Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
Navisite, Inc.,
a Delaware corporation
and
Avasta Acquisition Corp.,
a California corporation
and
Avasta, Inc.,
a California corporation
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Dated as of January 29, 2003
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TABLE OF CONTENTS
Page
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SECTION 1. Description of Transaction .................................... 1
1.1 Merger of Merger Sub into the Company ......................... 1
1.2 Effect of the Merger .......................................... 1
1.3 Closing; Effective Time ....................................... 1
1.4 Bylaws; Directors and Officers ................................ 1
1.5 Conversion of Shares........................................... 2
1.6 Earn-Out....................................................... 3
1.7 Employee Stock Options ........................................ 4
1.8 Closing of the Company's Transfer Books ....................... 4
1.9 Exchange of Certificates....................................... 5
1.10 Dissenting Shares.............................................. 5
1.11 Tax Consequences .............................................. 6
1.12 Further Action ................................................ 6
SECTION 2. Representations and Warranties of the Company ................. 6
2.1 Organization, Good Standing and Qualification ................. 6
2.2 Capitalization................................................. 6
2.3 Subsidiaries................................................... 7
2.4 Authorization ................................................. 7
2.5 Governmental Consents.......................................... 7
2.6 Litigation .................................................... 7
2.7 Proprietary Information Agreements............................. 7
2.8 Patents and Trademarks......................................... 8
2.9 Compliance with Other Instruments.............................. 9
2.10 Agreements; Action............................................. 9
2.11 Disclosure .................................................... 10
2.12 Voting Rights.................................................. 10
2.13 Title to Property and Assets .................................. 10
2.14 Minute Books .................................................. 10
2.15 Labor Agreements and Actions................................... 11
2.16 Obligations of Management ..................................... 12
2.17 Obligations to Related Parties ................................ 12
2.18 Real Property Holding Corporation.............................. 13
2.19 Permits........................................................ 13
2.20 Environmental and Safety Laws.................................. 13
2.21 Insurance...................................................... 13
2.22 Financial Statements........................................... 14
2.23 Brokers' Fees.................................................. 14
2.24 Changes ....................................................... 14
2.25 Tax Returns, Payments and Elections ........................... 00
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XXXXXXX 0. Representations and Warranties of NaviSite..................... 15
3.1 Private Placement ............................................. 16
3.2 Organization, Good Standing and Qualification ................. 16
3.3 Capitalization................................................. 16
3.4 Authorization.................................................. 16
3.5 Noncontravention .............................................. 16
3.6 Reports and Financial Statements .............................. 17
3.7 Litigation .................................................... 17
3.8 Valid Issuance ................................................ 17
SECTION 4. Certain Covenants of the Company............................... 17
4.1 Access and Investigation ...................................... 17
4.2 Operation of the Company's Business ........................... 17
4.3 No Negotiation ................................................ 19
4.4 Sun License ................................................... 19
SECTION 5. Additional Covenants of the Parties ........................... 19
5.1 Filings and Consents........................................... 19
5.2 Shareholder Approval........................................... 19
5.3 Public Announcements .......................................... 20
5.4 Termination of Agreements...................................... 20
5.5 Employee Retention Program..................................... 20
5.6 NaviSite Employee Benefits..................................... 20
5.7 Appraisal Rights Notice ....................................... 20
5.8 Observer Rights................................................ 20
SECTION 6. Conditions Precedent to Obligations of NaviSite................ 21
6.1 Accuracy of Representations ................................... 21
6.2 Performance of Covenants ...................................... 21
6.3 Shareholder Approval........................................... 21
6.4 Consents ...................................................... 21
6.5 Agreements and Documents....................................... 21
6.6 No Restraints ................................................. 22
6.7 No Legal Proceedings........................................... 22
6.8 Reduction in Liabilities ...................................... 22
6.9 Employees ..................................................... 22
6.10 Customer Contracts ............................................ 22
6.11 Accenture Waiver............................................... 23
6.12 MRR and Transition Fees........................................ 23
6.13 Staffing Plan ................................................. 23
6.14 Lockup Letter Agreements/Accredited Investor Certificates ..... 23
6.15 Bringdown Certificate ......................................... 23
6.16 Sun License ................................................... 23
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6.17 Voting Agreement .............................................. 23
6.18 Registration Rights ........................................... 23
SECTION 7. Conditions Precedent to Obligations of the Company ............ 23
7.1 Accuracy of Representations ................................... 23
7.2 Performance of Covenants ...................................... 23
7.3 Reserved....................................................... 23
7.4 Consents ...................................................... 24
7.5 No Restraints ................................................. 24
7.6 No Legal Proceedings........................................... 24
SECTION 8. Termination ................................................... 24
8.1 Termination Events ............................................ 24
8.2 Termination Procedures......................................... 24
8.3 Effect of Termination ......................................... 24
SECTION 9. Indemnification, Etc........................................... 25
9.1 Survival of Representations, Etc............................... 25
9.2 Indemnification................................................ 25
9.3 Threshold; Earn-Out Shares Exclusive Source of Indemnity
by the Avasta Shareholders.................................. 26
9.4 Satisfaction of Indemnification Claim.......................... 27
9.5 Defense of Third Party Claims ................................. 27
9.6 Dispute Resolution............................................. 28
9.7 ADR Process ................................................... 28
SECTION 10. Piggy-back registration rights ................................ 29
10.1 Piggy-Back Registrations....................................... 29
10.2 Underwritten Offering.......................................... 30
10.3 Holder Information ............................................ 30
10.4 Indemnity...................................................... 31
10.5 Assignment .................................................... 31
SECTION 11. Miscellaneous Provisions ...................................... 31
11.1 Avasta Shareholders' Agent..................................... 31
11.2 Further Assurances ............................................ 31
11.3 Fees and Expenses; Xxxxxx Godward Fees and Expenses ........... 31
11.4 Attorneys' Fees................................................ 32
11.5 Notices ....................................................... 32
11.6 Headings ...................................................... 33
11.7 Counterparts .................................................. 33
11.8 Governing Law ................................................. 33
11.9 Successors and Assigns ........................................ 33
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11.10 Remedies Cumulative; Specific Performance ..................... 33
11.11 Waiver......................................................... 33
11.12 Amendments..................................................... 33
11.13 Severability................................................... 34
11.14 Entire Agreement............................................... 34
11.15 NaviSite/CBT .................................................. 34
11.16 Construction................................................... 34
EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Earn-out Schedule
Exhibit C - Specified Liabilities to be Retired
Exhibit D - Form of Lock-up Agreement
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization is made and entered
into as of January 29, 2003 (this "Agreement"), by and among Navisite, Inc., a
Delaware corporation ("NaviSite"), Avasta Acquisition Corp., a California
corporation and wholly-owned subsidiary of NaviSite ("Merger Sub") and Avasta,
Inc., a California corporation (the "Company"). Certain other capitalized terms
used in this Agreement are defined in Exhibit A.
Recitals
A. NaviSite and the Company intend to effect a merger of Merger Sub with
and into the Company in accordance with this Agreement and the California
General Corporation Law (the "Merger"). Upon consummation of the Merger, Merger
Sub will cease to exist, and the Company will become a wholly owned direct or
indirect subsidiary of NaviSite.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. NaviSite has effected a 1-for-15 reverse stock split of NaviSite's
issued and outstanding Common Stock effective as of January 7, 2003. All
NaviSite share numbers contained in this Agreement reflect the reverse stock
split.
Agreement
The parties to this Agreement agree as follows:
SECTION 1. Description of Transaction
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the California General
Corporation Law.
1.3 Closing; Effective Time. Subject to the satisfaction by NaviSite and
the Company of the closing conditions contained in Sections 6 and 7 of this
Agreement, the consummation of the transactions contemplated by this Agreement
shall take place at the offices of Xxxxxx Godward LLP, Xxx Xxxxxxxx Xxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on January 31, 2003, or at such other
time and date as may be agreed upon by the parties (the "Closing"). The date on
which the Closing actually takes place is referred to in this Agreement as the
"Closing Date." Contemporaneously with or as promptly as practicable after the
Closing, a properly executed agreement of merger conforming to the requirements
of Chapter 11 of the California General Corporation Law shall be filed with the
Secretary of State of the State of California. The Merger shall become effective
at the time such agreement of merger is filed with the Secretary of State of the
State of California (the "Effective Time").
1.4 Bylaws; Directors and Officers. Unless otherwise determined by NaviSite
and the Company prior to the Effective Time:
(a) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(b) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the directors and officers of
Merger Sub immediately prior to the Effective Time.
1.5 Conversion of Shares.
(a) Subject to Section 1.9, at the Effective Time, by virtue of the
Merger and without any further action on the part of NaviSite, Merger Sub, the
Company or any shareholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be cancelled;
(ii) each share of Series A-P Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into the right
to receive the fraction of a share of NaviSite Common Stock equal to the
product of multiplying (A) the Series A-P Per Share Fraction by (B)
231,039.
(iii) each share of Series B-P Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into the right
to receive the fraction of a share of NaviSite Common Stock equal to the
product of multiplying (A) the Series B-P Per Share Fraction by (B)
231,039.
(iv) each share of Series C-P Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into the right
to receive the fraction of a share of NaviSite Common Stock equal to the
product of multiplying (A) the Series C-P Per Share Fraction by (B)
231,039.
(v) each share of Series D Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into the right
to receive the fraction of a share of NaviSite Common Stock equal to the
product of multiplying (A) the Series D Per Share Fraction by (B) 231,039.
(vi) each share of the common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share
of common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) The "Series A-P Per Share Fraction" shall be determined by
dividing: (A) $6,111,390.60 (the total liquidation preference of the Series
A-P Preferred Stock) by (B) $23,750,159.60 (the total liquidation
preference of the combined Series A-P, B-P, C-P and D Preferred Stock), and
dividing that result by 3,395,217 (the total number of outstanding shares
of Series A-P Preferred Stock, including any dissenting shares).
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(ii) The "Series B-P Per Share Fraction" shall be determined by
dividing: (A) $1,252,254.80 (the total liquidation preference of the Series
B-P Preferred Stock) by (B) $23,750,159.60 (the total liquidation
preference of the combined Series A-P, B-P, C-P and D Preferred Stock), and
dividing that result by 114,161 (the total number of outstanding shares of
Series B-P Preferred Stock, including any dissenting shares).
(iii) The "Series C-P Per Share Fraction" shall be determined by
dividing: (A) $1,542,646.20 (the total liquidation preference of the Series
C-P Preferred Stock) by (B) $23,750,159.60 (the total liquidation
preference of the combined Series A-P, B-P, C-P and D Preferred Stock), and
dividing that result by 530,287 (the total number of outstanding shares of
Series C-P Preferred Stock, including any dissenting shares).
(iv) The "Series D Per Share Fraction" shall be determined by
dividing: (A) $14,843,868 (the total liquidation preference of the Series D
Preferred Stock) by (B) $23,750,159.60 (the total liquidation preference of
the combined Series A-P, B-P, C-P and D Preferred Stock), and dividing that
result by 49,479,567 (the total number of outstanding shares of Series D
Preferred Stock, including any dissenting shares).
1.6 Earn-Out.
(a) Amount of Earn-Out Payment. If the Company has generated more than
$1,125,000 in Earn-out Revenue (as defined below) between February 1 and June
30, 2003 ("Earn-out Period"), then NaviSite will issue to the Avasta
Shareholders as additional consideration the number of shares of NaviSite Common
Stock set forth on Exhibit B hereto (with linear interpolation between the
numbers set forth on Exhibit B in the event that Earn-out Revenue are achieved
at a level in between the numbers set forth therein). The number of shares of
NaviSite Common Stock issued under this Section 1.6, in the aggregate, to the
Avasta Shareholders shall be referred to as the "Earn-out Shares."
For purposes of this Section 1.6, "Earn-out Revenue" shall mean the sum of
MRR and revenue from transition fees charged in connection with the Company's
contracts involving MRR ("Transition Fees"), measured from the later of contract
execution or February 1, 2003; provided that all contracts generating Earn-out
Revenue must be invoiced by September 30, 2003. (For example, a contract signed
on May 29, 2003 providing for $100,000 in MRR and $50,000 of Transition Fees,
and for which services to the customer begin on June 15, 2003 and invoicing
occurs on June 15, 2003, will result in $250,000 of Earn-out Revenue ($100,000
in MRR in May 2003, $100,000 in MRR in June 2003 and $50,000 in Transition
Fees.)) If Earn-out Shares are issued pursuant to this Section 1.6, they shall
be allocated and distributed to the Avasta Shareholders as follows:
(i) each share of Series A-P Preferred Stock outstanding
immediately prior to the Effective Time shall receive that number of shares
of NaviSite Common Stock equal to the product of multiplying (A) the Series
A-P Per Share Fraction by (B) the Earnout Shares;
(ii) each share of Series B-P Preferred Stock outstanding
immediately prior to the Effective Time shall receive that number of shares
of NaviSite Common Stock equal to the product of multiplying (A) the Series
B-P Per Share Fraction by (B) the Earnout Shares;
(iii) each share of Series C-P Preferred Stock outstanding
immediately prior to the Effective Time shall receive that number of shares
of NaviSite Common
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Stock equal to the product of multiplying (A) the Series C-P Per Share
Fraction by (B) the Earnout Shares; and
(iv) each share of Series D Preferred Stock outstanding
immediately prior to the Effective Time shall receive that number of shares
of NaviSite Common Stock equal to the product of multiplying (A) the Series
D Per Share Fraction by (B) the Earn-out Shares.
(b) Earn-out Process. The Earn-out Shares (if any) shall be issued
promptly after September 30, 2003. Promptly after September 30, 2003, NaviSite
shall provide a written statement (the "NaviSite Notice") to the Avasta
Shareholders' Agent as to (i) the number of Earn-out Shares to be issued, and
(ii) a summary, in reasonable detail and certified as accurate by the chief
financial officer of NaviSite, as to the calculations supporting the number of
Earn-out Shares to be issued. NaviSite shall permit the Avasta Shareholders'
Agent (or its designees) reasonable access to NaviSite's books and records to
permit the Avasta Shareholders' Agent to verify the accuracy and reasonableness
of the NaviSite Notice. The NaviSite Notice shall be conclusive and binding upon
all parties unless, within 30 days following receipt, the Avasta Shareholders'
Agent notifies NaviSite (the "Objection Notice") in writing that the Avasta
Shareholders' Agent disagrees with the NaviSite Notice. If the parties are in
disagreement following such process, NaviSite's chief financial officer, or his
designee, shall promptly meet with the Avasta Shareholders' Agent, or his
designee, and the parties shall attempt in good faith to reach a resolution of
such disagreement. If such disagreement is not resolved within ten (10) business
days after delivery of the Objection Notice, then the dispute shall be resolved
in accordance with the dispute resolution procedures set forth in Section 9.6.
(c) Right of Set-Off. NaviSite's obligation to deliver the Earn-out
Shares shall be subject to a right of set-off, such that the number of Earn-out
Shares to be delivered may be reduced by the number of shares deliverable in
connection with indemnification pursuant to Section 9.4 hereof, subject to the
dispute resolution procedures of Section 9.6.
(d) Certain Earn-out Provisions. NaviSite agrees to the following with
respect to this Section 1.6: (i) prior to February 1, 2003, two additional sales
persons and one additional sales engineer will be provided to the Company as a
resource (either as a new hire or made available by NaviSite), (ii) a pool of
$200,000 (to be paid at the same time the Earn-out Shares are paid) will be made
available as incentive compensation to the Company's senior management team
(excluding joint employees of the Company and NaviSite), tied to the Company's
achieving the maximum Earn-out under this Section 1.6 (to be reduced on a
pro-rata basis in accordance with Exhibit B if the Company achieves less than
the maximum Earn-out) and (iii) acknowledging that it will control the Company
as a whollyowned subsidiary, NaviSite agrees to act in good faith with respect
to such control as it may affect the Earn-out Revenues, and further agrees not
to take any action in bad faith with the purpose of depressing the Earn-out
Revenues.
1.7 Employee Stock Options. The stock options of the Company are not being
assumed by NaviSite in the Merger. All outstanding Company stock options and
Company warrants to acquire shares of the Company's capital stock shall be
terminated at or prior to the Effective Time. The Company has no stock option
plans other than its Tollgate, Inc. 1999 Stock Option Plan and Tollgate, Inc.
2000 Stock Option Plan.
1.8 Closing of the Company's Transfer Books. At the Effective Time, holders
of certificates representing shares of the Company's capital stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital
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stock shall be made on such stock transfer books after the Effective Time. If,
after the Effective Time, a valid certificate previously representing any of
such shares of the Company's capital stock (a "Company Stock Certificate") is
presented to the Surviving Corporation or NaviSite, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.9.
1.9 Exchange of Certificates.
(a) At or as soon as practicable after the Effective Time, NaviSite
will send to the holders of Company Stock Certificates receiving NaviSite common
stock a letter of transmittal in customary form with instructions for use in
effecting the surrender of Company Stock Certificates in exchange for
certificates representing NaviSite Common Stock. Upon surrender of a Company
Stock Certificate to NaviSite for exchange, together with a duly executed letter
of transmittal and lockup agreement, the holder of such Company Stock
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of NaviSite Common Stock that such
holder has the right to receive pursuant to the provisions of this Section 1,
and the Company Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.9, each Company Stock Certificate
shall be deemed, after the Effective Time, to represent only the right to
receive upon such surrender a certificate representing shares of NaviSite Common
Stock as contemplated by this Section 1. If any Company Stock Certificate shall
have been lost, stolen or destroyed, NaviSite may require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit as indemnity against any claim that may be made against NaviSite or
the Surviving Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to NaviSite Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Company Stock Certificate with respect
to the shares of NaviSite Common Stock represented thereby until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.9
(at which time such holder shall be entitled to receive all such dividends and
distributions).
(c) No fractional shares of NaviSite Common Stock shall be issued in
connection with the Merger; any fractional share shall be rounded down such that
no certificates for any such fractional shares shall be issued.
1.10 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "dissenting shares" within the meaning of Section
1300(b) of the California Corporations Code shall not be converted into or
represent the right to receive NaviSite Common Stock in accordance with Section
1.5, and the holder or holders of such shares shall be entitled only to such
rights as may be granted to such holder or holders in Chapter 13 of the
California General Corporation Law; provided, however, that if the status of any
such shares as "dissenting shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) NaviSite Common Stock in accordance with
Section 1.5.
(b) The Company shall give NaviSite prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
13 of the California General Corporation Law and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
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California General Corporation Law. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless NaviSite shall have consented in writing to such payment or settlement
offer.
1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.12 Further Action. If, at any time after the Effective Time, any further
action is determined by NaviSite to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or NaviSite with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
NaviSite shall be fully authorized (in the name of Merger Sub, in the name of
the Company and otherwise) to take such action.
SECTION 2. Representations and Warranties of the Company
Except as set forth on the Disclosure Schedule delivered by the Company to
NaviSite as of the date hereof, the Company hereby represents and warrants to
NaviSite that the statements contained in this Section 2 are true and correct as
of the date of this Agreement and will be true and correct as of the Closing as
though made as of the Closing (except to the extent such statements are made as
of a particular date, in which case such statements will be true and correct as
of such date).
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction where the ownership of its property or conduct of its business
requires it to be qualified to do business. True correct, complete accurate
copies of the Company's Articles and Bylaws have been provided to NaviSite.
2.2 Capitalization.
(a) The authorized capital of the Company consists of:
(i) 289,813,570 shares of Common Stock, of which 46,186,584
shares are issued and outstanding and 10,809,952 shares are reserved for
issuance under the Company's 1999 Stock Option Plan and 2000 Stock Option
Plan (the "Options"). Of the shares reserved for issuance under the
Company's 1999 Stock Option Plan and 2000 Stock Option Plan (the "Option
Plans"), 5,322,700 shares are subject to outstanding Options;
(ii) 230,186,430 shares of Preferred Stock (the "Preferred
Stock"), of which (i) 15,425,001 shares have been designated Series A
Preferred Stock, none of which are issued and outstanding; (ii) 15,425,001
shares have been designated Series A-P Preferred Stock, 3,395,217 of which
are issued and outstanding; (iii) 9,382,150 shares have been designated
Series B Preferred Stock, none of which are issued and outstanding; (iv)
9,382,150 shares have been designated Series B-P Preferred Stock, 114,161
of which are issued and outstanding; (v) 3,000,000 shares have been
designated Series B-1 Preferred Stock, none of which are issued and
outstanding; (vi) 29,452,731 shares have been designated Series C Preferred
Stock, none of which are issued and outstanding; (vii) 29,452,731 shares
have been designated Series C-P Preferred
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Stock, 530,283 of which are issued and outstanding; and (viii) 118,666,666
shares have been designated Series D Preferred Stock, 49,479,561 of which
are issued and outstanding; and
(iii) Warrants to purchase (i) 3,330,232 shares of Common Stock,
(ii) a variable number of shares of Common Stock issued in connection with
the Company's Series B Preferred Stock financing and (iii) approximately
2,000,000 shares of Series D Preferred Stock issued in connection with
bridge financings prior to the issuance of the Series D Preferred Stock
(collectively, the "Existing Warrants").
(b) Except as provided herein and for the conversion privileges of the
Preferred Stock, the Options and the Existing Warrants, there are no other
outstanding options, warrants, rights or agreements for the purchase or
acquisition from the Company of any equity securities.
(c) Section 2.2 of the Disclosure Schedule sets forth the name and
address of each shareholder of the Company, together with the kind and number of
equity securities of the Company held by each. Each shareholder of the Company
receiving consideration in the Merger is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
(d) All stock options issued by the Company and all warrants to
acquire common stock of the Company will terminate at the Effective Time. The
Company has no stock option plans other than its 1999 Stock Option Plan and 2000
Stock Option Plan.
2.3 Subsidiaries. The Company does not own or control, directly or
indirectly, nor does the Company have the right to acquire any equity securities
or any other interest in any other corporation, association, or other entity.
The Company is not a participant in any joint venture, partnership or similar
arrangement. The Company is not subject to any obligation or requirement to
provide funds for, or make any investment in (in the form of a loan, capital
contribution, or otherwise) any corporation, association, other business entity,
or person.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the performance of all obligations of the
Company under this Agreement has been taken or will be taken prior to the
Closing, and this Agreement constitutes a valid and legally binding obligation
of the Company, enforceable in accordance with its terms, subject to bankruptcy
and other laws of general application affecting the rights of creditors, and
except to the extent that the availability of any equitable remedy is subject to
the discretion of a court.
2.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
2.6 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the
Company. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
2.7 Proprietary Information Agreements. Each employee, officer and
consultant of the Company has executed a proprietary information agreement, in
one of the forms made available to counsel to NaviSite ("Proprietary Information
Agreements"), and no exceptions have been taken by any such employee, officer or
consultant to the terms of such agreement. No past or current employee, officer
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or consultant of the Company has excluded works or inventions made prior to his
or her employment with the Company from his or her assignment of inventions
pursuant to such employee, officer or consultant's proprietary information and
inventions agreement. The Company is not aware that any of its past or current
employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation. All past or current
vendors of the Company with access to confidential information of the Company
are parties to a written agreement substantially similar to the Proprietary
Information Agreements under which, among other things, each such vendor is
obligated to maintain the confidentiality of information of the Company.
2.8 Patents and Trademarks.
(a) Schedule 2.8 lists (i) each patent, patent application, copyright
registration or application therefor, mask work registration or application
therefor, and trademark, service xxxx and domain name registration or
application therefor owned or licensed by the Company and (ii) a description of
all components of software developed or in development by the Company,
indicating for each such component its current production status and the
identity of any third party software included in it (provided that for purposes
of this clause (ii), commercially available off-the-shelf software, shrinkwrap
license agreements to which the Company is a party and unregistered copyrights
will be excluded from Schedule 2.8). Schedule 2.8 shall distinguish between
Company Intellectual Property that is owned by the Company, licensed by the
Company from a third party or licensed by the Company to a third party.
(b) The Company owns or has the right to use all Intellectual Property
used or useful in its business ("Company Intellectual Property"). The Company
Intellectual Property represents all Intellectual Property that is necessary for
the operation of the Company's business as presently conducted. Each item of
Company Intellectual Property will be owned or available for use by the Company
immediately following the Closing on substantially identical terms and
conditions as it was immediately prior to the Closing. The Company has taken all
reasonable measures to protect the proprietary nature of each item of the
Company Intellectual Property, and to maintain in confidence all trade secrets
and confidential information, that it owns or uses. No other person or entity
has any rights to any of the Company Intellectual Property (except pursuant to
agreements or licenses specified on the Disclosure Schedule), and, to the
knowledge of the Company, no other person or entity is infringing, violating or
misappropriating any Company Intellectual Property.
(c) None of the Customer Deliverables, or the marketing, distribution,
provision or use thereof, materially infringes or violates, or constitutes a
material misappropriation of, any Intellectual Property rights of any person or
entity. None of the Internal Systems, or the use thereof, infringes or violates,
or constitutes a misappropriation of, any Intellectual Property rights of any
person or entity in any material respect. The Company has provided to NaviSite
complete and accurate copies of all written documentation in the Company's
possession relating to any complaint, claim or notice, or written threat
thereof, received by the Company alleging any infringement, violation or
misappropriation known to the Company concerning any Company Intellectual
Property.
(d) Schedule 2.8(d) identifies each license or other agreement
pursuant to which the Company has licensed, distributed or otherwise granted any
rights to any third party with respect to, any Company Intellectual Property.
Except as described in Schedule 2.8(d), the Company has not agreed to indemnify
any person or entity against any infringement, violation or misappropriation of
any Intellectual Property rights with respect to any Customer Deliverables.
(e) Schedule 2.8(e) identifies each item of Company Intellectual
Property that is owned by a party other than the Company, and the license or
agreement pursuant to which the
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Company uses it (excluding off-the-shelf software programs licensed by the
Company pursuant to "shrink wrap" licenses).
(f) The Customer Deliverables and the Internal Systems are free from
significant defects or programming errors and conform in all material respects
to the written documentation and specifications therefor.
2.9 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Articles or Bylaws or of any material
instrument, mortgage, indenture, agreement, judgment, order, writ, decree, lease
or contract to which it is a party or by which it is bound or, to its knowledge,
of any provision of federal or state statute, rule or regulation applicable to
the Company. The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any violation, which, individually or in the aggregate, would result in a
material and adverse effect on the Company's business or properties, or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree, lease or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business or
operations, or any of its assets or properties.
2.10 Agreements; Action.
(a) There are no agreements, understandings, instruments, contracts,
judgments, orders, decrees or proposed transactions to which the Company is a
party or by which it is bound which involve (i) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $10,000, or (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company (other than a limited use license of the Company's proprietary
rights under its standard master services agreement entered into in the ordinary
course of business), or (iii) the grant of rights to manufacture, produce,
assemble, license, market or sell its products to any other person or affecting
the Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products, or (iv) indemnification by the Company with respect
to infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale or license agreements entered into in the ordinary
course of business).
(b) Since January 1, 2002, except as reflected on the Company's
balance sheet as of November 30, 2002, the Company has not (i) declared or paid
any dividends, or authorized or made any distribution upon or with respect to
any class or Series of its capital stock, (ii) incurred (other than indebtedness
that has been converted into capital stock) any indebtedness for money borrowed
or incurred any other liabilities individually in excess of $50,000 or in excess
of $250,000 in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(d) There are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof, other than (i) for
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payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company, (iii) warrants held by shareholders
affiliated with the Company's directors Xxxx Xxxxx and Xxxxxxx del Xxxxxxx, and
(iv) other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company).
(e) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Articles or
Bylaws, which materially adversely affects its business as now conducted or as
proposed to be conducted, its properties or its financial condition.
(f) Schedule 2.10(f) sets forth a list of (i) all of the Company's
customers in contract with the Company and (ii) all of the Company's suppliers
(other than equipment lessors) that consistently involve more than $10,000 per
month in expense to the Company. The Company has delivered to NaviSite copies of
all contracts with the Company's customers and suppliers set forth on Schedule
2.10(f).
(g) The Company has not received any written or verbal notice as of
the date hereof to the effect that any customer with more than $10,000 in MRR
intends to cancel its contract with the Company.
(h) The Company has no indebtedness for borrowed money.
2.11 Disclosure. The Company has provided NaviSite with all the information
which NaviSite has requested for deciding whether to enter into this Agreement.
Neither this Agreement nor any other documents, exhibits or certificates made or
delivered by or on behalf of the Company in connection herewith or therewith
taken together as a whole contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements herein or
therein not misleading which has not been, prior to the Closing, corrected or
amended and such corrected or amended information provided to NaviSite.
2.12 Voting Rights. To the Company's knowledge, except as contemplated in
the Company's Amended and Restated Voting Agreement, dated as of October 9,
2002, no shareholder of the Company has entered into any agreement with respect
to the voting of equity securities of the Company.
2.13 Title to Property and Assets. The Company owns its property and assets
(excluding leased assets) free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances. Schedule
2.13 sets forth a list of all of the Company's agreements to lease real and/or
personal property (including equipment leases), copies of which have been
delivered to NaviSite.
2.14 Minute Books. The minute books of the Company made available to
NaviSite and its counsel contain all meetings and actions by written consent of
directors (and any committees of directors) and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
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2.15 Labor Agreements and Actions.
(a) Schedule 2.15(a) contains a complete and accurate list of all
Company Plans. Complete and accurate copies of (i) all Company Plans which have
been reduced to writing, (ii) written summaries of all unwritten Company Plans,
(iii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R
and (for all funded plans) all plan financial statements since inception of the
Company, have been delivered to NaviSite.
(b) Each Company Plan has been administered in all material respects
in accordance with its terms and each of the Company and the ERISA Affiliates
has in all material respects met its obligations with respect to each Company
Plan and has made all required contributions thereto. The Company, each ERISA
Affiliate and each Company Plan are in compliance in all material respects with
the currently applicable provisions of ERISA and the Code and the regulations
thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of the
Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings
and reports as to each Company Plan required to have been submitted to the
Internal Revenue Service or to the United States Department of Labor have been
duly submitted. No Company Plan has assets that include securities issued by the
Company or any ERISA Affiliate.
(c) There are no actions, suits, proceedings, claims, arbitrations or
investigations before any governmental entity or before any arbitrator (except
claims for benefits payable in the normal operation of the Company Plans and
proceedings with respect to qualified domestic relations orders) against or
involving any Company Plan or asserting any rights or claims to benefits under
any Company Plan that could give rise to any material liability.
(d) Each Company Plan which is required to satisfy Section 401(k)(3)
or Section 401 (m)(2) of the Code has been tested for compliance with and
satisfies the requirements of Section 201(k)(3) and Section 201(m)(2) of the
Code for each plan year ending prior to the Closing Date.
(e) Neither the Company, nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(f) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) There are no unfunded obligations under any Company Plan providing
benefits after termination of employment to any employee of the Company (or to
any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law. The assets
of each Company Plan which is funded are reported at their fair market value on
the books and records of such Company Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Company Plan that would subject the Company or any ERISA
Affiliate to (i) any material fine, penalty, tax or liability of any kind
imposed under ERISA or the Code or (ii) any contractual indemnification or
contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Company Plan.
-11-
(i) No Company Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(j) Each Company Plan is amendable and terminable unilaterally by the
Company at any time without liability or expense to the Company or such Company
Plan as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto)
and no Company Plan, plan documentation or agreement, summary plan description
or other written communication distributed generally to employees by its terms
prohibits the Company from amending or terminating any such Company Plan.
(k) Schedule 2.15(k) discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of the Company
(A) the benefits of which are contingent, or the terms of which are altered,
upon the occurrence of a transaction involving the Company of the nature of any
of the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; and (ii) agreement or plan binding the Company,
including any stock option plan, stock appreciation right plan, restricted stock
plan, stock purchase plan, severance benefit plan or Company Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(1) Schedule 2.15(1) sets forth the policy of the Company with respect
to accrued vacation, accrued sick time and earned time off and the amount of
such liabilities as of the date hereof.
(m) Schedule 2.15(m) sets forth all officers, employees and
consultants of the Company who are not citizens of the United States of America.
2.16 Obligations of Management. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer, key employee or consultant is
currently working or, to the Company's knowledge, plans to work for a
competitive enterprise, whether or not such officer, key employee or consultant
is or will be compensated by such enterprise.
2.17 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company and (iii) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company). None of the officers, members of the Board
of Directors or shareholders of the Company, or any members of their immediate
families, are indebted to the Company or, to the Company's knowledge, have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation which competes with the Company, except that officers,
directors and/or shareholders of the Company may own stock in publicly traded
companies which may compete with the Company. No officer, director or
shareholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company). The Company is not a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation.
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2.18 Real Property Holding Corporation. The Company is not a real property
holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.19 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its current business, the lack of
which would, individually or in the aggregate, materially and adversely affect
the Company's business, financial condition or results of operations, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
2.20 Environmental and Safety Laws.
(a) The Company and has complied in all material respects with all
applicable Environmental Laws. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any governmental entity, relating to any Environmental Law involving
the Company.
(b) The Company is not aware of any material liabilities or
obligations arising from the release of any materials of environmental concern
into the environment by the Company or affecting the Company's premises.
(c) The Company is not a party to or bound by any court order,
administrative order, consent order or other agreement between the Company and
any governmental entity entered into in connection with any legal obligation or
liability arising under any Environmental Law.
(d) Schedule 2.20 is a list of all documents (whether in hard copy or
electronic form) that contain any environmental reports, investigations and
audits relating to premises currently or previously owned or operated by the
Company (whether conducted by or on behalf of the Company or a third party, and
whether done at the initiative of the Company or directed by a governmental
entity or other third party) which the Company has possession of or access to. A
complete and accurate copy of each such document has been provided to NaviSite.
(e) The Company is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Company.
2.21 Insurance. Schedule 2.21 lists each insurance policy (including fire,
theft, casualty, comprehensive general liability, workers compensation, business
interruption, environmental, product liability and automobile insurance policies
and bond and surety arrangements) to which the Company is a party, all of which
are in full force and effect as of the Closing. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company. A list of all
insurance loss runs and worker's compensation claims received since the
inception of the Company has been provided to NaviSite. There is no material
claim pending under any such policy as to which coverage has been questioned,
denied or disputed by the underwriter of such policy. All premiums due and
payable under all such policies have been paid, the Company is not liable for
retroactive premiums or similar payments, all insurance premiums have been fully
accrued on the Company's Financial Statements and the Company is otherwise in
compliance in all
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material respects with the terms of such policies. The Company has no knowledge
of any threatened termination of, or premium increase with respect to, any such
policy. Each such policy will continue to be enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect immediately prior to the Closing. No insurance carried by the Company
has been canceled by the insurer for non-payment and the Company has never been
unable to obtain insurance coverage of the type described herein.
2.22 Financial Statements. The Company has delivered to NaviSite its
unaudited financial statements (balance sheet, profit and loss statement and, if
applicable, statement of cash flows) as of December 31, 2001 and November 30,
2002 (the "Financial Statements"), which are attached as Schedule 2.22. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates and for the periods, indicated therein,
subject to normal year-end audit adjustments. Except as disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. The Company has no
material liabilities and, to the best of its knowledge, knows of no material
contingent liabilities, not disclosed in the Financial Statements, except
current liabilities incurred in the ordinary course of business subsequent to
November 30, 2002 which have not been, either in any individual case or in the
aggregate, materially adverse to the financial condition or operating results of
the Company.
2.23 Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.24 Changes. Since November 30, 2002, there has not been:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is
reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition or operations of the Company;
(b) Any resignation or termination of any officer, key employee,
consultant or group of the foregoing; and the Company, to the best of its
knowledge, does not know of the impending resignation or termination of
employment of any such officer, key employee, consultant or group of the
foregoing;
(c) Any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material
debt owed to it;
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than reasonable
advances made in the ordinary course of business;
(g) Any change in any compensation arrangement or agreement with any
employee, officer, director, shareholder or consultant;
-14-
(h) Any declaration or payment of any dividend or other distribution
of the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business, not to exceed $100,000;
(k) Any sale, assignment or transfer of any Intellectual Property or
other intangible assets;
(l) Any change in any agreement to which the Company is a party or by
which it is bound which materially and adversely affects the business, assets,
liabilities, financial condition or operations of the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has had or is reasonably expected to have a
material adverse effect on the business, assets, liabilities, financial
condition or operations of the Company; or
(n) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (m) above.
2.25 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports as required by law, which were prepared in good faith. The
Company has paid all taxes and other assessments reflected in such returns and
reports, except those contested by it in good faith that are listed in the
Disclosure Schedule. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date
thereof. Since November 30, 2002, the Company has not incurred any taxes,
assessments or governmental charges other than in the ordinary course of
business and the Company has made adequate provisions on its books of account
for all taxes, assessments and governmental charges with respect to its
business, properties and operations for such period. To its knowledge, the
Company has withheld, or collected from each payment made to each of its
employees, the amount of all taxes, including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositories. The
Company has not elected pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341 (f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on the Company, its financial
condition, its current business or any of its properties or material assets. The
Company has not been advised (a) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (b) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes.
SECTION 3. Representations and Warranties of Navisite
Except as set forth on the Disclosure Schedule delivered by NaviSite to the
Company on the date hereof, the Company hereby represents and warrants to the
Company and the Avasta Shareholders that the statements contained in this
Section 3 are true and correct as of the date of this Agreement and will be true
and correct as of the Closing as though made as of the Closing (except to the
extent such statements are made as of a particular date, in which case such
statements will be true and correct as of such date).
-15-
3.1 Private Placement. Based in part on representations from the Avasta
Shareholders delivered to NaviSite, the offer, sale and issuance of the Shares
as contemplated by this Agreement is exempt from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act").
3.2 Organization, Good Standing and Qualification. NaviSite is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. NaviSite
is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
3.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of NaviSite
consists of (a) 395,000,000 shares of NaviSite Common Stock, of which 12,621,167
shares are issued and outstanding, and (b) 5,000,000 shares of Preferred Stock,
no shares of which are issued or outstanding. As of the date hereof:
(i) NaviSite has outstanding debt securities convertible into
11,562,393 shares of NaviSite Common Stock;
(ii) there are 317,994 shares of NaviSite Common Stock subject to
outstanding options and 639,015 shares of NaviSite Common Stock available
for issuance under NaviSite stock option plans; and
(iii) except as set forth in this Section 3.3, there are no
outstanding options, warrants, rights or agreements for the purchase or
acquisition from NaviSite of any shares of its capital stock.
(b) Since October 31, 2002, NaviSite has not declared, accrued, set
aside or paid any dividend or made any other distribution (whether in cash,
stock or other property) in respect of any shares of its capital stock.
(c) As of the date hereof, NaviSite has issued an aggregate of
11,320,923 shares of NaviSite Common Stock to CBT, ClearBlue Finance, Inc. and
ClearBlue Equity, Inc.
3.4 Authorization. All corporate action on the part of NaviSite, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the performance of all obligations of
NaviSite under this Agreement has been taken or will be taken prior to the
Closing, and this Agreement constitutes a valid and legally binding obligation
of NaviSite, enforceable in accordance with its terms, subject to bankruptcy and
other laws of general application affecting the rights of creditors, and except
to the extent that the availability of any equitable remedy is subject to the
discretion of a court.
3.5 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the agreement of merger as required by the
California General Corporation Law, neither the execution and delivery by
NaviSite of this Agreement, nor the consummation by NaviSite of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the certificate of incorporation or by-laws of NaviSite, (b) require on the
part of NaviSite any filing with, or permit,
-16-
authorization, consent or approval of, any federal, state, local or provincial
governmental authority, (c) conflict with, result in breach of, constitute (with
or without due notice or lapse of time or both) a default under any contract or
instrument to which NaviSite is a party or by which it is bound or to which any
of its assets is subject, except for any conflict, breach or default that does
not materially and adversely affect the consummation of the transactions
contemplated hereby, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to NaviSite or any of its properties or
assets.
3.6 Reports and Financial Statements. NaviSite has made available to the
Company complete and accurate copies, as amended or supplemented, of the
NaviSite Reports. The NaviSite Reports constitute all of the documents required
to be filed by NaviSite under Section 13 or subsections (a) or (c) of Section 14
of the Exchange Act with the U.S. Securities and Exchange Commission ("SEC")
from July 31, 2002 through the date of this Agreement. The NaviSite Reports
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder when filed. As of their respective dates,
the NaviSite Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements and unaudited interim
financial statements of NaviSite included in the NaviSite Reports (i) complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto when filed,
(ii) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be indicated therein or in
the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act), and (iii) fairly present the
consolidated financial condition, results of operations and cash flows of
NaviSite as of the respective dates thereof and for the periods referred to
therein.
3.7 Litigation. There is no action, suit, proceeding or investigation
pending or to NaviSite's knowledge, currently threatened against NaviSite which
questions the validity of this Agreement or the right of NaviSite to enter into
this Agreement, or to consummate the transactions contemplated hereby.
3.8 Valid Issuance. The NaviSite Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
SECTION 4. Certain Covenants of the Company
4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide NaviSite and
NaviSite's Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide NaviSite and NaviSite's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents and
information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as NaviSite may
reasonably request.
4.2 Operation of the Company's Business. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
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(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies;
(d) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(e) the Company shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(f) the Company shall not amend or permit the adoption of any
amendment to the Company's articles of incorporation or bylaws, or effect any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(h) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $25,000;
(i) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract other than in the ordinary
course of business or that is a Material Contract, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any such Contract;
(j) 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 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 pursuant to Contracts that
are not Material Contracts;
(k) the Company shall not incur or guarantee any indebtedness for
borrowed money;
(1) the Company shall not (i) establish, adopt or amend any employee
benefit plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers, employees or consultants, or (iii)
hire any new employee;
(m) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(n) the Company shall not make any Tax election;
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(o) the Company shall not commence or settle any Legal Proceeding;
(p) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(o)" above.
Notwithstanding the foregoing, the Company may take any action described above
if NaviSite gives its prior written consent to the taking of such action by the
Company, which consent will not be unreasonably withheld.
4.3 No Negotiation. Except as provided in Section 4.4, the Company shall
not:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than NaviSite) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
NaviSite) relating to or in connection with a possible Acquisition Transaction;
or
(c) consider, entertain or accept any proposal or offer from any
Person (other than NaviSite) relating to a possible Acquisition Transaction.
The Company shall promptly notify NaviSite in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company during the Pre-Closing Period.
4.4 Sun License. Notwithstanding any other provision in this Agreement, the
parties understand that the Company is in negotiations with Sun Microsystems
("Sun") to effect a perpetual, worldwide, transferable, sublicenseable,
nonexclusive license to Sun of all or substantially all of the Company's
intellectual property (the "Sun License") in exchange for a cash payment that is
yet to be determined. The Company agrees that, should the Company determine to
enter into the Sun License, NaviSite's obligation to close the Merger will be
conditioned upon NaviSite's approval of the Sun License. NaviSite understands
and agrees that the portion, if any, of the up front license fee (it being
understood that the up front licensing fee shall not include any on-going
service, support or maintenance fees or any other revenues or monthly license
fees earned after the entering into of the Sun License) received from Sun in
exchange for the Sun License exceeding $625,000 will be distributed either to
the Avasta Shareholders or to the Company's employees. Any consideration
received from Sun in an amount of $625,000 or less will be retained by the
Company.
SECTION 5. Additional Covenants of the Parties
5.1 Filings and Consents. As promptly as practicable after the execution of
this Agreement, each party to this Agreement (a) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to NaviSite a copy of each such filing
made, each such notice given and each such Consent obtained by the Company
during the Pre-Closing Period.
5.2 Shareholder Approval. The Company shall, in accordance with its
Articles and By-laws and the applicable requirements of the California General
Corporation Law, solicit the written
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consent of its shareholders as promptly as practicable for the purpose of
permitting them to consider and to consent to and approve the Merger and this
Agreement.
5.3 Public Announcements. Upon the execution of this Agreement the parties
acknowledge and agree that NaviSite (i) will make a public announcement
concerning the transactions contemplated by this Agreement and the terms hereof
and (ii) may be required to file this Agreement, and exhibits and schedules
hereto, as a public document with the SEC. Except as noted in the previous
sentence and except as may be required by applicable law, during the Pre-Closing
Period, neither party shall issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without the other's prior written
consent.
5.4 Termination of Agreements. Prior to the Closing, the Company and
certain of its shareholders shall enter into an agreement, reasonably
satisfactory in form and content to NaviSite (and conditioned and effective upon
the Closing), terminating all rights under (i) the Fourth Amended and Restated
Investor Rights Agreement, dated as of October 9, 2002, between the Company and
certain of its shareholders, (ii) the Fourth Amended and Restated Voting
Agreement, dated as of October 9, 2002, between the Company and certain of its
shareholders and (iii) the Second Amended and Restated Right of First Refusal
and Co-Sale Agreement, dated as of October 9, 2002, between the Company and
certain of its shareholders.
5.5 Employee Retention Program. At or prior to the Closing, the Company
shall cooperate with NaviSite with respect to any employee retention program
reasonably requested by NaviSite (provided that any cash required thereby shall
not be the responsibility of the Company prior to Closing).
5.6 NaviSite Employee Benefits. NaviSite covenants and agrees that the
employees of the Company who are offered employment with NaviSite will receive
substantially the same benefit package that NaviSite offers its similarly
situated employees, including without limitation participation in NaviSite's
stock option plan.
5.7 Appraisal Rights Notice. Upon receipt of the requisite stockholder
approval of this Agreement and the Merger, the Company shall, within two
business days of receipt of such approval, prepare and mail to its stockholders
a notice of appraisal rights in accordance with the requirements of Chapter 13
of the California Corporations Code.
5.8 Observer Rights.
(a) For the one year period following the Closing Date (the "Observer
Period") NaviSite shall permit a representative (who shall be reasonably
satisfactory to NaviSite) of Convergence Partners (the "Observer") to attend
meetings of NaviSite's Board of Directors (the "Board"), and all committees
thereof, in a non-voting capacity. During the Observer Period, NaviSite shall
provide the Observer with copies of all notices, minutes, information and other
materials of meetings of the Board and all committees thereof and all written
consents, waivers and similar materials of the Board and all committees thereof
that NaviSite provides to its directors (collectively, the "Materials"), when
and as such Materials are delivered to the Board.
(b) After the expiration of the Observer Period, at such time, and
only for so long as, Convergence Partners or entities affiliated therewith hold,
in the aggregate, more than 4% of the outstanding shares of NaviSite capital
stock, fully-diluted and on an as converted to Common Stock and basis (which
shall include all outstanding options, warrants and other equity securities to
acquire NaviSite
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capital stock and all outstanding debt securities convertible into shares of
NaviSite capital stock), NaviSite shall permit the Observer (who shall be
reasonably satisfactory to NaviSite) to attend to Board and committee meetings,
in a non-voting capacity and shall provide the Observer with copies of all
Materials, when and as such Materials are delivered to the Board.
(c) Notwithstanding the foregoing rights, NaviSite shall have the
right, in its reasonable discretion based upon the potential for conflicts of
interest with Convergence that may arise, matters of attorney-client privilege
or other reasonable purposes, to withhold all or a portion of any Materials from
the Observer and/or exclude the Observer from all or any portion of a Board or
committee meeting.
(d) Failure to deliver any such Materials as noted above shall not
invalidate any action of the Board or Committee of the Board taken at a meeting
or by written consent. As a condition to attending meeting of the Board or
committees thereof, the Observer shall enter into a mutually acceptable
confidentiality agreement with NaviSite.
SECTION 6. Conditions Precedent to Obligations of Navisite
The obligations of NaviSite to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of each of the following conditions:
6.1 Accuracy of Representations. The representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality shall
be true and correct in all respects, and all other representations and
warranties of the Company set forth 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 Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties shall be true and correct as of
such date).
6.2 Performance of Covenants. All of the covenants and obligations that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 Shareholder Approval. The Agreement and the terms of the Merger shall
have been duly approved by holders holding all of the outstanding Company
capital stock (including the receipt of any class votes required by law or the
Company's Articles).
6.4 Consents. All Consents required to be obtained by the Company in
connection with the Merger and the other transactions contemplated by this
Agreement shall have been obtained and shall be in full force and effect, except
for such consents the failure of which to obtain would not have a material
adverse effect on the ability of the parties to consummate the Merger.
6.5 Agreements and Documents. NaviSite shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Resignation letters effective on or before the Closing from each
director of the Company and each subsidiary of the Company;
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(b) an executed amendment to the Company's lease for the property at
0000 Xxxxxxxxxx Xxxxxx in San Francisco, California in form and substance
reasonably satisfactory to NaviSite;
(c) Reserved.
(d) a certificate of good standing of the Secretary of State of
California, dated as of a recent date;
(e) copies of the Articles and Bylaws of the Company and each
Subsidiary, certified by the Secretary of the Company; and
(f) a Secretary's certificate certifying to the incumbency of the
Company's officers and to the resolutions of the board of directors and
stockholders approving the transactions contemplated hereby.
6.6 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
6.7 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by NaviSite of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.8 Reduction in Liabilities. The Company shall have received written
commitments from the creditors of the Company associated with the liabilities
identified on Exhibit C such that $1,080,000 in cash to be provided by NaviSite
to such creditors (at the direction of the Company) at the Effective Time to
satisfy such liabilities (or subsequent indebtedness incurred to satisfy the
liabilities set forth in Exhibit C) will be sufficient to ensure that not more
than $250,000 of such liabilities (or subsequent indebtedness incurred to
satisfy the liabilities set forth on Exhibit C) will remain following the
consummation of such commitments. The Company will have provided NaviSite
written evidence in form and substance reasonably satisfactory to NaviSite of
such commitments signed by the respective creditors (or lenders as the case may
be).
6.9 Employees. The Company shall have terminated those employees and
consultants designated by NaviSite in writing a reasonable time prior to the
Closing, and the Company shall have used its best efforts to enter into
severance agreements with each such terminated employee (and, if required by the
contractual relationship, any consultant) in a form reasonably acceptable to
NaviSite, and NaviSite will be reasonably satisfied with all severance
arrangements for such employees and consultants.
6.10 Customer Contracts. The Company will have amended each and every
contract for systems management services with its customers, if and to the
extent that an amendment is needed for the Customer to relocate its equipment
from the Company's Leased Spaces to the co-location space leased by NaviSite in
Santa Xxxxx or San Jose, California. The Company will have provided or made
available such amendments to NaviSite.
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6.11 Accenture Waiver. Accenture shall have waived its right to terminate
the Joint Marketing Contract between the Company and Accenture in connection
with this transaction, pursuant to a writing in form and content reasonably
satisfactory to NaviSite.
6.12 MRR and Transition Fees. The Company shall have demonstrated to the
reasonable satisfaction of NaviSite that the Company had contracted for and
billed at least $450,000 in MRR and Transition Fees for each of the three full
calendar months immediately preceding the Closing Date.
6.13 Staffing Plan. The Company and NaviSite shall have agreed on a
staffing plan for the Company.
6.14 Lockup Letter Agreements/Accredited Investor Certificates. NaviSite
shall have received a fully completed and executed lockup letter agreement in
the form attached hereto as Exhibit D from each Avasta Shareholder receiving
consideration in the Merger.
6.15 Bringdown Certificate. The Company shall have delivered a certificate
from an officer of the company that the conditions set forth in this Section 6
(other than Section 6.15) have been satisfied.
6.16 Sun License. The terms of the Sun License (if entered into by the
Company prior to the Closing) are satisfactory to NaviSite, in its sole
discretion.
6.17 Voting Agreement. The Stockholder Voting Agreement, dated as of the
date hereof, by and among NaviSite and certain stockholders of Avasta shall be
in full force and effect with respect to each stockholder that is a party
thereto.
6.18 Registration Rights. Avasta shall have delivered a duly executed
letter agreement with CBA, in form and substance reasonably satisfactory to
NaviSite, evidencing CBA's agreement to the piggy-back registration rights set
forth in Section 10 hereof.
SECTION 7. Conditions Precedent to Obligations of the Company
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 Accuracy of Representations. The representations and warranties of
NaviSite set forth in this Agreement that are qualified as to materiality shall
be true and correct in all respects, and all other representations and
warranties of NaviSite set forth 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 Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties shall be true and correct as of
such date).
7.2 Performance of Covenants. All of the covenants and obligations that
NaviSite is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
7.3 Reserved.
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7.4 Consents. All Consents required to be obtained by NaviSite in
connection with the Merger and the other transactions contemplated by this
Agreement shall have been obtained and shall be in full force and effect, except
for such consents the failure of which to obtain would not have a material
adverse effect on the Closing.
7.5 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
7.6 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger.
SECTION 8. Termination
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by NaviSite if NaviSite reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of NaviSite to comply with or
perform any covenant or obligation of NaviSite set forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company to
comply with or perform any covenant or obligation set forth in this Agreement or
in any other agreement or instrument delivered to NaviSite);
(c) by NaviSite if the Closing has not taken place on or before
February 5, 2003 (other than as a result of any failure on the part of NaviSite
to comply with or perform any covenant or obligation of NaviSite set forth in
this Agreement);
(d) by the Company if the Closing has not taken place on or before
February 5, 2003 (other than as a result of the failure on the part of the
Company to comply with or perform any covenant or obligation set forth in this
Agreement); or
(e) by the mutual consent of NaviSite and the Company.
8.2 Termination Procedures. If NaviSite wishes to terminate this Agreement
pursuant to Section 8.1 (a) and (c), NaviSite shall deliver to the Company a
written notice stating that NaviSite is terminating this Agreement and setting
forth a brief description of the basis on which NaviSite is terminating this
Agreement. If the Company wishes to terminate this Agreement pursuant to Section
8.1(b) and (d), the Company shall deliver to NaviSite a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that:
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(a) neither the Company nor NaviSite shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement;
(b) the parties shall, in all events, remain bound by and continue to
be subject to the provisions set forth in Section 11; and
(c) the Company shall, in all events, remain bound by and continue to
be subject to Section 5.3.
SECTION 9. Indemnification, Etc.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company shall
survive the Closing and shall expire on September 30, 2003; provided, however,
that if, at any time prior to September 30, 2003, any Indemnitee (acting in good
faith) delivers to the Avasta Shareholder a written notice alleging the
existence of an inaccuracy in or a breach of any of the representations and
warranties made by the Company (and setting forth in reasonable detail the basis
for such Indemnitee's belief that such an inaccuracy or breach may exist) and
asserting a claim for recovery under Section 9.2 based on such alleged
inaccuracy or breach, then the claim asserted in such notice shall survive until
such time as such claim is fully and finally resolved.
(b) The representations and warranties made by NaviSite shall survive
the Closing and shall expire on September 30, 2003; provided, however, that if,
at any time prior to September 30, 2003, any Avasta Indemnitee (acting in good
faith) delivers to NaviSite a written notice alleging the existence of an
inaccuracy in or a breach of any of the representations and warranties made by
the NaviSite (and setting forth in reasonable detail the basis for such
Indemnitee's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive until such time as such
claim is fully and finally resolved.
9.2 Indemnification.
(a) From and after the Effective Time (but subject to Section 9.1(a)),
the Avasta Shareholders, severally and not jointly, shall hold harmless and
indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and which arise from or as a result of,
or are directly or indirectly connected with:
(i) any inaccuracy in or breach of any representation or warranty
set forth in Section 2 as of the date of this Agreement;
(ii) any inaccuracy in or breach of any representation or
warranty set forth in Section 2 as of the as of the Closing Date;
(iii) any failure to perform or breach of any covenant or
obligation of the Company;
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(iv) any stockholder or former stockholder of the Company seeking
to exercise his, her or its "dissenters rights" within the meaning of
Section 1300(b) of the California Corporation's Code;
(v) any dispute or claim relating to the allocation of NaviSite
Common Stock among the Avasta Shareholders; or
(vi) any Legal Proceeding relating to any inaccuracy or breach of
the type referred to in clauses (i) - (v) above (including any Legal
Proceeding commenced by any Indemnitee for the purpose of enforcing any of
its rights under this Section 9).
(b) From and after the Effective Time (but subject to Section 9.1(b)),
NaviSite shall hold harmless and indemnify each of the Avasta Indemnitees from
and against, and shall compensate and reimburse each of the Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Indemnitees or to which any of the Avasta Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with:
(i) any inaccuracy in or breach of any representation or warranty
set forth in Section 3 as of the date of this Agreement;
(ii) any inaccuracy in or breach of any representation or
warranty set forth in Section 3 as of the Closing Date;
(iii) any failure to perform or breach of any covenant or
obligation of NaviSite; or
(iv) any Legal Proceeding relating to any inaccuracy or breach of
the type referred to in clauses (i) - (iii) above (including any Legal
Proceeding commenced by any Avasta Indemnitee for the purpose of enforcing
any of its rights under this Section 9).
(c) If the Surviving Corporation suffers, incurs or otherwise becomes
subject to any Damages as a result of or in connection with any inaccuracy in or
breach of any representation, warranty, covenant or obligation, then (without
limiting any of the rights of the Surviving Corporation as an Indemnitee)
NaviSite shall also be deemed, by virtue of its ownership of the stock of the
Surviving Corporation, to have incurred Damages as a result of and in connection
with such inaccuracy or breach.
9.3 Threshold; Earn-Out Shares Exclusive Source of Indemnity by the Avasta
Shareholders.
(a) Neither NaviSite nor the Avasta Shareholders shall be required to
make any indemnification payment pursuant to Section 9.2(a) for any inaccuracy
in or breach of any of their representations and warranties set forth in Section
2 until such time as the total amount of all Damages that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees exceeds
$100,000 in the aggregate. If the total amount of such Damages exceeds $100,000,
then the Indemnitees (or the Avasta Indemnitees, as the case may be) shall be
entitled to be indemnified against and compensated and reimbursed only for the
portion of such Damages exceeding $100,000.
(b) The exclusive source of indemnity for the benefit of NaviSite
under this Section 9 shall be the Earn-out Shares not yet issued to the Avasta
Shareholders pursuant to the Earn-out,
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and in the event that indemnification is due NaviSite, NaviSite shall have the
right to withhold Earn-out Shares from the Avasta Shareholders (pro rata in
accordance with the number of shares of NaviSite Common Stock issued to them at
Closing). No Avasta Shareholder shall have any liability for indemnification
under this Agreement except in the form of such forfeiture of Earn-out Shares.
9.4 Satisfaction of Indemnification Claim. In the event Avasta Shareholders
shall have any liability to any Indemnitee under this Section 9, NaviSite may
cause such liability to be satisfied (subject to the dispute resolution
procedures of Section 9.6) by withholding from the Avasta Shareholders in
accordance with the provisions of this Section 9 that number of Earn-out Shares
determined by dividing (a) the aggregate dollar amount of such liability by (b)
the fair market value of NaviSite's Common Stock as of the date the notice
provided for in this Section 9.4 is delivered, as determined in good faith by
NaviSite's Board of Directors, and multiplying the result by 150%. Prior to
withholding any such shares, NaviSite shall give written notice (the
"Indemnification Notice") to the Avasta Shareholders' Agent, which notice shall
contain (i) a description in reasonable detail as to the amount and nature of
the claim for which NaviSite seeks indemnification and (ii) NaviSite's
determination of the fair market value of the NaviSite Common Stock, together
with justification for such determination in reasonable detail. If the Avasta
Shareholders' Agent does not contest the Indemnification Notice within 30 days,
then NaviSite shall be conclusively entitled to withhold Earn-out Shares from
distribution to the Avasta Shareholders as provided above (without the 150%
multiple). If the Avasta Shareholders' Agent does contest the Indemnification
Notice by providing an Objection Notice to NaviSite within 30 days of receipt of
the Indemnification Notice (which Objection Notice may dispute, without
limitation, either the Damages asserted by NaviSite or the fair market value of
NaviSite Common Stock claimed by NaviSite), then the parties rights will be
determined in accordance with the dispute resolution procedures of Section 9.6.
In such event, and notwithstanding the foregoing, the fair market value of
NaviSite's Common Stock for purposes of satisfying any claim for indemnification
under this Section 9 shall be finally determined as of the date such shares are
delivered to NaviSite in satisfaction of such claim.
9.5 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against NaviSite or against any other Person) with
respect to which any of the Avasta Shareholders may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9, NaviSite shall have the right to proceed with the defense of such
claim or Legal Proceeding. If NaviSite so proceeds with the defense of any such
claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Avasta Shareholders
(but only by forfeiture of Earn-Out Shares); and
(b) NaviSite shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Avasta Shareholders' Agent (as
defined in Section 11.1); provided, however, that such consent shall not be
unreasonably withheld.
(c) NaviSite shall give the Avasta Shareholders' Agent prompt notice
of the commencement of any such Legal Proceeding against NaviSite or the
Surviving Corporation; provided, however, that any failure on the part of
NaviSite to so notify the Avasta Shareholders' Agent shall not limit any of the
obligations of the Avasta Shareholders under this Section 9 (except to the
extent such failure materially prejudices the defense of such Legal Proceeding).
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9.6 Dispute Resolution.
(a) In case the Avasta Shareholders' Agent delivers an Objection
Notice in accordance with Section 1.6 or Section 9.4, or the parties hereto are
otherwise in dispute over a matter relating to this Agreement or the
transactions contemplated hereby, the Avasta Shareholders' Agent and NaviSite
shall attempt in good faith for a period of 30 days to agree upon the rights of
the respective parties with respect to each of such claims.
(b) If no such agreement can be reached within such 30 day period
after good faith negotiation, then such dispute shall be resolved pursuant to
the neutral binding alternative dispute resolution process ("ADR Process")
described below. In such event, any Party (acting together or individually)
shall submit a notice of such dispute ("Notice of Dispute") to JAMS (defined
below) which notice sets forth the details of the disputes) and requests JAMS to
implement the ADR Process set forth below.
9.7 ADR Process. The Notice Of Dispute shall be delivered to the San
Francisco office of Judicial Arbitration and Mediation Service ("JAMS") for
binding resolution pursuant to the ADR Process. The ADR Process shall be
conducted according to the following procedure:
(a) The ADR Process shall be conducted in San Francisco, California.
(b) JAMS shall promptly select a single retired California Superior
Court Judge to be the hearing officer ("Hearing Officer"). The Hearing Officer
shall not have any actual or perceived conflict of interest with any Party to
this Agreement, or to any Affiliate or subsidiary or their respective counsel
and absent any conflict, no Party shall have the right to object to the Hearing
Officer. The Hearing Officer shall have extensive and recent civil trial
experience and shall not have been primarily a criminal courts judge during
his/her career. The first hearing day shall be scheduled not later than thirty
(30) calendar days following appointment of the Hearing Officer and the hearing
process shall be concluded within sixty (60) calendar days from commencement.
(c) The Hearing Officer shall preside over the ADR Process, shall
accept relevant evidence, and may (in her/her discretion) hear live testimony of
the parties and their expert and other witnesses, examine and cross-examine the
parties and their witnesses, allow counsel to examine and cross-examine
witnesses, to conduct discovery, to hear arguments of counsel, and otherwise
conduct and control a hearing as if he/she were sitting as a California Superior
Court Judge without a jury. At the conclusion of the hearing, the Hearing
Officer shall orally announce a tentative decision as to the disagreement(s)
which form the basis of the dispute. In announcing the tentative decision and in
rendering the Final Award (defined below), the Hearing Officer shall be required
to follow California law in the interpretation of any document or agreement
(including this Agreement), in admitting evidence and in fashioning a remedy.
The Hearing Officer shall not have the power or authority to award any amount in
the nature or character of punitive or exemplary damages, but shall have the
power to issue an award for compensatory damages based on breach or default of
the Agreement, shall have the power to issue injunctive or other equitable
relief where appropriate, and shall have the power to issue an award for
attorneys' fees and costs as allowed by this Agreement.
(d) Within thirty (30) calendar days following conclusion of the oral
hearing, the Hearing Officer shall prepare and deliver to each of the parties a
written decision, accompanied by a statement of facts, law, underlying reasons
and conclusions necessary to fully explain his/her decision ("Final Award"). If
the Final Award requires payment by one party of any amount of money to the
other
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party, the Hearing Officer shall require that payment be made within thirty (30)
calendar days following issuance of the Final Award, and, if payment is not
timely made, the Final Award shall provide the party to whom payment is due with
the right but not the obligation to seek immediate enforcement of the Final
Award by a court of competent jurisdiction.
(e) The Final Award shall be final and binding on each party to the
dispute, shall be admissible in any court of law for any purpose reasonably
related thereto (including, but not limited to, for the purpose of determining
whether or not a breach or default under the Agreement has occurred), and either
party may petition the California Superior Court to enter the Final Award as the
final judgment and award of the court and/or to enforce enforcement of a Final
Award.
(f) Each party shall pay one-half of the fees and costs for JAMS and
the Hearing Officer. If advance payment or deposit is required prior to
commencement of the ADR Process, each party to the dispute hereby represents and
warrants that it will timely pay and deposit said amount. The failure to timely
pay any amounts requested by the Hearing Officer of JAMS shall constitute an
immediate and material event of default and if said amounts are not timely paid
following receipt of a five (5) business day notice and demand to pay, the
Hearing Officer shall be required (without the taking of any evidence or
testimony) to issue a Final Award in favor of the party to the dispute timely
paying its fees, on the terms and conditions requested by said party, which
shall be final and binding.
SECTION 10. Piggy-back registration rights
10.1 Piggy-Back Registrations.
(a) In the event NaviSite proposes to file a Registration Statement at
any time during the period beginning on the six-month anniversary of the Closing
Date and ending on the first anniversary of the Closing Date, NaviSite will,
prior to such filing, give written notice to all former stockholders of Avasta
who received Merger Shares in the Merger (each a "Merger Holder") of its
intention to do so; provided, that no such notice need be given if no shares
other than those sold for the account of NaviSite are to be included therein as
a result of advice from the managing underwriter pursuant to Section 10.2. Upon
the written request of a Merger Holder given within 10 days after NaviSite
provides such notice (which request shall state the intended method of
disposition of such Merger Shares), NaviSite shall use best efforts to cause all
Merger Shares which NaviSite has been requested by such Merger Holder to
register to be included in such registration; provided that NaviSite shall have
the right, in its sole discretion, to delay the filing of, postpone, suspend the
effectiveness of (and require that the Merger Holders immediately cease sales of
shares pursuant to the Registration Statement), or withdraw any registration
effected pursuant to this Section 10.1 without obligation to any Merger Holder.
(b) In the event NaviSite proposes to file a Registration Statement at
any time during the period beginning on the Earn-out Registration Trigger Date
and ending on the nine-month anniversary of the Earn-out Registration Trigger
Date, NaviSite will, prior to such filing, give written notice to all former
stockholders of Avasta who received Earn-out Shares in the Merger (each a
"Earn-out Holder"; together with the Merger Holders; the "Holders") of its
intention to do so; provided, that no such notice need be given if no shares
other than those sold for the account of NaviSite are to be included therein as
a result of advice from the managing underwriter pursuant to Section 10.2. Upon
the written request of an Earn-out Holder given within 10 days after NaviSite
provides such notice (which request shall state the intended method of
disposition of such Earn-out Shares), NaviSite shall use best efforts to cause
all Earnout Shares which NaviSite has been requested by such Earn-out Holder to
register to be included in such registration; provided that NaviSite shall have
the right, in its sole discretion, to delay the filing of, postpone, suspend the
effectiveness of (and require that the Earn-out Holders immediately cease sales
of
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shares pursuant to the Registration Statement), or withdraw any registration
effected pursuant to this Section 10.1 without obligation to any Earn-out
Holder.
(c) If such registration pursuant to subsections (a) or (b) above is a
CBA Registration Statement, the Holders shall have the right to include the
percentage of such Holder's total number of Merger Shares and/or Earn-out Shares
as is equal to the percentage of the total number of CBA's NaviSite Common Stock
to be included in the registration relative to all shares of NaviSite Common
Stock held by CBA (on a fully-diluted basis).
10.2 Underwritten Offering.
(a) If the registration for which NaviSite gives notice pursuant to
Section 10.1 is a registered public offering involving an underwriting, NaviSite
shall so advise the applicable Holders as a part of the written notice given
pursuant to Section 10.1. In such event, (i) the right of any Holder to include
its Shares in such registration pursuant to this Section 10.2 shall be
conditioned upon such Holder's participation in such underwriting on the terms
set forth herein and (ii) all Holders including Shares in such registration
shall enter into an underwriting agreement upon customary terms with the
underwriter or underwriters selected for the underwriting by NaviSite. If any
Holder who has requested inclusion of its Shares in such registration as
provided above disapproves of the terms of the underwriting, such Holder may
elect, by written notice to NaviSite, to withdraw his, her or its Shares from
such Registration Statement and underwriting. If the managing underwriter
advises NaviSite that marketing factors require a limitation on the number of
shares to be underwritten, the Shares held by the Holders shall be first
excluded from such Registration Statement and underwriting (in proportion, as
nearly as practicable, to the respective number of Merger Shares held by all
Holders on the date NaviSite gave the applicable notice specified in Section
10.1 above) to the extent deemed advisable by the managing underwriter.
(b) Notwithstanding Section 10.2(a) above, in the case of an
underwritten offering relating to a CBA Registration Statement, in the event the
managing underwriter advises NaviSite that marketing factors require a
limitation on the number of shares to be underwritten, the Shares held by the
Holders shall be reduced by the same relative percentage as the reduction in the
number of shares of CBA's NaviSite Common Stock to be included in such
registration.
(c) Notwithstanding the foregoing, NaviSite shall not be required,
pursuant to this Section 10.2, to include any Shares in a Registration Statement
if such Shares are eligible for sale under Rule 144 under the Securities Act.
10.3 Holder Information. NaviSite shall not be required to include any
Shares in a Registration Statement unless:
(a) each Holder owning such Shares to be included in the Registration
Statement provides to NaviSite in writing such information regarding such Holder
and the proposed sale of Shares by such Holder as NaviSite may reasonably
request in writing in connection with the Registration Statement or as shall be
required in connection therewith by the SEC or any state securities law
authorities;
(b) such Holder shall have provided to NaviSite his/her or its written
agreement:
(i) to indemnify NaviSite and each of its directors and officers
against, and hold NaviSite and each of its directors and officers harmless
from, any losses, claims, damages, expenses or liabilities (including
reasonable attorneys fees) to which NaviSite
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or such directors and officers may become subject by reason of any
statement or omission in the Registration Statement made in reliance upon,
or in conformity with, a written statement by such Holder furnished
pursuant to this Section 10; and
(ii) to report to NaviSite sales made by such Holder pursuant to
the Registration Statement.
10.4 Indemnity. NaviSite agrees to indemnify and hold harmless each Holder
whose Shares are included in a Registration Statement against any losses,
claims, damages, expenses or liabilities to which such Holder may become subject
by reason of any untrue statement of a material fact contained in the
Registration Statement or any omission to state therein a fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to NaviSite by or on behalf of a
Holder for use in the Registration Statement. NaviSite shall have the right to
assume the defense and settlement of any claim or suit for which NaviSite may be
responsible for indemnification under this Section 10.
10.5 Assignment. A Holder may not assign any of its rights under this
Section 10 except in connection with the transfer of some or all of his, her or
its Shares to a child or spouse, or trust for their benefit or, in the case of a
partnership, limited liability company or corporation, to its partners, members
or stockholders, respectively, pursuant to a pro rata distribution of its
Shares, provided each such transferee agrees in a written instrument delivered
to NaviSite to be bound by the provisions of this Section 10.
SECTION 11. Miscellaneous Provisions
11.1 Avasta Shareholders' Agent. Convergence Partners shall be the agent of
the Avasta Shareholders for all purposes under this Agreement after the Closing,
including without limitation determinations under Sections 1.6 and Section 9
(the "Avasta Shareholders' Agent"). NaviSite shall be entitled to deal
exclusively with the Avasta Shareholders' Agent on all matters under this
Agreement (including without limitation under Sections 1.6 and Section 9), and
shall be entitled to rely conclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be executed on behalf of
any Avasta Shareholder by the Avasta Shareholders' Agent, and on any other
action taken or purported to be taken on behalf of any Avasta Shareholder by the
Avasta Shareholders' Agent, as fully binding upon such Avasta Shareholder. If
the Avasta Shareholders' Agent shall for any reason be unwilling or unable to
fulfill its responsibilities as agent of the Avasta Shareholders, then the
Avasta Shareholders shall, within ten days after such death or disability,
appoint a successor agent and, promptly thereafter, shall notify NaviSite of the
identity of such successor. Any such successor shall become the "Avasta
Shareholders' Agent" for purposes of Section 9 and this Section 11.1. If for any
reason there is no Avasta Shareholders' Agent at any time, all references herein
to the Avasta Shareholders' Agent shall be deemed to refer to the Avasta
Shareholders.
11.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
11.3 Fees and Expenses; Xxxxxx Godward Fees and Expenses. Each party to
this Agreement shall bear and pay all fees, costs and expenses (including legal
fees and accounting fees) that have been incurred or that are incurred by such
party in connection with the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, NaviSite
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agrees that, in the event the parties to this Agreement break off negotiations
(for any reason) with respect to the transactions contemplated hereby, NaviSite
will be responsible for and will promptly pay Xxxxxx Godward LLP's ("Cooley
Godward") actual fees and costs incurred by the Company on and after November 1,
2002, up to a maximum obligation of $25,000 and NaviSite agrees that this
obligation will survive any termination of this Agreement. In the event that the
Merger is consummated, NaviSite will be responsible for and will pay at Closing
all of Xxxxxx Godward's actual fees and costs incurred by the Company on and
after November 1, 2002, up to an aggregate maximum amount (for both fees and
costs) of $85,000. The Company will cause Xxxxxx Godward to provide NaviSite
with regular updates as to the amount of fees and costs incurred (within the
limitations of Xxxxxx Godward's intra-month billing system).
11.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.5 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to NaviSite: NaviSite, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxxx
Fax: (000) 000-0000
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
if to the Avasta Shareholder Agent: Convergence Partners
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Fax: (000) 000-0000
if to the Company: Avasta, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxxx
Fax: (000) 000-0000
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with a copy to: Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
11.6 Headings. The headings contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
11.7 Counterparts. This Agreement may be executed in several counterparts
(including facsimile), each of which shall constitute an original and all of
which, when taken together, shall constitute one agreement.
11.8 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
11.9 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the parties hereto, and shall inure to the benefit of
the Company; the Avasta Shareholders; NaviSite; Merger Sub; the Indemnitees and
the Avasta Indemnities; and the respective successors and assigns (if any) of
the foregoing.
11.10 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
11.11 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
11.12 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of each of the parties hereto.
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11.13 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.14 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Confidentiality Agreement
executed by NaviSite and the Company as of January 2, 2003 shall not be
superseded by this Agreement and shall remain in effect in accordance with its
terms until the earlier of (a) the Effective Time, or (b) the date on which such
Confidentiality Agreement is terminated in accordance with its terms.
11.15 NaviSite/CBT. Provisions of this Agreement requiring the Company to
affirmatively provide documentation to NaviSite shall be deemed satisfied and
complied with to the extent such documentation required to be provided to
NaviSite has in fact been provided to ClearBlue Technologies, Inc.
11.16 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
[Remainder of Page Intentionally Left Blank]
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The parties hereto have caused this Agreement and Plan of Merger to be
executed and delivered as of the date first written above.
Navisite, Inc.,
a Delaware corporation
---------------
NaviSite. Inc.
APPROVED By: /s/ Xxxxx Xx
As To Form -------------------------
Legal Dept. RMD Name: Xxxxx Xx
Dated: 1-29-03 Title: CFO
---------------
Avasta Acquisition Corp.,
a California corporation
By: /s/ Xxxxx Xx
-------------------------
Name: Xxxxx Xx
Title: CFO
Avasta, Inc.,
a California corporation
By: /s/ Xxx Xxxxxxx
-------------------------
Name: Xxx Xxxxxxx
Title: CEO/President
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company, (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock
or other equity security of the Company, or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for
any capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
Articles. "Articles" shall mean the Company's Articles of Incorporation as
in effect on the date of this Agreement.
Avasta Indemnitees. "Avasta Indemnitees" shall mean the following Persons:
(a) the Company (but only until the Effective Time); (b) the Avasta
Shareholders; (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above.
Avasta Shareholders. "Avasta Shareholders" shall mean those shareholders of
the Company receiving shares of NaviSite Common Stock at the Closing.
By-laws. "By-laws" shall mean the Company's by-laws as in effect on the
date of this Agreement.
CBA. "CBA" means ClearBlue Atlantic LLC.
CBA Registration Statement. "CBA Registration Statement" means a
registration statement filed by NaviSite with the SEC for a public offering and
sale of securities owned or held by ClearBlue Atlantic, Inc.
CERCLA. "CERCLA" shall mean the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
Company Plan. "Company Plan" shall mean any Employee Benefit Plan
maintained, or contributed to, by the Company, or any ERISA Affiliate.
A-1
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization.
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Customer Deliverables. "Customer Deliverables" shall mean the products and
services that the Company (i) currently markets, sells or licenses, (ii) has
marketed, sold or licensed within the previous two years; or (iii) currently
plans to provide in the future.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule
delivered to NaviSite on behalf of the Company on the date hereof.
Earn-Out Registration Trigger Date. "Earn-out Registration Trigger Date"
means the date that is the three-month anniversary of the first date, if any,
the Earn-out Shares are actually earned and become payable pursuant to Section
1.6 of the Merger Agreement.
Employee Benefit Plan. "Employee Benefit Plan" shall mean any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA), any "employee
welfare benefit plan" (as defined in Section 3(l) of ERISA), and any other
written or oral plan, agreement or arrangement involving direct or indirect
compensation, including insurance coverage, severance benefits, disability
benefits, deferred compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation.
Environmental Law. "Environmental Law" shall mean any federal, state or
local law, statute, rule, order, directive, judgment, permit or regulation or
the common law relating to the environment, occupational health and safety, or
exposure of persons or property to materials of environmental concern, including
any statute, regulation, administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of materials of
environmental concern or documentation related to the foregoing; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace or
other areas of materials of environmental concern, including emissions,
discharges, injections, spills, escapes or dumping of materials of environmental
concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to
materials of environmental concern; (vii) the protection of wild life, marine
life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed
receptacles; and (ix) health and safety of employees and other persons. As used
above, the term "release" shall have the meaning set forth in CERCLA.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
ERISA Affiliate. "ERISA Affiliate" shall mean any entity which is, or at
any applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
A-2
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company.
Indemnitees. "Indemnitees" shall mean the following Persons: (a) NaviSite;
(b) NaviSite's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above; provided,
however, that the Avasta Shareholders shall not be deemed to be "Indemnitees."
Intellectual Property. "Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination,
utility model, certificate of invention and design patents, patent
applications, registrations and applications for registrations;
(b) trademarks, service marks, trade dress, Internet domain names,
logos, trade names and corporate names and registrations and applications
for registration thereof;
(c) copyrights and registrations and applications for registration
thereof;
(d) mask works and registrations and applications for registration
thereof;
(e) computer software, data and documentation;
(f) inventions, trade secrets and confidential business information,
whether patentable or nonpatentable and whether or not reduced to practice,
know-how, manufacturing and product processes and techniques, research and
development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information;
(g) other proprietary rights relating to any of the foregoing
(including remedies against infringements thereof and rights of protection
of interest therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
Internal Systems. "Internal Systems" shall mean the internal systems of the
Company that are used in its business or operations, including computer hardware
systems, software applications and embedded systems.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other governmental body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any governmental body.
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Merger Shares. "Merger Shares" means shares of NaviSite Common Stock issued
pursuant to Sections 1.5 of this Agreement.
MRR. "MRR" means the monthly recurring revenue set forth in the terms of
the applicable Avasta customer contract.
NaviSite Common Stock. "NaviSite Common Stock" means the common stock of
NaviSite, par value $0.01 per share.
NaviSite Reports. "NaviSite Reports" shall mean (a) the NaviSite's Annual
Report on Form 10-K for the fiscal year ended July 31, 2002, as filed with SEC,
and (b) all other reports filed by the Buyer under Section 13 or subsections (a)
or (c) of Section 14 of the Exchange Act with the SEC since July 31, 2002.
Other Holders. "Other Holders" means holders of securities of NaviSite
(other than the Holders) who are entitled, by contract with NaviSite, to
registration rights with respect to such securities.
Person. "Person" shall mean any individual, entity or governmental body.
Registration Statement. "Registration Statement" means (A) a registration
statement filed by NaviSite with the SEC for a public offering and sale of
securities of the Company other than (i) a registration statement on Form S-8 or
Form S-4, or their successors, or any other form for a similar limited purpose,
(ii) any registration statement covering only securities proposed to be issued
in exchange for securities or assets of another corporation, (iii) a
registration statement covering shares to be sold solely for the account of
Other Holders, which shares were acquired pursuant to either (1) an acquisition
of a company of which they were formerly stockholders, (2) a "private placement"
under the Securities Act or (3) Rule 144A under the Securities Act and (B) a CBA
Registration Statement.
Representatives. "Representatives" shall mean officers, directors,
shareholders, employees, agents, attorneys, accountants and advisors.
Shares. "Shares" means, collectively, the Merger Shares and the Earn-out
Shares.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any governmental body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
governmental body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
* * *
A-4
Exhibit B
Schedule of Additional Navisite Common Stock
Additional Shares of NaviSite
Revenue Common Stock
---------- -----------------------------
$1,125,000 --
$1,375,000 31,391
$1,625,000 62,782
$1,875,000 94,174
$2,125,000 125,565
$2,375,000 156,956
$2,625,000 188,347
$2,875,000 219,738
$3,125,000 251,130
$3,375,000 345,303
$3,625,000 439,477
$3,875,000 533,650
$4,125,000 627,824
$4,375,000 721,998
$4,625,000 816,171
$4,875,000 910,345
$5,125,000 1,004,518
A-5
Exhibit C
Liabilities to be Retired
Creditor Amount of Liability
-------- -------------------
Cisco $1,230,100
Citi Leasing 74,100
Comdisco 623,300
CommVest 965,700
Dell 286,300
Deutsche 31,300
e-Convergent 245,700
Fleet 223,700
Wellesley 240,700
A/P to non current vendors 481,700
Xxxxxx Godward 75,000
----------
Total $4,477,770
==========
A-6
