSENTS. Except as set forth on Schedule 2.4
and assuming the consents, approvals and authorizations contemplated by Sections
2.7 and 4.3 are obtained and are in full and effect and notices have been duly
given, none of the execution, delivery or the performance by Surebridge of this
Agreement and the other agreements, documents and instruments contemplated
hereby, nor the consummation by the Company of the transactions contemplated
hereby: (w) results in the creation or imposition of any Lien on any of the
property held by Surebridge or any of its Subsidiaries; (x) conflicts with,
contravenes or results in a breach of any provisions of the Charter or by-laws
of Surebridge or the organizational documents of any Subsidiary, each as
presently in effect; (y) requires consent to assignment or otherwise, as a
result of the transactions contemplated hereby (including to maintain in full
force and effect any of the Material Contracts as a result of the transactions
contemplated hereby), violates, or conflicts with, or results (or will violate,
conflict with or result) in a breach of any provision of, or constitutes a
default (or an event which, with or without notice or lapse of time or both,
would constitute a default) or gives rise to any right of termination,
cancellation or acceleration, change of control rights, modification,
notification, enhancement of rights of third parties, revocation of grant of
rights or assets, placement into or release from escrow of any assets of
Surebridge or any
9
of its Subsidiaries or acceleration of any right or obligation of Surebridge or
any of its Subsidiaries or a loss of any benefit to which Surebridge or any of
its Subsidiaries is entitled under any of the terms, conditions or provisions of
any Material Contract (as defined in Section 2.13) to which Surebridge or any
Subsidiary is a party or by which Surebridge or any Subsidiary or any of their
respective properties is bound or affected; or (z) violates any order, writ,
injunction, decree, statute, law, rule or regulation applicable to Surebridge or
any Subsidiary.
SECTION 2.5. FINANCIAL STATEMENTS.
(a) The Company has delivered to NaviSite the following
financial statements, true, correct and complete copies of which are
attached hereto as Schedule 2.5 (or will deliver to NaviSite such
financial statements for such periods completed subsequent to the date
hereof within fifteen (15) business days after the end of such period and
accompanied by a certificate, duly executed by the chief financial officer
of the Company in such person's capacity as an officer, restating with
respect to such financial statements, the representations of this Section
2.5) (collectively, the "FINANCIAL STATEMENTS"):
(i) Audited consolidated balance sheets of the Company
as of December 31, 2001, and consolidated statements of income and
retained earnings and consolidated statements of cash flows for each
of the years then ended;
(ii) Unaudited consolidated balance sheet of the
Company as of December 31, 2003 (as adjusted only for normal 2002
year end audit adjustments which are consistent in nature and amount
with adjustments made in prior years) (the "BASE BALANCE SHEET");
(iii) Unaudited consolidated balance sheet of the
Company as of December 31, 2002;
(iv) Unaudited consolidated statements of income and
retained earnings and cash flows of the Company as of December
31,2002 and 2003;
(v) Unaudited consolidated balance sheet of the
Company as of March 31, 2004 (the "MARCH BALANCE SHEET") and the
related unaudited consolidated statements of income and retained
earnings and cash flows for the quarterly periods ended March 31,
2004; and
(vi) Unaudited consolidated balance sheets and the
related unaudited consolidated statements of income and cash flows
for the monthly periods ended subsequent to March 31, 2004 and prior
to the date hereof.
(b) Subject to the absence of footnotes and normal year-end
audit adjustments with respect to any unaudited Financial Statements which
are consistent in nature and amount with adjustments made in prior years,
the Financial Statements have been (and those statements to be delivered
for periods ending subsequent to the date
10
hereof will be) prepared from, and in accordance with, the information
contained in the books and records of Surebridge and its Subsidiaries,
which have been regularly kept and maintained in accordance with
Surebridge's and its Subsidiaries' normal and customary practices and
applicable legal and accounting practices and fairly present, in all
material respects, the financial condition of Surebridge (on a
consolidated basis) as of the dates thereof and results of operations and
cash flows for the periods referred to therein, and have been prepared in
accordance with GAAP consistently applied throughout all periods
indicated, and present fairly (or when delivered will present fairly) in
all material respects the consolidated financial condition, cash flows and
operating results of the Company as of the dates and for the periods
indicated therein, and are consistent with the books and records of the
Company.
(c) As of the date hereof, all liabilities of the Company of
a type that would be required to be shown on the Financial Statements
(including the notes thereto, where applicable) in accordance with GAAP
(whether direct, indirect, accrued, absolute, contingent, asserted,
unasserted or otherwise) have been (other than liabilities of less than
$10,000 individually or $25,000 in the aggregate) (i) stated or adequately
reserved or accrued against on the Base Balance Sheet or the notes
thereto, (ii) reflected on Schedule 2.5, or (iii) incurred after the date
of the Base Balance Sheet in the ordinary course of business consistent
with past practices.
SECTION 2.6. ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule
2.6, from the date of the Base Balance Sheet to the date of this Agreement, the
Company has operated only in the ordinary course of business consistent with
past practices and there has not been any:
(a) event, occurrence or development which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect other than developments generally in the industry
in which the Company operates;
(b) event or development that would, individually or in the
aggregate, reasonably be expected to prevent or materially delay the
performance of this Agreement or any of the Ancillary Agreements by
Surebridge;
(c) any action taken by Surebridge or any Subsidiary during
the period from January 1, 2004 through the date of this Agreement that,
if taken during the period from the date of this Agreement through the
Closing Date, would constitute a breach of Section 5.1;
(d) exchange in, reclassification, split or subdivision of
the Company's authorized or issued capital stock; grant of any option,
right to purchase or similar right regarding the capital stock of the
Company; or purchase, redemption, retirement, or other acquisition by the
Company of any such capital stock; or
(e) declaration or payment of any dividend or other
distribution or payment in respect of the capital stock of the Company.
11
SECTION 2.7. CONSENTS AND APPROVALS. Except as set forth on Schedule 2.7,
the execution, delivery and performance of this Agreement by Surebridge will not
require any consent, approval, permit, authorization, waiver or other action by,
or filing with or notification to, any federal, state, local, or any foreign
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body (a "GOVERNMENTAL
AUTHORITY"), except the notification requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), if applicable.
SECTION 2.8. LITIGATION. Except as set forth on Schedule 2.8, as of the
date of this Agreement there is no litigation, action, suit, proceeding,
inquiry, claim, arbitration or investigation pending or, to the Company's
knowledge, threatened in writing against the Company or any of its assets or
property or any of its directors or officers in their capacities as such or for
which the Company is obligated to indemnify a third party. The Company is not a
party to or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or Governmental Authority or any arbitration ruling or
any settlement or similar agreement or written arrangement with ongoing
obligations relating to a dispute (or the resolution of a dispute) with any
third party.
SECTION 2.9. TAXES.
(a) Except as set forth on Schedule 2.9:
(i) Surebridge and each Subsidiary has timely filed or
been included in, or will timely file or be included in, all
material Tax Returns required to be filed by them or in which they
are to be included with respect to Taxes for any period ending on or
before the date of this Agreement, taking into account any extension
of time to file granted to or obtained on behalf of Surebridge or
any Subsidiary;
(ii) Surebridge and each Subsidiary have paid or caused
to be paid all Taxes and other assessments reflected in such Tax
Returns that have become due and payable, except those contested in
good faith as set forth on Schedule 2.9(a)(ii). The Company has made
provision, in accordance with GAAP, for all Taxes owed or accrued
through the date of this Agreement;
(iii) The Company has withheld and paid all Taxes
required to be withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder
or other third party under all applicable Tax Laws, and all Forms
W-2 and 1099 required with respect thereto have been properly
completed and timely filed and have, within the time and manner
prescribed by Law, registered for the purpose of each withholding
Tax in the relevant territory or jurisdiction;
(iv) There are no Liens for Taxes upon the assets or properties of
the Company or any Subsidiary except for (a) statutory Liens for
current Taxes not yet due and (b) Liens for Taxes being contested in
good faith (to the extent that such Liens are set forth on Schedule
2.9(iv) hereto);
12
(v) The Company has not requested any extension of
time within which to file any Tax Return in respect of any taxable
year which has not since been filed, and no outstanding waivers or
comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns has been given
by or on behalf of the Company;
(vi) The Company (a) is not required to include in
income in any taxable period ending after the Closing any adjustment
pursuant to Section 481(a) of the Code, by reason of any voluntary
or involuntary change in accounting method (nor has any Governmental
Authority proposed any such adjustment or change of accounting
method); (b) has not made an election, or is not required, to treat
any of its assets as tax-exempt bond financed property or tax-exempt
use property under Section 168 of the Code or any comparable
provision of foreign, state or local law; or (c) has not filed a
consent pursuant to former Section 341(f) of the Code for (or any
corresponding provision of state or local law) or agreed to have
former Section 341(f) of the Code (or any corresponding provision of
state or local law) applied to the disposition of any asset;
(vii) No power of attorney has been granted by or with
respect to the Company with respect to any matter relating to Taxes;
(viii) The Company is not a party to any agreement,
contract or arrangement that will result, separately or in the
aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code and no action by the
Company, whether pursuant to this Agreement or otherwise, shall
result in the making of any such payment;
(ix) The Company has not requested or received a ruling
or determination from any Governmental Authority or signed a closing
or other agreement with any Governmental Authority, in either case
with respect to Taxes;
(x) The Company is not a party to, is not bound by, or
does not have any obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement
(collectively, "TAX INDEMNIFICATION AGREEMENTS"); as of the date of
this Agreement, the Company has no knowledge of any potential
Liability to any Person as a result of, or pursuant to, any such Tax
Indemnification Agreement, including any tax Indemnification
Agreement set forth on Schedule 2.9(x);
(xi) The Company has previously delivered or made
available to NaviSite true, correct and complete copies of (a) all
audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Authority relating to the
United States federal, state, local or foreign Taxes due from or
with respect to the Company, (b) all United States federal Tax
Returns, and those state, local and foreign Tax Returns filed by the
Company or any Subsidiary (or, in each case, on its behalf) for tax
periods ending on or after
13
December 31, 2000 and (c) all closing agreements entered into by the
Company with any Governmental Authority with respect to Taxes; the
Company will deliver to NaviSite all materials with respect to the
foregoing for all matters arising after the date hereof.
(xii) The Company does not have any Liability for Taxes
of another Person (other than the affiliated group of which the
Company is now the common parent) under Section 1.1502-6 of the
Treasury regulations promulgated under the Code (the "TREASURY
REGULATIONS") or any similar provision under state, local or foreign
Law, by contract or otherwise;
(xiii) The Company does not have any deferred
intercompany gain or loss arising as a result of a deferred
intercompany transaction within the meaning of Section 1.1502-13 of
the Treasury Regulations (or similar provision under state, local or
foreign Law) or any excess loss account under Section 1.1502-19 of
the Treasury Regulations (or similar provision of state, local or
foreign Law);
(xiv) Since December 31, 2003, neither the Company nor
any Subsidiary has incurred any Liability for Taxes other than in
the ordinary course of business;
(xv) No claim has been made, nor does the Company
reasonably expect that a claim will be made by a Governmental
Authority in a jurisdiction where the Company or any Subsidiary does
not file Tax Returns that the Company or any Subsidiary is or may be
subject to taxation by that jurisdiction;
(xvi) The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period described in Section
897(c)(1)(A)(ii) of the Code
(xvii) Neither the Internal Revenue Service (the "IRS")
nor any other Governmental Authority is asserting as of the date of
this Agreement by written notice to the Company or, to the Company's
knowledge, threatening as of the date of this Agreement to assert
against the Company, any deficiency or claim for any amount of
additional Taxes; and
(xviii) No federal, state, local or foreign audits or
other administrative proceedings or court proceedings are pending as
of the date of this Agreement with regard to any Taxes or Tax
Returns of the Company and the Company has not received a written
notice prior to the date of this Agreement of any actual or
threatened audits or proceedings or is otherwise aware of any such
audits or proceedings.
(b) For the purposes of this Agreement:
14
(i) "TAXES" shall mean any United States federal,
state or local or non-U.S. income, gross receipts, license,
severance, occupation, premium, environmental (including taxes under
Code Section 59A), customs duties, profits, disability,
registration, alternative or add-on minimum, estimated, withholding,
payroll, employment, unemployment, social security (or similar),
excise, sales, use, value-added, occupancy, franchise, real
property, personal property, business and occupation, windfall
profits, capital stock, stamp, transfer or other tax, charge, fee or
imposition in the nature of Taxes, whether computed on a separate,
consolidated, unitary, combined or other basis, including any
interest, penalties, additions or assessments with respect thereto,
whether disputed or not;
(ii) "TAX LAW" means the Law (including any applicable
regulations or any administrative pronouncement) of any Governmental
Authority relating to any Tax;
(iii) "TAX RETURNS" shall means any U.S. federal, state,
local or foreign return, declaration, report, claim for refund,
amended return, declaration of estimated Tax or information return
or statement relating to Taxes, and any schedule, exhibit,
attachment or other materials submitted with any of the foregoing,
and any amendment thereto;
(iv) "LAW" means any non-U.S. or United States federal,
state or local law, statute, rule, regulation, ordinance, standard,
requirement, administrative ruling, order or process (including any
zoning or land use law or ordinance, building code, Environmental
Law, securities, stock exchange, blue sky, civil rights, employment,
labor or occupational health and safety law or regulation or any
law, order, rule or regulation applicable to federal contractors) or
administrative interpretation thereof, and any court, or
arbitrator's order or process; and
(v) "LIABILITY" means any debt, liability, commitment
or obligation of any kind, character or nature whatsoever, whether
known or unknown, secured or unsecured, fixed, absolute, contingent
or otherwise, and whether due or to become due.
SECTION 2.10. EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.10 hereto contains a true, correct and
complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option and other equity or
equity based compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare plan," fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); each profit sharing, stock bonus or other "pension
plan," fund or program (within the meaning of Section 3(2) of ERISA); each
employment, "change in control," termination or severance agreement; and
each other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or
15
contributed to or required to be contributed to by the Company or by any
trade or business, whether or not incorporated (an "ERISA AFFILIATE"),
that together with the Company would be deemed a "single employer" within
the meaning of Section 414(b), (c), (m) or (o) of the Code, or to which
the Company or an ERISA Affiliate is party, whether written or oral, for
the benefit of any employee or former employee of the Company (the
"EMPLOYEE PLANS"); provided that with respect to Employee Plans
established or maintained primarily for employees or former employees
working outside the United States only material Employee Plans are listed.
"FORMER EMPLOYEE PLAN" shall mean any Employee Plans of Surebridge or any
Subsidiary sponsored, maintained, or contributed to within the last three
years, notwithstanding that such plans are not listed on Schedule 2.10.
Neither the Company nor any ERISA Affiliate has any commitment or formal
plan, whether legally binding or not, to create any additional material
employee benefit plans or modify or change, in any material way, any
existing Employee Plans and no condition exists which would prevent the
Company from terminating any Employee Plans (other than Employee Plans
required to be maintained under applicable Law) without material liability
to the Company (other than for benefits accrued at the time of such
termination), except to the extent limited by Law.
(b) With respect to each Employee Plan, the Company has
heretofore delivered or made specifically available to NaviSite a current,
true, correct and complete copy (or, to the extent no such copy exists, an
accurate description) thereof (including any amendments thereto) and, to
the extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent IRS determination letter; (iii) the most
recent summary plan descriptions or other reports and summaries required
under ERISA or the Code; (iv) any material written communication (or a
description of any material oral communications) to participants since
January 1, 2003 concerning the Employee Plans; and (v) for the most recent
year for which such documents are available, the Form 5500 and attached
schedules, audited financial statements and actuarial valuation reports
and any attorney response to any auditor request. Each Employee Plan and
Former Employee Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code and, to the
knowledge of the Company, no event has occurred or circumstance exists
that would reasonably be expected to affect such qualified status. Each
Employee Plan and Former Employee Plan intended to satisfy the
requirements of Section 501(c)(9) has satisfied such requirements.
(c) None of the Employee Plans or Former Employee Plans is a
"multiemployer plan," as such term is defined in Section 3(37) of ERISA (a
"MULTIEMPLOYER PLAN"), nor is or was any Employee Plan or Former Employee
Plan subject to Section 302 or Title IV of ERISA or Section 412 of the
Code. No Liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring any such Liability. Neither
the Company nor any ERISA Affiliate sponsors, maintains, contributes to or
has an obligation to contribute to, or has at any time sponsored,
maintained, contributed to or
16
had an obligation to contribute to, any Multiemployer Plan or any pension
plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA.
(d) Except as set forth on Schedule 2.10, neither the
Company nor, to the knowledge of the Company, any Employee Plan, any
Former Employee Plan, any trust created thereunder, or any trustee or
administrator thereof, has engaged in a transaction in connection with
which the Company, any Employee Plan, any Former Employee Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any Employee Plan or any Former Employee Plan or any such trust could be
subject to either a material civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975
or 4976 of the Code. To the knowledge of the Company, there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code and other than a transaction that is exempt under
a statutory or administrative exemption) with respect to any Employee Plan
or any Former Employee Plan that could result in any material liability to
the Company or an ERISA Affiliate.
(e) Except as set forth on Schedule 2.10, each Employee Plan
and Former Employee Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law,
including but not limited to ERISA and the Code, and all contributions
required to be made under the terms of any of the Employee Plans or any
Former Employee Plan as of the date of this Agreement have been timely
made or, if not yet due, have been properly reflected on the Company
Financial Statements except for any failure to do so which would not
reasonably be expected to result in any material liability to the Company
or an ERISA Affiliate.
(f) Except as set forth on Schedule 2.10, no Employee Plan
or Former Employee Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former
employees of the Company for periods extending beyond their retirement or
other termination of service, other than (i) coverage mandated by
applicable Law, (ii) death benefits under any "pension plan," or (iii)
benefits the full cost of which is borne by the current or former employee
(or his beneficiary). The Company and each ERISA Affiliate are in material
compliance with (i) the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations (including
proposed regulations) thereunder and any similar state law and (ii) the
applicable requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended, and the regulations (including the
proposed regulations) thereunder.
(g) Except as set forth on Schedule 2.10, the consummation
of the transactions contemplated hereby will not (i) entitle any current
or former employee or officer of the Company to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time
of payment or vesting, or increase the amount of compensation or benefits
due any such employee or officer or (iii) prevent the Company from
amending or terminating any Employee Plan or Former Employee Plan.
17
(h) Except as set forth on Schedule 2.10, there are no
pending or, to the knowledge of the Company, threatened or anticipated
claims by or on behalf of any Employee Plan or Former Employee Plan, by
any employee or beneficiary covered under any such Employee Plan or Former
Employee Plan with respect to such plan, or otherwise involving any such
Employee Plan or Former Employee Plan, including any audit or inquiry by
the IRS or United States Department of Labor (other than routine claims
for benefits).
(i) With respect to each Employee Plan and Former Employee
Plan that is subject to the Law of any jurisdiction outside the United
States (each, a "FOREIGN BENEFIT PLAN"):
(i) all employer and employee contributions to each
Foreign Benefit Plan required by Law or by the terms of such Foreign
Benefit Plan have been timely made in all material respects, or, if
applicable, accrued, in accordance with applicable accounting
practices;
(ii) the fair market value of the assets of each funded
Foreign Benefit Plan, the Liability of each insurer for any Foreign
Benefit Plan funded through insurance or the book reserve
established for any Foreign Benefit Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued
benefit obligations, as of December 31, 2003, with respect to all
current and former participants in such plan according to the
actuarial assumptions and valuations most recently used to determine
employer contributions to such Foreign Benefit Plan and no
transaction contemplated by this Agreement shall cause such assets
or insurance obligations to be less than such benefit obligations;
(iii) the Foreign Benefit Plan has been maintained in
all material respects in accordance with all applicable Laws and, if
intended to qualify for special tax treatment, the Foreign Benefit
Plan meets all requirements for such treatment, except for any
failure to do so which would not result in any material liability to
the Company; and
(iv) each Foreign Benefit Plan required to be
registered has been registered and has been maintained in good
standing with applicable Governmental Authorities.
SECTION 2.11. REAL AND PERSONAL PROPERTY.
(a) Schedule 2.11(a) sets forth a list of all real
properties leased by the Company (the "LEASED REAL PROPERTY") and all
addresses, approximate square footage and expiration dates thereof. True
and complete copies of the leases (including all amendments, subordination
and non-disturbance agreements, estoppel certificates and related
documents) (each, a "LEASE" and collectively, the "LEASES") have been
delivered or made available to NaviSite. With respect to each Lease
required to be listed on Schedule 2.11(a):
18
(i) the Company has good, valid and enforceable
leasehold interests to the leasehold estate in the Leased Real
Property granted to the Company pursuant to each pertinent Lease,
subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of
equity; and
(ii) each of said Leases has been duly authorized and
executed by the Company and is in full force and effect and there is
no existing material default by the Company under any of the Leases.
(b) Schedule 2.11(b) sets forth a true, correct and complete
list of all equipment, fixtures and trade fixtures of the Company as of
March 31, 2004. Except as set forth on Schedule 2.11(b), the Company has
good title to all of its tangible personal property and assets shown on
the Base Balance Sheet or acquired after the date of the Base Balance
Sheet, free and clear of any mortgage, pledge, Lien, conditional sale
agreement, security title, encumbrance or other charge (collectively,
"ENCUMBRANCES"), except for (i) assets which have been disposed of to
nonaffiliated third parties since December 31, 2003 in the ordinary course
of business, (ii) Encumbrances reflected in the Base Balance Sheet, (iii)
Encumbrances for current Taxes not yet due and payable, and (iv) Permitted
Liens.
(c) The Company does not own, and never has owned, any real
property.
SECTION 2.12. LABOR AND EMPLOYMENT MATTERS. Except as set forth in
Schedule 2.12 hereto:
(a) There is no:
(i) collective bargaining agreement or any other
agreement, whether in writing or otherwise, with any labor
organization, union, group or association ("LABOR Organization")
applicable to the employees of the Company and the Company is not
subject to any charge, demand, petition or representation proceeding
seeking to compel, require or demand it to bargain with any labor
union or labor organization nor, as of the date of this Agreement,
is there pending or, to the Company's knowledge, threatened, any
material labor strike, dispute, walkout, work stoppage, slow down or
lockout involving the Company or action, dispute or employment
related complaint by or with respect to any employees of the
Company;
(ii) unfair labor practice complaint pending or, to the
knowledge of the Company, threatened against the Company before the
National Labor Relations Board or any other federal, state local or
foreign agency;
(iii) pending or, to the knowledge of the Company,
threatened representation question or union or labor organizing
activities with respect to employees of the Company.
19
(b) During the past three years, the Company has not
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting
any site of employment or one or more facilities or operating units within
any site of employment or facility of the Company; or (ii) a "mass layoff"
(as defined in the WARN Act (which is defined in Section 6.1(d)))
affecting any site of employment or facility of the Company; nor has the
Company been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state, local or foreign Law. The employees of the Company have not
suffered an "employment loss" (as defined in the WARN Act) since three
months prior to the date of this Agreement.
(c) The Company has at all times and in all material
respects properly classified each of their respective employees as
employees and each of their independent contractors as independent
contractors, as applicable, and no indication has been received from any
Governmental Authority that such contractors would be considered employees
for employment law or tax purposes at any time.
(d) The Company has at all times paid its respective
employees in conformance with applicable federal, state, local and foreign
wage and hour laws. There are not presently pending, or to the knowledge
of the Company threatened, any claims with respect to working hours or the
payment of wages, overtime or any other form of employee compensation.
(e) The Company does not, formally or informally, have a
custom or practice of paying ex-xxxxxx xxxxxxxxx payments to employees.
SECTION 2.13. CONTRACTS AND COMMITMENTS.
(a) Schedule 2.13 sets forth a true, complete and correct
list of the top 25 customers (and their known affiliates) of the Company
based on revenues for the fiscal year ended December 31, 2003. Schedule
2.13 sets forth a true, complete and correct list (including all
amendments, modifications or supplements with respect thereto) of the
following agreements (written or oral) to which Surebridge or any
Subsidiary is a party to the extent any such agreement (i) is currently in
effect or (ii) has been terminated on or prior to the date hereof but
contains provisions that survived such termination and such provisions are
currently in effect (other than provisions that customarily survive such
termination and do not relate to the principal business purpose of such
agreement and which do not create any material or ongoing financial or
other liability to NaviSite):
(i) Any loan agreement, note, mortgage, indenture,
security agreement and other agreement and instrument relating to
the borrowing of money or other agreement (or group of related
agreements) that requires the payment by the Company in excess of
$75,000, other than any agreement that is otherwise terminable by
the Company without penalty or termination fee with no greater than
60 days notice;
20
(ii) Any agreement (or group of related agreements)
between the Company and its top 25 customers (or their known
Affiliates) by revenues for the fiscal year ended December 31, 2003;
(iii) Any agreement concerning the establishment or
operation of a partnership, joint venture or limited liability
company;
(iv) Any agreement (or group of related agreements)
under which it has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) involving more than $50,000 or under
which it has imposed (or may impose) an Encumbrance on any of its
assets, tangible or intangible;
(v) Any agreement for the disposition of any portion
of the assets or business of the Company (other than sales in the
ordinary course of business) or any agreement for the acquisition of
the assets or business of any other entity (other than purchases in
the ordinary course of business);
(vi) Any agreement concerning non-competition,
exclusivity, non-solicitation, non-recruitment or other such
covenants that restricts any conduct of any business by the Company
in each case with respect to geographical area of operations or
scope or type of business of the Company (other than (A)
non-competition agreements entered into between the Company and its
employees or consultants and which do not restrict the Company with
respect to non-competition or (B) customer contracts and
non-disclosure agreements with standard non-solicitation of employee
provisions);
(vii) Any employment or consulting agreement (other than
offer letters for at-will employment for employees that do not
provide for any severance benefit upon such employee's termination
in excess of the Company's standard severance policy set forth on
Schedule 2.13);
(viii) Any collective bargaining or similar agreement;
(ix) Any agreement involving any current officer,
employee, director or shareholder of the Company (including
non-standard provisions in offer letters which provisions require
payment by Surebridge in excess of $5,000) or consulting agreement
with an individual involving payments by the Company in excess of
$85,000 per annum other than agreements entered into in connection
with the issuance and exercise of options;
(x) Any buy-sell or barter agreements;
(xi) Any derivative contracts and other hedging
arrangements;
(xii) Any acquisition agreement, by means of asset
purchase, merger, stock purchase, asset purchase, consolidation or
other similar transaction,
21
of a person or business by the Company (each, an "ACQUISITION")
pursuant to which (a) there are liabilities or obligations incurred
with respect to such Acquisition in excess of $100,000 that are
outstanding or contingent as of the date hereof and (b) there exist
any outstanding disputes between the Company, on the one hand, and
one or more of the selling parties in such Acquisition, on the other
hand, which relate to the Acquisition; and
(xiii) Any other material agreement, including a
guarantee, not entered into in the ordinary course of business.
(b) All contracts, agreements and instruments required to be
listed in Schedule 2.13 (the "MATERIAL CONTRACTS") are valid and are in
full force and effect and constitute legal, valid and binding obligations
of the Company and, to the knowledge of the Company, of the other parties
thereto, and are enforceable in accordance with their respective terms
subject, in each case, to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally. The Company has no knowledge
of, and has not received, any notice regarding termination of any Material
Contracts and the Company has no knowledge of any customer which has
indicated that it intends to terminate any Material Contract or not renew
upon its expiration. The Company is not in default and to the knowledge of
the Company, no other party in material default in complying with any
provisions of any Material Contract, and to the knowledge of the Company,
no condition or event or fact exists which, with notice, lapse of time or
both, could constitute a material default thereunder on the part of the
Company. The Company has delivered or made available to NaviSite a true,
correct and complete copy of each of the Material Contracts.
SECTION 2.14 INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement,
(i) "INTELLECTUAL PROPERTY ASSETS" means all of the
following, to the extent owned, licensed or used by the Company:
(A) the Products (as defined below);
(B) all patents, patent applications, patent
rights, and inventions and discoveries and invention
disclosures (whether or not patented) used by or related to
the Company (collectively, "PATENTS");
(C) all trade names, trade dress, logos,
packaging design, slogans, Internet domain names, registered
and unregistered trademarks and service marks and applications
used by or related to the Company (collectively, "MARKS");
(D) all copyrights in both published and
unpublished works, including without limitation all
compilations, databases and
22
computer programs, and all copyright registrations and
applications, and all derivatives, translations, adaptations
and combinations of the above used by or related to the
Company (collectively, "Copyrights");
(E) all know-how, trade secrets, confidential or
proprietary information, research in progress, algorithms,
data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, prototypes, techniques,
Company designed reports, Beta testing procedures and Beta
testing results used by or related to the Company
(collectively, "TRADE SECRETS");
(F) all goodwill, franchises, licenses, permits,
consents, approvals, technical information, telephone numbers,
and claims of infringement against third parties used by or
related to the Company (the "RIGHTS"); and
(G) all customer lists and telephone numbers,
names of potential sales leads, business strategies, outside
analysts' plans and reports, outlooks, forecasts and other
similar documents used by or related to the Company
(collectively, "OTHER INTANGIBLES").
(ii) "PRODUCTS" means those services (including hosting
and application management), computer programs, solutions and
related documentation sold, marketed, or provided by the Company as
of the date hereof.
(iii) "NONDISCLOSURE CONTRACTS" means all nondisclosure
and/or confidentiality agreements entered into between the Company
and persons in connection with disclosures by the Company relating
to the Products and the Intellectual Property Assets.
(b) Ownership of Intellectual Property Assets. The Company
is the exclusive owner of, and has good, valid and marketable title to all
of the Intellectual Property Assets, free and clear of all mortgages,
pledges, charges, Liens, equities, security interests, or other
encumbrances or agreements, and has the right to use without payment to a
third party (except as set forth in Schedule 2.14) all of the Intellectual
Property Assets. No claim is pending or, to the Company's knowledge,
threatened against the Company and/or its directors, officers, employees,
and consultants to the effect that (i) the Company's right, title and
interest in and to the Intellectual Property Assets is reduced, invalid or
unenforceable by the Company or that any of the Intellectual Property
Assets infringes, misappropriates, dilutes or otherwise violates the
rights of a third party, or (ii) challenging the Company's ownership or
use of, or the validity, enforceability or registerability of, any
Intellectual Property Assets and, to the knowledge of the Company, there
is no reasonable basis for a claim regarding any of the foregoing. There
exists no prior act or current conduct or use by the Company or any third
party that would void or invalidate any Intellectual Property Assets owned
by the Company that is used or is necessary for the conduct of the
Company's business as currently conducted, or give cause to any licensor
of Intellectual Property Assets licensed to the Company to
23
terminate or otherwise impair the rights of the Company pursuant to any
such license agreement. The Company has not brought or threatened a claim
against any person (i) alleging infringement, misappropriation, dilution
or any other violation of the Intellectual Property Assets or the
Intellectual Property that is the subject of any license agreement, or
(ii) challenging any person's ownership or use of, or the validity,
enforceability or registerability of, any Intellectual Property Assets
and, to the knowledge of the Company, there is no reasonable basis for a
claim regarding any of the foregoing. Except as set forth in Schedule
2.14, all former and current employees of the Company have executed
written instruments with the Company that assign to the Company all rights
to any inventions, improvements, discoveries or information relating to
the business of the Company. No current or former shareholder, partner,
director, officer, employee or contractor of Company (or any of their
respective predecessors in interest) has or will have, after giving effect
to the transactions contemplated by this Agreement, any legal or equitable
right, title or interest in or to, or any right to use, directly or
indirectly, in whole or in part, any of the Intellectual Property Assets.
All Intellectual Property Assets were developed by either (i) employees of
the Company within the scope of their employment, or (ii) independent
contractors who have assigned all of their rights in such Intellectual
Property Assets to the Company pursuant to a written agreement.
(c) Patents. Schedule 2.14 sets forth a complete and
accurate list and summary description of all Patents. All of the issued
Patents owned by the Company are currently in compliance with formal legal
requirements (including without limitation payment of filing, examination
and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or Taxes or
actions falling due within ninety (90) days after the Closing Date. In
each case where a Patent is held by the Company by assignment, the
assignment has been duly recorded with the U.S. Patent and Trademark
Office and all other jurisdictions of registration. No issued Patent has
been or is now involved in any interference, reissue, re-examination or
opposition proceeding. To the Company's knowledge, there is no potentially
interfering patent or patent application of any third party.
(d) Trademarks. Schedule 2.14 sets forth a complete and
accurate list and summary description of all Marks. Except as set forth on
Schedule 2.14, all Marks that have been registered with the United States
Patent and Trademark Office and/or any other jurisdiction are currently in
compliance with formal legal requirements (including without limitation
the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or Taxes or actions falling due
within ninety (90) days after the Closing Date. In each case where a Xxxx
is held by the Company by assignment, the assignment has been duly
recorded with the U.S. Patent and Trademark Office and all other
jurisdictions of registration. No registered Xxxx has been or is now
involved in any opposition, invalidation or cancellation proceeding and,
to the Company's knowledge, no such action is threatened with respect to
any of the Marks. All products and materials containing a Xxxx xxxx the
proper notice where permitted by Law. No Marks have been abandoned by the
Company, and no Marks are the subject of a pending application for
registration that is based on the Company's use of, or bona fide intent to
use, such Marks. To the knowledge of the Company, there has been no prior
use of such Marks by any third party which would confer upon said third
party superior rights in such Marks, and the Company has adequately
policed the Marks against third party infringement so as to maintain the
validity of such Marks.
24
To the knowledge of the Company, there has been no prior use of such Marks
by any third party which would confer upon said third party superior
rights in such Marks, and the Company has adequately policed the Marks
against third party infringement so as to maintain the validity of such
Marks.
(e) Copyrights. Schedule 2.14 sets forth a complete and
accurate list and summary description of all Copyrights. All Copyrights
that have been registered with the United States Copyright Office are
identified on such Schedule and are currently in compliance with formal
legal requirements, are valid and enforceable, and are not subject to any
fees or Taxes or actions falling due within ninety (90) days after the
Closing Date. In each case where a Copyright is held by the Company by
assignment, the assignment has been duly recorded with the U.S. Copyright
Office and all other jurisdictions of registration. None of the source or
object code, algorithms, or structure included in the Products is copied
from, based upon, or derived from any other source or object code,
algorithm or structure in violation of the rights of any third party. Any
substantial similarity of the Products to any computer program owned by
any third party did not result from the Products being copied from, based
upon, or derived from any such computer software program in violation of
the rights of any third party.
(f) Trade Secrets. Except as set forth on Schedule 2.14, the
Company has taken all reasonable measures (including, without limitation,
entering into appropriate confidentiality and nondisclosure agreements
with all officers, directors, employees, and consultants of the Company
and any other persons with access to the Trade Secrets) to protect the
secrecy, confidentiality and value of all Trade Secrets. To the knowledge
of the Company, there has not been any breach by any party to any such
confidentiality or non-disclosure agreement. To the Company's knowledge,
the Trade Secrets have not been disclosed by the Company to any person or
entity other than employees or contractors of the Company who needed to
know and use the Trade Secrets in the course of their employment or
contract performance, and then only pursuant to a written agreement
containing non-disclosure obligations that adequately protect Company's
proprietary interests in such Trade Secrets. To the Company's knowledge,
the Company has the right to use, free and clear of claims of third
parties, all Trade Secrets. To the knowledge of the Company, no third
party has asserted that the use by the Company of any Trade Secret
violates the rights of any third party. To the knowledge of the Company,
no third Person that is a party to any agreement with the Company or any
of its Subsidiaries containing obligations of non-disclosure with respect
to such Trade Secrets is in breach or default thereof.
(g) Other Intangibles. The Company has provided to NaviSite
access to all of its Other Intangibles used by the Company.
(h) Exclusivity of Rights. The Company has the exclusive
right to use, license, distribute, transfer and bring infringement actions
with respect to the Intellectual Property Assets, except for the rights of
any licensor or supplier of licensed Intellectual Property Assets referred
to in Schedule 2.14. Except as set forth on Schedule 2.14, the Company (i)
has not licensed or granted to anyone rights of any nature to use,
promote, market, sell, distribute or license any of its Intellectual
Property Assets; and (ii)
25
is not obligated to and does not pay royalties or other fees to anyone for
the Company's ownership, use, license or transfer of any of its
Intellectual Property Assets. The Intellectual Property Assets, and, to
the knowledge of the Company, the Intellectual Property owned by third
Persons that is the subject of a license agreement, has been duly
maintained, is valid and subsisting, in full force and effect and has not
been cancelled, expired or abandoned.
(i) Affirmative Obligations. Except as set forth in Schedule
2.14, the Company has no obligation to any other person to maintain,
modify, improve or upgrade the Products.
(j) Infringement. None of the Intellectual Property Assets
of the Company or the Products or the modifications made by the Company to
the Products sold by the Company (excluding any third-party rights or
products incorporated into such Products for which the Company has a valid
license) infringes or is alleged to infringe any patent, trademark,
service xxxx, trade name, copyright or other proprietary right or is a
derivative work based on the work of any other person, except as set forth
in Schedule 2.14.
SECTION 2.15. ENVIRONMENTAL MATTERS.
(a) The Company is in material compliance with Environmental
Laws (which compliance includes, but is not limited to, the possession by
the Company of all permits and other governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof). The Company has not received any written notice,
report or other information regarding any actual or alleged material
violation of Environmental Laws, or any material liabilities or potential
material liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), including any investigatory, remedial or corrective
obligations, relating to the Company or its facilities arising under
Environmental Laws. There is no Environmental Claim pending or, to the
knowledge of the Company, threatened against the Company. There are no
past or present actions, activities, circumstances, conditions, events or
incidents which reasonably would be expected to form the basis of an
Environmental Claim against the Company.
(b) "ENVIRONMENTAL CLAIM" means any action, investigation or
notice by any Person alleging potential Liability (including potential
Liability for investigatory costs, Cleanup costs, governmental response
costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (a) the presence,
release or threatened release of any hazardous materials at any location,
whether or not owned or operated by the Company, or (b) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law.
(c) "ENVIRONMENTAL LAWS" means all applicable federal, state
and local statutes or laws, judgments, orders, regulations, licenses,
permits, rules and ordinances relating to pollution or protection of
health, safety or the environment, including, but not limited to the
Federal Water Pollution Control Act (33 U.S.C.Section 1251 et
26
seq.), Resources Conservation and Recovery Act (42 U.S.C.Section 6901 et.
seq.), Safe Drinking Water Act (42 U.S.C.Section 3000(f) et. seq.), Toxic
Substances Control Act (15 U.S.C.Section 2601 et seq.), Clean Air Act (42
U.S.C.Section 7401 et. seq.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C.Section 9601 et seq.), and other
similar state and local statutes.
SECTION 2.16. INSURANCE. Schedule 2.16 sets forth a true and correct
summary of the insurance policies or binders held by, or for the benefit of, the
Company and its directors, officers, employees and agents, including the
underwriter of such policies and the amount of coverage thereunder. The Company
has delivered or made available to NaviSite true, correct and complete copies of
such policies and binders. Except as set forth in Schedule 2.16 hereto, (a) all
such policies or binders are in full force and effect and no premiums due and
payable thereon are delinquent, (b) there are no pending material claims against
such insurance policies or binders by the Company as to which the insurers have
denied Liability, (c) the Company has complied in all material respects with the
provisions of such policies and (d) there exist no material claims under such
insurance policies or binders that have not been properly and timely submitted
by the Company to its insurers. Except as set forth in Schedule 2.16 hereto, the
insurance coverage provided by such policies or insurance will not terminate or
lapse by reason of the transactions contemplated by this Agreement and,
following the Closing Date, the Company will continue to be covered under such
policies for events occurring prior to the Closing Date. Except as set forth in
Schedule 2.16 hereto, no such policy provides for or is subject to any currently
enforceable retroactive rate or premium adjustment or loss sharing arrangement
arising wholly or partially out of events arising prior to the date hereof. The
Company maintains insurance coverage in such amounts and covering such risks as
are in accordance with normal industry practice for companies engaged in
businesses similar to that of the Company (taking into account the cost and
availability of such insurance). Schedule 2.16 sets forth a list of all claims
for losses exceeding $50,000 submitted to insurers during the 18-month period
ending on the date of this Agreement.
SECTION 2.17. BROKERS. The Company has not entered into any contract
entitling any agent, broker, investment banker, financial advisor or other firm
or person to any broker's, finder's, success fee or any other commission or
similar fee in connection with the transactions contemplated hereby.
SECTION 2.18. COMPLIANCE WITH LAWS. EXCEPT AS SET FORTH ON SCHEDULE 2.18:
(a) The Company is not in default or violation of, and to
the knowledge of the Company, no event has occurred with respect to the
Company which, with the lapse of time or the giving of notice or both,
would result in the violation of or default under, any Law applicable to
Company or by which any property or asset of Company is bound, except for
any such conflicts, defaults or violations that would not, individually or
in the aggregate, have a Material Adverse Effect. The Company has not
received any written notice or written communication from any Governmental
Authority alleging noncompliance with any applicable Law. The Company is
not subject to reporting or registration under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT").
27
(b) To the knowledge of the Company, neither the Company nor
any of its directors, officers, agents or employees has in the past three
years (i) used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses related to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees
or to foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other unlawful payment.
(c) The Company is in possession of all authorizations,
licenses, permits, certificates, and approvals of any Governmental
Authority necessary for the Company to own, lease and operate its
properties or to carry on its respective businesses substantially as it is
being conducted as of the date hereof (the "COMPANY PERMITS"), and all
such Company Permits are valid, and in full force and effect, except where
the failure to have, or the suspension or cancellation of, or failure to
be valid or in full force and effect of, any of the Company Permits would
not, individually or in the aggregate, reasonably be expected to (A)
prevent or materially delay consummation of the transactions contemplated
hereby, (B) otherwise prevent or materially delay performance by the
Company of any of its material obligations under this Agreement or any
Ancillary Agreement or (C) result in a Material Adverse Effect.
SECTION 2.19. TRANSACTIONS WITH AFFILIATES. Except as provided on Schedule
2.19, there are no loans, leases or other agreements or transactions between the
Company or any present or former stockholder, director, officer or employee of
the Company, or to the Company's knowledge, any person controlled by such
officer, director, employee or stockholder or his or her immediate family.
Except as set forth in Schedule 2.19 hereto, to the knowledge of the Company, as
of the date hereof none of such persons has any direct or indirect ownership
interest in any firm or entity, except for less than a 1% interest in any
publicly-held corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company. Except as set forth in Schedule 2.19 hereto, no employee,
officer or director of the Company and no member of the immediate family of such
persons is directly or indirectly interested in any Material Contract with the
Company or has or claims to have any interest in the Intellectual Property
Assets of the Company.
SECTION 2.20. [INTENTIONALLY OMITTED.].
SECTION 2.21. BOOKS AND RECORDS. The books and records, minute books,
stock record books and similar records of Surebridge and its Subsidiaries
contain (as applicable) complete and accurate records of all actions taken since
January 2000 at any meeting of Surebridge's shareholders, board of directors or
any committee thereof, and all written consents executed in lieu of the holding
of such meeting, other than with respect to recent meetings or written consents
for which summaries of such meetings and actions have been provided to NaviSite
(other than with respect to the transactions contemplated hereby).
SECTION 2.22. BANK ACCOUNTS. Schedule 2.22 sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes,
checking accounts or other accounts of any nature the
28
available balance of which customarily exceeds $5,000, and from which it has
obtained a letter of credit, line of credit, equity line or other such
financing.
SECTION 2.23. SECURITIES LAW MATTERS.
(a) Surebridge is an "Accredited Investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (collectively with the rules and regulations promulgated
thereunder, the "SECURITIES ACT"). Surebridge is acquiring the Parent
Shares and the Notes for its own account, for investment, and not with a
current view to any "distribution" thereof within the meaning of
Regulation D and the Securities Act other than pursuant to an effective
registration statement or a valid exemption from registration under the
Securities Act. Surebridge is able to bear the economic risk of loss of
its investment in Parent. Surebridge represents that by reason of its or
its management's or board's business or financial experience, Surebridge
has the capacity to protect its own interests in connection with the
transactions contemplated hereby. Surebridge has had a reasonable
opportunity to review Parent's Public Filings and a reasonable opportunity
to discuss NaviSite's business, management, financial affairs and
operations with officers and management of NaviSite and has had the
opportunity to review NaviSite's operations and facilities. Surebridge
also has had the opportunity to ask questions of, and receive answers
from, NaviSite and its management regarding the terms and conditions of
Surebridge's investment in the Parent Shares and the Notes.
(b) Surebridge understands that because the Parent Shares
and the Notes have not been registered under the Securities Act nor under
securities or "blue sky" laws of any jurisdiction, it cannot dispose of
any or all of such securities unless such securities are subsequently
registered under the Securities Act or exemptions from such registration
are available. Surebridge understands that the Parent Shares and the Notes
are being offered and sold pursuant to an exemption from registration
under the Securities Act based in part upon the Company's representations
contained in this Agreement. Surebridge understands that the Parent Shares
and the Notes are subject to certain restrictions on transfer. Surebridge
further understands that Parent may, as a condition to the transfer of any
of such securities, require that the request for transfer be accompanied
by an opinion of counsel as described below. Surebridge understands that
each certificate representing the Parent Shares will bear a legend in
substantially the form provided below (in addition to any legend required
under applicable state securities laws and any appropriate legends with
respect to the contractual restrictions and limitations on
transferability).
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE
HOLDER NAMED HEREON FOR THE HOLDER'S OWN ACCOUNT FOR
INVESTMENT; AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD
OR IN ANY OTHER WAY TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS IN EFFECT AT THAT
TIME, OR AN OPINION OF COUNSEL
29
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT.
SECTION 2.24. RULE 145 COMPLIANCE. As of the date hereof and as of
Closing,
(i) neither this Agreement nor any plan or other
agreement provides for dissolution of Surebridge;
(ii) neither this Agreement nor any plan or other
agreement provides for the pro rata or similar distribution of the
Parent Shares or the Notes; and
(iii) the transfer of the Purchased Assets is not part
of a pre-existing plan for the distribution of the Parent Shares or
the Notes to be delivered pursuant to the transactions contemplated
hereby.
SECTION 2.25. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES;
KNOWLEDGE; DISCLOSURE.
(a) NONE OF THE COMPANY OR ITS REPRESENTATIVES HAVE MADE ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER RELATING TO THE COMPANY OR THE BUSINESS OF THE COMPANY OR
OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER
THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
ARTICLE II.
(b) Without limiting the generality of the foregoing, none
of the Company or such representatives of the Company has made, and shall
not be deemed to have made, any representations or warranties in the
materials relating to the business of the Company made available to
NaviSite or in any presentation of the business of the Company in
connection with the transactions contemplated hereby, and no statement
contained in any of such materials or made in any such presentation shall
be deemed a representation or warranty hereunder or otherwise. It is
understood that any cost estimates, projections or other predictions, any
data, any financial information or any memoranda or offering materials or
presentations, made available by the Company and its representatives are
not and shall not be deemed to be or to include representations or
warranties of the Company, provided that the foregoing shall not alter any
of the express representations and warranties in this Article II.
(c) Whenever a representation or warranty made by a party
hereof refers to the "knowledge" (or words of similar import), such
knowledge shall be deemed to refer to the actual knowledge which the
members of the board of directors, the executive officers and other
persons listed on Schedule 2.25 making such representation and warranty
possess.
30
ARTICLE III - INTENTIONALLY LEFT BLANK
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF NAVISITE
NaviSite Disclosure Schedule shall be arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections contained in
this Article IV. The disclosures in any section or subsection of NaviSite
Disclosure Schedule shall qualify other sections and subsections in this Article
IV to the extent it is reasonably apparent from a reading of the disclosure that
such disclosure is applicable to such other sections and subsections. Except as
set forth in NaviSite Disclosure Schedule attached hereto and delivered by
NaviSite, NaviSite hereby represents and warrants to the Company as of the date
hereof (or, if made as of a specified date, as of such date) and as of the
Closing Date, as follows.
SECTION 4.1. EXISTENCE; GOOD STANDING; AUTHORITY.
(a) Each of Buyer and Parent is a corporation is duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Each of Buyer and Parent has all requisite corporate
power and authority and all necessary governmental licenses,
authorizations, consents and approvals to own, operate, lease and encumber
its properties and carry on its business as currently operated and
conducted. Each of Buyer and Parent is duly licensed or qualified to do
business as a foreign corporation, and is in good standing under the laws
of any other jurisdiction in which the character or ownership of its
properties or in which the transaction or character of its business makes
such qualification necessary, except where the failure to be so licensed
or qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. Each of Buyer and Parent is not
in violation of any provision of its certificate of incorporation or
bylaws.
(b) Each of Buyer and Parent has the corporate power and
authority to execute and deliver this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of
each of Parent and Buyer pursuant to this Agreement and the Ancillary
Agreements and to carry out the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the performance by
each of Buyer and Parent of its obligations hereunder and the consummation
of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of each of Buyer
and Parent. No other corporate or similar action on the part of each of
Buyer and Parent is necessary to authorize the execution and delivery of
this Agreement by Buyer or Parent or the consummation by Buyer or Parent
of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Buyer and Parent and, assuming the due
authorization, execution and delivery of this Agreement by the Company,
this Agreement constitutes a legal, valid and binding obligation of Buyer
and Parent, enforceable against Buyer and Parent in accordance with its
terms.
SECTION 4.2. NO CONFLICT. Neither the execution and delivery by Buyer or
Parent of this Agreement and the other agreements, documents and instruments
contemplated hereby, nor
31
the consummation by Buyer or Parent of the transactions in accordance with the
terms hereof and thereof, conflicts with or results in a breach of any
provisions of Buyer's or Parent's certificate of incorporation or by-laws or
other organizational documents. Except as set forth on Schedule 4.2, the
execution and delivery by Buyer or Parent of this Agreement and the other
agreements, documents and instruments contemplated hereby, and the consummation
by Buyer or Parent of the transactions in accordance with the terms hereof and
thereof, will not violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, lease,
contract or other agreement to which Buyer or Parent is a party, or by which
Buyer or Parent or any of its properties is bound, except, in each case, as
would not have a Material Adverse Effect.
SECTION 4.3. CONSENTS AND APPROVALS. Except as set forth on Schedule 4.3,
the execution, delivery and performance of this Agreement by NaviSite will not
require any consent, approval, permit, authorization or other action by, or
filing with or notification to, any Governmental Authority, except the
notification requirements of the HSR Act, if applicable.
SECTION 4.4. LITIGATION. As of the date of this Agreement, other than as
set forth in Parent's Public Filings (as defined in Section 4.6 hereof) or as
set forth on Schedule 4.4, there is no litigation, action, suit, proceeding,
inquiry, claim, arbitration or investigation pending or, to NaviSite's
knowledge, threatened in writing, against NaviSite, or any of its assets or
property or any directors or officers in their capacities as such or for which
NaviSite is obligated to indemnify a third party. NaviSite is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree or
any court or Governmental Authority or any arbitration ruling or any settlement
or similar agreement or written arrangement with ongoing payment obligations
relating to any dispute (or the resolution of a dispute) with any third party.
SECTION 4.5. BROKERS. NaviSite has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with this
Agreement or the transactions contemplated hereby.
SECTION 4.6. SECURITIES LAW MATTERS.
(a) Parent has timely filed with the Securities and Exchange
Commission (the "SEC") all material forms, statements, reports and
documents (the "PUBLIC FILINGS") required to be filed by it since January
1, 2003 under the Exchange Act, and the rules and regulations thereunder,
(a) all of which, as amended, if applicable, complied when filed in all
material respects with all applicable requirements of the appropriate act
and the rules and regulations thereunder, and (b) none of which, as
amended, if applicable, contained, when filed, any untrue statement of
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made and at the time they were
made, not misleading.
(b) Parent's reports, statements and documents filed by
Parent pursuant to the Exchange Act, and its rules and regulations, as
well as all filings and
32
documents incorporated by reference therein, have been made available to
the Company via the SEC's website at xxx.xxx.xxx or upon the specific
request by the Company.
(c) The Parent Shares, when issued in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and will be issued in compliance with applicable federal,
state and foreign securities laws and all requirements set forth in
contracts and when delivered by Parent to the Company pursuant to this
Agreement, will be free and clear of any and all Encumbrances, other than
Encumbrances resulting from this Agreement.
(d) The Notes when issued in accordance with this Agreement
will be duly authorized and validly issued in compliance with applicable
federal, state and foreign securities laws and all requirements set forth
in contracts, and when delivered by Parent to the Company pursuant to this
Agreement, will be free and clear of any and all Encumbrances, other than
Encumbrances resulting from this Agreement.
SECTION 4.7 .ABSENCE OF MATERIAL CHANGES. Since the date of the last
Public Filing by Parent, there has been no event which had or could reasonably
be expected to have a Material Adverse Effect on Parent, other than developments
generally in the industry in which Parent operates.
SECTION 4.8. CONDUCT OF BUSINESS. Except as set forth in its Public
Filings and since the date of the last Public Filing, NaviSite has not (i)
incurred any material obligation or liability (absolute or contingent) other
than in the ordinary course of business and in amounts consistent with past
practices; (ii) canceled, without payment in full, any material notes, loans or
other obligations receivable or other debts or claims held by it other than in
the ordinary course of business and in amounts consistent with past practices;
(iii) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected to
Lien any of its material properties, tangible or intangible, or rights under any
material contract, permit, license, franchise or other agreement; (iv) conducted
its business in a manner materially different from its business as conducted on
such date; or (v) declared, made or paid or set aside for payment any cash or
non-cash distribution on any shares of its capital stock. Except as disclosed in
its Public Filings, NaviSite owns, possesses or has obtained all governmental,
administrative and third-party licenses, permits, certificates, registrations,
approvals, consents and other authorizations necessary to own or lease (as the
case may be) and operate their properties, whether tangible or intangible, and
to conduct their business or operations as currently conducted, except such
licenses, permits, certificates, registrations, approvals, consents and
authorizations the failure of which to obtain would not have a Material Adverse
Effect on NaviSite.
SECTION 4.9. COMPLIANCE WITH LAWS. Neither Buyer nor Parent is in default
or violation of any Law applicable to it or by which any property or asset of
Buyer or Parent is bound, except for any such conflicts, defaults or violations
that would not, individually or in the aggregate, have a Material Adverse Effect
on Buyer or Parent. Neither Buyer nor Parent has received any written notice or
written communication from any Governmental Authority alleging noncompliance
with any applicable Law.
33
SECTION 4.10 FINANCIAL STATEMENTS. The financial statements of Parent and
the related notes contained in the Public Filings present fairly, in accordance
with generally accepted accounting principles (except as may be indicated in the
notes thereto and, in the case of unaudited quarterly financial statements, as
permitted by Regulation S-X under the Exchange Act), the consolidated financial
position of Parent as of the dates indicated and for the respective periods
indicated therein (subject in the case of unaudited statements to normal and
recurring year-end adjustments), and the results of its operations and cash
flows for the periods therein specified. Such financial statements (including
the related notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
therein specified, except as disclosed in the Public Filings.
SECTION 4.11 NASDAQ LISTING. Parent's common stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed on the Nasdaq SmallCap
Market. Parent is in compliance with the continued listing requirements of the
Nasdaq Marketplace Rules and has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
common stock under the Exchange Act or delisting the common stock from the
Nasdaq SmallCap Market other than in connection with a quotation of Parent's
common stock on the Nasdaq National Market or the American Stock Exchange.
Parent knows of no reason why the Parent Shares will not be eligible for listing
on Nasdaq.
SECTION 4.12 CONTRACTS AND COMMITMENTS OF NAVISITE. Except as set forth on
Schedule 4.12, all material contracts, agreements and instruments of NaviSite
are valid and are in full force and effect and constitute legal, valid and
binding obligations of NaviSite and, to the knowledge of NaviSite, of the other
parties thereto, and are enforceable in accordance with their respective terms
subject, in each case, to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally. NaviSite has no knowledge of, and
has not received, any written notice regarding termination of any such material
contracts, agreements or instruments. Neither NaviSite nor, to the knowledge of
NaviSite, is any other party in material default in complying with any
provisions of any such material contract, agreement or instrument, and to the
knowledge of NaviSite, no condition or event or fact exists which, with notice,
lapse of time or both, could constitute a material default thereunder on the
part of NaviSite.
Whenever a representation or warranty made by Buyer or Parent hereof
refers to the "knowledge" (or words of similar import), such knowledge shall be
deemed to refer to the actual knowledge which the members of the board of
directors, the executive officers and other persons listed on Schedule 4.12
making such representation and warranty possess.
ARTICLE V - CERTAIN COVENANTS OF THE PARTIES
SECTION 5.1. CONDUCT OF BUSINESS PRIOR TO CLOSING. Surebridge agrees that,
between the date hereof and the Closing Date, the Company shall continue to
operate in the ordinary course of business, consistent with past practices,
except as described in Schedule 5.1 as otherwise contemplated by this Agreement.
In furtherance of the foregoing, except with the prior written consent of
Parent, which consent will not be unreasonably withheld:
34
(a) The Company (i) shall use good faith reasonable efforts
to (x) preserve intact its current business organization, (y) keep
available the services of its current officers and employees and (z)
maintain its relations and goodwill with all suppliers, customers,
landlords, creditors, employees and other persons having business
relationships with the Company, and (ii) shall pay its debts, taxes and
other liabilities when due and perform other material obligations when
due, except in the ordinary course of business consistent with past
practices or if the Company is disputing the liability or obligation in
good faith;
(b) The Company shall keep in full force all insurance
policies;
(c) The Company shall not declare, accrue (other than
regularly accruing dividends in the ordinary course), make, set aside or
pay any dividend (whether payable in cash, stock, property or a
combination thereof) or make any other distribution in respect of any
shares of capital stock, shall not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities and shall not
enter into any agreement with respect to the voting of its capital stock;
(d) The Company shall not sell, issue or authorize the
issuance of (i) any capital stock or other security or (ii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) None of Surebridge or any Subsidiary shall amend or
permit the adoption of any amendment to such party's certificate of
incorporation or bylaws or operating agreement or other such
organizational documents, or effect any recapitalization, reclassification
of shares or membership interests, stock split, reverse stock split or
similar transaction, other than those amendments listed on Schedule 5.1;
(f) The Company shall not form any subsidiary or acquire any
equity interest or other interest in any other entity;
(g) The Company shall not enter into any contract which
contains any non-compete or exclusivity provisions with respect to any
line of business or geographic area with respect to the Company or any of
its Subsidiaries or which restricts the conduct of any line of business by
the Company or any of its Subsidiaries or any geographic area in which the
Company or any of its Subsidiaries may conduct business, or which
otherwise restricts operation of the Company's business, in each case in
any material respect, in each case other than non-compete agreements
signed by employees incident to their employment by the Company or any of
its Subsidiaries;
(h) The Company shall not make or approve any capital
expenditure in excess of $50,000, except for such capital expenditures
included in and contemplated by the Company's budget as set forth in
Schedule 5.1(h), which has been approved by the Company's board of
directors;
(i) The Company shall not (i) enter into, or permit any of
the assets owned or used by it to become bound by, any (A) contract other
than in the ordinary
35
course of business or (B) Material Contract unless it is a customer
contract, provided that the Company has provided notice via email to Xxx
Xxxxx and one or more designated representatives of Parent at least one
business day prior to execution of such customer contract, (ii) amend,
cancel or prematurely terminate, or waive any material right or remedy
under, or request any material change in, any Material Contract other than
in the ordinary course of business consistent with past practice and in
the case of a Material Contract that is a customer contract, if the
Company has provided notice via email to Xxx Xxxxx and one or more
designated representatives of Parent at least one business day prior to
execution.
(j) The Company shall not waive, release, assign, settle or
compromise any material claims, or any material litigation or arbitration;
(k) The Company shall not (i) acquire, lease or license any
right or other asset from any other person, (ii) sell or otherwise dispose
of or encumber, or lease or license, any right or other asset to any other
person, or (iii) waive or relinquish any right, except for assets
acquired, leased, licensed or disposed of by the Company in the ordinary
course of business consistent with past practice or pursuant to existing
Material Contracts. The Company shall not modify, amend or terminate, or
waive, release or assign any material rights or claims with respect to any
confidentiality or standstill agreement to which the Company is a party;
(l) Other than amounts that may be borrowed under the
Company's existing credit agreement with Silicon Valley Bank (subject to
borrowing limits as of the date hereof), the Company shall not incur or
guarantee any other indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person for
borrowed money;
(m) The Company shall not (i) establish, adopt or amend any
employee benefit plan, (ii) pay any bonus (except for the payment of
bonuses listed on Schedule 5.1(m) on the date hereof or bonuses to be paid
in connection with the transactions contemplated by this Agreement as in
existence as of the date hereof and previously made available to NaviSite)
or make any profit-sharing payment, cash incentive payment or similar
payment to, or increase the amount of the wages, salary, commissions,
benefits or other compensation or remuneration payable or to become
payable to, any of its directors, officers, employees or consultant, (iii)
grant any rights to severance or termination pay to, or enter into any
agreement to provide severance benefits with, any director, officer or
other employee of the Company, (iv) establish, adopt, enter into of or
amend of any thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee, except for the issuance
of new stock options to new, non-executive employees in the ordinary
course of business consistent with past practice and except for the
termination of existing stock options, or to the extent required by
applicable Law, or (v) take any affirmative action to amend or waive any
performance or vesting criteria or accelerate vesting, exercisability or
funding under any Employee Plans;
36
(n) The Company shall not change any of its methods,
procedures, policies or principles of accounting or accounting practices;
(o) The Company shall not fail to be in material compliance
with the terms of instruments evidencing indebtedness owed by the Company;
(p) The Company shall not write up, write down or write off
the book value of any assets;
(q) The Company shall not make any material tax election or
settlement or compromise of any liability for Taxes, if such election,
settlement or compromise would have the effect of increasing the Tax
liability of Surebridge or any of its Subsidiaries after the Closing Date
or decreasing any Tax attribute of Surebridge or any Subsidiary existing
on the Closing Date;
(r) The Company shall not (A) pre-pay any debt, or pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice and in accordance with
their terms, or (B) fail to collect notes or accounts receivable except in
the ordinary course of business consistent with past practice or enter
into a factoring or discounting arrangement with a third party with
respect to accounts receivable; and
(s) The Company shall not enter into any agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions.
SECTION 5.2. ACCESS TO INFORMATION.
(a) Without undue disruption of its business, between the
date of this Agreement and the Closing Date, the Company shall give
NaviSite and its representatives reasonable access upon reasonable notice
and during times mutually convenient to NaviSite and senior management of
the Company to the facilities, properties, employees, books, and records
of the Company as from time to time may be reasonably requested.
Notwithstanding the foregoing, no information or knowledge obtained by
NaviSite during the course of any investigation conducted by NaviSite
pursuant to this Section 5.2(a) shall: (i) affect or be deemed to modify
in any respect any of the representations or warranties of the Company set
forth in this Agreement (or in any certificate, instrument or other
document delivered by the Company to NaviSite in connection with the
transactions contemplated hereby), or the conditions to the obligations of
the parties to consummate the transactions contemplated hereby in
accordance with the terms and conditions hereof, or (ii) be deemed to
amend or supplement the Company Disclosure Schedule, prevent or cure any
misrepresentations, breach of warranty or breach of covenant by the
Company.
(b) Any such investigation by NaviSite shall not
unreasonably interfere with any of the businesses or operations of the
Company. NaviSite shall not, prior to the Closing Date, have any contact
whatsoever with respect to the Company or with respect to the transactions
contemplated by this Agreement with any partner, lender,
37
ground lessor, vendor, supplier, employee or consultant of the Company,
except in consultation with the Company and then only with the express
prior approval of the Company, which approval shall not be unreasonably
withheld. All requests by NaviSite for access or information shall be
submitted or directed exclusively to an individual or individuals to be
designated by the Company.
SECTION 5.3. CONFIDENTIALITY. The parties shall adhere to the terms and
conditions of that certain Mutual Confidentiality Agreement dated November 12,
2003 by and between Surebridge and Parent (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.4. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) The Company and NaviSite shall as soon as reasonably
practicable use their good faith commercially reasonable efforts to obtain
their respective authorizations, consents, orders, waivers and approvals
and provide those notices necessary for their execution and delivery of,
and the performance of their obligations pursuant to, this Agreement. The
Company shall give any notices to third parties and use all commercially
reasonable efforts to obtain any third party consents required to be
listed on Schedules 2.4 or 2.7. In the event that either party shall fail
to obtain any third party consent described in the first sentence of this
Section 5.4, such party shall use reasonable efforts, and shall take
reasonable actions to minimize any adverse effect upon NaviSite (and
Surebridge, upon or after the Closing), and their respective businesses
resulting, or which could reasonably be expected to result after the
Closing, from the failure to obtain such consent.
(b) If required by the HSR Act and if the appropriate filing
of a Pre-Merger Notification and Report Form pursuant to the HSR Act has
not been filed prior to the date hereof, each party hereto agrees to make
an appropriate filing of a Pre-Merger Notification and Report Form with
respect to the transactions contemplated by this Agreement as soon as
commercially practicable and to supply promptly any additional information
and documentary material that may be requested pursuant to the HSR Act.
The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals and
shall promptly respond to any requests for additional information from any
Governmental Authority or filings in respect thereof. Notwithstanding
anything to the contrary herein, nothing in this Section 5.4 shall require
NaviSite or the Company to agree to (i) the imposition of conditions, (ii)
the requirement of divestiture of assets or property or (iii) the
requirement of expenditure of money by NaviSite or the Company to a third
party in exchange for any such consent. NaviSite shall pay all filing and
related fees in connection with any such filings which must be made by any
of the parties under the HSR Act.
(c) NaviSite shall use its good faith commercially
reasonable efforts to assist and cooperate with the Company, at the
Company's request, in obtaining the consents of third parties required to
be listed in Schedules 2.4 or 2.7, including (i) providing to such third
parties such financial statements and other financial information as such
third parties may reasonably request, and (ii) executing agreements to
effect the assumption of such agreements on or before the Closing Date.
NaviSite's
38
exercise of commercially reasonable efforts pursuant to the previous
sentence shall not require NaviSite to pay any amounts to any third party.
SECTION 5.5. FURTHER ACTION. Each of the parties hereto shall use its
respective commercially reasonable efforts to take or cause to be taken all
appropriate action, do or cause to be done all things necessary, proper or
advisable, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement. Surebridge agrees
that it shall use its good faith commercially reasonable efforts to assist and
cooperate with Parent in the preparation of any registration statement, proxy
statement, offering memoranda, information statement, filing with the SEC or
document prepared for investors or stockholders, and shall furnish to Parent all
information reasonably required with respect to the transactions contemplated
hereby or other transactions not contemplated by this Agreement, including using
reasonable efforts to cause to be delivered to Parent (i) the Company's
independent public accountants' consent to include the Company's financial
statements in any filing, prospectus, information statement or similar document
of Parent; and (ii) comfort letters from the Company's independent public
accountant at such times and on such dates and in form and substance reasonably
satisfactory to Parent. Notwithstanding any confidentiality obligations pursuant
to Section 5.3 or the Confidentiality Agreement, prior to Closing and without
the Company's prior written consent, NaviSite shall be permitted to use the
Company's confidential information (i) in any documents described in this
Section 5.5 to the extent that such information would reasonably be required to
be disclosed in a registration statement on Form S-4; provided, however, that
NaviSite shall notify the Company at least two days prior to using such
information and provide a copy of the documents, or drafts of the documents, in
which such confidential information is to be used or disclosed or (ii) in
discussions or otherwise in connection with any potential merger or acquisition
transaction if the recipient of such information executes a confidentiality
agreement with Parent under which they agree to maintain the confidentiality of
such information.
SECTION 5.6. PRESS RELEASES. The parties agree to issue Press Releases in
the form attached as Exhibit E promptly following execution of this Agreement.
The parties hereto will not, and will cause each of their Affiliates and
representatives not to issue or cause the publication of any other press release
or other public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of all of the parties
hereto which consent shall not be unreasonably withheld; provided, however, that
Parent may, without the prior consent of the other parties hereto, issue or
cause publication of any such press release or public announcement to the extent
that Parent, in good faith, reasonably determines, after consultation with
outside legal counsel, such action to be required by Law or by the rules of any
applicable self-regulatory organization, in which event Parent will use its
commercially reasonable efforts to allow Surebridge reasonable time to comment
on such press release or public announcement in advance of its issuance.
SECTION 5.7. NO SOLICITATION.
(a) Except as otherwise provided herein, unless and until
this Agreement shall have been terminated in accordance with its terms,
Surebridge agrees and covenants that the Company shall not, directly or
indirectly, initiate, solicit or
39
encourage any inquiries, participate in any discussions or negotiations,
or the making or implementation of any proposal or offer with respect to a
merger, acquisition, or similar transaction involving the purchase of the
Company, all or substantially all of the assets of the Company, or the
capital stock of the Company (an "ACQUISITION PROPOSAL"). The Company
shall, as promptly as practicable (and in no event later than 48 hours
after receipt thereof), advise NaviSite of any inquiry received by it
relating to any potential Acquisition Proposal and of the material terms
of any proposal or inquiry, including the identity of the person and its
affiliates making the same, that it may receive in respect of any such
potential Acquisition Proposal, or of any information requested from it or
of any negotiations or discussions being sought to be initiated with it.
(b) From the date of this Agreement until the earlier of the
Closing or one year from the date of this Agreement, NaviSite shall not,
and shall ensure that its directors, officers, employees, partners,
agents, Affiliates, advisors or representatives shall not, directly or
indirectly, (i) solicit for employment or employ any officer, employee or
consultant of the Company, (ii) encourage, induce or attempt to induce any
officer, employee or consultant of the Company to terminate his or her
employment or consulting relationship with the Company, (iii) interfere
with the business or operations of the Company, or (iv) take or fail to
take any actions with the purpose of adversely affecting the Company's
business relationships with its customers and suppliers or goodwill.
SECTION 5.8. NOTICE OF BREACHES.
(a) From the date of this Agreement until the Closing, the
Company shall promptly deliver to NaviSite supplemental information known
to the Company concerning events or circumstances occurring subsequent to
the date hereof which would render any representation, warranty or
statement made by the Company under this Agreement, inaccurate or
incomplete in any material respect at any time after the date of this
Agreement until the Closing. No such supplemental information shall be
deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty or statement in
this Agreement or any Schedule hereto.
(b) From the date of this Agreement until the Closing,
NaviSite shall promptly deliver to the Company supplemental information
known to NaviSite concerning events or circumstances occurring subsequent
to the date hereof which would render any representation, warranty or
statement made by NaviSite under this Agreement, inaccurate or incomplete
in any material respect at any time after the date of this Agreement until
the Closing. No such supplemental information shall be deemed to avoid or
cure any misrepresentation or breach of warranty or constitute an
amendment of any representation, warranty or statement in this Agreement
or any Schedule hereto.
(c) From the date of this Agreement until the Closing, each
party shall promptly notify the other in writing of any pending or, to the
knowledge of such party, threatened action, suit, arbitration or other
proceeding or investigation by any Governmental Authority or any other
person (A) challenging or seeking material
40
damages in connection with the transactions contemplated hereby or (B)
seeking to restrain or prohibit the consummation of the transactions
contemplated hereby or otherwise limit the right of NaviSite to own or
operate all or any portion of the businesses or assets of Surebridge or
any of its Subsidiaries, which in either case would reasonably be expected
to result in a Material Adverse Effect prior to or after the Closing.
SECTION 5.9. CONVEYANCE TAXES; COSTS. NaviSite shall be liable for and
shall hold the Company harmless against any transfer, value added, excise, stock
transfer, stamp, recording, registration and any similar taxes that become
payable in connection with the acquisition by Buyer of the Purchased Assets and
other transactions contemplated hereby, and the applicable parties shall file
such applications and documents as shall permit any such tax to be assessed and
paid on or prior to the Closing Date in accordance with any available pre-sale
filing procedure.
SECTION 5.10 BOOKS AND RECORDS. NaviSite shall, until the seventh
anniversary of the Closing Date, retain all books, records and other documents
pertaining to the Purchased Assets or business of Surebridge and each of its
Subsidiaries transferred to NaviSite on the Closing Date and to make the same
available for inspection and copying by the Company or any representative of the
Company at the expense of the Company during the normal business hours of
NaviSite upon reasonable request and upon reasonable notice.
SECTION 5.11 REGISTRATION AND DISTRIBUTION OF PARENT SHARES.
(a) In connection with the execution of this Agreement,
Parent and the Company shall execute and deliver the registration rights
agreement in the form attached hereto as Exhibit F (the "REGISTRATION
RIGHTS AGREEMENT").
(b) Except with the prior written consent of Parent, which
consent may be granted or withheld in the sole discretion of Parent,
Surebridge shall not sell, transfer, assign, convey, encumber, gift,
distribute or otherwise dispose ("TRANSFER") of the Parent Shares, the
Notes or the Conversion Shares for a period of one (1) year after the
Closing Date (the "LOCKUP"); provided, however, if NaviSite does not make
payments of at least Nine Million Five Hundred Thousand Dollars
($9,500,000) of the aggregate outstanding principal of the Primary Note
and the Escrow Note, collectively, within 180 days of the Closing Date or
an event of default occurs under either such Note, the Lockup shall become
null and void solely with respect to restrictions on sales and Surebridge
may sell the Parent Shares and/or any shares issuable upon conversion of
the Notes at any time thereafter. In addition, Surebridge may Transfer the
Parent Shares, the Primary Note, the Escrow Note and/or any shares
issuable upon conversion of the Notes without restriction by this Section
5.11 at any time after the first anniversary of the Closing Date.
SECTION 5.12 APPROVAL OF TRANSACTIONS; FIDUCIARY OUT.
(a) Surebridge shall use its reasonable best efforts to
obtain, as promptly as practicable, all necessary approvals, either at a
special meeting of shareholders or pursuant to a written shareholder
consent executed by Surebridge shareholders representing greater than 50%
of the votes required to approve this Agreement and the transactions
contemplated hereby, all in accordance with the
41
applicable requirements of the Delaware General Corporate Law. In
connection with such special meeting of shareholders or written
shareholder consent, Surebridge shall provide to its shareholders the
recommendation of its directors that the shareholders vote in favor of the
adoption of this Agreement, subject to the provisions of Section 5.12(b)
below. Copies of any written consent of Surebridge's shareholders pursuant
to Section 228 of the DGCL shall be delivered to NaviSite with a
certificate of Surebridge's secretary certifying as to the accuracy of the
written consent and that the written consent has been received by
Surebridge and included in the books and records of Surebridge.
(b) If, prior to the Closing and prior to obtaining the
necessary vote of Surebridge's stockholders approving this Agreement and
the transactions contemplated hereby, (i) Surebridge's directors shall
determine in good faith by a majority vote that any written proposal from
a third party for a transaction to purchase all or substantially all of
the stock or assets of the Company received after the date of this
Agreement is more favorable to Surebridge's shareholders than the
transactions contemplated by this Agreement (including any adjustment to
the terms and conditions of such transaction proposed in writing by
NaviSite in response to such proposed transaction) and is in the best
interest of Surebridge's shareholders (a "SUPERIOR PROPOSAL"), and (ii)
Surebridge has received advice from legal counsel that failure to enter
into such a competing transaction would constitute a breach of
Surebridge's directors' fiduciary duties, then Surebridge's directors may
withdraw their recommendation to vote in favor of this Agreement and may
terminate this Agreement. Surebridge may not terminate this Agreement
pursuant to this Section 5.12(b) once its stockholders have approved this
Agreement and the transactions contemplated hereby, whether by written
consent or otherwise.
SECTION 5.13 DELIVERY OF FINANCIAL STATEMENTS. For each fiscal quarter
ending on or after March 31, 2004 and on or before the date that is 10 business
days prior to the Closing Date, Surebridge shall deliver to NaviSite an
unaudited comparative consolidated balance sheet at the last day of such fiscal
quarter and unaudited comparative consolidated statements of income and cash
flows of the Company, for such quarter and the year-to-date period then ended
(including for the comparable quarter and the comparable year-to-date periods
for the prior year), and for each monthly period ending after the date hereof,
Surebridge shall deliver to NaviSite an unaudited consolidated balance sheet and
the related unaudited consolidated statements of income and cash flows within 20
days of the end of such monthly period (each, an "UNAUDITED COMPANY INTERIM
FINANCIAL STATEMENTS").
SECTION 5.14 FIRPTA CERTIFICATION. Prior to the Closing Date, Surebridge
shall deliver to NaviSite an affidavit from the Company, also delivered to the
Internal Revenue Service, that the Company is not, and has not been, a "U.S.
real property holding corporation" in accordance with the Treasury Regulations
under Section 897 and 1445 of the Code, so that Buyer is exempt from withholding
any portion of the Purchase Price.
SECTION 5.15 USE OF NAME. Following the Closing, NaviSite shall have the
right to use the name "Surebridge, Inc." and any other derivations thereof, and
Surebridge agrees to take all actions reasonable necessary, including changing
the legal name of Surebridge to a name that is
42
not similar to such name within 30 days after the Closing, to allow NaviSite to
exercise such right.
SECTION 5.16 ENDORSEMENT OF CHECKS, ETC. Surebridge hereby authorizes
NaviSite following the Closing to endorse for deposit only its name on and
collect for NaviSite's account any checks received in payment of any accounts
included in the Purchased Assets, and any refunds of deposits, prepaid expenses
and similar amounts included in the Purchased Assets. If any amounts due to
NaviSite are received by Surebridge, Surebridge will turn the same over to
NaviSite. Surebridge will hold such funds in trust exclusively for the benefit
of NaviSite, and Surebridge will promptly deliver such funds to NaviSite.
SECTION 5.17 RULE 145. From the date hereof until the first anniversary of
the Closing Date, neither Surebridge nor its Board of Directors or similar
representatives of Surebridge shall adopt resolutions relative to a plan or
agreement providing for dissolution of the Surebridge entity or for the pro rata
or similar distribution of the Parent Shares or the Notes to the Surebridge
shareholders within the meaning of Rule 145(a)(3)(iii).
SECTION 5.18 ISSUANCE OF PARENT SHARES. Promptly following the date
hereof, Parent shall use its best efforts to obtain the approval of its
stockholders by written consent pursuant to, and in compliance with, Section 228
of the DGCL (such written consent to be effective in accordance with Regulation
14C of the Exchange Act) of the issuance of shares of Parent's common stock (i)
representing 20% or more of the outstanding shares of Parent's common stock in
the transactions contemplated hereby, including as a result of the issuance by
Parent to Surebridge of the Parent Shares and upon conversion of the Notes, as
required by NASD Rule 4350(i)(1)(C), and (ii) which may result in a change of
control of Parent, as required by NASD Rule 4350(i)(1)(B). For clarity purposes
only, it shall not be a condition to Closing that Parent obtain an effective
vote of its stockholders pursuant to the requirements of this Section 5.18 or
otherwise. Surebridge acknowledges and understands that the Notes shall not and
may not be convertible into an aggregate number of shares of Parent's common
stock that is greater than or equal to (i) 19.9% of that number of shares of
Parent's common stock outstanding immediately prior to the Closing less (ii)
3,000,000 shares (the "SHARE CAP") unless and until Parent has obtained the
necessary and effective stockholder approval of the matters described in this
Section 5.18. Notwithstanding the previous sentence, in the event Parent does
not obtain the requisite stockholder approvals, Surebridge shall be entitled to
damages hereunder.
SECTION 5.19 CONSENTS. After the Closing Date, Surebridge and NaviSite
will cooperate and will each use commercially reasonable efforts to obtain any
consents listed on Schedules 2.4 and 2.7 that are not obtained prior to the
Closing Date. Notwithstanding anything to the contrary herein, this Agreement
shall not operate to assign any agreement, lease, contract, license, commitment,
understanding or undertaking, or any claim, right or benefit arising thereunder
or resulting therefrom, if an attempted assignment thereof, without the consent
of another party thereto, would constitute a breach, default or other
contravention thereof or in any way adversely affect the rights of Surebridge or
NaviSite thereunder. In the event that a consent required to assign any such
agreement, lease, contract, license, commitment, understanding or undertaking is
not obtained on or prior to the Closing Date or if an asset or assets are
otherwise not assignable hereunder (each such asset a "NON-TRANSFERABLE ASSET"),
then, from and after the Closing and,
43
with respect to each such Non-Transferable Asset, until the earlier to occur of
(i) such time as such Non-Transferable Asset shall be properly and lawfully
transferred or assigned to NaviSite or (ii) such time as the material benefits
intended to be transferred or assigned to NaviSite have been procured by
alternative means pursuant hereto, (A) the Non-Transferable Assets shall be held
by Surebridge in trust exclusively for the benefit of NaviSite to the extent
permitted under applicable Law, and Surebridge shall use commercially reasonable
efforts to perform and discharge all of the liabilities and other obligations of
Surebridge under the terms of all such Non-Transferable Assets in effect as of
the Closing at NaviSite's expense and (B) Surebridge shall use commercially
reasonable efforts to provide or cause to be provided to NaviSite all of the
benefits of Surebridge under the terms of such Non-Transferable Assets in effect
as of the Closing, including by promptly paying to NaviSite any monies received
by Surebridge from and after the Closing under such Non-Transferable Assets
attributable thereto. In the event that Surebridge is unable to obtain any
consent from any person under any Non-Transferable Asset after the Closing Date
through the use of commercially reasonable efforts, NaviSite shall be entitled
to procure the material rights and benefits of Surebridge under the terms of
such Non-Transferable Asset in effect as of the Closing by alternative means,
including, without limitation, by entering into new contracts with third persons
or otherwise; provided, however, that in the event that NaviSite shall exercise
its rights under this Section 5.19 in respect of any Non-Transferable Asset, the
obligations of Surebridge and NaviSite under this Section 5.19 in respect of
such Non-Transferable Asset shall thereupon cease and expire.
SECTION 5.20 CERTAIN TAX MATTERS.
(a) NaviSite shall prepare and timely file all Tax Returns
required to be filed on or after the Closing Date with respect to the
Purchased Assets, if any, and shall duly and timely pay all such Taxes
shown to be due on such Tax Returns. NaviSite's preparation of any such
Tax Returns shall be subject to Surebridge's approval for those periods
prior to the Closing, which approval shall not be unreasonably withheld.
NaviSite shall make such Tax Returns available for Surebridge's review and
approval no later than fifteen (15) business days prior to the due date
for filing such Tax Return.
(b) Each of NaviSite and Surebridge shall provide the other
party with such assistance as may reasonably be requested by the other
party in connection with the preparation of any Tax Return, any audit or
other examination by any taxing authority, or any judicial or
administrative proceedings related to liability for Taxes, and each will
retain and provide the requesting party with any records or information
which may be relevant to such return, audit or examination, proceedings or
determination. Any information obtained pursuant to this Section 5.20(b)
or pursuant to any other Section hereof providing for the sharing of
information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the parties hereto.
SECTION 5.21 NAVISITE DEBT FINANCING. From the date of this Agreement
through the Closing Date, NaviSite shall maintain in full force and effect,
without impairment of borrowing limits, or any limitation on NaviSite's rights
thereunder whatsoever, that certain Accounts Receivable Financing Agreement with
Silicon Valley Bank dated May 27, 2003, as amended, and NaviSite shall not take,
or fail to take, any action, or permit the occurrence of any event of
44
default, or any event that, with notice or passage of time would constitute, an
event of default under such agreement.
SECTION 5.22. NOTE PAYMENT. For a period of one year following the
Closing, NaviSite shall, within two business days of receiving a written request
from Surebridge, pay to Surebridge in immediately available funds such
additional amounts up to $800,000 in the aggregate, which Surebridge may request
in order to meet Surebridge's tax payment obligations in connection with the
sale of its assets pursuant to this Agreement that Surebridge substantiates in
writing. Payments pursuant to this Section 5.22 shall be deemed a required
prepayment of the Primary Note and shall reduce the outstanding principal
outstanding thereunder in accordance with its terms. Notwithstanding the
foregoing, NaviSite shall not be required to prepay such sums if NaviSite has
paid at least $1,300,000 in aggregate principal amount of the Primary Note prior
to receipt of the request for a prepayment hereunder.
ARTICLE VI - EMPLOYEE MATTERS
SECTION 6.1. EMPLOYEES; BENEFITS.
(a) NaviSite shall offer employment effective as of the
Closing Date to some or all of the employees of the Company in NaviSite's
sole discretion on terms and conditions, including provision of salary and
benefits, which are comparable to, in the aggregate, similarly situated
employees of NaviSite. NaviSite shall make its employment offers at least
three (3) business days prior to the Closing Date and shall inform the
Company of the employees who accept such offer of employment (the
"RETAINED EMPLOYEES"). The Company shall cooperate with NaviSite's
reasonable requests for access to the employees of the Company for
purposes of making any employment offers. In this regard, the Company
agrees to provide NaviSite, as soon as practical after the date hereof, to
the extent not already provided, a true and complete list of all employees
of the Company together with their respective names, positions, dates of
hire and current salaries.
(b) From and after the Closing Date, NaviSite shall provide
the Retained Employees with benefits (including, without limitation,
retirement and welfare benefits) that are substantially comparable, in the
aggregate, to the benefits provided to NaviSite's existing employees.
(c) From and after the Closing Date, NaviSite shall honor in
accordance with their terms those severance agreements between Surebridge
or any of its Subsidiaries, on the one hand, and their employees, on the
other hand, in effect as of the date hereof and listed on Schedule 6.1(e).
(d) NaviSite shall not, at any time prior to 91 days after
the Closing Date, effect a "plant closing" or "mass layoff", as those
terms are defined in the Worker Adjustment and Retraining Notification Act
of 1988, as amended (the "WARN ACT"), or take any other action affecting
in whole or in part any site of employment of NaviSite which could result
in any liability to the Company without fully complying with all of the
45
requirements of the WARN Act and any other applicable foreign, federal,
state or other law (a "WARN ACT VIOLATION"); provided, however, if
NaviSite engages in a WARN Act Violation, it shall indemnify and hold
harmless Surebridge against and in respect of any damages, claims, losses,
expenses, costs, obligations or liabilities arising from such WARN Act
Violation.
(e) At the Closing, NaviSite shall pay to the Company (upon
receipt of a full waiver and release (which release shall also include
NaviSite, its Affiliates and assigns as released parties to the same
extent as the Company)) an amount equal to the final pay, severance pay
and accrued but unused vacation time and any other contractual or ordinary
course severance payments for employees of the Company who are not offered
employment with NaviSite or who are offered employment but do not become
Retained Employees (the "NON-RETAINED EMPLOYEES"), in accordance with (i)
applicable law and (ii) the greater of that amount payable under (x) the
Company's severance policy set forth on Schedule 6.1(e) and (y) the
severance agreements set forth on Schedule 6.1(e). The Company shall not
terminate any Retained Employee or Non-Retained Employee, other than those
employees listed on Schedule 6.1(e)(A), without NavSite's prior written
consent. The Company shall be responsible for providing any required or
desired notices and shall take any and all other such necessary or
appropriate actions to terminate any Retained Employee or any Non-Retained
Employee upon NaviSite's request to so terminate. At all times after the
date hereof and until the Closing, the Company shall use its good faith
efforts to cooperate with NaviSite and ensure that relations with its
employees, especially the Retained Employees, remain and continue to be
good, and that the services of its employees continue without
interruption. In addition, with respect to any Non-Retained Employee who
receives an offer of employment from NaviSite but does not accept such
offer, at NaviSite's request, the Company shall enter into a transition
services agreement with NaviSite pursuant to which the Company shall make
available to NaviSite, if permitted by law, at NaviSite's sole cost and
expense, the services of those Non-Retained Employees whose continued
service NaviSite has requested for a period of up to 12 months following
the Closing. Any subsequent terminations by the Company of such employees
shall be at NaviSite's full cost and expense. The Company agrees that it
will not, without the prior written consent of NaviSite, increase or
decrease any compensation (including salary, wages, bonuses or
commissions) or amend or modify any severance or bonus agreements that may
be paid or payable to any Non-Retained Employee. It being understood that
nothing in the forgoing shall require the Company to keep in place any
benefit programs or plans. NaviSite acknowledges that following Closing,
the Company is not expected to have any employees other than those who may
be retained at NaviSite's request hereunder, and that the full cost and
expense associated with retaining such employees will be borne by
NaviSite. Further, NaviSite shall indemnify and hold harmless the Company,
its directors, officers, shareholders and their affiliates against any
losses, liabilities, damages or expenses, including legal fees, to which
the Company may become subject in connection with providing the forgoing
transition services, but only to the extent the Company was neither
grossly negligent nor engaged in willful malfeasance. In the event
NaviSite shall fail to pay any amounts due to the Company under this
Section 6.1(e)
46
within ten (10) days of such amount being due, the Company shall be
immediately relieved of all obligations under this Section 6.1(e).
(f) NaviSite shall pay any costs, including termination
fees, required to be paid upon the termination of any Employee Plan. In
the event Surebridge receives any refund upon the termination of an
Employee Plan, Surebridge shall promptly pay NaviSite the amount of such
refund.
SECTION 6.2. OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) The Company and NaviSite agree that all rights to
exculpation and indemnification existing in favor of, and all limitations
on the personal liability of, the directors, officers, employees of the
Company ("INDEMNIFIED PERSONS") provided for in Surebridge's Charter and
by-laws and the organizational documents of each Subsidiary, as
applicable, as in effect as of the date hereof with respect to matters
occurring prior to and through the Closing, and specifically including the
transactions contemplated hereby, shall continue in full force and effect
for a period of six (6) years from the Closing; provided, however, that
all rights to indemnification in respect of any claims (each a "CLAIM")
asserted or made within such period shall continue until the disposition
of such Claim. Following the Closing, NaviSite will indemnify and hold
harmless the Indemnified Persons with respect to acts or omissions
occurring prior to and through the Closing to the same extent that
Surebridge would have such obligations pursuant to its Charter or by-laws
or pursuant to applicable Law, and NaviSite shall advance expenses to each
such Indemnified Person in connection with any proceeding involving such
Indemnified Person to the fullest extent so permitted upon receipt of any
undertaking required by applicable law or the Charter or by-laws, in each
case as in effect on the date hereof; provided that such indemnification
shall be subject to any limitation imposed from time to time under
applicable Law for any act of fraud or any international or willful act or
omission in bad faith. Following the Closing, NaviSite shall not, and
shall not permit any former Surebridge Subsidiary to amend or modify its
Charter or by-laws or other organizational documents, as applicable,
except as required by applicable Law, if the effect of such amendment or
modification would be to lessen or otherwise adversely affect the
indemnification rights of such Indemnified Persons as provided therein,
and NaviSite shall advance expenses to each such Indemnified Person in
connection with any proceeding involving such Indemnified Person to the
fullest extent so permitted upon receipt of any undertaking required by
Law or in the Charter or by-laws of the organizational documents of the
former Surebridge Subsidiaries, as applicable. Similarly, following the
Closing, Surebridge shall not amend or modify its Charter or by-laws or
other organizational documents, as applicable, except as required by
applicable law, if the effect of such amendment or modification would be
to lessen or otherwise adversely affect the indemnification rights of such
Indemnified Persons as provided therein.
(b) Prior to the Closing, Surebridge shall be permitted to
purchase an extended reporting period endorsement under Surebridge's
existing directors' and officers' liability insurance coverage for the
Surebridge's directors and officers in a form acceptable to Surebridge
which shall provide such directors and officers with coverage
47
for six (6) years following the Closing of not less than the existing
coverage under, and have other terms not materially less favorable to, the
insured persons than the directors' and officers' liability insurance
coverage presently maintained by Surebridge; provided, however, that
Surebridge shall not pay or agree to pay a premium for such insurance in
excess of $90,000. This Section 6.2 is intended to benefit each of the
Indemnified Persons and their respective heirs and personal
representatives, each whom shall be entitled to enforce the provisions
hereof.
ARTICLE VII - CONDITIONS TO CLOSING
SECTION 7.1. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the transactions contemplated by this Agreement for
the Closing shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied
with by Buyer or Parent on or before the Closing shall have been complied
with in all material respects, and the Company shall have received a
certificate of each of Buyer and Parent to such effect signed by a duly
authorized officer of Buyer or Parent, as applicable.
(b) The representations and warranties of Buyer and Parent
contained in this Agreement that are qualified as to materiality,
"Material Adverse Effect" or other words of similar effect shall be true
and correct in all respects, and all other representations and warranties
of Parent and Buyer contained in this Agreement shall be true and correct
in all material respects, in each case as of the date of this Agreement
and as of the time of Closing, with the same force and effect as though
such representations and warranties had been made on and as of time of
Closing (except for representations and warranties that are made as of a
specified date or time, which shall be true and correct only as of such
specific date or time) and the Company shall have received a certificate
to such effect signed by an authorized officer of Parent.
(c) Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions to be consummated at the Closing
shall have expired or been terminated.
(d) No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and has the effect
of making the transactions contemplated by this Agreement for the Closing
illegal or otherwise restraining or prohibiting consummation of such
transactions.
(e) NaviSite shall have received the authorizations, orders,
approvals and consents of Governmental Authorities and material third
parties described in Schedule 4.3, if any.
48
(f) This Agreement and the transactions contemplated hereby
shall have been approved by the holders of at least fifty percent (50%) of
the voting stock of Company, plus the requisite approval of any
shareholders holding capital stock that have separate class or series vote
with respect to the transactions contemplated hereby.
(g) Parent shall have made a preliminary filing with the SEC
under Regulation 14C of the Exchange Act in accordance with Section 5.18.
(h) Buyer shall have delivered to the Company instruments of
transfer reasonably acceptable to the Company pursuant to which Buyer
shall assume the Assumed Liabilities, including the Assignment and
Assumption Agreement.
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF NAVISITE. The obligations of
NaviSite to consummate the transactions contemplated by this Agreement for the
Closing shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied
with by the Company on or before the Closing shall have been complied with
in all material respects, and NaviSite shall have received a certificate
of the Company to such effect signed by a duly authorized officer of the
Company.
(b) The representations and warranties of the Company
contained in this Agreement that are qualified as to materiality,
"Material Adverse Effect" or other words of similar effect shall be true
and correct in all respects, and all other representations and warranties
of the Company contained in this Agreement shall be true and correct in
all material respects, in each case as of the date of this Agreement and
as of the time of Closing, with the same force and effect as though such
representations and warranties had been made on and as of time of Closing
(except for representations and warranties that are made as of a specified
date or time, which shall be true and correct only as of such specific
date or time) and NaviSite shall have received a certificate to such
effect signed by an authorized officer of the Company.
(c) Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions to be consummated at the Closing
shall have expired or been terminated.
(d) No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the transactions contemplated by this Agreement for the Closing
illegal or otherwise restraining or prohibiting consummation of such
transactions.
(e) The Company, as applicable, shall have received the
authorizations, orders, approvals and consents of Governmental Authorities
described in Schedule 2.7.
49
(f) NaviSite shall have received from the Company the consents
set forth on Schedule 7.2(f) (the "NECESSARY CONSENTS"), and none of such
Necessary Consents shall have been withdrawn or rescinded and such other
consents as are in the Company's possession.
(g) NaviSite shall have received the audited financial
statements of the Company for the fiscal year ended December 31, 2002.
(h) NaviSite shall have received the Audited 2003 Financials
of the Company and the Aggregate Net Worth of the Company based on the
Audited 2003 Financials is not more than $5,000,000 less than the
Aggregate Net Worth of the Company based on the Base Balance Sheet (a
"MATERIAL ADVERSE FINANCIAL CHANGE").
(i) NaviSite shall have received the Unaudited Company Interim
Financial Statements required to be delivered to it pursuant to Section
5.13.
(j) Surebridge shall have delivered to NaviSite such bills of
sale, assignments and other instruments of transfer reasonably acceptable
to NaviSite necessary to transfer title to the Purchased Assets to
NaviSite as contemplated by Article I, free and clear of all Liens, except
for the Permitted Liens.
(k) Surebridge shall have delivered to NaviSite confirmation
that the warrant held by Silicon Valley Bank for purchase of shares of
Surebridge's common stock is an Excluded Liability hereunder or a copy of
an amendment to the warrant, such amendment to provide that the warrant
shall not be assigned to an acquiring entity, or that such warrant shall
not be exercisable for securities of an acquiring entity in the event of a
sale of all or substantially all of the assets of the Company.
SECTION 7.3. INABILITY TO DELIVER CLOSING CERTIFICATES, In the event
NaviSite or the Company cannot deliver any certificate contemplated by Sections
7.1(a), 7.1(b), 7.2(a) or 7.2(b), the applicable party shall deliver a closing
certificate to the other parties outlining the reasons for such party's
inability to comply with the closing condition(s) and confirming compliance
otherwise with the applicable closing condition. Any certificate delivered
pursuant to this Section 7.3 shall be deemed to satisfy the closing conditions
in Section 7.1 or 7.2, as applicable, but shall not be deemed to cure the breach
of any representation, warranty or covenant and the breaching party shall remain
liable for such breach.
ARTICLE VIII - TERMINATION
SECTION 8.1. TERMINATION. This Agreement may be terminated or the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) at any time, by the mutual written consent of the Company
and NaviSite;
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(b) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action which permanently restrains,
enjoins or otherwise prohibits the transactions contemplated hereby and
such order, decree, ruling or other action shall have become final and
non-appealable;
(c) if the transactions contemplated hereby shall not have
been consummated by June 30, 2004 (the "END DATE"); provided, however,
that the right to terminate this Agreement pursuant to this clause shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on
or before such date and such action or failure to act constitutes a
material breach of this Agreement;
(d) by NaviSite, if there is a Material Adverse Financial
Change;
(e) by NaviSite, if since the date of this Agreement, there
shall have been any event, development or change of circumstance that
constitutes, has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Change of the Company and such
Material Adverse Change is not cured within five days after written notice
thereof;
(f) by the Company, if since the date of this Agreement, there
shall have been any event, development or change of circumstance that
constitutes, has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Change of NaviSite and such
Material Adverse Change is not cured within five days after written notice
thereof; and
(g) by NaviSite if (A) the Company's directors shall have
withdrawn, or adversely modified, its recommendation of the transactions
contemplated hereby or this Agreement (or determined to do so in
accordance with Section 5.12); (B) the Company's directors shall have
determined to recommend to the Company's shareholders that they approve an
Acquisition Proposal other than that contemplated by this Agreement or
shall have determined to accept a Superior Proposal; (C) a tender offer or
exchange offer that, if successful, would result in any person or group
becoming a beneficial owner of 20% or more of the outstanding shares of
the Company's common stock is commenced (other than by NaviSite or an
affiliate of NaviSite) and the directors fail to recommend that the
shareholders of the Company not tender their common stock in such tender
or exchange offer; (D) any person (other than any current shareholder,
NaviSite or an affiliate of NaviSite) or group becomes after the date
hereof the beneficial owner of 20% or more of the outstanding shares of
the Company's common stock; or (E) for any reason within its control the
Company fails to hold the Company's shareholder meeting or delivery
written consents by June 25, 2004.
SECTION 8.2. EFFECT OF TERMINATION.
(a) Limitation on Liability. In the event of termination of
this Agreement by either the Company or NaviSite as provided in Section
8.1, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of the
51
Company or NaviSite or their respective Subsidiaries, officers or
directors except (x) with respect to Section 5.3, Section 10.2, and this
Section 8.2 and (y) with respect to any liabilities or damages incurred or
suffered by a party as a result of the willful and material breach by the
other party of any of its representations, warranties, covenants or other
agreements set forth in this Agreement or any Ancillary Agreement.
(b) NaviSite Expenses. The Company and NaviSite agree that if
this Agreement is terminated by NaviSite pursuant to Sections 8.1(c),
8.1(d), 8.1(e) and 8.1(g), then the Company shall pay NaviSite an amount
equal to the sum of NaviSite's third party expenses up to $350,000.
(c) Seller Expenses. The Company and NaviSite agree that if
this Agreement is terminated by the Company pursuant to Section 8.1(c) and
8.1(f), then NaviSite shall pay the Company an amount equal to the sum of
the Company's third party expenses up to $350,000.
(d) Payment of Expenses. Payment of expenses pursuant to
Section 8.2(b) and 8.2(c) shall be made not later than two business days
after delivery to the other party of notice of demand for payment and a
documented itemization setting forth in reasonable detail all Expenses of
the party entitled to receive payment (which itemization may be
supplemented and updated from time to time by such party until the 30th
day after such party delivers such notice of demand for payment, but only
for amounts incurred prior to the date of termination, but which
description shall not include a detailed description of legal fees and
services rendered). In any proceedings concerning payment of amounts due
under this Section 8.2(d), the party prevailing in such proceeding shall
be entitled to recover its Expenses from the other party incurred in
connection therewith.
(e) Termination Fee. In addition to any payment required by
the foregoing provisions of this Section 8.2, in the event that this
Agreement is terminated pursuant to Section 8.1(g) then the Company shall
pay to NaviSite immediately upon such termination, in the case of a
termination by the Company, or within two business days thereafter, in the
case of a termination by NaviSite, a termination fee of $1,650,000.
(f) All Payments. All payments under Sections 8.2(b), 8.2(c)
or 8.2(e) shall be made by wire transfer of immediately available funds to
an account designated by the party entitled to receive payment.
SECTION 8.3. WAIVER. At any time prior to the Closing, NaviSite and the
Company may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered by the other party pursuant hereto or (c) waive compliance
with any of the agreements of the other party or conditions to its own
obligations contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of
52
the same term or condition by such party, or a waiver of any other term or
condition of this Agreement by such party.
ARTICLE IX - SURVIVAL; INDEMNIFICATION
SECTION 9.1. Survival. The parties agree that the representations,
warranties, covenants and agreements contained in this Agreement shall survive
the Closing until twelve months after the Closing Date (the "CUT-OFF DATE"). No
claim for indemnification hereunder may be brought after the Cut-Off Date,
except for claims (x) of which the Company has been notified in writing with
reasonable specificity by NaviSite prior to the Cut-Off Date, and (y) of which
NaviSite has been notified in writing with reasonable specificity by the Company
prior to the Cut-Off Date.
SECTION 9.2. Indemnification of NaviSite. Subject to Section 9.1, NaviSite
shall be indemnified and held harmless against and in respect of any and all
damages, claims, demands, losses, expenses, costs, obligations and liabilities,
including without limitation reasonable attorneys' fees (collectively,
"LOSSES"), which arise or result from any breach of any of the representations
or warranties contained in Article II or the failure of the Company to perform
any of its covenants or agreements contained herein. Notwithstanding the
foregoing,
(a) there shall be no indemnification of NaviSite until the
aggregate amount of Losses incurred by NaviSite exceed $250,000 (the
"Threshold"), at which time the full amount of Losses incurred shall be
subject to indemnification hereunder;
(b) there shall be no indemnification payments hereunder that
exceed in the aggregate the principal amount of the Escrow Note (the
"INDEMNIFICATION CAP");
(c) there shall be no indemnification of NaviSite with respect
to Losses arising out of breaches of the representations or warranties
contained in Article II to the extent that the Company has made a
corresponding reserve for such Losses on the Base Balance Sheet or the
March Balance Sheet, provided that such reserves are specifically
identified on such balance sheets; and
(d) there shall be no indemnification of NaviSite for punitive
damages, speculative damages, special damages, incidental damages or lost
profits.
In determining the foregoing thresholds and in otherwise determining the amount
of any Losses for which NaviSite is entitled to assert a claim for
indemnification hereunder, the amount of any such Losses shall be determined
after deducting therefrom the amount of any insurance proceeds and other third
party recoveries received by NaviSite in respect of such Losses (which
recoveries NaviSite agrees to use commercially reasonable efforts to obtain). If
an indemnification adjustment is received by NaviSite pursuant to this Article
IX, and NaviSite later receives insurance proceeds or other third party
recoveries in respect of the related Losses, NaviSite shall immediately pay to
the Company a sum equal to the lesser of (y) the actual amount of such insurance
proceeds or other third party recoveries or (z) the actual amount of the
indemnification adjustment previously made with respect to such Losses.
53
SECTION 9.3. Procedure for Indemnification of NaviSite.
(a) Upon receipt by the Escrow Agent of a certificate signed
by any officer of NaviSite (a "NAVISITE CERTIFICATE"):
(i) stating that Losses exist in an aggregate amount
greater than the Threshold for claims against the Escrow Account, and
(ii) specifying in reasonable detail the individual
items included in the amount of Losses in such claim, the date each such
item was paid, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
(b) As soon as practicable following the earlier of: (i)
receipt of written authorization from the Company and NaviSite with respect to
the disposition of such claim or receipt of written notice of a final decision
or order of a court of competent jurisdiction with respect to such claim (in
either case, a "DISTRIBUTION DIRECTIVE"); or (ii) the close of business on the
thirtieth (30th) day following receipt by the Escrow Agent of a NaviSite
Certificate to which the Company has not objected in accordance with this
Section 9.4, the Escrow Agent shall record, (A) in the event of its receipt of a
Distribution Directive, the amount of the Losses stipulated in the Distribution
Directive or, (B) in the event that a Written Escrow Objection (as herein
defined) is not received by the close of business on the thirtieth (30th) day
following the Escrow Agent's receipt of a NaviSite Certificate, the amount of
the Losses set forth in NaviSite Certificate. The Escrow Agent shall record such
amounts on a register that is attached to and made a part of the Escrow Note
(the "LOSS ADJUSTMENTS"), and the Loss Adjustments shall thereafter constitute a
reduction in the principal due under the Escrow Note.
(c) At the time of delivery of any NaviSite Certificate to the
Escrow Agent, a duplicate copy of such NaviSite Certificate shall be delivered
to the Company, and for a period of thirty (30) days after such delivery to the
Escrow Agent of such NaviSite Certificate, the Escrow Agent shall not make any
adjustment to the Escrow Note in respect of the claims described in such
NaviSite Certificate unless the Escrow Agent shall have received written
authorization from the Company and NaviSite to make such adjustment. As soon as
practicable after the expiration of such thirty (30) day period, the Escrow
Agent shall make the Loss Adjustments as contemplated by Section 9.4(b), unless
the Company shall object in a written statement to the claim made in NaviSite
Certificate specifying in reasonable detail the nature of such objection and the
basis therefor, and such statement shall have been delivered to the Escrow Agent
and to NaviSite prior to the expiration of such thirty (30) day period (the
"WRITTEN ESCROW OBJECTION").
(i) In case the Company shall so object in writing to
any claim or claims by NaviSite made in any NaviSite Certificate pursuant
to this Article IX, NaviSite shall have twenty (20) days after receipt by
the Escrow Agent of an objection by the Company to respond in a written
statement to the objection of the Company. If after such twenty (20) day
period there remains a dispute as to any claims, the Company and NaviSite
shall attempt in good faith for twenty (20) days to agree upon the rights
of the respective parties with respect
54
to each of such claims. If the Company and NaviSite should so agree, a
memorandum setting forth such agreement shall be prepared and signed by
both parties and shall be furnished to the Escrow Agent. The Escrow Agent
shall be entitled to rely on any such memorandum and shall make Loss
Adjustments to the Escrow Note in accordance with the terms thereof.
(ii) If no agreement regarding the rights of the
respective parties can be reached after good faith negotiation, either the
Company or NaviSite may seek to resolve such dispute or claim in a court
of competent jurisdiction or seek other legal or equitable resolution in
accordance with this Agreement. Notwithstanding the foregoing, either the
Company or NaviSite may at any time apply to any court of competent
jurisdiction for injunctive relief in connection with a claim for
indemnification or otherwise to prevent irreparable harm.
SECTION 9.4. NAVISITE'S REMEDIES EXCLUSIVE. Except as set forth in the
Registration Rights Agreement, the remedies provided in this Article IX shall be
the exclusive remedies of NaviSite after the Closing in connection with the
transactions contemplated by this Agreement (other than with respect to a breach
of Section 5.17 by Surebridge), including without limitation any breach or
non-performance of any representation or warranty contained herein. NaviSite may
not commence any suit, action or proceeding against the Company with respect to
the subject matter of this Agreement (other than with respect to a breach of
Section 5.17 by Surebridge), whether in contract, tort or otherwise, except to
enforce NaviSite's express rights under this Article IX. After the Closing, the
Escrow Account shall be NaviSite's sole source for satisfaction of the
indemnification obligations under this Article IX (other than with respect to a
breach of Section 5.17 by Surebridge). Notwithstanding the foregoing, NaviSite
may seek to specifically enforce any covenant contained herein.
SECTION 9.5. PRIORITY OF ESCROW ACCOUNT. Subject to this Article IX and
the Escrow Agreement, NaviSite shall be entitled to recover the full amount of
all Losses for which it is entitled to indemnification from the Escrow Account
in the following order: (i) first from the Cash Escrow, if any, but only to the
extent such Losses actually requires a cash payment by NaviSite to a third party
who is not an Affiliate of NaviSite; and (ii) second, as a Loss Adjustment
against the Escrow Note. In the event that the Losses for which NaviSite is
entitled to indemnification did not result in a cash payment to any such third
party, then such Losses shall only be satisfied by a Loss Adjustment. NaviSite
shall certify in each NaviSite Certificate the amount of any cash payments made
to unaffiliated third parties as a result of any Losses for which it seeks
indemnification hereunder.
ARTICLE X - GENERAL PROVISIONS
SECTION 10.1. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally, or the next business day if sent by overnight courier
(providing proof of delivery), or on the same business day if sent via facsimile
on a business day during normal business hours to the
55
parties at the following addresses (or at such other address for a party as
specified by like notice):
Prior to Closing if to the Company, to:
Surebridge, Inc.
00 XxXxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxx, Esq.
Facsimile: (000) 000-0000
with copy to:
Xxxxxxx Xxxxxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Cable, P.C.
Facsimile: (000) 000-0000
With an additional copy following closing to:
Surebridge, Inc.
c/o Spectrum Equity Investors, L.P.
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
If to NaviSite, to:
NaviSite, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxx Xxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Rosedale & Xxxxxxxxx LLP
00 Xx. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxx X. Rosedale, Esq.
Facsimile: (000) 000-0000
SECTION 10.2. FEES AND EXPENSES. Except as provided otherwise herein, each
of NaviSite, on the one hand, and the Company, prior to Closing, on the other
hand, shall bear its own expenses in connection with the negotiation and the
consummation of the transactions
56
contemplated by this Agreement. Following the Closing, NaviSite shall pay any
actual fees or expenses owed by the Company to counsel for the Company that were
not paid prior to Closing, including such fees and expenses owed to counsel for
the Company related solely to the transaction contemplated hereby, which
transaction fees and expenses do not exceed $300,000 in the aggregate. In
addition, NaviSite shall pay the actual fees and expenses of one counsel to the
preferred stockholders of the Company with respect to the transactions
contemplated hereby, such fees and expenses not to exceed $100,000.
SECTION 10.3. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) An "AFFILIATE" shall mean any affiliate, as defined in
Rule 12b-2 under the Exchange Act;
(b) "EFFECT" means any change, event, violation, inaccuracy,
circumstance or effect;
(c) "GAAP" means U.S. generally accepted accounting
principles, consistently applied;
(d) "MATERIAL ADVERSE CHANGE" means a Material Adverse Effect
that results in, or would reasonably be expected to result in, either (i)
a $5,000,000 decrease in the annualized revenue of the Company or Buyer,
as the case may be; or (ii) a $5,000,000 increase in the annualized
expenses of the Company or Buyer, as the case may be.
(e) "MATERIAL ADVERSE EFFECT" means any Effect that (a) is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of a party,
together with its subsidiaries taken as a whole or (b) materially impedes
such party's authority to consummate the transactions contemplated hereby
in accordance with the terms hereof and applicable Laws, provided that in
no event shall any of the following, alone or in combination, be deemed to
constitute, nor shall any of the following be taken into account in
determining whether there has been or shall be, a Material Adverse Effect:
(A) any Effect directly related to the announcement or pendency of the
transactions contemplated hereby, including, but not limited to, a decline
in Buyer's stock price; (B) any Effect that results from changes affecting
any of the industries in which such party operates generally or the United
States economy generally which does not have a disproportionate effect on
such party; (C) any Effect that results from changes affecting general
worldwide economic or capital market conditions which does not have a
disproportionate effect on such party; or (D) changes in Laws or
regulations or the interpretation thereof;
(f) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
SECTION 10.4. INTERPRETATION. When a reference is made in this Agreement
to an Article, Section, Schedule or Exhibit, such reference will be to an
Article or Section of, or a
57
Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they will be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement will refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms used herein with
initial capital letters have the meanings ascribed to them herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
SECTION 10.5. COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in one or more counterparts, all of which will be considered one and
the same agreement and will become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties. This
Agreement may be executed by facsimile signature.
SECTION 10.6. AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by NaviSite and the
Company or in the case of a waiver, the party waiving compliance. No waiver by
any party with respect to any default, misrepresentation or breach of warranty
or covenant hereunder shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence.
SECTION 10.7. ENTIRE AGREEMENT; SEVERABILITY. This Agreement (including
the exhibits, schedules, documents and instruments referred to herein) and the
Confidentiality Agreement constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement. If any term, condition or
other provision of this Agreement is found to be invalid, illegal or incapable
of being enforced by virtue of any rule of law, public policy or court
determination, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to limit
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
58
SECTION 10.8. THIRD PARTY BENEFICIARIES. Except as expressly provided in
this Agreement, each party hereto intends that this Agreement shall not benefit
or create any right or cause of action in or on behalf of any Person other than
the parties hereto and their respective successors and permitted assigns.
SECTION 10.9. GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the internal laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws.
SECTION 10.10. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned, in whole or in
part, by operation of law or otherwise by the parties hereto without the prior
written consent of the other party; provided that the Company may assign its
rights under this Agreement to its stockholders in connection with the
dissolution of the Company on or after the first anniversary of the Closing. Any
assignment in violation of the preceding sentence will be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 10.11. CONSENT TO JURISDICTION. Each of the parties hereby
consents to personal jurisdiction, service of process and exclusive venue in the
federal or state courts of the State of Delaware for any claim, suit or
proceeding arising under this Agreement, or in the case of a third party claim
subject to indemnification hereunder, in the court where such claim is brought.
SECTION 10.12. MUTUAL DRAFTING. The parties hereto are sophisticated and
have been represented by attorneys throughout the transactions contemplated
hereby who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of Laws relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.
SECTION 10.13. REMEDIES. It is specifically understood and agreed that any
breach of the provisions of this Agreement or any other agreement executed and
delivered pursuant to this Agreement by any party 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).
Notwithstanding anything to the contrary contained in this Agreement, except as
provided in Article IX, NaviSite has no right to set-off or otherwise alter the
amounts due under, or terms of, the Primary Note or the Escrow Note as a result
of any action or inaction of the Company under this Agreement.
SECTION 10.14. BULK SALES LAW. NaviSite waives compliance by the Company
with the provisions of any applicable bulk sales, fraudulent conveyance or other
Law for the protection of creditors in connection with the transactions
contemplated hereby.
[Remainder of page intentionally left blank]
59
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
COMPANY:
SUREBRIDGE, INC.
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman and CEO
BUYER:
LEXINGTON ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
PARENT:
NAVISITE, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and CEO
NaviSite, Inc. agrees to furnish supplementally to the Securities and
Exchange Commission copies of any of the following omitted schedules and
exhibits upon the request of the Commission:
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B-1 Form of Primary Note
Exhibit B-2 Form of Escrow Note
Exhibit C Form of Assignment and Assumption Agreement
Exhibit D Form of Xxxx of Sale
Exhibit E Form of Press Release
Exhibit F Registration Rights Agreement
SCHEDULES
Schedule 1.1(a) Permitted Liens
Schedule 1.1(b) Excluded Assets
Schedule 1.6 March Net Working Capital Calculation
Schedule 2.1 Organization and Good Standing
Schedule 2.2 Subsidiary Capitalization
Schedule 2.3 Subsidiaries
Schedule 2.4 Conflicts
Schedule 2.5 Financial Statements
Schedule 2.6 Absence of Certain Changes
Schedule 2.7 Consents and Approvals
Schedule 2.8 Litigation
Schedule 2.9 Taxes
Schedule 2.10 Employee Benefit Plans
Schedule 2.11(a) Leases
Schedule 2.11(b) Personal Property
Schedule 2.12 Labor and Employment Matters
Schedule 2.13 Material Contracts
Schedule 2.14 Intellectual Property
Schedule 2.16 Insurance
Schedule 2.18 Compliance with Laws
Schedule 2.19 Transactions with Affiliates
Schedule 2.22 Bank Accounts
Schedule 2.25 Knowledge of the Company
Schedule 4.2 Conflicts of NaviSite
Schedule 4.3 NaviSite Consents and Approvals
Schedule 4.4 Litigation of NaviSite
Schedule 4.12 Contracts and Commitments of NaviSite
Schedule 5.1 Conduct of Business
Schedule 5.1(h) Budget of the Company
Schedule 5.1(m) Bonuses
Schedule 6.1(e) Severance Arrangements
Schedule 7.2(f) Required Consents and Approvals
